UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________
SCHEDULE 13D
Under the Securities Exchange Act Of 1934
Peapod, Inc.
(Name of Issuer)
Common Stock, $0.01 par value per share
(Title of Class of Securities)
704718105
(CUSIP Number)
Mr. A.H.P.M. van Tielraden with copies to:
Koninklijke Ahold N.V. Maureen Brundage, Esq./
Albert Heijnweg 1 John Reiss, Esq.
1507 EH Zaandam White & Case LLP
The Netherlands 1155 Avenue of the Americas
011-31-75-659-9111 New York, NY 10036
212-819-8200
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
April 14, 2000
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
<PAGE>
CUSIP No. 704718105
================================================================================
- - -- -----------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Koninklijke Ahold N.V. I.R.S. IDENTIFICATION NO. 000000000
- - -- -----------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)[ ]
(b)[ ]
- - -- -----------------------------------------------------------------------------
3 SEC USE ONLY
- - -- -----------------------------------------------------------------------------
4 SOURCE OF FUNDS
WC
- - -- -----------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
- - -- -----------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
The Netherlands
- - ----------------------------- ------- ------------------------------------------
NUMBER OF SHARES BENEFICIALLY 7 SOLE VOTING POWER
OWNED BY EACH REPORTING PERSON 3,666,667 (1) (2)
WITH
------- ------------------------------------
8 SHARED VOTING POWER
None
------- ------------------------------------
9 SOLE DISPOSITIVE POWER
3,666,667 (1) (2)
------- ------------------------------------
10 SHARED DISPOSITIVE POWER
None
- - -------- -----------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,666,667 (1) (2)
- - -------- -----------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN
SHARES [ ]
- - -------- -----------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
16.7% (2)
- - -------- -----------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
- - -------- -----------------------------------------------------------------------
<PAGE>
(1) The shares of common stock of Peapod, Inc. (the "Issuer") covered by
this report are purchasable by Koninklijke Ahold N.V. ("Ahold") upon exercise of
(i) the warrant (the "Previously Issued Warrant") granted by the Issuer to Ahold
pursuant to the Warrant Agreement dated as of April 10, 2000, and (ii) the
warrant (the "Warrant (Credit Agreement)", and together with the Previously
Issued Warrant, the "Outstanding Warrants") granted by the Issuer to Ahold
pursuant to the Warrant Agreement dated as of April 14, 2000, in each case, as
described in Item 4 of this Statement. Prior to the exercise of the Outstanding
Warrants, Ahold is not entitled to any rights as a shareholder of the Issuer as
to the shares covered by the Outstanding Warrants. The number of shares of
common stock ("Common Stock") of the Issuer purchasable by Ahold under the
Outstanding Warrants, which is initially 3,666,667 shares, is subject to
adjustment in certain circumstances. The Outstanding Warrants may be exercised
at any time.
In addition, Ahold and the Issuer have entered into a Purchase Agreement
(the "Purchase Agreement") dated as of April 14, 2000. Pursuant to and subject
to the terms and conditions set forth in the Purchase Agreement (including
approval by the stockholders of the Issuer), Ahold would acquire (i) 726,371
shares of Series B Convertible Preferred Stock (the "Shares") of the Issuer
which would be convertible into initially 19,369,873 shares of Common Stock,
representing approximately 51% of the total outstanding shares of Common Stock
as of April 14, 2000 (based on the Issuer's representations in the Purchase
Agreement and treating as outstanding for this purpose the shares of Common
Stock subject to conversion under the Series B Convertible Preferred Stock), and
(ii) the warrant (the "Warrant (Preferred Stock)") to purchase 32,894,270 shares
of Common Stock. Based on the Issuer's representations in the Purchase
Agreement, upon conversion of the Shares and exercise of the Outstanding
Warrants and the Warrant (Preferred Stock) Ahold would be entitled to purchase
approximately 75% of the total outstanding shares of Common Stock as of April
14, 2000 (treating as outstanding for this purpose the shares of Common Stock
subject to conversion under the Shares and the shares of Common Stock subject to
exercise under the Outstanding Warrants and the Warrant (Preferred Stock)).
Prior to the purchase of the Shares and the Warrant (Preferred Stock), Ahold
expressly disclaims beneficial ownership of the Shares, the Warrant (Preferred
Stock) and the shares of Common Stock which are purchasable by Ahold upon
conversion of the Shares and exercise of the Warrants (Preferred Stock).
Ahold has also entered into Voting Agreements (collectively, the "Voting
Agreements") with certain individual and institutional stockholders of the
Issuer ("Stockholder Parties"). The Voting Agreements are limited to requiring
that, subject to the terms and conditions of such agreements, each Stockholder
Party vote such Stockholder Party's shares of Common Stock in favor of the
transactions contemplated by the Purchase Agreement, against an Alternative
Transaction (as defined in Item 4 of this Statement), against certain
extraordinary transactions involving a reorganization or substantially all of
the assets of the Issuer and in favor of Ahold's nominees to the Board of
Directors. Each of the Stockholder Parties has delivered to Ahold an irrevocable
proxy (the "Proxies") limited to voting such stockholders' shares of Common
Stock in respect of the transactions contemplated by the Purchase Agreement, an
Alternative Transaction, certain extraordinary transactions involving a
reorganization or substantially all of the assets of the Issuer and Ahold's
nominees to the Board of Directors. On April 14, 2000, the Stockholder Parties
owned 7,396,175 shares of Common Stock (based on the Issuer's representations in
the Purchase Agreement, representing approximately 40.5% of the outstanding
shares of Common Stock as of April 14, 2000). Ahold expressly disclaims
beneficial ownership of the shares of Common Stock which are subject to the
Voting Agreements and the Proxies.
(2) Based on the Issuer's representations in the Purchase Agreement, the
number of shares indicated represents approximately 16.7% of the total
outstanding shares of Common Stock as of April 14, 2000 (treating as outstanding
for this purpose the shares of Common Stock subject to the Outstanding
Warrants).
<PAGE>
SCHEDULE 13D
Item 1. Security and Issuer
This statement on Schedule 13D relates to the common stock, $0.01 par value
per share ("Common Stock"), of Peapod, Inc., a Delaware corporation (the
"Issuer"), the principal executive offices of which are located at 9933 Woods
Drive, Skokie, Illinois 60077.
Item 2. Identity and Background
(a) - (c); (f) This statement on Schedule 13D is being filed by Koninklijke
Ahold N.V. ("Ahold"), a public company with limited liability, incorporated
under the laws of The Netherlands.
Ahold is the largest food provider in The Netherlands, one of the largest
food retailers in the United States and one of the largest and among the most
internationally diverse food providing groups worldwide. Ahold has its corporate
seat in Zaandam, Municipality of Zaanstad, The Netherlands. The principal
executive offices of Ahold are located at Albert Heijnweg 1, 1507 EH Zaandam,
The Netherlands, telephone: 011-31-75-659-9111.
The name, citizenship, business address, present principal occupation or
employment and five-year employment history of each member of the Supervisory
Board and the Corporate Executive Board of Ahold and the executive officers of
Ahold are set forth on Schedule I attached hereto.
(d)-(e) During the last five years, neither Ahold nor, to the best of
Ahold's knowledge, any person named on Schedule I attached hereto has been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or has been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction as a result of which such person
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws
Item 3. Source and Amount of Funds or Other Consideration
In connection with, and as an inducement to Ahold's willingness to enter
into the Promissory Note and the Credit Agreement, each as defined and described
in Item 4 of this Statement, the Issuer granted to Ahold (i) a warrant (the
"Previously Issued Warrant") to purchase 100,000 shares of Common Stock pursuant
to the Warrant Agreement dated as of April 10, 2000, a copy of which is filed as
Exhibit 10.1 hereto, and (ii) a warrant (the "Warrant (Credit Agreement)", and
together with the Previously Issued Warrant, the "Outstanding Warrants") to
purchase 3,566,667 shares of Common Stock pursuant to the Warrant Agreement
dated as of April 14, 2000, a copy of which is filed as Exhibit 10.2 hereto, in
each case, as described in Item 4 of this Statement. Nominal consideration was
paid by Ahold to the Issuer for the Outstanding Warrants. The Outstanding
Warrants entitle Ahold to purchase up to 3,666,667 shares (subject to
adjustment) of Common Stock at any time at an exercise price of $3.00 per share,
subject to adjustment. If Ahold elects to exercise the Outstanding Warrants,
purchase the Shares or exercise the Warrants (Preferred Stock), it currently
anticipates that the funds to pay the exercise price and the purchase price will
come from available working capital.
Item 4. Purpose of the Transaction
(a) - (j) Purchase Agreement.
On April 14, 2000, Ahold and the Issuer entered into the Purchase Agreement
dated as of April 14, 2000 (the "Purchase Agreement"), a copy of which is filed
as Exhibit 10.3 hereto. Capitalized terms used herein but not otherwise defined
herein have the meanings set forth in the Purchase Agreement. Pursuant to the
Purchase Agreement and subject to the terms and conditions set forth therein
(including approval by the stockholders of the Issuer and the termination or
expiration of the waiting period under the Hart-Scott-Rodino Act), Ahold would
acquire 726,371 shares of Series B Convertible Preferred Stock of the Issuer
(the "Shares") which have a liquidation value of $100 per Share and would be
convertible into 19,369,873 shares of Common Stock, representing initially
approximately 51% of the total outstanding shares of Common Stock as of April
14, 2000 (based on the Issuer's representations in the Purchase Agreement and
treating as outstanding for this purpose the shares of Common Stock subject to
conversion under the Series B Convertible Preferred Stock). The Shares are
convertible into shares of Common Stock at a conversion price (subject to
adjustment), which is initially $3.75 per share of Common Stock.
In contemplation of the Purchase Agreement, (i) BEW, Inc., a Delaware
Corporation ("BEW"), an affiliate of Ahold, advanced $3,000,000 to the Issuer
pursuant to a Promissory Note (the "Promissory Note") dated as of April 5, 2000,
a copy of which is filed as Exhibit 99.1 hereto, and (ii) BEW and the Issuer
entered into a Security Agreement, dated as of April 5, 2000, and a Collateral
Assignment of Intellectual Property, dated as of April 10, 2000, each to secure
the Promissory Note. Pursuant to these security agreements the Issuer granted a
pledge over all of its assets to BEW. In connection with the Promissory Note,
the Issuer issued the Previously Issued Warrant.
In connection with the Purchase Agreement, the Issuer and Ahold entered
into (i) a Credit Agreement (the "Credit Agreement") dated as of April 14, 2000,
whereby Ahold provided a $20,000,000 revolving credit facility to the Issuer, a
copy of which is filed as Exhibit 10.4 hereto, and (ii) an Amended and Restated
Security Agreement dated as of April 5, 2000, a copy of which is filed as
Exhibit 10.5 hereto, and an Amended and Restated Collateral Assignment of
Intellectual Property dated as of April 14, 2000, a copy of which is filed as
Exhibit 10.6 hereto, each to secure the Issuer's obligations under the Credit
Agreement. These security agreements were an amendment and restatement of the
security agreements between the Issuer and BEW, and pursuant to these security
agreements the Issuer granted a pledge over all of its assets to Ahold. Pursuant
to the Credit Agreement, Ahold advanced a portion of its $20 million commitment
to the Issuer to repay all amounts owing to BEW under the Promissory Note. In
connection with the Credit Agreement, the Issuer issued the Warrant (Credit
Agreement).
Taking into account the Shares and the Warrants, following consummation of
the transactions contemplated by the Purchase Agreement, based on the Issuer's
representations in the Purchase Agreement, Ahold would have the right to acquire
approximately 75% of the total outstanding shares of Common Stock as of April
14, 2000 (treating as outstanding for this purpose the shares of Common Stock
subject to the Shares and the Warrants).
In connection with the execution of the Purchase Agreement, three nominees
of Ahold were elected to the 11 member Board of Directors of the Issuer. The
Purchase Agreement provides that if the purchase of the Shares is consummated,
Ahold will be entitled to nominate a further three persons to the Board of
Directors of the Issuer. The Purchase Agreement further provides that the number
of nominees Ahold is entitled to nominate to the Board of Directors of the
Issuer will be adjusted as follows: (i) as long as Ahold beneficially owns
securities of the Issuer that constitute, or if exercised, exchanged or
converted into Common Stock would constitute, at least 70% of the aggregate
issued and outstanding Common Stock, the Issuer shall use its reasonable best
efforts to ensure that a total of seven nominees of Ahold are members of the
Issuer's Board of Directors (for the purposes of this clause (i), the Warrants
shall not be included in the calculation of Ahold's beneficial ownership); (ii)
as long as Ahold beneficially owns securities of the Issuer that constitute, or
if exercised, exchanged or converted into Common Stock would constitute, at
least 33-1/3% but less than 70% of the aggregate issued and outstanding Common
Stock, the Issuer shall use its reasonable best efforts to ensure that a total
of six nominees of Ahold are members of the Issuer's Board of Directors; (iii)
as long as Ahold beneficially owns securities of the Issuer that constitute, or
if exercised, exchanged or converted into Common Stock would constitute, at
least 10% but less than 33-1/3% of the aggregate issued and outstanding Common
Stock, the Issuer shall use its reasonable best efforts to ensure that a total
of three nominees of Ahold are members of the Issuer's Board of Directors. In
addition, in connection with the execution of the Purchase Agreement, the Issuer
and Ahold agreed to cooperate and take all actions reasonably necessary to
appoint, within ten Business Days from the date of the Purchase Agreement, as
Chief Executive Officer of the Issuer a person selected by Ahold and reasonably
satisfactory to the Issuer, on terms and conditions mutually satisfactory to the
Issuer and Ahold.
Ahold may elect to purchase the Shares in one or more, but no more than
three closings, provided that at each closing, Ahold shall purchase a pro rata
amount of Shares and Warrants (Preferred Stock). The Closings under the Purchase
Agreement are subject to the satisfaction or waiver of certain conditions,
including, but not limited to: (a) obtaining approval (the "Stockholder
Approval") of (i) a majority of the stockholders of the Issuer present in person
or by proxy and entitled to vote of the issuance of the Series B Preferred Stock
and Warrants to the extent required by Applicable Law and NASD rules and
regulations, (ii) a majority of the outstanding stock of the Issuer to the
amendment and restatement of the Issuer's Certificate of Incorporation in a
manner reasonably satisfactory to the Issuer and to reflect the corporate
governance provisions provided for in the Purchase Agreement, and (iii) a
majority of the stockholders of the Issuer present in person or by proxy and
entitled to vote, more generally, if requested by Ahold, the approval of the
Purchase Agreement, the other Documents and the transactions contemplated
thereby; (b) the termination or expiration of the waiting period under the
Hart-Scott-Rodino Act; and (c) other customary conditions.
The Purchase Agreement contains certain restrictions (subject to certain
exceptions) on the conduct of the business of the Issuer, pursuant to which the
Issuer has agreed, among other things, not to (a) declare and pay dividends; (b)
issue or sell any of its securities or make any other changes in its capital
structure; (c) make any changes or amendments to corporate governance documents;
(d) acquire (whether by merger or purchase) any assets (including equity
interests) having a value in excess of $100,000 individually and $500,000 in the
aggregate; (e) sell, lease or otherwise encumber or dispose of any of its
material assets, other than sales of inventory in the ordinary course of
business, or assets having a value in excess of $100,000 individually and
$500,000 in the aggregate; (f) incur indebtedness for borrowed money in excess
of $100,000 in any calendar year; (g) modify its benefit or compensation plans
or enter into or materially amend or terminate any employment or consulting
agreement; (h) make capital expenditures, other than budgeted expenditures
approved by Ahold or capital expenditures not in excess of $100,000 in any
calendar year; (i) settle any material claim, liability or obligation; (j) make
or rescind any material tax election; (k) make any material change in its method
of accounting; (l) enter into any agreement significantly restraining its
ability to compete or conduct its business; (m) close any distribution center,
office or other premises; (n) adopt a plan of liquidation or reorganization; (o)
fail to maintain its Intellectual Property; (p) effect any material reduction in
its workforce; (q) enter into any transactions with Affiliates; (r) materially
amend any material contract; and (s) amend any shareholders rights plan which
would restrict the ability of Ahold to exercise the rights and receive the
benefits of a shareholder of the Issuer.
Pursuant to the Purchase Agreement, the Issuer has agreed that its Board of
Directors will recommend that the Stockholder Approval be given. The Issuer has
also agreed that it shall not, nor shall it authorize or permit any of its
Affiliates to, or their respective officers, directors, employees, auditors,
agents, representatives, consultants, advisors, investment bankers, attorneys,
accountants and other agents (collectively, "Representatives") to, directly or
indirectly, (i) initiate, solicit or entertain offers from, negotiate with or in
any manner knowingly encourage, discuss, accept, or consider any proposal of any
other person relating to (w) the acquisition of capital stock of the Issuer or
any of its Subsidiaries, securities convertible into or exchangeable for shares
of capital stock of the Issuer or any of its Subsidiaries, (x) the acquisition
of the Issuer's or any of its Subsidiaries' assets or business, in whole or in
part, whether directly or indirectly, through purchase, merger, consolidation,
business combination, recapitalization, liquidation, dissolution or otherwise,
(y) the incurrence of indebtedness for borrowed money by the Issuer or any of
its Subsidiaries, or (z) any other transaction the consummation of which could
reasonably be expected to impede, interfere with, prevent, delay or dilute the
benefits to Ahold of the transactions contemplated hereby, including, without
limitation, by taking any action that would make Section 203 of the Delaware
General Corporation Law or the Rights Agreement inapplicable to an Alternative
Transaction (other than the transactions contemplated by the Purchase Agreement,
sales of inventory in the ordinary course and shares issued upon the exercise of
existing stock options) (any of the foregoing being an "Alternative
Transaction"); (ii) initiate, participate, engage in, or agree to initiate,
participate or engage in negotiations or discussions concerning, or provide to
any person or entity any information or data relating to the Issuer or any
Subsidiary, or otherwise cooperate with or assist or participate in, facilitate
or encourage, any inquiries or the making of any proposal that constitutes, or
may reasonably be expected to lead to an Alternative Transaction, (iii) in
connection with any Alternative Transaction, require it to abandon, terminate or
fail to consummate the transactions contemplated by the Purchase Agreement or
the other Documents; (iv) grant any waiver or release under or amend any
standstill, confidentiality or similar agreement entered into by the Issuer or
any of its Affiliates or representatives; (v) agree to, approve or recommend any
Alternative Transaction; or (vi) take any other action inconsistent with the
obligations and commitments of the Issuer described in this paragraph.
Under the Purchase Agreement, the Issuer has agreed that neither its Board
of Directors nor any committee of its Board of Directors shall: (i) withdraw or
modify the approval or recommendation by such Board of Directors or
such committee of the Purchase Agreement, the other Documents or any of the
transactions contemplated thereby, (ii) approve or recommend any Alternative
Transaction, or (iii) cause or permit the Issuer or any Affiliate to enter into
any letter of intent, agreement in principle or other arrangement or agreement
with respect to an Alternative Transaction.
The Purchase Agreement may be terminated (i) by mutual agreement of the
parties at any time, (ii) by either party if the Stockholder Approval is not
obtained on or prior to the seven month anniversary of the date of the Purchase
Agreement, or (iii) by either party if the Issuer's stockholders vote against
the Purchase Agreement and the transactions contemplated thereby at the
Stockholders' Meeting. If the Purchase Agreement is terminated by Ahold in
accordance with the provisions described in clauses (ii) or (iii) in the
immediately preceding sentence, then the Issuer shall (a) reimburse Ahold for
all of its out-of-pocket expenses incurred in connection with the Purchase
Agreement and the transactions contemplated thereby, and (b) pay to Ahold in
immediately available funds a termination fee in an amount equal to $1,000,000.
Warrants.
In connection with, and as a condition and inducement to, Ahold's
willingness to enter into the Promissory Note, the Credit Agreement and the
Purchase Agreement, the Issuer granted to Ahold the Outstanding Warrants and
agreed to grant to Ahold a warrant (the "Warrant (Preferred Stock)", together
with the Outstanding Warrants, the "Warrants") to purchase initially 32,894,270
shares of Common Stock pursuant to a Warrant Agreement, a copy of which is filed
as Exhibit 10.7 hereto. The Warrants give Ahold the right to purchase initially
up to an aggregate of 36,560,937 shares of Common Stock, representing
approximately 24% of the outstanding shares of Common Stock as of April 14, 2000
(based on the Issuer's representations in the Purchase Agreement and treating as
outstanding for this purpose the shares of Common Stock subject to the Shares
and the Warrants) at an exercise price, which is initially $3.00 per share for
the Outstanding Warrants and $3.75 per share for the Warrant (Preferred Stock).
In the event Stockholder Approval or HSR Approval is not obtained within 120
days of the date of the Purchase Agreement (the "Outside Date") (subject to
extension if Ahold exercises any of the Warrants), the exercise price for the
Warrant (Credit Agreement) and the Warrant (Preferred Stock) will be reduced by
50%.
Ahold may exercise the Warrants, in whole or in part, at any time and from
time to time, prior to the tenth anniversary of the date of issue of the
Warrant. Payment of the exercise price may be made in a variety of methods,
including in cash or by the provisions of goods or services with a fair value
equal to the exercise price. The exercise price and the number of shares
issuable upon exercise of the Warrants is subject to anti-dilution adjustment
under certain circumstances as set forth in the Warrants.
Certificate of Designations of Series B Convertible Preferred Stock.
The terms of the Shares are set forth in the Certificate of Designations of
the Issuer (the "Certificate of Designations"), a copy of which is filed as
Exhibit 10.8 hereto. The Shares will be entitled to receive dividends at a rate
of (i) if either Stockholder Approval or HSR Approval has not been obtained
prior to the Outside Date or there shall exist any Event of Non-Compliance (as
defined in the Certificate of Designations), in each case, 12.5% per annum for
all quarterly dividend periods commencing on or after the Outside Date and
ending on or before the date, if any, on which both Stockholder Approval and HSR
Approval have been obtained or, in the case of an Event of Non-Compliance,
commencing on the date of the occurrence of such Event of Non-Compliance and
ending on the date that such Event of Non-Compliance is cured, and (ii) for all
other quarterly dividend periods, 8% per annum. Unless all dividends on the
outstanding Shares shall have been paid, no dividends or other distributions may
be paid to the holders of Common Stock. Upon a liquidation, dissolution or
winding-up of the Issuer, Ahold or the holder of the Shares will be entitled to
receive a liquidation preference equal to $100 per share, plus all accrued but
unpaid dividends, before any liquidating distribution may be made with respect
to the Common Stock. Ahold or the holder of the Shares will have the right to
vote on an as-converted basis together with the holders of Common Stock as a
single class on all matters, including the election of directors, submitted to
the Issuer's stockholders for a vote.
The Shares are convertible into shares of Common Stock initially at a ratio
of 26.67 shares of Common Stock for each Share. Initially, the effective
conversion price per share of Common Stock will be $3.75. The conversion ratio
is subject to anti-dilution adjustment under certain circumstances as set forth
in the Certificate of Designations. The Issuer has the right to redeem and Ahold
or the holder of the Shares has the right to require the Issuer to redeem the
Shares at the original issue price plus all accrued and unpaid dividends on and
after the eighth anniversary of the date of the Purchase Agreement. Ahold also
has the right to require the Issuer to redeem the Shares upon a Change of
Control (as defined in the Certificate of Designations). The Issuer has granted
Ahold or the holder of the Shares preemptive rights to purchase a pro-rata
amount of any new securities issued by the Issuer.
Registration Rights Agreement.
In connection with the Purchase Agreement, the Issuer and Ahold entered
into a Registration Rights Agreement (the "Registration Rights Agreement") dated
as of April 14, 2000, a copy of which is filed as Exhibit 10.9 hereto.
Holders of more than 50% of the Registrable Securities (as defined in the
Registration Rights Agreement) of the Issuer may at any time after the earlier
to occur of (a) the Final Closing or (b) the termination of the Purchase
Agreement, request the Issuer to prepare and file a shelf registration statement
on Form S-3, or such other form as the Issuer may at the time be eligible to use
for the registration of securities under the Securities Act providing for the
sale by the holders of all of their Registrable Securities then outstanding, and
all Registrable Securities issuable thereafter.
Ahold has the right, subject to certain limitations and restrictions, to
require the Issuer at the request of Ahold to effect the following number of
registrations of shares of Common Stock and securities convertible into, or
exercisable or exchangeable for, shares of Common Stock ("Common Stock
Equivalents") held by Ahold ("Demand Registrations"): (i) until the earlier to
occur of the Outside Date or the date of the consummation of the Final Closing,
there shall be no right to demand a Demand Registration, (ii) in the period, if
any, commencing on the Outside Date and ending on the date of the consummation
of the Final Closing, if the Final Closing occurs, four Demand Registrations,
and (iii) at any time after the consummation of the Final Closing, an unlimited
number of Demand Registrations. Ahold also has the right, subject to certain
limitations and restrictions, to require the Issuer to include shares of Common
Stock and Common Stock Equivalents then held by the Ahold in any other
registration by the Issuer of its equity securities under the Securities Act
(with certain customary exceptions). The Company will pay certain expenses of
Ahold in connection with such registrations as provided in the Registration
Rights Agreement.
Other Agreements.
Ahold has entered into agreements (collectively, the "Voting Agreements")
with certain individual and institutional stockholders of the Issuer
("Stockholder Parties") requiring that, subject to the terms and conditions of
such agreements, each Stockholder Party vote such Stockholder Party's shares of
Common Stock in favor of the transactions contemplated by the Purchase
Agreement, against an Alternative Transaction, against certain extraordinary
transactions involving a reorganization or substantially all of the assets of
the Issuer and in favor Ahold's nominees to the Board of Directors. Each of the
Stockholder Parties has delivered to Ahold an irrevocable proxy to vote such
stockholders' shares of Common Stock in favor of the transactions contemplated
by the Purchase Agreement, against an Alternative Transaction, against certain
extraordinary transactions involving a reorganization or substantially all of
the assets of the Issuer and in favor Ahold's nominees to the Board of
Directors. On April 14, 2000, the Stockholder Parties owned 7,396,175 shares of
Common Stock (based on the Issuer's representations in the Purchase Agreement,
representing approximately 40.5% of the outstanding shares of Common Stock as of
April 14, 2000). The Voting Agreements and accompanying proxies are filed as
Exhibits 10.10 and 10.11 hereto.
Concurrently with the execution of the Purchase Agreement, the Issuer
amended the Issuer's stockholder rights plan (the "Amended and Restated
Stockholders Rights Agreement") to exempt Ahold and its affiliates from the
applicable provisions of the rights plan.
In connection with the Purchase Agreement, the Issuer and Ahold entered
into a Supply and Services Agreement dated as of April 14, 2000, whereby the
Issuer agreed to purchase, and Ahold agreed to supply, all of the Issuer's
requirements of perishable and non-perishable goods from Ahold and obtain
certain other services for the Issuer's online business. The Issuer and Ahold
have also agreed to enter into a Technology Partnership and License Agreement
regarding the development and licensing of technology used in the business of
the Issuer and Ahold.
The descriptions of each of the agreements herein are qualified in their
entirety by reference to such agreements, copies of which are filed as Exhibits
hereto.
Other than as described herein, Ahold has no current plans or proposals
which relate to, or would result in, any of the matters listed in items 4(a)-(j)
of Schedule 13D.
Ahold will continue to evaluate the business, operations and management of
the Issuer and Ahold, subject to its obligations under the Purchase Agreement,
may determine in the future to take actions which relate to or would result in
one or more of the following as it may deem appropriate under the circumstances
then existing: (a) the acquisition of additional securities of the Issuer, or
the disposition of securities of the Issuer; (b) an extraordinary corporate
transaction, such as a merger, reorganization or liquidation, involving the
Issuer or any of its subsidiaries; (c) a sale or transfer of a material amount
of assets of the Issuer or any of its subsidiaries; (d) a change in the
capitalization or dividend policy of the Issuer; (e) a change in the business of
corporate structure of the Issuer; (f) a change in the Issuer's charter or
bylaws; (g) a class of securities of the Issuer to be delisted from a national
securities exchange or to cease to be authorized to be quoted in an inter-dealer
quotation system of a registered national securities association; (h) a class of
equity securities of the Issuer becoming eligible for termination of
registration pursuant to Section 12(g)(4) of the Securities Exchange Act of
1934; or (i) any action similar to any of those enumerated above. Pursuant to
the Purchase Agreement, during the one-year period beginning on the date of the
Purchase Agreement, Ahold has agreed not to propose, or vote any securities in
favor of, a merger, reorganization, recapitalization or other similar
transaction involving the Issuer that would result in the elimination of the
outstanding shares of Common Stock other than the shares held beneficially by
Ahold, unless any such transaction was approved by an independent committee of
the Board of Directors of the Issuer.
Item 5. Interest in Securities of the Issuer
(a) As a result of the issuance of the Outstanding Warrants, Ahold may be
deemed to be the beneficial owner of 3,666,667 shares of Common Stock, which
would represent approximately 16.7% of the shares of Common Stock outstanding
after the exercise of the Outstanding Warrants as of April 14, 2000 (based on
the Issuer's representations in the Purchase Agreement and treating as
outstanding for this purpose the shares of Common Stock subject to the
Outstanding Warrants).
In addition, pursuant to and subject to the terms and conditions set forth
in the Purchase Agreement (including approval by the stockholders of the
Issuer), Ahold would acquire (i) 726,371 shares of Series B Convertible
Preferred Stock (the "Shares") of the Issuer which would be convertible into
initially 19,369,873 shares of Common Stock, representing approximately 51% of
the total outstanding shares of Common Stock as of April 14, 2000 (based on the
Issuer's representations in the Purchase Agreement and treating as outstanding
for this purpose the shares of Common Stock subject to conversion under the
Series B Convertible Preferred Stock), and (ii) warrants (the "Warrant
(Preferred Stock)") to purchase 32,894,270 shares of Common Stock. Based on the
Issuer's representations in the Purchase Agreement, upon conversion of the
Shares and exercise of the Warrants Ahold would be entitled to purchase
approximately 75% of the total outstanding shares of Common Stock as of April
14, 2000 (treating as outstanding for this purpose the shares of Common Stock
subject to conversion under the Shares and exercise under the Warrants). Prior
to the occurrence of the purchase of the Shares and the Warrant (Preferred
Stock), Ahold expressly disclaims beneficial ownership of the Shares, Warrant
(Preferred Stock) and the shares of Common Stock which are purchasable by Ahold
upon conversion of the Shares and exercise of the Warrants (Preferred Stock).
(b) Ahold would have the sole power to vote or to direct the vote of, and
sole power to dispose or direct the disposition of, all the shares of Common
Stock acquired upon the exercise of the Outstanding Warrants. In respect of the
shares of Common Stock subject to the Voting Agreements, Ahold has the sole
power to vote in favor of the transactions contemplated by the Purchase
Agreement, against an Alternative Transaction, against certain extraordinary
transactions involving a reorganization of substantially all of the assets of
the Issuer and in favor Ahold's nominees to the Board of Directors of Directors,
but not the power to vote with respect to any other matter or the power to
dispose or direct the disposition of such shares.
(c) Except as described herein, neither Ahold nor, to the best of Ahold's
knowledge, any of the persons referred to in Schedule I attached hereto,
beneficially owns or has acquired or disposed of any shares of Common Stock of
the Issuer during the past 60 days.
(d) Not applicable.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of the Issuer
Except as provided in the Purchase Agreement, the Warrants, the
Registration Rights Agreement, the Stockholders Rights Agreement and the Voting
Agreements, neither Ahold nor, to the best of Ahold's knowledge, any of the
persons referred in Schedule I attached hereto has any contracts, arrangements,
understandings or relationships (legal or otherwise) with any persons with
respect to any securities of the Issuer, including, but not limited to,
transfers or voting of any securities, finder's fees, joint ventures, loan or
option arrangements, puts or calls, guarantees of profits, division of profits
or loss, or the giving or withholding of proxies.
<PAGE>
Item 7. Material to be filed as Exhibits
10.1 Warrant Agreement (Promissory Note), dated as of April 10, 2000, issued
by Peapod, Inc. in favor of Koninklijke Ahold N.V.
10.2 Warrant Agreement (Credit Agreement), dated as of April 14, 2000, issued
by Peapod, Inc. in favor of Koninklijke Ahold N.V.
10.3 Purchase Agreement, dated as of April 14, 2000, by and between Peapod,
Inc. and Koninklijke Ahold N.V.
10.4 Credit Agreement dated as of April 14, 2000, between Peapod, Inc. and
Koninklijke Ahold N.V.
10.5 Amended and Restated Security Agreement dated as of April 5, 2000, by
Peapod, Inc. to BEW, Inc. and Koninklijke Ahold N.V.
10.6 Amended and Restated Collateral Assignment of Intellectual Property dated
as of April 14, 2000, by Peapod, Inc. to BEW, Inc. and Koninklijke Ahold
N.V.
10.7 Form of Warrant Agreement (Preferred Stock), to be issued by Peapod, Inc.
in favor of Koninklijke Ahold N.V.
10.8 Certificate of Designations of Series B Convertible Preferred Stock of
Peapod, Inc., dated as of April 14, 2000.
10.9 Registration Rights Agreement, dated as of April 14, 2000, by and between
Peapod, Inc. and Koninklijke Ahold N.V.
10.10 Voting Agreement, dated as of April 14, 2000, by and among Peapod, Inc.,
Koninklijke Ahold N.V and certain Individual Investors.
10.11 Voting Agreement, dated as of April 14, 2000, by and among Peapod, Inc.,
Koninklijke Ahold N.V and certain Institutional Investors.
24.1 Power of Attorney, executed by Robert G. Tobin, Executive Vice-President
and member of the Corporate Executive Board of Koninklijke Ahold N.V.
99.1 Promissory Note, dated April 5, 2000, by Peapod, Inc. to the order of
BEW, Inc.
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: April 24, 2000
KONINKLIJKE AHOLD N.V.
By: /s/ A.H.P.M. van Tielraden
__________________________________
Name: A.H.P.M. van Tielraden
Title: General Counsel
<PAGE>
Schedule I
Set forth below is the name, present principal occupation or employment and
material occupations, positions, offices or employments for the past five years
of each member of the Supervisory Board, the Corporate Executive Board and each
executive officer of Koninklijke Ahold N.V. The principal address of Koninklijke
Ahold N.V. and, unless indicated below, the current business address for each
individual listed below is Albert Heijnweg 1, 1507 EH Zaandam, The Netherlands,
Telephone: 011-31-75-6599111. Each such person is, unless indicated below, a
citizen of The Netherlands. Members of the Supervisory Board are identified by
an asterisk and members of the Corporate Executive Board are identified by two
asterisks.
Name and Current Present Principal Occupation or
Business Address Employment; Material Positions Held
During the Past Five Years
H. de Ruiter* Chairman of the Supervisory Board of Koninklijke
Ahold N.V.; Former Group Managing Director and
Managing Director of Royal Dutch Petroleum
Company; Member of the Supervisory Board of
Royal Dutch Petroleum Company; Director of Shell
Petroleum N.V. The Hague; Director of Shell
Petroleum Company Ltd. London; Member of the
Supervisory Board of Heineken N.V.; Chairman of
the Supervisory Board of Wolters Kluwer N.V.;
Chairman of the Supervisory Board of Beers N.V.;
Vice-Chairman of the Supervisory Board of Corus
Group; Former Chairman and Member of the
Supervisory Board of Koninklijke Hoogovens N.V.;
Member of the Supervisory Board of Vopak; Former
Chairman and Member of the Supervisory Board of
Koninklijke Pakhoed N.V.; Member of the
Supervisory Board of Aegon N.V.
R.J. Nelissen* Vice Chairman of the Supervisory Board of
Koninklijke Ahold N.V.; Former Minister of
Economic Affairs; Former Vice-Premier and
Minister of Finance of the Dutch Government;
Former Chairman of the Managing Board of ABN
AMRO Holding N.V.; Supervisory Board Member of
ABN AMRO Holding N.V. and ABN AMRO Bank N.V.;
Chairman of the Supervisory Board of N.V.
Luchthaven Schiphol; Chairman of the Supervisory
Board of Koninklijke Boskalis Westminster N.V;
Chairman of the Supervisory Board of
DaimlerChrysler Nederland B.V.; Supervisory
Board Member of International Flavors &
Fragrances IFF (Nederland) B.V.; Supervisory
Board Member of Elsevier N.V. and Reed Elsevier
PLC
Sir Michael Perry* Member of the Supervisory Board of Koninklijke
c/o Centrica PLC Ahold N.V.; Deputy Chairman of Bass PLC;
11-12 Clifford Street Chairman of Centrica PLC (formerly British Gas);
London W1X 1RB Chairman of Dunlop Slazenger Group Limited;
United Kingdom Non-Executive Director of Marks & Spencer PLC;
Chairman of The Shakespeare Globe Trust;
Chairman of The Shakespeare Globe Trust;
Chairman of the British Government's Senior
Salaries Review Body; Former Director of British
Gas PLC; Former Chairman of the Managing Board
of Unilever PLC; Former Chairman of United
Holdings Ltd.; Former Chairman of The
Advertising Association; Former Member of the
British Chamber of Commerce (Citizen of the
United Kingdom)
J.A. van Kemenade* Member of the Supervisory Board of Koninklijke
Ahold N.V.; Queen's Commissioner for the Dutch
Province of North-Holland; Former Minister of
Education and Science of the Dutch Government;
Vice-Chairman of the Supervisory Board of De
Nederlandsche Bank N.V.; Chairman of the Inter
Provinciaal Overleg; Member of the Board of
Stichting; Chairman of 'Stichting Prins Bernhard
Cultuurfonds' Noord
A.J. Kranendonk* Member of the Supervisory Board of Koninklijke
Ahold N.V.; Former President of the Management
Board of Friesland W.A.; Former Chairman of the
Association of Dutch Chambers of Commerce;
Member of the Supervisory Board of S.C. Johnson
Polymer B.V.; Chairman of the Supervisory Board
of Athlon N.V.; Member of the Supervisory Board
of Lankhorst Sneek B.V.; Chairman of the
Supervisory Board of Dokkumer Vlaggen Centrale
B.V.; Chairman of 'Stichting Preferente
Aandelen' NBM-Amstelland; Member of the Board of
'Stichting Administratiekantoor' Koninklijke
Bols Wessanen
Richard F. Meyer* Member of the Supervisory Board of Koninklijke
c/o Harvard Business Ahold N.V.; Professor of Business
School Administration, Harvard Business School;
Morgan Hall 211 Chairman of NEDD (Citizen of the United States)
Boston, Massachusetts
02163
Lodewijk J.R. de Vink* Member of the Supervisory Board of Koninklijke
c/o Warner-Lambert Company Ahold N.V.; Chairman, President and Chief
201 Tabor Road Executive Officer of Warner-Lambert Company;
Morris Plains, New Jersey President and former Chief Operating Officer of
07950 Warner-Lambert Company; Former President of
Schering International (Citizen of the United
States)
Cees H. van der Hoeven** President and Chief Executive Officer of
Koninklijke Ahold N.V.; Member of the
Supervisory Board of ABN AMRO Bank N.V.;
Director of Ahold U.S.A., Inc.
J.G. Andreae** Executive Vice President of Koninklijke Ahold
N.V.; Former President of Albert Heijn B.V.;
Member of the Corporate Executive Board of
Albert Heijn B.V.; President of the Supervisory
Board of S.V.M.; Former Member of the
Supervisory Board of KLM-catering; Co-chairman
of ECR Europe; Co-chairman of ECR NL; Director
of Ahold U.S.A., Inc.
A.Michael Meurs** Executive Vice President and Chief Financial
Officer of Koninklijke Ahold N.V.; Supervisory
Director B of Disco Ahold International Holdings
N.V.; Former Senior Vice President of Business
Development of Koninklijke Ahold N.V.; Former
Senior Vice President of Finance of Koninklijke
Ahold N.V.; Former Vice President of Finance
Koninklijke Ahold N.V.; Former Director of Ahold
Americas Holdings, Inc.; Former Executive Vice
President of Croesus, Inc.; Member of the
Supervisory Board of Van Den Boom Groep; Member
of the Supervisory Board of Van der Hoop
Effectenbank N.V.; Director and Executive Vice
President of Ahold U.S.A., Inc.
Alan S. Noddle** Executive Vice President of Koninklijke Ahold
N.V.; Supervisory Director B of Disco Ahold
International Holdings N.V.; Director of
Inversiones Santa Isabel S.A.; Former Chief
Executive Officer of Giant Food Stores, Inc.;
Director of Ahold U.S.A., Inc.; Former President
and Chief Executive Officer of Ahold U.S.A.
Support Services, Inc. (Citizen of the United
States)
Robert G. Tobin** Executive Vice President of Koninklijke Ahold
c/o Ahold U.S.A., Inc N.V.; Director and President of Ahold Americas
14101 Newbrook Drive Holdings, Inc.; Chairman, Director, President
Corporate Pointe Two and Chief Executive Officer of Ahold U.S.A.,
Chantilly, Virginia 20151 Inc.; Director of Ahold Finance U.S.A., Inc.;
Former President and Chief Executive Officer of
Croesus, Inc.; Director and Former Chairman,
President and Chief Executive Officer of The
Stop & Shop Companies, Inc. (a wholly owned
subsidiary of Koninklijke Ahold N.V. since 1996)
(Citizen of the United States)
N.L.J. Berger Corporate Secretary of Koninklijke Ahold N.V.;
Former Deputy General Counsel of Koninklijke
Ahold N.V.
A.J. Brouwer Senior Vice President Management Development and
Organization of Koninklijke Ahold N.V.; Former
Vice President of Management Development and
Organization of Koninklijke Ahold N.V.;
Executive Vice President HR/MD Ahold Europe
A. Buitenhuis Senior Vice President of Finance and Fiscal
Affairs of Koninklijke Ahold N.V.; Former Vice
President of Fiscal Affairs of Koninklijke Ahold
N.V.
A.H.P.M. van Tielraden Senior Vice President and General Counsel of
Koninklijke Ahold N.V.; Former Vice President
and Deputy General Counsel of Koninklijke Ahold
N.V.; Director of Ralico SDN BHD; Supervisory B
member of Paiz Ahold B.V. (will be replaced,
date not yet known); Former Director of Legal
Affairs Hagemeyer N.V.; Former Senior Legal
Advisor of Unilever Nederland B.V.; Former
General Counsel of Quest International
P.P.M. Ekelschot Senior Vice President of Internal Audit of
Koninklijke Ahold N.V.; Former Vice President
of Internal Audit of Koninklijke Ahold N.V.;
Vice President of Koninklijke NIVRA; Treasurer
IIA-Netherland
H. Gobes Senior Vice President of Communications of
Koninklijke Ahold N.V.
Maarten J. Dorhout Mees Senior Vice President of Business Development of
Koninklijke Ahold N.V.; Former Senior Vice
President of Sales and Services of Albert Heijn
B.V.; Former Deputy Director of Customer
Services of Albert Heijn B.V.
L.A.P.A. Verhelst Senior Vice President of Administration of
Koninklijke Ahold N.V.; Former Managing Director
of Pays-Bas Property Fund N.V.; Former Member
of the Executive Board of Koninklijke Bols
Wessanen N.V.; President of the Supervisory
Board of AVIO-Diepen B.V.
C. Sterk Senior Vice President of Financial Services of
Koninklijke Ahold N.V.; Former Senior Vice
President of Administration of Koninklijke Ahold
N.V.; Former President of Albert Heijn B.V.
<PAGE>
EXHIBIT INDEX
-------------
10.1 Warrant Agreement (Promissory Note), dated as of April 10, 2000, issued
by Peapod, Inc. in favor of Koninklijke Ahold N.V.
10.2 Warrant Agreement (Credit Agreement), dated as of April 14, 2000, issued
by Peapod, Inc. in favor of Koninklijke Ahold N.V.
10.3 Purchase Agreement, dated as of April 14, 2000, by and between Peapod,
Inc. and Koninklijke Ahold N.V.
10.4 Credit Agreement dated as of April 14, 2000, between Peapod, Inc. and
Koninklijke Ahold N.V.
10.5 Amended and Restated Security Agreement dated as of April 5, 2000, by
Peapod, Inc. to BEW, Inc. and Koninklijke Ahold N.V.
10.6 Amended and Restated Collateral Assignment of Intellectual Property dated
as of April 14, 2000, by Peapod, Inc. to BEW, Inc. and Koninklijke Ahold
N.V.
10.7 Form of Warrant Agreement (Preferred Stock), to be issued by Peapod, Inc.
in favor of Koninklijke Ahold N.V.
10.8 Certificate of Designations of Series B Convertible Preferred Stock of
Peapod, Inc., dated as of April 14, 2000.
10.9 Registration Rights Agreement, dated as of April 14, 2000, by and between
Peapod, Inc. and Koninklijke Ahold N.V.
10.10 Voting Agreement, dated as of April 14, 2000, by and among Peapod, Inc.,
Koninklijke Ahold N.V and certain Individual Investors.
10.11 Voting Agreement, dated as of April 14, 2000, by and among Peapod, Inc.,
Koninklijke Ahold N.V and certain Institutional Investors.
24.1 Power of Attorney, executed by Robert G. Tobin, Executive Vice-President
and member of the Corporate Executive Board of Koninklijke Ahold N.V.
99.1 Promissory Note, dated April 5, 2000, by Peapod, Inc. to the order of
BEW, Inc.
EX-10.1
================================================================================
WARRANT
to Purchase Common Stock of
PEAPOD, INC.,
a Delaware corporation
-----------------------
Warrant No. [__]
Original Issue Date: April 10, 2000
-----------------------
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
1. DEFINITIONS............................................................1
2. EXERCISE OF WARRANT....................................................8
2.1 Manner of Exercise................................................8
2.2 Payment of Taxes..................................................9
2.3 Fractional Shares................................................10
2.4 Reduced Exercise Price...........................................10
3. TRANSFER, DIVISION AND COMBINATION....................................10
3.1 Transfer.........................................................10
3.2 Division and Combination.........................................11
3.3 Expenses.........................................................11
4. ANTIDILUTION PROVISIONS...............................................11
4.1 Upon Issuance of Common Stock....................................11
4.2 Upon Acquisition of Common Stock.................................12
4.3 Provisions Applicable to Adjustments.............................12
4.4 Upon Stock Dividends or Splits...................................14
4.5 Upon Combinations................................................14
4.6 Upon Reclassifications, Reorganizations, Consolidations or
Mergers.........................................................14
4.7 Deferral in Certain Circumstances................................15
4.8 Other Anti-Dilution Provisions...................................15
4.9 Appraisal Procedure..............................................15
4.10 Adjustment of Number of Shares Purchasable......................15
4.11 Exceptions......................................................16
4.12 Notice of Adjustment of Exercise Price..........................16
4.13 Other Dilutive Events...........................................16
5. NO IMPAIRMENT; REGULATORY COMPLIANCE AND COOPERATION; NOTICE OF
EXPIRATION............................................................17
6. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH
OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY.............................17
7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS.........18
7.1 Notices of Corporate Actions.....................................18
7.2 Taking of Record.................................................19
7.3 Closing of Transfer Books........................................19
8. TRANSFER RESTRICTIONS.................................................19
8.1 Restrictions on Transfers........................................19
8.2 Restrictive Legends..............................................20
8.3 Termination of Securities Law Restrictions.......................21
9. LOSS OR MUTILATION....................................................21
10. OFFICE OF THE COMPANY.................................................21
11. FINANCIAL AND BUSINESS INFORMATION....................................21
12. DILUTION FEE..........................................................23
13. MISCELLANEOUS.........................................................23
13.1 Nonwaiver.......................................................23
13.2 Notice Generally................................................23
13.3 Indemnification.................................................24
13.4 Limitation of Liability.........................................24
13.5 Remedies........................................................24
13.6 Successors and Assigns..........................................24
13.7 Amendment.......................................................24
13.8 Severability....................................................25
13.9 Headings........................................................25
13.10 GOVERNING LAW; JURISDICTION....................................25
13.11 WAIVER OF JURY TRIAL...........................................26
ANNEX A SUBSCRIPTION FORM
ANNEX B ASSIGNMENT FORM
<PAGE>
NEITHER THIS WARRANT NOR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE HEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR ANY STATE SECURITIES LAW. THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND
THE SECURITIES ISSUABLE UPON EXERCISE HEREOF MAY NOT BE TRANSFERRED, SOLD,
ASSIGNED, EXCHANGED, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
OR ENCUMBERED WITHOUT COMPLIANCE WITH THE PROVISIONS OF, AND ARE OTHERWISE
RESTRICTED BY THE PROVISIONS OF, THE ACT, THE RULES AND REGULATIONS THEREUNDER
AND THIS WARRANT. THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF
SHALL BE ENTITLED TO THE BENEFITS RELATING TO THIS WARRANT OF ALL FUTURE
AGREEMENTS TO BE ENTERED INTO WITH THE PURCHASER OR ITS AFFILIATES.
Warrant No. [___]
WARRANT
TO PURCHASE 100,000 SHARES OF COMMON STOCK
(SUBJECT TO ADJUSTMENT) OF
PEAPOD, INC.
THIS IS TO CERTIFY THAT Koninklijke Ahold NV, a company organized under the
laws of The Netherlands, (the "Purchaser") or its registered assigns, is
entitled, at any time prior to the Expiration Date (such term, and certain other
capitalized terms used herein being hereinafter defined), to purchase from
Peapod, Inc., a Delaware corporation (the "Company"), 100,000 shares of the
Common Stock of the Company (subject to adjustment as provided herein), at a
purchase price per share equal to $3.00 (the initial "Exercise Price"), subject
to adjustment as provided herein.
1. DEFINITIONS
As used in this Warrant (including the Subscription Form), the following
terms have the respective meanings set forth below:
"Additional Warrants" shall mean warrants issued to the Purchaser in
connection with the provision of a credit facility by the Purchaser and warrants
issued to the Purchaser in connection with the purchase of Preferred Stock by
the Purchaser.
"Affiliate" shall mean, with respect to any person, any other person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified person and, shall include (a) in the case of
a person who is an individual, (i) members of such specified person's immediate
family (as defined in Instruction 2 of Item 404(a) of Regulation S-K under the
Securities Act) and (ii) trusts, the trustee and all beneficiaries of which are
such specified person or members of such person's immediate family as determined
in accordance with the foregoing clause (i), and (b) any person that directly or
indirectly owns more than 5% of any class of capital stock or other interest of
such specified person. For the purposes of this definition, "control," when used
with respect to any person means the power to direct the management and policies
of such person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "affiliated," "controlling"
and "controlled" have meanings correlative to the foregoing. Notwithstanding the
foregoing, for purposes of this Warrant, the Purchaser and its Affiliates shall
not be deemed Affiliates of the Company.
"After-Tax Basis" when referring to a payment that is required hereunder
(the "target amount"), shall mean a total payment (the "total amount") that,
after deduction of all federal, state and local taxes that are required to be
paid by the recipient in respect of the receipt or accrual of such total amount,
is equal to the target amount.
"Agreed Rate" shall mean the rate of interest announced publicly by
Citibank, N.A. in New York, New York, from time to time, as Citibank, N.A.'s
base rate.
"Appraisal Procedure" if applicable, shall mean the following procedure to
determine the fair market value, as to any security, for purposes of the
definition of "Fair Value" or the fair market value, as to any other property
(in either case, the "valuation amount"). The valuation amount shall be
determined in good faith by the Board of Directors; provided, however, that if
the Majority Warrant Holders disagree with such valuation amount within a
reasonable period of time (not to exceed twenty (20) days after notice thereof)
the valuation amount shall be determined by an investment banking firm of
national recognition, which firm shall be reasonably acceptable to the Board of
Directors and the Majority Warrant Holders. If the Board of Directors and the
Majority Warrant Holders are unable to agree upon an acceptable investment
banking firm within ten (10) days after the date either party proposed that one
be selected, the investment banking firm will be selected by an arbitrator
located in New York City, New York, selected by the American Arbitration
Association (or if such organization ceases to exist, the arbitrator shall be
chosen by a court of competent jurisdiction). The arbitrator shall select the
investment banking firm (within ten (10) days of his appointment) from a list,
jointly prepared by the Board of Directors and the Majority Warrant Holders, of
not more than six investment banking firms of national standing in the United
States, of which no more than three may be named by the Board of Directors and
no more than three may be named by the Majority Warrant Holders. The arbitrator
may consider, within the ten-day period allotted, arguments from the parties
regarding which investment banking firm to choose, but the selection by the
arbitrator shall be made in its sole discretion from the list of six. The Board
of Directors and the Majority Warrant Holders shall submit their respective
valuations and other relevant data to the investment banking firm, and the
investment banking firm shall as soon as practicable thereafter make its own
determination of the valuation amount. The final valuation amount for purposes
hereof shall be the average of the two valuation amounts closest together, as
determined by the investment banking firm, from among the valuation amounts
submitted by the Company and the Majority Warrant Holders and the valuation
amount calculated by the investment banking firm. The determination of the final
valuation amount by such investment-banking firm shall be final and binding upon
the parties. The Company shall pay the fees and expenses of the investment
banking firm and arbitrator (if any) used to determine the valuation amount. If
required by any such investment banking firm or arbitrator, the Company shall
execute a retainer and engagement letter containing reasonable terms and
conditions, including, without limitation, customary provisions concerning the
rights of indemnification and contribution by the Company in favor of such
investment banking firm or arbitrator and its officers, directors, partners,
employees, agents and Affiliates.
"Appraised Value" per share of Common Stock as of a date specified herein
shall mean the value of such a share as of such date as determined by an
investment bank of nationally recognized standing selected jointly by the
Majority Warrant Holders and the Company. If the Company and the Majority
Warrant Holders cannot agree on a mutually acceptable investment bank, then the
Company and the Majority Warrant Holders shall each choose one such investment
bank and the respective chosen firms shall jointly select a third investment
bank, which shall make the determination. The Company shall pay the costs and
fees of each such investment bank (including any such investment bank selected
by the Majority Warrant Holders), and the decision of the investment bank making
such determination of Appraised Value shall be final and binding on the Company
and all affected Holders of Warrants or Warrant Stock. Such Appraised Value
shall be determined as a pro rata portion of the value of the Company taken as a
whole, based on the higher of (A) the value derived from a hypothetical sale of
the entire Company as a going concern by a willing seller to a willing buyer
(neither acting under any compulsion) and (B) the liquidation value of the
entire Company. No discount shall be applied on account of (i) any Warrants or
Warrant Stock representing a minority interest, (ii) any lack of liquidity of
the Common Stock or the Warrants, (iii) the fact that the Warrants or Warrant
Stock may constitute "restricted securities" for securities law purposes, (iv)
the existence of any call option or (v) any other grounds.
"Book Value" per share of Common Stock as of a date specified herein shall
mean the consolidated book value of the Company and its Subsidiaries as of such
date divided by the number of shares of Common Stock Outstanding on such date.
Such book value shall be determined in accordance with GAAP, except that there
shall be no reduction in such book value by reason of any amount that may be
required either as an offset to or reserve against retained earnings or as a
deduction from book value as a result of the issuance, existence, anticipated
exercise of, or anticipated cost to the Company of the repurchase of, any of the
Warrants.
"Business Day" shall mean a day other than a Saturday, Sunday or day on
which banking institutions in New York are authorized or required to remain
closed.
"Commission" shall mean the Securities and Exchange Commission or any other
federal agency then administering the Securities Act and other federal
securities laws.
"Common Stock" shall mean the Common Stock of the Company, par value $0.01
per share, as constituted on the Original Issue Date, and any capital stock into
which such Common Stock may thereafter be changed, and shall also include (i)
capital stock of the Company of any other class (regardless of how denominated)
issued to the holders of shares of any Common Stock upon any reclassification
thereof which is also not preferred as to dividends or liquidation over any
other class of stock of the Company and which is not subject to redemption and
(ii) shares of common stock of any successor or acquiring corporation (as
defined in Section 4.6 hereof) received by or distributed to the holders of
Common Stock of the Company in the circumstances contemplated by Section 4.6
hereof.
"Company" shall mean Peapod, Inc., a Delaware corporation, and any
successor corporation.
"Current Market Price" shall mean as of any specified date the average of
the Daily Market Price of one share of the Common Stock for the shorter of (x)
the 10 consecutive Business Days immediately preceding such date or (y) the
period commencing on the Business Day next following the first public
announcement by the Company of any event giving rise to an adjustment of the
Exercise Price pursuant to Section 4 below and ending on such date.
"Daily Market Price" shall mean, with respect to one share of Common Stock
and for any Business Day: (i) if the Common Stock is then listed on a national
securities exchange or is authorized for quotation on NASDAQ and is designated
as a National Market System security, the last sale price of one share of Common
Stock, regular way, on such day on the principal stock exchange or market system
on which such Common Stock is then listed or authorized for quotation, or, if no
such sale takes place on such day, the average of the closing bid and asked
prices for one share of Common Stock on such day as reported on such stock
exchange or market system or (ii) if the Common Stock is not then listed or
authorized for quotation on any national securities exchange or designated as a
National Market System security on NASDAQ but is traded over-the-counter, the
average of the closing bid and asked prices for one share of Common Stock as
reported on NASDAQ or the Electronic Bulletin Board or in the National Daily
Quotation Sheets, as applicable.
"Designated Office" shall have the meaning set forth in Section 10 hereof.
"Dilution Fee" shall have the meaning set forth in Section 12 hereof.
"Dilution Fee Payment Date" shall have the meaning set forth in Section 12
hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Excluded Securities" shall have the meaning set forth in Section 4.11
hereof.
"Exercise Date" shall have the meaning set forth in Section 2.1 hereof.
"Exercise Notice" shall have the meaning set forth in Section 2.1 hereof.
"Exercise Period" shall mean the period during which this Warrant is
exercisable pursuant to Section 2.1 hereof.
"Exercise Price" shall mean, in respect of a share of Common Stock at any
date herein specified, the initial Exercise Price set forth in the preamble of
this Warrant, as adjusted from time to time pursuant to Sections 2.4 and 4
hereof.
"Expiration Date" shall mean the tenth anniversary of the Original Issue
Date.
"Fair Value" per share of Common Stock as of any specified date shall mean
(A) if the Common Stock is publicly traded on such date, the Current Market
Price per share or (B) if the Common Stock is not publicly traded on such date,
(1) the fair market value per share of Common Stock as determined in good faith
by the Board of Directors of the Company and set forth in a written notice to
each Holder or (2) if the Majority Warrant Holders object in writing to such
price as determined by the Board of Directors within thirty (30) days after
receiving notice of same, the Appraised Value per share as of such date.
"GAAP" shall mean generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board, which are in effect from time to time,
consistently applied.
"Holder" shall mean (a) with respect to this Warrant, the person in whose
name the Warrant set forth herein is registered on the books of the Company
maintained for such purpose and (b) with respect to any other Warrant or shares
of Warrant Stock, the person in whose name such Warrant or Warrant Stock is
registered on the books of the Company maintained for such purpose.
"Lien" shall mean any mortgage or deed of trust, pledge, hypothecation,
assignment, deposit arrangement, lien, charge, claim, security interest,
easement or encumbrance, or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including, without
limitation, any lease or title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement perfecting a security interest
under the Uniform Commercial Code or comparable law of any jurisdiction).
"Majority Warrant Holders" shall mean, with respect to a given
determination, the Holders of Warrants and Additional Warrants representing the
right to acquire more than fifty percent (50%) of the Common Stock underlying
all of the then outstanding Warrants and Additional Warrants.
"NASD" shall mean the National Association of Securities Dealers, Inc., or
any successor corporation thereto.
"NASDAQ" shall mean the NASDAQ quotation system, or any successor reporting
system.
"Opinion of Counsel" shall mean a written opinion of outside counsel
experienced in Securities Act matters chosen by the Holder of this Warrant or
Warrant Stock issued upon the exercise hereof and reasonably acceptable to the
Company.
"Original Issue Date" shall mean the date on which this Warrant was issued,
as set forth on the cover page of this Warrant.
"Outstanding" shall mean, when used with reference to Common Stock, at any
date as of which the number of shares thereof is to be determined, all issued
shares of Common Stock, except shares then owned or held by or for the account
of the Company or any Subsidiary, and shall include all shares issuable in
respect of outstanding scrip or any certificates representing fractional
interests in shares of Common Stock.
"person" shall mean any individual, partnership, corporation, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or agency or political subdivision
thereof, or other entity.
"Preferred Stock" shall mean convertible preferred stock of the Company.
"Restricted Common Stock" shall mean shares of Common Stock which are, or
which upon their issuance on the exercise of this Warrant would be, evidenced by
a certificate bearing the restrictive legend set forth in Section 8.2(a) hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Share Withholding Option" shall have the meaning set forth in Section
2.1(c) hereof.
"subsidiary" shall mean, with respect to any person, (a) a corporation a
majority of whose capital stock with voting power, under ordinary circumstances,
to elect directors is at the time, directly or indirectly, owned by such person,
by a subsidiary of such person, or by such person and one or more subsidiaries
of such person, (b) a partnership in which such person or a subsidiary of such
person is, at the date of determination, a general partner of such partnership,
or (c) any other person (other than a corporation) in which such person, a
subsidiary of such person or such person and one or more subsidiaries of such
person, directly or indirectly, at the date of determination thereof, has (i) at
least a majority ownership interest, (ii) the power to elect or direct the
election of the directors or other governing body of such person, or (iii) the
power to direct or cause the direction of the affairs or management of such
person. For purposes of this definition, a person is deemed to own any capital
stock or other ownership interest if such person has the right to acquire such
capital stock or other ownership interest, whether through the exercise of any
purchase option, conversion privilege or similar right.
"Subsidiary" shall mean a subsidiary of the Company.
"Transfer" shall mean any disposition of any Warrant or Warrant Stock or of
any interest therein, which would constitute a "sale" thereof or a transfer of a
beneficial interest therein within the meaning of the Securities Act.
"Warrant Price" shall mean an amount equal to (i) the number of shares of
Common Stock being purchased upon exercise of all or a portion of this Warrant
pursuant to Section 2.1 hereof, multiplied by (ii) the Exercise Price as of the
date of such exercise.
"Warrants" shall mean this Warrant and all warrants issued upon transfer,
division or combination of, or in substitution for, this Warrant or any other
such Warrant. All Warrants shall at all times be identical as to terms and
conditions, except as to the number of shares of Common Stock for which they may
be exercised and their date of issuance.
"Warrant Stock" generally shall mean the shares of Common Stock issued,
issuable or both (as the context may require) upon the exercise of Warrants.
2. EXERCISE OF WARRANT
2.1 Manner of Exercise. (a) From and after the Original Issue Date and
until 5:00 P.M., New York time, on the Expiration Date, the Holder of this
Warrant may from time to time exercise this Warrant, on any Business Day, for
all or any part of the number of shares of Common Stock purchasable hereunder.
In order to exercise this Warrant, in whole or in part, the Holder shall (i)
deliver to the Company at its Designated Office a written notice of the Holder's
election to exercise this Warrant (an "Exercise Notice"), which Exercise Notice
shall be irrevocable and specify the number of shares of Common Stock to be
purchased, together with this Warrant and (ii) pay to the Company the Warrant
Price in accordance with Section 2.1(c) (the date on which both such delivery
and payment shall have first taken place being hereinafter sometimes referred to
as the "Exercise Date"). Such Exercise Notice shall be in the form of the
subscription form appearing at the end of this Warrant as Annex A, duly executed
by the Holder or its duly authorized agent or attorney.
(b) Upon receipt by the Company of such Exercise Notice, Warrant and
payment (if applicable), the Company shall, as promptly as practicable, and in
any event within five (5) Business Days thereafter, execute (or cause to be
executed) and deliver (or cause to be delivered) to the Holder a certificate or
certificates representing the aggregate number of full shares of Common Stock
issuable upon such exercise, together with cash in lieu of any fraction of a
share, as hereafter provided. The stock certificate or certificates so delivered
shall be, to the extent possible, in such denomination or denominations as the
exercising Holder shall reasonably request in the Exercise Notice and shall be
registered in the name of the Holder or, subject to Section 8 below, such other
name as shall be designated in the Exercise Notice. This Warrant shall be deemed
to have been exercised, and such stock certificate or certificates shall be
deemed to have been issued, and the Holder or any other person so designated to
be named therein shall be deemed to have become a holder of record of the shares
evidenced by such stock certificate or certificates for all purposes, as of the
Exercise Date.
(c) Payment of the Warrant Price shall be made at the option of the Holder
by one or more of the following methods: (i) by delivery of a certified or
official bank check in the amount of such Warrant Price payable to the order of
the Company, (ii) by instructing the Company to withhold a number of shares of
Warrant Stock then issuable upon exercise of this Warrant with an aggregate Fair
Value equal to such Warrant Price (the "Share Withholding Option"), (iii) by
surrendering to the Company shares of Common Stock previously acquired by the
Holder with an aggregate Fair Value equal to such Warrant Price, (iv) by
surrendering to the Company dividends due and owing by the Company to the Holder
equal to such Warrant Price, or (v) by providing to the Company goods or
services with a fair value determined by the Board of Directors equal to such
Warrant Price (or if the Majority Warrant Holders object in writing to such
determination within thirty (30) days after receiving notice of same, as
determined by an independent expert of national recognition in the relevant
industry, which expert shall be reasonably acceptable to the Board of Directors
and the Majority Warrant Holders, and if the Board of Directors and the Majority
Warrant Holders are unable to agree upon an acceptable independent expert within
ten (10) days after the date either party proposed that one be selected, the
independent expert will be selected by an arbitrator located in New York City,
New York, selected by the American Arbitration Association (or if such
organization ceases to exist, the arbitrator shall be chosen by a court of
competent jurisdiction)). In the event of any withholding of Warrant Stock or
surrender of Common Stock pursuant to clause (ii) or (iii) above where the
number of shares whose Fair Value is equal to the Warrant Price is not a whole
number, the number of shares withheld by or surrendered to the Company shall be
rounded up to the nearest whole share and the Company shall make a cash payment
to the Holder based on the incremental fraction of a share being so withheld by
or surrendered to the Company in an amount determined in accordance with Section
2.3 hereof.
(d) If this Warrant shall have been exercised in part, the Company shall,
at the time of delivery of the certificate or certificates representing the
shares of Common Stock being issued, deliver to the Holder a new Warrant
evidencing the rights of the Holder to purchase the unpurchased shares of Common
Stock called for by this Warrant. Such new Warrant shall in all other respects
be identical to this Warrant. Notwithstanding any provision herein to the
contrary, the Company shall not be required to register shares of Common Stock
in the name of any person who acquired this Warrant (or part hereof) or any
shares of Warrant Stock otherwise than in accordance with this Warrant.
(e) All Warrants delivered for exercise shall be canceled by the Company.
2.2 Payment of Taxes. All shares of Common Stock issuable upon the exercise
of this Warrant pursuant to the terms hereof shall be validly issued, fully paid
and nonassessable, issued without violation of any preemptive rights and free
and clear of all Liens (other than any created by actions of the Holder). The
Company shall pay all expenses in connection with, and all issuance, transfer,
stamp and other similar taxes and other governmental charges that may be imposed
with respect to, the issue or delivery thereof, unless such tax or charge is
imposed by law upon the Holder, in which case such taxes or charges shall be
paid by the Holder and the Company shall reimburse the Holder therefor on an
After-Tax Basis. The Company shall not, however, be required to pay any tax or
governmental charge which may be payable in respect of any Transfer involved in
the issue and delivery of shares of Common Stock issuable upon exercise of this
Warrant in a name other than that of the Holder of the Warrants to be exercised,
and no such issue or delivery shall be made unless and until the person
requesting such issue has paid to the Company the amount of any such tax, or has
established to the satisfaction of the Company that such tax has been paid.
2.3 Fractional Shares. The Company shall not be required to issue a
fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share that the Holder of one or more Warrants, the rights under
which are exercised in the same transaction, would otherwise be entitled to
purchase upon such exercise, the Company shall pay to such Holder an amount in
cash equal to such fraction multiplied by the Fair Value.
3. TRANSFER, DIVISION AND COMBINATION
3.1 Transfer. Subject to compliance with Section 8 hereof, each transfer of
this Warrant and all rights hereunder, in whole or in part, shall be registered
on the books of the Company to be maintained for such purpose, upon surrender of
this Warrant at the Designated Office, together with a written assignment of
this Warrant in the form of Annex B hereto duly executed by the Holder or its
agent or attorney and funds sufficient to pay any transfer taxes described in
Section 2.2 in connection with the making of such transfer. Upon such surrender
and delivery and, if required, such payment, the Company shall, subject to
Section 8, execute and deliver a new Warrant or Warrants in the name of the
assignee or assignees and in the denominations specified in such instrument of
assignment, and shall issue to the assignor a new Warrant evidencing the portion
of this Warrant not so assigned and this Warrant shall promptly be cancelled. A
Warrant, if properly assigned in compliance with Section 8, may be exercised by
the new Holder for the purchase of shares of Common Stock without having a new
Warrant issued.
3.2 Division and Combination. Subject to compliance with the applicable
provisions of this Warrant including, without limitation, Section 8, this
Warrant may be divided or combined with other Warrants upon presentation hereof
at the Designated Office, together with a written notice specifying the names
and denominations in which new Warrants are to be issued, signed by the Holder
or its agent or attorney. Subject to compliance with the applicable provisions
of this Warrant as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.
3.3 Expenses. The Company shall prepare, issue and deliver at its own
expense (other than pursuant to Section 2.2 hereof) any new Warrant or Warrants
required to be issued under this Section 3.
3.4 Maintenance of Books. The Company agrees to maintain, at the Designated
Office, books for the registration and transfer of the Warrants.
4. ANTIDILUTION PROVISIONS
The number of shares of Common Stock for which this Warrant is exercisable
and the Exercise Price shall be subject to adjustment from time to time as set
forth in this Section 4. The Company agrees that, at the election of the Holder,
the antidilution provisions in this Section 4 shall be revised to conform to
antidilution provisions in warrants issued in connection with the provision of a
credit facility by the Purchaser or the purchase of Preferred Stock by the
Purchaser. The Holder agrees that, at the election of the Company, the
exceptions to the antidilution provisions in Section 4.11 shall be revised to
conform to the exceptions to the antidilution provisions in warrants issued in
connection with the provision of a credit facility by the Purchaser or the
purchase of Preferred Stock by the Purchaser.
4.1 Upon Issuance of Common Stock. If the Company shall, at any time or
from time to time after the Original Issuance Date, issue any shares of Common
Stock, options to purchase or rights to subscribe for Common Stock, securities
by their terms convertible into or exchangeable for Common Stock, or options to
purchase or rights to subscribe for such convertible or exchangeable securities,
other than shares of Preferred Stock issued to the Purchaser or Excluded
Securities, without consideration or for consideration per share less than
either (a) the Exercise Price or (b) the Fair Value of the Common Stock, in each
case, in effect immediately prior to the issuance of such Common Stock or
securities, then such Exercise Price shall forthwith be adjusted to a price
equal to the lower of (x) the Exercise Price in effect immediately prior
thereto, or (y) the lowest consideration per share for which such shares of
Common Stock or such options, rights or convertible or exchangeable securities
are issued (plus the additional consideration required to be paid upon exercise,
exchange or conversion of such options, rights or convertible or exchangeable
securities).
4.2 Upon Acquisition of Common Stock. If the Company or any Subsidiary
shall, at any time or from time to time after the Original Issuance Date,
directly or indirectly, redeem, purchase or otherwise acquire (a) any shares of
Common Stock for a consideration per share greater than the Fair Value of shares
of Common Stock immediately prior to such event, or (b) any options to purchase
or rights to subscribe for Common Stock, securities by their terms convertible
into or exchangeable for Common Stock (other than shares of Preferred Stock
issued to the Purchaser that are redeemed according to their terms), or options
to purchase or rights to subscribe for such convertible or exchangeable
securities, in either case, for a consideration per share of Common Stock for
which such options, rights or convertible or exchangeable securities are
exercisable, convertible or exchangeable, that is greater than the amount, if
any, by which the Fair Value of shares of Common Stock immediately prior to such
event exceeds the per share exercise, exchange, subscription, conversion or
purchase price applicable to such options, rights or convertible or exchangeable
securities, then, in the case of (a) or (b), the Exercise Price shall forthwith
be lowered to a price equal to the price obtained by multiplying:
(i) the Exercise Price in effect immediately prior to such event, by
(ii) a fraction of which (x) the denominator shall be the Fair Value
per share of Common Stock immediately prior to such event and (y) the
numerator shall be the result of dividing:
(A) (1) the product of (a) the number of shares of Common Stock
outstanding on a fully-diluted basis and (b) the Fair Value per share
of Common Stock, in each case, immediately prior to such event, minus
(2) the aggregate consideration paid by the Company in such event, by
(B) the number of shares of Common Stock outstanding on a
fully-diluted basis immediately prior to such event, minus the number
of shares of Common Stock purchased or acquired, or for which the
options, rights or convertible or exchangeable securities acquired
were exercisable, convertible or exchangeable.
For purposes of this Section 4, "fully diluted basis" shall be determined
in accordance with the treasury method of GAAP and Section 4.3.
4.3 Provisions Applicable to Adjustments. For the purposes of any
adjustment of an Exercise Price pursuant to Sections 4.1 and 4.2, the following
provisions shall be applicable:
(i) In the case of the issuance of Common Stock for cash in a
public offering or private placement, the consideration shall be
deemed to be the amount of cash paid therefor before deducting
therefrom any discounts, commissions or placement fees payable by the
Company to any underwriter or placement agent in connection with the
issuance and sale thereof.
(ii) In the case of the issuance of Common Stock for a
consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the Fair Value thereof as
determined in accordance with the Appraisal Procedure.
(iii) In the case of the issuance of options to purchase or
rights to subscribe for Common Stock, securities by their terms
convertible into or exchangeable for Common Stock, or options to
purchase or rights to subscribe for such convertible or exchangeable
securities, except for shares of Preferred Stock issued to the
Purchaser or options to acquire Excluded Securities:
(A) the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options to purchase or rights
to subscribe for Common Stock shall be deemed to have been issued
at the time such options or rights were issued and for a
consideration equal to the consideration (determined in the
manner provided in subparagraphs (i) and (ii) above), if any,
received by the Company upon the issuance of such options or
rights plus the minimum purchase price provided in such options
or rights for the Common Stock covered thereby;
(B) the aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange of any such
convertible or exchangeable securities or upon the exercise of
options to purchase or rights to subscribe for such convertible
or exchangeable securities and subsequent conversion or exchange
thereof shall be deemed to have been issued at the time such
securities, options, or rights were issued and for a
consideration equal to the consideration received by the Company
for any such securities and related options or rights (excluding
any cash received on account of accrued interest or accrued
dividends), plus the additional consideration, if any, to be
received by the Company upon the conversion or exchange of such
securities or the exercise of any related options or rights (the
consideration in each case to be determined in the manner
provided in paragraphs (i) and (ii) above);
(C) on any change in the number of shares or exercise price
of Common Stock deliverable upon exercise of any such options or
rights or conversions of or exchanges for such securities, other
than a change resulting from the antidilution provisions thereof,
the applicable Exercise Price shall forthwith be readjusted to
such Exercise Price as would have been obtained had the
adjustment made upon the issuance of such options, rights or
securities not converted prior to such change or options or
rights related to such securities not converted prior to such
change been made upon the basis of such change;
(D) upon the expiration of any such options or the
termination of any rights, convertible securities or exchangeable
securities, the applicable Exercise Price shall forthwith be
readjusted to such Exercise Price as would have been in effect at
the time of such expiration or termination had such options,
rights, convertible securities or exchangeable securities, to the
extent outstanding immediately prior to such expiration or
termination, never been issued; and
(E) no further adjustment of the Exercise Price adjusted
upon the issuance of any such options, rights, convertible
securities or exchangeable securities shall be made as a result
of the actual issuance of Common Stock on the exercise of any
such rights or options or any conversion or exchange of any such
securities.
4.4 Upon Stock Dividends or Splits. If, at any time after the Original
Issuance Date, the number of shares of Common Stock outstanding is increased by
a stock dividend payable in shares of Common Stock or by a subdivision or
split-up of shares of Common Stock, then, following the record date for the
determination of holders of Common Stock entitled to receive such stock
dividend, or to be affected by such subdivision or split-up, the Exercise Price
shall be appropriately decreased so that the number of shares of Common Stock
purchasable on exercise of the Warrants shall be increased in proportion to such
increase in outstanding shares.
4.5 Upon Combinations. If, at any time after the Original Issuance Date,
the number of shares of Common Stock outstanding is decreased by a combination
of the outstanding shares of Common Stock into a smaller number of shares of
Common Stock, then, following the record date to determine shares affected by
such combination, the Exercise Price shall be appropriately increased so that
the number of shares of Common Stock purchasable on exercise of each of the
Warrants shall be decreased in proportion to such decrease in outstanding
shares.
4.6 Upon Reclassifications, Reorganizations, Consolidations or Mergers. In
the event of any capital reorganization of the Company, any reclassification of
the stock of the Company (other than a change in par value or from par value to
no par value or from no par value to par value or as a result of a stock
dividend or subdivision, split-up or combination of shares), or any
consolidation or merger of the Company with or into another corporation (where
the Company is not the surviving corporation or where there is a change in or
distribution with respect to the Common Stock), each Warrant shall after such
reorganization, reclassification, consolidation, or merger be exercisable for
the kind and number of shares of stock or other securities or property of the
Company or of the successor corporation resulting from such consolidation or
surviving such merger, if any, to which the holder of the number of shares of
Common Stock deliverable (immediately prior to the time of such reorganization,
reclassification, consolidation or merger) upon exercise of such Warrant would
have been entitled upon such reorganization, reclassification, consolidation or
merger. The provisions of this clause shall similarly apply to successive
reorganizations, reclassifications, consolidations, or mergers.
4.7 Deferral in Certain Circumstances. In any case in which the provisions
of this Section 4 shall require that an adjustment shall become effective
immediately after a record date of an event, the Company may defer until the
occurrence of such event issuing to the Holder of any Warrant exercised after
such record date and before the occurrence of such event the shares of capital
stock issuable upon such exercise by reason of the adjustment required by such
event and issuing to such Holder only the shares of capital stock issuable upon
such exercise before giving effect to such adjustments; provided, however, that
the Company shall deliver to such Holder an appropriate instrument or due bills
evidencing such Holder's right to receive such additional shares.
4.8 Other Anti-Dilution Provisions. If the Company has issued or issues any
securities on or after the Original Issuance Date containing provisions
protecting the holder or holders thereof against dilution in any manner more
favorable to such holder or holders thereof than those set forth in this Section
4, such provisions (or any more favorable portion thereof) shall be deemed to be
incorporated herein as if fully set forth in this Warrant and, to the extent
inconsistent with any provision of this Warrant, shall be deemed to be
substituted therefor.
4.9 Appraisal Procedure. In any case in which the provisions of this
Section 4 shall necessitate that the Appraisal Procedure be utilized for
purposes of determining an adjustment to the Exercise Price, the Company may
defer until the completion of the Appraisal Procedure and the determination of
the adjustment (1) issuing to the Holder of any Warrant exercised after the date
of the event that requires the adjustment and before completion of the Appraisal
Procedure and the determination of the adjustment, the shares of capital stock
issuable upon such exercise by reason of the adjustment required by such event
and issuing to such Holder only the shares of capital stock issuable upon such
exercise before giving effect to such adjustment and (2) paying to such Holder
any amount in cash in lieu of a fractional share of capital stock pursuant to
Section 2.3 above; provided, however, that the Company shall deliver to such
holder an appropriate instrument or due bills evidencing such holder's right to
receive such additional shares or cash.
4.10 Adjustment of Number of Shares Purchasable. Upon any adjustment of the
Exercise Price as provided in Section 4.1, 4.2, 4.4, 4.5 or 4.6, the Holders of
the Warrants shall thereafter be entitled to purchase upon the exercise thereof,
at the Exercise Price resulting from such adjustment, the number of shares of
Common Stock (calculated to the nearest 1/100th of a share) obtained by
multiplying the Exercise Price in effect immediately prior to such adjustment by
the number of shares of Common Stock issuable on the exercise hereof immediately
prior to such adjustment and dividing the product thereof by the Exercise Price
resulting from such adjustment.
4.11 Exceptions. Section 4 shall not apply to (i) any issuance of Common
Stock upon exercise of any options or warrants outstanding on the Original
Issuance Date, (ii) the issuance of shares of Common Stock in an aggregate
amount not to exceed 500,000 shares (subject to adjustment on the same basis as
is the number of shares for which this Warrant is exercisable as a result of an
event specified in Section 4.4, 4.5 or 4.6) upon exercise of options or warrants
that have been approved by the Board of Directors, or any issuance of such
options or warrants, (iii) in addition to options and warrants referred to in
clause (ii) of this Section 4.11, options or warrants to purchase shares of
Common Stock issued pursuant to an employee stock option plan or employee stock
incentive plan approved by the Board of Directors and the Company's stockholders
on or after the date on which the Holder has representatives constituting at
least a majority of the Board of Directors of the Company, or any shares of
Common Stock issued upon exercise of such options or warrants (the securities
referred to in clauses (i), (ii) and (iii) being collectively referred to as
"Excluded Securities"), (iv) any issuance of Common Stock in an underwritten
public offering at a price per share at least equal to the Exercise Price then
in effect if the underwriting discount does not exceed 7%, or (v) the issuance
of Preferred Stock and warrants to the Purchaser that is contemplated by the
letter dated April 4, 2000 from the Purchaser to the Company.
4.12 Notice of Adjustment of Exercise Price. Whenever the Exercise Price is
adjusted as herein provided:
(i) the Company shall compute the adjusted Exercise Price in
accordance with this Section 4 and shall prepare a certificate signed by
the Company's independent accounting firm, setting forth the adjusted
Exercise Price and showing in reasonable detail the facts upon which such
adjustment is based, and such certificate shall forthwith be filed at each
office or agency maintained for such purpose or exercise of Warrants; and
(ii) a notice stating that the Exercise Price has been adjusted and
setting forth the adjusted Exercise Price shall forthwith be prepared by
the Company, and as soon as practicable after it is prepared, such notice
shall be mailed by the Company at its expense to all Holders at their last
addresses as they shall appear in the stock register.
4.13 Other Dilutive Events. If any corporate action shall occur as to which
the provisions of this Section 4 are not strictly applicable but as to which the
failure to make any adjustment would adversely affect the purchase rights or
value represented by the Warrants in accordance with the essential intent and
principles of this Section 4 (which are to place the Holder in a position as
nearly equal as possible to the position the Holder would have occupied had the
Holder purchased shares of Common Stock on the date hereof) then, in each such
case, the Company shall appoint a firm of independent certified public
accountants of recognized national standing (which may be the regular auditors
of the Company) to give their opinion upon the adjustment, if any, on a basis
consistent with the essential intent and principles established in this Section
4, necessary to preserve, without dilution, the purchase rights represented by
the Warrants. Upon receipt of such opinion, the Company will promptly mail a
copy thereof to the Holders and will make the adjustments described therein;
provided that no such adjustment will increase the Exercise Price or decrease
the number of shares of Common Stock obtainable as otherwise determined pursuant
to this Section 4.
5. NO IMPAIRMENT; REGULATORY COMPLIANCE AND COOPERATION; NOTICE OF
EXPIRATION
(a) The Company shall not by any action, including, without limitation,
amending its charter documents or through any reorganization, reclassification,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other similar voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of the Holder against impairment. Without limiting the generality of the
foregoing, the Company shall take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of Common Stock upon the exercise of this Warrant, free
and clear of all Liens, and shall use its best efforts to obtain all such
authorizations, exemptions or consents from any public regulatory body having
jurisdiction thereof as may be necessary to enable the Company to perform its
obligations under this Warrant.
(b) The Company shall deliver to each Holder of Warrants on or before six
months prior to the tenth anniversary of the Original Issue Date, but no earlier
than nine months prior to the tenth anniversary of the Original Issue Date,
advance notice of such tenth anniversary and of the anticipated Expiration Date.
If the Company fails to fulfill in a timely manner the notice obligation set
forth in the prior sentence, it shall provide such notice as soon as possible
thereafter.
6. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH OR
APPROVAL OF ANY GOVERNMENTAL AUTHORITY
From and after the Original Issue Date, the Company shall at all times
reserve and keep available for issuance upon the exercise of the Warrants such
number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of all outstanding Warrants. All
shares of Common Stock issuable pursuant to the terms hereof, when issued upon
exercise of this Warrant with payment therefor in accordance with the terms
hereof, shall be duly and validly issued and fully paid and nonassessable, not
subject to preemptive rights and shall be free and clear of all Liens. Before
taking any action that would result in an adjustment in the number of shares of
Common Stock for which this Warrant is exercisable or in the Exercise Price, the
Company shall obtain all such authorizations or exemptions thereof, or consents
thereto, as may be necessary from any public regulatory body or bodies having
jurisdiction over such action. If any shares of Common Stock required to be
reserved for issuance upon exercise of Warrants require registration or
qualification with any governmental authority under any federal or state law
(other than under the Securities Act or any state securities law) before such
shares may be so issued, the Company will in good faith and as expeditiously as
possible and at its expense endeavor to cause such shares to be duly registered.
7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS
7.1 Notices of Corporate Actions.
In case:
(a) the Company shall take an action or an event shall occur, that would
require an Exercise Price adjustment pursuant to Section 4; or
(b) the Company shall grant to the holders of its Common Stock rights or
warrants to subscribe for or purchase any shares of capital stock of any class;
or
(c) of any reclassification of the Common Stock (other than a subdivision
or combination of the outstanding shares of Common Stock), or of any
consolidation, merger or share exchange to which the Company is a party and for
which approval of any stockholders of the Company is required, or of the sale or
transfer of all or substantially all of the assets of the Company; or
(d) of the voluntary or involuntary dissolution, liquidation or winding up
of the Company; or
(e) the Company or any Subsidiary shall commence a tender offer for all or
a portion of the outstanding shares of Common Stock (or shall amend any such
tender offer to change the maximum number of shares being sought or the amount
or type of consideration being offered therefor);
then the Company shall cause to be filed at each office or agency maintained for
such purpose, and shall cause to be mailed to all Holders of Warrants at their
last addresses as they shall appear in the stock register, at least 30 days
prior to the applicable record, effective or expiration date hereinafter
specified, a notice stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution or granting of rights or warrants,
or, if a record is not to be taken, the date as of which the holders of Common
Stock of record who will be entitled to such dividend, distribution, rights or
warrants are to be determined, (y) the date on which such reclassification,
consolidation, merger, share exchange, sale, transfer, dissolution, liquidation
or winding up is expected to become effective, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities, cash or other property deliverable
upon such reclassification, consolidation, merger, share exchange, sale,
transfer, dissolution, liquidation or winding up, or (z) the date on which such
tender offer commenced, the date on which such tender offer is scheduled to
expire unless extended, the consideration offered and the other material terms
thereof (or the material terms of the amendment thereto). Such notice shall also
set forth such facts with respect thereto as shall be reasonably necessary to
indicate the effect of such action on the Exercise Price and the number and kind
or class of shares or other securities or property which shall be deliverable or
purchasable upon the occurrence of such action or deliverable upon exercise of
the Warrants. Neither the failure to give any such notice nor any defect therein
shall affect the legality or validity of any action described in clauses (a)
through (e) of this Section 7.1.
7.2 Taking of Record. In the case of all dividends or other distributions
by the Company to the holders of its Common Stock with respect to which any
provision of any Section hereof refers to the taking of a record of such
holders, the Company will in each such case take such a record and will take
such record as of the close of business on a Business Day.
7.3 Closing of Transfer Books. The Company shall not at any time, except
upon dissolution, liquidation or winding up of the Company, close its stock
transfer books or Warrant transfer books so as to result in preventing or
delaying the exercise or transfer of any Warrant.
8. TRANSFER RESTRICTIONS
The Holder, by acceptance of this Warrant, agrees to be bound by the
provisions of this Section 8.
8.1 Restrictions on Transfers. Neither this Warrant nor any shares of
Restricted Common Stock issued upon the exercise hereof shall be transferred,
sold, assigned, exchanged, mortgaged, pledged, hypothecated or otherwise
disposed of or encumbered except in compliance with the provisions of the
Securities Act, the rules and regulations thereunder and this Warrant. Each
certificate, if any, evidencing such shares of Restricted Common Stock issued
upon any such Transfer, other than in a public offering pursuant to an effective
registration statement, shall bear the restrictive legend set forth in Section
8.2(a), and each Warrant issued upon such Transfer shall bear the restrictive
legend set forth in Section 8.2(b), unless the Company determines that, or the
Holder delivers to the Company an Opinion of Counsel to the effect that, such
legend is not required for the purposes of compliance with the Securities Act.
Holders of the Warrants or the Restricted Common Stock, as the case may be,
shall not be entitled to Transfer such Warrants or such Restricted Common Stock
except in accordance with this Section 8.1.
8.2 Restrictive Legends.
(a) Except as otherwise provided in this Section 8, each certificate for
Warrant Stock initially issued upon the exercise of this Warrant, and each
certificate for Warrant Stock issued to any subsequent transferee of any such
certificate, shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES
LAW. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED,
SOLD, ASSIGNED, EXCHANGED, MORTGAGED, PLEDGED, HYPOTHECATED OF OTHERWISE
DISPOSED OF OR ENCUMBERED WITHOUT COMPLIANCE WITH THE PROVISIONS OF, AND
ARE OTHERWISE RESTRICTED BY THE PROVISIONS OF, THE ACT AND THE RULES AND
REGULATIONS THEREUNDER."
(b) Except as otherwise provided in this Section 8, each Warrant shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
"NEITHER THIS WARRANT NOR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR ANY STATE SECURITIES LAW. THE WARRANT REPRESENTED BY THIS
CERTIFICATE AND THE STOCK ISSUABLE UPON EXERCISE HEREOF MAY NOT BE
TRANSFERRED, SOLD, ASSIGNED, EXCHANGED, MORTGAGED, PLEDGED, HYPOTHECATED OF
OTHERWISE DISPOSED OF OR ENCUMBERED WITHOUT COMPLIANCE WITH THE PROVISIONS
OF, AND ARE OTHERWISE RESTRICTED BY THE PROVISIONS OF, THE ACT, THE RULES
AND REGULATIONS THEREUNDER AND THIS WARRANT."
8.3 Termination of Securities Law Restrictions. Notwithstanding the
foregoing provisions of this Section 8, the restrictions imposed by Section 8.1
upon the transferability of the Warrants and the Restricted Common Stock and the
legend requirements of Section 8.2(a) and (b) shall terminate as to any
particular Warrant or shares of Restricted Common Stock when the Company shall
have received from the Holder thereof an Opinion of Counsel to the effect that
such legend is not required in order to ensure compliance with the Securities
Act. Whenever the restrictions imposed by Section 8.1 shall terminate as to this
Warrant, as herein above provided, the Holder hereof shall be entitled to
receive from the Company, at the expense of the Company, a new Warrant with no
restrictive legend, and none of the Warrants issued upon registration of
transfer, division or combination of, or in substitution for, such Warrant or
Warrants shall have any similar restrictive legend endorsed thereon. Whenever
the restrictions imposed by this Section shall terminate as to any share of
Restricted Common Stock, as herein above provided, the Holder thereof shall be
entitled to receive from the Company, at the Company's expense, a new
certificate representing such Common Stock not bearing the restrictive legend
set forth in Section 8.2(a).
9. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and an indemnity reasonably satisfactory to it (it
being understood that the written indemnification agreement of or affidavit of
loss of the Holder shall be a sufficient indemnity) and, in case of mutilation,
upon surrender and cancellation hereof, the Company will execute and deliver in
lieu hereof a new Warrant of like tenor to such Holder; provided, however, that,
in the case of mutilation, no indemnity shall be required if this Warrant in
identifiable form is surrendered to the Company for cancellation.
10. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the Company shall
maintain an office or agency, which may be the principal executive offices of
the Company (the "Designated Office"), where the Warrants may be presented for
exercise, registration of transfer, division or combination as provided in this
Warrant. Such Designated Office shall initially be the office of the Company at
9933 Woods Drive, Skokie, Illinois 60077. The Company may from time to time
change the Designated Office to another office of the Company or its agent
within the United States by notice given to all registered Holders at least ten
(10) Business Days prior to the effective date of such change.
11. FINANCIAL AND BUSINESS INFORMATION
If at any time prior to the Expiration Date, the Company is not required to
file reports under Section 13 or 15(d) of the Exchange Act, the Company shall
furnish to Holders of Warrants the following:
(a) Quarterly Reports. As soon as available, but not later than 45 days
after the end of each quarterly accounting period, (A) a consolidated balance
sheet of the Company as of the end of such period and consolidated statements of
income, cash flows and changes in stockholders' equity for such quarterly
accounting period and for the period commencing at the end of the previous
fiscal year and ending with the end of such period, setting forth in each case
in comparative form the corresponding figures for the corresponding period of
the preceding fiscal year, all prepared in accordance with generally accepted
accounting principles consistently applied, subject to normal year-end
adjustments and the absence of footnote disclosure, and (B) a report by
management of the Company of the operating and financial highlights of the
Company and its Subsidiaries for such period, which shall include an analysis of
the operations of the Company and its Subsidiaries for such period.
(b) Annual Reports. As soon as available, but not later than 90 days after
the end of each fiscal year of the Company, audited consolidated financial
statements of the Company, which shall include statements of income, cash flows
and changes in stockholders' equity for such fiscal year and a balance sheet as
of the last day thereof, each prepared in accordance with generally accepted
accounting principles, consistently applied, and accompanied by the report of a
"Big 5" firm of independent certified public accountants selected by the
Company's Board of Directors (the "Accountants"). The Company and its
Subsidiaries shall maintain a system of accounting sufficient to enable its
Accountants to render the report referred to in this Section 11(b).
(c) Miscellaneous. Promptly upon becoming available, each of the following:
(i) notification in writing of the existence of any default under any
material agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which any of their assets are bound;
(ii) upon request, copies of all reports prepared for or delivered to
the management of the Company or its Subsidiaries by its accountants; and
(iii) upon request, any other routinely collected financial or other
information available to management of the Company or its Subsidiaries
(including, without limitation, routinely collected statistical data).
The Company shall comply with any written request from any Holder that the
Company not provide such Holder with any of the foregoing information for any
period of time.
12. DILUTION FEE
In the event any dividends are declared with respect to the Common Stock,
the Holder of this Warrant as of the record date established by the Board of
Directors for such dividend shall be entitled to receive as a dilution fee (the
"Dilution Fee") an amount (whether in the form of cash, securities or other
property) equal to the amount (and in the form) of the dividends that such
Holder would have received had this Warrant been exercised for purchase of
Common Stock immediately prior to the record date of such dividend, such
Dilution Fee to be payable on the payment date of the dividend established by
the Board of Directors (the "Dilution Fee Payment Date"). The record date for
any such Dilution Fee shall be the record date for the applicable dividend, and
any such Dilution Fee shall be payable to the persons in whose name this Warrant
is registered at the close of business on the applicable record date.
13. MISCELLANEOUS
13.1 Nonwaiver. No course of dealing or any delay or failure to exercise
any right hereunder on the part of the Company or the Holder shall operate as a
waiver of such right or otherwise prejudice the rights, powers or remedies of
such person.
13.2 Notice Generally. Any notice, demand, request, consent, approval,
declaration, delivery or communication hereunder to be made pursuant to the
provisions of this Warrant shall be sufficiently given or made if in writing and
either delivered in person with receipt acknowledged or by reputable air courier
service with tracking capability and charges prepaid or by facsimile, addressed
as follows:
(a) if to any Holder of this Warrant or of Warrant Stock issued upon the
exercise hereof, at its last known address appearing on the books of the Company
maintained for such purpose;
(b) if to the Company, at the Designated Office;
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, or three (3) Business Days after the same
shall have been deposited in the United States mail, or one (1) Business Day
after the same shall have been sent by Federal Express or another recognized
overnight courier service.
13.3 Indemnification. If the Company fails to make, when due, any payments
provided for in this Warrant, the Company shall pay to the Holder hereof (a)
interest at the Agreed Rate on any amounts due and owing to such Holder and (b)
such further amounts as shall be sufficient to cover any costs and expenses
including, but not limited to, reasonable attorneys' fees and expenses incurred
by such Holder in collecting any amounts due hereunder. The Company shall
indemnify, save and hold harmless the Holder hereof and the Holders of any
Warrant Stock issued upon the exercise hereof from and against any and all
liability, loss, cost, damage, reasonable attorneys' and accountants' fees and
expenses, court costs and all other out-of-pocket expenses incurred in
connection with or arising from any default hereunder by the Company. This
indemnification provision shall be in addition to the rights of such Holder or
Holders to bring an action against the Company for breach of contract based on
such default hereunder.
13.4 Limitation of Liability. No provision hereof, in the absence of
affirmative action by the Holder to purchase shares of Common Stock, and no
enumeration herein of the rights or privileges of the Holder hereof, shall give
rise to any liability of such Holder to pay the Exercise Price for any Warrant
Stock other than pursuant to an exercise of this Warrant or any liability as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
13.5 Remedies. Each Holder of Warrants and/or Warrant Stock, in addition to
being entitled to exercise its rights granted by law, including recovery of
damages, shall be entitled to specific performance of its rights provided under
this Warrant. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions
of this Warrant and hereby agrees, in an action for specific performance, to
waive the defense that a remedy at law would be adequate.
13.6 Successors and Assigns. Subject to the provisions of Sections 3.1, 8.1
and 8.2, this Warrant and the rights evidenced hereby shall inure to the benefit
of and be binding upon the successors of the Company and the permitted
successors and assigns of the Holder hereof. The provisions of this Warrant are
intended to be for the benefit of all Holders from time to time of this Warrant
and to the extent applicable, all Holders of shares of Warrant Stock issued upon
the exercise hereof (including transferees), and shall be enforceable by any
such Holder.
13.7 Amendment. This Warrant and all other Warrants may be modified or
amended or the provisions hereof waived with the written consent of the Company
and the Majority Warrant Holders, provided that no such Warrant may be modified
or amended to reduce the number of shares of Common Stock for which such Warrant
is exercisable or to increase the price at which such shares may be purchased
upon exercise of such Warrant (before giving effect to any adjustment as
provided therein) without the written consent of the Holder thereof.
13.8 Severability. Wherever possible, each provision of this Warrant shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Warrant shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Warrant.
13.9 Headings. The headings used in this Warrant are for the convenience of
reference only and shall not, for any purpose, be deemed a part of this Warrant.
13.10 GOVERNING LAW; JURISDICTION. (a) IN ALL RESPECTS, INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS WARRANT AND THE
OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, EXCEPT WITH RESPECT TO
THE VALIDITY OF THIS WARRANT, THE ISSUANCE OF WARRANT STOCK UPON EXERCISE HEREOF
AND THE RIGHTS AND DUTIES OF THE COMPANY WITH RESPECT TO REGISTRATION OF
TRANSFER, WHICH SHALL BE GOVERNED BY THE LAWS OF THE STATE OF DELAWARE.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS WARRANT MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK AND, BY EXECUTION AND DELIVERY OF
THIS WARRANT, THE COMPANY HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS. THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT
OF ANY OF THE AFOREMENTIONED COURTS IN ANY ACTION OR PROCEEDING BY THE MAILING
OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE
COMPANY AT ITS ADDRESS PROVIDED PURSUANT TO SECTION 13.2, SUCH SERVICE TO BECOME
EFFECTIVE SEVEN DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT
OF THE HOLDER OF THIS WARRANT TO SERVE PROCESS IN ANY OF THE MATTERS PERMITTED
BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY
IN ANY OTHER JURISDICTION. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE
AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS
WARRANT BROUGHT IN THE COURTS REFERRED TO ABOVE AND HEREBY FURTHER IRREVOCABLY
WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION
OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM.
(c) THE COMPANY HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING ARISING UNDER OR WITH RESPECT HERETO.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
and its corporate seal to be impressed hereon and attested by its Secretary or
an Assistant Secretary.
PEAPOD, INC.
By:_________________________________
Name:
Title:
Attest:
By:_____________________________
Name:
Title:
<PAGE>
ANNEX A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned Holder of this Warrant irrevocably exercises this Warrant
for the purchase of ______ shares Common Stock of Peapod, Inc. and herewith
makes payment of the Warrant Price as follows (check one or more of the
following):
o by delivery herewith of a certified or official bank check in
the amount of such Warrant Price payable to the order of the
Company;
o hereby instructs the Company to withhold a number of shares of
Warrant Stock then issuable upon exercise of this Warrant with
an aggregate Fair Value equal to such Warrant Price;
o herewith surrenders to the Company shares of Common Stock
previously acquired by the Holder with an aggregate Fair Value
equal to such Warrant Price; or
o herewith surrenders to the Company dividends due and owing by
the Company to the Holder equal to such Warrant Price; or
o by providing to the Company goods or services with a fair
value equal to such Warrant Price;
all at the price and on the terms and conditions specified in this Warrant and
requests that certificates for the shares of Common Stock hereby purchased (and
any securities or other property issuable upon such exercise) be issued in the
name of and delivered to ______________________________ whose address is
_________________________________ and, if such shares of Common Stock shall not
include all of the shares of Common Stock issuable as provided in this Warrant,
that a new Warrant of like tenor and date for the balance of the shares of
Common Stock issuable hereunder be delivered to the undersigned.
-----------------------------------
(Name of Registered Owner)
-----------------------------------
(Signature of Registered Owner)
-----------------------------------
(Street Address)
-----------------------------------
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
<PAGE>
ANNEX B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby
sells, assigns and transfers unto the assignee named below all of the rights of
the undersigned under this Warrant, with respect to the number of shares of
Common Stock set forth below:
No. of Shares of
Name and Address of Assignee Common Stock
- - ---------------------------- -----------------
and does hereby irrevocably constitute and appoint _____________________
attorney-in-fact to register such transfer onto the books of Peapod, Inc.
maintained for the purpose, with full power of substitution in the premises.
Dated: _____________ Print Name: ________________________
Signature: _________________________
Witness: ___________________________
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
EX-10.2
================================================================================
WARRANT
to Purchase Common Stock of
PEAPOD, INC.,
a Delaware corporation
_________________
Warrant No. [__]
Original Issue Date: April 14, 2000
_________________
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
1. DEFINITIONS...............................................................1
2. EXERCISE OF WARRANT.......................................................8
2.1 Manner of Exercise...................................................8
2.2 Payment of Taxes....................................................10
2.3 Fractional Shares...................................................10
2.4 Reduced Exercise Price..............................................11
3. TRANSFER, DIVISION AND COMBINATION.......................................11
3.1 Transfer............................................................11
3.2 Division and Combination............................................11
3.3 Expenses............................................................11
3.4 Maintenance of Books................................................11
4. ANTIDILUTION PROVISIONS..................................................11
4.1 Upon Issuance of Common Stock.......................................12
4.2 Upon Acquisition of Common Stock....................................12
4.3 Provisions Applicable to Adjustments................................13
4.4 Upon Stock Dividends or Splits......................................14
4.5 Upon Combinations...................................................15
4.6 Upon Reclassifications, Reorganizations, Consolidations or Mergers..15
4.7 Deferral in Certain Circumstances...................................16
4.8 Other Anti-Dilution Provisions......................................16
4.9 Appraisal Procedure.................................................16
4.10 Adjustment of Number of Shares Purchasable.........................16
4.11 Exceptions.........................................................17
4.12 Notice of Adjustment of Exercise Price.............................17
4.13 Other Dilutive Events..............................................17
5. NO IMPAIRMENT; REGULATORY COMPLIANCE AND COOPERATION; NOTICE OF
EXPIRATION...............................................................18
6. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH
OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY................................18
7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS............19
7.1 Notices of Corporate Actions........................................19
7.2 Taking of Record....................................................20
7.3 Closing of Transfer Books...........................................20
8. TRANSFER RESTRICTIONS....................................................20
8.1 Restrictions on Transfers...........................................20
8.2 Restrictive Legends.................................................21
8.3 Termination of Securities Law Restrictions..........................21
9. LOSS OR MUTILATION.......................................................22
10. OFFICE OF THE COMPANY....................................................22
11. FINANCIAL AND BUSINESS INFORMATION.......................................22
12. DILUTION FEE.............................................................23
13. MISCELLANEOUS............................................................24
13.1 Nonwaiver..........................................................24
13.2 Notice Generally...................................................24
13.3 Indemnification....................................................24
13.4 Limitation of Liability............................................25
13.5 Remedies...........................................................25
13.6 Successors and Assigns.............................................25
13.7 Amendment..........................................................25
13.8 Severability.......................................................25
13.9 Headings...........................................................26
13.10 GOVERNING LAW; JURISDICTION.......................................26
ANNEX A SUBSCRIPTION FORM
ANNEX B ASSIGNMENT FORM
<PAGE>
NEITHER THIS WARRANT NOR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE HEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR ANY STATE SECURITIES LAW. THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND
THE SECURITIES ISSUABLE UPON EXERCISE HEREOF MAY NOT BE TRANSFERRED, SOLD,
ASSIGNED, EXCHANGED, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
OR ENCUMBERED WITHOUT COMPLIANCE WITH THE PROVISIONS OF, AND ARE OTHERWISE
RESTRICTED BY THE PROVISIONS OF, THE ACT, THE RULES AND REGULATIONS THEREUNDER
AND THIS WARRANT.
Warrant No. [___]
WARRANT
TO PURCHASE 3,566,667 SHARES OF COMMON STOCK
(SUBJECT TO ADJUSTMENT) OF
PEAPOD, INC.
THIS IS TO CERTIFY THAT KONINKLIJKE AHOLD N.V., (the "Purchaser") or its
registered assigns, is entitled, at any time prior to the Expiration Date (such
term, and certain other capitalized terms used herein being hereinafter
defined), to purchase from Peapod, Inc., a Delaware corporation (the "Company"),
3,566,667 shares of the Common Stock of the Company (subject to adjustment as
provided herein), at a purchase price per share equal to $3.00 (the initial
"Exercise Price"), subject to adjustment as provided herein.
1. DEFINITIONS
As used in this Warrant (including the Subscription Form), the following
terms have the respective meanings set forth below:
"Affiliate" shall mean, with respect to any person, any other person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified person and, shall include (a) in the case of
a person who is an individual, (i) members of such specified person's immediate
family (as defined in Instruction 2 of Item 404(a) of Regulation S-K under the
Securities Act) and (ii) trusts, the trustee and all beneficiaries of which are
such specified person or members of such person's immediate family as determined
in accordance with the foregoing clause (i), and (b) any person that directly or
indirectly owns more than 5% of any class of capital stock or other interest of
such specified person. For the purposes of this definition, "control," when used
with respect to any person means the power to direct the management and policies
of such person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "affiliated," "controlling"
and "controlled" have meanings correlative to the foregoing. Notwithstanding the
foregoing, for purposes of this Warrant, the Purchaser and its Affiliates shall
not be deemed Affiliates of the Company.
"After-Tax Basis" when referring to a payment that is required hereunder
(the "target amount"), shall mean a total payment (the "total amount") that,
after deduction of all federal, state and local taxes that are required to be
paid by the recipient in respect of the receipt or accrual of such total amount,
is equal to the target amount.
"Agreed Rate" shall mean the rate of interest announced publicly by
Citibank, N.A. in New York, New York, from time to time, as Citibank, N.A.'s
base rate.
"Appraisal Procedure" if applicable, shall mean the following procedure to
determine the fair market value, as to any security, for purposes of the
definition of "Fair Value" or the fair market value, as to any other property
(in either case, the "valuation amount"). The valuation amount shall be
determined in good faith by the Board of Directors; provided, however, that if
the Majority Warrant Holders disagree with such valuation amount within a
reasonable period of time (not to exceed twenty (20) days after notice thereof)
the valuation amount shall be determined by an investment banking firm of
national recognition, which firm shall be reasonably acceptable to the Board of
Directors and the Majority Warrant Holders. If the Board of Directors and the
Majority Warrant Holders are unable to agree upon an acceptable investment
banking firm within ten (10) days after the date either party proposed that one
be selected, the investment banking firm will be selected by an arbitrator
located in New York City, New York, selected by the American Arbitration
Association (or if such organization ceases to exist, the arbitrator shall be
chosen by a court of competent jurisdiction). The arbitrator shall select the
investment banking firm (within ten (10) days of his appointment) from a list,
jointly prepared by the Board of Directors and the Majority Warrant Holders, of
not more than six investment banking firms of national standing in the United
States, of which no more than three may be named by the Board of Directors and
no more than three may be named by the Majority Warrant Holders. The arbitrator
may consider, within the ten-day period allotted, arguments from the parties
regarding which investment banking firm to choose, but the selection by the
arbitrator shall be made in its sole discretion from the list of six. The Board
of Directors and the Majority Warrant Holders shall submit their respective
valuations and other relevant data to the investment banking firm, and the
investment banking firm shall as soon as practicable thereafter make its own
determination of the valuation amount. The final valuation amount for purposes
hereof shall be the average of the two valuation amounts closest together, as
determined by the investment banking firm, from among the valuation amounts
submitted by the Company and the Majority Warrant Holders and the valuation
amount calculated by the investment banking firm. The determination of the final
valuation amount by such investment-banking firm shall be final and binding upon
the parties. The Company shall pay the fees and expenses of the investment
banking firm and arbitrator (if any) used to determine the valuation amount. If
required by any such investment banking firm or arbitrator, the Company shall
execute a retainer and engagement letter containing reasonable terms and
conditions, including, without limitation, customary provisions concerning the
rights of indemnification and contribution by the Company in favor of such
investment banking firm or arbitrator and its officers, directors, partners,
employees, agents and Affiliates.
"Appraised Value" per share of Common Stock as of a date specified herein
shall mean the value of such a share as of such date as determined by an
investment bank of nationally recognized standing selected jointly by the
Majority Warrant Holders and the Company. If the Company and the Majority
Warrant Holders cannot agree on a mutually acceptable investment bank, then the
Company and the Majority Warrant Holders shall each choose one such investment
bank and the respective chosen firms shall jointly select a third investment
bank, which shall make the determination. The Company shall pay the costs and
fees of each such investment bank (including any such investment bank selected
by the Majority Warrant Holders), and the decision of the investment bank making
such determination of Appraised Value shall be final and binding on the Company
and all affected Holders of Warrants or Warrant Stock. Such Appraised Value
shall be determined as a pro rata portion of the value of the Company taken as a
whole, based on the higher of (A) the value derived from a hypothetical sale of
the entire Company as a going concern by a willing seller to a willing buyer
(neither acting under any compulsion) and (B) the liquidation value of the
entire Company. No discount shall be applied on account of (i) any Warrants or
Warrant Stock representing a minority interest, (ii) any lack of liquidity of
the Common Stock or the Warrants, (iii) the fact that the Warrants or Warrant
Stock may constitute "restricted securities" for securities law purposes, (iv)
the existence of any call option or (v) any other grounds.
"Book Value" per share of Common Stock as of a date specified herein shall
mean the consolidated book value of the Company and its Subsidiaries as of such
date divided by the number of shares of Common Stock Outstanding on such date.
Such book value shall be determined in accordance with GAAP, except that there
shall be no reduction in such book value by reason of any amount that may be
required either as an offset to or reserve against retained earnings or as a
deduction from book value as a result of the issuance, existence, anticipated
exercise of, or anticipated cost to the Company of the repurchase of, any of the
Warrants.
"Business Day" shall mean a day other than a Saturday, Sunday or day on
which banking institutions in New York are authorized or required to remain
closed.
"Commission" shall mean the Securities and Exchange Commission or any other
federal agency then administering the Securities Act and other federal
securities laws.
"Common Stock" shall mean the Common Stock of the Company, par value $0.01
per share, as constituted on the Original Issue Date, and any capital stock into
which such Common Stock may thereafter be changed, and shall also include (i)
capital stock of the Company of any other class (regardless of how denominated)
issued to the holders of shares of any Common Stock upon any reclassification
thereof which is also not preferred as to dividends or liquidation over any
other class of stock of the Company and which is not subject to redemption and
(ii) shares of common stock of any successor or acquiring corporation (as
defined in Section 4.6 hereof) received by or distributed to the holders of
Common Stock of the Company in the circumstances contemplated by Section 4.6
hereof.
"Company" shall mean Peapod, Inc., a Delaware corporation, and any
successor corporation.
"Current Market Price" shall mean as of any specified date the average of
the Daily Market Price of one share of the Common Stock for the shorter of (x)
the 10 consecutive Business Days immediately preceding such date or (y) the
period commencing on the Business Day next following the first public
announcement by the Company of any event giving rise to an adjustment of the
Exercise Price pursuant to Section 4 below and ending on such date.
"Daily Market Price" shall mean, with respect to one share of Common Stock
and for any Business Day: (i) if the Common Stock is then listed on a national
securities exchange or is authorized for quotation on NASDAQ and is designated
as a National Market System security, the last sale price of one share of Common
Stock, regular way, on such day on the principal stock exchange or market system
on which such Common Stock is then listed or authorized for quotation, or, if no
such sale takes place on such day, the average of the closing bid and asked
prices for one share of Common Stock on such day as reported on such stock
exchange or market system or (ii) if the Common Stock is not then listed or
authorized for quotation on any national securities exchange or designated as a
National Market System security on NASDAQ but is traded over-the-counter, the
average of the closing bid and asked prices for one share of Common Stock as
reported on NASDAQ or the Electronic Bulletin Board or in the National Daily
Quotation Sheets, as applicable.
"Designated Office" shall have the meaning set forth in Section 10 hereof.
"Dilution Fee" shall have the meaning set forth in Section 12 hereof.
"Dilution Fee Payment Date" shall have the meaning set forth in Section 12
hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Excluded Securities" shall have the meaning set forth in Section 4.11
hereof.
"Exercise Date" shall have the meaning set forth in Section 2.1 hereof.
"Exercise Notice" shall have the meaning set forth in Section 2.1 hereof.
"Exercise Period" shall mean the period during which this Warrant is
exercisable pursuant to Section 2.1 hereof.
"Exercise Price" shall mean, in respect of a share of Common Stock at any
date herein specified, the initial Exercise Price set forth in the preamble of
this Warrant, as adjusted from time to time pursuant to Sections 2.4 and 4
hereof.
"Expiration Date" shall mean the tenth anniversary of the Original Issue
Date.
"Fair Value" per share of Common Stock as of any specified date shall mean
(A) if the Common Stock is publicly traded on such date, the Current Market
Price per share or (B) if the Common Stock is not publicly traded on such date,
(1) the fair market value per share of Common Stock as determined in good faith
by the Board of Directors of the Company and set forth in a written notice to
each Holder or (2) if the Majority Warrant Holders object in writing to such
price as determined by the Board of Directors within thirty (30) days after
receiving notice of same, the Appraised Value per share as of such date.
"GAAP" shall mean generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board, which are in effect from time to time,
consistently applied.
"Holder" shall mean (a) with respect to this Warrant, the person in whose
name the Warrant set forth herein is registered on the books of the Company
maintained for such purpose and (b) with respect to any other Warrant or shares
of Warrant Stock, the person in whose name such Warrant or Warrant Stock is
registered on the books of the Company maintained for such purpose.
"HSR Approval" shall mean the expiration of all waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and applicable
rules and regulations and any similar state acts applicable to the issuance of
Series B Preferred Stock as contemplated by the Purchase Agreement.
"Lien" shall mean any mortgage or deed of trust, pledge, hypothecation,
assignment, deposit arrangement, lien, charge, claim, security interest,
easement or encumbrance, or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including, without
limitation, any lease or title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement perfecting a security interest
under the Uniform Commercial Code or comparable law of any jurisdiction).
"Majority Warrant Holders" shall mean, with respect to a given
determination, the Holders of Warrants, the holders of the Previously Issued
Warrants and the holders of the Warrants (Preferred Stock) representing the
right to acquire more than fifty percent (50%) of the Common Stock underlying
all of the then outstanding Warrants, the Previously Issued Warrants and the
Warrants (Preferred Stock).
"NASD" shall mean the National Association of Securities Dealers, Inc., or
any successor corporation thereto.
"NASDAQ" shall mean the NASDAQ quotation system, or any successor reporting
system.
"Opinion of Counsel" shall mean a written opinion of outside counsel
experienced in Securities Act matters chosen by the Holder of this Warrant or
Warrant Stock issued upon the exercise hereof and reasonably acceptable to the
Company.
"Original Issue Date" shall mean the date on which this Warrant was issued,
as set forth on the cover page of this Warrant.
"Outside Date" shall mean the date that is one hundred and twenty (120)
days after the date hereof or, if the Holder exercises this Warrant or the
Warrants (Preferred Stock) and as a direct result of such exercise, the
Stockholders Meeting (as defined in the Purchase Agreement) is delayed, one
hundred and twenty (120) days plus the number of days of such delay after the
date hereof.
"Outstanding" shall mean, when used with reference to Common Stock, at any
date as of which the number of shares thereof is to be determined, all issued
shares of Common Stock, except shares then owned or held by or for the account
of the Company or any Subsidiary, and shall include all shares issuable in
respect of outstanding scrip or any certificates representing fractional
interests in shares of Common Stock.
"person" shall mean any individual, partnership, corporation, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or agency or political subdivision
thereof, or other entity.
"Preferred Stock" shall mean convertible preferred stock of the Company.
"Previously Issued Warrants" shall mean the Warrant dated April 10, 2000
issued by the Company to the Purchaser, and all warrants issued upon transfer,
division or combination of, or in substitution for, such warrant or any other
such warrant.
"Purchase Agreement" shall mean the Purchase Agreement, dated as of April
14, 2000, by and between the Company and the Purchaser.
"Restricted Common Stock" shall mean shares of Common Stock which are, or
which upon their issuance on the exercise of this Warrant would be, evidenced by
a certificate bearing the restrictive legend set forth in Section 8.2(a) hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Series B Preferred Stock" shall mean the Series B Preferred Stock to be
authorized pursuant to the Certificate of Designation in the form attached as
Exhibit I to the Purchase Agreement.
"Share Withholding Option" shall have the meaning set forth in Section
2.1(c) hereof.
"Stockholder Approval" shall mean the approval by the Company's
stockholders of the issuance of the shares of Series B Preferred Stock and the
Warrants, and the other transactions contemplated pursuant to the Purchase
Agreement.
"subsidiary" shall mean, with respect to any person, (a) a corporation a
majority of whose capital stock with voting power, under ordinary circumstances,
to elect directors is at the time, directly or indirectly, owned by such person,
by a subsidiary of such person, or by such person and one or more subsidiaries
of such person, (b) a partnership in which such person or a subsidiary of such
person is, at the date of determination, a general partner of such partnership,
or (c) any other person (other than a corporation) in which such person, a
subsidiary of such person or such person and one or more subsidiaries of such
person, directly or indirectly, at the date of determination thereof, has (i) at
least a majority ownership interest, (ii) the power to elect or direct the
election of the directors or other governing body of such person, or (iii) the
power to direct or cause the direction of the affairs or management of such
person. For purposes of this definition, a person is deemed to own any capital
stock or other ownership interest if such person has the right to acquire such
capital stock or other ownership interest, whether through the exercise of any
purchase option, conversion privilege or similar right.
"Subsidiary" shall mean a subsidiary of the Company.
"Transfer" shall mean any disposition of any Warrant or Warrant Stock or of
any interest therein, which would constitute a "sale" thereof or a transfer of a
beneficial interest therein within the meaning of the Securities Act.
"Warrant Price" shall mean an amount equal to (i) the number of shares of
Common Stock being purchased upon exercise of all or a portion of this Warrant
pursuant to Section 2.1 hereof, multiplied by (ii) the Exercise Price as of the
date of such exercise.
"Warrants" shall mean this Warrant and all warrants issued upon transfer,
division or combination of, or in substitution for, this Warrant or any other
such Warrant. All Warrants shall at all times be identical as to terms and
conditions, except as to the number of shares of Common Stock for which they may
be exercised and their date of issuance.
"Warrants (Preferred Stock)" shall mean the Warrant (Preferred Stock)
issued by the Company to the Purchaser pursuant to the Purchase Agreement, and
all warrants issued upon transfer, division or combination of, or in
substitution for, such warrant or any other such warrant.
"Warrant Stock" generally shall mean the shares of Common Stock issued,
issuable or both (as the context may require) upon the exercise of Warrants.
2. EXERCISE OF WARRANT
2.1 Manner of Exercise. (a) From and after the Original Issue Date and
until 5:00 P.M., New York time, on the Expiration Date, the Holder of this
Warrant may from time to time exercise this Warrant, on any Business Day, for
all or any part of the number of shares of Common Stock purchasable hereunder.
In order to exercise this Warrant, in whole or in part, the Holder shall (i)
deliver to the Company at its Designated Office a written notice of the Holder's
election to exercise this Warrant (an "Exercise Notice"), which Exercise Notice
shall be irrevocable and specify the number of shares of Common Stock to be
purchased, together with this Warrant and (ii) pay to the Company the Warrant
Price in accordance with Section 2.1(c) (the date on which both such delivery
and payment shall have first taken place being hereinafter sometimes referred to
as the "Exercise Date"). Such Exercise Notice shall be in the form of the
subscription form appearing at the end of this Warrant as Annex A, duly executed
by the Holder or its duly authorized agent or attorney.
(b) Upon receipt by the Company of such Exercise Notice, Warrant and
payment (if applicable), the Company shall, as promptly as practicable, and in
any event within five (5) Business Days thereafter, execute (or cause to be
executed) and deliver (or cause to be delivered) to the Holder a certificate or
certificates representing the aggregate number of full shares of Common Stock
issuable upon such exercise, together with cash in lieu of any fraction of a
share, as hereafter provided. The stock certificate or certificates so delivered
shall be, to the extent possible, in such denomination or denominations as the
exercising Holder shall reasonably request in the Exercise Notice and shall be
registered in the name of the Holder or, subject to Section 8 below, such other
name as shall be designated in the Exercise Notice. This Warrant shall be deemed
to have been exercised, and such stock certificate or certificates shall be
deemed to have been issued, and the Holder or any other person so designated to
be named therein shall be deemed to have become a holder of record of the shares
evidenced by such stock certificate or certificates for all purposes, as of the
Exercise Date.
(c) Payment of the Warrant Price shall be made at the option of the Holder
by one or more of the following methods: (i) by delivery of a certified or
official bank check in the amount of such Warrant Price payable to the order of
the Company, (ii) by instructing the Company to withhold a number of shares of
Warrant Stock then issuable upon exercise of this Warrant with an aggregate Fair
Value equal to such Warrant Price (the "Share Withholding Option"), (iii) by
surrendering to the Company shares of Common Stock previously acquired by the
Holder with an aggregate Fair Value equal to such Warrant Price, (iv) by
surrendering to the Company dividends due and owing by the Company to the Holder
equal to such Warrant Price, or (v) by providing to the Company goods or
services with a fair value as specified in any contract pursuant to which such
goods or services are provided or, if not specified, as determined by the Board
of Directors equal to such Warrant Price (or if the Majority Warrant Holders
object in writing to such determination within thirty (30) days after receiving
notice of same, as determined by an independent expert of national recognition
in the relevant industry, which expert shall be reasonably acceptable to the
Board of Directors and the Majority Warrant Holders, and if the Board of
Directors and the Majority Warrant Holders are unable to agree upon an
acceptable independent expert within ten (10) days after the date either party
proposed that one be selected, the independent expert will be selected by an
arbitrator located in New York City, New York, selected by the American
Arbitration Association (or if such organization ceases to exist, the arbitrator
shall be chosen by a court of competent jurisdiction)). In the event of any
withholding of Warrant Stock or surrender of Common Stock pursuant to clause
(ii) or (iii) above where the number of shares whose Fair Value is equal to the
Warrant Price is not a whole number, the number of shares withheld by or
surrendered to the Company shall be rounded up to the nearest whole share and
the Company shall make a cash payment to the Holder based on the incremental
fraction of a share being so withheld by or surrendered to the Company in an
amount determined in accordance with Section 2.3 hereof.
(d) If this Warrant shall have been exercised in part, the Company shall,
at the time of delivery of the certificate or certificates representing the
shares of Common Stock being issued, deliver to the Holder a new Warrant
evidencing the rights of the Holder to purchase the unpurchased shares of Common
Stock called for by this Warrant. Such new Warrant shall in all other respects
be identical to this Warrant. Notwithstanding any provision herein to the
contrary, the Company shall not be required to register shares of Common Stock
in the name of any person who acquired this Warrant (or part hereof) or any
shares of Warrant Stock otherwise than in accordance with this Warrant.
(e) All Warrants delivered for exercise shall be canceled by the Company.
(f) On the date of exercise of the Warrants the Company shall use
commercially reasonable efforts to satisfy all the conditions set forth in
Section 7.2 of the Purchase Agreement other than the condition set forth in
Section 7.2(n), provided that if the Company shall have used its commercially
reasonable efforts to satisfy such conditions and such conditions shall not have
been satisfied, the Holder shall have no rights or remedies arising as a result
of such failure.
2.2 Payment of Taxes. All shares of Common Stock issuable upon the exercise
of this Warrant pursuant to the terms hereof shall be validly issued, fully paid
and nonassessable, issued without violation of any preemptive rights and free
and clear of all Liens (other than any created by actions of the Holder). The
Company shall pay all expenses in connection with, and all issuance, transfer,
stamp and other similar taxes and other governmental charges that may be imposed
with respect to, the issue or delivery thereof, unless such tax or charge is
imposed by law upon the Holder, in which case such taxes or charges shall be
paid by the Holder and the Company shall reimburse the Holder therefor on an
After-Tax Basis. The Company shall not, however, be required to pay any tax or
governmental charge which may be payable in respect of any Transfer involved in
the issue and delivery of shares of Common Stock issuable upon exercise of this
Warrant in a name other than that of the Holder of the Warrants to be exercised,
and no such issue or delivery shall be made unless and until the person
requesting such issue has paid to the Company the amount of any such tax, or has
established to the satisfaction of the Company that such tax has been paid.
2.3 Fractional Shares. The Company shall not be required to issue a
fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share that the Holder of one or more Warrants, the rights under
which are exercised in the same transaction, would otherwise be entitled to
purchase upon such exercise, the Company shall pay to such Holder an amount in
cash equal to such fraction multiplied by the Fair Value.
2.4 Reduced Exercise Price. On the Outside Date, in the event that the HSR
Approval or the Stockholders Approval shall not have been obtained, the Exercise
Price shall be reduced to an amount equal to 50% of the Exercise Price in effect
immediately prior to the Outside Date.
3. TRANSFER, DIVISION AND COMBINATION
3.1 Transfer. Subject to compliance with Section 8 hereof, each transfer of
this Warrant and all rights hereunder, in whole or in part, shall be registered
on the books of the Company to be maintained for such purpose, upon surrender of
this Warrant at the Designated Office, together with a written assignment of
this Warrant in the form of Annex B hereto duly executed by the Holder or its
agent or attorney and funds sufficient to pay any transfer taxes described in
Section 2.2 in connection with the making of such transfer. Upon such surrender
and delivery and, if required, such payment, the Company shall, subject to
Section 8, execute and deliver a new Warrant or Warrants in the name of the
assignee or assignees and in the denominations specified in such instrument of
assignment, and shall issue to the assignor a new Warrant evidencing the portion
of this Warrant not so assigned and this Warrant shall promptly be cancelled. A
Warrant, if properly assigned in compliance with Section 8, may be exercised by
the new Holder for the purchase of shares of Common Stock without having a new
Warrant issued.
3.2 Division and Combination. Subject to compliance with the applicable
provisions of this Warrant including, without limitation, Section 8, this
Warrant may be divided or combined with other Warrants upon presentation hereof
at the Designated Office, together with a written notice specifying the names
and denominations in which new Warrants are to be issued, signed by the Holder
or its agent or attorney. Subject to compliance with the applicable provisions
of this Warrant as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.
3.3 Expenses. The Company shall prepare, issue and deliver at its own
expense (other than pursuant to Section 2.2 hereof) any new Warrant or Warrants
required to be issued under this Section 3.
3.4 Maintenance of Books. The Company agrees to maintain, at the Designated
Office, books for the registration and transfer of the Warrants.
4. ANTIDILUTION PROVISIONS
The number of shares of Common Stock for which this Warrant is exercisable
and the Exercise Price shall be subject to adjustment from time to time as set
forth in this Section 4.
4.1 Upon Issuance of Common Stock. If the Company shall, at any time or
from time to time after the Original Issuance Date, issue any shares of Common
Stock, options to purchase or rights to subscribe for Common Stock, securities
by their terms convertible into or exchangeable for Common Stock, or options to
purchase or rights to subscribe for such convertible or exchangeable securities,
other than shares of Series B Preferred Stock issued to the Purchaser or
Excluded Securities, without consideration or for consideration per share less
than either (a) the Exercise Price or (b) the Fair Value of the Common Stock, in
each case, in effect immediately prior to the issuance of such Common Stock or
securities, then such Exercise Price shall forthwith be adjusted to a price
equal to the lower of (x) the Exercise Price in effect immediately prior
thereto, or (y) the lowest consideration per share for which such shares of
Common Stock or such options, rights or convertible or exchangeable securities
are issued (plus the additional consideration required to be paid upon exercise,
exchange or conversion of such options, rights or convertible or exchangeable
securities).
4.2 Upon Acquisition of Common Stock. If the Company or any Subsidiary
shall, at any time or from time to time after the Original Issuance Date,
directly or indirectly, redeem, purchase or otherwise acquire (a) any shares of
Common Stock for a consideration per share greater than the Fair Value of shares
of Common Stock immediately prior to such event, or (b) any options to purchase
or rights to subscribe for Common Stock, securities by their terms convertible
into or exchangeable for Common Stock (other than shares of Series B Preferred
Stock issued to the Purchaser that are redeemed according to their terms), or
options to purchase or rights to subscribe for such convertible or exchangeable
securities, in either case, for a consideration per share of Common Stock for
which such options, rights or convertible or exchangeable securities are
exercisable, convertible or exchangeable, that is greater than the amount, if
any, by which the Fair Value of shares of Common Stock immediately prior to such
event exceeds the per share exercise, exchange, subscription, conversion or
purchase price applicable to such options, rights or convertible or exchangeable
securities, then, in the case of (a) or (b), the Exercise Price shall forthwith
be lowered to a price equal to the price obtained by multiplying:
(i) the Exercise Price in effect immediately prior to such event, by
(ii) a fraction of which (x) the denominator shall be the Fair Value
per share of Common Stock immediately prior to such event and (y) the
numerator shall be the result of dividing:
(A) (1) the product of (a) the number of shares of Common Stock
outstanding on a fully-diluted basis and (b) the Fair Value per share
of Common Stock, in each case, immediately prior to such event, minus
(2) the aggregate consideration paid by the Company in such event, by
(B) the number of shares of Common Stock outstanding on a
fully-diluted basis immediately prior to such event, minus the number
of shares of Common Stock purchased or acquired, or for which the
options, rights or convertible or exchangeable securities acquired
were exercisable, convertible or exchangeable.
For purposes of this Section 4, "fully diluted basis" shall be determined
in accordance with the treasury method of GAAP and Section 4.3.
4.3 Provisions Applicable to Adjustments. For the purposes of any
adjustment of an Exercise Price pursuant to Sections 4.1 and 4.2, the following
provisions shall be applicable:
(i) In the case of the issuance of Common Stock for cash in a
public offering or private placement, the consideration shall be
deemed to be the amount of cash paid therefor before deducting
therefrom any discounts, commissions or placement fees payable by the
Company to any underwriter or placement agent in connection with the
issuance and sale thereof.
(ii) In the case of the issuance of Common Stock for a
consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the Fair Value thereof as
determined in accordance with the Appraisal Procedure.
(iii) In the case of the issuance of options to purchase or
rights to subscribe for Common Stock, securities by their terms
convertible into or exchangeable for Common Stock, or options to
purchase or rights to subscribe for such convertible or exchangeable
securities, except for shares of Series B Preferred Stock issued to
the Purchaser or options to acquire Excluded Securities:
(A) the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options to purchase or rights
to subscribe for Common Stock shall be deemed to have been issued
at the time such options or rights were issued and for a
consideration equal to the consideration (determined in the
manner provided in subparagraphs (i) and (ii) above), if any,
received by the Company upon the issuance of such options or
rights plus the minimum purchase price provided in such options
or rights for the Common Stock covered thereby;
(B) the aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange of any such
convertible or exchangeable securities or upon the exercise of
options to purchase or rights to subscribe for such convertible
or exchangeable securities and subsequent conversion or exchange
thereof shall be deemed to have been issued at the time such
securities, options, or rights were issued and for a
consideration equal to the consideration received by the Company
for any such securities and related options or rights (excluding
any cash received on account of accrued interest or accrued
dividends), plus the additional consideration, if any, to be
received by the Company upon the conversion or exchange of such
securities or the exercise of any related options or rights (the
consideration in each case to be determined in the manner
provided in paragraphs (i) and (ii) above);
(C) on any change in the number of shares or exercise price
of Common Stock deliverable upon exercise of any such options or
rights or conversions of or exchanges for such securities, other
than a change resulting from the antidilution provisions thereof,
the applicable Exercise Price shall forthwith be readjusted to
such Exercise Price as would have been obtained had the
adjustment made upon the issuance of such options, rights or
securities not converted prior to such change or options or
rights related to such securities not converted prior to such
change been made upon the basis of such change;
(D) upon the expiration of any such options or the
termination of any rights, convertible securities or exchangeable
securities, the applicable Exercise Price shall forthwith be
readjusted to such Exercise Price as would have been in effect at
the time of such expiration or termination had such options,
rights, convertible securities or exchangeable securities, to the
extent outstanding immediately prior to such expiration or
termination, never been issued; and
(E) no further adjustment of the Exercise Price adjusted
upon the issuance of any such options, rights, convertible
securities or exchangeable securities shall be made as a result
of the actual issuance of Common Stock on the exercise of any
such rights or options or any conversion or exchange of any such
securities.
4.4 Upon Stock Dividends or Splits. If, at any time after the Original
Issuance Date, the number of shares of Common Stock outstanding is increased by
a stock dividend payable in shares of Common Stock or by a subdivision or
split-up of shares of Common Stock, then, following the record date for the
determination of holders of Common Stock entitled to receive such stock
dividend, or to be affected by such subdivision or split-up, the Exercise Price
shall be appropriately decreased so that the number of shares of Common Stock
purchasable on exercise of the Warrants shall be increased in proportion to such
increase in outstanding shares.
4.5 Upon Combinations. If, at any time after the Original Issuance Date,
the number of shares of Common Stock outstanding is decreased by a combination
of the outstanding shares of Common Stock into a smaller number of shares of
Common Stock, then, following the record date to determine shares affected by
such combination, the Exercise Price shall be appropriately increased so that
the number of shares of Common Stock purchasable on exercise of each of the
Warrants shall be decreased in proportion to such decrease in outstanding
shares.
4.6 Upon Reclassifications, Reorganizations, Consolidations or Mergers. In
the event of any capital reorganization of the Company, any reclassification of
the stock of the Company (other than a change in par value or from par value to
no par value or from no par value to par value or as a result of a stock
dividend or subdivision, split-up or combination of shares), any sale or
transfer to another Person of the property of the Company as an entirety or
substantially as an entirety, or any consolidation or merger of the Company with
or into another corporation (where the Company is not the surviving corporation
or where there is a change in or distribution with respect to the Common Stock),
each Warrant shall after such reorganization, reclassification, consolidation,
transfer or merger be exercisable for the kind and number of shares of stock or
other securities or property of the Company or of the successor corporation
resulting from such consolidation, transfer or surviving such merger, if any, to
which the holder of the number of shares of Common Stock deliverable
(immediately prior to the time of such reorganization, reclassification,
consolidation or merger) upon exercise of such Warrant would have been entitled
upon such reorganization, reclassification, consolidation, transfer or merger.
The provisions of this clause shall similarly apply to successive
reorganizations, reclassifications, consolidations, transfers, or mergers.
Notwithstanding anything contained in this Agreement to the contrary, in
the event that the Company shall effect any of the transactions described in
this Section 4.6, each person (other than the Company) which may be required to
issue a new Warrant as provided above shall assume by written instrument
delivered to, and reasonably satisfactory to, the Majority Warrant Holders (i)
the obligations of the Company under this Agreement (and if the Company shall
survive the consummation of such transaction, such assumption shall be in
addition to, and shall not release the Company from, any continuing obligations
of the Company under this Agreement) and (ii) the obligation to deliver to all
Holders such new Warrants as, in accordance with the foregoing provisions of
this Section 4.6, such Holders may be entitled to receive, and such Person shall
have similarly delivered to such Holders an opinion of counsel for such Person,
which counsel shall be reasonably satisfactory to the Majority Warrant Holders,
stating that this Agreement shall thereafter continue in full force and effect
and that the terms hereof (including, without limitation, all of the provisions
of this Section 4.6, shall be applicable to the stock, securities, cash or
property which such person may be required to deliver upon any exercise of any
of the Warrants or such new Warrant or the exercise of any rights pursuant
hereto.
4.7 Deferral in Certain Circumstances. In any case in which the provisions
of this Section 4 shall require that an adjustment shall become effective
immediately after a record date of an event, the Company may defer until the
occurrence of such event issuing to the Holder of any Warrant exercised after
such record date and before the occurrence of such event the shares of capital
stock issuable upon such exercise by reason of the adjustment required by such
event and issuing to such Holder only the shares of capital stock issuable upon
such exercise before giving effect to such adjustments; provided, however, that
the Company shall deliver to such Holder an appropriate instrument or due bills
evidencing such Holder's right to receive such additional shares.
4.8 Other Anti-Dilution Provisions. If the Company has issued or issues any
securities on or after the Original Issuance Date containing provisions
protecting the holder or holders thereof against dilution in any manner more
favorable to such holder or holders thereof than those set forth in this Section
4, such provisions (or any more favorable portion thereof) shall be deemed to be
incorporated herein as if fully set forth in this Warrant and, to the extent
inconsistent with any provision of this Warrant, shall be deemed to be
substituted therefor.
4.9 Appraisal Procedure. In any case in which the provisions of this
Section 4 shall necessitate that the Appraisal Procedure be utilized for
purposes of determining an adjustment to the Exercise Price, the Company may
defer until the completion of the Appraisal Procedure and the determination of
the adjustment (1) issuing to the Holder of any Warrant exercised after the date
of the event that requires the adjustment and before completion of the Appraisal
Procedure and the determination of the adjustment, the shares of capital stock
issuable upon such exercise by reason of the adjustment required by such event
and issuing to such Holder only the shares of capital stock issuable upon such
exercise before giving effect to such adjustment and (2) paying to such Holder
any amount in cash in lieu of a fractional share of capital stock pursuant to
Section 2.3 above; provided, however, that the Company shall deliver to such
holder an appropriate instrument or due bills evidencing such holder's right to
receive such additional shares or cash.
4.10 Adjustment of Number of Shares Purchasable. Upon any adjustment of the
Exercise Price as provided in Section 4.1, 4.2, 4.4, 4.5 or 4.6, the Holders of
the Warrants shall thereafter be entitled to purchase upon the exercise thereof,
at the Exercise Price resulting from such adjustment, the number of shares of
Common Stock (calculated to the nearest 1/100th of a share) obtained by
multiplying the Exercise Price in effect immediately prior to such adjustment by
the number of shares of Common Stock issuable on the exercise hereof immediately
prior to such adjustment and dividing the product thereof by the Exercise Price
resulting from such adjustment.
4.11 Exceptions. Section 4 shall not apply to (i) any issuance of Common
Stock upon exercise of any options or warrants outstanding on April 14, 2000,
(ii) the issuance of shares of Common Stock, in an aggregate amount not to
exceed 500,000 shares to McLane Group, L.P., (iii) the issuance of shares of
Common Stock, in an aggregate amount not to exceed 2,600,000 shares upon
exercise of options or warrants that have been approved by the Board of
Directors, or any issuance of such options or warrants, (iv) shares of Common
Stock issued pursuant to the Company's current employee stock purchase plan in
an amount not to exceed 114,000 shares (the securities referred to in clauses
(i), (ii), (iii) and (iv) being collectively referred to as "Excluded
Securities"), (iv) any issuance of Common Stock in an underwritten public
offering at a price per share at least equal to the Exercise Price then in
effect if the underwriting discount does not exceed 7%, or (v) the issuance of
Series B Preferred Stock and Warrants (Preferred Stock) to the Purchaser
pursuant to the Purchase Agreement.
4.12 Notice of Adjustment of Exercise Price. Whenever the Exercise Price is
adjusted as herein provided:
(i) the Company shall compute the adjusted Exercise Price in
accordance with this Section 4 and shall prepare a certificate signed by
the Company's independent accounting firm, setting forth the adjusted
Exercise Price and showing in reasonable detail the facts upon which such
adjustment is based, and such certificate shall forthwith be filed at each
office or agency maintained for such purpose or exercise of Warrants; and
(ii) a notice stating that the Exercise Price has been adjusted and
setting forth the adjusted Exercise Price shall forthwith be prepared by
the Company, and as soon as practicable after it is prepared, such notice
shall be mailed by the Company at its expense to all Holders at their last
addresses as they shall appear in the stock register.
4.13 Other Dilutive Events. If any event occurs as to which the provisions
of this Section 4 are not strictly applicable or, if strictly applicable, would
not fairly and adequately protect the conversion rights of the Holders in
accordance with the essential intent and principles of such provisions, then the
Board of Directors shall make such adjustments in the application of such
provisions, in accordance with such essential intent and principles, as shall be
reasonably necessary to protect such purchase rights as aforesaid; provided that
no such adjustment will increase the Exercise Price or decrease the number of
shares of Common Stock obtainable as otherwise determined pursuant to this
Section 4.
5. NO IMPAIRMENT; REGULATORY COMPLIANCE AND COOPERATION; NOTICE OF EXPIRATION
(a) The Company shall not by any action, including, without limitation,
amending its charter documents or through any reorganization, reclassification,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other similar voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of the Holder against impairment. Without limiting the generality of the
foregoing, the Company shall take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of Common Stock upon the exercise of this Warrant, free
and clear of all Liens, and shall use its best efforts to obtain all such
authorizations, exemptions or consents from any public regulatory body having
jurisdiction thereof as may be necessary to enable the Company to perform its
obligations under this Warrant.
(b) The Company shall deliver to each Holder of Warrants on or before six
months prior to the tenth anniversary of the Original Issue Date, but no earlier
than nine months prior to the tenth anniversary of the Original Issue Date,
advance notice of such tenth anniversary and of the anticipated Expiration Date.
If the Company fails to fulfill in a timely manner the notice obligation set
forth in the prior sentence, it shall provide such notice as soon as possible
thereafter.
6. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH OR
APPROVAL OF ANY GOVERNMENTAL AUTHORITY
From and after the Original Issue Date, the Company shall at all times
reserve and keep available for issuance upon the exercise of the Warrants such
number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of all outstanding Warrants. All
shares of Common Stock issuable pursuant to the terms hereof, when issued upon
exercise of this Warrant with payment therefor in accordance with the terms
hereof, shall be duly and validly issued and fully paid and nonassessable, not
subject to preemptive rights and shall be free and clear of all Liens. Before
taking any action that would result in an adjustment in the number of shares of
Common Stock for which this Warrant is exercisable or in the Exercise Price, the
Company shall obtain all such authorizations or exemptions thereof, or consents
thereto, as may be necessary from any public regulatory body or bodies having
jurisdiction over such action. If any shares of Common Stock required to be
reserved for issuance upon exercise of Warrants require registration or
qualification with any governmental authority under any federal or state law
(other than under the Securities Act or any state securities law) before such
shares may be so issued, the Company will in good faith and as expeditiously as
possible and at its expense endeavor to cause such shares to be duly registered.
7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS
7.1 Notices of Corporate Actions.
In case:
(a) the Company shall take an action or an event shall occur, that would
require an Exercise Price adjustment pursuant to Section 4; or
(b) the Company shall grant to the holders of its Common Stock rights or
warrants to subscribe for or purchase any shares of capital stock of any class;
or
(c) of any reclassification of the Common Stock (other than a subdivision
or combination of the outstanding shares of Common Stock), or of any
consolidation, merger or share exchange to which the Company is a party and for
which approval of any stockholders of the Company is required, or of the sale or
transfer of all or substantially all of the assets of the Company; or
(d) of the voluntary or involuntary dissolution, liquidation or winding up
of the Company; or
(e) the Company or any Subsidiary shall commence a tender offer for all or
a portion of the outstanding shares of Common Stock (or shall amend any such
tender offer to change the maximum number of shares being sought or the amount
or type of consideration being offered therefor);
then the Company shall cause to be filed at each office or agency maintained for
such purpose, and shall cause to be mailed to all Holders of Warrants at their
last addresses as they shall appear in the stock register, at least 30 days
prior to the applicable record, effective or expiration date hereinafter
specified, a notice stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution or granting of rights or warrants,
or, if a record is not to be taken, the date as of which the holders of Common
Stock of record who will be entitled to such dividend, distribution, rights or
warrants are to be determined, (y) the date on which such reclassification,
consolidation, merger, share exchange, sale, transfer, dissolution, liquidation
or winding up is expected to become effective, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities, cash or other property deliverable
upon such reclassification, consolidation, merger, share exchange, sale,
transfer, dissolution, liquidation or winding up, or (z) the date on which such
tender offer commenced, the date on which such tender offer is scheduled to
expire unless extended, the consideration offered and the other material terms
thereof (or the material terms of the amendment thereto). Such notice shall also
set forth such facts with respect thereto as shall be reasonably necessary to
indicate the effect of such action on the Exercise Price and the number and kind
or class of shares or other securities or property which shall be deliverable or
purchasable upon the occurrence of such action or deliverable upon exercise of
the Warrants. Neither the failure to give any such notice nor any defect therein
shall affect the legality or validity of any action described in clauses (a)
through (e) of this Section 7.1.
7.2 Taking of Record. In the case of all dividends or other distributions
by the Company to the holders of its Common Stock with respect to which any
provision of any Section hereof refers to the taking of a record of such
holders, the Company will in each such case take such a record and will take
such record as of the close of business on a Business Day.
7.3 Closing of Transfer Books. The Company shall not at any time, except
upon dissolution, liquidation or winding up of the Company, close its stock
transfer books or Warrant transfer books so as to result in preventing or
delaying the exercise or transfer of any Warrant.
8. TRANSFER RESTRICTIONS
The Holder, by acceptance of this Warrant, agrees to be bound by the
provisions of this Section 8.
8.1 Restrictions on Transfers. Neither this Warrant nor any shares of
Restricted Common Stock issued upon the exercise hereof shall be transferred,
sold, assigned, exchanged, mortgaged, pledged, hypothecated or otherwise
disposed of or encumbered except in compliance with the provisions of the
Securities Act, the rules and regulations thereunder and this Warrant. Each
certificate, if any, evidencing such shares of Restricted Common Stock issued
upon any such Transfer, other than in a public offering pursuant to an effective
registration statement, shall bear the restrictive legend set forth in Section
8.2(a), and each Warrant issued upon such Transfer shall bear the restrictive
legend set forth in Section 8.2(b), unless the Company determines that, or the
Holder delivers to the Company an Opinion of Counsel to the effect that, such
legend is not required for the purposes of compliance with the Securities Act.
Holders of the Warrants or the Restricted Common Stock, as the case may be,
shall not be entitled to Transfer such Warrants or such Restricted Common Stock
except in accordance with this Section 8.1.
8.2 Restrictive Legends.
(a) Except as otherwise provided in this Section 8, each certificate for
Warrant Stock initially issued upon the exercise of this Warrant, and each
certificate for Warrant Stock issued to any subsequent transferee of any such
certificate, shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAW. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED, SOLD, ASSIGNED, EXCHANGED, MORTGAGED, PLEDGED,
HYPOTHECATED OF OTHERWISE DISPOSED OF OR ENCUMBERED WITHOUT COMPLIANCE
WITH THE PROVISIONS OF, AND ARE OTHERWISE RESTRICTED BY THE PROVISIONS
OF, THE ACT AND THE RULES AND REGULATIONS THEREUNDER."
(b) Except as otherwise provided in this Section 8, each Warrant shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
"NEITHER THIS WARRANT NOR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. THE WARRANT
REPRESENTED BY THIS CERTIFICATE AND THE STOCK ISSUABLE UPON EXERCISE
HEREOF MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, EXCHANGED, MORTGAGED,
PLEDGED, HYPOTHECATED OF OTHERWISE DISPOSED OF OR ENCUMBERED WITHOUT
COMPLIANCE WITH THE PROVISIONS OF, AND ARE OTHERWISE RESTRICTED BY THE
PROVISIONS OF, THE ACT, THE RULES AND REGULATIONS THEREUNDER AND THIS
WARRANT."
8.3 Termination of Securities Law Restrictions. Notwithstanding the
foregoing provisions of this Section 8, the restrictions imposed by Section 8.1
upon the transferability of the Warrants and the Restricted Common Stock and the
legend requirements of Section 8.2(a) and (b) shall terminate as to any
particular Warrant or shares of Restricted Common Stock when the Company shall
have received from the Holder thereof an Opinion of Counsel to the effect that
such legend is not required in order to ensure compliance with the Securities
Act. Whenever the restrictions imposed by Section 8.1 shall terminate as to this
Warrant, as herein above provided, the Holder hereof shall be entitled to
receive from the Company, at the expense of the Company, a new Warrant with no
restrictive legend, and none of the Warrants issued upon registration of
transfer, division or combination of, or in substitution for, such Warrant or
Warrants shall have any similar restrictive legend endorsed thereon. Whenever
the restrictions imposed by this Section shall terminate as to any share of
Restricted Common Stock, as herein above provided, the Holder thereof shall be
entitled to receive from the Company, at the Company's expense, a new
certificate representing such Common Stock not bearing the restrictive legend
set forth in Section 8.2(a).
9. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and an indemnity reasonably satisfactory to it (it
being understood that the written indemnification agreement of or affidavit of
loss of the Holder shall be a sufficient indemnity) and, in case of mutilation,
upon surrender and cancellation hereof, the Company will execute and deliver in
lieu hereof a new Warrant of like tenor to such Holder; provided, however, that,
in the case of mutilation, no indemnity shall be required if this Warrant in
identifiable form is surrendered to the Company for cancellation.
10. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the Company shall
maintain an office or agency, which may be the principal executive offices of
the Company (the "Designated Office"), where the Warrants may be presented for
exercise, registration of transfer, division or combination as provided in this
Warrant. Such Designated Office shall initially be the office of the Company at
9933 Woods Drive, Skokie, Illinois 60077. The Company may from time to time
change the Designated Office to another office of the Company or its agent
within the United States by notice given to all registered Holders at least ten
(10) Business Days prior to the effective date of such change.
11. FINANCIAL AND BUSINESS INFORMATION
If at any time prior to the Expiration Date, the Company is not required to
file reports under Section 13 or 15(d) of the Exchange Act, the Company shall
furnish to Holders of Warrants the following:
(a) Quarterly Reports. As soon as available, but not later than 45
days after the end of each quarterly accounting period, (A) a consolidated
balance sheet of the Company as of the end of such period and consolidated
statements of income, cash flows and changes in stockholders' equity for
such quarterly accounting period and for the period commencing at the end
of the previous fiscal year and ending with the end of such period, setting
forth in each case in comparative form the corresponding figures for the
corresponding period of the preceding fiscal year, all prepared in
accordance with generally accepted accounting principles consistently
applied, subject to normal year-end adjustments and the absence of footnote
disclosure, and (B) a report by management of the Company of the operating
and financial highlights of the Company and its Subsidiaries for such
period, which shall include an analysis of the operations of the Company
and its Subsidiaries for such period.
(b) Annual Reports. As soon as available, but not later than 90 days
after the end of each fiscal year of the Company, audited consolidated
financial statements of the Company, which shall include statements of
income, cash flows and changes in stockholders' equity for such fiscal year
and a balance sheet as of the last day thereof, each prepared in accordance
with generally accepted accounting principles, consistently applied, and
accompanied by the report of a "Big 5" firm of independent certified public
accountants selected by the Company's Board of Directors (the
"Accountants"). The Company and its Subsidiaries shall maintain a system of
accounting sufficient to enable its Accountants to render the report
referred to in this Section 11(b).
(c) Miscellaneous. Promptly upon becoming available, each of the
following:
(i) notification in writing of the existence of any default under
any material agreement or instrument to which the Company or any of
its Subsidiaries is a party or by which any of their assets are bound;
(ii) upon request, copies of all reports prepared for or
delivered to the management of the Company or its Subsidiaries by its
accountants; and
(iii) upon request, any other routinely collected financial or
other information available to management of the Company or its
Subsidiaries (including, without limitation, routinely collected
statistical data).
The Company shall comply with any written request from any Holder that the
Company not provide such Holder with any of the foregoing information for any
period of time.
12. DILUTION FEE
In the event any dividends are declared with respect to the Common Stock,
as of the record date established by the Board of Directors the Company shall
pay the Holder of this Warrant as a dilution fee (the "Dilution Fee") an amount
(whether in the form of cash, securities or other property) equal to the amount
(and in the form) of the dividends that such Holder would have received had this
Warrant been exercised for purchase of Common Stock immediately prior to the
record date of such dividend, such Dilution Fee to be payable on the payment
date of the dividend established by the Board of Directors (the "Dilution Fee
Payment Date"). The record date for any such Dilution Fee shall be the record
date for the applicable dividend, and any such Dilution Fee shall be payable to
the persons in whose name this Warrant is registered at the close of business on
the applicable record date.
13. MISCELLANEOUS
13.1 Nonwaiver. No course of dealing or any delay or failure to exercise
any right hereunder on the part of the Company or the Holder shall operate as a
waiver of such right or otherwise prejudice the rights, powers or remedies of
such person.
13.2 Notice Generally. Any notice, demand, request, consent, approval,
declaration, delivery or communication hereunder to be made pursuant to the
provisions of this Warrant shall be sufficiently given or made if in writing and
either delivered in person with receipt acknowledged or by reputable air courier
service with tracking capability and charges prepaid or by facsimile, addressed
as follows:
(a) if to any Holder of this Warrant or of Warrant Stock issued
upon the exercise hereof, at its last known address appearing on the
books of the Company maintained for such purpose;
(b) if to the Company, at the Designated Office;
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, or three (3) Business Days after the same
shall have been deposited in the United States mail, or one (1) Business Day
after the same shall have been sent by Federal Express or another recognized
overnight courier service.
13.3 Indemnification. If the Company fails to make, when due, any payments
provided for in this Warrant, the Company shall pay to the Holder hereof (a)
interest at the Agreed Rate on any amounts due and owing to such Holder and (b)
such further amounts as shall be sufficient to cover any costs and expenses
including, but not limited to, reasonable attorneys' fees and expenses incurred
by such Holder in collecting any amounts due hereunder. The Company shall
indemnify, save and hold harmless the Holder hereof and the Holders of any
Warrant Stock issued upon the exercise hereof from and against any and all
liability, loss, cost, damage, reasonable attorneys' and accountants' fees and
expenses, court costs and all other out-of-pocket expenses incurred in
connection with or arising from any default hereunder by the Company. This
indemnification provision shall be in addition to the rights of such Holder or
Holders to bring an action against the Company for breach of contract based on
such default hereunder.
13.4 Limitation of Liability. No provision hereof, in the absence of
affirmative action by the Holder to purchase shares of Common Stock, and no
enumeration herein of the rights or privileges of the Holder hereof, shall give
rise to any liability of such Holder to pay the Exercise Price for any Warrant
Stock other than pursuant to an exercise of this Warrant or any liability as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
13.5 Remedies. Each Holder of Warrants and/or Warrant Stock, in addition to
being entitled to exercise its rights granted by law, including recovery of
damages, shall be entitled to specific performance of its rights provided under
this Warrant. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions
of this Warrant and hereby agrees, in an action for specific performance, to
waive the defense that a remedy at law would be adequate.
13.6 Successors and Assigns. Subject to the provisions of Sections 3.1, 8.1
and 8.2, this Warrant and the rights evidenced hereby shall inure to the benefit
of and be binding upon the successors of the Company and the permitted
successors and assigns of the Holder hereof. The provisions of this Warrant are
intended to be for the benefit of all Holders from time to time of this Warrant
and to the extent applicable, all Holders of shares of Warrant Stock issued upon
the exercise hereof (including transferees), and shall be enforceable by any
such Holder.
13.7 Amendment. This Warrant and all other Warrants may be modified or
amended or the provisions hereof waived with the written consent of the Company
and the Majority Warrant Holders, provided that no such Warrant may be modified
or amended to reduce the number of shares of Common Stock for which such Warrant
is exercisable or to increase the price at which such shares may be purchased
upon exercise of such Warrant (before giving effect to any adjustment as
provided therein) without the written consent of the Holder thereof.
13.8 Severability. Wherever possible, each provision of this Warrant shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Warrant shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Warrant.
13.9 Headings. The headings used in this Warrant are for the convenience of
reference only and shall not, for any purpose, be deemed a part of this Warrant.
13.10 GOVERNING LAW; JURISDICTION. (a) IN ALL RESPECTS, INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS WARRANT AND THE
OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, EXCEPT WITH RESPECT TO
THE VALIDITY OF THIS WARRANT, THE ISSUANCE OF WARRANT STOCK UPON EXERCISE HEREOF
AND THE RIGHTS AND DUTIES OF THE COMPANY WITH RESPECT TO REGISTRATION OF
TRANSFER, WHICH SHALL BE GOVERNED BY THE LAWS OF THE STATE OF DELAWARE.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS WARRANT MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK AND, BY EXECUTION AND DELIVERY OF
THIS WARRANT, THE COMPANY HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS. THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT
OF ANY OF THE AFOREMENTIONED COURTS IN ANY ACTION OR PROCEEDING BY THE MAILING
OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE
COMPANY AT ITS ADDRESS PROVIDED PURSUANT TO SECTION 13.2, SUCH SERVICE TO BECOME
EFFECTIVE SEVEN DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT
OF THE HOLDER OF THIS WARRANT TO SERVE PROCESS IN ANY OF THE MATTERS PERMITTED
BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY
IN ANY OTHER JURISDICTION. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE
AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS
WARRANT BROUGHT IN THE COURTS REFERRED TO ABOVE AND HEREBY FURTHER IRREVOCABLY
WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION
OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM.
(c) THE COMPANY HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING ARISING UNDER OR WITH RESPECT HERETO.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
and its corporate seal to be impressed hereon and attested by its Secretary or
an Assistant Secretary.
PEAPOD, INC.
By:_________________________________
Name:
Title:
Attest:
By:_____________________________
Name:
Title:
<PAGE>
ANNEX A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned Holder of this Warrant irrevocably exercises this Warrant
for the purchase of ______ shares Common Stock of Peapod, Inc. and herewith
makes payment of the Warrant Price as follows (check one or more of the
following):
o by delivery herewith of a certified or official bank check in the
amount of such Warrant Price payable to the order of the Company;
o hereby instructs the Company to withhold a number of shares of Warrant
Stock then issuable upon exercise of this Warrant with an aggregate
Fair Value equal to such Warrant Price;
o herewith surrenders to the Company shares of Common Stock previously
acquired by the Holder with an aggregate Fair Value equal to such
Warrant Price;
o herewith surrenders to the Company dividends due and owing by the
Company to the Holder equal to such Warrant Price; or
o by providing to the Company goods or services with a fair value equal
to such Warrant Price;
all at the price and on the terms and conditions specified in this Warrant and
requests that certificates for the shares of Common Stock hereby purchased (and
any securities or other property issuable upon such exercise) be issued in the
name of and delivered to ______________ whose address is
_________________________________ and, if such shares of Common Stock shall not
include all of the shares of Common Stock issuable as provided in this Warrant,
that a new Warrant of like tenor and date for the balance of the shares of
Common Stock issuable hereunder be delivered to the undersigned.
____________________________________
(Name of Registered Owner)
____________________________________
(Signature of Registered Owner)
____________________________________
(Street Address)
____________________________________
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
<PAGE>
ANNEX B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby
sells, assigns and transfers unto the assignee named below all of the rights of
the undersigned under this Warrant, with respect to the number of shares of
Common Stock set forth below:
No. of Shares of
Name and Address of Assignee Common Stock
- - ---------------------------- ----------------
and does hereby irrevocably constitute and appoint _____________________
attorney-in-fact to register such transfer onto the books of Peapod, Inc.
maintained for the purpose, with full power of substitution in the premises.
Dated: _____________ Print Name: ________________________
Signature: _________________________
Witness: ___________________________
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
EXHIBIT 10.3
PURCHASE AGREEMENT
among
PEAPOD, INC.,
a Delaware corporation
and
KONINKLIJKE AHOLD N.V.
__________________________
Dated
April 14, 2000
___________________________
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS....................................................................1
ARTICLE II
SALE AND PURCHASE..............................................................9
SECTION 2.1. Sale and Issuance of Shares and Warrants................9
SECTION 2.2. Closings...............................................10
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................................11
SECTION 3.1. Organization and Standing..............................11
SECTION 3.2. Capital Stock..........................................11
SECTION 3.3. Subsidiaries...........................................12
SECTION 3.4. Authorization; Enforceability..........................12
SECTION 3.5. No Violation; Consents.................................13
SECTION 3.6. Permits................................................14
SECTION 3.7. Litigation.............................................14
SECTION 3.8. SEC Documents; Financial Statements....................14
SECTION 3.9. Change in Condition....................................15
SECTION 3.10. Employee Benefit Plans and Labor Matters..............16
SECTION 3.11. Interests in Real Property............................20
SECTION 3.12. Leases................................................21
SECTION 3.13. Compliance with Law...................................21
SECTION 3.14. Related Party Transactions............................21
SECTION 3.15. Tax Matters...........................................22
SECTION 3.16. Environmental Matters.................................23
SECTION 3.17. Intellectual Property.................................25
SECTION 3.18. Registration Rights...................................28
SECTION 3.19. Insurance.............................................28
SECTION 3.20. Contracts.............................................29
SECTION 3.21. Questionable Payments.................................30
SECTION 3.22. Accuracy of Information...............................31
SECTION 3.23. Private Offering......................................31
SECTION 3.24. Split Pea.............................................31
SECTION 3.25. Brokers...............................................31
SECTION 3.26. Voting and Proxy Agreements...........................32
SECTION 3.27. Rights Agreement......................................32
SECTION 3.28. Determination of Amount of Capital....................33
SECTION 3.29. Fairness Opinion......................................33
SECTION 3.30 State Takeover Statutes................................33
SECTION 3.31. Malloy Stock, Options and Note........................33
SECTION 3.32 Other Interests........................................33
SECTION 3.33 Books and Records......................................33
SECTION 3.34 Personal Property......................................34
SECTION 3.35 Accounts Receivable....................................34
SECTION 3.36 Inventory..............................................34
SECTION 3.37 Product Liability......................................34
SECTION 3.38 Copies of Documents....................................35
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER...............................35
SECTION 4.1. Authorization; Enforceability; No Violations...........35
SECTION 4.2. Consents...............................................35
SECTION 4.3. Private Placement......................................36
ARTICLE V
COVENANTS OF THE COMPANY......................................................36
SECTION 5.1. Operation of Business..................................36
SECTION 5.2. Negative Covenants.....................................37
SECTION 5.3. Access to Books and Records............................41
SECTION 5.4. Agreement to Take Necessary and
Desirable Actions....................................42
SECTION 5.5. Compliance with Conditions;
Commercially Reasonably Efforts......................42
SECTION 5.6. Consents and Approvals.................................42
SECTION 5.7. Stockholder Approval...................................42
SECTION 5.8. Tax Treatment of Preferred Stock.......................43
SECTION 5.9. Other Activities of Purchaser..........................43
SECTION 5.10. HSR Act Filings.......................................43
SECTION 5.11. No Solicitation.......................................44
SECTION 5.12. Use of Proceeds.......................................46
SECTION 5.13. Reduction of Capital..................................46
SECTION 5.14. Amendment of Bylaws...................................46
SECTION 5.15. Transfer Agent; CUSIP.................................46
SECTION 5.16. Notification of Certain Matters.......................46
SECTION 5.17. Malloy Shares.........................................47
ARTICLE VI
COVENANTS OF THE PURCHASER....................................................47
SECTION 6.1. Agreement to Take Necessary and Desirable Actions......47
SECTION 6.2. Compliance with Conditions; Commercially
Reasonable Efforts...................................47
SECTION 6.3. HSR Act Filings........................................47
SECTION 6.4. Confidential Information...............................48
SECTION 6.5 Notification of Certain Matters........................48
SECTION 6.6 Restrictions on Mergers................................49
ARTICLE VII
CONDITIONS PRECEDENT TO CLOSING...............................................49
SECTION 7.1. Conditions to the Company's Obligations................49
SECTION 7.2. Conditions to The Purchaser's Obligations..............50
ARTICLE VIII
INFORMATION; DIRECTORS; RESERVATION OF STOCK..................................53
SECTION 8.1. Access to Information..................................53
SECTION 8.2. Information Rights of Purchaser........................53
SECTION 8.3. Information Rights.....................................55
SECTION 8.4. Directors..............................................55
SECTION 8.5. Reservation of Common Stock.............................57
ARTICLE IX
MISCELLANEOUS.................................................................58
SECTION 9.1. Survival; Indemnification..............................58
SECTION 9.2. Notices................................................60
SECTION 9.3. Governing Law..........................................62
SECTION 9.4. Termination; Fees......................................62
SECTION 9.5. Entire Agreement.......................................63
SECTION 9.6. Modifications and Amendments...........................63
SECTION 9.7. Waivers and Extensions.................................63
SECTION 9.8. Titles and Headings; Interpretation....................63
SECTION 9.9. Exhibits and Schedules.................................63
SECTION 9.10. Expenses; Brokers.....................................63
SECTION 9.11. Press Releases and Public Announcements...............64
SECTION 9.12. Assignment; No Third Party Beneficiaries..............64
SECTION 9.13. Severability..........................................64
SECTION 9.14. Counterparts; Facsimile...............................64
SECTION 9.15. Further Assurances....................................65
SECTION 9.16. Remedies Cumulative...................................65
<PAGE>
SCHEDULES
Schedule I Series B Preferred Stock and Warrants to be Purchased
Schedule 3.2 Capital Stock
Schedule 3.3 Subsidiaries
Schedule 3.5 No Violation; Consents
Schedule 3.7 Litigation
Schedule 3.8 SEC Documents; Financial Statements
Schedule 3.9 Change in Condition
Schedule 3.10 Employee Benefit Plans and Labor Matters
Schedule 3.10(n) Employee Severance Arrangements
Schedule 3.11 Interests in Real Property
Schedule 3.12 Leases
Schedule 3.13 Compliance with Law
Schedule 3.14 Related Party Transactions
Schedule 3.17 Intellectual Property
Schedule 3.18 Registration Rights
Schedule 3.20 Contracts
Schedule 3.31 Malloy Agreement
Schedule 3.32 Other Interests
Schedule 5.1(d) Key Employees
Schedule 5.2 Negative Covenants
EXHIBITS
Exhibit A......... Credit Agreement
Exhibit B......... Amended and Restated Security Agreement
Exhibit C Amended and Restated Collateral Assignment of
Intellectual Property Agreement
Exhibit D......... Registration Rights Agreement
Exhibit E......... Services Agreement
Exhibit F......... Voting Agreement
Exhibit G......... Warrant (Credit Agreement)
Exhibit H......... Warrant (Preferred Stock)
Exhibit I......... Certificate of Designation
Exhibit J......... Opinion of Sidley & Austin
<PAGE>
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") is made as of April 14, 2000, by
and among Peapod, Inc., a Delaware corporation (the "Company"), and KONINKLIJKE
AHOLD N.V., a public company with limited liability organized and existing under
the laws of the Netherlands (the "Purchaser").
WHEREAS, in contemplation of this Agreement, the Company issued the
Promissory Note dated April 5, 2000 in favor of BEW, Inc., a Delaware
Corporation ("BEW"), an Affiliate of the Purchaser, and entered into a Security
Agreement dated April 5, 2000 with BEW (as amended, the "Note and Security
Agreement"), whereby BEW advanced $3,000,000 to the Company;
WHEREAS, in connection with the Note and Security Agreement the Company
issued a warrant (the "Previously Issued Warrant") dated April 10, 2000 in favor
of the Purchaser, for 100,000 shares of Common Stock (as defined below);
WHEREAS, in connection with the execution of this Agreement, the Company
will enter into the Credit and Security Agreements (as defined below) to
refinance the Note and Security Agreement;
WHEREAS, on the date hereof A. Michael Meurs, Steve Odland and William J.
Grice, nominees of the Purchaser, have been appointed as directors of the
Company;
WHEREAS, the Board of Directors of the Company has approved the issue of
the Securities (as defined below) by the Company to the Purchaser and each of
the Supervisory Board and the Executive Board of the Purchaser has approved the
subscription of the Securities by the Purchaser; and
WHEREAS, in connection with the execution of this Agreement, the Company
will enter into a Services Agreement (as defined below) for the provision of
services between the Company and the Purchaser and its Affiliates, and the other
Documents (as defined below);
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
"Affiliate" shall mean, with respect to any person, any other person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified person and, shall include (a) in the case of
a person who is an individual, (i) members of such specified person's immediate
family (as defined in Instruction 2 of Item 404(a) of Regulation S-K under the
Securities Act) and (ii) trusts, the trustee and all beneficiaries of which are
such specified person or members of such person's immediate family as determined
in accordance with the foregoing clause (i), and (b) any person that directly or
indirectly owns more than 5% of any class of capital stock or other interest of
such specified person. For the purposes of this definition, "control," when used
with respect to any person means the power to direct the management and policies
of such person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "affiliated," "controlling"
and "controlled" have meanings correlative to the foregoing. Notwithstanding the
foregoing, for purposes of this Agreement, Nevis, Tribune, the Purchaser and its
Affiliates shall not be deemed Affiliates of the Company.
"Associates" shall have the meaning provided in the Rights Agreement.
"Aggregate Number" shall have the meaning set forth in Section 2.1(b).
"Agreement" shall have the meaning set forth in the Preamble.
"Alternative Transaction" shall have the meaning set forth in Section 5.11.
"Alternative Transaction Documentation" shall have the meaning set forth in
Section 5.11.
"Applicable Law" shall mean, with respect to any person, any law, statute,
rule, regulation, order, writ, injunction, judgment or decree of any
Governmental Authority to which such person or any of its subsidiaries is bound
or to which any of their respective properties is subject.
"Audited Financial Statements" shall have the meaning set forth in
Section 3.8.
"Benefit Plan" shall have the meaning set forth in Section 3.10.
"BEW" shall have the meaning set forth in the Recitals.
"Business Day" shall mean any day except a Saturday, a Sunday or any other
day on which commercial banks are required or authorized to close in Chicago,
Illinois or New York, New York.
"Certificate of Designation" shall have the meaning set forth in Section
2.1.
"Charter" with respect to any corporation shall mean the certificate of
incorporation or articles of incorporation of such corporation.
"Closing" shall have the meaning set forth in Section 2.1(b).
"Closing Date" shall have the meaning set forth in Section 2.2(a).
"Code" shall mean have the meaning set forth in Section 3.10.
"Commission" shall mean the United States Securities and Exchange
Commission.
"Commitments" shall have the meaning set forth in Section 3.20.
"Common Stock" shall mean the common stock, par value $.01 per share, of
the Company.
"Company" shall have the meaning set forth in the Preamble.
"Credit and Security Agreements" shall mean the Credit Agreement, to be
entered into by and between the Company and the Purchaser on the date hereof,
substantially in the form attached as Exhibit A hereto (the "Credit Agreement"),
the Amended and Restated Security Agreement, dated as of April 5, 2000, by and
among BEW, the Purchaser and the Company, substantially in the form attached as
Exhibit B hereto, the Amended and Restated Collateral Assignment of Intellectual
Property Agreement, to be entered into by and between the Purchaser and the
Company, on the date hereof, substantially in the form attached as Exhibit C
hereto, together with all documents, agreements, certificates and instruments
entered into in connection therewith on or after the date hereof.
"Date Data" shall have the meaning set forth in Section 3.17(l).
"DGCL" shall mean the Delaware General Corporation Law.
"Documents" shall mean (i) this Agreement, (ii) the Warrants, (iii) the
Certificate of Designation, (iv) the Registration Rights Agreement, (v) the
Credit and Security Agreements, (v) the Services Agreement, (vi) the Wareroom
License Agreement, (vii) the Technology Partnership and License Agreement, and
(viii) the Voting Agreements.
"Employee" shall have the meaning set forth in Section 3.10.
"Environmental Claim" shall have the meaning set forth in Section 3.16(c).
"Environmental Laws" shall have the meaning set forth in Section 3.16(a).
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" shall mean with respect to any person (within the meaning
of section 3(9) of ERISA) any other person that would be regarded together with
such person as a single employer under section 414(b), (c), (m) or (o) of the
Code.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Final Closing" shall have the meaning set forth in Section 2.1(b).
"Final Closing Date" shall have the meaning set forth in Section 2.1(b).
"Financial Statements" shall mean the Audited Financial Statements and the
Interim Financial Statements.
"GAAP" shall mean generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board, which are in effect from time to time,
consistently applied.
"Governmental Authority" shall mean any foreign, Federal, state or local
court or governmental or regulatory authority.
"Holder" shall mean any person that is the beneficial owner of Shares,
Warrants, or shares of Common Stock issued upon conversion of Shares or upon
exercise of Warrants, as a result of the sale, assignment or other transfer of
Securities originally issued to the Purchaser or issuable or issued upon the
conversion or exercise of any such Securities.
"Houlihan Lokey" shall have the meaning set forth in Section 3.25.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and applicable rules and regulations and any similar state
acts.
"HSR Approval" shall mean the expiration of all waiting periods under the
HSR Act applicable to the issuance of Series B Preferred Stock as contemplated
by the Documents.
"Indemnified Party" shall have the meaning set forth in Section 9.1(c).
"Indemnifying Party" shall have the meaning set forth in Section 9.1(c).
"Intellectual Property" shall mean all domestic and foreign trademarks,
service marks, trade names, corporate and business names, brand names, Internet
domain names, universal resource locators ("URLs"), designs, logos, trade dress,
slogans, and general intangibles of like nature, together with all goodwill,
registrations and applications related to the foregoing (collectively,
"Trademarks"); patents and industrial designs (including any continuations,
divisionals, continuations-in-part, renewals, provisionals, reissues, and
applications for any of the foregoing); copyrights (including any registrations
and applications for any of the foregoing); Software; "mask works" (as defined
under 17 USC section 901) and any registrations and applications for "mask
works"; inventions (whether or not patentable), invention disclosures, moral and
economic rights of authors and inventors (however denominated), technical data
and customer lists; technology, trade secrets and other confidential
information, know-how, proprietary processes, formulae, algorithms, models, and
methodologies (whether or not patentable) (collectively, "Trade Secrets"); all
improvements and refinements of any of the foregoing; rights of publicity and
privacy relating to the use of the names, likenesses, voices, signatures and
biographical information of real persons; in each case used in or necessary for
the business of the Company and any Subsidiary.
"Key Stockholders" shall mean Tribune, Nevis, Thomas L. Parkinson, Andrew
B. Parkinson, Trygve E. Myhren, Robert S. Goodale, Tasso H. Coin, Seth L.
Pierrepont, Mark VanStekelenburg and Drayton McLane.
"Leases" shall have the meaning set forth in Section 3.12.
"License Agreements" shall have the meaning set forth in Section 3.17.
"Lien" shall mean any pledge, lien, claim, restriction, charge or
encumbrance of any kind.
"Malloy Agreement" shall have the meaning set forth in Section 3.31.
"Material Adverse Effect" shall mean a material adverse effect (i) on the
business, operations, prospects, properties, earnings, assets, liabilities or
condition (financial or other) of the Company and its Subsidiaries, taken as a
whole, or (ii) on the ability of the Company or any of its Subsidiaries to
perform its obligations hereunder or under any of the other Documents.
"Materials of Environmental Concern" shall have the meaning set forth in
Section 3.16.
"NASD" shall mean the National Association of Security Dealers.
"NASDAQ" shall mean the NASDAQ quotation system, or any successor reporting
system.
"Nevis" shall mean Nevis Capital Management, Inc., a Maryland corporation.
"Note and Security Agreement" shall have the meaning set forth in the
Recitals.
"Notices" shall have the meaning set forth in Section 9.2.
"PBGC" shall have the meaning set forth in Section 3.10.
"Permitted Liens" shall mean: (i) liens for Taxes and other governmental
charges and assessments arising in the ordinary course of business which are not
yet due and payable, (ii) liens of landlords and liens of carriers,
warehousemen, mechanics and materialmen and other like liens arising in the
ordinary course of business for sums not yet due and payable (iii) other liens
or imperfections on property which are not material in amount, do not interfere
with, and are not violated by, the consummation of the transactions contemplated
by this Agreement, and do not impair the marketability of, or materially detract
from the value of or materially impair the existing use of, the property
affected by such lien or imperfection, and (iv) liens created or permissible
under the Credit and Security Agreements.
"Permitted Transferee" shall mean any person.
"person" shall mean any individual, partnership, corporation, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or agency or political subdivision
thereof, or other entity.
"Preferred Stock" shall mean the preferred stock, par value $.01 per share,
of the Company.
"Previously Issued Warrant" shall have the meaning set forth in the
Recitals.
"Purchaser" shall have the meaning set forth in the Preamble.
"Purchaser Nominees" shall mean the nominees of the Purchaser to serve as
directors of the Company.
"Registration Rights Agreement" shall mean the Registration Rights
Agreement to be entered into by and among the Company and the Purchaser on the
date hereof, substantially in the form attached as Exhibit D hereto.
"Related Party" shall have the meaning set forth in Section 3.14.
"Rights" shall have the meaning set forth in Section 3.27.
"Rights Agreement" shall have the meaning set forth in Section 3.5.
"SEC Documents" shall have the meaning set forth in Section 3.8(c).
"Securities" shall mean the Shares and the Warrants.
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Series B Preferred Stock" shall mean the Series B Convertible Preferred
Stock, par value $0.01 per share, of the Company.
"Services Agreement" shall mean the Supply and Services Agreement to be
entered into by and between the Company and the Purchaser or its Affiliate, on
the date hereof, substantially in the form attached as Exhibit E hereto.
"Shares" shall mean the shares of Series B Preferred Stock to be issued and
sold by the Company to the Purchaser under Section 2.1(b) hereof.
"Software" shall mean any and all (a) computer programs, including any and
all software implementation of algorithms, models and methodologies, whether in
source code or object code form, (b) databases and compilations, including any
and all data and collections of data, (c) designs, processes, procedures and
data collectors, and (d) all documentation, including user manuals and training
materials, relating to any of the foregoing.
"Split Pea" shall have the meaning set forth in Section 3.24.
"Stockholder Approval" shall have the meaning set forth in Section 5.7.
"Stockholder Meeting" shall have the meaning set forth in Section 5.7.
"Subsequent Filings" shall have the meaning set forth in Section 3.8.
"subsidiary" shall mean, with respect to any person, (a) a corporation a
majority of whose capital stock with voting power, under ordinary circumstances,
to elect directors is at the time, directly or indirectly, owned by such person,
by a subsidiary of such person, or by such person and one or more subsidiaries
of such person, (b) a partnership in which such person or a subsidiary of such
person is, at the date of determination, a general partner of such partnership,
or (c) any other person (other than a corporation) in which such person, a
subsidiary of such person or such person and one or more subsidiaries of such
person, directly or indirectly, at the date of determination thereof, has (i) at
least a majority ownership interest, (ii) the power to elect or direct the
election of the directors or other governing body of such person, or (iii) the
power to direct or cause the direction of the affairs or management of such
person. For purposes of this definition, a person is deemed to own any capital
stock or other ownership interest if such person has the right to acquire such
capital stock or other ownership interest, whether through the exercise of any
purchase option, conversion privilege or similar right.
"Subsidiary" shall mean a subsidiary of the Company.
"Taxes" shall mean all foreign, Federal, State and local taxes, including,
without limitation, any interest, penalties or additions to tax that may become
payable in respect thereof, imposed by any Governmental Authority, which taxes
shall include, without limiting the generality of the foregoing, all income
taxes, profits, capital gains, payroll and employee withholding taxes,
unemployment insurance, social security, sales and use taxes, excise taxes,
franchise taxes, gross receipts taxes, occupation taxes, real and personal
property taxes, stamp taxes, transfer taxes, workmen's compensation taxes and
other obligations of the same or a similar nature, whether arising before, on or
after the Closing Date and shall include any liability for such amounts as a
result of either being a member of a combined, consolidated, unitary or
affiliated group or of a contractual obligation to indemnify any person or other
entity.
"Tax Returns" shall mean all returns, declarations, statements, schedules,
forms, reports, information returns or other documents (including any related or
supporting information), and any amendments thereto, filed or required to be
filed with any Governmental Authority in connection with the determination,
assessment, collection or administration of any Taxes.
"Technology Partnership and License Agreement" shall mean the Technology
Partnership and License Agreement to be entered into by and between the Company
and the Purchaser or its Affiliate, on or prior to the first Closing, in form
and substance, reasonably satisfactory to the Company and the Purchaser.
"Threshold Securities" shall mean a number of securities of the Company
that constitute, or if exercised, exchanged or converted into Common Stock would
constitute, at least 10% of the aggregate issued and outstanding Common Stock.
"Trade Secrets" shall have the meaning set forth in the definition of
"Intellectual Property" in this Article I.
"Trademarks" shall have the meaning set forth in the definition of
"Intellectual Property" in this Article I.
"Tribune" shall mean Tribune National Marketing Company, a Delaware
corporation.
"Voting Agreements" shall mean one or more voting agreements dated April
14, 2000, by and among the Key Stockholders substantially in the form of Exhibit
F hereto.
"Wareroom License Agreement" shall mean the Wareroom License Agreement to
be entered into by and between the Company and the Purchaser or its Affiliate,
on or prior to the first Closing, substantially in the form of Exhibit B
attached to the Services Agreement.
"WARN Act" shall mean the Worker Adjustment and Retraining Notification Act
of 1988, as amended, and any applicable state or local law with regard to "plant
closings" or "mass layoffs" as such terms are defined in the WARN Act or
applicable state or local law.
"Warrants" shall mean the Warrant (Credit Agreement) to be issued on the
date hereof by the Company in favor of the Purchaser to purchase Common Stock,
substantially in the form of Exhibit G attached hereto, and the Warrant
(Preferred Stock) to be issued by the Company in favor of the Purchaser to
purchase Common Stock, substantially in the form of Exhibit H attached hereto,
in accordance with Section 2.1(b).
"Wasserstein" shall have the meaning set forth in Section 3.25.
"Year 2000 Compliance" shall have the meaning set forth in Section 3.17.
ARTICLE II
SALE AND PURCHASE
SECTION 2.1. Sale and Issuance of Shares and Warrants.
(a) On the date hereof and concurrently with the execution of the Credit
and Security Agreements, the Purchaser shall purchase and accept from the
Company the Warrants (Credit Agreement) for the purchase price indicated on
Schedule I.
(b) Upon the terms and subject to the conditions set forth in this
Agreement, the Company shall issue and the Purchaser shall purchase and accept
from the Company the number (the "Aggregate Number") of shares of Series B
Preferred Stock and Warrants (Preferred Stock) for the purchase prices indicated
on Schedule I as soon as practicable after all of the conditions set forth in
Article VII hereof shall have been satisfied or duly waived, including, without
limitation, receipt of Stockholder Approval, but in no event later than three
Business Days thereafter (the "Final Closing Date"). Notwithstanding the
foregoing, the Purchaser shall have the right to purchase shares of Series B
Preferred Stock and Warrants (Preferred Stock) in one or more closings, but no
more than three closings (each, a "Closing", and the Closing occurring on the
Final Closing Date, the "Final Closing") such that the number of shares of
Series B Preferred Stock and Warrants equals the Aggregate Number; provided,
that, any such purchase by Purchaser shall be in accordance with and not in
violation of NASD rules and regulations. At each Closing, the Purchaser shall
purchase and accept from the Company shares of Series B Preferred Stock and
Warrants (Preferred Stock) on a pro rata basis (for example, if at a Closing,
the Purchaser purchases 10% of the shares of Series B Preferred Stock set forth
in Schedule I, the Purchaser shall purchase 10% of the Warrants (Preferred
Stock) set forth in Schedule I).
(c) On or before the first Closing, the Company shall adopt and file with
the Secretary of State of Delaware the Certificate of Designation relating to
the Series B Preferred Stock (the "Certificate of Designation"), substantially
in the form attached as Exhibit I hereto.
SECTION 2.2. Closings.
(a) Each Closing (other than the Final Closing), shall take place at 9:00
a.m., New York time, on the date five Business Days after the Purchaser has
provided written notice to the Company that all of the conditions relating to
such Closing set forth in Article VII hereof shall have been satisfied or duly
waived or at such other time and date as the parties hereto shall agree in
writing (the "Closing Date"), at the offices of White & Case LLP, 1155 Avenue of
the Americas, New York, New York or at such other place as the parties hereto
shall agree in writing.
(b) The Final Closing, shall take place at 9:00 a.m., New York time on the
Final Closing Date or at such other time and date as the parties hereto shall
agree in writing, at the offices of White & Case LLP, 1155 Avenue of the
Americas, New York, New York or at such other place as the parties hereto shall
agree in writing.
(c) On each Closing Date (i) the Purchaser shall deposit into a bank
account designated by the Company not later than one Business Day prior to such
Closing Date, by wire transfer of immediately available funds, an amount equal
to the aggregate purchase price of the Securities being purchased by the
Purchaser from the Company pursuant to Section 2.2(a), and (ii) the Company
shall deliver to the Purchaser, against payment of the purchase price therefor,
certificates representing the Shares and Warrants, being purchased by the
Purchaser pursuant to Section 2.2(a). The Shares and Warrants shall be in
definitive form and registered in the name of the Purchaser or its nominee or
designee and in such denominations (including fractional shares) as the
Purchaser shall request not later than one Business Day prior to the Closing
Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchaser as follows:
SECTION 3.1. Organization and Standing. The Company is duly incorporated,
validly existing and in good standing as a domestic corporation under the laws
of the State of Delaware and has all requisite corporate power and authority to
own its properties and assets and to carry on its business as it is now being
conducted and as proposed to be conducted. The Company is duly qualified to
transact business as a foreign corporation and is in good standing in each
jurisdiction in which the character of the properties owned or leased by it or
the nature of its business makes such qualification necessary, except where the
failure to so qualify or be in good standing could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
SECTION 3.2. Capital Stock. On the date hereof, the authorized capital
stock of the Company will consist solely of (a) 50,000,000 shares of Common
Stock and (b) 5,000,000 shares of Preferred Stock. Immediately prior to the
Closing, or if there is more than one Closing, the Final Closing, following the
filing of the amendment to the Company's Charter increasing the authorized
shares of stock of the Company, the authorized capital stock of the Company will
consist solely of (a) 100,000,000 shares of Common Stock and (b) 10,000,000
shares of Preferred Stock. As of the date hereof, of the 50,000,000 shares of
Common Stock authorized, (i) 18,260,842 shares of Common Stock are issued and
outstanding, (ii) 3,611,716 shares are reserved for issuance pursuant to
outstanding options and warrants and existing employee stock plans, (iii)
19,369,873 shares are reserved for issuance upon conversion of the shares of
Series B Preferred Stock, (iv) 100,000 shares will be reserved for issuance upon
exercise of the Previously Issued Warrant and 36,460,937 shares will be reserved
for issuance upon exercise of the Warrants. As of the date hereof, of the
5,000,000 shares of Preferred Stock authorized, (i) 1,000,000 shares have been
designated Series A Preferred Stock, none of which will be issued or outstanding
but all of which have been reserved for issuance upon the exercise of rights
under the Rights Agreement. Immediately prior to the first Closing, or if there
is more than one Closing, the Final Closing, 730,000 shares will have been
designated Series B Preferred Stock. As of the date hereof, there are securities
convertible, exchangeable or exercisable into 661,319 shares of Common Stock at
or below $3.75 per share of Common Stock. Immediately following each Closing,
each share of capital stock of the Company that is issued and outstanding will
be duly authorized, validly issued, fully paid and nonassessable, and will not
be subject to nor issued in violation of, any preemptive rights. All shares of
Series B Preferred Stock issued in a Closing, or as a dividend on any
outstanding shares of Series B Preferred Stock, will be duly authorized, validly
issued, fully paid and nonassessable. The Previously Issued Warrant and all
Warrants issued at a Closing will be duly authorized, validly issued, fully paid
and nonassessable. Upon conversion of any shares of Series B Preferred Stock in
accordance with their terms, all of the Common Stock issued upon such conversion
will be duly authorized, validly issued, fully paid and nonassessable. Upon
exercise of the Previously Issued Warrant and the Warrants in accordance with
their terms, the Common Stock issued upon such exercise will be duly authorized,
validly issued, fully paid and nonassessable. Except for the Previously Issued
Warrant and as set forth on Schedule 3.2 or as contemplated by this Agreement,
at the date hereof there are, and immediately following each Closing there will
be (a) no outstanding or authorized options, warrants, agreements, conversion
rights, preemptive rights, other rights, subscriptions, claims of any character,
obligations, convertible or exchangeable securities, or other commitments,
contingent or otherwise, relating to shares of capital stock of the Company or
any of its Subsidiaries or pursuant to which the Company or any of its
Subsidiaries is or may become obligated to issue shares of its capital stock or
any securities convertible into, exchangeable for, or evidencing the right to
subscribe for, purchase or acquire, any shares of the capital stock of the
Company or any of its Subsidiaries, (b) no restrictions upon the dividends,
voting or transfer of any shares of capital stock of the Company pursuant to its
Charter, Bylaws or other governing documents or any agreement or other
instruments to which it is a party or by which it is bound, and (c) no shares of
Common Stock or Preferred Stock held by the Company in its treasury. The holders
of the Series B Preferred Stock will, upon issuance thereof, have the rights set
forth in the Certificate of Designation. Neither the Company nor any of its
Subsidiaries has authorized or outstanding bonds, debentures, notes or other
indebtedness the holders of which have the right to vote (or convertible or
exercisable for or exchangeable into securities the holders of which have the
right to vote) with the stockholders of such person on any matter. Except as
contemplated by this Agreement or the Rights Agreement or as set forth on
Schedule 3.2, there are no outstanding contractual obligations of the Company or
any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of
Common Stock or the capital stock of the Company or any of its Subsidiaries.
SECTION 3.3. Subsidiaries. The Company has no Subsidiaries.
SECTION 3.4. Authorization; Enforceability. The Company has the corporate
power to execute, deliver and perform its obligations under each of the
Documents and has taken all necessary corporate action to authorize the
execution, delivery and performance by it of each of the Documents and to
consummate the transactions contemplated hereby and thereby except, with respect
to the Closing, or the Final Closing if the Purchaser elects to have more than
one Closing, the Stockholder Approval. No other corporate proceedings on the
part of the Company are necessary therefor. The Company has duly executed and
delivered this Agreement. This Agreement constitutes, and each of the other
Documents, when executed and delivered by the Company and, assuming due
execution by the other parties hereto and thereto (other than the Subsidiaries),
will constitute legal, valid and binding obligations of the Company enforceable
against it in accordance with their terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and by
general principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
SECTION 3.5. No Violation; Consents.
(a) The execution, delivery and performance by the Company of each of the
Documents to which it is a party, all actions taken in connection with the
execution of the Voting Agreement, the consummation of the transactions
contemplated hereby and thereby does not and will not contravene any Applicable
Law, except for any such contraventions that could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. No actions
taken in connection with the execution of the Voting Agreement contravenes any
Applicable Law. The execution, delivery and performance by the Company of the
Documents to which it is a party and the consummation of the transactions
contemplated hereby and thereby (i) will not (x) violate, result in a breach of
or constitute (with due notice or lapse of time or both) a default under any
contract, lease, loan agreement, Benefit Plan, mortgage, security agreement,
trust indenture or other agreement or instrument to which the Company or any of
its Subsidiaries is a party or by which any of them is bound or to which any of
their properties or assets is subject, except to the extent any such conflict or
breach, singly or in the aggregate, would not have a Material Adverse Effect,
(y) result in the creation or imposition of any Lien (other than a Permitted
Lien) upon any of the properties or assets of any of them, or (z) except as set
forth on Schedule 3.5(a), obligate the Company to make any payment or incur any
additional obligation, or give rise to any right of any person with respect to
the Company, under any term or provision of any contract or agreement, the
Charter or Bylaws of the Company, any Benefit Plan or any Applicable Law, that
relates to a change of control or ownership of the Company or any similar
provision, (ii) will not violate any provision of its Charter or Bylaws, and
(iii) will not result in the Purchaser or any of its Affiliates, Associates or
Permitted Transferees being (x) an "Acquiring Person" under the Amended and
Restated Stockholder Rights Agreement, dated as of April 14, 2000 (the "Rights
Agreement"), by and between the Company and First Chicago Trust Company of New
York, a division of Equiserve, as Rights Agent, or (y) an "interested
stockholder," under Section 203 of the DGCL.
(b) Except as set forth on Schedule 3.5(b), no consent, authorization or
order of, or filing or registration with, any Governmental Authority or other
person is required to be obtained or made by the Company or any of its
Subsidiaries for the execution, delivery and performance of any of the
Documents, or the consummation of any of the transactions contemplated hereby or
thereby, except (i) the HSR Approval, and (ii) the Stockholder Approval, which
will have been obtained on or prior to the Closing Date, or the Final Closing
Date if the Purchaser elects to have more than one Closing.
SECTION 3.6. Permits. Each of the Company and its Subsidiaries has such
licenses, permits, exemptions, consents, waivers, authorizations, orders and
approvals from appropriate Governmental Authorities ("Permits") as are necessary
to own, lease or operate their properties and to conduct their businesses as
currently owned and conducted and all such Permits are valid and in full force
and effect, except such Permits that the failure to have or to be in full force
and effect could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect. No action by the Company or any of its
Subsidiaries outside the normal course of business is required in order that all
material Permits shall remain in full force and effect following either of the
Closings.
SECTION 3.7. Litigation. Except as set forth on Schedule 3.7, there are no
pending or, to the best knowledge of the Company, threatened claims, actions,
suits, labor disputes, grievances, administrative or arbitration or other
proceedings or, to the best knowledge of the Company, investigations against the
Company, its Subsidiaries or their respective assets or properties before or by
any Governmental Authority or before any arbitrator that could, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect. None
of the transactions contemplated by any of the Documents is restrained or
enjoined (either temporarily, preliminarily or permanently), and no material
adverse conditions have been imposed thereon by any Governmental Authority or
arbitrator. None of the Company, its Subsidiaries or any of their respective
assets or properties, is subject to any order, writ, judgment, award, injunction
or decree of any Governmental Authority or arbitrator, that could, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
SECTION 3.8. SEC Documents; Financial Statements.
(a) The Company has provided to the Purchaser copies of the audited
consolidated balance sheet of the Company and its consolidated Subsidiaries as
of December 31, 1998 (the "1998 Financials") and December 31, 1999 (the "1999
Financials"), together with the related audited consolidated statements of
operations, stockholders' equity and cash flows for the fiscal year then ended,
and the notes thereto, accompanied with respect to the 1998 Financials by the
unqualified opinion thereon of KPMG LLP and with respect to the 1999 Financials
by the qualified opinion of KPMG (collectively, the "Audited Financial
Statements"). The Audited Financial Statements (including the notes thereto)
were prepared in accordance with GAAP and present fairly, in all material
respects, the consolidated financial position and results of operation of the
Company and its consolidated Subsidiaries as of December 31, 1998 and December
31, 1999 and for the periods then ended.
(b) Neither the Company nor any of its Subsidiaries has any material
claims, liabilities or indebtedness, contingent or otherwise of any kind
whatsoever (whether accrued, absolute, contingent or otherwise and whether or
not required to be reflected in the Company's financial statements in accordance
with GAAP), except (i) as set forth in the Audited Financial Statements, (ii)
the Credit and Security Agreements, and (iii) liabilities to trade creditors
incurred subsequent to December 31, 1999 in the ordinary course of business
consistent with past practices not involving borrowings by the Company or any
Subsidiary.
(c) Since January 1, 1997, the Company has filed all forms, reports and
documents with the Commission (including all exhibits thereto) required under
the Securities Act or the Exchange Act or the rules and regulations promulgated
thereunder (collectively, the "SEC Documents"), each of which complied in all
material respects with all applicable requirements of the Securities Act and the
Exchange Act as in effect on the dates so filed. None of the SEC Documents (as
of their respective filing dates) contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. Any forms, reports and
documents filed by the Company with the Commission subsequent to the date hereof
and prior to the Final Closing Date (collectively, the "Subsequent Filings")
will comply in all material respects with all applicable requirements of the
Securities Act and the Exchange Act and will not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The Company has
heretofore furnished to the Purchaser copies of each of the SEC Documents (other
than exhibits or schedules to the SEC Documents) and will furnish to the
Purchaser copies of each Subsequent Filing promptly after the date of such
filing.
(d) No representation or warranty of the Company contained in any document,
certificate or written statement furnished to the Purchaser by or at the
direction of the Company for use in connection with the transactions
contemplated by this Agreement, contains any untrue statement of a material fact
or omits to state any material fact (known to the Company, in the case of
information not furnished by them) necessary in order to make the statements
contained herein or therein not misleading in light of the circumstances in
which the same were made. There are no facts known to any of the Company or its
Subsidiaries (other than matters of a general economic nature) that could,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect and that have not been disclosed in the SEC Documents, this
Agreement or in such other documents, certificates and statements furnished to
the Purchaser for use in connection with the transactions contemplated by this
Agreement.
SECTION 3.9. Change in Condition.
(a) Except as set forth on Schedule 3.9, since December 31, 1999, the
Company and its Subsidiaries have operated their respective businesses only in
the ordinary course consistent with past practices and there has not occurred
(i) any event, occurrence or conditions, or to the best knowledge of the
Company, any circumstance or development that could, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect, or (ii) any
action specified in Section 5.2 of this Agreement.
SECTION 3.10. Employee Benefit Plans and Labor Matters.
(a) For purposes of this Agreement:
(i) "Benefit Plan" means any employee benefit plan, arrangement,
policy or commitment, including, without limitation, any employment,
consulting, severance or deferred compensation agreement, executive
compensation, bonus, incentive, pension, profit-sharing, savings,
retirement, stock option, stock purchase or severance pay plan, any life,
health, disability or accidental death and dismemberment insurance plan,
any holiday and vacation practice or any other employee benefit plan,
within the meaning of section 3(3) of ERISA, whether formal or informal,
written or oral and whether legally binding or not, that is maintained,
administered or contributed to or was maintained, administered or
contributed to at any time by the Company or any of its ERISA Affiliates
for the benefit of any employee, former employee, consultant, officer or
director of the Company or any ERISA Affiliate;
(ii) "Code" means the Internal Revenue Code of 1986, as amended;
(iii) "Employee" means any individual employed by the Company or any
of its ERISA Affiliates;
(iv) "IRS" means the United States Internal Revenue Service; and
(v) "PBGC" means the Pension Benefit Guaranty Corporation.
(b) Schedule 3.10 lists all Benefit Plans. With respect to each such plan,
the Company has delivered or made available to the Purchasers correct and
complete copies of (i) all plan documents and agreements and related trust or
other funding arrangements (including all amendments thereto); (ii) all summary
plan descriptions and material employee communications; (iii) the annual report
and actuarial report (including all schedules thereto) if required under ERISA
or other applicable law, for the last three most recently completed plan years;
(iv) the most recent annual audited financial statement; (v) if the plan is
intended to qualify under Code section 401(a) or 403(a), the most recent
determination letter, if any, received from the IRS; and (vi) all material
communications with any Governmental Authority (including, without limitation,
the PBGC, the U.S. Department of Labor and the IRS).
(c) There are no Benefit Plans that (i) are covered by or subject to any
liability under Code section 412, ERISA section 302 or Title IV of ERISA and no
condition exists that presents a material risk to the Company or any ERISA
Affiliate of incurring such liability; (ii) are intended to qualify under Code
section 401(a) or 403(a) other than the Peapod 401(k) Savings Plan; (iii)
provide benefits to current or former Employees or their respective
beneficiaries beyond their retirement or other termination of service (other
than coverage mandated by Code section 4980B or Part 6 of Title I of ERISA); or
(iv) are self-insured "multiple employer welfare arrangements," as such term is
defined in section 3(40) of ERISA.
(d) Each Benefit Plan conforms in all respects to, and its administration
is in all respects in compliance with, its terms and all Applicable Law,
including but not limited to ERISA and the Code, except to the extent that the
failure to conform or to be administered would not reasonably be expected to
result in a material liability.
(e) The consummation of the transactions contemplated by this Agreement
will not (i) entitle any current or former Employee, officer or director of the
Company or any ERISA Affiliate to severance pay, unemployment compensation or
any similar payment; or (ii) accelerate the time of payment or vesting of any
right or privilege, or increase the amount of any compensation due to, any
current or former Employee, officer or director of the Company.
(f) No Benefit Plan is a "multiple employer plan" or a "multiemployer plan"
within the meaning of the Code or ERISA.
(g) In the six years preceding the date hereof, (i) no Benefit Plan that is
or was subject to Title IV of ERISA has been terminated; (ii) no reportable
event within the meaning of section 4043 of ERISA has occurred; (iii) no filing
of a notice of intent to terminate such a Benefit Plan has been made; (iv) the
PBGC has not initiated any proceeding to terminate any such Benefit Plan and no
condition exists that presents a material risk that such proceeding will be
initiated; and (v) no prohibited transaction (within the meaning of Section 406
of ERISA or Section 4975 of the Code), breach of fiduciary duty (pursuant to
Section 409 of ERISA) or civil action (pursuant to Section 502 of ERISA) has
occurred that could result in a material liability to the Company or any
Subsidiary.
(h) Except for the Executive Employment Agreement between William Malloy
and the Company, dated as of September 27, 1999, neither the Company nor any of
its Subsidiaries has any existing arrangement with any of its Employees
providing for an excise tax gross up in respect of any excise taxes imposed by
section 4999 of the Code.
(i) Except as set forth on Schedule 3.10, none of the Company, any
Subsidiary or any ERISA Affiliate has any commitment or formal plan, whether
legally binding or not, to create any additional employee benefit plan or modify
or change any existing Benefit Plan that would affect any Employee, former
Employee or director of the Company.
(j) Except as set forth on Schedule 3.10, (i) no amounts payable under the
Benefit Plans will fail to be deductible for federal income tax purposes by
virtue of section 162(a)(1), 162(m) or 280G of the Code and (ii) all
contributions (including all employer contributions and employee salary
reduction contributions) required to be made to any Benefit Plan by applicable
law or regulation or by any plan document or other contractual undertaking, and
all premiums due or payable with respect to insurance policies funding any
Benefit Plan, have been timely made or paid in full or, to the extent not
required to be made or paid on or before the date hereof, have been fully
reflected on the financial statements in accordance with GAAP. Each Benefit Plan
that is an employee welfare benefit plan under Section 3(1) of ERISA either (i)
is funded through an insurance company contract and is not a "welfare benefit
fund" with the meaning of Section 419 of the Code or (ii) has benefits paid as
needed solely from the general assets of the Company and its Subsidiaries.
(k) No liability, claim, action or litigation has been made, commenced or,
to the Company's knowledge, threatened with respect to any Benefit Plan (other
than routine claims for benefits payable in the ordinary course, and appeals of
such desired claims).
(l) Except as set forth on Schedule 3.10,
(i) there is no labor strike, dispute, slowdown, stoppage or lockout
actually pending, or to the knowledge of the Company or any of its
Subsidiaries, threatened against or affecting the Company or any of its
Subsidiaries and during the past five years there has not been any such
action;
(ii) to the knowledge of the Company and any of its Subsidiaries,
there are no union claims to represent the employees of the Company or any
of its Subsidiaries;
(iii) neither the Company nor any of its Subsidiaries is a party to or
bound by any collective bargaining or similar agreement with any labor
organization, or work rules or practices agreed to with any labor
organization or employee association applicable to employees of the Company
or any of its Subsidiaries;
(iv) none of the employees of the Company or any of its Subsidiaries
are represented by any labor organization and none of the Company or any of
its Subsidiaries have any knowledge of any current union organizing
activities among the employees of the Company or any of its Subsidiaries,
nor does any question concerning representation exist concerning such
employees;
(v) true, correct and complete copies of all written personnel
policies, rules and procedures applicable to employees of the Company or
any of its Subsidiaries have heretofore been delivered to the Purchaser;
(vi) the Company and its Subsidiaries are, and have at all times been,
in material compliance with all applicable laws respecting employment and
employment practices, terms and conditions of employment, wages, hours of
work and occupational safety and health, and are not engaged in any unfair
labor practices as defined in the National Labor Relations Act or other
applicable law, ordinance or regulation;
(vii) there is no unfair labor practice charge or complaint against
the Company or any Subsidiary pending or, to the knowledge of the Company
and any of its Subsidiaries, threatened before the National Labor Relations
Board or any similar state or foreign agency;
(viii) there is no grievance or arbitration proceeding arising out of
any collective bargaining agreement or other grievance procedure relating
to the Company or any of its Subsidiaries;
(ix) to the knowledge of the Company and any of its Subsidiaries, no
charges with respect to or relating to the Company or any of its
Subsidiaries are pending before the Equal Employment Opportunity Commission
or any other agency responsible for the prevention of unlawful employment
practices
(x) to the knowledge of the Company and any of its Subsidiaries, no
federal, state, local or foreign agency responsible for the enforcement of
labor or employment laws intends to conduct an investigation with respect
to or relating to the Company and any of its Subsidiaries and no such
investigation is in progress; and
(xi) there are no complaints, controversies, lawsuits or other
proceedings pending or, to the knowledge of the Company or any of its
Subsidiaries, any applicant for employment or classes of the foregoing
alleging breach of any express or implied contract or employment, any law
or regulation governing employment or the termination thereof or other
discriminatory, wrongful or tortuous conduct in connection with the
employment relationship. Except as set forth in Schedule 3.10, there are no
employment contracts or severance agreements with any employees of the
Company or any of its Subsidiaries. The execution of this Agreement and the
consummation of the transactions contemplated hereby shall not result in a
breach or other violation of any collective bargaining agreement to which
the Company or any of its Subsidiaries is a party.
(m) Since the enactment of the WARN Act, neither the Company nor any of its
Subsidiaries have effectuated (i) a "plant closing" (as defined in the WARN Act)
affecting any site of employment or one or more facilities or operating units
within any site of employment or facility of the Company or any of its
Subsidiaries, or (ii) a "mass layoff" (as defined in the WARN Act) affecting any
site of employment or facility of the Company or any of its Subsidiaries; nor
has the Company or any of its Subsidiaries been affected by any transaction or
engaged in layoffs or employment terminations sufficient in number to trigger
application of any similar state or local law. Except as set forth in Schedule
3.10, none of the employees of the Company or any of its Subsidiaries has
suffered an "employment loss" (as defined in the WARN Act) with regard to their
employment with the Company or any of its Subsidiaries since March 1, 1995.
(n) Except as set forth on Schedule 3.10(n) neither the Company nor any of
its Subsidiaries have any employment or severance agreements with any Employees
or former employees (to the extent the Company continues to have obligations
with respect to former employees).
SECTION 3.11. Interests in Real Property.
(a) Schedule 3.11 sets forth a true and complete list of all real
properties owned and all material real property leased by the Company or any of
its Subsidiaries. Each of the Company and its Subsidiaries has good and
marketable title in fee simple to all real properties owned by it, free and
clear of all Liens, except for Permitted Liens, and valid and enforceable
leasehold interests in all real estate leased by it, except where the lack of
such title or the invalidity or unenforceability of such leasehold interests
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(b) None of the real properties owned by, or the leasehold estates of, the
Company or any Subsidiary are subject to (i) any Liens or (ii) any easements,
rights of way, licenses, grants, building or use restrictions, exceptions,
reservations, limitations or other impediments that, in either case (i) or (ii),
will materially adversely affect the value thereof for their present use, taken
as a whole, or that materially interfere with or impair the present and
continued use thereof, taken as a whole, in the usual and normal conduct of the
business of any such person.
(c) To the best knowledge of the Company, all improvements on such real
properties and the operations therein conducted conform in all material respects
to all applicable health, fire, environmental, safety, zoning and building laws,
ordinances and administrative regulations (whether through grandfathering
provisions, permitted use exceptions, variances or otherwise), except for
possible nonconforming uses or violations that do not and will not interfere
with the present use, operation or maintenance thereof as now used, operated or
maintained or access thereto, and that do not and will not materially affect the
value thereof for their present use. Neither the Company nor any Subsidiary has
received notice of any violation of or noncompliance with any such laws,
ordinances or administrative regulations from any applicable governmental or
regulatory authority, except for notices of violations or failures so to comply,
if any, that could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.
SECTION 3.12. Leases.
(a)(i) Neither the Company nor any Subsidiary is in breach of or default
(and no event has occurred which, with due notice or lapse of time or both, may
constitute a breach or default) under any lease required to be set forth on
Schedule 3.11 (the "Leases") and (ii) no party to any Lease has given, or to the
best knowledge of the Company threatened to give, or advised that it will be
giving the Company or any Subsidiary written notice of or made a claim with
respect to any breach or default, the consequences of which, in either case (i)
or (ii) could, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect.
(b) Except as set forth on Schedule 3.12, after taking into account the
exercise of any options (which are exercisable solely at the discretion of the
Company or any Subsidiary), none of the Leases terminates by its terms before
January 1, 2002.
(c) None of the Leases require a consent to be obtained for the execution,
delivery and performance of any of the Documents or the consummation of any of
the transactions contemplated hereby or thereby.
(d) Neither the Company nor any Subsidiary has any ownership, financial or
other interest in the landlords under any of the Leases.
SECTION 3.13. Compliance with Law. The operations of the Company and its
Subsidiaries have been conducted in accordance with all Applicable Laws,
including, without limitation, all Applicable Laws relating to consumer
protection, currency exchange, employment (including, without limitation, equal
opportunity and wage and hour), safety and health, environmental protection,
conservation, wetlands, architectural barriers to the handicapped, fire, zoning
and building, occupation safety, pension and securities, except for violations
or failures so to comply, if any, that could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. Neither the
Company nor any Subsidiary has received notice of any violation of or
noncompliance with any Applicable Laws except as set forth on Schedule 3.13 and
except for notices of violations or failures so to comply, if any, that could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
SECTION 3.14. Related Party Transactions. Except as set forth on Schedule
3.14 and except for the consummation of the transactions contemplated by the
Documents (including, without limitation, the Voting Agreements) (i) neither the
Company nor any of its Subsidiaries is a party to any agreement or arrangement
with or for the benefit of any person who, to the Company's knowledge, based on
a review of Schedule 13Ds and Schedule 13Gs filed under the Exchange Act, is a
holder of 5% or more of the outstanding equity securities of the Company or any
officer, director, partner or Affiliate of any such person ("Related Party");
(ii) all transactions between the Company and its Subsidiaries, on the one hand,
and a Related Party, on the other hand, are on terms and conditions which could
be obtained from an unaffiliated third party in an arm's length transaction; and
(iii) no Affiliate of the Company or Related Party is a supplier, lessor, lessee
or competitor of the Company or any of its Subsidiaries.
SECTION 3.15. Tax Matters.
(a) The Company and its Subsidiaries have duly and properly filed, or will
duly and properly file, on a timely basis, all material Tax Returns which were
or will be required to be filed by them for all periods ending on or before any
Closing Date. All such Tax Returns of the Company and its Subsidiaries were (or
will be) true, correct and complete in all material respects when filed. The
Company and its Subsidiaries have paid all material Taxes and Tax liabilities
required to be paid by them for periods ending on or before any Closing Date, or
with respect to any period that ends after any Closing Date, the portion of such
period up to and including any Closing Date, other than those Taxes being
contested in good faith or those Taxes currently payable without penalty or
interest, in each case which have been adequately disclosed and for which an
adequate reserve or accrual has been established in the Financial Statements in
accordance with GAAP.
(b) All material Taxes that the Company and its Subsidiaries are or were
required by law to withhold or collect through any Closing Date have been duly
withheld or collected and, to the extent required, have been paid to the proper
Governmental Authority. There are no Liens with respect to Taxes upon any of the
properties or assets, real or personal, tangible or intangible, of the Company
or any Subsidiary except for statutory liens for Taxes not yet due or
delinquent.
(c) Neither the Company nor any of its Subsidiaries is currently the
beneficiary of any waivers or extensions with respect to any Tax Returns, no Tax
Returns of the Company or any Subsidiary are currently under audit or
examination by any Governmental Authority and to the best knowledge of the
Company and its Subsidiaries, no such audit or examination is threatened.
Neither the Company nor any Subsidiary has received any notices from any
Governmental Authority relating to any issue which could materially affect the
Tax liability of the Company or any Subsidiary. No issue was raised in any audit
or examination of Tax Returns by any Governmental Authority that, if raised with
respect to any period not so audited or examined, could be expected to result in
a proposed deficiency.
(d) Neither the Company nor any of its Subsidiaries is party to, bound by
or has an obligation under any Tax allocation, Tax indemnity, or Tax sharing
agreement or similar contract arrangement. Neither the Company nor any of its
Subsidiaries (i) has been a member of an affiliated group filing a consolidated
Tax Return (other than a group the common parent of which was the Company), or
(ii) has been included in any "consolidated," "unitary" or "combined" Tax Return
provided for under the law of any foreign jurisdiction or any state or locality
with respect to Taxes for any taxable period for which the statute of
limitations has not expired (other than a group the common parent of which was
the Company), or (iii) has any liability for the Taxes of any person (other than
the Company and its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or
any similar provision of state, local or foreign law), as a transferee or
successor, by contract, agreement to indemnify or otherwise. Neither the Company
nor any of its Subsidiaries has any obligation by contract, agreement,
arrangement or otherwise to permit any person, other than the Company and its
Subsidiaries, to use the benefit of a refund, credit or offset of Tax of any of
the Company and its Subsidiaries.
(e) Neither the Company nor any of its Subsidiaries has been a United
States real property holding corporation within the meaning of section 897(c)(2)
of the Code during the period specified in section 897(c)(1)(A)(ii) of the Code.
(f) Neither the Company nor any of its Subsidiaries has filed (or will file
prior to any Closing) a consent under section 341(f) of the Code.
(g) The Company has not applied for, been granted, or agreed to any
accounting method change for which it will be required to take into account any
adjustment under Section 481 of the Code or any similar provision of the Code or
the corresponding tax laws of any nation, state or locality.
SECTION 3.16. Environmental Matters.
(a) The Company and its Subsidiaries are in compliance in all material
respects with all applicable federal, state, local and foreign laws and
regulations relating to pollution or protection of human health or the
environment, including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata, and natural resources (together
"Environmental Laws" and including, without limitation, laws and regulations
relating to emissions, discharges, releases or threatened releases of chemicals,
pollutants, contaminants, wastes, toxic or hazardous substances or wastes,
petroleum and petroleum products, asbestos or asbestos-containing materials,
polychlorinated biphenyls, lead or lead-based paints or materials, or radon
("Materials of Environmental Concern")), or otherwise relating to the
manufacture, generation, processing, distribution, use, treatment, storage,
disposal, transport or handling of Materials of Environmental Concern, or the
preservation of the environment or mitigation of adverse effects thereon and
each law and regulation with regard to record keeping, notification, disclosure,
and reporting requirements respecting Materials of Environmental Concern. The
Company and its Subsidiaries possess all permits and other governmental
authorizations required under all applicable Environmental Laws, and are in
compliance in all material respects with the terms and conditions thereof.
(b) The Company and its Subsidiaries have not received any communication
(written or oral), whether from a Governmental Authority, citizens group,
employee or otherwise, that alleges that the Company or any of its Subsidiaries
are not in full compliance with any Environmental Laws and, to the best
knowledge of the Company, there are no circumstances that may prevent or
interfere with such full compliance in the future.
(c) There is no claim, action, written or oral notice or cause of action
pending or, to the best knowledge of the Company, any investigation or notice of
violation threatened (together, "Environmental Claim") by any person or entity
alleging potential liability (including, without limitation, potential liability
for investigatory costs, cleanup costs, governmental response costs, natural
resources damages, property damages, personal injuries, or penalties) arising
out of, based on or resulting from (a) the presence, or release into the
environment, of any Material of Environmental Concern at any location, whether
or not owned, leased or operated by the Company or any of its Subsidiaries or
(b) circumstances forming the basis of any violation, or alleged violation, of
any Environmental Law, that in either case is pending or threatened against the
Company, or any of its Subsidiaries or against any person or entity whose
liability for any Environmental Claim the Company or any of its Subsidiaries has
retained or assumed either contractually or by operation of law.
(d) To the best knowledge of the Company, there are no past or present
actions, activities, circumstances, conditions, events or incidents, including,
without limitation, the release, emission, discharge, presence or disposal of
any Material of Environmental Concern, that could form the basis of any
Environmental Claim against the Company or any of its Subsidiaries or, to the
Company's and any of its Subsidiaries' best knowledge, against any person or
entity whose liability for any Environmental Claim the Company or any of its
Subsidiaries has retained or assumed either contractually or by operation of
law.
(e) Without in any way limiting the generality of the foregoing, (i) there
are no on-site or off-site locations where the Company or any of its
Subsidiaries has (previously or currently) stored, disposed or arranged for the
disposal of Materials of Environmental Concern, (ii) there are no underground
storage tanks located on any property owned, leased, operated or controlled by
the Company or any of its Subsidiaries, (iii) there is no asbestos contained in
or forming part of any building, building component, structure or office space
owned, leased, operated or controlled by the Company or any of its Subsidiaries,
and (iv) there are no PCBs or PCB-containing items are used or stored at any
property owned, leased, operated or controlled by the Company or any of its
Subsidiaries.
(f) The Company and its Subsidiaries have provided to the Purchaser all
assessments, reports, data, results of investigations or audits, and other
information that is in the possession of or reasonably available to the Company
or any of its Subsidiaries regarding environmental matters pertaining to the
environmental condition of the business of the Company or any of its
Subsidiaries, or the compliance (or noncompliance) by the Company or any of its
Subsidiaries with any Environmental Laws.
(g) Neither the Company nor any of its Subsidiaries is required by virtue
of the transactions set forth herein and contemplated hereby, or as a condition
to the effectiveness of any transactions contemplated hereby, (i) to perform a
site assessment for Materials of Environmental Concern, (ii) to remove or
remediate Materials of Environmental Concern, (iii) to give notice to or receive
approval from any Governmental Authority, or (iv) to record or deliver to any
person or entity any disclosure document or statement pertaining to
environmental matters.
SECTION 3.17. Intellectual Property.
(a) Schedule 3.17(a) sets forth, for the Intellectual Property owned by the
Company or any Subsidiary, a complete and accurate list of all U.S. and foreign
(i) patents and patent applications; (ii) trademark registrations (including
Internet domain registrations), trademark applications, and material
unregistered trademarks; (iii) copyright and mask work registrations, copyright
and mask work applications, and material unregistered copyrights; and (iv) all
Software (other than readily available "off-the-shelf" commercial software
programs having an acquisition price of less than $5,000) which are owned,
licensed, or leased, by the Company or any Subsidiary, identifying which
Intellectual Property is owned, licensed, or leased, as the case may be. The
Intellectual Property constitutes all the intellectual property necessary to
operate the business of the Company and its Subsidiaries as of the Closing Date
in substantially the manner in which it is currently operated. To the extent
indicated on Schedule 3.17(a), the Intellectual Property has been duly
registered in, filed in or issued by the United States Patent and Trademark
Office, United States Copyright Office, a duly authorized and appropriate domain
name registrar, the appropriate offices in the various states of the United
States and the appropriate offices of other jurisdictions (foreign and
domestic), and each such registration, filing and issuance remains in full force
and effect as of the Closing Date.
(b) Schedule 3.17(b) sets forth a complete and accurate list of all
material oral or written agreements (whether between the Company or a Subsidiary
and third parties or inter-corporate) to which the Company or any Subsidiary is
a party or otherwise bound, (i) granting or obtaining any right to use or
practice any rights under any Intellectual Property (other than licenses for
readily available "off-the-shelf" commercial software programs having an
acquisition price of less than $5,000), or (ii) restricting the Company's or any
Subsidiary's right to use any Intellectual Property, including, without
limitation, license agreements, development agreements, distribution agreements,
settlement agreements, consent to use agreements, and covenants not to sue
(collectively, the "License Agreements"). The License Agreements are valid and
binding obligations of the Company or a Subsidiary, as applicable, enforceable
in accordance with their terms, and to the Company's knowledge, there exists no
event or condition which will result in a violation or breach of, or constitute
(with or without due notice of lapse of time or both) a default by any party
under any such License Agreement. Except as set forth in Schedule 3.17(b),
neither the Company nor any of its Subsidiaries have licensed or sublicensed its
rights in any material Intellectual Property other than pursuant to the License
Agreements. No royalties, honoraria or other fees are currently payable by the
Company or any Subsidiary to any third parties for the use of or right to use
any Intellectual Property except pursuant to the License Agreements and set
forth on Schedule 3.17(b).
(c) The Company or a Subsidiary owns, or to the Company's best knowledge
has a valid right to use, free and clear of all Liens, all of the Intellectual
Property. The Company or a Subsidiary is listed in the records of the
appropriate United States, state, or foreign registry as the sole current owner
of record for each application and registration and has the exclusive right to
file, prosecute and maintain all applications and registrations with respect to
the Intellectual Property that is listed on Schedule 3.17(a).
(d) The Intellectual Property owned by the Company or any Subsidiary and,
to the Company's knowledge, any material Intellectual Property licensed to the
Company or any Subsidiary, has not been canceled, expired, abandoned or
otherwise terminated and all renewal fees in respect thereof have been duly
paid, and to the Company's knowledge is valid and enforceable.
(e) Neither the Company nor any of its Subsidiaries has received any
written notice or claim and there is no pending or, to the best of the Company's
knowledge, threatened claim, suit, arbitration, interference or other
adversarial or contested proceeding before any court, agency, arbitral tribunal,
or registration authority in any jurisdiction (foreign or domestic) involving
the Intellectual Property owned by the Company or its Subsidiaries, or, to the
best of the Company's knowledge, the material Intellectual Property licensed to
the Company or any Subsidiary, alleging that the activities or the conduct of
the Company's or any Subsidiary's businesses infringe upon, dilute, violate or
constitute the unauthorized use, misuse or misappropriation of the intellectual
property rights of any third party or challenging the Company's or any
Subsidiary's ownership, use, validity, enforceability or registrability of any
Intellectual Property. There are no settlements, forebearances to sue, consents,
judgments, or orders or similar obligations to which the Company or any
Subsidiary is a party other than the License Agreements which (i) restrict the
Company's or any Subsidiary's right to use any Intellectual Property, (ii)
restrict the Company's or any Subsidiary's businesses in order to accommodate a
third party's intellectual property rights or (iii) permit third parties to use
any Intellectual Property owned by the Company or any Subsidiary. To the best
knowledge of the Company, neither the Company nor any of its Subsidiaries know
of any valid basis for any such claims.
(f) The conduct of the Company's and any Subsidiary's business as currently
conducted or planned to be conducted does not infringe upon (either directly or
indirectly such as through contributory infringement or inducement to infringe)
any intellectual property rights owned or controlled by any third party. To the
Company's knowledge, no third party is misappropriating, infringing, diluting or
violating any Intellectual Property owned by the Company or any Subsidiary and
no such claims, suits, arbitrations or other adversarial proceedings have been
brought or threatened against any third party by the Company or any Subsidiary.
(g) The Company and each Subsidiary take reasonable measures to protect the
confidentiality of its Trade Secrets, including requiring their employees and
other parties having access thereto to execute written non-disclosure
agreements. To the best of the Company's knowledge, no Trade Secret of the
Company or its Subsidiaries has been disclosed or authorized to be disclosed to
any third party other than pursuant to a non-disclosure agreement. To the best
of the Company's knowledge, no party to any non-disclosure agreement relating to
its Trade Secrets is in breach or default thereof. The Purchaser has been
provided with a copy of the Company's form of non-disclosure agreement and the
non-disclosure agreements referred to in this clause (g) contain substantially
the same terms and conditions as the form of non-disclosure agreement.
(h) No current or former partner, director, officer, or employee of the
Company or any Subsidiary (or any of their respective predecessors in interest)
will, after giving effect to the transactions contemplated herein, directly own
or retain any rights to use any of the Intellectual Property owned or used by
the Company or any Subsidiary.
(i) With respect to the Software set forth in Schedule 3.17(a) which is
owned by the Company, such Software was either developed (i) by employees of the
Company or any Subsidiary within the scope of their employment or (ii) by
independent contractors who have assigned their rights to the Company or any
Subsidiary pursuant to signed, written agreements.
(j) Except as set forth in Schedule 3.17(a), for the twelve month period
prior to the Closing Date, the Internet domain names and URL's of the
Intellectual Property (together with any content and other materials accessible
and/or displayed thereon, the "Sites") direct and resolve to the appropriate
Internet protocol addresses and are and have been maintained and accessible to
Internet users on those certain computers used by the Company to make the Sites
so accessible (the "Server") approximately twenty-four (24) hours per day, seven
(7) days per week ("24/7") and are and have been operational for downloading
content from the Server on a 24/7 basis. The Company has fully operational
back-up copies of the Sites (and all related software, databases and other
information), made from the current versions of the Sites as accessible to
Internet users on the Server (and copied directly therefrom) which copies will
have been made at least every two weeks from the date hereof until the Closing
Date. Such back-up copies are kept in a safe and secure environment, fit for the
back-up of media, and are not located at the same location of the Server. The
Company has no reason to believe that the Sites will not operate on the Server
or will not continue to be accessible to Internet users on a 24/7 basis prior
to, at the time of, and after the Closing Date.
(k) The Trademarks listed on Schedule 3.17(a), for which the Company or any
Subsidiary has obtained or applied for a registration have been continuously
used in the form appearing in, and in connection with the goods and services
listed in, their respective registration certificates, and are all the
Trademarks that are material to the Company and its Subsidiaries. To the
knowledge of the Company, there has been no prior use of such Trademarks by any
third party which would confer upon said third party superior rights in such
Trademarks. The Company and its Subsidiaries have undertaken reasonable policing
of such Trademarks against third party infringement.
(l) All material Software and systems used by the Company and each
Subsidiary are Year 2000 Compliant. As used herein, "Year 2000 Compliant" and
"Year 2000 Compliance" shall mean for all dates and times, including, without
limitation dates and times after December 31, 1999 and in the multi-century
scenario, when used on a stand-alone system or in combination with other
software or systems: (i) the application system functions and receives,
processes, manipulates and calculates dates, times and date-related data
correctly without abnormal results; (ii) there is no century ambiguity; (iii)
all reports and displays are sorted correctly; and (iv) leap years are accounted
for and correctly identified (including, without limitation, that 2000 is
recognized as a leap year). The Company and each Subsidiary have obtained
written representations or assurances from each entity that (x) provides
material data of any type that includes date information or which is otherwise
derived from, dependent on or related to date information ("Date Data") to the
Company or any Subsidiary, (y) processes in any way Date Data for the Company or
any Subsidiary or (z) otherwise provides any material product or service to the
Company or any Subsidiary that is dependent on Year 2000 Compliance, that all of
such entity's Date Data and related material software and systems that are used
for, or on behalf of, the Company or any Subsidiary are Year 2000 Compliant.
Neither the Company nor any Subsidiary has experienced any material disruptions
to the business of the Company and its Subsidiaries as a result of a failure by
the Company, a Subsidiary, or any third party to be Year 2000 Compliant. The
Company and its Subsidiaries have established and put in place, commercially
reasonable contingency plans to address, correct and otherwise attend to any
material problems that may occur with its material Software and systems as a
result of a failure of such Software or systems to be Year 2000 Compliant.
SECTION 3.18. Registration Rights. Except as set forth on Schedule 3.18,
neither the Company nor any of its Subsidiaries is under any obligation to
register any of its outstanding securities pursuant to the Securities Act.
SECTION 3.19. Insurance. The Company and its Subsidiaries maintain, with
reputable insurers, insurance in such amounts, including deductible
arrangements, and of such a character as is customary for companies engaged in
the same or similar business. All policies of title, fire, liability, casualty,
business interruption, workers' compensation and other forms of insurance
including, but not limited to, directors and officers insurance, held by the
Company and its Subsidiaries as of the date hereof, are in full force and effect
in accordance with their terms. Neither the Company nor any of its Subsidiaries
is in default under any provisions of any such policy of insurance and neither
the Company nor any of its Subsidiaries has received notice of cancellation of
any such insurance.
SECTION 3.20. Contracts.
(a) Schedule 3.20 sets forth a true and complete list of all contracts and
other instruments to which the Company or any of its Subsidiaries is a party
that are material to the business, operations, properties, prospects or
financial condition of any of them (collectively, the "Commitments"), including
without limitation:
(i) any material agreement, contract or commitment relating to the
employment of any person by the Company or any of its Subsidiaries, or any
bonus, deferred compensation, pension, profit sharing, stock option,
employee stock purchase, retirement or other employee benefit plan;
(ii) any material agreement, indenture or other instrument which
contains restrictions with respect to payment of dividends or any other
distribution in respect of its capital stock;
(iii) any agreement, contract or commitment relating to capital
expenditures in excess of $100,000 in any fiscal year;
(iv) any agreement to acquire, directly or indirectly, any equity
interest in or assets of any other person (other than purchases of
supplies, inventory, or equipment in the ordinary course of business)
whether or not the transactions contemplated thereby have been consummated,
and under which the Company or any of its Subsidiaries continues to have
any outstanding obligations;
(v) any loan (other than accounts receivable from trade debtors
arising in the ordinary course of business) or advance to (other than
travel or entertainment advances to employees made in the ordinary course
of business), or investment in, any person or any agreement, contract or
commitment relating to the making of any such loan, advance or investment;
(vi) any agreement relating to indebtedness in excess of $500,000;
(vii) any guarantee or other contingent liability in respect of any
indebtedness or obligation of any other person (other than the endorsement
of negotiable instruments for collection in the ordinary course of
business) in excess of $500,000;
(viii) any material management service, consulting, financial advisory
or any other similar type contract including, without limitation, any
contract with any investment or commercial bank;
(ix) any material agreement, contract or commitment limiting the
ability of the Company or any of its Subsidiaries to engage in any line of
business or to compete with any person;
(x) any agreement, contract or commitment which involves payments in
excess of $100,000 in any calendar year and is not cancelable without
penalty within 30 days;
(xi) any agreement, contract or commitment for the disposal of a
material amount of assets or properties of the Company or any of its
Subsidiaries (other than sales to customers in the ordinary course of
business);
(xii) any agreement, contract or commitment which is material to the
Company or any of its Subsidiaries and contain a "change in control" or
similar provision;
(xiii) any agreement, contract or commitment relating to any material
joint venture, partnership, strategic alliance or similar arrangement;
(xiv) any collective bargaining agreement, labor contract or other
written arrangement with any labor union or any employee organization;
(xv) any material agreement, contract or commitment with any
Affiliate; and
(xvi) any other material agreement, contract or commitment.
(b) Each Commitment is in full force and effect on the date hereof. Neither
the Company nor any of its Subsidiaries is in default in respect of any
Commitment, and no event has occurred which, with due notice or lapse of time or
both, would constitute such a default, except for any such defaults that could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. To the best knowledge of the Company, no other party to any of
the Commitments is in default in respect thereof, and no event has occurred
which, with due notice or lapse of time or both, would constitute such a
default.
SECTION 3.21. Questionable Payments. None of the Company, any of its
Subsidiaries nor, to the Company's knowledge, any employee, agent or
representative of the Company or any of its Subsidiaries acting on their behalf
has, directly or indirectly, made any bribes, kickbacks, illegal payments or
illegal political contributions using corporate funds of the Company or any
Subsidiary or made any illegal payments to obtain or retain business using
corporate funds of the Company or any Subsidiary in violation of the U.S.
Foreign Corrupt Practices Act of 1977.
SECTION 3.22. Accuracy of Information. None of the representations,
warranties or statements of the Company contained in this Agreement or in the
exhibits hereto contains any untrue statement of a material fact or, taken as a
whole together with the SEC Documents, omits to state any material fact
necessary in order to make any of such representations, warranties or statements
not misleading. All information relating to the Company and its Subsidiaries
that may be material to a purchaser for value of the Securities has been
disclosed to the Purchaser and any such information arising on or after the date
hereof will forthwith be disclosed to the Purchaser. Nothing contained in the
schedules hereto could, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.
SECTION 3.23. Private Offering. None of the Company, any of its
Subsidiaries, nor anyone acting on their behalf, has offered or sold or will
offer or sell any securities, or has taken or will take any other action, which
could reasonably be expected to subject the offer, issuance or sale of the
Securities, as contemplated hereby, to the registration provisions of the
Securities Act.
SECTION 3.24. Split Pea.
(a) On the liquidation of Split Pea Software, Inc. ("Split Pea"), the
Company received good, valid and marketable title to all the assets, properties
and rights of Split Pea, free and clear of any Liens. The liquidation of Split
Pea was effected in accordance with the liquidation plan approved by the
Company, and the shareholders of Split Pea other the Company received nothing
other than the forgiveness of the promissory note dated December 31, 1998, in
favor of the Company as part of the liquidation. This liquidation of Split Pea
was effected in accordance with Applicable Law.
(b) The Company owns, licenses, leases or has any right to use or license
the SuRF Software (as defined in that certain Bill of Sale and Assignment of
Assets dated as of December 31, 1998 between the Company and Split Pea Software,
Inc.) and any modifications, enhancements or new versions thereof. The SuRF
Software is not material to the business of the Company or any of its
Subsidiaries and neither the Company nor any of its Subsidiaries utilizes,
relies on, or licenses the SuRF Software in its business or operations as
currently conducted or proposed to be conducted (other than in connection with
the Software License Agreement dated December 12, 1997, between Coles Myer Ltd.
and the Company).
SECTION 3.25. Brokers. The Company and its Subsidiaries and their agents
and representatives have incurred no obligation or liability, contingent or
otherwise, for brokerage or finders' fees, agents' commissions, investment
banking fees, or other similar payment in connection with this Agreement except
fees payable in cash to Wasserstein Perella & Co., Inc. ("Wasserstein") that do
not exceed $6,000,000, pursuant to a letter agreement dated August 3, 1999, as
amended by a letter agreement dated April 13, 2000, and Houlihan Lokey Howard &
Zukin Financial Advisors, Inc. ("Houlihan Lokey") that do not exceed $400,000,
pursuant to a letter agreement dated February 14, 2000, as supplemented by the
addendum dated April 4, 2000, correct and complete copies of which has been
delivered to the Purchaser.
SECTION 3.26. Voting and Proxy Agreements. Each of the Voting Agreements
are in full force and effect and constitute a valid and binding obligation of
each of the Key Stockholders, enforceable against each in accordance with its
terms.
SECTION 3.27. Rights Agreement. The Company, with the approval of the
Board, has duly amended the Rights Agreement so as (a) to grant to the Purchaser
a number of rights under such agreement ("Rights") equivalent to the number that
would be associated with the number of shares of Common Stock into which the
shares of Series B Preferred Stock purchased by the Purchaser hereunder are
convertible, as such number may be adjusted from time to time pursuant to the
provisions in the Rights Agreement and the Certificate of Designation, (b) to
grant, upon each issuance of shares of Series B Preferred Stock as a dividend on
the outstanding shares of Series B Preferred Stock, to the recipient of such
dividend, a number of Rights equivalent to the number that would be associated
with the number of shares of Common Stock into which such shares of Series B
Preferred Stock so issued as dividends are convertible, as such number may be
adjusted from time to time pursuant to the provisions in the Rights Agreement
and the Certificate of Designation, and (c) to exclude the Purchaser and its
Affiliates, Associates and Permitted Transferees from the definition of
"Acquiring Person" in the Rights Agreement. A copy of the Rights Agreement has
been furnished to the Purchaser. During such time as the Purchaser or any of its
Affiliates is an owner of any shares of Series B Preferred Stock, shares of
Common Stock into which such shares of Series B Preferred Stock may have been
converted, or warrants to purchase shares of Common Stock, and while the Rights
are outstanding, (i) the Company shall not amend or supplement the Rights
Agreement in any manner that would result in it or any of its Affiliates,
Associates or Permitted Transferees becoming an Acquiring Person (as defined in
the Rights Agreement) or being the cause or occasion of a Trigger Event (as
defined in the Rights Agreement) occurring, and shall amend or supplement the
Rights Agreement as necessary to ensure that the Purchaser and its Affiliates,
Associates or Permitted Transferees does not so become an Acquiring Person or be
the cause or occasion of a Trigger Event occurring, and (ii) the Company may
amend the Rights Agreement or may adopt a new rights agreement similar to the
Rights Agreement only if (A) such amendment or new agreement provides for the
issuance to the holders of the shares of Series B Preferred Stock (I) of rights
identical per share of Common Stock to those to be issued to holders of other
shares of Common Stock, and (II) of a number of rights with respect to each
share of Series B Preferred Stock equal to the number of shares of Common Stock
into which such shares of Series B Preferred Stock are then convertible,
multiplied by the number of rights to be issued with respect to each such share
of Common Stock, and (B) the Company's amendment, adoption of such new
agreement, or of any amendment or supplement to either thereto, complies with
clause (i) (in the case of an adoption of such new agreement, such new agreement
being deemed an amendment to the Rights Agreement under clause (i)).
SECTION 3.28. Determination of Amount of Capital. The Board of Directors of
the Company has, by resolution, duly resolved in accordance with Section 154 of
the DGCL that $7,300 (constituting the aggregate par value of the 730,000 shares
of Series B Preferred Stock to be issued by the Company to the Purchaser) shall
constitute "capital" and the remainder of the consideration received by the
Company for such shares shall constitute "surplus" (in each case, as such terms
are used in Section 154 of the DGCL).
SECTION 3.29. Fairness Opinion. The Company's Board of Directors has
received oral opinions of each of Wasserstein and Houlihan Lokey that the
proposed consideration to be received by the Company pursuant to this Agreement
is fair to the Company and from a financial point of view. A complete and
correct signed copy of a written opinion confirming each such oral opinion shall
be delivered to the Company on April 17, 2000. Promptly upon receipt thereof,
the Company shall deliver such written opinions to the Purchaser.
SECTION 3.30 State Takeover Statutes. The Company has taken all necessary
actions to render inapplicable Section 203 of the DGCL to the Purchaser, its
Affiliates, Associates and their transferees. No other takeover statute or
similar statute or regulation of any state is applicable to this Agreement, the
Previously Issued Warrants or the Warrants (including all of the transactions
contemplated hereby and thereby).
SECTION 3.31. Malloy Stock, Options and Note. The Company and William M.
Malloy have executed a Separation Agreement (the "Malloy Agreement") in the form
previously delivered to the Purchaser.
SECTION 3.32 Other Interests. Except for the Company's interest in its
Subsidiaries, or as set forth in Schedule 3.32, neither the Company nor its
Subsidiaries owns directly or indirectly any interest or investment (whether
equity or debt) in, nor is the Company or any of its Subsidiaries subject to any
obligation or requirement to provide for or to make any investment (in the form
of a loan, capital contribution or otherwise) to or in, any person.
SECTION 3.33 Books and Records. The respective minute books of the Company
and its Subsidiaries, to the extent previously made available to the Purchaser
and its representatives, contain, and the respective minutes of books of the
Company and its Subsidiaries made available to the Purchaser after the date
hereof will contain, accurate records of all meetings of, and corporate actions
taken by (including action taken by written consent) the respective shareholders
and Board of Directors of the Company and its Subsidiaries, it being understood
that certain of such minutes are in draft form and are marked as such. None of
the Company or any of its Subsidiaries has any of its records, systems,
controls, data or information recorded, stored, maintained, operated or
otherwise wholly or partly dependent upon or held by any means (including any
electronic, mechanical or photographic process, whether computerized or not)
which (including all means of access thereto and therefrom) are not under the
exclusive ownership and direct control the Company or its Subsidiaries.
SECTION 3.34 Personal Property. Except for properties and assets reflected
in the Financial Statements, or acquired since December 31, 1999, which have
been sold or otherwise disposed of in the ordinary course of business, each of
the Company and its Subsidiaries has good, valid and marketable title to (a) all
of its owned personal properties and assets (tangible and intangible),
including, without limitation, all of the personal properties and assets
reflected in the Audited Financial Statements, except as may be indicated in the
notes thereto, and (b) all of the personal properties and assets (tangible or
intangible) purchased by the Company and its Subsidiaries since December 31,
1999, in each case free and clear of all Liens, except for Permitted Liens. All
of the tangible personal property owned by each of the Company and its
Subsidiaries is in good operating condition and repair, ordinary wear and tear
excepted, and is adequate and suitable for the purposes for which they are
presently being used.
SECTION 3.35 Accounts Receivable. The amount of all accounts receivable,
unbilled invoices and other debts due or recorded in the respective records and
books of account of the Company and its Subsidiaries as being due to the Company
and its Subsidiaries as of the date hereof (less the amount of any provision or
reserve therefor made in accordance with GAAP in the respective records and
books of account of the Company and its Subsidiaries) are good and collectible
in full in the ordinary course of business; and none of such accounts receivable
or other debts is subject to any counterclaim or set-off except to the extent of
any such provision or reserve. The reserve for doubtful accounts reflected in
the Audited Financial Statements has been established in accordance with GAAP
and no receivable which should have been written down or reserved against in
accordance with GAAP has not been written down or reserved against. There has
been no material adverse change since December 31, 1999 in the amount of
accounts receivable or other debts due to the Company and its Subsidiaries or
the allowances with respect thereto, or accounts payable of the Company and its
Subsidiaries, from that reflected in the Audited Financial Statements.
SECTION 3.36 Inventory. The inventory of the Company and its Subsidiaries
consists of items that are in all material respects good and merchantable and
are of a quality and quantity presently usable in the ordinary course of
business. The inventory is valued (on an average cost basis) at the lower of
cost or market value. All items of the inventory have been properly recorded on
the books and records of the Company (including appropriate provisions for items
which are obsolete, below standard quality or unusable given the current state
of operations of the Company), all in accordance with GAAP. Since December 31,
1999, none of the Company nor any of its Subsidiaries has changed the method of
valuing its respective inventory.
SECTION 3.37 Product Liability. There are no recalls in progress, or the
best knowledge of the Company, threatened or pending under the Consumer Products
Safety Act, as amended, or any similar act or statute (collectively, "Consumer
Protection Legislation") with respect to any products sold by the Company or its
Subsidiaries, and no report has been filed under any Consumer Protection
Legislation or is required to be filed with respect to any product sold by the
Company or its Subsidiaries.
SECTION 3.38 Copies of Documents. The Company has made available for
inspection and copying by the Purchaser and their advisers, true, complete and
correct copies of (i) all documents referred to in this Article III or in any
schedule hereto, and (ii) execution versions of all documents prepared in
connection with the proposed transaction involving Apollo Investment Fund IV,
L.P., Apollo Overseas Partners IV, L.P., Ares Leveraged Investment Fund, L.P.,
Ares Leveraged Investment Fund II, L.P., Parande, S.A.S., GRP II, L.P., GRP II
Partners, L.P., Pequot Private Equity Fund II, L.P. and Internet Grocery
Partners, L.P.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Company as follows:
SECTION 4.1. Authorization; Enforceability; No Violations.
(a) The Purchaser is duly organized and validly existing in good standing
as a corporation under the laws of its jurisdiction of organization and has all
requisite corporate power and authority to own its properties and assets and to
carry on its business as it is now being conducted. The Purchaser has the
corporate power to execute, deliver and perform the terms and provisions of the
Documents and has taken all necessary corporate action to authorize the
execution, delivery and performance by it of such Documents and to consummate
the transactions contemplated hereby and thereby. No other corporate proceedings
on the part of the Purchaser is necessary therefor.
(b) The Purchaser has duly executed and delivered this Agreement and will
duly execute and deliver the other Documents to which it is a party. This
Agreement constitutes, and the other Documents to which the Purchaser is a
party, when executed and delivered by the Purchaser, and, assuming the due
execution by the other parties hereto and thereto, will constitute the legal,
valid and binding obligations of the Purchaser, enforceable against the
Purchaser in accordance with their terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and by
general principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
SECTION 4.2. Consents. No consent, authorization or order of, or filing or
registration with, any Governmental Authority or other person is required to be
obtained or made by the Purchaser for the execution, delivery and performance by
the Purchaser of this Agreement or any of the other Documents or the
consummation of any of the transactions contemplated hereby or thereby other
than those required for a Closing that will have been made or obtained on or
prior to such Closing.
SECTION 4.3. Private Placement.
(a) The Purchaser understands that (i) the offering and sale of the
Securities by the Company to the Purchaser is intended to be exempt from
registration under the Securities Act pursuant to section 4(2) thereof, and (ii)
there is no existing public or other market for the Securities.
(b) The Securities to be acquired by the Purchaser pursuant to this
Agreement are being acquired for its own account and without a view to making a
distribution thereof in violation of the Securities Act, without prejudice,
however, to its right to sell or otherwise dispose of all or any part of such
Securities in compliance with the provisions of the Securities Act and
applicable state securities or "blue sky" laws.
(c) The Purchaser has sufficient knowledge and experience in financial and
business matters so as to be capable of evaluating the merits and risks of its
investment in the Securities and the Purchaser is capable of bearing the
economic risks of such investment, including a complete loss of its investment
in the Securities.
(d) The Purchaser is an "accredited investor," as such term is defined in
Regulation D under the Securities Act.
(e) The Purchaser acknowledges that the Company and, for purposes of the
opinions to be delivered to the Purchaser pursuant to Section 7.2(n) hereof,
Sidley & Austin will rely on the accuracy and truth of its representations in
this Section 4.3, and the Purchaser hereby consents to such reliance.
(f) The Purchaser has had the opportunity to ask questions of, and receive
answers from, representatives of the Company concerning the Company and the
terms and conditions of this transaction, as well as to obtain any information
requested by the Purchaser. Any questions raised by the Purchaser concerning the
transaction have been answered to the satisfaction of the Purchaser. The
Purchaser's decision to enter into the transactions contemplated hereby is based
in part on the answers to such questions as the Purchaser has raised concerning
the transaction and on the Purchaser's own evaluation of the risks and merits of
the purchase and the Company's proposed business activities.
ARTICLE V
COVENANTS OF THE COMPANY
SECTION 5.1. Operation of Business.
(a) Except as contemplated hereby or as consented to in writing by the
Purchaser, between the date hereof and the Final Closing Date, and thereafter
for so long as the Purchaser, together with its Affiliates, or any Permitted
Transferee, beneficially owns Threshold Securities, the Company shall, and shall
cause each of the Subsidiaries to: (i) in all material respects carry on their
respective businesses in, and not enter into any material transaction other than
in accordance with, the regular and ordinary course (including related Internet
ventures), (ii) use their commercially reasonable efforts to preserve intact
their business organizations, (iii) keep available the services of their
officers and employees, and (iv) preserve their relationships with customers,
suppliers and others having material business dealings with them, and (v)
maintain, in all material respects, its assets and properties and keep its books
in accordance with present practices in a condition suitable for its current
use.
(b) Between the date hereof and the Final Closing Date, and thereafter for
so long as the Purchaser, together with its Affiliates, or any Permitted
Transferee, beneficially owns Threshold Securities, except as provided for
herein, or contemplated hereby, and except as consented to or approved by the
Purchaser, the Company shall not, and shall not permit any of the Subsidiaries
to, take any action that would reasonably be expected to cause any of the
representations and warranties made by the Company in this Agreement not to
remain true and correct as if made at and as of each Closing Date.
(c) Notwithstanding Section 5.2, the Company and Purchaser shall cooperate
and take all actions reasonably necessary to appoint, within ten Business Days
from the date hereof, as Chief Executive Officer the person selected by the
Purchaser and reasonably satisfactory to the Company, on terms and conditions
mutually satisfactory to the Company and the Purchaser. The Company shall not,
and shall not permit any of its Subsidiaries to, directly or indirectly, without
the approval of the Purchaser, terminate the employment of, amend the employment
terms or reduce the responsibility or authority of the Chief Executive Officer.
(d) The Company shall use its reasonable best efforts to enter into
employment agreements (with incentive compensation plans) with the key employees
who are of vice president level or above identified on the employment term sheet
provided by the Purchaser to Thomas L. Parkinson and Andrew B. Parkinson on or
about the date hereof, on the terms and conditions set forth in such term sheet.
SECTION 5.2. Negative Covenants. Without limiting the generality of Section
5.1, and, except as otherwise expressly permitted or required by this Agreement
or set forth in Schedule 5.2, between the date hereof and the Final Closing
Date, and thereafter for so long as the Purchaser, together with its Affiliates,
or any Permitted Transferee, beneficially owns Threshold Securities, the Company
shall not, and shall not permit any of its Subsidiaries to, without the prior
written consent of the Purchaser, except to the extent that any of the
restrictions set forth below are also restrictions contained in the Credit
Agreement in effect as of the date hereof, the Company shall only be restricted
herein to the extent the Company is restricted from taking such action in the
Credit Agreement.
(a) (i) declare, set aside or pay any dividends on (whether in cash, shares
of capital stock of the Company, or other property), or make any other actual,
constructive or deemed distributions in respect of, any of its capital stock, or
otherwise make any payments to shareholders of the Company in their capacity as
such, except Series B Preferred Stock and dividends payable to the Company
declared by any of the Company's Subsidiaries, (ii) split, combine or reclassify
any of its capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock or (iii) other than in connection with the liquidation of Split
Pea, purchase, redeem or otherwise acquire any shares of capital stock of the
Company or any of its Subsidiaries or any other securities thereof or any
rights, warrants or options to acquire any such shares or other securities or
set apart money or other property for any mandatory purchase or analogous fund
for the redemption, purchase or acquisition of any shares of capital stock of
the Company (other than shares of Series B Preferred Stock that are redeemed
according to their terms);
(b) authorize, issue, deliver, sell, pledge, dispose of or otherwise
encumber any shares of its capital stock or other voting securities or equity
equivalent or any securities convertible into or exchangeable or exercisable
for, or any rights, warrants or options to acquire, any such shares or voting
securities or convertible securities or equity equivalent or any phantom stock
or stock appreciation rights or enter into any agreement or contract with
respect to the sale or issuance of any of such securities; other than (i) any
issuance of Common Stock upon exercise of any options or warrants outstanding on
the date hereof, (ii) the issuance of stock options pursuant to employee stock
option plans providing for the issuance of shares of Common Stock in an
aggregate amount not to exceed 2,600,000 shares and the issuance of Common Stock
upon exercise thereof (iii) the issuance of 500,000 warrants to the McLane Group
and the issuance of Common Stock upon exercise thereof and (iv) the issuance of
shares of Common Stock to employees under the Company's employee stock purchase
plan in effect as of the date hereof.
(c) amend its Charter or Bylaws, the Certificate of Designation or the
Rights Agreement or equivalent governing documents;
(d) acquire or agree to acquire by merging with, or by purchasing a
material amount of assets of or equity in, or by any other manner, any business
or any corporation, partnership, association or other business organization or
division thereof or otherwise acquire or agree to acquire any assets other than
(i) inventory in the ordinary course of business or assets having a purchase
price not in excess of $100,000 individually or $500,000 in the aggregate;
(e) sell, lease or otherwise dispose of or agree to sell, lease or
otherwise dispose of, any of its assets, other than sales of inventory in the
ordinary course of business, or which involve assets having a current value not
in excess of $100,000 individually or $500,000 in the aggregate or allow any
properties or assets (including, without limitation, Intellectual Property) to
become subject to any Lien other than a Permitted Lien;
(f) incur any indebtedness for borrowed money in excess of $100,000 in any
calendar year or guarantee any such indebtedness or issue or sell any debt
securities or guarantee any debt securities of others, or make any loans,
advances or capital contributions to, or investments, in each case in excess of
$100,000 in the aggregate in any calendar year in, any other person other than a
wholly owned subsidiary, enter into any "keep-well" or other agreement to
maintain any financial state and condition of another person or enter into any
arrangement having the economic effect of any of the foregoing;
(g) grant any severance or termination pay not currently required to be
paid under existing severance plans or enter into or adopt, or materially amend
any existing, severance plan, agreement or arrangement, or enter into or
materially amend any employee benefit plan except as required by Applicable Law,
or enter into, materially amend or terminate any employment or consulting
agreement, except, in each case as required by Applicable Law;
(h) enter into any contract or commitment with respect to capital
expenditures other than expenditures within a capital budget approved by the
Purchaser for a calendar year or capital expenditures not in excess of $100,000
in the aggregate in any calendar year;
(i) except to the extent required under existing employee and director
benefit plans, agreements or arrangements as in effect on the date of this
Agreement or as required under Applicable Law, make a material amendment or
modification of the compensation, bonus or fringe benefits of any of its
directors, officers or employees of the Company or any of its Subsidiaries;
(j) agree to the settlement of any material claim or litigation;
(k) make or rescind any material tax election or settle or compromise any
material tax liability;
(l) except as required by Applicable Law or GAAP, make any change in its
method of accounting or accounting policies;
(m) except as set forth on the Schedules hereto, accelerate the payment,
right to payment or vesting of any bonus, severance, profit sharing, retirement,
deferred compensation, stock option, insurance or other compensation or
benefits;
(n) pay, discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction of any such
claims, liabilities or obligations in the ordinary course of business and
consistent with past practice;
(o) enter into any agreement, understanding or commitment that
significantly restrains, limits or impedes the Company's or any of its
Subsidiaries' ability to compete with or conduct any business or line of
business, including, but not limited to, geographic limitations on the Company's
or any of its Subsidiaries' activities;
(p) materially modify, amend or terminate any Commitment or waive any of
its rights or claims thereunder or enter into any contract, agreement,
commitment or arrangement that, if in existence on the date hereof, would be a
Commitment;
(q) establish, adopt, enter into, amend or terminate any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any directors, officers or employees, except, in
the case of collective bargaining, pension or retirement arrangements, or
trusts, as required by Applicable Law;
(r) execute any new lease or sublease for real property requiring payments
in excess of $100,000 in any calendar year, or cancel, modify, terminate or
amend any lease or sublease for real property;
(s) close any distribution center, office or other premises of the Company
or any of its Subsidiaries;
(t) adopt or enter into a plan of complete or partial liquidation,
dissolution, winding up, merger, consolidation, restructuring, recapitalization
or other reorganization of the Company or any of its Subsidiaries, other than
liquidations, dissolutions, mergers, consolidations, restructurings,
recapitalizations, or other reorganizations involving only wholly-owned
Subsidiaries of the Company and no other person;
(u) plan, announce, implement or effect any reduction in force, lay-off,
early retirement program, severance program or other program or effort
concerning the termination of employment of employees of the Company or its
Subsidiaries;
(v) fail to maintain its Intellectual Property as currently maintained, or
allow any material Intellectual Property to expire or to become abandoned,
canceled or otherwise terminated;
(w) commence or terminate the employment of, or materially amend the
employment terms of, or change the responsibilities or duties of, the Chairman,
Chief Executive Officer, President, Chief Operating Officer, Chief Financial
Officer or Chief Technology Officer or any other executive officer of the
Company;
(x) transfer, license, sell or otherwise dispose of any materially
Intellectual Property or Software;
(y) enter into any agreement, arrangement or transaction with or for the
benefit of any person who is an Affiliate of the Company;
(z) in any way change the preferences, rights or powers with respect to the
Series B Preferred Stock, so as to affect the Series B Preferred Stock
adversely;
(aa) create any Subsidiary;
(bb) cause or permit the number of directors of the Company to be greater
than 11;
(cc) take any action including, without limitation, the adoption of any
shareholder rights plan or amendments to its Charter, Bylaws or other governing
documents, which would, directly or indirectly, restrict or impair the ability
of the Purchaser to vote, or otherwise to exercise the rights and receive the
benefits of a stockholder with respect to, securities of the Company that may be
acquired or controlled by the Purchaser; or
(dd) agree to any restriction on the Company's ability to satisfy its
obligations under the Certificate of Designation to holders of Series B
Preferred Stock or the Company's ability to honor the exercise of any rights of
the holders of the Series B Preferred Stock;
(ee) increase the number of authorized shares of Series B Preferred Stock
or authorize the issuance of or issue any shares of the Series B Preferred Stock
(other than the issuance of additional shares of Series B Preferred Stock to be
paid as dividends on the Series B Preferred Stock pursuant to the terms of the
Certificate of Designation); and
(ff) agree, in writing or otherwise, to take any of the foregoing actions.
SECTION 5.3. Access to Books and Records. Upon reasonable notice, the
Company shall afford, and shall cause each of the Subsidiaries to afford, to the
Purchaser and the Purchaser's accountants, counsel and representatives full
access to all the Company's and the Subsidiaries' properties, books, contracts,
commitments, records (including, but not limited to, tax returns), employees,
customers, suppliers and accountants and, shall furnish promptly to the
Purchaser (a) a copy of each report, schedule and other document filed or
received by the Company or any of the Subsidiaries pursuant to the requirements
of federal or state securities laws, and (b) all other information concerning
the Company's and the Subsidiaries' business, properties and personnel as the
Purchaser may reasonably request, provided that no investigation or receipt of
information pursuant to this Section 5.3 shall affect any representation or
warranty of the Company or the conditions to the obligations of the Purchaser.
SECTION 5.4. Agreement to Take Necessary and Desirable Actions. The Company
shall execute and deliver the Documents and such other documents, certificates,
agreements and other writings and take such other actions as may be necessary,
desirable or reasonably requested by the Purchaser in order to consummate or
implement as expeditiously as practicable the transactions contemplated hereby.
SECTION 5.5. Compliance with Conditions; Commercially Reasonably Efforts.
The Company shall use its commercially reasonable efforts to cause all of the
obligations imposed upon it in this Agreement to be duly complied with and to
cause all conditions precedent to the obligations of the Company and the
Purchaser to be satisfied. Upon the terms and subject to the conditions of this
Agreement, the Company shall use its commercially reasonable efforts to take, or
cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable consistent with Applicable Law to consummate and
make effective in the most expeditious manner practicable the transactions
contemplated hereby.
SECTION 5.6. Consents and Approvals. The Company shall (a) use its
commercially reasonable efforts to obtain all necessary consents, waivers,
authorizations and approvals of all Governmental Authorities and of all other
persons, firms or corporations required in connection with the execution,
delivery and performance by them of this Agreement, any other Document or any of
the transactions contemplated hereby or thereby, and (b) diligently assist and
cooperate with the Purchaser in preparing and filing all documents required to
be submitted by the Purchaser to any Governmental Authority in connection with
such transactions and in obtaining any governmental consents, waivers,
authorizations or approvals which may be required to be obtained by the
Purchaser in connection with such transactions (which assistance and cooperation
shall include, without limitation, timely furnishing to the Purchaser all
information concerning the Company and its Subsidiaries that counsel to the
Purchaser determines is required to be included in such documents or would be
helpful in obtaining any such required consent, waiver, authorization or
approval).
SECTION 5.7. Stockholder Approval The Company shall (a) as soon as
practicable, but not later than 30 days after the date hereof, prepare and file
a proxy statement with the Commission with respect to the holding of a
stockholders' meeting (the "Stockholder Meeting") for the purpose of obtaining
stockholder approval ("Stockholder Approval") of, amongst other things, (i) the
issuance of the Series B Preferred Stock and Warrants to the extent required by
Applicable Law and NASD rules and regulations, (ii) the amendment and
restatement of the Company's Certificate of Incorporation in a manner reasonably
satisfactory to the Purchaser and to reflect the corporate governance provided
for herein, and (iii) more generally, if requested by the Purchaser, the
approval of this Agreement, the other Documents and the transactions
contemplated hereby and thereby, (b) promptly call and give notice of such
meeting following the Commission's clearance of such proxy statement and (c) on
or before the fortieth (40th) day following the Commission's clearance of such
proxy statement, convene and hold such meeting. The Company shall use its
commercially reasonable best efforts to obtain such Stockholder Approval,
including, but not limited to, responding promptly to the Commission's comments
in order to obtain clearance of such proxy statement. The Company shall, through
its Board of Directors, recommend to its stockholders that Stockholder Approval
be given, and the Company shall use its best efforts to cause each member of the
Company's Board of Directors and all other Key Stockholders to vote their shares
of Common Stock to approve the items set forth in clause (a) of this Section
5.7. The Company shall otherwise use its best efforts to obtain the requisite
vote of its stockholders to obtain the Stockholder Approval. The Company shall
afford the Purchaser and its counsel an opportunity to review and comment upon
any description of the Purchaser or its Affiliates, this Agreement, the other
Documents or the transactions contemplated hereby and thereby set forth in such
proxy statement (including all drafts or amendments thereto). The Purchaser
shall provide the Company with all necessary information reasonably requested
with respect to itself and its Affiliates solely for inclusion by the Company in
such proxy statement. The Company shall notify the Purchaser promptly of the
receipt of any comments from the Commission or its staff and of any request by
the Commission or its staff for amendments or supplements to such proxy
statement or for additional information and will supply the Purchaser with
copies of all correspondence between the Company or any of its representatives,
on the one hand, and the Commission or its staff, on the other hand, with
respect to such proxy statement. If at any time prior to such stockholders
meeting there shall occur any event that would be required, under the Exchange
Act and the rules and regulations thereunder, to be set forth in an amendment or
supplement to such proxy statement, the Company will promptly prepare and mail
to its stockholders such an amendment or supplement.
SECTION 5.8. Tax Treatment of Preferred Stock. The Company covenants and
agrees not to take any action inconsistent with the Series B Preferred Stock
being considered common stock for U.S. Federal income tax purposes.
SECTION 5.9. Other Activities of Purchaser. Nothing contained in this
Agreement or any other agreement of the Company shall be deemed to prohibit the
Purchaser or any of its Affiliates from forming or investing in other entities
engaged in activities similar to, or competitive with, those of the Company, or
from competing with the Company or any of its Subsidiaries; provided, however,
in no event shall this provision override any restriction contained in the
Services Agreement.
SECTION 5.10. HSR Act Filings.
(a) As promptly as practicable after the date hereof but in any event no
later than 10 Business Days thereafter, the Company shall file all reports and
documents as may be necessary to comply with the HSR Act. The Company shall
cooperate with and assist the Purchaser and take such action as may be
reasonably required and as permitted under law in connection with such filings
(including cooperating with additional requests for information, documents and
interviews of officers and personnel by either of the antitrust enforcement
agencies).
(b) The Company shall use commercially reasonable efforts to resolve such
objections, if any, as may be asserted under any antitrust law with respect to
the transactions contemplated by this Agreement. If any administrative, judicial
or legislative action or proceeding is instituted (or threatened to be
instituted) challenging any transaction contemplated by this Agreement as
violative of any antitrust law, the Company shall, (i) cooperate with and assist
the Purchaser to contest and resist any such action or proceeding, and to have
vacated, lifted, reversed or overturned any decree, judgment, injunction or
other order (whether temporary, preliminary or permanent) that is in effect and
that restricts, prevents or prohibits consummation of the transactions as
contemplated by this Agreement, including, without limitation, by pursuing all
reasonable avenues of administrative and judicial appeal.
SECTION 5.11. No Solicitation.
(a) From the date hereof until the Closing Date, or the Final Closing Date
if the Purchaser elects to have more than one Closing, the Company shall not and
shall cause its Affiliates and each of their respective officers, directors,
employees, auditors, agents, representatives, consultants, advisors, investment
bankers, attorneys, accountants and other agents (collectively,
"Representatives") not to, directly or indirectly, (i) initiate, solicit or
entertain offers from, negotiate with or in any manner knowingly encourage,
discuss, accept, or consider any proposal of any other person relating to (w)
the acquisition of capital stock of the Company or any of its Subsidiaries,
securities convertible into or exchangeable for shares of capital stock of the
Company or any of its Subsidiaries, (x) the acquisition of the Company's or any
of its Subsidiaries' assets or business, in whole or in part, whether directly
or indirectly, through purchase, merger, consolidation, business combination,
recapitalization, liquidation, dissolution or otherwise, (y) the incurrence of
indebtedness for borrowed money by the Company or any of its Subsidiaries, or
(z) any other transaction the consummation of which could reasonably be expected
to impede, interfere with, prevent, delay or dilute the benefits to the
Purchaser of the transactions contemplated hereby, including, without
limitation, by taking any action that would make Section 203 of the DGCL or the
Rights Agreement inapplicable to an Alternative Transaction (other than the
transactions contemplated by this Agreement, sales of inventory in the ordinary
course and shares issued upon the exercise of existing stock options) (any of
the foregoing being an "Alternative Transaction"), (ii) initiate, participate
engage in, or agree to initiate, participate or engage in negotiations or
discussions concerning, or provide to any person or entity any information or
data relating to the Company or any Subsidiary, or otherwise cooperate with or
assist or participate in, facilitating or encouraging, any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to lead
to an Alternative Transaction, (iii) in connection with any Alternative
Transaction, require it to abandon, terminate or fail to consummate the
transactions contemplated by this Agreement or the other Documents, (iv) grant
any waiver or release under or amend any standstill, confidentiality or similar
agreement entered into by the Company or any of its Affiliates or
representatives; (v) agree to, approve or recommend any Alternative Transaction,
or (vi) take any other action inconsistent with the obligations and commitments
assumed by the Company pursuant to this Section 5.11; provided, however, that
nothing contained herein shall limit the ability of the Company to comply with
Rule 14d-9 and Rule 14e-2 promulgated under the Exchange Act; and provided
further that if, in respect of an offer, proposal or inquiry relating to a
possible Alternative Transaction from a third party or entity made after the
date hereof which has not been solicited or encouraged in violation of clause
(i) or (ii) above, the Board of Directors of the Company determines in good
faith, after consultation with counsel, that its fiduciary duties so require,
the Company and its Representatives may participate or engage in discussions or
negotiations with such third party or entity concerning such Alternative
Transaction, or provide such third party with information or data relating to
the Company or any Subsidiary, in each case for purposes of complying with its
disclosure obligations to its stockholders in connection with the Stockholders'
Meeting. The Company shall immediately cease and cause to be terminated any
existing activities, discussions or negotiations by the Company, its Affiliates
or their respective Representatives with any person conducted heretofore with
respect to any of the foregoing. Without limiting the foregoing, it is agreed
that any violation of the restrictions set forth in this Section 5.11 by any
Representative of the Company or any of its Affiliates whether or not such
person is purporting to act on behalf of the Company or any of its Affiliates,
shall constitute a breach of this Section 5.11 by the Company.
(b) From the date hereof until the Closing Date, or the Final Closing Date
if the Purchaser elects to have more than one Closing, neither the Board of
Directors of the Company nor any committee thereof shall (i) withdraw or modify
the approval or recommendation by such Board of Directors or such committee of
this Agreement, the other Documents or any of the transactions contemplated
hereby or thereby, (ii) approve or recommend any Alternative Transaction or
(iii) cause or permit the Company or any Affiliate to enter into any letter of
intent, agreement in principle or other arrangement or agreement with respect to
an Alternative Transaction.
(c) In addition to the obligations of the Company set forth in paragraphs
(a) and (b) of this Section 5.11, the Company shall promptly (but in any event
within 24 hours of receipt or occurrence thereof), (i) advise the Purchaser
orally and in writing of any request for information with respect to, or any
inquiry or proposal regarding any Alternative Transaction, or of any information
received from Tribune or Nevis in respect of a request for information directed
to such stockholder with respect to, or of any inquiry or proposal regarding any
Alternative Transaction, (ii) advise the Purchaser of the terms and conditions
of such request or inquiry, and (iii) provide to the Purchaser copies of any
written documentation material to understanding or evaluating such request,
Alternative Transaction or inquiry (the "Alternative Transaction Documentation")
which is received by the Company from the person (or from any Representatives of
such person) making such Alternative Transaction, inquiry or proposal and the
identity of the person making any such request, Alternative Transaction or such
inquiry or proposal. The Company shall (x) keep the Purchaser fully informed of
the status and material details (including amendments or proposed amendments) of
any such request or Alternative Transaction, (y) keep the Purchaser fully
informed as to the material details of any information requested, and (z)
provide to the Purchaser within one day of receipt thereof all copies of any
additional Alternative Transaction Documentation received by the Company from
the person (or from any Representatives of such person) making such Alternative
Transaction, inquiry or proposal. The Company shall promptly provide to the
Purchaser any information concerning the Company provided to any other person in
connection with any Alternative Transaction which was not previously provided to
the Purchaser.
(d) The Company shall immediately request each person which has heretofore
executed a confidentiality agreement in connection with its consideration of
acquiring the Company or any portion thereof to return or destroy all
confidential information heretofore furnished to such person by or on behalf of
the Company and the Company shall use its commercially reasonable efforts to
have such information returned.
SECTION 5.12. Use of Proceeds. The Company shall use the proceeds from the
sale of Securities hereunder first to repay any indebtedness owing pursuant to
the Credit and Security Agreements and thereafter for the development of
distribution facilities, advertising and marketing expenses and general
corporate purposes.
SECTION 5.13. Reduction of Capital. In the event that at any time the
Company has insufficient "surplus" and "net profits" required under Section 170
of the DGCL to declare dividends on the shares of Series B Preferred Stock in
accordance with the terms of the Certificate of Designation, the Company shall
reduce its capital by transferring a portion of the capital to surplus to the
maximum extent permitted under Section 244 of the DGCL.
SECTION 5.14. Amendment of Bylaws. Prior to first Closing Date, or if there
is only one Closing, the Final Closing Date, the Company shall amend its bylaws
in a manner reasonably satisfactory to the Purchaser and to reflect the
corporate governance provided for herein.
SECTION 5.15. Transfer Agent; CUSIP Prior to the effective date of any
registration statement covering the Securities, the Company shall (i) appoint a
transfer agent and registrar for the Securities, (ii) provide the transfer agent
with printed certificates for the Securities in a form eligible for deposit with
The Depository Trust Company, and (iii) provide a CUSIP number for the
Securities.
SECTION 5.16. Notification of Certain Matters. The Company shall promptly
notify the Purchaser of the occurrence or non-occurrence of any fact or event
which has caused or could reasonably likely cause (x) any representation or
warranty made by it in this Agreement or the other Documents to be untrue or
inaccurate in any material respect at any time or (y) any covenant, condition or
agreement under this Agreement or the other Documents not to be complied with or
satisfied by it in any material respect; provided, however, that no such
notification shall modify the representations or warranties of any party or the
conditions to the obligations of any party hereunder. The Company shall promptly
notify the Purchaser of any notice or other communication from any third party
alleging that the consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement or the other
Documents.
SECTION 5.17. Malloy Shares. If the Company purchases less than 311,891
shares of Common Stock from William M. Malloy, the Company and the Purchaser
agree to equitably adjust (i) the conversion price of the Shares, such that on
conversion of all the Shares only, the Purchaser shall beneficially own 51% of
the aggregate issued and outstanding shares of Common Stock, and (ii) the
exercise price of the Warrants, such that on exercise of all the Warrants only,
the Purchaser shall beneficially own 25% of the aggregate issued and outstanding
shares of Common Stock.
ARTICLE VI
COVENANTS OF THE PURCHASER
SECTION 6.1. Agreement to Take Necessary and Desirable Actions. The
Purchaser agrees to execute and deliver each of the Documents and such other
documents, certificates, agreements and other writings and to take such other
actions as may be necessary, desirable or reasonably requested by the Company in
order to consummate or implement as expeditiously as practicable the
transactions contemplated hereby.
SECTION 6.2. Compliance with Conditions; Commercially Reasonable Efforts.
The Purchaser will use its commercially reasonable efforts to cause all of the
obligations imposed upon it in this Agreement to be duly complied with, and to
cause all conditions precedent to the obligations of the Company and the
Purchaser to be satisfied. Upon the terms and subject to the conditions of this
Agreement, the Purchaser shall use its commercially reasonable efforts to take,
or cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable consistent with Applicable Law to consummate and
make effective in the most expeditious manner practicable the transactions
contemplated hereby.
SECTION 6.3. HSR Act Filings.
(a) As promptly as practicable after the date hereof but in any event no
later than 10 Business Days thereafter, the Purchaser shall file all reports and
documents as may be necessary to comply with the HSR Act. The Purchaser shall
cooperate with and assist the Company and take such action as may be reasonably
required and as permitted under law in connection with such filings (including
cooperating with additional requests for information, documents and interviews
of officers and personnel by either of the antitrust enforcement agencies).
(b) The Purchaser shall use commercially reasonable efforts to resolve such
objections, if any, as may be asserted under any antitrust law with respect to
the transactions contemplated by this Agreement. If any administrative, judicial
or legislative action or proceeding is instituted (or threatened to be
instituted) challenging any transaction contemplated by this Agreement as
violative of any antitrust law, the Purchaser shall cooperate with and assist
the Company to contest and resist any such action or proceeding, and to have
vacated, lifted, reversed or overturned any decree, judgment, injunction or
other order (whether temporary, preliminary or permanent) that is in effect and
that restricts, prevents or prohibits consummation of the transactions as
contemplated by this Agreement, including, without limitation, by pursuing all
reasonable avenues of administrative and judicial appeal.
SECTION 6.4. Confidential Information. The Purchaser acknowledges that the
information being provided under Section 5.3 may be material non-public
information and hereby covenants and agrees to keep, and cause its Affiliates
and representatives to keep, confidential any information identified by the
Company as confidential, in a writing delivered to the Purchaser unless (a) such
information becomes generally available to the public (other than as a result of
a breach of this provision by the Purchaser), (b) such information was available
to the Purchaser on a non-confidential basis from a source (other than the
Company or its representatives) that, to the Purchaser's knowledge, is not and
was not prohibited from disclosing such information to the Purchaser by a
contractual, legal or fiduciary obligation or (c) the Purchaser is required by
law to disclose such information; provided, that in an event specified in clause
(c), the Purchaser shall provide the Company with prompt prior written notice of
such required disclosure, the Purchaser shall disclose only that portion of the
confidential information that the Purchaser is advised by counsel is legally
required. The Purchaser agrees that it will comply, and will cause its
representatives to comply, with all U.S. securities laws applicable to the
receipt of material non-public information and restrictions on trading in
securities when in possession of such information. The Purchaser agrees not to
use any confidential information in violation of any law.
SECTION 6.5 Notification of Certain Matters. From the date hereof through
the Final Closing Date, the Purchaser shall promptly notify the Company of the
occurrence or non-occurrence of any fact or event of which the Company is aware
which has caused or could reasonably likely cause (x) any representation or
warranty made by it in this Agreement or the other Documents to be untrue or
inaccurate in any material respect at any time or (y) any covenant, condition or
agreement under this Agreement or the other Documents not to be complied with or
satisfied by it in any material respect; provided, however, that no such
notification shall modify the representations or warranties of any party or the
conditions to the obligations of any party hereunder. The Purchaser shall
promptly notify the Company of any notice or other communication from any third
party alleging that the consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement or the other
Documents.
SECTION 6.6 Restrictions on Mergers. During the one-year period beginning
on the date hereof, the Purchaser, and its Affiliates, and its Permitted
Transferees shall not propose, or vote any securities in favor of, a merger,
reorganization, recapitalization or other similar transaction involving the
Company that would result in the elimination of the outstanding shares of Common
Stock other than the shares held beneficially by the Purchaser, its Affiliates
and its Permitted Transferees, unless any such transaction is approved by an
independent committee of the Board of Directors of the Company.
ARTICLE VII
CONDITIONS PRECEDENT TO CLOSING
SECTION 7.1. Conditions to the Company's Obligations. The obligations of
the Company hereunder required to be performed on each Closing Date with respect
to the Purchaser shall be subject, at its election, to the satisfaction or
waiver (which waiver, if so requested by the Purchaser, shall be made in
writing), at or prior to the Closing occurring on such Closing Date, of the
following conditions:
(a) The representations and warranties of the Purchaser contained in this
Agreement shall be true and correct in all material respects on and as of such
Closing Date.
(b) The Purchaser shall have performed in all material respects all
obligations and agreements, and complied in all material respects with all
covenants, contained in this Agreement, to be performed and complied with by the
Purchaser at or prior to such Closing Date.
(c) All material governmental and regulatory approvals and clearances and
all third-party consents necessary for the consummation of the transactions
contemplated by the Documents to occur on such Closing Date shall have been
obtained and shall be in full force and effect, the consummation of such
transactions does not and will not contravene any Applicable Law, except to the
extent any contravention or contraventions, individually or in the aggregate,
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(d) The Purchaser shall have delivered to the Company a certificate,
executed by the Purchaser or on its behalf by a duly authorized representative,
dated as of such Closing Date, certifying that each of the conditions specified
in this Section 7.1 has been satisfied with respect to the Purchaser.
(e) All documents, instruments, agreements and arrangements relating to the
transactions contemplated by the Documents shall be reasonably satisfactory to
the Company, shall have been executed and delivered by the parties thereto and
no party to any of the foregoing (other than the Company) shall have breached
any of its material obligations thereunder.
SECTION 7.2. Conditions to The Purchaser's Obligations. The obligations of
the Purchaser hereunder required to be performed at each Closing shall be
subject, at its election, to the satisfaction or waiver (which waiver, if so
requested by the Company, shall be made in writing), at or prior to the Closing,
of the following conditions:
(a) The representations and warranties of the Company contained in this
Agreement shall be true and correct in all material respects when made and on
and as of such Closing Date.
(b) The Company shall have performed in all material respects all
obligations and agreements, and complied in all material respects with all
covenants, contained in this Agreement and the other Documents, to be performed
and complied with by it at or prior to such Closing Date, and there shall exist
no Event of Default (as defined in the Credit Agreement) under the Credit and
Security Agreements.
(c) The Company shall have entered into or caused to become effective such
agreements and governing documents as the Purchaser may deem reasonably
appropriate to effect the provisions of the Voting Agreement, and each of such
agreements and documents shall be in full force and effect.
(d) The Company's Board of Directors shall consist of not more than 11
directors. If immediately following the subject Closing, the Purchaser would
beneficially own securities of the Company that constitute, or if exercised,
exchanged or converted into Common Stock would constitute, at least 33-1/3% of
the aggregate issued and outstanding Common Stock, provided that the Purchaser
has given notice to the Company at least two Business Day's prior to a Closing
(without duplication) of its Purchaser Nominees, the Company shall have
appointed a total of six of such Purchaser Nominees (or such lessor number as
provided by the Purchaser) to serve as members of the Company's Board of
Directors.
(e) All Documents and all documents, instruments, agreements and
arrangements relating to the transactions contemplated by the Documents shall be
reasonably satisfactory to the Purchaser, shall have been executed and delivered
by the parties thereto, be in full force and effect and no party to any of the
foregoing (other than the Purchaser) shall have breached any of its material
obligations thereunder.
(f) (i) Since December 31, 1999, no change, occurrence or development shall
have occurred, been threatened or become known to the Purchaser that could
reasonably be expected to have a Material Adverse Effect, (ii) the Purchaser
shall not have become aware of any information or other matter relating to the
Company (x) of which the Company (but not the Purchaser) had knowledge on or
prior to the date of this Agreement, (y) that, in the Purchaser's reasonable
judgment, is inconsistent with any information or other matter relating to the
Company disclosed to the Purchaser by the Company or any of its representatives
prior to the date of this Agreement, and (z) would have been viewed by the
Purchaser, in its reasonable judgment, as having materially and adversely
altered the total mix of information made available to the Purchaser prior to
the date of this Agreement. For purposes of this Section 7.2(f), the Company
shall be deemed to have "knowledge" of a particular fact or other matter if (I)
any individual who is serving, or who has at any time served, as a director,
officer or management-level employee of the Company is actually aware of such
fact or other matter; or (II) a prudent individual serving as a director,
officer or management-level employee of the Company could be expected to
discover or otherwise become aware of such fact or other matter in the diligent
exercise of his or her duties in such capacity. There shall have been no
material adverse development in any pending litigation that in the reasonable
good faith judgment of the board of directors of the Purchaser, after
consultation with legal counsel, could reasonably be likely to result in a
material adverse judgment against the Company resulting in damages (after taking
into account any recoveries under available insurance) in an amount in excess of
$3,000,000.
(g) Since December 31, 1999, the business of the Company shall have been
operated in compliance with all Applicable Laws, except where the failure to do
so could not reasonably be expected to have a Material Adverse Effect.
(h) There shall be no litigation, proceeding or other action seeking an
injunction or other restraining order, damages or other relief from a
Governmental Authority pending or threatened which, in the reasonable judgment
of the Purchaser, would materially adversely affect the consummation of the
transactions contemplated by the Documents on the terms contemplated hereby and
thereby and there shall be no litigation, proceeding or other action (including,
without limitation, relating to environmental matters or the Benefit Plans)
pending or threatened against the Company or its Subsidiaries which could,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(i) During the seven-calendar-day period ending on such Closing Date, (A)
trading in securities generally on the New York Stock Exchange or the American
Stock Exchange or the over-the-counter market shall not have been suspended and
minimum prices shall not have been established on either of such exchanges or
such market by such exchange or by the Commission, and (B) a general banking
moratorium shall not have been declared by Federal or New York or California
authorities.
(j) All registration rights agreements with the Company shall have been
amended to provide that no other person will exercise any demand or piggy back
registration rights without the prior written consent of the Purchaser.
(k) All governmental and regulatory approvals and clearances and all
third-party consents necessary for the consummation of all of the transactions
contemplated by the Documents to occur on such Closing Date shall have been
obtained and shall be in full force and effect, and the Purchaser shall be
reasonably satisfied that the consummation of such transactions does not and
will not contravene any Applicable Law, except to the extent any contravention
or contraventions, individually or in the aggregate, could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect.
(l) The Company shall have delivered to the Purchaser a certificate,
executed by it or on its behalf by a duly authorized representative, dated as of
such Closing Date, certifying that each of the conditions (other than any
condition the fulfillment of which is subject to the reasonable satisfaction of
the Purchaser) specified in this Section 7.2 has been satisfied.
(m) Sidley & Austin, counsel to the Company, shall have delivered to the
Purchaser an opinion, dated such Closing Date, addressed to the Purchaser,
substantially in the form attached as Exhibit J hereto.
(n) The Purchaser shall have received delivery of the Securities as set
forth hereunder.
(o) The Company shall have delivered to the Purchaser certificates of the
appropriate public officials to the effect that each of the Purchaser and its
Subsidiaries is a validly existing corporation in good standing in its
jurisdiction of organization dated not more than 5 days prior to the Closing
Date.
(p) The Company shall have delivered to the Purchaser a certificate of the
Secretary of the Company (i) certifying that a true and correct copy of the
Charter, Bylaws and all resolutions of the Board of Directors authorizing the
execution and delivery of this Agreement and each Document to which the Company
is a party and authorizing the performance by the Company of the transactions
contemplated hereby and thereby is attached thereto and (ii) containing the
incumbency and specimen signature of each of the officers of the Company.
(q) The Company shall have taken all necessary action so that at least two
thirds of the Company's then current Board of Directors shall have approved the
election of the Purchaser Nominees.
(r) William M. Malloy shall not have revoked the Malloy Agreement with
respect to the waiver of discrimination claims contained in such agreement or if
such agreement has been revoked, a substitute agreement containing substantially
similar terms shall have been entered into by William M. Malloy and the Company.
(s) The Purchaser shall have received a complete and correct signed copy of
the written opinions confirming the oral opinions of Wasserstein and Houlihan
Lokey referred to in Section 3.29.
(t) The Purchaser shall have received such other certificates, instruments
and documents in furtherance of the transactions contemplated by this Agreement
or the other Documents as it may reasonably request.
ARTICLE VIII
INFORMATION; DIRECTORS; RESERVATION OF STOCK
SECTION 8.1. Access to Information. As long as the Purchaser, together with
its Affiliates, or Permitted Transferees, beneficially owns Threshold
Securities, upon the request of the Purchaser, the Company shall afford the
Purchaser and its accountants, counsel and other representatives full access to
all of the properties, books, contracts, commitments, and records (including,
but not limited to, tax returns), employees, customers, suppliers and
accountants of the Company and its Subsidiaries. The Purchaser will, and will
cause its agents to, conduct any such investigations on reasonable advance
notice, during normal business hours, with reasonable numbers of persons and in
such a manner as not to interfere unreasonably with the normal operations of the
Company and its Subsidiaries.
SECTION 8.2. Information Rights of Purchaser. As long as the Purchaser,
together with its Affiliates, or Permitted Transferees, beneficially owns
Threshold Securities, the Company shall furnish to the Purchaser, the following:
(a) Monthly Reports. As soon as available, but not later than 30 days after
the end of each fiscal month (or 45 days in the case of the report for the month
of April 2000), beginning with the report for the month of April 2000, a
consolidated balance sheet of the Company and its Subsidiaries as of the end of
such period and consolidated statements of income of the Company and its
Subsidiaries for such period and for the period commencing at the end of the
previous fiscal year and ending with the end of such period, setting forth, in
each case, in comparative form the corresponding figures for the corresponding
period of the preceding fiscal year, and including comparisons to the budget or
business plan and an analysis of the variances from the budget or plan, all
prepared in accordance with GAAP (except for the absence of footnotes, and
quarter-end and year-end adjustments).
(b) Quarterly Reports. As soon as available, but not later than 45 days
after the end of each quarterly accounting period, (i) a consolidated balance
sheet of the Company and its Subsidiaries as of the end of such period and
consolidated statements of income, cash flows and changes in stockholders'
equity for such quarterly accounting period and for the period commencing at the
end of the previous fiscal year and ending with the end of such period, setting
forth in each case in comparative form the corresponding figures for the
corresponding period of the preceding fiscal year, and including comparisons to
the budget or business plan and an analysis of the variances from the budget or
plan, all prepared in accordance with GAAP, subject to normal year-end
adjustments and the absence of footnote disclosure, and (ii) a report by
management of the Company of the operating and financial highlights of the
Company and its Subsidiaries for such period, which shall include (x) a
comparison between operating and financial results and budget and (y) an
analysis of the operations of the Company and its Subsidiaries for such period.
(c) Annual Audit. As soon as available, but not later than 90 days after
the end of each fiscal year of the Company, audited consolidated financial
statements of the Company and its Subsidiaries, which shall include statements
of income, cash flows and changes in stockholders' equity for such fiscal year
and a balance sheet as of the last day thereof, each prepared in accordance with
GAAP, and accompanied by the report of a "Big 5" firm of independent certified
public accountants selected by the Company's Board of Directors. The Company and
its Subsidiaries shall maintain a system of accounting sufficient to enable its
accountants to render the report referred to in this Section 8.2(c).
(d) Notice of Litigation, Disputes and Adverse Changes. Prompt notice of:
(i) each material legal action, suit, arbitration or other
administrative or governmental investigation or proceeding (whether
federal, state, local or foreign) instituted or, to the Company's
knowledge, threatened against the Company or any of its Subsidiaries (or of
any occurrence or dispute which involves a reasonable likelihood of any
such action, suit, arbitration, investigation or proceeding being
instituted), and
(ii) any other occurrence or change of circumstance relating to the
Company which, in either such case, could reasonably be expected to
materially and adversely affect the Company's condition (financial or
otherwise), properties, assets, liabilities, business or operations (except
for any changes that are the effect or result of economic factors generally
affecting the economy as a whole).
(e) Miscellaneous. Promptly upon becoming available, each of the following:
(i) copies of all financial statements, reports, press releases,
notices, proxy statements and other documents sent by the Company or its
Subsidiaries to its stockholders generally or released to the public and
copies of all regular and periodic reports, if any, filed by the Company or
its Subsidiaries with the Commission, any securities exchange or NASDAQ;
(ii) notification in writing of the existence of any default, which
continues uncured for a period of more than 10 days thereafter, under any
material agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which any of their assets are bound;
(iii) upon request, copies of all reports prepared for or delivered to
the management of the Company or its Subsidiaries by its accountants; and
(iv) upon request, any other information reasonably requested.
SECTION 8.3. Information Rights. Without duplication of any document or
information provided pursuant to Section 8.2, as long as the Purchaser
beneficially owns any shares of Common Stock, the Company shall provide to the
Purchaser the following:
(a) as soon as available, but not later than 45 days after the end of
each quarterly accounting period, a Quarterly Report on Form 10-Q or, if
the Company does not then file quarterly reports with the Commission, the
documents referred to in Section 8.2(b);
(b) as soon as available, but not later than 90 days after the end of
each fiscal year, an Annual Report on Form 10-K or, if the Company does not
then file annual reports with the Commission, the audited consolidated
financial statements referred to in Section 8.2(c); and
(c) simultaneously with any distribution of any document to the
stockholders of the Company generally, any such document so distributed.
SECTION 8.4. Directors.
(a) At all times, the Company shall use its reasonable best efforts to
ensure that the Company's Board of Directors shall consist of not more than 11
directors.
(b) (i) As of the date hereof, the Company shall have appointed three
Purchaser Nominees to be directors of the Company. (ii) As long as the Purchaser
beneficially owns securities of the Company that constitute, or if converted
into Common Stock would constitute, at least 70% of the aggregate issued and
outstanding Common Stock, the Company shall use its reasonable best efforts to
ensure that a total of seven Purchaser Nominees are members of the Company's
Board of Directors. For the purposes of this clause (ii), the Previously Issued
Warrants and the Warrants shall not be included in the calculation of the
Purchaser's beneficial ownership. (iii) As long as the Purchaser beneficially
owns securities of the Company that constitute, or if exercised, exchanged or
converted into Common Stock would constitute, at least 33- 1/3% but less than
70% of the aggregate issued and outstanding Common Stock, the Company shall use
its reasonable best efforts to ensure that a total of six Purchaser Nominees are
members of the Company's Board of Directors. (iv) As long as the Purchaser
beneficially owns securities of the Company that constitute, or if exercised,
exchanged or converted into Common Stock would constitute, at least 10% but less
than 33- 1/3% of the aggregate issued and outstanding Common Stock, the Company
shall use its reasonable best efforts to ensure that a total of three Purchaser
Nominees are members of the Company's Board of Directors. For the purposes of
clauses (iii) and (iv) of this Section 8.4(b), the Previously Issued Warrants
and the Warrants shall be included in the calculation of the Purchaser's
beneficial ownership. Notwithstanding the foregoing, as long as any loan or
commitment is outstanding under the Credit Agreement, the Company shall use its
reasonable best efforts to ensure that no less than a total of three Purchaser
Nominees are members of the Company's Board of Directors. The Company and the
Board of Directors may not take any action, without due cause, to remove the
Purchaser Nominees serving as directors of the Company.
(c) The Company shall ensure that the Board of Directors (and the Company's
nominating committee, if any) shall recommend the inclusion of the Purchaser
Nominees such persons in the slate of nominees recommended to stockholders for
election as directors at each annual meeting of stockholders of the Company.
(d) The Board of Directors shall appoint Purchaser Nominees to serve on
each committee of the Board of Directors in at least the same proportions that
the number of Purchaser Nominees serving on the Board of Directors bears to the
total number of directors then comprising the Board of Directors, provided,
however, that the Company and the Purchaser shall cooperate in order to comply
with any NASD rules or regulations (or the rules and regulations of any national
exchange on which the Company's Common Stock is traded) relating to director
independence on committees.
(e) If at any time, a vacancy is created on the Board of Directors by
reason of the incapacity, death, removal or resignation of any Purchaser
Nominees, then the Board of Directors shall appoint an individual designated by
the Purchaser to fill such vacancy until the next meeting of stockholders.
(f) The Company shall provide the Purchaser Nominees serving as directors
notice of each meeting of the Board of Directors at the same time and in the
same manner as other members of the Board of Directors.
(g) The Purchaser Nominees serving as directors shall be entitled to
compensation and indemnification rights consistent with those of other directors
of the Company, including, without limitation, any rights to participate in
stock option or similar plans. At all times on and after the date hereof, the
Company shall be a party to and comply with indemnification agreements (in such
form as is currently available to the Company's directors or such other form
mutually satisfactory to the Purchaser and the Company) with each of the
nominees of the Purchaser serving as directors. The Company shall at all times
maintain a directors' and officers' insurance policy covering the Company's
directors and officers that provides, in the aggregate, at least $10,000,000 of
liability coverage and, in any event, substantially no less coverage than the
policy covering the current directors of the Company as of the date of this
Agreement.
(h) The provisions of this Section 8.4 shall be further effected pursuant
to an amendment to the Company's Bylaws in a form acceptable to the Purchaser,
which shall not be further amended by the Board of Directors in a manner that,
individually or in the aggregate, adversely affects the Purchaser.
(i) If at any time the Board of Directors shall consist of more than 11
Directors or the number of Purchaser Nominees serving as directors of the
Company (or members of committees) shall be less than the number required
pursuant to this Section 8.4 and the requirement that the Company appoint such
number of Purchaser Nominees as directors of the Company does not violate
Applicable Laws or NASD rules or regulations (or the rules or regulations of any
national exchange on which the Company's Common Stock is traded), then for all
purposes of the Documents, the Company shall be deemed to have failed to comply
in a material respect with its agreements contained in this Agreement; provided,
however, if the number of Purchaser Nominees is less than the number required
pursuant to this Section 8.4 solely because of the resignation, death or
incapacity of a Purchaser Nominee, then the Company shall not have failed to
comply with its agreements contained in this Agreement.
(i) The Purchaser and its Affiliates shall vote the Securities and any
shares of Common Stock it owns in favor of the appointment of the Purchaser
Nominees to the Board of Directors.
SECTION 8.5. Reservation of Common Stock. Prior to any Closing Date, the
Company shall reserve and keep available out of its authorized but unissued
Common Stock, the number of shares required for issuance upon the conversion of
the Series B Preferred Stock and the exercise of the Warrants being purchased at
such Closing (including any additional shares which may become so issuable by
reason of the operation of anti-dilution provisions of the Certificate of
Designation and the Warrants).
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. Survival; Indemnification.
(a) All representations, warranties, covenants and agreements (except
covenants and agreements which are expressly required to be performed and are
performed in full on or before a Closing Date) contained in this Agreement shall
be deemed made at each Closing as if made at such time and shall survive such
Closing for two years, except that (i) with respect to claims asserted pursuant
to this Section 9.1 before the expiration of the applicable representation or
warranty, such claims shall survive until the date they are finally liquidated
or otherwise resolved, (ii) Sections 3.10, 3.15 and 3.16 shall survive until the
end of the applicable statute of limitations (as waived, tolled or amended), and
(iii) Section 3.2 and this Section 9.1 shall survive indefinitely. All
statements as to factual matters contained in any certificate, document or other
instrument executed and delivered by the parties pursuant hereto shall be deemed
to be representations, warranties and covenants by such party hereunder. No
claim may be commenced under this Section 9.1 (or otherwise) following
expiration of the applicable period of survival, and upon such expiration the
Indemnifying Party shall be released from all liability with respect to claims
under each such section not theretofore made by the Indemnified Party. A claim
shall be made or commenced hereunder by the Indemnified Party delivering to the
Indemnifying Party a written notice specifying in reasonable detail the nature
of the claim, the amount claimed (if known or reasonably estimable), and the
factual basis for the claim.
(b) (i) The Company agrees to indemnify and hold harmless the Purchaser,
its Affiliates, and their respective officers, directors, employees and duly
authorized agents and each of their affiliates and each other person controlling
the Purchaser or any of their Affiliates within the meaning of either section 15
of the Securities Act or section 20 of the Exchange Act and any partner of any
of them from and against all losses, claims, damages or liabilities resulting
from any claim, lawsuit or other proceeding by any person to which any party
indemnified under this clause may become subject which is related to or arises
out of (A) the transactions contemplated by this Agreement and the other
Documents, whether or not consummated, (B) any breach of, or failure to perform
any of the representations, warranties, covenants or agreements made in any of
the Documents by the Company or (C) any action or omission of the Company or any
of its Subsidiaries in connection with the transactions contemplated hereby or
by the other Documents, and will reimburse the Purchaser and any other party
indemnified under this clause for all reasonable out-of-pocket expenses
(including, without limitation, reasonable counsel fees and disbursements)
incurred by the Purchaser or any such other party indemnified under this clause
and further agrees that the indemnification and reimbursements commitments
herein shall apply whether or not the Purchaser or any such other party
indemnified under this clause is a formal party to any such lawsuits, claims or
other proceedings. The foregoing provisions are expressly intended to cover,
without limitation, reimbursement of legal and other expenses incurred in a
deposition or other discovery proceeding.
(ii) Notwithstanding the foregoing clause (i), the Company shall not be
liable to any party otherwise entitled to indemnification pursuant thereto: (A)
in respect of any loss, claim, damage, liability or expense to the extent the
same is determined, in final judgment by a court having jurisdiction, to have
resulted from the gross negligence or willful misconduct of such party or (B)
for any settlement effected by such party without the written consent of the
Company, which consent shall not be unreasonably withheld.
(c) If a person entitled to indemnity hereunder (an "Indemnified Party")
asserts that any party hereto (the "Indemnifying Party") has become obligated to
the Indemnified Party pursuant to Section 9.1(b), or if any suit, action,
investigation, claim or proceeding is begun, made or instituted as a result of
which the Indemnifying Party may become obligated to the Indemnified Party
hereunder, the Indemnified Party agrees to notify the Indemnifying Party
promptly and to cooperate with the Indemnifying Party, at the Indemnifying
Party's expense, to the extent reasonably necessary for the resolution of such
claim or in the defense of such suit, action or proceeding, including making
available any information, documents and things in the possession of the
Indemnified Party which are reasonably necessary therefor.
Notwithstanding the foregoing notice requirement, the right to
indemnification hereunder shall not be affected by any failure to give, or delay
in giving, notice unless, and only to the extent that, the rights and remedies
of the Indemnifying Party shall have been prejudiced as a result of such failure
or delay.
(d) In fulfilling its obligations under this Section 9.1, after providing
each Indemnified Party with a written acknowledgment of any liability under this
Section 9.1 as between such Indemnified Party and the Indemnifying Party, the
Indemnifying Party shall have the right to investigate, defend, settle or
otherwise handle, with the aforesaid cooperation, any claim, suit, action or
proceeding brought by a third party in such manner as the Indemnifying Party may
in its sole discretion deem appropriate; provided, however, that (i) counsel
retained by the Indemnifying Party is reasonably satisfactory to the Indemnified
Party and (ii) the Indemnifying Party shall not, except with the consent of the
Indemnified Party, enter into any settlement that does not include as an
unconditional term thereof the giving by the person or persons asserting such
claim to all Indemnified Parties of an unconditional release from all liability
with respect to such claim or consent to entry of any judgment. Notwithstanding
anything to the contrary contained herein, the Indemnifying Party may retain one
firm of counsel to represent all Indemnified Parties in such claim, action or
proceeding; provided, however, that in the event that the defendants in, or
targets of, any such claim, action or proceeding include more than one
Indemnified Party, and any Indemnified Party shall have reasonably concluded,
based on the opinion of its own counsel, that there may be one or more legal
defenses available to it which are in conflict with those available to any other
Indemnified Party, then such Indemnified Party may employ separate counsel to
represent or defend it or any other person entitled to indemnification and
reimbursement hereunder with respect to any such claim, action or proceeding in
which it or such other person may become involved or is named as defendant and
the Indemnifying Party shall pay the reasonable fees and disbursement of such
counsel. Notwithstanding the Indemnifying Party's election to assume the defense
or investigation of such claim, action or proceeding, the Indemnified Party
shall have the right to employ separate counsel at the expense of the
Indemnifying Party and to direct the defense or investigation of such claim,
action or proceeding if (A) in the written opinion of counsel to the Indemnified
Party, use of counsel of the Indemnifying Party's choice could reasonably be
expected to give rise to a conflict of interest, or (B) the Indemnifying Party
shall not have employed counsel reasonably satisfactory to the Indemnified Party
to represent the Indemnified Party within a reasonable time after notice of the
assertion of any such claim or institution of any such action or proceeding. In
all other situations, the Indemnified Party shall have the right to participate
in the defense or investigation of such claim, action or proceeding if the
Indemnifying Party shall authorize the Indemnified Party to employ separate
counsel at the Indemnifying Party's expense or if the fees and expenses of
counsel for the Indemnified Party shall be borne by the Indemnified Party. If
the Indemnifying Party does not notify the Indemnified Party within 30 days
after the receipt of the Indemnified Party's notice of a claim of indemnity
hereunder that it elects to undertake the defense thereof, the Indemnified Party
shall have the right to contest, settle or compromise the claim but shall not
thereby waive any right to indemnity therefor pursuant to this Agreement.
(e) If for any reason (other than the gross negligence or willful
misconduct referred to in subclause (b)(ii) above) the foregoing indemnification
by the Company is unavailable to any Indemnified Party or is insufficient to
hold it harmless as and to the extent contemplated by subclauses (b), (c) and
(d) above, then the Company shall contribute to the amount paid or payable by
such Indemnified Party as a result of such loss, claim, damage or liability in
such proportion as is appropriate to reflect the relative benefits received by
the Company and its Affiliates, on the one hand, and the Purchaser and any other
applicable Indemnified Party, as the case may be, on the other hand, as well as
any other relevant equitable considerations.
SECTION 9.2. Notices. All notices, demands, requests, consents, approvals
or other communications (collectively, "Notices") required or permitted to be
given hereunder or which are given with respect to this Agreement shall be in
writing and shall be personally served, delivered by a reputable air courier
service with tracking capability, with charges prepaid, or transmitted by hand
delivery or facsimile, addressed as set forth below, or to such other address as
such party shall have specified most recently by written notice. Notice shall be
deemed given on the date of service or transmission if personally served or
transmitted by facsimile. Notice otherwise sent as provided herein shall be
deemed given on the next Business Day following delivery of such notice to a
reputable air courier service.
If to the Company, to it at:
Peapod, Inc.
9933 Woods Drive
Skokie, IL 60077
Attention: Andrew Parkinson, Chairman
Facsimile: (847) 583-9495
with a copy (which shall not constitute notice) to:
Sidley & Austin
Bank One Plaza
10 South Dearborn Street
Chicago, IL 60603
Attn: Christine A. Leahy, Esq.
Facsimile: (312) 853-7036
if to the Purchaser:
Koninklijke Ahold N.V.
c/o The Stop and Shop Supermarket Company
1385 Hancock Street
Quincy, MA 02169
Attn: David Kramer, Esq.
Facsimile: (617) 770-6013
and:
Koninklijke Ahold NV
Albert Heijnweg 1
1507 EH Zaandam, The Netherlands
Attention: Ton van Tielraden, Esq.
Facsimile: (31-75) 659-8366
and a copy (which shall not constitute notice) to:
White & Case
1155 Avenue of the Americas
New York, New York 10036
Attention: Maureen S. Brundage, Esq./John M. Reiss, Esq.
Facsimile: (212) 354-8113
SECTION 9.3. Governing Law. This Agreement and the rights and obligations
of the parties hereunder shall be governed by, and construed in accordance with,
the laws of the State of New York, and each party hereto submits to the
non-exclusive jurisdiction of the state and federal courts within the County of
New York in the State of New York. Any legal action or proceeding with respect
to this Agreement may be brought in the courts of the State of New York or of
the United States of America for the Southern District of New York and, by
execution and delivery of this Agreement, the Company hereby accepts for itself
and in respect of its property, generally and unconditionally, the jurisdiction
of the aforesaid courts. The Company further irrevocably consents to the service
of process out of any of the aforementioned courts in any action or proceeding
by the mailing of copies thereof by registered or certified mail, postage
prepaid, to the Company at its address set forth in Section 9.2, such service to
become effective seven days after such mailing. Nothing herein shall affect the
right of the Purchaser to serve process in any of the matters permitted by law
or to commence legal proceedings or otherwise proceed against the Company in any
other jurisdiction. The Company hereby irrevocably waives any objection which it
may now or hereafter have to the laying of venue of any of the aforesaid actions
or proceedings arising out of or in connection with this Agreement brought in
the courts referred to above and hereby further irrevocably waives and agrees
not to plead or claim in any such court that any such action or proceeding
brought in any such court has been brought in an inconvenient forum.
SECTION 9.4. Termination; Fees.
(a) This Agreement may be terminated in accordance with the next two
sentences. This Agreement may be terminated by (i) by mutual agreement of the
parties at any time, (ii) by either party if the Stockholder Approval is not
obtained on or prior to the seventh month anniversary of the date hereof, or
(iii) by either party, if the Company's stockholders vote against this Agreement
and the transactions contemplated hereby at the Stockholders' Meeting.
Termination pursuant to the foregoing clauses (i), (ii) or (iii)
notwithstanding, Sections 3, 4, (for the purposes of Section 9.1), 5, 6.4, 8 and
9 hereof shall remain in effect. No termination of this Agreement shall affect
any party's liability for willful breach of this Agreement.
(b) If this Agreement is terminated by the Purchaser in accordance with
clauses (ii) or (iii) of Section 9.4(a), and the Purchaser shall have voted in
favor of this Agreement and the transactions contemplated hereby at the
Stockholders' Meeting, all securities of the Company held by it (and eligible to
vote, it being understood that the Purchaser shall have no obligation to
exercise any Warrants) as of the record date for such Stockholders' Meeting, on
the day next succeeding the date of such termination, the Company shall (x)
reimburse the Purchaser in immediately available funds for the out-of-pocket
expenses of the Purchaser (including, without limitation, printing fees, filing
fees and fees and expenses of its legal and financial advisors and all fees and
expenses payable to any financing sources) related to this Agreement or the
other Documents, the transactions contemplated hereby and thereby and any
related financing and (y) pay to the Purchaser in immediately available funds an
amount equal to $1,000,000.
SECTION 9.5. Entire Agreement. This Agreement (including all agreements
entered into pursuant hereto and all certificates and instruments delivered
pursuant hereto and thereto) constitutes the entire agreement of the parties
with respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements, representations, understandings, negotiations and
discussions between the parties or their Affiliates, whether oral or written,
with respect to the subject matter hereof, including, without limitation, the
letter dated April 4, 2000 from the Purchaser to the Company, together with the
letter in response dated April 4, 2000 from the Company to the Purchaser, and
the letter agreement, dated March 28, 2000, entered into by the Company with
Ahold USA, Inc.
SECTION 9.6. Modifications and Amendments. No amendment, modification or
termination of this Agreement shall be binding upon any other party unless
executed in writing by the parties hereto intending to be bound thereby.
SECTION 9.7. Waivers and Extensions. Any party to this Agreement may waive
any right, breach or default which such party has the right to waive, provided
that such waiver will not be effective against the waiving party unless it is in
writing, is signed by such party, and specifically refers to this Agreement.
Waivers may be made in advance or after the right waived has arisen or the
breach or default waived has occurred. Any waiver may be conditional. No waiver
of any breach of any agreement or provision herein contained shall be deemed a
waiver of any preceding or succeeding breach thereof nor of any other agreement
or provision herein contained. No waiver or extension of time for performance of
any obligations or acts shall be deemed a waiver or extension of the time for
performance of any other obligations or acts.
SECTION 9.8. Titles and Headings; Interpretation. Titles and headings of
sections of this Agreement are for convenience only and shall not affect the
construction of any provision of this Agreement. Where any representation or
warranty contained in this Agreement is expressly qualified by reference to the
best knowledge of the Company, the Company confirms that it has made due and
diligent inquiry as to the matters that are the subject of such representations
and warranties.
SECTION 9.9. Exhibits and Schedules. Each of the annexes, exhibits and
schedules referred to herein and attached hereto is an integral part of this
Agreement and is incorporated herein by reference.
SECTION 9.10. Expenses; Brokers. The Company shall pay or cause to be paid,
whether or not any Closing occurs hereunder, all reasonable out-of-pocket fees
and expenses incurred by the Purchaser and its respective Affiliates, in
connection with the transactions contemplated by this Agreement, the other
Documents and all matters related thereto (including, without limitation, HSR
Act filing fees, and reasonable fees and disbursements of counsel and
consultants). Each of the parties represents to the others that neither it nor
any of its Affiliates has used a broker or other intermediary, in connection
with the transactions contemplated by this Agreement for whose fees or expenses
any other party will be liable and respectively agrees to indemnify and hold the
others harmless from and against any and all claims, liabilities or obligations
with respect to any such fees or expenses asserted by any person on the basis of
any act or statement alleged to have been made by such party or any of its
Affiliates.
SECTION 9.11. Press Releases and Public Announcements. All press releases
and similar public announcements relating to the transactions contemplated by
the Documents shall be made only if mutually agreed upon by the Company and the
Purchaser, except to the extent that such disclosure is, in the opinion of
counsel, required by law or by stock exchange regulation; provided that any such
required disclosure shall only be made by one party, to the extent consistent
with law, after consultation with the other party.
SECTION 9.12. Assignment; No Third Party Beneficiaries. This Agreement and
the rights, duties and obligations hereunder may not be assigned or delegated by
either the Company or the Purchaser without the prior written consent of the
other; provided that the Purchaser may assign or delegate its rights, duties and
obligations hereunder to a Permitted Transferee, provided, however, to the
extent rights in this Agreement are subject to the Purchaser owning a minimum
amount of capital stock of the Company, the Permitted Transferee will not be
entitled to exercise such rights unless it owns such minimum amount of capital
stock. Except as provided in the preceding sentence, any assignment or
delegation of rights, duties or obligations hereunder made without the prior
written consent of the other party hereto shall be void and of no effect. This
Agreement and the provisions hereof shall be binding upon and shall inure to the
benefit of each of the parties and their respective successors and permitted
assigns. This Agreement is not intended to confer any rights or benefits on any
persons that are not party hereto other than as expressly set forth in Section
9.1.
SECTION 9.13. Severability. This Agreement shall be deemed severable, and
the invalidity or unenforceability of any term or provision hereof shall not
affect the validity or enforceability of this Agreement or of any other term or
provision hereof. Furthermore, in lieu of any such invalid or unenforceable term
or provision, the parties hereto intend that there shall be added as a part of
this Agreement a provision as similar in terms to such invalid or unenforceable
provision as may be possible and be valid and enforceable.
SECTION 9.14. Counterparts; Facsimile. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original, and all of
which taken together shall constitute one and the same instrument. All documents
and closing deliveries for the transactions contemplated by this Agreement and
the other Documents may be delivered by a party at the Closing via facsimile;
provided, that, the originally executed signature pages and original documents
are delivered to the appropriate parties within two (2) Business Days following
the Closing.
SECTION 9.15. Further Assurances. Each party hereto, upon the request of
any other party hereto, shall do all such further acts and execute, acknowledge
and deliver all such further instruments and documents as may be necessary or
desirable to carry out the transactions contemplated by this Agreement,
including, in the case of the Company, such acts, instruments and documents as
may be necessary or desirable to convey and transfer to the Purchaser the Shares
to be purchased by it hereunder.
SECTION 9.16. Remedies Cumulative. The remedies provided herein shall be
cumulative and shall not preclude the assertion by any party hereto of any other
rights or the seeking of any remedies against the other party hereto.
* * *
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
PEAPOD, INC.
a Delaware corporation
By: ______________________________
Name: ______________________________
Title: ______________________________
<PAGE>
KONINKLIJKE AHOLD N.V.
a Netherlands corporation
By: ______________________________
Name: ______________________________
Title: ______________________________
EX-10.4
- - --------------------------------------------------------------------------------
CREDIT AGREEMENT
among
PEAPOD, INC.
and
KONINKLIJKE AHOLD NV
____________________________________
Dated as of April 14, 2000
____________________________________
$20,000,000
- - --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. Amount and Terms of Credit.........................................1
1.01 Commitment...................................................1
1.02 Notice of Borrowing..........................................1
1.03 Conversions..................................................2
1.04 Interest.....................................................2
1.05 Interest Periods.............................................3
SECTION 2. Commitment.........................................................4
2.01 [Reserved]......................................................4
2.02 Voluntary Termination or Reduction of Unutilized Total
Commitment.....................................................4
2.03 Mandatory Prepayments and Commitment Reductions..............4
SECTION 3. Payments...........................................................5
3.01 Voluntary Prepayments...........................................5
3.02 Method and Place of Payment.....................................5
3.03 Net Payments....................................................5
SECTION 4A. Conditions Precedent to Initial Loans.............................7
4A.01 Execution of Agreement.........................................7
4A.02 Fees. .........................................................7
4A.03 Officer's Certificate..........................................7
4A.04 Opinions of Counsel............................................7
4A.05 Adverse Change, etc............................................7
4A.06 Litigation.....................................................7
4A.07 Approvals......................................................7
4A.08 Transaction Documents..........................................8
4A.09 Previous Bridge Loan; Security Documents.......................8
4A.10 Security Documents.............................................8
4A.11 Warrants.......................................................9
4A.12 Split Pea Software Liquidation.................................9
SECTION 4B. Conditions Precedent to All Loans.................................9
4B.01 No Default; Representations and Warranties.....................9
4B.02 Notice of Borrowing............................................9
4B.03 Restrictions on Loans..........................................9
4B.04 Security Documents.............................................10
4B.05 Second Opinion of Counsel......................................10
SECTION 5. Representations, Warranties and Agreements........................10
5.01 Borrower Status................................................10
5.02 Power and Authority............................................10
5.03 No Violation...................................................11
5.04 Litigation.....................................................11
5.05 Use of Proceeds; Margin Regulations............................11
5.06 Approvals......................................................11
5.07 Investment Company Act.........................................11
5.08 Public Utility Holding Company Act.............................12
5.09 True and Complete Disclosure...................................12
5.10 Financial Condition; Financial Statements; Projections, etc....12
5.11 Security Interests.............................................13
5.12 Compliance with Statutes, etc..................................13
5.13 Tax Returns and Payments.......................................13
5.14 Subsidiaries...................................................13
5.15 Representations and Warranties in Transaction Documents........14
5.16 Patents, etc...................................................14
SECTION 6. Affirmative Covenants.............................................14
6.01 Information Covenants..........................................14
6.02 Books, Records and Inspections.................................16
6.03 Payment of Taxes...............................................16
6.04 Existence; Franchises..........................................16
6.05 Compliance with Statutes, etc..................................16
6.06 Good Repair....................................................17
6.07 End of Fiscal Years; Fiscal Quarters...........................17
6.08 Use of Proceeds................................................17
6.09 Corporate Formalities..........................................17
6.10 Compliance with Environmental Laws.............................17
6.11 Performance of Obligations.....................................18
SECTION 7. Negative Covenants................................................18
7.01 Business.......................................................18
7.02 Consolidation, Merger, Sale or Purchase of Assets, etc.........18
7.03 Liens..........................................................18
7.04 Indebtedness...................................................20
7.05 Capital Expenditures...........................................20
7.06 Advances, Investments and Loans................................20
7.07 Dividends, etc.................................................20
7.08 Transactions with Affiliates...................................21
7.09 Prohibition on Creation of Subsidiaries........................21
SECTION 8. Events of Default.................................................21
8.01 Payments.......................................................21
8.02 Representations, etc...........................................21
8.03 Covenants......................................................21
8.04 Default Under Other Agreements.................................21
8.05 Bankruptcy, etc................................................22
8.06 Security Documents.............................................22
8.07 Judgments......................................................22
8.08 Change of Control..............................................22
8.09 Transaction Documents..........................................22
SECTION 9. Definitions.......................................................23
SECTION 10. Miscellaneous....................................................30
10.01 Payment of Expenses, etc......................................30
10.02 Right of Setoff...............................................32
10.03 Notices.......................................................32
10.04 Assignments...................................................32
10.05 No Waiver; Remedies Cumulative................................32
10.06 Calculations; Computations....................................32
10.07 GOVERNING LAW; SUBMISSION TO JURISDICTION;
VENUE; WAIVER OF JURY TRIAL; WAIVER OF CERTAIN CLAIMS........33
10.08 Counterparts..................................................34
10.09 Effectiveness.................................................34
10.10 Headings Descriptive..........................................34
10.11 Amendment or Waiver...........................................34
10.12 Survival......................................................34
<PAGE>
SCHEDULE I Existing Liens
SCHEDULE 5.04 Litigation
SCHEDULE 5.10(b) Material Adverse Changes since December 31, 1999
EXHIBIT A Form of Opinion of Sidley & Austin
EXHIBIT B Form of Amended and Restated Collateral Assignment of
Intellectual Property
EXHIBIT C Form of Amended and Restated Security Agreement
<PAGE>
CREDIT AGREEMENT, dated as of April 14, 2000, among PEAPOD, INC., a
Delaware corporation (the "Borrower") and Koninklijke Ahold NV (the "Lender").
Unless otherwise defined herein, all capitalized terms used herein and defined
in Section 9 are used herein as so defined.
W I T N E S S E T H :
WHEREAS, subject to and upon the terms and conditions set forth herein, the
Lender is willing to make available to the Borrower the credit facilities
provided for herein;
NOW, THEREFORE, IT IS AGREED:
SECTION 1. Amount and Terms of Credit.
1.01 Commitment. (a) Subject to and upon the terms and conditions set forth
herein, the Lender agrees to make a revolving loan or revolving loans (each such
term loan a "Loan" and together with any revolving loans made pursuant to clause
(i) of this Section 1.01 collectively, the "Loans") to the Borrower, which Loans
(i) shall be incurred by the Borrower pursuant to one or more drawings, at any
time and from time to time during the period commencing on the Initial Borrowing
Date and ending on the Maturity Date, (ii) shall, unless the Lender is unable to
determine the Eurodollar Rate, at the option of the Borrower, be incurred and
maintained as and/or converted into Base Rate Loans or Eurodollar Loans, (iii)
may be repaid and reborrowed in accordance with the provisions hereof and (iv)
shall not exceed the Commitment in aggregate principal amount at any one time
outstanding.
(b) The Borrower may not (i) incur Loans in excess of $3,000,000 (exclusive
of Loans made to repay the Term Note or other obligations owing to the Lender or
its Affiliates) in principal amount in any calendar month (or such greater
amount as the Lender and the Borrower shall agree), (ii) incur Loans more than
four times in any calendar month and (iii) incur Loans in excess of the amount
of the budgeted cash flow requirements of the Borrower for its operations for
the two week period following the Borrowing thereof, as set forth in a budget
provided by the Borrower to the Lender and reasonably acceptable to the Lender;
provided, however, it being understood that the Lender shall not object to the
amount of the Borrowing request on the Second Borrowing Date to the extent such
request is for an amount not to exceed $1,500,000.
1.02 Notice of Borrowing. (a) Whenever the Borrower desires to incur Loans,
the Borrower shall give the Lender at its Notice Office, prior to 12:00 Noon
(New York time), at least three Business Days' (one Business Day's in the case
of a Borrowing of Base Rate Loans) prior written notice (or telephonic notice
promptly confirmed in writing) of each Borrowing of Loans to be made hereunder.
Each such notice shall specify (i) the aggregate principal amount of the Loans
to be made pursuant to such Borrowing, (ii) the date of such Borrowing (which
shall be a Business Day), (iii) whether the respective Borrowing shall consist
of Base Rate Loans or (to the extent permitted) Eurodollar Loans and, if
Eurodollar Loans, the Interest Period to be initially applicable thereto and
(iv) the proposed use of the proceeds of such Loans. The Notice of Borrowing
will certify that the use of the proceeds of the Loan, and the timing of the use
thereof, are in accordance with the cash flow budget for the following two weeks
provided by the Borrower to the Lender.
(b) The proceeds of the initial Loans hereunder shall be applied first (i)
to repay all principal, accrued interest and the amounts owing under or
evidenced by the Term Note or (ii) for the acquisition by the Lender of the Term
Note (and in the case of such acquisition, the Term Note shall be deemed
amended, restated and superseded hereby and the amount paid by the Lender to
acquire the Term Note shall constitute a Loan hereunder). The proceeds of the
Loans referred to in this Section 1.02(b) shall be remitted by the Lender
directly to the holder of the Term Note and the Borrower hereby directs such
disposition of such proceeds.
(c) Subject to the terms and conditions of this Agreement and except as
otherwise provided in Section 1.02(b) and elsewhere herein, the Lender shall
make the proceeds of each requested Loan (other than Loans to repay obligations
owing to the Lender or its Affiliates, which may be applied directly to such
obligations) available to the Borrower by 2:00 p.m. (New York time) on the
requested date of such borrowing in immediately available funds to the
Borrower's account at the Northern Trust Company, Chicago, Illinois pursuant to
the following wire transfer instructions: ABA #071000152; For Credit to 65781;
FBO: Peapod, Inc..
1.03 Conversions. The Borrower shall have the option, unless the Lender is
unable to determine the Eurodollar Rate, to convert on any Business Day
occurring on or after the Initial Borrowing Date (but in no event may there be
more than one conversion in any one month) all of the outstanding principal
amount of Loans made pursuant to one or more Borrowings into a Borrowing or
Borrowings of another Type of Loan. In no event may less than all of the Base
Rate Loans be converted to Eurodollar Loans.
1.04 Interest. (a) The unpaid principal amount of each Base Rate Loan shall
bear interest from the date of the Borrowing thereof until the earlier of (i)
the maturity (whether by acceleration or otherwise) of such Base Rate Loan and
(ii) the conversion of such Base Rate Loan to a Eurodollar Loan pursuant to
Section 1.03, at a rate per annum which shall at all times be the Applicable
Base Rate Margin plus the Base Rate in effect from time to time.
(b) The unpaid principal amount of each Eurodollar Loan shall bear interest
for each interest period thereof from the date of the Borrowing until the
earlier of (i) maturity (whether by acceleration or otherwise) of such
Eurodollar Loan and (ii) the conversion of such Eurodollar Loan to a Base Rate
Loan at a rate per annum which shall at all times be the Applicable Eurodollar
Margin plus the relevant Eurodollar Rate.
(c) All overdue principal and, to the extent permitted by law, overdue
interest in respect of each Loan and any other overdue amount payable hereunder
shall, in each case, bear interest at a rate per annum equal to the Base Rate in
effect from time to time plus the sum of (i) 2% and (ii) the Applicable Base
Rate Margin, provided that no Loan shall bear interest after maturity (whether
by acceleration or otherwise) at a rate per annum less than 2% plus the rate of
interest applicable thereto at maturity. Interest which accrues under this
Section 1.04(c) shall be payable on demand.
(d) Interest shall accrue from and including the date of any Borrowing to,
but excluding the date of, any repayment thereof and shall be payable monthly in
arrears on the last Business Day of each month and on any repayment, prepayment
or conversion (on the amount repaid, prepaid or converted) and at maturity
(whether by acceleration or otherwise) and, after such maturity, on demand.
(e) All computations of interest hereunder shall be made in accordance with
Section 10.06(b).
(f) The Lender's determination of any interest rate shall, absent manifest
error, be final and conclusive and binding on both parties.
1.05 Interest Periods. (a) At the time the Borrower gives a notice of
borrowing or notice of conversion (which must be given three Business Days prior
to the requested conversion) in respect of the making of, or conversion into, a
Borrowing of Eurodollar Loans the Borrower shall have the right to elect, by
giving the Lender written notice thereof (or telephonic notice promptly
confirmed in writing), the Interest Period applicable to such Borrowing, which
Interest Period shall, at the option of the Borrower, be a one or three month
period. Notwithstanding anything to the contrary contained above:
(i) the initial Interest Period for any Borrowing of Eurodollar Loans
shall commence on the date of such Borrowing (including the date of any
conversion from a Borrowing of Base Rate Loans) and each Interest Period
occurring thereafter in respect of such Borrowing shall commence on the day
on which the next preceding Interest Period expires;
(ii) if any Interest Period begins on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period, such Interest Period shall end on the last Business Day of
such calendar month;
(iii) if any Interest Period would otherwise expire on a day which is
not a Business Day, such Interest Period shall expire on the next
succeeding Business Day, provided that if any Interest Period would
otherwise expire on a day which is not a Business Day but is a day of the
month after which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding Business Day; and
(iv) no Interest Period shall extend beyond the Maturity Date.
(b) If, prior to the third Business Day prior to the expiration of any
Interest Period, the Borrower has failed to elect a new Interest Period to be
applicable to the respective Borrowing of Eurodollar Loans as provided above,
the Borrower shall be deemed to have elected to convert such Borrowing into a
Borrowing of Base Rate Loans effective as of the expiration date of such current
Interest Period.
SECTION 2. Commitment.
2.01 [Reserved]
2.02 Voluntary Termination or Reduction of Unutilized Total Commitment.
Upon at least two Business Days' prior written notice (or telephone notice
promptly confirmed in writing) to the Lender at its Notice Office, the Borrower
shall have the right, at any time or from time to time, without premium or
penalty, to terminate or partially reduce the unutilized Commitment in whole or
in part.
2.03 Mandatory Prepayments and Commitment Reductions.
(A) Commitment Reductions:
(a) On the date of receipt thereof by the Borrower of Cash Proceeds
from any Asset Sale (other than Asset Sales not exceeding $250,000 in the
aggregate during the term of this Agreement), the Commitment shall be
permanently reduced by an amount equal to 100% of the Net Cash Proceeds
from such Asset Sale.
(b) On the date of the receipt thereof by the Borrower, the Commitment
shall be permanently reduced by an amount equal to 100% of the proceeds
(net of underwriting discounts, commissions and other reasonable costs
associated therewith) of the incurrence of any Indebtedness by the
Borrower, other than Indebtedness permitted by Section 7.04 as in effect on
the date hereof.
(c) On the date of the receipt thereof by the Borrower, the Commitment
shall be permanently reduced by an amount equal to 100% of the cash
proceeds (net of underwriting discounts, commissions and other reasonable
costs associated therewith) of any sale or issuance of its equity (other
than the Preferred Stock and proceeds from the exercise of options not to
exceed $250,000 during any fiscal year) and 100% of any amount of cash
received by the Borrower in connection with any contribution to its
capital.
(d) On the date of receipt thereof by the Borrower of cash proceeds
from any Recovery Event, the Commitment shall be permanently reduced by an
amount equal to 100% of the proceeds of such Recovery Event (after
deducting reasonable expenses in realizing such proceeds), provided that if
the Borrower intends to use such insurance proceeds or condemnation award
to replace or repair the affected property, the Borrower may use such
proceeds or awards (not exceeding $500,000 in aggregate amount during the
term of this Agreement) to purchase such replacement property or make such
repairs within 30 days after such Recovery Event and shall deliver to the
Lender written evidence of the use of such proceeds or award for such
purpose.
(e) The Commitment shall be terminated in full on the earliest to
occur of: (i) the Maturity Date, (ii) if the shareholders of the Borrower
disapprove of the sale of shares pursuant to the Securities Purchase
Agreement, 45 days after such disapproval, (iii) the fourth monthly
anniversary of the Effective Date, if the shareholders of the Borrower
fail, within four months after the Effective Date, to approve or disapprove
the sale of securities pursuant to the Securities Purchase Agreement, or
(iv) the fourth monthly anniversary of the Effective Date, if the purchase
of all securities pursuant to the Securities Purchase Agreement does not
occur on or before such fourth monthly anniversary (other than by reason of
breach by the Purchaser (as defined in the Securities Purchase Agreement)
of its obligation under the Securities Purchase Agreement).
(B) Repayments and Prepayments:
(a) If on any date the aggregate outstanding principal amount of Loans
exceeds the Commitment as then in effect, the Borrower shall repay on such
date the principal of Loans in an aggregate amount equal to such excess.
(b) Notwithstanding anything to the contrary contained elsewhere in
this Agreement all then outstanding Loans shall be repaid in full on the
Maturity Date.
(c) The outstanding Loans shall be prepaid with the net proceeds
received by the Borrower from the issuance of the Preferred Stock, but such
prepayment shall not reduce the amount of the Commitment.
SECTION 3. Payments.
3.01 Voluntary Prepayments. The Borrower shall have the right to prepay
Loans in whole or in part, without premium or penalty, from time to time on the
following terms and conditions: the Borrower shall give the Lender prior to
12:00 noon (New York time) at the Notice Office at least one Business Day's
prior written notice (or telephonic notice promptly confirmed in writing) of its
intent to prepay the Loans and the amount of such prepayment.
3.02 Method and Place of Payment. Except as otherwise specifically provided
herein, all payments under this Agreement shall be made to the Lender not later
than 12:00 P.M. (New York time) on the date when due and shall be made in
immediately available funds and in lawful money of the United States of America
at the Payment Office. Any payments under this Agreement which are made later
than 12:00 P.M. (New York time) shall be deemed to have been made on the next
succeeding Business Day. Whenever any payment to be made hereunder shall be
stated to be due on a day which is not a Business Day, the due date thereof
shall be extended to the next succeeding Business Day and, with respect to
payments of principal, interest shall be payable during such extension at the
applicable rate in effect immediately prior to such extension.
3.03 Net Payments. (a) All payments made by the Borrower will be made
without setoff, counterclaim or other defense. All such payments will be made
free and clear of, and without deduction or withholding for, any present or
future taxes, levies, imposts, duties, fees, assessments or other charges of
whatever nature now or hereafter imposed by any jurisdiction or by any political
subdivision or taxing authority thereof or therein with respect to such payments
(but excluding, except as provided in the second succeeding sentence, any tax
imposed on or measured by the net income or net profits of the Lender pursuant
to the laws of the jurisdiction in which it is organized or the jurisdiction in
which the principal office or applicable lending office of the Lender is located
or any subdivision thereof or therein) and all interest, penalties or similar
liabilities with respect to such non-excluded taxes, levies, imposts, duties,
fees, assessments or other charges (all such non-excluded taxes, levies,
imposts, duties, fees, assessments or other charges being referred to
collectively as "Taxes"). If any Taxes are so levied or imposed, the Borrower
agrees to pay the full amount of such Taxes, and such additional amounts as may
be necessary so that every payment of all amounts due under this Agreement,
after withholding or deduction for or on account of any Taxes, will not be less
than the amount provided for herein. If any amounts are payable in respect of
Taxes pursuant to the preceding sentence, the Borrower agrees to reimburse the
Lender, upon the written request of the Lender, for taxes imposed on or measured
by the net income or profits of the Lender pursuant to the laws of the
jurisdiction in which the Lender is organized or in which the principal office
or applicable lending office of the Lender is located or under the laws of any
political subdivision or taxing authority of any such jurisdiction in which the
Lender is organized or in which the principal office or applicable lending
office of the Lender is located and for any withholding of taxes as the Lender
shall determine in good faith are payable by, or withheld from, the Lender, in
respect of such amounts so paid to or on behalf of the Lender pursuant to the
preceding sentence and in respect of any amounts paid to or on behalf of the
Lender pursuant to this sentence. The Borrower will furnish to the Lender within
45 days after the date the payment of any Taxes is due pursuant to applicable
law certified copies of tax receipts evidencing such payment by the Borrower or,
if the relevant taxing authority does not issue such receipts, such other
documents of payment as may be reasonably satisfactory to the Lender. The
Borrower agrees to indemnify, defend and hold harmless the Lender, and reimburse
the Lender upon its written request, for the amount of any Taxes so levied or
imposed and paid by the Lender and all costs and expenses incurred in connection
with same including, without limitation, attorney's fees and interest and
penalties on the Taxes.
(b) Notwithstanding Section 3.03(a), the Borrower shall not be required to
make any payments to the Lender pursuant to Section 3.03(a) unless the Lender
complies with the following certification requirements:
(i) the Lender shall, no later than the Initial Borrowing Date,
deliver to the Borrower two accurate and complete signed originals of
Internal Revenue Service Form W-8ECI or any successor thereto
(collectively, "Form W-8ECI"), or two accurate and complete signed
originals of Internal Revenue Service Form W-8BEN or any successor thereto
(collectively, "Form W-8BEN"), as appropriate, in each case indicating that
the Lender is on the date of delivery thereof entitled to receive all
payments under this Agreement free from withholding of United States
federal income tax;
(ii) the Lender shall deliver to the Borrower two further Form W-8ECIs
or Form W-8BENs, as appropriate, on or before the date that any such forms
expire or become obsolete and after the occurrence of any event requiring a
change in the most recent form previously delivered by it to the Borrower
(other than a change in law that renders such forms inapplicable or which
would prevent the Lender from duly completing and delivering any such form)
unless the Lender is precluded from delivering such forms; and
(iii) the Lender shall, to the extent it is legally entitled to do so
and the same would not be disadvantageous to it, promptly upon the
Borrower's reasonable request to that effect, and at the Borrower's cost
and expense, deliver to the Borrower such other forms or similar
documentation as may be required from time to time by any applicable law,
treaty, rule or regulation in order to establish the Lender's exemption
from withholding on payments under this Agreement.
SECTION 4A. Conditions Precedent to Initial Loans. The obligation of the
Lender to make Loans hereunder on the Initial Borrowing Date is subject, at the
time of the making of such Loans, to the satisfaction of each of the following
conditions:
4A.01 Execution of Agreement. On or prior to the Initial Borrowing Date,
this Agreement shall have become effective as provided in Section 10.09.
4A.02 Fees. On the Initial Borrowing Date, the Borrower shall have paid to
the Lender all Fees and expenses (including, without limitation, reasonable fees
and expenses of counsel) agreed upon by such parties to be paid on or prior to
such date.
4A.03 Officer's Certificate. On the Initial Borrowing Date, the Lender
shall have received a certificate dated such date signed by the President or any
Vice President of the Borrower stating that all of the applicable conditions set
forth in Sections 4A.05, 4A.06, 4A.07, and 4A.08 exist or have been satisfied as
of such date.
4A.04 Opinions of Counsel. On the Initial Borrowing Date, the Lender shall
have received an opinion, addressed to the Lender and dated the Initial
Borrowing Date, from Sidley & Austin, special counsel to the Borrower, covering
the matters contained in Exhibit A, which opinion shall be in form and substance
satisfactory to the Lender.
4A.05 Adverse Change, etc. On the Initial Borrowing Date, nothing shall
have occurred (and the Lender shall have not become aware of any facts or
conditions not previously known) which the Lender shall determine (a) has, or is
reasonably likely to have, a material adverse effect on the rights or remedies
of the Lender, or on the ability of the Lender to perform its obligations to the
Borrower, or (b) has, or is reasonably likely to have, a Material Adverse
Effect.
4A.06 Litigation. On the Initial Borrowing Date, there shall be no actions,
suits or proceedings pending or threatened (a) with respect to this Agreement or
any other Document or the transactions contemplated hereby or thereby or (b)
which the Lender shall determine could reasonably be expected to (i) have a
Material Adverse Effect or (ii) have a material adverse effect on the rights or
remedies of the Lender hereunder or under any other Credit Document.
4A.07 Approvals. On or prior to the Initial Borrowing Date, all material
and necessary governmental and third party approvals intended to be obtained on
or prior to the Initial Borrowing Date in connection with the transactions
contemplated by this Agreement and the other Documents and otherwise referred to
herein or therein shall have been obtained and remain in effect, and all
applicable waiting periods shall have expired without any action being taken by
any competent authority which restrains or prevents such transactions or
imposes, in the reasonable judgment of the Lender, materially adverse conditions
upon the consummation of such transactions. Additionally, there shall not exist
any judgment, order, injunction or other restraint issued or filed or a hearing
seeking injunctive relief or other restraint pending or notified prohibiting or
imposing materially adverse conditions upon, or materially delaying, or making
economically unfeasible, the consummation of the transactions contemplated by
this Agreement and the other Documents or otherwise referred to herein or
therein.
4A.08 Transaction Documents. On or prior to the Initial Borrowing Date, the
Borrower and an Affiliate of the Lender shall have executed the Securities
Purchase Agreement, and all of the Transaction Documents required by the terms
of the Securities Purchase Agreement to then be executed and the Borrower shall
be in compliance with all of its obligations thereunder.
4A.09 Previous Bridge Loan; Security Documents. On or prior to the Initial
Borrowing Date, all outstanding amounts owing under the Term Note shall, as
provided in Section 1.02(b), either be (x) repaid in full, and all security
interests and liens relating thereto terminated or assigned to the Lender or (y)
purchased or otherwise obtained by the Lender from such Affiliate (in which case
the Term Note shall be deemed amended and restated by this Agreement, and be
superseded hereby). On the Initial Borrowing Date, the Borrower shall have no
Indebtedness or preferred stock outstanding other than as permitted by Section
7.04.
4A.10 Security Documents. (a) On the Initial Borrowing Date, the Borrower
shall have duly authorized, executed and delivered an Amended and Restated
Security Agreement in the form of Exhibit C (as modified, supplemented,
extended, renewed, replaced or amended from time to time in accordance with the
terms hereof and thereof, the "Security Agreement") covering all of the
Borrower's collateral described therein, in each case together with:
(i) executed copies of financing statements (Form UCC-1) in
appropriate form for filing under the UCC of each jurisdiction as may be
necessary to perfect the security interests purported to be created by the
Security Agreement;
(ii) certified copies of Requests for Information or Copies (Form
UCC-11), or equivalent reports, each of recent date listing all effective
financing statements that name the Borrower as debtor and that are filed in
the jurisdictions referred to in clause (i) above, together with copies of
such other financing statements that name the Borrower as debtor (none of
which shall cover the collateral described in the Security Agreement);
(iii) evidence of the completion of all other recordings and filings
of, or with respect to, the Security Agreement as may be necessary or, in
the opinion of the Lender, desirable to perfect the security interests
intended to be created by the Security Agreement (including, without
limitation, filings and registrations with respect to copyrights, patents
and trademarks); and
(iv) evidence that all other actions necessary or, in the opinion of
the Lender, desirable to perfect and protect the security interests
purported to be created by the Security Agreement have been taken;
(b) On the Initial Borrowing Date, the Borrower shall have duly authorized,
executed and delivered a Collateral Assignment of Intellectual Property in the
form of Exhibit B (as modified, supplemented, extended, renewed, replaced or
amended from time to time in accordance with the terms hereof and thereof, the
"Intellectual Property Assignment") covering all of the Borrower's intellectual
property collateral described therein, in each case together with:
(i) evidence of the completion of all recordings and filings of, or
with respect to, the Intellectual Property Assignment as may be necessary
or, in the opinion of the Lender, desirable to perfect the security
interests intended to be created by the Intellectual Property Assignment
(including, without limitation, filings and registrations with respect to
copyrights, patents and trademarks); and
(ii) evidence that all other actions necessary or, in the opinion of
the Lender, desirable to perfect and protect the security interests
purported to be created by the Intellectual Property Assignment have been
taken.
4A.11 Warrants. On or prior to the Initial Borrowing Date, the Lender shall
have received warrants exerciseable into 3,566,667 shares of common stock (at an
exercise price of $3.00 per share and otherwise in the form of Exhibit I to the
Securities Purchase Agreement).
4A.12 Split Pea Software Liquidation. On or before the second Borrowing
Date, Split Pea Software, Inc. shall have been liquidated on terms and
conditions acceptable to the Lender.
SECTION 4B. Conditions Precedent to All Loans. The obligation of the Lender
to make Loans (including Loans on the Initial Borrowing Date) is subject, at the
time of the making of each such Loan, to the satisfaction of the following
conditions:
4B.01 No Default; Representations and Warranties. At the time of each such
Loan and also after giving effect to the incurrence of Loans on such date, (i)
there shall exist no Default or Event of Default, and (ii) all representations
and warranties contained herein and in the other Credit Documents in effect at
such time shall be true and correct in all material respects with the same
effect as though such representations and warranties had been made on the date
of such Loan (it being understood and agreed that any representation or warranty
which by its terms is made of a specified date shall be true and correct in all
material respects as of such specified date).
4B.02 Notice of Borrowing. Prior to the making of each Loan, the Lender
shall have received a notice of borrowing meeting the requirements of Section
1.02.
4B.03 Restrictions on Loans. The Borrower shall be in compliance with the
restrictions on the making of Loans described in Section 1.01(b).
4B.04 Security Documents. The Security Documents shall be in full force and
effect.
4B.05 Second Opinion of Counsel. On the Second Borrowing Date, the Lender
shall have received an opinion, addressed to the Lender and dated the Second
Borrowing Date, from Sidley & Austin, special counsel to the Borrower, covering
the creation and perfection of the security interests under the Security
Documents, which opinion shall be in form and substance satisfactory to the
Lender.
The acceptance of the proceeds of each Loan by the Borrower (occurring on
the Initial Borrowing Date and thereafter) shall constitute a representation and
warranty by the Borrower to the Lender that all the conditions specified in
Section 4A (with respect to the Loans on the Initial Borrowing Date) and in this
Section 4B (with respect to Loans on and after the Initial Borrowing Date) and
applicable to such Loans exist as of that time. All of the certificates, legal
opinions and other documents and papers referred to in Sections 4A and in this
Section 4B, unless otherwise specified, shall be delivered to the Lender at its
Notice Office and shall be in form and substance reasonably satisfactory to the
Lender.
SECTION 5. Representations, Warranties and Agreements. In order to induce
the Lender to enter into this Agreement and to make the Loans provided for
herein, the Borrower makes the following representations and warranties to, and
agreements with, the Lender, all of which shall survive the execution and
delivery of this Agreement and the making of the Loans (with the occurrence of
the Effective Date and the incurrence by the Borrower of the Loans hereunder on
the Initial Borrowing Date being deemed to constitute a representation and
warranty that the matters specified in this Section 5 are true and correct in
all material respects on and as of each such date of such Loan unless such
representation and warranty expressly indicates that it is being made as of any
specific date, in which case such representation and warranty shall be true and
correct in all material respects as of such specific date):
5.01 Borrower Status. The Borrower (i) is a duly organized and validly
existing corporation in good standing under the laws of the jurisdiction of its
organization or formation and has the power and authority to own its property
and assets and to transact the business in which it is engaged and (ii) has duly
qualified and is authorized to do business and is in good standing in all
jurisdictions where it is required to be so qualified and where the failure to
be so qualified which, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.
5.02 Power and Authority. The Borrower has the power and authority to
execute, deliver and carry out and perform the terms and provisions of the
Documents to which it is a party and has taken all necessary action to authorize
the execution, delivery and performance of the Documents to which it is a party.
The Borrower has duly executed and delivered each Document to which it is a
party and each such Document constitutes the legal, valid and binding obligation
of the Borrower enforceable in accordance with its terms, except to the extent
that the enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws generally affecting
creditors' rights and by equitable principles (regardless of whether enforcement
is sought in equity or at law).
5.03 No Violation. Neither the execution, delivery and performance by the
Borrower of the Documents to which it is a party nor compliance by it with the
terms and provisions thereof, nor the consummation of the transactions
contemplated therein, (i) will contravene any applicable provision of any law,
statute, rule, regulation, order, writ, injunction or decree of any court or
governmental instrumentality, (ii) will conflict or be inconsistent with, or
result in any breach of, any of the terms, covenants, conditions or provisions
of, or constitute a default under, or (other than pursuant to the Security
Documents) result in the creation or imposition of (or the obligation to create
or impose) any Lien upon any of the property or assets of the Borrower pursuant
to the terms of any indenture, mortgage, deed of trust, agreement or other
instrument to which the Borrower is a party or by which it or any of its
material property or assets are bound or to which it may be subject or (iii)
will violate any provision of the certificate of incorporation or by-laws (or
equivalent organizational documents) of the Borrower.
5.04 Litigation. Except as set forth in Schedule 5.04 hereto, in regards to
which there have been no material adverse developments since April 14, 2000,
there are no actions, suits or proceedings pending or, to the Borrower's
knowledge, threatened with respect to any Credit Document or with respect to the
Borrower that are reasonably likely to have a Material Adverse Effect or that
could reasonably be expected to have a Material Adverse Effect on the rights or
remedies of the Lender or on the ability of the Borrower to perform its
obligations to them hereunder, under the other Credit Documents to which it is,
or will be, a party. None of the litigation set forth in Schedule 5.04 could
reasonably be expected to have a Material Adverse Effect.
5.05 Use of Proceeds; Margin Regulations. (a) The proceeds of all Loans
shall be utilized (i) on the Initial Borrowing Date to effect the refinancing of
the bridge loan described in Section 4A.09 and (ii) after the Initial Borrowing
Date, for general corporate purposes.
(b) Neither the making of any Loan hereunder, nor the use of the proceeds
thereof, will be used to purchase or carry any Margin Stock or to extend credit
for the purpose of purchasing or carrying any Margin Stock. Neither the making
of any Loan nor the use of the proceeds thereof will violate or be inconsistent
with the provisions of Regulations T, U or X of the Board of Governors of the
Federal Reserve System.
5.06 Approvals. No order, consent, approval, license, authorization or
validation of, or filing, recording or registration with (except for filings
that have been obtained or made on or prior to the Initial Borrowing Date and
which remain in full force and effect on the Initial Borrowing Date), or
exemption by, any governmental or public body or authority, or any subdivision
thereof, is required to authorize, or is required in connection with, (i) the
execution, delivery and performance of any Credit Document or (ii) the legality,
validity, binding effect or enforceability of any such Credit Document.
5.07 Investment Company Act. The Borrower is not an "investment company" or
a company "controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended.
5.08 Public Utility Holding Company Act. The Borrower is not a "holding
company," or a "subsidiary company" of a "holding company," or an "affiliate" of
a "holding company" or of a "subsidiary company" of a "holding company," within
the meaning of the Public Utility Holding Company Act of 1935, as amended.
5.09 True and Complete Disclosure. All factual information (taken as a
whole) heretofore or contemporaneously furnished by or on behalf of the Borrower
in writing to the Lender for purposes of or in connection with this Agreement or
any transaction contemplated by the Documents is true and accurate in all
material respects on the date as of which such information is dated or certified
and not incomplete by omitting to state any material fact necessary to make such
information (taken as a whole) not misleading at such time in light of the
circumstances under which such information was provided. There is no fact known
to the Borrower or which would be reasonably likely to have a Material Adverse
Effect which has not been disclosed herein or in such other documents,
certificates and statements furnished to the Lender for use in connection with
the transactions contemplated hereby.
5.10 Financial Condition; Financial Statements; Projections, etc. (a) On
and as of the Initial Borrowing Date, on a pro forma basis after giving effect
to the incurrence of Loans and to all Indebtedness incurred, and to be incurred,
and Liens created, and to be created, by the Borrower in connection therewith,
(x) the sum of the assets, at a fair valuation, of the Borrower taken as a whole
will exceed its debts, (y) the Borrower will not have incurred or intended to,
or believe that they will, incur debts beyond their ability to pay such debts as
such debts mature and (z) the Borrower will not have unreasonably small capital
with which to conduct its business. For purposes of this Section 5.10(a), "debt"
means any liability on a claim, and "claim" means (i) right to payment whether
or not such a right is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured
or unsecured; or (ii) right to an equitable remedy for breach of performance if
such breach gives rise to a payment, whether or not such right to an equitable
remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed,
undisputed, secured or unsecured. The amount of contingent liabilities at any
time shall be computed as the amount that, in the light of all the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability.
(b) Except as set forth in Schedule 5.10(b), since December 31, 1999,
nothing has occurred that has had or could reasonably be expected to have a
Material Adverse Effect.
(c) On and as of the Initial Borrowing Date, the budgets, projections and
pro forma financial information delivered to the Lender prior to the Initial
Borrowing Date have been prepared in good faith and based on reasonable
assumptions, and there are no statements or conclusions in the budgets and
projections which are based upon or include information known to the Borrower to
be misleading in any material respect or which fail to take into account
material information known to the Borrower regarding the matters reported
therein. On the Initial Borrowing Date, the Borrower believes that the
Projections and pro forma financial information are reasonable, it being
recognized by the Lender, however, that projections as to future events are not
to be viewed as facts and that the actual results during the period or periods
covered by the Projections may differ from the projected results and that the
differences may be material.
(d) The budgets and projections delivered to the Lender after the Initial
Borrowing Date (including each budget submitted pursuant to Section 1 in
connection with a Borrowing) will be prepared in good faith and based on
reasonable assumptions, and there will be no statements or conclusions therein
which are based upon or include information then known to the Borrower to be
misleading in any material respect or which fail to take into account material
information then known to the Borrower regarding the matters reported therein.
(e) As of the Initial Borrowing Date (i) there were no liabilities or
obligations with respect to the Borrower of a nature (whether absolute, accrued,
contingent or otherwise and whether or not due) which, either individually or in
aggregate, could reasonably be expected to be material to the Borrower taken as
a whole, and (ii) the Borrower does not know of any basis for the assertion
against it of any liability or obligation of any nature whatsoever which, either
individually or in the aggregate, could reasonably be expected to be material to
the Borrower.
5.11 Security Interests. On and after the Initial Borrowing Date, each of
the Security Documents creates, as security for the Obligations purported to be
secured thereby, a valid and enforceable perfected security interest in and Lien
on all of the Collateral subject thereto, superior to and prior to the rights of
all third Persons and subject to no other Liens (except (x) to the extent
expressly set forth in the Security Documents and (y) that the Collateral may be
subject to the security interests evidenced by Permitted Liens).
5.12 Compliance with Statutes, etc. The Borrower is in compliance with all
applicable statutes, regulations and orders of, and all applicable restrictions
imposed by, all governmental bodies, domestic or foreign, in respect of the
conduct of its business and the ownership of its property, except such
noncompliances as could not, either individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect.
5.13 Tax Returns and Payments. The Borrower has filed all federal and state
income tax returns and all other material tax returns, domestic and foreign,
required to be filed by it and has paid all federal and state income taxes and
all other material taxes and assessments payable by it which have become due,
except for those contested in good faith and adequately disclosed and fully
provided for on the financial statements of the Borrower in accordance with
GAAP. The Borrower has at all times paid, or has provided adequate reserves (in
the good faith judgment of the management of the Borrower) for the payment of,
all federal, state and material local and foreign income taxes applicable for
all prior fiscal years and for the current fiscal year to date. There is no
material action, suit, proceeding, investigation, audit or claim now pending or,
to the knowledge of the Borrower threatened by any authority regarding any taxes
relating to the Borrower. As of the Initial Borrowing Date, the Borrower has not
entered into an agreement or waiver or been requested to enter into an agreement
or waiver extending any statute of limitations relating to the payment or
collection of taxes of the Borrower, or is aware of any circumstances that would
cause the taxable years or other taxable periods of the Borrower not to be
subject to the normally applicable statute of limitations.
5.14 Subsidiaries. Borrower has no Subsidiaries.
5.15 Representations and Warranties in Transaction Documents. Each of the
representations and warranties contained in the Transaction Documents is true
and correct (unless such representation and warranty shall be true and correct
as of a specific date, in which case such representation and warranty shall be
true and correct in all material respects as of such date).
5.16 Patents, etc. The Borrower possesses all material patents, trademarks,
service marks, trade names, copyrights and licenses, free from burdensome
restrictions, that are used for the operation of its business as presently
conducted.
SECTION 6. Affirmative Covenants. The Borrower hereby covenants and agrees
that as of the Effective Date and thereafter for so long as this Agreement is in
effect and until the Commitment has terminated and the Loans, together with
interest, Fees and all other monetary Obligations incurred hereunder, are paid
in full:
6.01 Information Covenants. The Borrower will furnish to the Lender:
(a) Annual Financial Statements. Within 90 days after the close of
each fiscal year of the Borrower, the consolidated balance sheet of the
Borrower, as at the end of such fiscal year and the related consolidated
statements of income and retained earnings and of cash flows for such
fiscal year, in each case setting forth comparative consolidated figures
for the preceding fiscal year, and in the case of the consolidated
financial statements, examined by one (1) of the "Big-5" independent
certified public accountants of recognized national standing whose opinion
shall not be qualified as to the scope of audit, together with a
certificate of such accounting firm stating that in the course of its
regular audit of the business of the Borrower, which audit was conducted in
accordance with generally accepted auditing standards, such accounting firm
has obtained no knowledge of any Default or Event of Default which has
occurred and is continuing or, if in the opinion of such accounting firm
such a Default or Event of Default has occurred and is continuing, a
statement as to the nature thereof.
(b) Quarterly Financial Statements. As soon as available and in any
event within 45 days after the close of each of the first three quarterly
accounting periods in each fiscal year of the Borrower, the consolidated
balance sheet of the Borrower, as at the end of such quarterly accounting
period and the related consolidated statements of income and retained
earnings and of cash flows for such quarterly accounting period and for the
elapsed portion of the fiscal year ended with the last day of such
quarterly accounting period, and where applicable, setting forth
comparative consolidated figures for the related periods in the prior
fiscal year, all of which shall be certified by the chief financial officer
or controller of the Borrower, subject to changes resulting from audit and
normal year-end audit adjustments.
(c) Monthly Reports. As soon as practicable, and in any event within
30 days after the end of each monthly accounting period of each fiscal year
of the Borrower (other than the last monthly accounting period in such
fiscal year), monthly reports in a form reasonably satisfactory to the
Lender, in conformity with the requirements of the Section 8.2 (a) of the
Securities Purchase Agreement.
(d) Budgets. No later than the end of each fiscal year of the Borrower
commencing after the date hereof, a cash flow budget by month of the
Borrower for the following fiscal year in reasonable detail satisfactory to
the Lender.
(e) Officer's Certificates. At the time of the delivery of the
financial statements provided for in Sections 6.01(a) (b) and (c), a
certificate of the chief financial officer of the Borrower to the effect
that no Default or Event of Default exists or, if any Default or Event of
Default does exist, specifying the nature and extent thereof, which
certificate, in the case of the certificate delivered pursuant to Sections
6.01(a) and (b), shall set forth the calculations required to establish
whether the Borrower was in compliance with the provisions of Section 7.05
as at the end of such fiscal quarter or year, as the case may be.
(f) Notice of Default or Litigation. Promptly, and in any event within
five Business Days after the Borrower obtains knowledge thereof, notice of
(x) the occurrence of any event which constitutes a Default or an Event of
Default, which notice shall specify the nature thereof, the period of
existence thereof and what action the Borrower proposes to take with
respect thereto or (y) the commencement of or any significant development
in any litigation or governmental proceeding pending against the Borrower
which is likely to have a Material Adverse Effect or is likely to have a
material adverse effect on the ability of the Borrower to perform its
obligations hereunder, under any other Credit Document or any Transaction
Document.
(g) Auditors' Reports. Promptly upon receipt thereof, a copy of each
final report or "management letter" submitted to the Borrower by its
independent accountants in connection with any annual, interim or special
audit made by it of the books of the Borrower.
(h) Other Reports and Filings. Promptly after the filing or delivery
thereof, copies of all financial information, proxy materials and reports,
if any, which the Borrower shall publicly file with the SEC.
(i) Environmental Matters. Promptly after any senior or executive
officer of the Borrower obtains knowledge thereof, notice of one or more of
the following environmental matters, unless such environmental matters
could not, individually or when aggregated with all other such
environmental matters, be reasonably expected to have a Material Adverse
Effect:
(i) any pending or threatened Environmental Claim against the
Borrower or any Real Property owned, leased or operated by the
Borrower;
(ii) any condition or occurrence on or arising from any Real
Property owned, leased or operated by the Borrower that (a) results in
noncompliance by the Borrower with any applicable Environmental Law or
(b) could reasonably be expected to form the basis of an Environmental
Claim against the Borrower or any such Real Property;
(iii) any condition or occurrence on any Real Property owned,
leased or operated by the Borrower that could reasonably be expected
to cause such Real Property to be subject to any restrictions on the
ownership, occupancy, use or transferability by the Borrower of such
Real Property under any Environmental Law; and
(iv) the taking of any removal or remedial action in response to
the actual or alleged presence of any Hazardous Material on any Real
Property owned, leased or operated by the Borrower as required by any
Environmental Law or any governmental or other administrative agency;
provided, that in any event the Borrower shall deliver to the Lender
all notices received by the Borrower from any government or
governmental agency under, or pursuant to, CERCLA which identify the
Borrower as potentially responsible parties for remediation costs or
which otherwise notify the Borrower of potential liability under
CERCLA. All such notices shall describe in reasonable detail the
nature of the claim, investigation, condition, occurrence or removal
or remedial action and the Borrower's response thereto.
(j) Other Information. From time to time, such other information or
documents (financial or otherwise) as the Lender may reasonably request.
6.02 Books, Records and Inspections. The Borrower will permit, upon
reasonable notice to the Borrower, officers and designated representatives of
the Lender to visit and inspect any of the properties or assets of the Borrower
in whomsoever's possession, and to examine the books of account of the Borrower
and discuss the affairs, finances and accounts of the Borrower with, and be
advised as to the same by, its and their officers and independent accountants,
all at such reasonable times and intervals and to such reasonable extent as the
Lender may desire.
6.03 Payment of Taxes. The Borrower will pay and discharge all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits, or upon any properties belonging to it, prior to the date on
which penalties attach thereto, and all lawful claims which, if unpaid, might
become a Lien not otherwise permitted pursuant to Section 7.03 or charge upon
any properties of the Borrower, provided that the Borrower shall not be required
to pay any such tax, assessment, charge, levy or claim which is being contested
in good faith and by proper proceedings if payment of same is not a condition
precedent to being able to contest same and, if not such a condition, if it has
maintained adequate reserves with respect thereto in accordance with GAAP.
6.04 Existence; Franchises. The Borrower will do or cause to be done, all
things necessary to preserve and keep in full force and effect its existence,
material rights, franchises, licenses, patents and authority, provided that any
transaction permitted by Section 7.02 or any failure which would not,
individually or in the aggregate, have a Material Adverse Effect will not
constitute a breach of this Section 6.04.
6.05 Compliance with Statutes, etc. The Borrower will comply in all
material respects with all applicable statutes (including, without limitation,
all applicable Environmental Laws), regulations and orders of, and all
applicable restrictions imposed by, all governmental bodies, domestic or
foreign, in respect of the conduct of its business and the ownership of its
property except for such non-compliance which could not reasonably be expected
to have a Material Adverse Effect or could not reasonably be expected to have a
material adverse effect on the ability of the Borrower to perform its
obligations under any Credit Document and/or Transaction Document to which it is
a party.
6.06 Good Repair. The Borrower will ensure that its material properties and
equipment used or useful in its business in whomsoever's possession they may be,
are kept, in all material respects, in good repair, working order and condition,
normal wear and tear excepted.
6.07 End of Fiscal Years; Fiscal Quarters. The Borrower will, for financial
reporting and tax purposes, cause (i) each of its fiscal years to end on
December 31 of each year and (ii) each of its fiscal quarters to end on March
31, June 30, September 30 and December 31 of each year.
6.08 Use of Proceeds. All proceeds of the Loans shall be used as provided
in Section 5.05.
6.09 Corporate Formalities. The Borrower will satisfy customary corporate
formalities, including the holding of regular board of directors' and
shareholders' meetings and the maintenance of corporate offices and records.
6.10 Compliance with Environmental Laws. (a) The Borrower will comply with
all Environmental Laws applicable to the ownership or use of its Real Property
now or hereafter owned, leased or operated by the Borrower except such
non-compliances as could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect, and will promptly pay or cause to be
paid all costs and expenses incurred in connection with such compliance, and
will keep or cause to be kept all such Real Property free and clear of any Liens
imposed pursuant to such Environmental Laws. The Borrower will not generate,
use, treat, store, release or dispose of, or permit the generation, use,
treatment, storage, Release or disposal of Hazardous Materials on any Real
Property now or hereafter owned, leased or operated by the Borrower, or
transport or permit the transportation of Hazardous Materials to or from any
such Real Property, except for Hazardous Materials generated, used, treated,
stored, released or disposed of at any such Real Properties in compliance in all
material respects with all applicable Environmental Laws and reasonably required
in connection with the operation, use and maintenance of the business or
operations of the Borrower.
(b) At any time that the Borrower gives notice to the Lender pursuant to
Section 6.01(i), then at the reasonable written request of the Lender, the
Borrower will provide, at the sole expense of the Borrower, an environmental
site assessment report concerning any Real Property owned, leased or operated by
the Borrower, prepared by an environmental consulting firm reasonably approved
by the Lender, indicating the presence or absence of Hazardous Materials and the
potential cost of any removal or remedial action in connection with such
Hazardous Materials on such Real Property. If the Borrower fails to provide the
same within ninety (90) days after such request was made, the Lender may order
the same, the cost of which shall be borne by the Borrower, and the Borrower
shall grant and hereby grant to the Lender and its agents access to such Real
Property and specifically grant the Lender an irrevocable non-exclusive license,
subject to the rights of tenants, to undertake such an assessment at any
reasonable time upon reasonable notice to the Borrower, all at the sole and
reasonable expense of the Borrower.
6.11 Performance of Obligations. The Borrower will perform all of its
obligations under the terms of each material agreement, contract or instrument
by which it is bound, except such non-performances as could not, either
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
SECTION 7. Negative Covenants. The Borrower hereby covenants and agrees
that as of the Effective Date and thereafter for so long as this Agreement is in
effect and until the Commitment has terminated and the Loans, together with
interest, Fees and all other Obligations incurred hereunder, are paid in full:
7.01 Business. The Borrower will not engage (directly or indirectly) in any
business other than the type of business in which the Borrower is engaged on the
Effective Date and reasonable extensions thereof.
7.02 Consolidation, Merger, Sale or Purchase of Assets, etc. The Borrower
will not wind up, liquidate or dissolve its affairs, or enter into any
transaction of merger or consolidation, or sell or otherwise dispose of all or
any part of its property or assets (other than inventory in the ordinary course
of business), or enter into any sale-leaseback transactions, or purchase, lease
or otherwise acquire all or any part of the property or assets of any Person
(other than purchases of inventory in the ordinary course of business), or agree
to do any of the foregoing at any future time, except that the following shall
be permitted:
(a) Capital Expenditures to the extent within the limitations set
forth in Section 7.05;
(b) the investments, acquisitions and transfers or dispositions of
properties permitted pursuant to Section 7.06;
(c) the Borrower may lease (as lessee) real or personal property in
the ordinary course of business (so long as such lease does not create a
Capitalized Lease Obligation not otherwise permitted by Section 7.04(b);
and
(d) the transactions contemplated by the Transaction Documents.
7.03 Liens. The Borrower will not create, incur, assume or suffer to exist
any Lien upon or with respect to any property or assets of any kind (real or
personal, tangible or intangible) of the Borrower whether now owned or hereafter
acquired, or sell any such property or assets subject to an understanding or
agreement, contingent or otherwise, to repurchase such property or assets
(including sales of accounts receivable or notes with recourse to the Borrower)
or assign any right to receive income, or file or permit the filing of any
financing statement under the UCC or any other similar notice of Lien under any
similar recording or notice statute; provided that the provisions of this
Section 7.03 shall not prevent the creation, incurrence, assumption or existence
of the following (with such Liens described below being herein referred to as
"Permitted Liens"):
(a) Liens for taxes, assessments or governmental charges or rules not
yet due or Liens for taxes, assessments or governmental charges or rules
being contested in good faith and by appropriate proceedings for which
adequate reserves (in the good faith judgment of the management of the
Borrower) have been established in accordance with GAAP;
(b) Liens in respect of property or assets of the Borrower imposed by
law which were incurred in the ordinary course of business and do not
secure indebtedness for borrowed money, such as carriers', warehousemen's
and mechanics' Liens, statutory landlord's Liens, and other similar Liens
arising in the ordinary course of business, and (x) which do not in the
aggregate materially detract from the value of such property or assets or
materially impair the use thereof in the operation of the business of the
Borrower taken as a whole or (y) which are being contested in good faith by
appropriate proceedings, which proceedings have the effect of preventing
the forfeiture or sale of the property or asset subject to such Lien;
(c) Liens created by or pursuant to the Security Documents or other
Liens in favor of the Lender;
(d) Liens in existence on the Initial Borrowing Date which are listed,
and the property subject thereto described, in Schedule I, but only to the
respective date, if any, set forth in such Schedule I for the removal,
replacement and termination of any such Liens, plus renewals, replacements,
refinancings and extensions of such Liens to the extent set forth on
Schedule I;
(e) Liens arising from judgments, decrees or attachments (or securing
of appeal bonds with respect thereto) in circumstances not constituting an
Event of Default under Section 8.09, provided that no cash or property
(other than proceeds of insurance payable by reason of such judgments,
decrees or attachments) is deposited or delivered to secure any respective
judgment or award, or any appeal bond in respect thereof, the fair market
value of which exceeds $10,000;
(f) Liens (other than any Lien imposed by ERISA) incurred or deposits
made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security, or
to secure the performance of tenders, statutory obligations, surety bonds
(other than appeal bonds), bids, leases, government contracts, performance
and return-of-money bonds and other similar obligations incurred in the
ordinary course of business (exclusive of obligations in respect of the
payment for borrowed money), provided that the aggregate amount of deposits
at any time pursuant to this clause (f) shall not exceed $25,000;
(g) easements, rights-of-way, restrictions, minor defects or
irregularities in title and other similar charges or encumbrances not
interfering in any material respect with the ordinary conduct of the
business of the Borrower; and
(h) Liens arising from UCC financing statements regarding operating
leases and Liens securing Capitalized Lease Obligations permitted by this
Agreement.
7.04 Indebtedness. The Borrower will not contract, create, incur, assume or
suffer to exist any Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement and the other
Credit Documents;
(b) Capitalized Lease Obligations of the Borrower provided that the
aggregate amount of Indebtedness incurred pursuant to this clause (b) after
the date hereof shall not exceed $400,000 at any time; and
(c) A letter of credit in a stated amount not to exceed $1,200,000.
7.05 Capital Expenditures. The Borrower will not incur Capital Expenditures
in any fiscal year of the Borrower in excess of the lesser of (i) $2,000,000 or
(ii) the amount set forth in the most recent cash flow budget for such year
provided by the Borrower to the Lender and acceptable to the Lender.
7.06 Advances, Investments and Loans. The Borrower will not, directly or
indirectly, lend money or give credit or make advances to any Person, or
purchase or acquire any stock, obligations or securities of, or any other
interest in, or make any capital contribution to, any other Person, or purchase
or own a futures contract or otherwise become liable for the purchase or sale of
currency or other commodities at a future date in the nature of a futures
contract, or hold cash or Cash Equivalents (each of the foregoing an
"Investment" and, collectively, "Investments"), except that the following shall
be permitted:
(a) the Borrower may acquire and hold accounts receivables owing it,
if created or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms;
(b) loans and advances to employees in an aggregate principal amount
not to exceed $100,000 at any time outstanding shall be permitted; and
(c) the Borrower may hold cash in deposit accounts in the ordinary
course of business and Cash Equivalents provided that so long as any Loan
is outstanding such cash and Cash Equivalents may not be in excess of
$500,000 (other than such cash and Cash Equivalents representing proceeds
of a Loan pending the application thereof).
7.07 Dividends, etc. The Borrower will not authorize, declare or pay any
dividends (other than dividends payable solely in capital stock of the Borrower)
or return any capital to its stockholders or authorize or make any other
distribution, payment or delivery of property or cash to its stockholders as
such, or redeem, retire, purchase or otherwise acquire, directly or indirectly,
for a consideration, any shares of any class of its capital stock now or
hereafter outstanding (or any warrants for or options or stock appreciation
rights in respect of any of such shares), or set aside any funds for any of the
foregoing purposes, as the case may be, now or hereafter outstanding (or any
options or warrants or stock appreciation rights issued by such Person with
respect to its capital stock) (all of the foregoing "Dividends"), other than
payments of Dividends on the Preferred Stock.
7.08 Transactions with Affiliates. The Borrower will not enter into any
transaction or series of transactions after the Initial Borrowing Date whether
or not in the ordinary course of business, with any Affiliate of the Borrower;
provided, that the foregoing restrictions shall not apply to (i) advances to
employees of the Borrower to the extent permitted by Section 7.06(b), (ii)
employment arrangements (including arrangements made with respect to bonuses)
entered into in the ordinary course of business, or (iii) the transactions
contemplated by the Transaction Documents.
7.09 Prohibition on Creation of Subsidiaries. The Borrower shall not be
permitted to establish, create or acquire any Subsidiary or Subsidiaries.
SECTION 8. Events of Default. Upon the occurrence of any of the following
specified events (each an "Event of Default"):
8.01 Payments. The Borrower shall (i) default in the payment when due of
any principal of any Loan or (ii) default, and such default shall continue
unremedied for three or more Business Days, in the payment after notice of any
interest on the Loans or any Fees or any other amounts owing hereunder or under
any other Credit Document; or
8.02 Representations, etc. Any representation, warranty or statement made
by the Borrower herein or in any other Document or in any statement or
certificate delivered or required to be delivered pursuant hereto or thereto
shall prove to be untrue in any material respect on the date as of which made or
deemed made; or
8.03 Covenants. The Borrower shall (a) default in the due performance or
observance by it of any term, covenant or agreement contained in Section
6.01(e)(x) or Section 7, or (b) default in the due performance or observance by
it of any term, covenant or agreement (other than those referred to in Section
8.01, 8.02 or clause (a) of this Section 8.03) contained in this Agreement and
such default shall continue unremedied for a period of 10 days after notice to
the Borrower by the Lender; or
8.04 Default Under Other Agreements. (a) The Borrower shall (i) default in
any payment with respect to any Indebtedness (other than the Obligations) beyond
the period of grace, if any, applicable thereto or (ii) default in the
observance or performance of any agreement or condition relating to any such
Indebtedness or contained in any instrument or agreement evidencing, securing or
relating thereto, or any other event shall occur or condition exist, the effect
of which default or other event or condition is to cause, or to permit the
holder or holders of such Indebtedness (or a trustee or agent on behalf of such
holder or holders) to cause, any such Indebtedness to become due prior to its
stated maturity or (b) any such Indebtedness of the Borrower shall be declared
to be due and payable, or required to be prepaid other than by a regularly
scheduled required prepayment, prior to the stated maturity thereof, provided
that it shall not constitute a Default or an Event of Default pursuant to this
Section 8.04 unless the principal amount of any one issue of such Indebtedness
exceeds $250,000 in the aggregate; or
8.05 Bankruptcy, etc. The Borrower shall commence a voluntary case
concerning itself under Title 11 of the United States Code entitled
"Bankruptcy," as now or hereafter in effect, or any successor thereto (the
"Bankruptcy Code"); or an involuntary case is commenced against the Borrower and
the petition is not controverted within 30 days, or is not dismissed within 60
days, after commencement of the case; or a custodian (as defined in the
Bankruptcy Code) is appointed for, or takes charge of, all or substantially all
of the property of the Borrower; or the Borrower commences any other proceeding
under any reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to the Borrower; or there is
commenced against the Borrower any such proceeding which remains undismissed for
a period of 60 days; or the Borrower is adjudicated insolvent or bankrupt; or
any order of relief or other order approving any such case or proceeding is
entered; the Borrower suffers any appointment of any custodian or the like for
it or any substantial part of its property to continue undischarged or unstayed
for a period of 60 days; or the Borrower makes a general assignment for the
benefit of creditors; or any corporate action is taken by the Borrower for the
purpose of effecting any of the foregoing; or
8.06 Security Documents. At any time after the execution and delivery
thereof, any of the Security Documents shall cease to be in full force and
effect, or shall cease to give the Lender the Liens, rights, powers and
privileges purported to be created thereby superior to and prior to the rights
of all third Persons (except as permitted by Section 7.03), and subject to no
other Liens (except as permitted by Section 7.03), or the Borrower shall default
in the due performance or observance of any term, covenant or agreement on its
part to be performed or observed pursuant to any such Security Document and such
default shall continue beyond the period of grace, if any, specifically
applicable thereto pursuant to the terms of such Security Document; or
8.07 Judgments. One or more judgments or decrees shall be entered against
the Borrower involving a liability in the aggregate (not paid or fully covered
by a reputable and solvent insurance company) and such judgments and decrees
either shall be final and non-appealable or shall not be vacated, discharged or
stayed or bonded pending appeal for any period of 30 consecutive days, and the
aggregate amount of all such judgments equals or exceeds $250,000; or
8.08 Change of Control. A Change of Control shall occur; or
8.09 Transaction Documents. The Borrower shall default in the observance or
performance in any material respect of any Transaction Document; provided,
however if such default is capable of being cured such default shall not have
been remedied within 30 days of such default;
then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, the Lender may by written notice to the Borrower, take
any or all of the following actions, without prejudice to the rights of the
Lender, to enforce its claims against the Borrower, except as otherwise
specifically provided for in this Agreement (provided that, if an Event of
Default specified in Section 8.05 shall occur with respect to the Borrower, the
result which would occur upon the giving of written notice by the Lender as
specified in clauses (i) and (ii) below shall occur automatically without the
giving of any such notice): (i) declare the Commitment terminated, whereupon the
Commitment shall forthwith terminate immediately; (ii) declare the principal of
and any accrued interest in respect of all Loans and all Obligations owing
hereunder to be, whereupon the same shall become, forthwith due and payable
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Borrower; and (iii) enforce any or all of the Liens and
security interests created pursuant to the Security Documents.
SECTION 9. Definitions. As used herein, the following terms shall have the
meanings herein specified unless the context otherwise requires. Defined terms
in this Agreement shall include in the singular number the plural and in the
plural the singular:
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling (including, but not limited to, all directors
and officers of such Person), controlled by, or under direct or indirect common
control with such Person. A Person shall be deemed to control a corporation if
such Person possesses, directly or indirectly, the power (i) to vote 5% or more
of the securities having ordinary voting power for the election of directors of
such corporation or (ii) to direct or cause the direction of the management and
policies of such corporation, whether through the ownership of voting
securities, by contract or otherwise. Notwithstanding the foregoing, for
purposes of this Agreement, neither the Lender nor its Affiliates shall be
deemed Affiliates of the Borrower.
"Agreement" shall mean this Credit Agreement, as the same may be from time
to time modified, amended and/or supplemented.
"Applicable Base Rate Margin" shall mean 2.00%.
"Applicable Eurodollar Margin" shall mean 3.00%.
"Asset Sale" shall mean the sale, transfer or other disposition by the
Borrower to any Person of any asset of the Borrower (other than sales, transfers
or other dispositions (i) in the ordinary course of business of inventory or
(ii) made in connection with the purchase by the Borrower of replacement
equipment pursuant to Section 2.11(c) of the Security Agreement in an amount not
exceeding $500,000 during the term of this Agreement).
"Bankruptcy Code" shall have the meaning provided in Section 8.05.
"Base Rate" at any time shall mean the higher of (i) the rate which is 1/2
of 1% in excess of the Federal Funds Rate and (ii) the Prime Lending Rate.
"Base Rate Loan" shall mean each Loan bearing interest at the rates
provided in Section 1.04(a).
"Borrower" shall have the meaning provided in the preamble of this
Agreement.
"Borrowing" shall mean the incurrence of one Type of Loan by the Borrower
from the Lender on a given date (or resulting from conversions on a given date).
"Business Day" shall mean (i) for all purposes other than as covered by
clause (ii) below, any day excluding Saturday, Sunday and any day which shall be
in the City of New York or Boston, Massachusetts a legal holiday or a day on
which banking institutions are authorized by law or other governmental actions
to close and (ii) with respect to all notices and determinations in connection
with, and payments of principal and interest on, Eurodollar Loans, any day which
is a Business Day described in clause (i) and which is also a day for trading by
and between banks in U.S. dollar deposits in the interbank Eurodollar market.
"Capital Expenditures" shall mean, for any period, the aggregate of all
expenditures (whether paid in cash or accrued as liabilities and including in
all events all amounts expended or capitalized under Capital Leases but
excluding any amount representing capitalized interest) by the Borrower during
that period that, in conformity with GAAP, are or are required to be included in
the property, plant or equipment reflected in the consolidated balance sheet of
the Borrower.
"Capital Lease" as applied to any Person, shall mean any lease of any
property (whether real, personal or mixed) by that Person as lessee which, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.
"Capitalized Lease Obligations" as applied to any Person, shall mean all
obligations under Capital Leases of such Person or any of its Subsidiaries in
each case taken at the amount thereof accounted for as liabilities in accordance
with GAAP.
"Cash Equivalents" shall mean, as to any Person, (i) securities issued or
directly and fully guaranteed or insured by the United States or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States is pledged in support thereof) having maturities of not more than six
months from the date of acquisition, (ii) marketable direct obligations issued
by any state of the United States or any political subdivision of any such state
or any public instrumentality thereof maturing within six months from the date
of acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either Standard & Poor's Ratings Services or
Moody's Investors Service, Inc., (iii) Dollar denominated time deposits and
certificates of deposit of any commercial bank having, or which is the principal
banking subsidiary of a bank holding company having, a long-term unsecured debt
rating of at least "A" or the equivalent thereof from Standard & Poor's Ratings
Services or "A2" or the equivalent thereof from Moody's Investors Service, Inc.
with maturities of not more than six months from the date of acquisition by such
Person, (iv) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (i) above entered into
with any bank meeting the qualifications specified in clause (iii) above, (v)
commercial paper issued by any Person incorporated in the United States rated at
least A-1 or the equivalent thereof by Standard & Poor's Ratings Services or at
least P-1 or the equivalent thereof by Moody's Investors Service, Inc. and in
each case maturing not more than six months after the date of acquisition by
such Person and (vi) investments in money market funds substantially all of
whose assets are comprised of securities of the types described in clauses (i)
through (v) above.
"Cash Proceeds" shall mean, with respect to any Asset Sale, the aggregate
cash payments (including any cash received by way of deferred payment pursuant
to a note receivable issued in connection with such Asset Sale, but only as and
when so received) received by the Borrower from such Asset Sale.
"CERCLA" shall mean the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et seq.
"Change of Control" shall mean (i) any Person or group (as such term is
used under the Exchange Act) of Persons (other than the Lender or its
Affiliates) owns (beneficially or of record) more than 15% of the voting equity
interest in the Borrower's capital stock, assuming the exercise of all
securities exercisable, convertible or exchangeable for or into common equity
interests held by such Person or group, and (ii) during any period of 12
consecutive calendar months after the Effective Date, individuals who at the
beginning of such period constituted the Board of Directors of the Borrower
(together with any new directors whose election by such Board of Directors or
whose nomination for election by the stockholders or members, as the case may
be, of the Borrower was approved by a vote of a majority of the directors then
still in office who were either directors at the beginning of such period or
whose election or nomination for election was previously so approved) cease for
any reason to constitute a majority of such Board of Directors then in office.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time, and the regulations promulgated and rulings issued thereunder. Section
references to the Code are to the Code, as in effect at the date of this
Agreement and any subsequent provisions of the Code, amendatory thereof,
supplemental thereto or substituted therefor.
"Commitment" shall mean $20,000,000, as the same may be reduced or
terminated pursuant to Sections 2.02, 2.03 or 8.
"Contingent Obligations" shall mean, as to any Person, any obligation of
such Person guaranteeing or intending to guarantee any Indebtedness, leases,
dividends or other obligations ("primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not contingent,
(a) to purchase any such primary obligation or any property constituting direct
or indirect security therefor, (b) to advance or supply funds (i) for the
purchase or payment of any such primary obligation or (ii) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (c) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation or (d) otherwise to assure or hold harmless the owner of
such primary obligation against loss in respect thereof, provided, however, that
the term Contingent Obligation shall not include endorsements of instruments for
deposit or collection in the ordinary course of business. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person is
required to perform thereunder) as determined by such Person in good faith.
"Credit Documents" shall mean this Agreement and, after the execution and
delivery thereof pursuant to the terms of this Agreement, each of the Security
Documents and any documents executed in connection therewith.
"Default" shall mean any event, act or condition which with notice or lapse
of time, or both, would constitute an Event of Default.
"Dividends" shall have the meaning provided in Section 7.07.
"Documents" shall mean and include the Credit Documents and the Transaction
Documents.
"Effective Date" shall have the meaning provided in Section 10.09.
"Environmental Claims" shall mean any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, directives, claims, liens,
notices of noncompliance or violation, investigations or proceedings relating in
any way to any Environmental Law or any permit issued, or any approval given,
under any such Environmental Law (hereafter, "Claims"), including, without
limitation, (a) any and all Claims by governmental or regulatory authorities for
enforcement, cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and (b) any and all Claims by any
third party seeking damages, contribution, indemnification, cost recovery,
compensation or injunctive relief in connection with alleged injury or threat of
injury to health, safety or the environment due to the presence of Hazardous
Materials.
"Environmental Law" shall mean any Federal, state, foreign or local
statute, law, rule, regulation, ordinance, code, guideline, written policy and
rule of common law now or hereafter in effect and in each case as amended, and
any judicial or administrative interpretation thereof, including any judicial or
administrative order, consent decree or judgment, relating to the environment,
employee health and safety or Hazardous Materials, including, without
limitation, CERCLA; RCRA; the Federal Water Pollution Control Act, 33 U.S.C.
Section 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. Section 2601
et seq.; the Clean Air Act, 42 U.S.C. Section 7401 et seq.; the Safe Drinking
Water Act, 42 U.S.C. Section 3803 et seq.; the Oil Pollution Act of 1990, 33
U.S.C. Section 2701 et seq.; the Emergency Planning and the Community
Right-to-Know Act of 1986, 42 U.S.C. Section 11001 et seq.; the Hazardous
Material Transportation Act, 49 U.S.C. Section 1801 et seq. and the Occupational
Safety and Health Act, 29 U.S.C. Section 651 et seq.; and any state and local or
foreign counterparts or equivalents, in each case as amended from time to time.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder. Section references to ERISA are to ERISA, as in effect at the date
of this Agreement and any subsequent provisions of ERISA, amendatory thereof,
supplemental thereto or substituted therefor.
"Eurodollar Loans" shall mean each Loan bearing interest at the rates
provided in Section 1.04(b).
"Eurodollar Rate" shall mean with respect to any Borrowing of Eurodollar
Loans for any Interest Period, the rate appearing on Page 3750 of the Telerate
Service (or on any successor or substitute page of such Service, or any
successor to or substitute for such Service, providing rate quotations
comparable to those currently provided on such page of such Service, as
determined by the Lender from time to time for purposes of providing quotations
of interest rates applicable to dollar deposits in the London interbank market)
at approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period, as the rate for dollar deposits with a
maturity comparable to such Interest Period.
"Event of Default" shall have the meaning provided in Section 8.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"GAAP" shall mean generally accepted accounting principles in the United
States of America as in effect on the date of this Agreement; it being
understood and agreed that determinations in accordance with GAAP for purposes
of Section 7.09, including defined terms as used therein, are subject (to the
extent provided therein) to Section 10.06(a).
"Hazardous Materials" shall mean (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation, transformers or other equipment that
contained electric fluid containing levels of polychlorinated biphenyls and/or
radon gas; (b) any chemicals, materials or substances defined as or included in
the definition of "hazardous substances," "hazardous waste," "hazardous
materials," "extremely hazardous waste," "restricted hazardous waste," "toxic
substances," "toxic pollutants," "contaminants," or "pollutants," or words of
similar meaning and regulatory effect, under any applicable Environmental Law;
and (c) any other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any governmental authority.
"Indebtedness" of any Person shall mean, without duplication, (i) all
indebtedness of such Person for borrowed money, (ii) the deferred purchase price
of assets or services which in accordance with GAAP would be shown on the
liability side of the balance sheet of such Person, (iii) the face amount of all
letters of credit issued for the account of such Person and, without
duplication, all drafts drawn thereunder, (iv) all Indebtedness of a second
Person secured by any Lien on any property owned by such first Person, whether
or not such indebtedness has been assumed, (v) all Capitalized Lease Obligations
of such Person, (vi) all obligations of such Person to pay a specified purchase
price for goods or services whether or not delivered or accepted, i.e.,
take-or-pay and similar obligations, (vii) all net obligations of such Person
under interest rate hedging agreements and similar derivatives agreement and
(viii) all Contingent Obligations of such Person, provided that Indebtedness
shall not include trade payables, deferred revenue, taxes and accrued expenses,
in each case arising in the ordinary course of business.
"Initial Borrowing Date" shall mean the date upon which the initial
Borrowing of Loans occurs.
"Intellectual Property Assignment" shall have the meaning specified in
Section 4A.10(b).
"Interest Expense" shall mean, for any period, total interest expense
(including that attributable to Capital Leases in accordance with GAAP) of the
Borrower on a consolidated basis with respect to all outstanding Indebtedness of
the Borrower, including, without limitation, all capitalized interest.
"Interest Period" with respect to any Eurodollar Loan shall mean the
interest period applicable thereto, as determined pursuant to Section 1.05.
"Investment" shall have the meaning provided in Section 7.06.
"Leasehold" of any Person shall mean all of the right, title and interest
of such Person as lessee or licensee in, to and under leases or licenses of
land, improvements and/or fixtures.
"Lender" shall have the meaning provided in the preamble of this Agreement.
"Lien" shall mean any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any agreement to give any of the
foregoing, any conditional sale or other title retention agreement or any lease
in the nature thereof).
"Loan" shall have the meaning provided in Section 1.01.
"Margin Stock" shall have the meaning provided in Regulation U.
"Material Adverse Effect" shall mean a material adverse effect on the
business, property, assets, liabilities, operations, condition (financial or
otherwise) or prospects of the Borrower.
"Maturity Date" shall mean April 14, 2003.
"Net Cash Proceeds" shall mean, with respect to any Asset Sale, the Cash
Proceeds resulting therefrom net of reasonable expenses of sale (including
payment of principal, premium and interest of other Indebtedness secured by the
assets the subject of the Asset Sale and required to be, and which is, repaid
under the terms thereof as a result of such Asset Sale), and incremental taxes
paid or payable as a result thereof.
"Net Income" shall mean, for any period, the net income (or loss) of the
Borrower on a consolidated basis for such period taken as a single accounting
period determined in conformity with GAAP, provided that there shall be excluded
the income (or loss) of any Person in which any other Person (other than the
Borrower) has a joint interest, except to the extent of the amount of dividends
or other distributions actually paid to the Borrower by such Person during such
period.
"Notice Office" shall mean the office of the Lender designated to the
Borrower in writing from time to time.
"Obligations" shall mean all amounts, direct or indirect, contingent or
absolute, of every type or description, and at any time existing, owing to the
Lender pursuant to the terms of this Agreement or any other Credit Document.
"Payment Office" shall mean the office of the Lender designated to the
Borrower in writing from time to time.
"Permitted Liens" shall have the meaning provided in Section 7.03.
"Person" shall mean any individual, partnership, joint venture, firm,
corporation, limited liability company, association, trust or other enterprise
or any government or political subdivision or any agency, department or
instrumentality thereof.
"Preferred Stock" shall mean the Preferred Stock purchased by an Affiliate
of the Lender pursuant to the Securities Purchase Agreement.
"Prime Lending Rate" shall mean the rate which Bankers Trust Company
announces from time to time as its prime lending rate, the Prime Lending Rate to
change when and as such prime lending rate changes.
"RCRA" shall mean the Resource Conservation and Recovery Act, as amended,
42 U.S.C. Section 6901 et seq.
"Real Property" of any Person shall mean all of the right, title and
interest of such Person in and to land, improvements and fixtures, including
Leaseholds.
"Recovery Event" shall mean the receipt by the Borrower of any cash
insurance proceeds or condemnation award payable (i) by reason of theft, loss,
physical destruction or damage or any other similar event with respect to any
property or asset of the Borrower (including without limitation, business
interruption insurance), or (ii) by reason of any condemnation, taking, seizing
or similar event with respect to any property or asset of the Borrower.
"Regulation T, U and X" shall mean Regulations T, U and X of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof establishing margin requirements.
"SEC" shall mean the Securities and Exchange Commission and any successor
thereto.
"Second Borrowing Date" shall mean the date upon which the second Borrowing
of Loans occurs.
"Securities Purchase Agreement" shall mean the Purchase Agreement by and
between the Borrower and the Lender, dated as of April 14, 2000.
"Security Agreement" shall have the meaning provided in Section 4A.10(b).
"Security Documents" shall mean the Security Agreement and the Intellectual
Property Assignment.
"Service Agreement" shall have the meaning provided in the Securities
Purchase Agreement.
"Subsidiary" of any Person shall mean and include (i) any corporation more
than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person directly or
indirectly through Subsidiaries and (ii) any partnership, association, joint
venture or other entity in which such Person directly or indirectly through
Subsidiaries, has more than a 50% equity interest at the time. Unless otherwise
expressly provided, all references herein to "Subsidiary" shall mean a
Subsidiary of the Borrower.
"Taxes" shall have the meaning provided in Section 3.03.
"Term Note" shall mean the note dated April 5th, 2000 made by the Borrower
to the order of BEW, Inc., an affiliate of the Lender.
"Transaction Documents" shall mean the Securities Purchase Agreement and
any other document or instrument entered into in connection therewith, including
without limitation the Preferred Stock and all other Documents (as defined in
the Securities Purchase Agreement).
"Type" shall mean any type of Loan determined with respect to the interest
option applicable thereto, i.e., a Base Rate Loan or Eurodollar Loan.
"UCC" shall mean the Uniform Commercial Code, as in effect from time to
time in the relevant jurisdiction.
SECTION 10. Miscellaneous.
10.01 Payment of Expenses, etc. The Borrower agrees to: (i) whether or not
the transactions herein contemplated are consummated, pay all reasonable
out-of-pocket costs and expenses of the Lender in connection with the
negotiation, preparation, execution and delivery of the Credit Documents and the
documents and instruments referred to therein and any amendment, waiver or
consent relating thereto (including, without limitation, the reasonable fees and
disbursements of White & Case LLP) and of the Lender in connection with the
enforcement of the Credit Documents and the documents and instruments referred
to therein (including, without limitation, the reasonable fees and disbursements
of counsel for the Lender); (ii) pay and hold the Lender harmless from and
against any and all present and future stamp and other similar taxes with
respect to the foregoing matters and save the Lender harmless from and against
any and all liabilities with respect to or resulting from any delay or omission
(other than to the extent attributable to the Lender) to pay such taxes; and
(iii) indemnify the Lender, its officers, directors, employees, representatives
and agents (each an "Indemnified Person") from and hold each of them harmless
against any and all losses, liabilities, claims, damages or expenses
(collectively "Indemnified Liabilities") incurred by any of them (whether
asserted by the Borrower or otherwise) as a result of, or arising out of, or in
any way related to, or by reason of, (a) any investigation, litigation or other
proceeding (whether or not the Lender is a party thereto) related to the
entering into and/or performance of any Credit Document or the use of the
proceeds of any Loans hereunder or the consummation of any transactions
contemplated in any Credit Document, including, without limitation, the
reasonable fees and disbursements of counsel incurred in connection with any
such investigation, litigation or other proceeding (but excluding (i) any such
losses, liabilities, claims, damages or expenses to the extent incurred by
reason of the gross negligence or willful misconduct of the Person to be
indemnified, (ii) the reimbursement of amounts paid by an Indemnified Person on
any final, non-appealable judgment in the Borrower's favor against such
Indemnified Person by a court of competent jurisdiction, or (iii) the
reimbursement of amounts paid by an Indemnified Person seeking indemnification
in any settlement of any claim constituting Indemnified Liabilities with a party
other than the Borrower which was effected by an Indemnified Person without the
prior consent of the Borrower, unless either (x) the Borrower has had reasonable
opportunity to defend such Indemnified Person against such claim and has not
promptly and diligently prosecuted such defense by counsel reasonably
satisfactory to such Indemnified Person or (y) the Borrower has failed to
provide evidence reasonably satisfactory to the Lender of the Borrower's
financial ability to satisfy its indemnity obligations hereunder in respect of
such claim) or (b) the actual or alleged presence of Hazardous Materials in the
air, surface water, groundwater, surface or subsurface of any Real Property
owned or at any time operated by the Borrower, the generation, storage,
transportation or disposal of Hazardous Materials at any location whether or not
owned or operated by the Borrower, the non-compliance of any Real Property owned
or at any time operated by the Borrower with federal, state and local laws,
regulations, and ordinances (including applicable permits thereunder) applicable
to any such Real Property, or any Environmental Claim asserted against the
Borrower or any such Real Property, including, in each case, without limitation,
the reasonable fees and disbursements of counsel and other consultants incurred
in connection with any such investigation, litigation or other proceeding (but
excluding any losses, liabilities, claims, damages or expenses to the extent
incurred by reason of the gross negligence or willful misconduct of the Person
to be indemnified). To the extent that the undertaking to indemnify, pay or hold
harmless the Lender set forth in the preceding sentence may be unenforceable
because it is violative of any law or public policy, the Borrower shall make the
maximum contribution to the payment and satisfaction of each of the indemnified
liabilities which is permissible under applicable law.
10.02 Right of Setoff. In addition to any rights now or hereafter granted
under applicable law or otherwise, and not by way of limitation of any such
rights, if an Event of Default then exists, the Lender is hereby authorized at
any time or from time to time, without presentment, demand, protest or other
notice of any kind to the Borrower or to any other Person, any such notice being
hereby expressly waived, to set off and to appropriate and apply any and all
deposits (general or special) and any other Indebtedness at any time held or
owing by the Lender to or for the credit or the account of the Borrower against
and on account of the Obligations and liabilities of the Borrower to the Lender
under this Agreement or under any of the other Credit Documents, and all other
claims of any nature or description arising out of or connected with this
Agreement or any other Credit Document, irrespective of whether or not the
Lender shall have made any demand hereunder and although said Obligations,
liabilities or claims, or any of them, shall be contingent or unmatured.
10.03 Notices. Except as otherwise expressly provided herein, all notices
and other communications provided for hereunder shall be in writing (including
facsimile communication) and mailed, faxed or delivered (a) if to the Lender, at
its address specified as the Notice Office and (b) if to the Borrower, at the
address specified next to the signature of the Borrower below. All such notices
and communications shall not be effective until received by the Lender or the
Borrower, as the case may be. Each party hereto may, by a notice to the other
party in accordance herewith, specify a different address for notices to it
hereunder.
10.04 Assignments. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns of the
parties hereto; provided, however, that the Borrower may not assign or transfer
any of its rights or obligations hereunder without the consent of the Lender.
10.05 No Waiver; Remedies Cumulative. No failure or delay on the part of
the Lender in exercising any right, power or privilege hereunder or under any
other Credit Document and no course of dealing between the Borrower and the
Lender shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power or privilege hereunder or under any other Credit
Document preclude any other or further exercise thereof or the exercise of any
other right, power or privilege hereunder or thereunder. The rights and remedies
herein expressly provided are cumulative and not exclusive of any rights or
remedies which the Lender would otherwise have. No notice to or demand on the
Borrower in any case shall entitle the Borrower to any other or further notice
or demand in similar or other circumstances or constitute a waiver of the rights
of the Lender to any other or further action in any circumstances without notice
or demand.
10.06 Calculations; Computations. (a) The financial statements to be
furnished to the Lender pursuant hereto shall be made and prepared in accordance
with GAAP, as in effect on the Initial Borrowing Date, consistently applied
throughout the periods involved (except as set forth in the notes thereto or as
otherwise disclosed in writing by the Borrower to the Lender), provided that
except as otherwise specifically provided herein, all computations determining
compliance with Section 7.09, including definitions used therein shall utilize
accounting principles and policies in accordance with GAAP, as in effect on the
Initial Borrowing Date.
(b) All computations of interest and fees hereunder shall be made on the
basis of a year of 360 days for the actual number of days (including the first
day but excluding the last day) occurring in the period for which such interest
or fees are payable.
10.07 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY
TRIAL; WAIVER OF CERTAIN CLAIMS. (a) THIS AGREEMENT AND THE OTHER CREDIT
DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER
SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF
NEW YORK. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY
OTHER CREDIT DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR
OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION
AND DELIVERY OF THIS AGREEMENT, THE BORROWER HEREBY IRREVOCABLY ACCEPTS FOR
ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS. THE BORROWER HEREBY FURTHER IRREVOCABLY
WAIVES ANY CLAIM THAT ANY SUCH COURTS LACK JURISDICTION OVER THE BORROWER, AND
AGREES NOT TO PLEAD OR CLAIM, IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT BROUGHT IN ANY OF THE AFORESAID
COURTS, THAT ANY SUCH COURT LACKS JURISDICTION OVER THE BORROWER. THE BORROWER
FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE BORROWER, AT
ITS ADDRESS FOR NOTICES PURSUANT TO SECTION 10.03, SUCH SERVICE TO BECOME
EFFECTIVE 30 DAYS AFTER SUCH MAILING. THE BORROWER HEREBY IRREVOCABLY WAIVES ANY
OBJECTION TO SUCH SERVICE OF PROCESS AND FURTHER IRREVOCABLY WAIVES AND AGREES
NOT TO PLEAD OR CLAIM IN ANY ACTION OR PROCEEDING COMMENCED HEREUNDER OR UNDER
ANY OTHER CREDIT DOCUMENT THAT SERVICE OF PROCESS WAS IN ANY WAY INVALID OR
INEFFECTIVE. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE LENDER TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR
OTHERWISE PROCEED AGAINST THE BORROWER IN ANY OTHER JURISDICTION.
(b) THE BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR
PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (a) ABOVE AND HEREBY
FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT
THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN
AN INCONVENIENT FORUM.
(c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT
OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
(d) THE BORROWER AGREES THAT IT WILL NOT ASSERT AGAINST THE LENDER, AND
HEREBY WAIVES, ANY CLAIM FOR CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE
DAMAGES IN CONNECTION WITH THIS AGREEMENT, OR ANY OTHER CREDIT DOCUMENT OR
TRANSACTION DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
10.08 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A set of counterparts
executed by all the parties hereto shall be lodged with the Borrower and the
Lender.
10.09 Effectiveness. This Agreement shall become effective on the date (the
"Effective Date") on which each of the Borrower and the Lender shall have signed
a counterpart hereof (whether the same or different counterparts) and shall have
delivered (including by way of facsimile device) the same to the Lender at its
Notice Office.
10.10 Headings Descriptive. The headings of the several sections and
subsections of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Agreement.
10.11 Amendment or Waiver. Neither this Agreement nor any other Credit
Document nor any terms hereof or thereof may be changed, waived, discharged or
terminated unless such change, waiver, discharge or termination is in writing
signed by the Borrower and the Lender.
10.12 Survival. All indemnities set forth herein including, without
limitation, in Section 10.01 shall survive the execution and delivery and
termination of this Agreement and the making and repayment of the Loans.
* * *
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of
this Agreement to be duly executed and delivered as of the date first above
written.
Address: PEAPOD, INC.
9933 Woods Drive
Skokie, IL 60077
fax no.: (847) 583-9494
Attention: Andrew Parkinson By:________________________
Name:
Title:
KONINKLIJKE AHOLD NV
By:________________________
Name:
Title:
EX-10.5
AMENDED AND RESTATED SECURITY AGREEMENT
dated as of April 5, 2000
by
PEAPOD, INC.
Debtor
to
BEW, Inc.
and
KONINKLIJKE AHOLD NV
each a Secured Party
<PAGE>
TABLE OF CONTENTS
Page
Section 1. Definitions........................................................1
Section 2. Collateral.........................................................6
2.1 Grant of Security Interest.......................................6
2.2 Perfection and Protection of Security Interest...................7
2.3 Location of Offices and Collateral...............................8
2.4 Title to, Liens on, and Sale and Use of Collateral...............8
2.5 Appraisals.......................................................9
2.6 Access and Examination; Confidentiality..........................9
2.7 Collateral Reporting............................................10
2.8 Accounts........................................................10
2.9 Collection of Accounts; Payments................................11
2.10 Inventory......................................................12
2.11 Equipment......................................................12
2.12 Assigned Contracts.............................................13
2.13 Documents, Instruments, and Chattel Paper......................14
2.14 Right to Cure..................................................14
2.15 Power of Attorney..............................................14
2.16 The Secured Party's Rights, Duties and Liabilities.............15
Section 3. Information and Notices...........................................15
3.1 Information.....................................................15
3.2 Notices to Secured Party........................................15
Section 4. Events of Default.................................................17
Section 5. Remedies..........................................................17
5.1 Remedies of Secured Party.......................................17
5.2 Debtor's Waiver of Rights.......................................18
Section 6. Representations and Warranties....................................18
6.1 Due Organization................................................18
6.2 Valid Execution; Binding Effect.................................18
6.3 No Violation....................................................18
6.4 No Consents.....................................................19
6.5 Liens...........................................................19
Section 7. Miscellaneous.....................................................19
7.1 Cumulative Remedies; No Prior Recourse to Collateral............19
7.2 Illegality, Etc.................................................19
7.3 GOVERNING LAW; CHOICE OF FORUM; SERVICE OF PROCESS..............19
7.4 WAIVER OF JURY TRIAL............................................20
7.5 WAIVER OF CERTAIN CLAIMS........................................21
7.6 Survival of Representations and Warranties......................21
7.7 Other Security and Guaranties...................................21
7.8 Fees and Expenses; Interest.....................................21
7.9 Notices.........................................................22
7.10 Waiver of Notices..............................................22
7.11 Binding Effect.................................................22
7.12 Indemnity of the Secured Party by the Debtor...................23
7.13 Final Agreement; Amendments....................................23
7.14 Right of Setoff................................................23
7.15 Severability...................................................24
7.16 Section Headings...............................................24
7.17 Counterparts...................................................24
7.18 Release of Collateral..........................................24
SCHEDULES
Schedule 1 Existing Permitted Liens
Schedule 2.3 Location of Offices and Collateral
<PAGE>
AMENDED AND RESTATED SECURITY AGREEMENT
AMENDED AND RESTATED SECURITY AGREEMENT dated as of April 5, 2000 by
PEAPOD, Inc., a Delaware corporation (the "Debtor"), to BEW, Inc., a Delaware
corporation ("BEW") and KONINKLIJKE AHOLD NV ("Ahold").
R E C I T A L S:
A. BEW has made, and may hereafter make, loans in the aggregate principal
amount of U.S. $3,000,000 (collectively the "Term Loan") to the Debtor, such
Term Loan being evidenced by a promissory note dated April 5, 2000 made by the
Debtor to the order of BEW in the principal amount of U.S. $3,000,000 (as from
time to time amended, reissued or renewed, and any promissory note issued in
substitution therefor, the "Term Note").
B. To secure the Term Loan the Debtor executed and delivered to BEW a
Security Agreement dated as of April 5, 2000 (the "Existing Security Agreement")
pursuant to which the Debtor granted to BEW a security interest on the Debtor's
rights, title and interest in the property described therein.
C. Ahold may hereafter make additional loans to the Debtor in an aggregate
principal amount not exceeding, together with the Term Loan, U.S. $20,000,000
pursuant to, and on the terms and conditions set forth in, a Credit Agreement
(the "Credit Agreement") proposed to be entered into by Ahold with the Debtor,
which loans will be used first to repay the Term Note and all other indebtedness
evidenced by the Term Note (the Term Loan and all loans outstanding under the
Credit Agreement hereinafter collectively referred to as the "Loans").
D. To induce BEW and Ahold (collectively and individually hereinafter
referred to as the "Secured Party") to make the Loans, the Debtor has agreed to
amend and restate the Existing Security Agreement in its entirety pursuant
hereto.
E. The execution and delivery by the Debtor of this Agreement is one of the
conditions to the willingness of the Secured Party to make the balance of the
Loans to the Debtor.
ACCORDINGLY, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and to induce the Secured Party to make and maintain the Loans to
the Debtor, the Existing Security Agreement is hereby amended and restated to
read in its entirety as follows:
Section 1. Definitions. (a) Capitalized terms used but not defined herein
shall have the meanings given to such terms in the Term Note, the Collateral
Assignment or (upon the execution thereof) the Credit Agreement. In addition,
the following terms shall have the meanings specified for such terms below:
"Account Debtor" means each Person obligated in any way on or in connection
with an Account.
"Accounts" means all of the Debtor's now owned or hereafter acquired or
arising accounts (as such term is defined in the UCC), whether now existing or
hereafter arising, and any other rights to payment for the sale or lease of
goods or rendition of services, whether or not they have been earned by
performance.
"Assigned Contracts" means, collectively, all rights and remedies of the
Debtor, and all moneys and claims for money due or to become due to the Debtor,
under any contracts of the Debtor, and any amendments, supplements, extensions,
and renewals thereof, including without limitation all rights and claims of the
Debtor now or hereafter existing: (i) under any insurance, indemnities,
warranties, and guarantees provided for or arising out of or in connection with
any of the foregoing contracts; (ii) for any damages arising out of or for
breach or default under or in connection with any of the foregoing contracts;
(iii) to all other amounts from time to time paid or payable under or in
connection with any of the foregoing contracts; or (iv) to exercise or enforce
any and all covenants, remedies, powers and privileges thereunder.
"Attorney Costs" means and includes all reasonable fees, out-of-pocket
expenses and disbursements of any law firm or other external counsel engaged by
the Secured Party, the reasonable allocated cost of internal legal counsel of
the Secured Party and all reasonable out-of-pocket expenses and disbursements of
internal counsel of the Secured Party.
"Collateral" has the meaning specified in section 2.1.
"Collateral Assignment" means that certain Collateral Assignment of
Intellectual Property Agreement of even date herewith by and between Debtor and
the Secured Party, as the same may be amended, restated, supplemented or
otherwise modified from time to time.
"Credit Documents" means the Credit Agreement (if executed by the Debtor
and Ahold), the Notes, the Collateral Assignment, this Agreement and all other
documents and instruments executed and delivered by the Debtor in connection
with, or to evidence or secure, the Obligations.
"Default" means an Event of Default or an event or circumstances which with
the giving of notice or lapse of time or both would be an Event of Default.
"Environmental Release" means a release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration of
Hazardous Materials into the indoor or outdoor environment or into or out of any
property, including the movement of Hazardous Materials through or in the air,
soil, surface water, ground water or other property.
"Equipment" means all of the Debtor's now owned and hereafter acquired
machinery, equipment, furniture, furnishings, fixtures, and other tangible
personal property (except Inventory), including without limitation motor
vehicles with respect to which a certificate of title has been issued, dies,
tools, jigs, and office equipment, as well as all of such types of property
leased by the Debtor and all of the Debtor's rights and interests with respect
thereto under such leases (including, without limitation, options to purchase);
together with all present and future additions and accessions thereto,
replacements therefor, component and auxiliary parts and supplies used or to be
used in connection therewith, and all substitutes for any of the foregoing, and
all manuals, drawings, instructions, warranties and rights with respect thereto;
wherever any of the foregoing is located.
"Financial Assets" means all of the Debtor's now owned or hereafter
acquired financial assets (as defined in the UCC).
"General Intangibles" means all of the Debtor's now owned or hereafter
acquired general intangibles (as defined in the UCC), including without
limitation the uniform resource locator, www.peapod.com, choses in action and
causes of action and all other intangible personal property of any Debtor of
every kind and nature (other than Accounts), including, without limitation, all
contract rights, corporate or other business records, Proprietary Rights,
inventions, designs, blueprints, plans, specifications, goodwill, computer
software, customer lists, registrations, licenses, franchises, tax refund
claims, any funds which may become due to the Debtor in connection with the
termination of any pension plan or other employee benefit plan or any rights
thereto and any other amounts payable to the Debtor from any pension plan or
other employee benefit plan, rights and claims against carriers and shippers,
rights to indemnification, business interruption insurance and proceeds thereof,
property, casualty or any similar type of insurance and any proceeds thereof,
proceeds of insurance covering the lives of key employees on which the Debtor is
beneficiary, and any letter of credit, guarantee, claim, security interest or
other security held by or granted to the Debtor.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"Inventory" means all of the Debtor's now owned and hereafter acquired
inventory (as such term is defined in the UCC) and any other goods, merchandise,
and other personal property, wherever located, to be furnished under any
contract of service or held for sale or lease, all returned goods, raw
materials, other materials and supplies of any kind, nature or description which
are or might be consumed in the Debtor's business or used in connection with the
packing, shipping, advertising, selling or finishing of such goods, merchandise
and such other personal property, and all documents of title or other documents
representing them.
"Investment Property" means all of the Debtor's now owned or hereafter
acquired investment property (as defined in the UCC) and includes the Debtor's
now owned or hereafter acquired rights, title and interests in and to any and
all: (a) securities, whether certificated or uncertificated, (b) security
entitlements, (c) securities accounts, (d) commodity contracts and (e) commodity
accounts (as such terms are defined in the UCC).
"Lien" means: (a) any interest in property securing an obligation owed to,
or a claim by, a Person other than the owner of the property, whether such
interest is based on the common law, statute, or contract, and including,
without limitation, a security interest, charge, claim, lien (including any lien
or charge arising from a mortgage or deed of trust), encumbrance, pledge,
hypothecation, assignment, deposit arrangement, agreement, security agreement,
conditional sale or trust receipt or a lease, consignment or bailment for
security purposes; and (b) to the extent not included under clause (a), any
reservation, exception, encroachment, easement, right-of-way, covenant,
condition, restriction, lease or other title exception or encumbrance affecting
property.
"Material Adverse Effect" means any change or effect (or any development
that, insofar as can reasonably be foreseen, is likely to result in any such
change or effect) or fact or condition (or any development that, insofar as can
reasonably be foreseen, is likely to result in any fact or condition) that is
(a) materially adverse to the business, properties, assets, financial condition
or results of operations of the Debtor taken as a whole, or Debtor and its
Subsidiaries taken as a whole, as the case may be, or (b) a material adverse
change in, or a material adverse effect upon the Collateral; provided, however,
that (i) any adverse change, effect or development that is caused by or results
from conditions affecting the United States economy generally or the economy of
any nation or region in which the Debtor or its Subsidiaries conducts business
that is material to the business of the Debtor and its Subsidiaries, taken as a
whole, shall not be taken into account in determining whether there has been (or
whether there could reasonably be foreseen) a "Material Adverse Effect" with
respect to the Debtor, (ii) any adverse change, effect or development that is
caused by or results from conditions generally affecting the industries in which
the Debtor conducts its business shall not be taken into account in determining
whether there has been (or whether there could reasonably be foreseen) a
"Material Adverse Effect" with respect to the Debtor, and (iii) any adverse
change, effect or development that is caused by or results from the announcement
or pendency of this Agreement, the other Credit Documents, the merger between
the Debtor (or any of its affiliates) and the Secured Party (or any of its
affilaites), or the transactions contemplated hereby shall not be taken into
account in determining whether there has been (or whether there could reasonably
be foreseen) a "Material Adverse Effect" with respect to the Debtor.
"Notes" means the Term Note and each other promissory note evidencing any
Loan.
"Obligations" means all present and future liabilities, obligations,
covenants, duties, and debts owing by the Debtor to the Secured Party under or
pursuant to or in connection with the Loans, the Notes, the Credit Agreement (if
executed by the Debtor and Ahold), this Agreement or any other Credit Documents,
whether or not evidenced by any note, or other instrument or document, whether
arising from an extension of credit, loan, advance, guaranty, indemnification or
otherwise, whether direct or indirect, absolute or contingent, due or to become
due, primary or secondary, as principal or guarantor, and including, without
limitation, all principal, interest, charges, out-of-pocket expenses, fees,
Attorney Costs, filing fees and any other sums chargeable to the Debtor
hereunder or under any of the other Credit Documents.
"Permitted Liens" means:
(i) the Secured Party's Liens;
(ii) Liens for taxes, provided that the payment of any such taxes
which are due and payable is being contested in good faith and by
appropriate proceedings diligently pursued, adequate financial reserves
have been established on the Debtor's books and records with respect
thereto, and a stay of enforcement of any such Lien is in effect;
(iii) Liens securing the claims or demands of materialmen, mechanics,
service providers, carriers, warehousemen, landlords and other like
Persons, provided that if any such Lien arises from the nonpayment of such
claims or demands when due, such claims or demands could not reasonably be
expected to have a Material Adverse Effect or are being contested in good
faith by appropriate proceedings diligently pursued, so long as adequate
financial reserves have been established on the Debtor's books with respect
thereto and a stay of enforcement of any such Lien is in effect;
(iv) reservations, exceptions, encroachments, easements, rights of
way, covenants, conditions, restrictions, leases, and other similar title
exceptions or encumbrances affecting any real estate of the Debtor;
provided that they do not in the aggregate materially detract from the
value of such real estate or materially interfere with its use in the
ordinary conduct of the Debtor's business;
(v) judgment, writs, warrants of attachment and other similar Liens
arising in connection with court proceedings, provided that any such
judgments, writs and warrants do not constitute an Event of Default under
the Term Note;
(vi) Liens described on Schedule 1 hereto;
(vii) Liens securing indebtedness that is incurred to pay or finance
the purchase price or cost of Equipment provided that (x) such Liens
encumber only the Equipment paid for or financed with the indebtedness so
secured and (y) such indebtedness does not exceed the acquisition cost of
such Equipment;
(viii) deposits made in the ordinary course of business in connection
with workers' compensation, unemployment insurance or other types of social
security benefits or to secure the performance of bids, tenders, sales,
contracts (other than for repayment of borrowed money), surety, appeal and
performance bonds; provided that the foregoing do not in the aggregate
materially detract from the value of the Debtor's assets or property taken
as a whole or materially impair the use thereof in the operation of the
businesses taken as a whole;
(ix) leases or subleases granted to others in the ordinary course of
business which do not interfere in any material respect with the business
of the Debtor taken as a whole; and
(x) any interest or title of the lessor in the property subject to any
operating lease entered into by the Debtor or any of its Subsidiaries in
the ordinary course of business.
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation, limited
liability company or other entity of kind or any governmental authority or
political subdivision, agency, department or instrumentality thereof.
"Premises" means all land, together with all buildings, improvements and
fixtures thereon and all tenements, hereditaments and appurtenances belonging or
in any way appertaining thereto now owned or leased or hereafter acquired or
leased by the Debtor including, without limitation, any interest arising from an
option to purchase or lease any Premises or any portion thereof.
"Proprietary Rights" means all of the Debtor's now owned and hereafter
arising or acquired: licenses, franchises, permits, patents, patent rights,
copyrights and copyrights applications (including without limitation all
software and related documentation), works which are the subject matter of
copyrights, trademarks, service marks, trade names, trade styles, corporate
names, brand names, slogans, patent, trademark and service mark applications,
trade secrets and inventions, and all licenses and rights related to any of the
foregoing, and all other rights under any of the foregoing, all extensions,
renewals, reissues, divisions, continuations, and continuations-in-part of any
of the foregoing, all goodwill associated with the foregoing and all rights to
sue for past, present and future infringement of any of the foregoing.
"Secured Party's Liens" means any Lien granted to the Secured Party
pursuant to this Agreement or any other Credit Document or under applicable law
and which secures the Obligations.
"UCC" means the Uniform Commercial Code (or any successor statute) as in
effect from time to time in the State of New York or in any other state the laws
of which are required to be applied with respect to the creation, validity,
attachment, perfection or priority of the Secured Party's Liens.
(b) References herein to any party hereto shall include its successors and
permitted assigns; references herein to any statute shall include all amendments
thereto and all successors statute; and reference herein to Sections or
Schedules are to Sections of or Schedules to this Agreement unless otherwise
specified.
Section 2. Collateral.
2.1 Grant of Security Interest. (a) As security for all present and future
Obligations, the Debtor hereby grants to the Secured Party a continuing security
interest in, lien on, and right of set-off against, all personal property and
fixtures of the Debtor, including without limitation all of the following
property of the Debtor, whether now owned or existing or hereafter acquired or
arising, regardless of where located:
(i) all Accounts of the Debtor (including all credit enhancements
therefor);
(ii) all Inventory of the Debtor;
(iii) all Equipment of the Debtor (provided that (x) the Debtor shall
not be required to record the Secured Party's Lien on any certificate of
title relating to any motor vehicle unless requested to do so by the
Secured Party and (y) no such security interest shall extend to any item of
Equipment to the extent that such Equipment is subject to a Permitted Lien
to which the Secured Party's Liens thereon would be subordinate and which
prohibits the grant of such security interest to the Secured Party);
(iv) all Assigned Contracts, letter of credit, chattel paper,
promissory notes, instruments and documents of title of the Debtor;
provided, that the Collateral shall not include any Assigned Contract in
respect of which the grant of the security contemplated by this Agreement
shall be prohibited by its terms; provided, however, that upon the
termination of such prohibitions for any reason whatsoever, the provisions
of this Section 2.1 shall be deemed to apply thereto automatically;
(v) all General Intangibles of the Debtor, including all Proprietary
Rights of the Debtor; provided, that the Collateral shall not include any
General Intangible in respect of which the grant of the security
contemplated by this Agreement shall be prohibited by its terms; provided,
however, that upon the termination of such prohibitions for any reason
whatsoever, the provisions of this Section 2.1 shall be deemed to apply
thereto automatically;
(vi) all Investment Property and Financial Assets of the Debtor;
(vii) to the extent not included in the foregoing, all claims which
the Debtor has against any other Person, including all amounts owing to the
Debtor by any Person for loans and advances made by the Debtor to such
Person;
(viii) all money, cash, cash equivalents, securities and other
property of any kind of the Debtor held directly or indirectly by, or under
the control of, the Secured Party or any affiliates thereof or by a bailee
thereof;
(ix) all deposit accounts, credits and balances of the Debtor with,
and other claims of the Debtor against, the Secured Party, any of its
affiliates or any other Person;
(x) all books, records and other property related to or referring to
any of the foregoing, including, without limitation, books, records,
account ledgers, data processing records, computer software and other
property at any time evidencing or relating to any of the foregoing; and
(xi) all accessions to, substitutions for and replacements, products
and proceeds of any of the foregoing, including, but not limited to,
proceeds of any insurance policies, claims against third parties, and
condemnation or requisition payments with respect to all or any of the
foregoing.
All of the foregoing, and all other property of the Debtor in which the Secured
Party may at any time be granted a Lien to secure the Obligations, is herein
collectively referred to as the "Collateral."
(b) All of the Obligations shall be secured by all of the Collateral. The
Secured Party may in its sole discretion, (i) exchange, waive or release any of
the Collateral, and (ii) when any payment Event of Default exists (x) apply
Collateral and direct the order or manner of sale thereof as the Secured Party
may determine, and (y) settle, compromise, collect, or otherwise liquidate any
Collateral in any manner, all without affecting the Obligations or the Secured
Party's right to take any other action with respect to any other Collateral.
2.2 Perfection and Protection of Security Interest. (a) The Debtor shall,
at its expense, perform all steps requested by the Secured Party in writing at
any time to perfect, maintain, protect, and enforce the Secured Party's Liens,
including, without limitation: (i) executing and filing financing or
continuation statements, and amendments thereof, in form and substance
satisfactory to the Secured Party; (ii) delivering to the Secured Party the
originals of all instruments, documents, and chattel paper, and all other
Collateral of which the Secured Party determines it should have physical
possession in order to perfect and protect the Secured Party's security interest
therein, duly pledged, endorsed or assigned to the Secured Party without
restriction; provided, however, that if no Event of Default exists the Secured
Party will at the Debtor's request promptly, and in any event, within 5 days
following receipt of request therefor, redeliver any such promissory notes and
instruments to the Debtor as the Debtor may reasonably require in order to
enforce its rights thereunder in the ordinary course of business; (iii)
delivering to the Secured Party warehouse receipts covering any portion of the
Collateral located in warehouses and for which warehouse receipts are issued;
(iv) placing notations on the Debtor's books of account to disclose the Secured
Party's security interest; (v) delivering to the Secured Party all letters of
credit on which the Debtor is named beneficiary and which provide for or relates
to payment of any Account; and (vi) taking such other steps as are deemed
reasonably necessary or desirable by the Secured Party to maintain and protect
the Secured Party's Liens. To the extent permitted by applicable law, the
Secured Party may file, without the Debtor's signature, one or more financing
statements disclosing the Secured Party's Liens or may sign any such financing
statements in the name of the Debtor. The Debtor agrees that a carbon,
photographic, photostatic, or other reproduction of this Agreement or of a
financing statement is sufficient as a financing statement.
(b) If any Collateral is at any time in the possession or control of any
warehouseman, bailee or the Debtor's agents or processors, then the Debtor shall
notify the Secured Party thereof and, if so requested by the Secured Party,
shall notify such Person of the Secured Party's security interest in such
Collateral and, during the existence of a Default upon the Secured Party's
request in writing, instruct such Person to hold all such Collateral for the
Secured Party's account subject to the Secured Party's instructions. If at any
time any Collateral is located on any facility of the Debtor which is not owned
by the Debtor, then the Debtor shall, at the written request of the Secured
Party, use commercially reasonable efforts (including without limitation
enforcing lease obligations) to obtain written waivers, in form and substance
satisfactory to the Secured Party, of all present and future Liens to which the
owner or lessor of such premises may be entitled to assert against the
Collateral.
(c) From time to time, the Debtor shall, upon the Secured Party's written
request, execute and deliver confirmatory written instruments pledging to the
Secured Party, the Debtor's interest in any item of Collateral, but the Debtor's
failure to do so shall not affect or limit the Secured Party's security interest
or the Secured Party's other rights in and to any Collateral. So long as this
Agreement is in effect and until all Obligations have been fully satisfied, the
Secured Party's Liens shall continue in full force and effect in all Collateral.
2.3 Location of Offices and Collateral. The Debtor represents and warrants
to the Secured Party that: (a) as of the date hereof Schedule 2.3 is a correct
and complete list of the Debtor's chief executive office, the location of its
books and records, the locations of the Collateral, and the locations of all of
its other places of business of the Debtor; and (b) Schedule 2.3 correctly
identifies any of such facilities and locations that are not owned by the
Debtor. The Debtor covenants and agrees that it will not (i) maintain any
Collateral at any location other than those locations listed for the Debtor on
Schedule 2.3 or in transit to such locations, (ii) otherwise change or add to
any of such locations, or (iii) change the location of its chief executive
office from the location identified in Schedule 2.3, unless it gives the Secured
Party at least thirty (30) days' prior written notice thereof and executes any
and all financing statements and other documents that the Secured Party
reasonably requests in writing in connection therewith. The Debtor shall not in
any event change its chief executive office to a location outside the United
States.
2.4 Title to, Liens on, and Sale and Use of Collateral. The Debtor
represents and warrants to the Secured Party and agrees with the Secured Party
that: (a) all of the Collateral is and will continue to be owned by the Debtor
free and clear of all Liens whatsoever, except for Permitted Liens; (b) the
Secured Party's Liens in the Collateral of the Debtor will not be subject to any
prior Lien, except Permitted Liens; (c) the Debtor will use, store, and maintain
the Collateral with all reasonable care and will use such Collateral for lawful
purposes only; and (d) the Debtor will not, without the Secured Party's prior
written approval, sell, or dispose of or permit the sale or disposition of any
of the Collateral except for sales of Inventory in the ordinary course of
business and sales of Equipment as permitted by Section 2.11(c). The inclusion
of proceeds in the Collateral shall not be deemed to constitute the Secured
Party's consent to any sale or other disposition of the Collateral except as
expressly permitted herein.
2.5 Appraisals. [Intentionally Omitted]
2.6 Access and Examination; Confidentiality. (a) No more than once every
four (4) months (and at any time when a Default exists), the Secured Party may
at all reasonable times and upon reasonable notice, have access to, examine,
audit, make extracts from or copies of and inspect any or all of the Debtor's
records, files, and books of account and the Collateral, and discuss the
Debtor's affairs with the Debtor's officers, management and internal and
external auditors and accountants. The Debtor will deliver to the Secured Party
any instrument necessary for the Secured Party to obtain records from any
service bureau maintaining records for the Debtor. The Secured Party may, at any
time when a Default exists, and at the Debtor's expense, make copies of all of
the Debtor's books and records, or require the Debtor to deliver such copies to
the Secured Party. The Secured Party may, without expense to the Secured Party,
but (unless an Event of Default exists) without materially disrupting the
Debtor's business, use such of the Debtor's personnel, supplies, and premises as
may be reasonably necessary for maintaining or enforcing the Secured Party's
Liens. The Secured Party shall have the right, at any time, in the Secured
Party's name or in the name of a nominee of the Secured Party, to verify with
commercially reasonable frequency the validity, amount or any other matter
relating to the Accounts, Inventory or other Collateral, by mail, telephone or
otherwise.
(b) The Secured Party agrees to take normal and reasonable precautions and
exercise due care to maintain the confidentiality of all information identified
as "confidential" or "secret" by the Debtor and provided to or obtained by the
Secured Party or by or on behalf of the Debtor under this Agreement or any other
Credit Document, and neither the Secured Party nor any of their respective
Affiliates shall use any such information other than in connection with or in
enforcement of this Agreement and the other Credit Documents, except to the
extent that such information (i) was or becomes generally available to the
public other than as a result of disclosure by the Secured Party, or (ii) was or
becomes available on a nonconfidential basis from a source other than the
Debtor, provided that such source is not bound by a confidentiality agreement
with the Debtor known to the Secured Party; provided, however, that the Secured
Party may disclose such information (1) at the request or pursuant to any
requirement of any governmental authority to which the Secured Party is subject
or in connection with an examination of the Secured Party by any such
governmental authority; (2) pursuant to subpoena or other court process; (3)
when required to do so in accordance with the provisions of any applicable
requirement of law; (4) to the extent reasonably required in connection with any
litigation or proceeding (including, but not limited to, any bankruptcy
proceeding) to which the Secured Party, or their respective affiliates may be
party; provided that, to the extent practicable, the Debtor has had reasonable
notice of such litigation or proceeding and shall be afforded a reasonable
opportunity to raise its objections to disclosure in such litigation or
proceeding; (5) to the extent reasonably required in connection with the
exercise of any remedy hereunder or under any other Credit Document; (6) to the
Secured Party's independent auditors, accountants, attorneys and other
professional advisors; (7) to any affiliate of the Secured Party and to any
participant in or assignee of, or potential participant in or assignee of, the
Secured Party's rights and obligations under the Note, provided that such
affiliate, participant or assignee agrees to keep such information confidential
to the same extent required of the Secured Party hereunder; and (8) as expressly
permitted under the terms of any other document or agreement regarding
confidentiality to which a Debtor is party or is deemed party with the Secured
Party. The Secured Party shall have no liability for the breach by any other
Person of the provisions of this Section 2.6.]
2.7 Collateral Reporting. No more than once each quarter (and at any time
upon the Secured Party's request following the occurrence and during the
continuance of an Event of Default), the Debtor shall promptly provide the
Secured Party upon its written request with the following documents, in form
satisfactory to the Secured Party: (a) an aging of the Debtor's Accounts; (b)
Inventory reports; (c) copies of invoices in connection with the Debtor's
Accounts, customer statements, credit memos, remittance advices and reports,
deposit slips, shipping and delivery documents in connection with the Debtor's
Accounts and for Inventory and Equipment acquired by the Debtor, purchase orders
and invoices; (d) such other reports as to the Collateral as the Secured Party
shall reasonably request in writing from time to time; and (e) with the delivery
of each of the foregoing, a certificate of an officer of the Debtor certifying
the accuracy and completeness of the foregoing. If any of the Debtor's records
or reports of the Collateral are prepared by an accounting service or other
agent, the Debtor hereby authorizes such service or agent to deliver such
records, reports, and related documents to the Secured Party, upon its written
request following the occurrence and during the continuance of an Event of
Default.
2.8 Accounts. (a) The Debtor hereby represents and warrants to the Secured
Party, with respect to the Debtor's Accounts, that: (i) each existing Account
is, and each future Account will be, owned by the Debtor free and clear of all
Liens other than Permitted Liens, (ii) each existing Account represents, and
each future Account will represent, a bona fide sale or lease and delivery of
goods by the Debtor, or rendition of services by the Debtor, in the ordinary
course of the Debtor's business; (iii) each existing Account is, and each future
Account will be, for a liquidated amount payable by the Account Debtor thereon
on the terms set forth in the invoice therefor or in the schedule thereof
delivered to the Secured Party, without any offset, deduction, defense, or
counterclaim except those known to the Debtor and disclosed to the Secured Party
in accordance with this Agreement; (iv) no payment will be received with respect
to any Account, and no credit, discount, or extension, or agreement therefor
will be granted on any Account, except in the ordinary course of business or as
reported to the Secured Party in accordance with this Agreement; (v) each copy
of any invoice relating to an Account and delivered to the Secured Party by the
Debtor will be a genuine copy of the original invoice sent to the Account Debtor
named therein; and (vi) all goods described in each invoice will have been
delivered to the Account Debtor and all services described in each invoice will
have been performed.
(b) The Debtor shall not re-date any invoice or sale or make sales on
extended dating beyond that customary in the Debtor's business or extend or
modify any Account except in the ordinary course of business. If the Debtor
becomes aware of any matter adversely affecting the collectibility of any
Account or Accounts of any Account Debtor involving in the aggregate an amount
greater than $50,000, including information regarding the Account Debtor's
creditworthiness, the Debtor will promptly so advise the Secured Party.
(c) The Debtor shall not accept any promissory note or other instrument in
excess of $100,000 in aggregate amount or maturing more than 12 months after the
issuance date thereof, except a check or other instrument for the immediate
payment of money, with respect to any Account without the Secured Party's
written consent, and the Debtor shall notify the Secured Party of any such
promissory notes in excess of $100,000 delivered to the Debtor in respect of any
Account; provided that if an Event of Default exists, the Debtor shall not
accept any such note or instrument (regardless of amount) without the consent of
the Secured Party. Any such note or instrument shall be considered as evidence
of the Account and not payment thereof and the Debtor will promptly deliver any
such instrument in excess of $100,000 (and, if an Event of Default exists, all
such notes and instruments) to the Secured Party, endorsed by the Debtor to the
Secured Party in a manner satisfactory in form and substance to the Secured
Party. Regardless of the form of presentment, demand or notice of protest with
respect thereto, the Debtor shall remain liable on any such note or instrument
pledged by it to the Secured Party, up to the amount of the outstanding
Obligations, until such instrument is paid in full.
(d) The Debtor shall notify the Secured Party promptly of all disputes and
claims with any Account Debtors in excess of $50,000, individually, or $100,000
in the aggregate for all Account Debtors, and the Debtor agrees to settle,
contest, or adjust such dispute or claim at no expense to the Secured Party. No
discount, credit or allowance shall be granted to any such Account Debtor
without the Secured Party's prior written consent, except for discounts, credits
and allowances made or given in the ordinary course of the Debtor's business
when no Event of Default exists hereunder. The Secured Party may, at all times
when an Event of Default exists, settle or adjust disputes and claims directly
with Account Debtors for amounts and upon terms which the Secured Party, shall
consider advisable and, in all cases, the Secured Party will credit the
Obligations with only the net amounts received by the Secured Party in payment
of any Accounts of the Debtor.
(e) If an Account Debtor returns any Inventory to the Debtor when no Event
of Default exists, then the Debtor shall, to the extent consistent with past
practice, promptly determine the reason for such return and shall issue a credit
memorandum to the Account Debtor in the appropriate amount. The Debtor shall
immediately report to the Secured Party any return involving an amount in excess
of $100,000. Each such report shall indicate the reasons for the returns and the
locations and condition of the returned Inventory. All returned Inventory shall
be subject to the Secured Party's Liens thereon.
2.9 Collection of Accounts; Payments. Beginning on or after the Maturity
Date, (a) until the Secured Party notifies the Debtor to the contrary, the
Debtor shall make collection of all Accounts and other Collateral for the
Secured Party, shall receive all payments as the Secured Party's trustee, and
shall, if so requested in writing by the Secured Party, immediately deliver all
payments in their original form duly endorsed in blank to the Secured Party or,
during the existence of a Default if so requested in writing by the Secured
Party, shall deposit the same into a blocked deposit account established for the
Debtor at a bank acceptable to the Secured Party and subject to documentation
reasonably acceptable to the Secured Party. When an Event of Default exists, if
the Debtor is so requested in writing by the Secured Party, the Debtor shall
establish a lock-box service for collections of Accounts at a bank acceptable to
the Secured Party and pursuant to documentation reasonably satisfactory to the
Secured Party. If such lock-box service is established, the Debtor shall
instruct all Account Debtors to make all payments directly to the address
established for such service. If, notwithstanding such instructions, the Debtor
receives any proceeds of Accounts, it shall receive such payments as the Secured
Party's trustee, and shall immediately deliver such payments to the Secured
Party in their original form duly endorsed in blank. All collections received in
any such lock-box or blocked deposit account or directly by the Secured Party,
and all funds in any blocked deposit account to which such collections are
deposited shall be subject to the Secured Party's sole control. The Secured
Party or the Secured Party's designee may, at any time when an Event of Default
exists, notify Account Debtors that the Accounts have been assigned to the
Secured Party and of the Secured Party's security interest therein, and may
collect them directly and charge the collection costs and out-of-pocket expenses
to the Debtor. So long as an Event of Default has occurred and is continuing,
the Debtor, at the Secured Party's written request, shall execute and deliver to
the Secured Party such documents as the Secured Party shall require to grant the
Secured Party access to any post office box in which collections of Accounts are
received.
(b) If sales of Inventory are made for cash, the Debtor shall, if so
requested by the Secured Party in writing, immediately deliver to the Secured
Party or deposit into a blocked deposit account the cash which the Debtor
receives.
(c) All payments (including funds received by the Secured Party at a bank
designated by it) received by the Secured Party on the Accounts of the Debtor or
as proceeds of other Collateral solely in an amount up to the then aggregate
amount of the Obligations will be the Secured Party's sole property for its
benefit and will be credited to the Obligations (conditional upon final
collection upon receipt by the Secured Party), and any excess thereof shall be
the sole property of the Debtor and shall be immediately delivered to and/or
deposited for the account of, the Debtor.
2.10 Inventory. The Debtor represents and warrants to the Secured Party and
agrees with the Secured Party that all of the Inventory owned by the Debtor is
and will be held for sale or lease, or to be furnished in connection with the
rendition of services, in the ordinary course of the Debtor's business, and is
and will be fit for such purposes. The Debtor will keep its Inventory in good
and marketable condition, at its own expense. The Debtor will not, without the
prior written consent of the Secured Party (which consent shall not be
unreasonably withheld), acquire or accept any Inventory on consignment or
approval. The Debtor agrees that all Inventory, if any, produced by any Debtor
in the United States will be produced in accordance with the Federal Fair Labor
Standards Act of 1938, as amended, and all rules, regulations, and orders
thereunder. The Debtor will conduct a physical count of the Inventory at least
once per fiscal year (and at any time upon the Secured Party's request following
the occurrence and during the continuance of an Event of Default), without
materially disrupting the business, at such other times as the Secured Party
reasonably requests in writing. The Debtor will not, without the Secured Party's
written consent (which consent shall not be unreasonably withheld), sell any
Inventory on a bill-and-hold, guaranteed sale, sale or return, sale on approval,
consignment, or other repurchase or return basis.
2.11 Equipment. (a) The Debtor represents and warrants to the Secured Party
and agrees with the Secured Party that all of the Equipment owned by the Debtor
that is material to the day-to-day operations of the Debtor's business is and
will be used or held for use in the Debtor's business, and is and will be fit
for such purposes. The Debtor shall keep and maintain its Equipment in good
operating condition and repair (ordinary wear and tear excepted) and shall make
all necessary replacements thereof.
(b) The Debtor shall promptly inform the Secured Party of any material
additions to or deletions from the Equipment. The Debtor shall not permit any
Equipment to become a fixture with respect to real property or to become an
accession with respect to other personal property with respect to which real or
personal property the Secured Party does not have a first priority Lien. The
Debtor will not, without the Secured Party's prior written consent (which
consent shall not be unreasonably withheld), alter or remove any identifying
symbol or number on any of the Debtor's Equipment constituting Collateral.
(c) The Debtor shall not, without the Secured Party's prior written
consent, sell, lease as a lessor, or otherwise dispose of any of the Debtor's
Equipment; provided, however, that the Debtor may dispose of Equipment to the
extent permitted by the Term Note and the Credit Agreement (if the same is
executed by the Debtor and Ahold); and provided, further, that the Debtor may
dispose of obsolete, unusable or non-useful Equipment without the Secured
Party's consent, subject to the conditions set forth in the next sentence. In
the event any of such Equipment is sold, transferred or otherwise disposed of
pursuant to the second proviso contained in the immediately preceding sentence,
(1) if such sale, transfer or disposition is effected without replacement of
such Equipment, or such Equipment is replaced by Equipment leased by the Debtor
or by Equipment purchased by the Debtor subject to a Permitted Lien, which
replacement in either case, may occur up to thirty (30) days following the date
of such sale, transfer or disposition, then the Debtor shall deliver all of the
cash proceeds of any such sale, transfer or disposition to the Secured Party,
and (2) if such sale, transfer or disposition is made in connection with the
purchase by the Debtor of replacement Equipment, then the Debtor shall use the
proceeds of such sale, transfer or disposition to purchase such replacement
Equipment within thirty (30) days after such disposition and shall deliver to
the Secured Party written evidence of the use of the proceeds for such purchase.
All replacement Equipment purchased by the Debtor shall be free and clear of all
Liens except Permitted Liens.
2.12 Assigned Contracts. The Debtor shall fully perform all of its
obligations under each of the Assigned Contracts, and shall enforce all of its
material rights and remedies thereunder. Without limiting the generality of the
foregoing, the Debtor shall take all action reasonably necessary or appropriate,
as determined solely by the Debtor, to permit, and shall not take any action
which would have any materially adverse effect upon, the full enforcement of all
indemnification rights under the Assigned Contracts. The Debtor shall notify the
Secured Party in writing, promptly after the Debtor becomes aware thereof, of
any event or fact which could give rise to a claim by it for indemnification
under any of the material Assigned Contracts, and shall diligently pursue, as it
deems appropriate, such right and report to the Secured Party on all further
developments with respect thereto. The Debtor shall remit directly to the
Secured Party for application to the Obligations in such order as the Secured
Party shall determine, all amounts received by the Debtor as indemnification or
otherwise pursuant to its Assigned Contracts. If the Debtor shall fail after the
Secured Party's demand to pursue diligently any right under the material
Assigned Contracts, or an Event of Default then exists, the Secured Party may
directly enforce such right in its own or the Debtor's name and may enter into
such settlements or other agreements with respect thereto as the Secured Party,
shall determine. In any suit, proceeding or action brought by the Secured Party
under any Assigned Contract for any sum owing thereunder or to enforce any
provision thereof, the Debtor shall indemnify, defend and hold the Secured Party
harmless from and against all expense (including without limitation Attorney
Costs), loss or damage suffered by reason of any defense, setoff, counterclaims,
recoupment, or reduction of liability whatsoever of the obligor thereunder
arising out of a breach by the Debtor of any obligation thereunder or arising
out of any other agreement, indebtedness or liability at any time owing from the
Debtor to or in favor of such obligor or its successors. All obligations of the
Debtor under an Assigned Contract shall be and remain enforceable only against
the Debtor and shall not be enforceable against the Secured Party.
Notwithstanding any provision hereof to the contrary, the Debtor shall at all
times remain liable to observe and perform all of its material duties and
obligations under the Assigned Contracts, and the Secured Party's exercise of
any of its rights with respect to the Collateral shall not release the Debtor
from any of such duties and obligations. The Secured Party shall not be
obligated to perform or fulfill the Debtor's duties or obligations under the
Assigned Contracts or to make any payment thereunder, or to make any inquiry as
to the nature or sufficiency of any payment or property received by it
thereunder or the sufficiency of performance by any party thereunder, or to
present or file any claim, or to take any action to collect or enforce any
performance, any payment of any amounts, or any delivery of any property.
2.13 Documents, Instruments, and Chattel Paper. The Debtor represents and
warrants to the Secured Party that (a) all documents, instruments, and chattel
paper, if any, describing, evidencing, or constituting Collateral, and all
signatures and endorsements thereon, are and will be complete, valid, and
genuine in all material respects, and (b) all goods evidenced by such documents,
instruments, and chattel paper are and will be owned by the Debtor, free and
clear of all Liens other than Permitted Liens.
2.14 Right to Cure. The Secured Party may, in its discretion, pay any
amount or do any act required of the Debtor hereunder in order to preserve,
protect, maintain or enforce the Obligations of the Debtor, the Collateral or
the Secured Party's Liens therein, and which the Debtor fails to pay or do after
reasonable prior notice from the Secured Party (which in any event need not be
longer than 10 days), including, without limitation, payment of any judgment
against the Debtor, any insurance premium, any warehouse charge, any finishing
or processing charge, any landlord's claim, and any other Lien upon or with
respect to the Collateral. The Debtor shall immediately upon demand reimburse
the Secured Party for all payments that the Secured Party makes under this
Section 2.14 and all out-of-pocket costs and expenses that the Secured Party
pays or incurs in connection with any action taken by the Secured Party
hereunder with respect to the Obligations or the Collateral, and such
reimbursement obligation shall be added to the Debtor's Obligations. Any payment
made or other action taken by the Secured Party under this Section 2.14 shall be
without prejudice to any right to assert an Event of Default under Credit
Document and to proceed thereafter as herein provided.
2.15 Power of Attorney. During the existence of a Default, the Debtor
hereby appoints the Secured Party and the Secured Party's designee as the
Debtor's attorney, with power: (a) to endorse the Debtor's name on any checks,
notes, acceptances, money orders, or other forms of payment or security that
come into the Secured Party's possession; (b) to sign the Debtor's name on any
invoice, bill of lading, warehouse receipt or other document of title relating
to any Collateral, on drafts against customers, on assignments of Accounts, on
notices of assignment, financing statements and other public records; (c) so
long as there exists any Event of Default, to notify the post office authorities
to change the address for delivery of the Debtor's mail to an address designated
by the Secured Party and to receive, open and dispose of all mail addressed to
the Debtor; (d) to send requests for verification of Accounts to customers or
Account Debtors; (e) to clear Inventory through customs in the Debtor's name,
the Secured Party's name or the name of the Secured Party's designee, and to
sign and deliver to customs officials powers of attorney in the Debtor's name
for such purpose; and (f) to do all things necessary to carry out this
Agreement. The Debtor ratifies and approves all acts of such attorney. The
Secured Party will not be liable for any acts or omissions or for any error of
judgment or mistake of fact or law except for its gross negligence or willful
misconduct. This power, being coupled with an interest, is irrevocable until
this Agreement has been terminated and the Obligations have been fully
satisfied.
2.16 The Secured Party's Rights, Duties and Liabilities. The Debtor assumes
all responsibility and liability arising from or relating to the use, sale or
other disposition of the Collateral. Neither the Secured Party, nor any of its
officers, directors, employees or agents, shall be liable or responsible in any
way for the safekeeping of any of the Collateral, or for any loss or damage
thereto, or for any diminution in the value thereof, or for any act of default
of any warehouseman, carrier, forwarding agency or other person whomsoever, all
of which shall be at the Debtor's sole risk except that in the case of any
Collateral in the Secured Party's possession, the Secured Party shall use the
same degree of care in the respect thereto as it uses with respect to its own
property. The Obligations shall not be affected by any failure of the Secured
Party to take any steps to perfect the Secured Party's Liens or to collect or
realize upon the Collateral, nor shall loss of or damage to the Collateral
release any Debtor from any of the Obligations. So long as there exists any
Event of Default, the Secured Party may (but shall not be required to), without
notice to or consent from the Debtor, sue upon or otherwise collect, extend the
time for payment of, modify or amend the terms of, compromise or settle for
cash, credit, or otherwise upon any terms, grant other indulgences, extensions,
renewals, compositions, or releases, and take or omit to take any other action
with respect to the Collateral, any security therefor, any agreement relating
thereto, any insurance applicable thereto, or any Person liable directly or
indirectly in connection with any of the foregoing, without discharging or
otherwise affecting the liability of the Debtor for the Obligations or under
this Agreement, any other Credit Document or any other agreement now or
hereafter existing between the Secured Party and the Debtor.
Section 3. Information and Notices.
3.1 Information. The Debtor shall promptly deliver to the Secured Party all
such information regarding the financial and business affairs, operations,
and/or conditions of the Debtor as the Secured Party shall reasonably request in
writing, and shall notify its accountants and auditors that the Secured Party is
authorized to obtain such information directly from them.
3.2 Notices to Secured Party. The Debtor shall notify the Secured Party, in
writing, of the following matters at the following times:
(a) Promptly, and in any event within five (5) days, after becoming
aware of any Event of Default.
(b) Promptly, and in any event within five (5) days, after becoming
aware of any material adverse change in the Collateral.
(c) Promptly, and in any event within five (5) days, after becoming
aware of any pending or threatened action, suit, proceeding, or
counterclaim by any Person, or any pending or threatened investigation by a
Governmental Authority which may have a material adverse effect on the
Collateral.
(d) Promptly, and in any event within five (5) days, after becoming
aware of any pending or threatened strike, work stoppage, unfair labor
practice claim, or other labor dispute affecting any Debtor or any of its
Subsidiaries in a manner which could reasonably be expected to have a
material adverse effect on the Collateral.
(e) Promptly, and in any event within five (5) days, after becoming
aware of any violation of any law, statute, regulation, or ordinance of a
governmental Authority affecting the Debtor or any Subsidiary or affiliate
thereof which could reasonably be expected to have a material adverse
effect on the Collateral.
(f) Promptly, and in any event within five (5) days, after receipt of
any notice of any violation by the Debtor or any Subsidiary thereof of any
Environmental Law which could reasonably be expected to have a material
adverse effect on the Collateral or that any Governmental Authority has
asserted that the Debtor or any Subsidiary thereof is not in compliance
with any Environmental Law or is investigating the Debtor's or such
Subsidiary's compliance therewith.
(g) Promptly, and in any event within five (5) days, after receipt of
any written notice that the Debtor or any Subsidiary thereof is or may be
liable to any Person as a result of an Environmental Release or threatened
Environmental Release of any Hazardous Materials or that the Debtor or any
Subsidiary thereof is subject to investigation by any Governmental
Authority evaluating whether any remedial action is needed to respond to an
Environmental Release or threatened Environmental Release of any Hazardous
Materials which, in either case, is reasonably likely to give rise to
liability in excess of $100,000 or have a material adverse effect on the
Collateral.
(h) Promptly, and in any event within five (5) days, after receipt of
any written notice of the imposition of any Environmental Lien against any
property of the Debtor or any of its Subsidiaries which could reasonably be
expected to have a material adverse effect on the Debtor or the Collateral.
(i) Any change in the Debtor's name, state of incorporation, or form
of organization, trade names or styles under which the Debtor will sell
Inventory or create Accounts, or to which instruments in payment of
Accounts may be made payable, in each case at least thirty (30) days prior
thereto.
Each notice given under this Section 3 shall describe the subject matter
thereof in reasonable detail, and shall set forth the action that the Debtor has
taken or proposes to take with respect thereto.
Section 4. Events of Default. The occurrence of any one or more of the
following events or circumstance shall constitute an "Events of Default"
hereunder:
(a) the Debtor shall fail to pay in full when due any amount payable
by the Debtor hereunder or under any other Credit Document, subject to
applicable cure periods as may be agreed upon, if any;
(b) the Debtor shall default in the performance or observance of any
other covenant, agreement or obligation of the Debtor hereunder and such
default shall continue for 30 days after the Debtor receives notice thereof
from the Secured Party;
(c) any representation or warranty made or deemed to be made by the
Debtor hereunder or under any other Credit Document or any certificate,
financial statement or report furnished by the Debtor pursuant hereto or
thereto shall prove to be untrue in any material respect when made, deemed
made or furnished;
(d) this Agreement shall cease to be in full force and effect or the
Debtor shall assert that this Agreement, the Note or any other Credit
Document to which the Debtor is a party is not binding upon it; or
(e) there shall occur any Event of Default under (and as defined in)
the Note or (if executed by the Debtor and Ahold) the Credit Agreement or
any other Credit Document.
Section 5. Remedies.
5.1 Remedies of Secured Party. Except to the extent otherwise provided in
the Credit Agreement (if executed by the Debtor and Ahold), upon the occurrence
and during the continuance of an Event of Default: (i) the Secured Party shall
have, in addition to all other rights hereunder or under any other Credit
Document, the rights and remedies of a secured party under the UCC and other
applicable law; (ii) the Secured Party may, at any time, take possession of the
Collateral and keep it on the Debtor's premises, at no cost to the Secured
Party, or remove any part of it to such other place or places as the Secured
Party may desire, or the Debtor shall, upon the Secured Party's demand, at the
Debtor's cost, assemble the Collateral and make it available to the Secured
Party at a place specified by the Secured Party; and (iii) the Secured Party may
sell and deliver any Collateral at public or private sales, for cash, upon
credit or otherwise, at such prices and upon such terms as the Secured Party
deems advisable, in its sole discretion, and may, if the Secured Party deems it
reasonable, postpone or adjourn any sale of the Collateral by an announcement at
the time and place of sale or of such postponed or adjourned sale without giving
a new notice of sale. Without in any way requiring notice to be given in the
following manner, the Debtor agrees that any notice by the Secured Party of
sale, disposition or other intended action hereunder or in connection herewith,
whether required by the UCC or otherwise, shall constitute reasonable notice to
the Debtor if such notice is mailed by registered or certified mail, return
receipt requested, postage prepaid, or is delivered personally against receipt,
at least ten (10) days prior to such action to the Debtor's address specified in
or pursuant to Section 7.9. If any Collateral is sold on terms other than
payment in full at the time of sale, no credit shall be given against the
Obligations until the Secured Party receives payment, and if the buyer defaults
in payment, the Secured Party may resell the Collateral without further notice
to the Debtor. In the event the Secured Party seeks to take possession of all or
any portion of the Collateral by judicial process, the Debtor irrevocably
waives: (i) the posting of any bond, surety or security with respect thereto
which might otherwise be required; (ii) any demand for possession prior to the
commencement of any suit or action to recover the Collateral; and (iii) any
requirement that the Secured Party retain possession and not dispose of any
Collateral until after trial or final judgment. The Debtor agrees that the
Secured Party has no obligation to preserve rights to the Collateral or marshal
any Collateral for the benefit of any Person. The Secured Party is hereby
granted a license or other right to use, without charge, the Debtor's labels,
patents, copyrights, name, trade secrets, trade names, trademarks, customer
lists and advertising matter, or any similar property, in completing production
of, advertising or selling any Collateral, and the Debtor's rights under all
licenses and all franchise agreements shall inure to the Secured Party's benefit
for such purpose. The proceeds of sale shall be applied first to all
out-of-pocket expenses of sale, including without limitation attorneys' fees,
and then to the Obligations in whatever order the Secured Party elects. The
Secured Party will return any excess to the Debtor or as a court may otherwise
direct, and the Debtor shall remain liable for any deficiency.
5.2 Debtor's Waiver of Rights and Claims. If an Event of Default occurs,
the Debtor hereby waives all rights to notice and hearing prior to the exercise
by the Secured Party of the Secured Party's rights to repossess the Collateral
without judicial process or to replevy, attach or levy upon the Collateral
without notice or hearing. The Debtor also waives all claims, damages and
demands against the Lender arising out of the repossession, retention or sale of
the Collateral or any part or parts thereof, except any such claims, damages and
demands arising out of the gross negligence or willful misconduct of the Lender.
Section 6. Representations and Warranties. The Debtor represents and
warrants to the Secured Party that:
6.1 Due Organization. The Debtor (a) is a corporation duly incorporated and
validly existing, in good standing, under the laws of its State of
incorporation, (ii) has the power and authority to own its property and assets
and to transaction the business in which it is engaged and (c) is duly qualified
and authorized to engage in business in each jurisdiction where the ownership by
it of property or the conduct by it of business makes such qualification and
authorization necessary, except where the failure to be so qualified and
authorized would not have a Material Adverse Effect.
6.2 Valid Execution; Binding Effect. The Debtor has the power to execute,
deliver and perform this Agreement and each of the other Credit Documents to
which it is a party and has taken all necessary corporate action to authorize
the execution, delivery and performance by it of this Agreement. The Debtor has
duly executed and delivered this Agreement, and this Agreement constitutes its
legal, valid and binding obligations enforceable in accordance with its terms,
subject, as to enforceability, to applicable bankruptcy, insolvency and similar
laws affecting creditors' rights generally and to general principals of equity
(regardless of whether enforcement is sought in a proceeding in equity or at
law).
6.3 No Violation. Neither the execution, delivery or performance by the
Debtor of this Agreement or of any other Credit Documents to which it is a
party, nor compliance by it with the terms and provisions hereof or thereof,
will (i) violate any provision of the certificate or articles of incorporation
or By-Laws of the Debtor, (ii) contravene any material provision of any law,
statute, rule or regulation or any order, writ, injunction or decree of any
court or Governmental Authority or (iii) conflict or be inconsistent with or
result in any breach of any of the terms, covenants, conditions or provisions
of, or constitute a default under, or result in the creation or imposition of
(or the obligation to create or impose) any Lien (other than the Secured Party's
Liens) upon any of the property or assets of the Debtor pursuant to the terms of
any agreement, contract or instrument to which the Debtor is a party or by which
it or any of its property or assets is bound or to which it may be subject.
6.4 No Consents. No order, consent, approval, license, authorization or
validation of, or filing, recording or registration with, or exemption by, any
Governmental Authority is required to authorize, or is otherwise required in
connection with (other than as have heretofore been obtained or made), (i) the
execution, delivery and performance by the Debtor of this Agreement or (b) the
legality, validity, binding effect or enforceability of this Agreement or the
Liens granted hereunder, except for the filing of UCC financing statements and
continuation statements with respect thereto in all jurisdictions specified by
the UCC, and the filing of all necessary recording instruments in respect of the
Debtor's intellectual property with the appropriate recording office.
6.5 Liens. This Agreement creates, in favor of the Secured Party, a valid
and (upon filing of UCC financing statements and other instruments with respect
thereto) perfected security interest in all Collateral owned by the Debtor,
subject to no other Liens (other than Permitted Liens).
Section 7. Miscellaneous.
7.1 Cumulative Remedies; No Prior Recourse to Collateral. The enumeration
herein of the Secured Party's rights and remedies is not intended to be
exclusive, and such rights and remedies are in addition to and not by way of
limitation of any other rights or remedies that the Secured Party may have under
any other Credit Document or under the UCC or other applicable law. The Secured
Party shall have the right, in its sole discretion, to determine which rights
and remedies are to be exercised and in which order. The exercise of one right
or remedy shall not preclude the exercise of any others, all of which shall be
cumulative. The Secured Party may, without limitation, proceed directly against
the Debtor to collect the Obligations without any prior recourse to the
Collateral, or any other obligor on the Obligations. No failure to exercise and
no delay in exercising, on the part of the Secured Party, any right, remedy,
power or privilege hereunder, shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege.
7.2 Illegality, Etc.. The illegality or unenforceability of the Note or any
other Credit Document or any instrument or agreement referred to herein shall
not in any way affect or impair the legality or enforceability of this
Agreement.
7.3 GOVERNING LAW; CHOICE OF FORUM; SERVICE OF PROCESS. (a) THIS AGREEMENT
SHALL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO
DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO ITS CHOICE OF LAW RULES THAT WOULD MAKE THE LAWS OF ANY OTHER JURISDICTION
APPLICABLE TO THIS AGREEMENT; PROVIDED THAT PERFECTION ISSUES UNDER ARTICLE 9 OF
THE UCC MAY, TO THE EXTENT REQUIRED BY SAID ARTICLE 9, BE DETERMINED UNDER
APPLICABLE CHOICE OR CONFLICT OF LAW RULES SET FORTH IN ARTICLES 9 OF THE UCC.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE
SOUTHERN DISTRICT OF NEW YORK (AND SHALL BE BROUGHT BY THE DEBTOR ONLY IN SAID
COURTS), AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT THE DEBTOR CONSENTS,
FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF
THOSE COURTS (AND ALL APPELLATE COURTS THEREFROM) IN ANY SUCH ACTION OR
PROCEEDING. THE DEBTOR IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION
TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH
COURTS IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO.
NOTWITHSTANDING THE FOREGOING, THE SECURED PARTY SHALL HAVE THE RIGHT TO BRING
ANY ACTION OR PROCEEDING AGAINST THE DEBTOR OR ITS PROPERTY IN THE COURTS OF ANY
OTHER JURISDICTION WHICH THE SECURED PARTY DEEMS NECESSARY OR APPROPRIATE IN
ORDER TO COLLECT THE OBLIGATIONS OR REALIZE ON THE COLLATERAL OR OTHER SECURITY
FOR THE OBLIGATIONS.
(c) THE DEBTOR HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON
IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY REGISTERED OR
CERTIFIED MAIL (RETURN RECEIPT REQUESTED) DIRECTED TO THE DEBTOR AT ITS ADDRESS
SET FORTH IN OR PURSUANT TO SECTION 7.9, AND SERVICE SO MADE SHALL BE DEEMED TO
BE COMPLETED FIVE (5) BUSINESS DAYS AFTER THE SAME SHALL HAVE BEEN SO DEPOSITED
IN THE U.S. MAILS POSTAGE PREPAID. NOTHING CONTAINED HEREIN SHALL AFFECT THE
RIGHT OF SECURED PARTY TO SERVE LEGAL PROCESS BY ANY OTHER MANNER PERMITTED BY
LAW.
7.4 WAIVER OF JURY TRIAL. THE DEBTOR HEREBY WAIVES ITS RIGHT TO A TRIAL BY
JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO
THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR
OTHERWISE. WITHOUT LIMITING THE FOREGOING, THE DEBTOR FURTHER AGREES THAT ITS
RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY
ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO
CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER CREDIT
DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT
AND THE OTHER CREDIT DOCUMENTS.
7.5 WAIVER OF CERTAIN CLAIMS. THE DEBTOR AGREES THAT IT WILL NOT ASSERT
AGAINST THE SECURED PARTY, AND HEREBY WAIVES, ANY CLAIM FOR CONSEQUENTIAL,
INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES IN CONNECTION WITH THIS AGREEMENT OR ANY
OF THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY.
7.6 Survival of Representations and Warranties. All of the Debtor's
representations and warranties contained in this Agreement shall survive the
execution, delivery, and acceptance thereof by the parties, notwithstanding any
investigation by the Secured Party or its agents.
7.7 Other Security and Guaranties. The Secured Party may, without notice or
demand and without affecting the Debtor's obligations hereunder, from time to
time: (a) take from any Person and hold collateral (other than the Collateral)
for the payment of all or any part of the Obligations and exchange, enforce or
release such collateral or any part thereof; and (b) accept and hold any
endorsement or guaranty of payment of all or any part of the Obligations and
release or substitute any such endorser or guarantor, or any Person who has
given any Lien in any other collateral as security for the payment of all or any
part of the Obligations, or any other Person in any way obligated to pay all or
any part of the Obligations.
7.8 Fees and Expenses; Interest. (a) The Debtor agrees, to pay to the
Secured Party, on demand, all reasonable costs and out-of-pocket expenses that
the Secured Party pays or incurs in connection with the administration (after
the occurrence and during the continuance of an Event of Default), enforcement
and termination of this Agreement, including, without limitation: (i) costs and
out-of-pocket expenses (including Attorneys Costs) paid or incurred to obtain
payment of the Obligations, enforce the Secured Party's Liens, sell or otherwise
realize upon the Collateral, and otherwise enforce the provisions of this
Agreement or to defend any claims made or threatened against the Secured Party
arising out of the transactions contemplated hereby (including, without
limitation, preparations for and consultations concerning any such matters);
(ii) costs and out-of-pocket expenses (including Attorney Costs) for any
amendment, supplement, waiver or consent in connection with this Agreement;
(iii) costs and out-of-pocket expenses of lien searches; (iv) taxes, fees and
other charges for filing financing statements and continuations, and other
actions to perfect, protect, and continue the Secured Party's Liens; (v) sums
paid or incurred to pay any amount or take any action required of the Debtor
under this Agreement that the Debtor fails to pay or take; (vi) costs of
inspections, and verifications of the Collateral, including, without limitation,
travel, lodging, and meals for inspections of the Collateral and the Debtor's
operations by the Secured Party; (vii) costs and out-of-pocket expenses of
collecting checks and other items of payment, and establishing and maintaining
blocked accounts and lock boxes; and (viii) costs and expenses of preserving and
protecting the Collateral. The foregoing shall not be construed to limit any
other provisions of the Credit Documents regarding costs and out-of-pocket
expenses to be paid by the Debtor.
(b) If the Debtor fails to pay when due any amount payable by it to the
Secured Party hereunder (including any reimbursement obligations of the Debtor
hereunder), after written notice thereof from the Secured Party, such unpaid
amount shall bear interest, payable by the Debtor on demand, at a rate per annum
equal to the rate borne by the Note on overdue amounts of principal.
7.9 Notices. Except as otherwise provided herein, all notices, demands and
requests that any party is required or elects to give to any other shall be in
writing and any such notice shall become effective (a) upon personal delivery
thereof, including, but not limited to, delivery by overnight mail and courier
service or (b) three (3) business days after it shall have been mailed by United
States mail, first class, certified or registered, with postage prepaid, in each
case addressed to the party to be notified as follows (provided that no notice
to the Secured party shall be effective until actually received by it):
If to BEW:
BEW, Inc.
19 Skelley Ave.
Weymouth, MA 02189
Attention: Anne J. Longo
if to Ahold:
Koninklijke Ahold NV
Albert Heijnweg 1
1507 EH Zaandam, The Netherlands
Attention: Ton van Tielraden, Esq.
if to the Debtor:
Peapod, Inc.
9933 Woods Drive
Skokie, Illinois 60077
Attention: Daniel Rabinowitz
or, as to any party, to such other address as such party shall designate for
itself by like notice to the other parties. Failure or delay in delivering
copies of any notice, demand, request, consent, approval, declaration or other
communication to the Persons designated above to receive copies shall not
adversely affect the effectiveness of such notice, demand, request, consent,
approval, declaration or other communication.
7.10 Waiver of Notices. Unless otherwise expressly provided herein, the
Debtor waives presentment, protest and notice of demand or dishonor and protest
as to any instrument and notice of intent to accelerate the Obligations, as well
as any and all other notices to which it might otherwise be entitled. No notice
to or demand on the Debtor which the Secured Party may elect to give shall,
except as otherwise expressly provided herein, entitle the Debtor to any or
further notice or demand in the same, similar or other circumstances.
7.11 Binding Effect. The provisions of this Agreement shall be binding upon
and inure to the benefit of the respective representatives, successors and
assigns of the parties hereto; provided, however, that no right or interest
herein or any obligation hereunder may be assigned by the Debtor without the
prior written consent of the Secured Party. The rights and benefits of the
Secured Party hereunder shall inure to the benefit of any successor thereto and,
if the Secured Party so agrees, to any Person acquiring any interest of the
Secured Party in the Obligations or any part thereof.
7.12 Indemnity of the Secured Party by the Debtor. [Intentionally Omitted]
7.13 Final Agreement; Amendments. This Agreement and the other Credit
Documents are intended by the Debtor and the Secured Party to be the final,
complete, and exclusive expression of the agreement between them. This
Agreement, together with the other Credit Documents, supersedes any and all
prior oral or written agreements relating to the subject matter hereof. No
modification, rescission, waiver, release, or amendment of any provision of this
Agreement shall be made, except by a written agreement signed by the Debtor and
the Secured Party.
7.14 Right of Setoff. In addition to any rights and remedies of the Secured
Party provided by law, the Secured Party is authorized at any time and from time
to time, without prior notice to the Debtor, any such notice being waived by the
Debtor to the fullest extent permitted by law, to set-off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held by, and other indebtedness at any time owing by, the Secured Party to or
for the credit or the account of the Debtor against any and all Obligations
owing to the Secured Party, now or hereafter existing, irrespective of whether
or not the Secured Party shall have made demand under this Agreement or any
Credit Document and although such Obligations may be contingent or unmatured.
The Secured Party agrees promptly to notify the Debtor after any such set-off
and application made by the Secured Party; provided, however, that the failure
to give such notice shall not affect the validity of such set-off and
application.
7.15 Severability. If any part of this Agreement is contrary to, prohibited
by or deemed invalid under any applicable law of any jurisdiction, such
provision shall, as to such jurisdiction, be inapplicable and deemed omitted to
the extent so contrary, prohibited or invalid, without invalidating the
remainder hereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
7.16 Section Headings. Section headings used in this Agreement are for
convenience only and shall not affect the construction of this Agreement.
7.17 Counterparts. This Agreement may be executed in any number of
counterparts and by the Secured Party and the Debtor in separate counterparts,
each of which shall be an original, but all of which shall together constitute
one and the same agreement. Delivery by a party by facsimile transmission of a
counterpart of this Agreement signed by such party shall be effective as a
manual delivery by such party of such counterpart.
7.18 Release of Collateral. Upon payment in full of all the Obligations and
the termination of the Notes and (if the Credit Agreement is executed by the
Debtor and Ahold) the termination of all obligations the Secured Party to make
loans to the Debtor, the Secured Party at the request of the Debtor shall
promptly, and in any event within 2 Weeks after the request therefor, execute,
deliver and file such instruments as the Debtor shall reasonably request (and at
the Debtor's expense) in order to reassign, release or terminate its security in
the Collateral.
7.19 References. Unless and until the Credit Agreement is executed by Ahold
and the Debtor and loans are made to Debtor thereunder, all references to the
"Secured Party" shall be to BEW. Upon execution of the Credit Agreement by Ahold
and Debtor and the repayment of the Term Loan and all other indebtedness owing
to BEW by Debtor under the Credit Documents, all references herein to the
"Secured Party" (except in Sections 2.16, 7.3, 7.4, 7.5 and 7.8) shall refer to
Ahold; provided, however, in the event BEW is required to return any such
payments to Debtor or trustee or receiver therefor, all references to the
"Secured Party" shall again include BEW.
[Remainder of this page intentionally left blank; signature pages follow]
<PAGE>
IN WITNESS WHEREOF, each party hereto has executed and delivered this
Agreement by its duly authorized officer as of the date first written above.
Debtor
PEAPOD, INC.
By: ___________________________________
Name: Dan Rabinowitz
Title: Senior VP and
Chief Financial Officer
<PAGE>
IN WITNESS WHEREOF, each party hereto has executed and delivered this
Agreement by its duly authorized officer as of the date first written above.
Secured Party
BEW, Inc.
By: ___________________________________
Name: Anne J. Longo
Title: President
<PAGE>
IN WITNESS WHEREOF, each party hereto has executed and delivered this
Agreement by its duly authorized officer as of the date first written above.
Secured Party
Koninklijke Ahold NV
By: ___________________________________
Name:
Title:
EX-10.6
AMENDED AND RESTATED COLLATERAL ASSIGNMENT
OF INTELLECTUAL PROPERTY
AMENDED AND RESTATED COLLATERAL ASSIGNMENT OF INTELLECTUAL PROPERTY dated
as of April 14, 2000 by PEAPOD, Inc., a Delaware corporation (the "Assignor"),
to BEW, Inc., a Delaware corporation ("BEW") and KONINKLIJKE AHOLD NV ("Ahold").
W I T N E S S E T H :
WHEREAS, BEW has made loans in the aggregate principal amount of U.S.
$3,000,000 (collectively, the "Term Loan") to the Assignor, such Term Loan being
evidenced by a promissory note dated April 5, 2000 made by the Assignor to the
order of the BEW in the principal amount of U.S. $3,000,000 (said promissory
note, as from time to time amended, reissued or renewed, and any promissory note
issued in substitution therefor, the "Term Note");
WHEREAS, to secure the Term Loan the Debtor executed and delivered to BEW a
Collateral Assignment of Intellectual Property dated as of April 10, 2000 (the
"Existing Assignment Agreement") pursuant to which the Assignor granted to BEW a
security interest on the Assignor's rights, title and interest in the
intellectual property described therein.
WHEREAS, Ahold may hereafter make loans to the Assignor in an aggregate
principal amount not exceeding, together with the Term Loan, $20,000,000
(collectively, together with the Term Loan, the "Loans") pursuant to, and on the
terms and conditions set forth in, a Credit Agreement (the "Credit Agreement")
of even date herewith being entered into concurrently herewith by Ahold with the
Assignor, which loans will be first used to repay the Term Note and all other
indebtedness evidenced by the Term Note (the Term Loan and all loans outstanding
under the Credit Agreement hereinafter collectively referred to as the "Loans").
WHEREAS, to induce the BEW and Ahold (collectively and individually
hereinafter referred to as the "Assignee") to make and maintain the Loans, the
Assignor has agreed to amend and restate the Existing Security Agreement in its
entirety pursuant hereto.
WHEREAS, the execution and delivery by the Debtor of this Agreement is one
of the conditions to the willingness of the Secured Party to make the Loans to
the Debtor;
NOW THEREFORE, in consideration of the premises and the covenants
hereinafter contained and to induce the Assignee to make and maintain the Loans
to the Assignor, the Assignor and the Assignee agree hereby that the Existing
Assignment Agreement is amended and restated to read as follows:
1. DEFINITIONS
Terms used herein that are defined in the Term Note, Security Agreement and
(when executed and delivered by the Assignor and the Assignee or, as the case
may be, by the Assignor and an affiliate of the Assignee) the Credit Agreement
shall have the meanings assigned to them therein unless otherwise defined
herein. References to this "Collateral Assignment" shall mean this Collateral
Assignment of Intellectual Property, including all amendments, modifications and
supplements and any exhibits or schedules to any of the foregoing, and shall
refer to this Collateral Assignment as the same may be in effect at the time
such reference becomes operative.
As used herein:
"Obligations" means all present and future liabilities, obligations,
covenants, duties, and debts owing by the Assignor to the Assignee under or
pursuant to or in connection with the Collateral Assignment, the Term Note or
any other Credit Documents, whether or not evidenced by any note, or other
instrument or document, whether arising from an extension of credit, loan,
advance, guaranty, indemnification or otherwise, whether direct or indirect,
absolute or contingent, due or to become due, primary or secondary, as principal
or guarantor, and including, without limitation, all principal, interest,
charges, out-of-pocket expenses, fees, and disbursements of counsel, filing fees
and any other sums chargeable to the Assignor hereunder or under any of the
other Credit Documents.
"Credit Documents" means this Collateral Assignment, the Security
Agreement, the Credit Agreement (if executed by the Assignor and the Assignee
or, as the case may be, by the Assignor and an affiliate of the Assignee), the
Term Note and any other document or all other documents and instruments executed
and delivered by the Assignor in connection with, or to evidence or secure, the
Obligations.
"Event of Default" has the meaning specified for such term in the Security
Agreement.
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation, limited
liability company, governmental authority agency or instrumentality or any other
entity.
"Release Date" means the date on which the Loans, all interest thereon and
all other Obligations are irrevocably paid in full and all obligations or
commitments of the Assignee to make loans or extend credit to the Assignor are
terminated.
"Security Agreement" means that certain Amended and Restated Security
Agreement dated as of April 10, 2000 by and between Assignor and the Assignee,
as the same may be amended, restated, supplemented or otherwise modified from
time to time.
2. ASSIGNMENT OF INTEREST
2.1 Patents, Trademarks, Copyrights and Other Intellectual Property. The
Assignor hereby grants, assigns and conveys to the Assignee, as security for the
full and prompt payment of the Obligations when due, a first priority security
interest in the entire right, title and interest of the Assignor in and to all
of its now owned, existing or filed or hereafter acquired, arising or filed:
(a) (i) all patents and patent applications of the Assignor,
including, without limitation, those listed on Exhibit A hereto and the
inventions and improvements described and claimed therein, and patentable
inventions and methods of the Assignor, (ii) all reissues, divisions,
continuations, renewals, extensions, reexamination and
continuations-in-part of any of the foregoing, (iii) all income, royalties,
damages or payments now and hereafter due and/or payable to such Assignor
under any of the foregoing with respect to any of the foregoing, including,
without limitation, damages or payments for past or future infringements of
any of the foregoing, (iv) the right of the Assignor to sue for past,
present and future infringements of any of the foregoing and (v) all rights
of such Assignor corresponding to any of the foregoing throughout the world
(collectively, the "Patents");
(b) (i) all trademarks, service marks, trademark and service mark
registrations, Internet and domain names, uniform resource locators
(including, without limitation, www.peapod.com) trade and business names
and trademark and service mark applications of the Assignor, including,
without limitation, those listed on Exhibit B hereto, (ii) all renewals of
any of the foregoing, (iii) all income, royalties, damages and payments now
or hereafter due and/or payable to such Assignor under any of the foregoing
or with respect to any of the foregoing, including, without limitation,
damages or payments for past or future infringements of any of the
foregoing, (iv) the right of the Assignor to sue for past, present and
future infringements of any of the foregoing, (v) all rights of the
Assignor corresponding to any of the foregoing throughout the world, and
(vi) the goodwill of the Assignor's business connected with and symbolized
by any of the foregoing (collectively, the "Trademarks");
(c) all trade secrets and confidential business information of the
Assignor, including formulae and recipes, computations, systems, inventions
and methods (whether patentable or unpatentable and whether or not reduced
to practice), know-how, manufacturing and production processes, designs and
techniques, research and development information, specifications, drawings,
designs, plans, proposals, technical data, copyrightable work, financial,
business, and marketing plans, customer and supplier lists and information
(collectively, the "Trade Secrets");
(d) all copyrights, copyright applications (including, without
limitation, computer software, source and object code, databases and
related documentation) and other intellectual and proprietary property
rights of the Assignor, including, without limitation, those listed on
Exhibit C hereto (collectively, the "Other Intellectual Property Rights");
and
(e) to the extent assignable without causing a default thereunder, the
Assignor's rights in licenses and license agreements with any other Person
under or with respect to any patents, trademarks, trade secrets or other
intellectual property rights and licenses and license agreements of the
Assignor with any other Person under or with respect to any of the Patents,
Trademarks, Trade Secrets or Other Intellectual Property Rights (all
licenses and license agreements assigned to the Assignee pursuant hereto
herein collectively called the "Licenses").
All Patents, Trademarks, Trade Secrets, Licenses and Other Intellectual Property
herein collectively called the "Proprietary Rights"; provided, that
notwithstanding anything to the contrary contained herein, the Proprietary
Rights shall not include any Licenses or other agreements in respect of which
the grant of the security contemplated by this Agreement shall be prohibited by
its terms; provided, however, that upon the termination of such prohibitions for
any reason whatsoever, the provisions of this Section 2.1 shall be deemed to
apply thereto automatically.
2.2 Restriction on Future Agreements. The Assignor agrees that until the
Release Date, the Assignor will not, without the Assignee's prior written
consent, enter into any agreement, including, without limitation, any license
agreement, that grants to any Person other than the Assignee rights to or
interests in any Proprietary Rights that is inconsistent with the Assignor's
obligations under this Collateral Assignment. The Assignor further agrees that
until the Release Date it will not take any action, or permit any action to be
taken by any affiliate of the Assignor or other Person subject to the Assignor's
control, including, without limitation, licensees, or fail to take any action,
that would affect the validity or enforcement of the rights granted to the
Assignee under this Collateral Assignment.
2.3 New Patents, Trademarks and Other Intellectual Property Rights. The
Assignor represents and warrants that the Patents, Trademarks and Other
Intellectual Property Rights listed in Exhibits A, B and C hereto are owned by
the Assignor and such Patents, Trademarks and Other Intellectual Property Rights
constitute all of the material Patents, Trademarks and Other Intellectual
Property Rights that the Assignor now owns which are registered with the United
States Patent and Trademark Office and the United States Copyright Office or an
accredited and appropriate domain name registrar, as applicable. If, before the
Release Date the Assignor shall (i) obtain any new Patents, Trademarks, Other
Intellectual Property Rights or Trade Secrets or rights thereto or (ii) become
entitled to the benefit of any new Patent, Trademark, Trade Secret, License or
Other Intellectual Property Rights, the Assignor shall give to the Assignee
prompt written notice thereof. Each Assignor hereby authorizes the Assignee to
modify this Collateral Assignment by amending any or all the Exhibits attached
hereto, as applicable, to include any such Patents, Trademarks or Other
Intellectual Property Rights.
2.4 Royalties and Terms. The Assignor hereby agrees that upon the
occurrence and during the continuance of an Event of Default, the Assignee, or
any designee of the Assignee, may, subject to applicable law and to any then
existing Licenses granted by such Assignor in respect of any Patent, Trademark
or Other Intellectual Property of such Assignor, use any or all of the Patents,
Trademarks, Trade Secrets, Licenses or Other Intellectual Property Rights
worldwide without any liability to such Assignor for royalties or other related
charges. The term of the assignments granted in this Section 2.4 shall extend
until the earlier of (i) the expiration of all rights under each of the
respective Patents, Trademarks, Trade Secrets and Licenses and Other
Intellectual Property Rights assigned hereunder or (ii) the Release Date.
2.5 Reassignment to Assignor. On the Release Date, the Assignee shall
execute and deliver to the Assignor, at the Assignor's request and at such
Assignor's sole cost and expense, such releases, deeds, assignments and other
instruments as may be necessary to relinquish, without any representations or
warranties whatsoever (other than a representation that the Assignee has not
assigned or transferred the Proprietary Rights covered by such releases, or its
security interests therein, except as contemplated or permitted hereby or by the
other Credit Documents), all of the Assignee's rights in such of the Proprietary
Rights as shall not have been sold or disposed of pursuant to the terms of this
Collateral Assignment.
2.6 Duties of Assignors. Subject to the rights of the Assignee, until the
Release Date the Assignor shall (i) prosecute diligently any patent, trademark
or copyright application and licenses of the Assignor pending as of the date
hereof or thereafter, (ii) make application on unpatented but patentable
inventions of the Assignor and on trademarks and copyrights, as appropriate, of
the Assignor (iii) preserve and maintain all rights in the Proprietary Rights of
the Assignor and (iv) possess all Trade Secrets of the Assignor. Any
out-of-pocket expenses incurred in connection with such applications by the
Assignor shall be borne by the Assignor. The Assignor shall not abandon any
Patent, Trademark, Trade Secret, License, or Other Intellectual Property Rights
or the right to file any patent application unless the Assignor, in its
reasonable discretion, determines that to take such action in a particular
instance would be in the best commercial interest of the Assignor.
2.7 Assignee's Right to Sue. If an Event of Default shall have occurred and
be continuing, the Assignee shall have the right, but shall in no way be
obligated, to bring suit on behalf of the Assignor to enforce any of the
Assignor's rights in any Proprietary Rights in the event the Assignor declines
to bring such suit and, if the Assignee shall commence any such suit, the
Assignor shall, at the request of the Assignee, do any and all lawful acts and
execute any and all proper documents requested by the Assignee in aid of such
enforcement and the Assignor shall promptly pay, or reimburse and indemnify the
Assignee upon demand, for all reasonable out-of-pocket costs and expenses
incurred by the Assignee in the exercise of its rights under this Section 2.7.
2.8 Assignee Appointed Attorney-in-Fact. During the existence of a Default,
the Assignor appoints the Assignee or the Assignee's designee as its
attorney-in-fact to do all things necessary to carry out or enforce this
Collateral Assignment. The Assignor ratifies and approves to the fullest extent
permitted by law all acts of the Assignee as attorney-in-fact taken in
accordance herewith. The Assignee as attorney-in-fact will not be liable for any
acts or omissions, or for any error of judgment or mistake of fact or law,
except for gross negligence or willful misconduct. This power, being coupled
with an interest, is irrevocable until the Release Date.
3. FILINGS AND CONSENTS
The Assignor shall, at the cost and expense of the Assignor deliver to the
Assignee, upon the execution and delivery of this Collateral Assignment and at
any time and from time to time thereafter, such instruments and documents, in
form and substance satisfactory to the Assignee, and take such other action, as
the Assignee shall reasonably specify as being necessary or appropriate, in the
reasonable opinion of the Assignee, to perfect the Security interests and other
interests granted by the Assignor to the Assignee hereby in the Proprietary
Rights, including, without limitation, filings with the United States Patent and
Trademark Office and the Copyright Office of the United States. The Assignor
will also, at its own expense, from time to time hereafter make, execute,
endorse, acknowledge, file and/or deliver to the Assignee all documents or
instruments and take such further steps reasonably requested by the Assignee to
perfect Assignee's security interests in all Proprietary Rights.
4. COVENANTS
The Assignor agrees that until the Release Date, unless the Assignee agrees
otherwise in writing: (a) the Assignor will, at its sole cost and expense,
warrant and defend the Proprietary Rights from any and all material claims and
demands of any other Person; (b) the Assignor will not grant, create or permit
to exist any Lien on any of the Proprietary Rights in favor of any other Person;
(c) the Assignor will pay, and indemnify and hold the Assignee harmless from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever with respect to any Proprietary Rights, including (without
limitation) claims of patent or trademark or Other Intellectual Property Right
infringement, and any claim of unfair competition or antitrust violation, (i)
provided that Assignor shall not have any obligation hereunder with respect to
such indemnification arising from the Assignee's gross negligence or willful
misconduct in the use, assignment and sublicensing of the Patents, Trademarks
and Licenses that are covered by this Collateral Assignment; (ii) which is for
reimbursement for amounts paid by an Indemnified Person on any final,
non-appealable judgment in the Assignor's favor against the Assignee by a court
of competent jurisdiction; or (iii) which is for reimbursement of amounts paid
by the party seeking indemnification in any settlement with a party other than
the Assignee which has been properly effected by the Assignee without the prior
consent of the Assignor, unless either (x) the Assignor has had a reasonable
opportunity to assume responsibility and has not diligently prosecuted a defense
of such indemnified obligation; or (y) the Assignor has failed to provide
reasonable evidence of its financial ability to satisfy its indemnity
obligations hereunder; (d) the Assignor will not enter into any agreement that
is inconsistent in any material respect with the Assignor's obligations under
this Collateral Assignment; and (e) all Proprietary Rights of the Assignor shall
be subsisting, valid and enforceable in all material respects against third
Persons, except to the extent otherwise disclosed in writing to the Assignor
prior to the date hereof.
5. DEFAULT
5.1 Remedies. (a) Upon the occurrence and during the continuance of an
Event of Default, the Assignee, in addition to any rights and remedies under the
Credit Documents or applicable law, may, in its discretion:
(i) collect, receive, appropriate and realize upon all or any of the
Proprietary Rights or any part thereof;
(ii) enter, with or without process of law and without breach of the
peace, any premises where any of the Proprietary Rights or the books and
records related thereto are or may be located, and without charge or
liability to the Assignee seize and remove the Proprietary Rights (and
copies of the Assignor's books and records in any way relating to the
Proprietary Rights) from said premises and/or remain upon said premises and
use the same (together with said books and records) for the purpose of
collecting, preparing and disposing of the Proprietary Rights; or
(iii) sell or otherwise dispose of, including without limitation the
granting of licenses, any Proprietary Rights at public or private sale for
cash or credit.
(b) Upon the occurrence of an Event of Default, the Assignee, in its
discretion, may exercise any one or more of the rights and remedies accruing to
a secured party under the UCC as adopted in the relevant state or states and any
other applicable law upon default by a debtor. The Assignor recognizes that in
the event the Assignor fails to perform, observe or discharge any of its
obligations or liabilities under this Collateral Assignment, no remedy of law
will provide adequate relief to the Assignee, and the Assignor agrees that the
Assignee shall be entitled to temporary and permanent injunctive relief in any
such case without the necessity of proving actual damages.
(c) Any notice required to be given by the Assignee of a sale, lease, other
disposition of any of the Proprietary Rights or any other intended action by the
Assignee, delivered by telex, facsimile transmission or overnight mail, postage
prepaid and duly addressed to the Assignor at its address set forth beside its
signature hereto, not less than ten (10) days prior to such proposed action,
shall constitute commercially reasonable and fair notice thereof to the
Assignor.
(d) Upon the occurrence of an Event of Default, the Assignee shall have the
right at any time and from time to time thereafter, in its discretion, without
notice thereof to the Assignor, to take control, in any manner, of any item of
payment for or proceeds of any of the Proprietary Rights.
(e) The Assignee may, if the Assignee deems it reasonable, postpone or
adjourn any sale of Proprietary Rights of the Assignor, or any part thereof,
from time to time by an announcement at the time and place of sale or by
announcement at the time and place of such postponed or adjourned sale, without
being required to give a new notice of sale.
(f) All cash proceeds received by the Assignee in respect of any sale of,
collection from, or other realization upon all or any part of the Proprietary
Rights shall be applied (after payment of any amounts payable to the Assignee as
reimbursement for the costs and expenses incurred by it in connection with the
sale of any of the Proprietary Rights) by the Assignee against all or any part
of the Obligations in such order as the Assignee shall elect. Any surplus of
such cash or cash proceeds held by the Assignee and remaining after payment in
full of all the Obligations shall be paid over to the Assignor or to whomsoever
may be lawfully entitled to receive such surplus and any deficiency remaining
after application of such cash or cash proceeds to the Obligations shall
continue to be an Obligation of the Assignor, for which the Assignor shall
remain liable.
5.2 Waivers by Assignors. Except as otherwise provided for in this
Collateral Assignment and to the extent permitted under applicable law, the
Assignor waives (i) presentment, demand and protest and notice of presentment,
dishonor, protest, default, nonpayment, maturity, release, compromise,
settlement, extension or renewal of any or all Obligations and of any accounts,
contract rights, documents, instruments, chattel paper and guaranties at any
time held by the Assignee on which the Assignor may in any way be liable and
hereby ratifies and confirms whatever the Assignee may do in this regard, (ii)
all rights to notice and a hearing prior to the Assignee's taking possession or
control of, or to the Assignee's replevy, attachment or levy upon, any of the
Proprietary Rights or any bond or security that might be required by any court
prior to allowing the Assignee to exercise any of the Assignee's remedies, and
(iii) the benefit of all valuation, appraisal and exemption laws. The Assignor
acknowledges that it has been advised by its counsel with respect to this
Collateral Assignment and the transactions evidenced by this Collateral
Assignment.
5.3 Cumulative Remedies. All of the Assignee's rights and remedies with
respect to the Proprietary Rights, whether established hereby or by any of the
other Credit Documents, or by any other agreements or by law, shall be
cumulative and may be exercised singularly or concurrently. The Assignor
acknowledges and agrees that this Collateral Assignment is not intended to limit
or restrict in any way the rights and remedies of the Assignee under the Term
Note or any other Credit Document but rather is intended to facilitate the
exercise of such rights and remedies.
6. MISCELLANEOUS
6.1 Waivers. No course of dealing between the Assignor and the Assignee,
nor any failure to exercise, nor any delay in exercising, on the part of the
Assignee, any right, power or privilege hereunder, under the Term Note or under
any other Credit Document shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or privilege hereunder or
thereunder preclude any other or further exercise thereof or the exercise of any
other right, power or privilege.
6.2 Severability. The provisions of this Collateral Assignment are
severable, and if any clause or provision shall be held invalid and
unenforceable in whole or in part as to the Assignor in any jurisdiction, then
such invalidity or unenforceability shall affect only such clause or provision
or part thereof as to such Assignor in such jurisdiction and shall not in any
manner affect such clause or provision in any other jurisdiction, or any other
clause or provision of this Collateral Assignment in any jurisdiction.
6.3 Modification. This Collateral Assignment cannot be altered, amended or
modified in any way, except by a writing signed by the party to be charged
therewith.
6.4 Binding Effect; Benefits. This Collateral Assignment shall be binding
upon the Assignor and its successors and assigns, and shall inure to the benefit
of the Assignee and its successors and assigns. No Assignor may assign its
rights or obligations hereunder or its interest in any Proprietary Rights
without the consent of the Assignee.
6.5 Governing Law. This Collateral Assignment shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to its choice of law rules which would make the laws of any other jurisdiction
applicable to this Collateral Assignment.
6.6 Notices. (a) Any notice, demand or communication hereunder shall be
given in writing (including facsimile transmission) and mailed or delivered to
each party at its address set forth beside its signature hereto, or, as to any
party, at such other address as shall be designated by such party by a prior
notice to the other parties in accordance with the terms of this Section 6.6.
(b) Each notice hereunder shall be effective (i) five (5) business days
after such notice is mailed, by registered or certified mail, postage prepaid
(return receipt requested), (ii) upon delivery by hand or (iii) in the case of
any notice or communication by facsimile transmission, on the date when sent;
provided, however, that notices to the Assignee shall not be effective until
actually received by it.
6.7 Headings. The Section titles and headings in this Collateral Assignment
are and shall be without substantive meaning or context of any kind whatsoever
and are for convenience of reference only.
6.8 References. Unless and until the Credit Agreement is executed by Ahold
and the Assignor and loans are made to Assignor thereunder, all references to
the "Secured Party" shall be to BEW. Upon execution of the Credit Agreement by
Ahold and Assignor and the repayment of the Term Loan and all other indebtedness
owing to BEW by Assignor under the Credit Documents, all references herein to
the "Secured Party" (except in Section 6.5) shall refer to Ahold; provided,
however, in the event BEW is required to return any such payments to Assignor or
trustee or receiver therefor, all references to the "Secured Party" shall again
include BEW.
[Remainder of this page intentionally left blank; signature pages follow]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Collateral
Assignment to be duly executed by their authorized officers on the day and year
first above written.
Address: PEAPOD, INC.
9933 Woods Drive
Skokie, Illinois 60077 By:________________________________
Attention: Dan Rabinowitz Name: Dan Rabinowitz
Fax No.: (847) 583-9540 Title: Senior VP and
Chief Financial Officer
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Collateral
Assignment to be duly executed by their authorized officers on the day and year
first above written.
Address: BEW, Inc.
19 Skelley Ave.
Weymouth, MA 02189 By:________________________________
Attention: Anne J. Longo Name: Anne J. Longo
Fax No.: (617) 770-6013 Title: President
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Collateral
Assignment to be duly executed by their authorized officers on the day and year
first above written.
Address:
Koninklijke Ahold NV
Albert Heijnweg 1
1507 EH Zaandam, The Netherlands By:________________________________
Attention: Ton van Tielraden, Esq. Name: Robert G. Tobin
Fax No.: (31-75) 659-8366 Title:
<PAGE>
STATE OF ______________ )
)ss.:
COUNTY OF ____________ )
On this _____ day of ___________, 2000, before me personally came Dan
Rabinowitz, who being duly sworn, did depose and say that he is the Senior Vice
President and Chief Financial Officer of PEAPOD, INC., the corporation described
in and which executed the above instrument as Assignor, and that he signed his
name thereto on behalf of, and pursuant to the authority granted by, said
corporation.
________________________
Notary Public
<PAGE>
STATE OF ______________ )
)ss.:
COUNTY OF ____________ )
On this ___ day of ____________, 2000, before me personally came Robert G.
Tobin, who being duly sworn, did depose and say that he is an authorized
signatory of Koninklijke Ahold NV, the corporation described in and which
executed the above instrument as Assignee, and that he signed his name thereto
on behalf of, and pursuant to the authority granted by, said corporation.
________________________
Notary Public
<PAGE>
STATE OF ______________ )
)ss.:
COUNTY OF ____________ )
On this ___ day of ____________, 2000, before me personally came Anne J.
Longo, who being duly sworn, did depose and say that she is the President of
BEW, Inc., the corporation described in and which executed the above instrument
as Assignee, and that she signed her name thereto on behalf of, and pursuant to
the authority granted by, said corporation.
________________________
Notary Public
<PAGE>
COLLATERAL ASSIGNMENT OF PATENTS
WHEREAS, PEAPOD, INC. a Delaware corporation ("Assignor"), having its chief
executive office at 9933 Woods Drive, Skokie, Illinois 60077, is the owner of
all right, title and interest in and to the United States patents and United
States patent applications set forth on Schedule A attached hereto
(collectively, the "Patents and Patent Applications");
WHEREAS, the Assignor may be indebted to Koninklijke Ahold NV ("Assignee")
for the principal amount of up to $20,000,000.00 under a Credit Agreement (the
"Credit Agreement") dated as of April [ ], 2000 entered into by the Assignor
with the Assignee; and
WHEREAS, to secure its obligations under the Credit Agreement, the Assignor
wishes to assign to the Assignee, and to grant to the Assignee a security
interest in and lien upon, the Patents and Patent Applications;
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, and subject to the terms and conditions of the Amended
and Restated Collateral Assignment of Intellectual Property dated as of April
__, 2000, as from time to time amended, made by the Assignor in favor of the
Assignee, the Assignor hereby assigns to the Assignee, and grants to the
Assignee a security interest in and a lien upon, the Patents and Patent
Applications to secure the Assignor's obligations and indebtedness under the
Credit Agreement.
Date: ____________ PEAPOD, INC.
By________________________
Name: Dan Rabinowitz
Title: Senior VP and
Chief Financial Officer
<PAGE>
STATE OF ______________ )
)ss.:
COUNTY OF ____________ )
On this _____ day of ___________, 2000, before me personally came Dan
Rabinowitz, who being duly sworn, did depose and say that he is the Senior Vice
President and Chief Financial Officer of PEAPOD, INC., the corporation described
in and which executed the above instrument as Assignor, and that he signed his
name thereto on behalf of, and pursuant to the authority granted by, said
corporation.
________________________
Notary Public
<PAGE>
COLLATERAL ASSIGNMENT OF COPYRIGHTS
WHEREAS, PEAPOD, INC. a Delaware corporation ("Assignor"), having its chief
executive office at 9933 Woods Drive, Skokie, Illinois 60077, is the owner of
all right, title and interest in and to the United States copyrights and
associated United States copyright registrations and applications for
registration set forth on Schedule A attached hereto (collectively, the
"Copyrights and Copyright Applications");
WHEREAS, the Assignor may be indebted to Koninklijke Ahold NV ("Assignee")
for the principal amount of up to $20,000,000.00 under a Credit Agreement (the
"Credit Agreement") dated as of April [ ], 2000 entered into by the Assignor
with the Assignee; and
WHEREAS, to secure its obligations under the Credit Agreement, the Assignor
wishes to assign to the Assignee, and to grant to the Assignee a security
interest in and lien upon, the Copyrights and Copyright Applications;
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, and subject to the terms and conditions of the Amended
and Restated Collateral Assignment of Intellectual Property dated as of April
__, 2000, as from time to time amended, made by the Assignor in favor of the
Assignee, the Assignor hereby assigns to the Assignee, and grants to the
Assignee a security interest in and a lien upon the, Copyrights and Copyright
Applications to secure the Assignor's obligations and indebtedness under the
Credit Agreement.
Date: ____________ PEAPOD, INC.
By________________________
Name: Dan Rabinowitz
Title: Senior VP and
Chief Financial Officer
<PAGE>
STATE OF ______________ )
)ss.:
COUNTY OF ____________ )
On this _____ day of ___________, 2000, before me personally came Dan
Rabinowitz, who being duly sworn, did depose and say that he is the Senior Vice
President and Chief Financial Officer of PEAPOD, INC., the corporation described
in and which executed the above instrument as Assignor, and that he signed his
name thereto on behalf of, and pursuant to the authority granted by, said
corporation.
________________________
Notary Public
<PAGE>
COLLATERAL ASSIGNMENT OF TRADEMARKS,
SERVICE MARKS AND TRADE NAMES
WHEREAS, PEAPOD, INC. a Delaware corporation ("Assignor"), having its chief
executive office at 9933 Woods Drive, Skokie, Illinois 60077, is the owner of
all right, title and interest in and to the United States trademarks, service
marks and trade names and United States trademark and service mark registrations
and trade name, trademark and service mark applications set forth on Schedule A
attached hereto (the "Trademarks, Service Marks, Trade Names and Registrations
and Applications");
WHEREAS, the Assignor may be indebted to Koninklijke Ahold NV ("Assignee")
for the principal amount of up to $20,000,000.00 under a Credit Agreement (the
"Credit Agreement") dated as of April [ ], 2000 entered into by the Assignor
with the Assignee; and
WHEREAS, to secure its obligations under the Credit Agreement, the Assignor
wishes to assign to the Assignee, and to grant to the Assignee a security
interest in and lien upon, the Trademarks, Service Marks, Trade Names and
Registrations and Applications;
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, and subject to the terms and conditions of the Amended
and Restated Collateral Assignment of Intellectual Property dated as of April
__, 2000, as from time to time amended, made by the Assignor in favor of the
Assignee, the Assignor hereby assigns to the Assignee, and grants to the
Assignee a security interest in and a lien upon, the Trademarks, Service Marks,
Trade Names and Registrations and Applications to secure the Assignor's
obligations and indebtedness under the Credit Agreement.
Date: ____________ PEAPOD, INC.
By________________________
Name: Dan Rabinowitz
Title: Senior VP and
Chief Financial Officer
<PAGE>
STATE OF ______________ )
)ss.:
COUNTY OF ____________ )
On this _____ day of ___________, 2000, before me personally came Dan
Rabinowitz, who being duly sworn, did depose and say that he is the Senior Vice
President and Chief Financial Officer of PEAPOD, INC., the corporation described
in and which executed the above instrument as Assignor, and that he signed his
name thereto on behalf of, and pursuant to the authority granted by, said
corporation.
________________________
Notary Public
EX-10.7
================================================================================
WARRANT
to Purchase Common Stock of
PEAPOD, INC.,
a Delaware corporation
________________________
Warrant No. [__]
Original Issue Date: [______], 2000
________________________
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
1. DEFINITIONS...........................................................1
2. EXERCISE OF WARRANT...................................................8
2.1 Manner of Exercise...............................................8
2.2 Payment of Taxes................................................10
2.3 Fractional Shares...............................................10
2.4 Reduced Exercise Price..........................................11
3. TRANSFER, DIVISION AND COMBINATION...................................11
3.1 Transfer........................................................11
3.2 Division and Combination........................................11
3.3 Expenses........................................................11
3.4 Maintenance of Books............................................11
4. ANTIDILUTION PROVISIONS..............................................11
4.1 Upon Issuance of Common Stock...................................12
4.2 Upon Acquisition of Common Stock................................12
4.3 Provisions Applicable to Adjustments............................13
4.4 Upon Stock Dividends or Splits..................................14
4.5 Upon Combinations...............................................15
4.6 Upon Reclassifications, Reorganizations, Consolidations or
Mergers.......................................................15
4.7 Deferral in Certain Circumstances...............................16
4.8 Other Anti-Dilution Provisions..................................16
4.9 Appraisal Procedure.............................................16
4.10 Adjustment of Number of Shares Purchasable.....................16
4.11 Exceptions.....................................................17
4.12 Notice of Adjustment of Exercise Price.........................17
4.13 Other Dilutive Events..........................................17
5. NO IMPAIRMENT; REGULATORY COMPLIANCE AND COOPERATION;
NOTICE OF EXPIRATION................................................18
6. RESERVATION AND AUTHORIZATION OF COMMON STOCK;
REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY.........18
7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS........19
7.1 Notices of Corporate Actions....................................19
7.2 Taking of Record................................................20
7.3 Closing of Transfer Books.......................................20
8. TRANSFER RESTRICTIONS................................................20
8.1 Restrictions on Transfers.......................................20
8.2 Restrictive Legends.............................................21
8.3 Termination of Securities Law Restrictions......................21
9. LOSS OR MUTILATION...................................................22
10. OFFICE OF THE COMPANY................................................22
11. FINANCIAL AND BUSINESS INFORMATION...................................22
12. DILUTION FEE.........................................................23
13. MISCELLANEOUS........................................................24
13.1 Nonwaiver......................................................24
13.2 Notice Generally...............................................24
13.3 Indemnification................................................24
13.4 Limitation of Liability........................................25
13.5 Remedies.......................................................25
13.6 Successors and Assigns.........................................25
13.7 Amendment......................................................25
13.8 Severability...................................................25
13.9 Headings.......................................................26
13.10 GOVERNING LAW; JURISDICTION...................................26
ANNEX A SUBSCRIPTION FORM
ANNEX B ASSIGNMENT FORM
<PAGE>
NEITHER THIS WARRANT NOR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE HEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR ANY STATE SECURITIES LAW. THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND
THE SECURITIES ISSUABLE UPON EXERCISE HEREOF MAY NOT BE TRANSFERRED, SOLD,
ASSIGNED, EXCHANGED, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
OR ENCUMBERED WITHOUT COMPLIANCE WITH THE PROVISIONS OF, AND ARE OTHERWISE
RESTRICTED BY THE PROVISIONS OF, THE ACT, THE RULES AND REGULATIONS THEREUNDER
AND THIS WARRANT.
Warrant No. [___]
WARRANT
TO PURCHASE 32,894,270 SHARES OF COMMON STOCK
(SUBJECT TO ADJUSTMENT) OF
PEAPOD, INC.
THIS IS TO CERTIFY THAT KONINKLIJKE AHOLD N.V., (the "Purchaser") or its
registered assigns, is entitled, at any time prior to the Expiration Date (such
term, and certain other capitalized terms used herein being hereinafter
defined), to purchase from Peapod, Inc., a Delaware corporation (the "Company"),
32,894,270 shares of the Common Stock of the Company (subject to adjustment as
provided herein), at a purchase price per share equal to $3.75 (the initial
"Exercise Price"), subject to adjustment as provided herein.
1. DEFINITIONS
As used in this Warrant (including the Subscription Form), the following
terms have the respective meanings set forth below:
"Affiliate" shall mean, with respect to any person, any other person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified person and, shall include (a) in the case of
a person who is an individual, (i) members of such specified person's immediate
family (as defined in Instruction 2 of Item 404(a) of Regulation S-K under the
Securities Act) and (ii) trusts, the trustee and all beneficiaries of which are
such specified person or members of such person's immediate family as determined
in accordance with the foregoing clause (i), and (b) any person that directly or
indirectly owns more than 5% of any class of capital stock or other interest of
such specified person. For the purposes of this definition, "control," when used
with respect to any person means the power to direct the management and policies
of such person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "affiliated," "controlling"
and "controlled" have meanings correlative to the foregoing. Notwithstanding the
foregoing, for purposes of this Warrant, the Purchaser and its Affiliates shall
not be deemed Affiliates of the Company.
"After-Tax Basis" when referring to a payment that is required hereunder
(the "target amount"), shall mean a total payment (the "total amount") that,
after deduction of all federal, state and local taxes that are required to be
paid by the recipient in respect of the receipt or accrual of such total amount,
is equal to the target amount.
"Agreed Rate" shall mean the rate of interest announced publicly by
Citibank, N.A. in New York, New York, from time to time, as Citibank, N.A.'s
base rate.
"Appraisal Procedure" if applicable, shall mean the following procedure to
determine the fair market value, as to any security, for purposes of the
definition of "Fair Value" or the fair market value, as to any other property
(in either case, the "valuation amount"). The valuation amount shall be
determined in good faith by the Board of Directors; provided, however, that if
the Majority Warrant Holders disagree with such valuation amount within a
reasonable period of time (not to exceed twenty (20) days after notice thereof)
the valuation amount shall be determined by an investment banking firm of
national recognition, which firm shall be reasonably acceptable to the Board of
Directors and the Majority Warrant Holders. If the Board of Directors and the
Majority Warrant Holders are unable to agree upon an acceptable investment
banking firm within ten (10) days after the date either party proposed that one
be selected, the investment banking firm will be selected by an arbitrator
located in New York City, New York, selected by the American Arbitration
Association (or if such organization ceases to exist, the arbitrator shall be
chosen by a court of competent jurisdiction). The arbitrator shall select the
investment banking firm (within ten (10) days of his appointment) from a list,
jointly prepared by the Board of Directors and the Majority Warrant Holders, of
not more than six investment banking firms of national standing in the United
States, of which no more than three may be named by the Board of Directors and
no more than three may be named by the Majority Warrant Holders. The arbitrator
may consider, within the ten-day period allotted, arguments from the parties
regarding which investment banking firm to choose, but the selection by the
arbitrator shall be made in its sole discretion from the list of six. The Board
of Directors and the Majority Warrant Holders shall submit their respective
valuations and other relevant data to the investment banking firm, and the
investment banking firm shall as soon as practicable thereafter make its own
determination of the valuation amount. The final valuation amount for purposes
hereof shall be the average of the two valuation amounts closest together, as
determined by the investment banking firm, from among the valuation amounts
submitted by the Company and the Majority Warrant Holders and the valuation
amount calculated by the investment banking firm. The determination of the final
valuation amount by such investment-banking firm shall be final and binding upon
the parties. The Company shall pay the fees and expenses of the investment
banking firm and arbitrator (if any) used to determine the valuation amount. If
required by any such investment banking firm or arbitrator, the Company shall
execute a retainer and engagement letter containing reasonable terms and
conditions, including, without limitation, customary provisions concerning the
rights of indemnification and contribution by the Company in favor of such
investment banking firm or arbitrator and its officers, directors, partners,
employees, agents and Affiliates.
"Appraised Value" per share of Common Stock as of a date specified herein
shall mean the value of such a share as of such date as determined by an
investment bank of nationally recognized standing selected jointly by the
Majority Warrant Holders and the Company. If the Company and the Majority
Warrant Holders cannot agree on a mutually acceptable investment bank, then the
Company and the Majority Warrant Holders shall each choose one such investment
bank and the respective chosen firms shall jointly select a third investment
bank, which shall make the determination. The Company shall pay the costs and
fees of each such investment bank (including any such investment bank selected
by the Majority Warrant Holders), and the decision of the investment bank making
such determination of Appraised Value shall be final and binding on the Company
and all affected Holders of Warrants or Warrant Stock. Such Appraised Value
shall be determined as a pro rata portion of the value of the Company taken as a
whole, based on the higher of (A) the value derived from a hypothetical sale of
the entire Company as a going concern by a willing seller to a willing buyer
(neither acting under any compulsion) and (B) the liquidation value of the
entire Company. No discount shall be applied on account of (i) any Warrants or
Warrant Stock representing a minority interest, (ii) any lack of liquidity of
the Common Stock or the Warrants, (iii) the fact that the Warrants or Warrant
Stock may constitute "restricted securities" for securities law purposes, (iv)
the existence of any call option or (v) any other grounds.
"Book Value" per share of Common Stock as of a date specified herein shall
mean the consolidated book value of the Company and its Subsidiaries as of such
date divided by the number of shares of Common Stock Outstanding on such date.
Such book value shall be determined in accordance with GAAP, except that there
shall be no reduction in such book value by reason of any amount that may be
required either as an offset to or reserve against retained earnings or as a
deduction from book value as a result of the issuance, existence, anticipated
exercise of, or anticipated cost to the Company of the repurchase of, any of the
Warrants.
"Business Day" shall mean a day other than a Saturday, Sunday or day on
which banking institutions in New York are authorized or required to remain
closed.
"Commission" shall mean the Securities and Exchange Commission or any other
federal agency then administering the Securities Act and other federal
securities laws.
"Common Stock" shall mean the Common Stock of the Company, par value $0.01
per share, as constituted on the Original Issue Date, and any capital stock into
which such Common Stock may thereafter be changed, and shall also include (i)
capital stock of the Company of any other class (regardless of how denominated)
issued to the holders of shares of any Common Stock upon any reclassification
thereof which is also not preferred as to dividends or liquidation over any
other class of stock of the Company and which is not subject to redemption and
(ii) shares of common stock of any successor or acquiring corporation (as
defined in Section 4.6 hereof) received by or distributed to the holders of
Common Stock of the Company in the circumstances contemplated by Section 4.6
hereof.
"Company" shall mean Peapod, Inc., a Delaware corporation, and any
successor corporation.
"Current Market Price" shall mean as of any specified date the average of
the Daily Market Price of one share of the Common Stock for the shorter of (x)
the 10 consecutive Business Days immediately preceding such date or (y) the
period commencing on the Business Day next following the first public
announcement by the Company of any event giving rise to an adjustment of the
Exercise Price pursuant to Section 4 below and ending on such date.
"Daily Market Price" shall mean, with respect to one share of Common Stock
and for any Business Day: (i) if the Common Stock is then listed on a national
securities exchange or is authorized for quotation on NASDAQ and is designated
as a National Market System security, the last sale price of one share of Common
Stock, regular way, on such day on the principal stock exchange or market system
on which such Common Stock is then listed or authorized for quotation, or, if no
such sale takes place on such day, the average of the closing bid and asked
prices for one share of Common Stock on such day as reported on such stock
exchange or market system or (ii) if the Common Stock is not then listed or
authorized for quotation on any national securities exchange or designated as a
National Market System security on NASDAQ but is traded over-the-counter, the
average of the closing bid and asked prices for one share of Common Stock as
reported on NASDAQ or the Electronic Bulletin Board or in the National Daily
Quotation Sheets, as applicable.
"Designated Office" shall have the meaning set forth in Section 10 hereof.
"Dilution Fee" shall have the meaning set forth in Section 12 hereof.
"Dilution Fee Payment Date" shall have the meaning set forth in Section 12
hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Excluded Securities" shall have the meaning set forth in Section 4.11
hereof.
"Exercise Date" shall have the meaning set forth in Section 2.1 hereof.
"Exercise Notice" shall have the meaning set forth in Section 2.1 hereof.
"Exercise Period" shall mean the period during which this Warrant is
exercisable pursuant to Section 2.1 hereof.
"Exercise Price" shall mean, in respect of a share of Common Stock at any
date herein specified, the initial Exercise Price set forth in the preamble of
this Warrant, as adjusted from time to time pursuant to Sections 2.4 and 4
hereof.
"Expiration Date" shall mean the tenth anniversary of the Original Issue
Date.
"Fair Value" per share of Common Stock as of any specified date shall mean
(A) if the Common Stock is publicly traded on such date, the Current Market
Price per share or (B) if the Common Stock is not publicly traded on such date,
(1) the fair market value per share of Common Stock as determined in good faith
by the Board of Directors of the Company and set forth in a written notice to
each Holder or (2) if the Majority Warrant Holders object in writing to such
price as determined by the Board of Directors within thirty (30) days after
receiving notice of same, the Appraised Value per share as of such date.
"GAAP" shall mean generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board, which are in effect from time to time,
consistently applied.
"Holder" shall mean (a) with respect to this Warrant, the person in whose
name the Warrant set forth herein is registered on the books of the Company
maintained for such purpose and (b) with respect to any other Warrant or shares
of Warrant Stock, the person in whose name such Warrant or Warrant Stock is
registered on the books of the Company maintained for such purpose.
"HSR Approval" shall mean the expiration of all waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and applicable
rules and regulations and any similar state acts applicable to the issuance of
Series B Preferred Stock as contemplated by the Purchase Agreement.
"Lien" shall mean any mortgage or deed of trust, pledge, hypothecation,
assignment, deposit arrangement, lien, charge, claim, security interest,
easement or encumbrance, or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including, without
limitation, any lease or title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement perfecting a security interest
under the Uniform Commercial Code or comparable law of any jurisdiction).
"Majority Warrant Holders" shall mean, with respect to a given
determination, the Holders of Warrants, the holders of the Previously Issued
Warrants and the holders of the Warrants (Credit Agreement) representing the
right to acquire more than fifty percent (50%) of the Common Stock underlying
all of the then outstanding Warrants, the Previously Issued Warrants and the
Warrants (Credit Agreement).
"NASD" shall mean the National Association of Securities Dealers, Inc., or
any successor corporation thereto.
"NASDAQ" shall mean the NASDAQ quotation system, or any successor reporting
system.
"Opinion of Counsel" shall mean a written opinion of outside counsel
experienced in Securities Act matters chosen by the Holder of this Warrant or
Warrant Stock issued upon the exercise hereof and reasonably acceptable to the
Company.
"Original Issue Date" shall mean the date on which this Warrant was issued,
as set forth on the cover page of this Warrant.
"Outside Date" shall mean the date that is one hundred and twenty (120)
days after the date hereof or, if the Holder exercises this Warrant or the
Warrants (Credit Agreement) and as a direct result of such exercise, the
Stockholders Meeting (as defined in the Purchase Agreement) is delayed, one
hundred and twenty (120) days plus the number of days of such delay after the
date hereof.
"Outstanding" shall mean, when used with reference to Common Stock, at any
date as of which the number of shares thereof is to be determined, all issued
shares of Common Stock, except shares then owned or held by or for the account
of the Company or any Subsidiary, and shall include all shares issuable in
respect of outstanding scrip or any certificates representing fractional
interests in shares of Common Stock.
"person" shall mean any individual, partnership, corporation, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or agency or political subdivision
thereof, or other entity.
"Preferred Stock" shall mean convertible preferred stock of the Company.
"Previously Issued Warrants" shall mean the Warrant dated April 10, 2000
issued by the Company to the Purchaser, and all warrants issued upon transfer,
division or combination of, or in substitution for, such warrant or any other
such warrant.
"Purchase Agreement" shall mean the Purchase Agreement, dated as of April
14, 2000, by and between the Company and the Purchaser.
"Restricted Common Stock" shall mean shares of Common Stock which are, or
which upon their issuance on the exercise of this Warrant would be, evidenced by
a certificate bearing the restrictive legend set forth in Section 8.2(a) hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Series B Preferred Stock" shall mean the Series B Preferred Stock to be
authorized pursuant to the Certificate of Designation in the form attached as
Exhibit I to the Purchase Agreement.
"Share Withholding Option" shall have the meaning set forth in Section
2.1(c) hereof.
"Stockholder Approval" shall mean the approval by the Company's
stockholders of the issuance of the shares of Series B Preferred Stock and the
Warrants, and the other transactions contemplated pursuant to the Purchase
Agreement.
"subsidiary" shall mean, with respect to any person, (a) a corporation a
majority of whose capital stock with voting power, under ordinary circumstances,
to elect directors is at the time, directly or indirectly, owned by such person,
by a subsidiary of such person, or by such person and one or more subsidiaries
of such person, (b) a partnership in which such person or a subsidiary of such
person is, at the date of determination, a general partner of such partnership,
or (c) any other person (other than a corporation) in which such person, a
subsidiary of such person or such person and one or more subsidiaries of such
person, directly or indirectly, at the date of determination thereof, has (i) at
least a majority ownership interest, (ii) the power to elect or direct the
election of the directors or other governing body of such person, or (iii) the
power to direct or cause the direction of the affairs or management of such
person. For purposes of this definition, a person is deemed to own any capital
stock or other ownership interest if such person has the right to acquire such
capital stock or other ownership interest, whether through the exercise of any
purchase option, conversion privilege or similar right.
"Subsidiary" shall mean a subsidiary of the Company.
"Transfer" shall mean any disposition of any Warrant or Warrant Stock or of
any interest therein, which would constitute a "sale" thereof or a transfer of a
beneficial interest therein within the meaning of the Securities Act.
"Warrant Price" shall mean an amount equal to (i) the number of shares of
Common Stock being purchased upon exercise of all or a portion of this Warrant
pursuant to Section 2.1 hereof, multiplied by (ii) the Exercise Price as of the
date of such exercise.
"Warrants" shall mean this Warrant and all warrants issued upon transfer,
division or combination of, or in substitution for, this Warrant or any other
such Warrant. All Warrants shall at all times be identical as to terms and
conditions, except as to the number of shares of Common Stock for which they may
be exercised and their date of issuance.
"Warrants (Credit Agreement)" shall mean the Warrant (Credit Agreement)
issued by the Company to the Purchaser pursuant to the Purchase Agreement, and
all warrants issued upon transfer, division or combination of, or in
substitution for, such warrant or any other such warrant.
"Warrant Stock" generally shall mean the shares of Common Stock issued,
issuable or both (as the context may require) upon the exercise of Warrants.
2. EXERCISE OF WARRANT
2.1 Manner of Exercise. (a) From and after the Original Issue Date and
until 5:00 P.M., New York time, on the Expiration Date, the Holder of this
Warrant may from time to time exercise this Warrant, on any Business Day, for
all or any part of the number of shares of Common Stock purchasable hereunder.
In order to exercise this Warrant, in whole or in part, the Holder shall (i)
deliver to the Company at its Designated Office a written notice of the Holder's
election to exercise this Warrant (an "Exercise Notice"), which Exercise Notice
shall be irrevocable and specify the number of shares of Common Stock to be
purchased, together with this Warrant and (ii) pay to the Company the Warrant
Price in accordance with Section 2.1(c) (the date on which both such delivery
and payment shall have first taken place being hereinafter sometimes referred to
as the "Exercise Date"). Such Exercise Notice shall be in the form of the
subscription form appearing at the end of this Warrant as Annex A, duly executed
by the Holder or its duly authorized agent or attorney.
(b) Upon receipt by the Company of such Exercise Notice, Warrant and
payment (if applicable), the Company shall, as promptly as practicable, and in
any event within five (5) Business Days thereafter, execute (or cause to be
executed) and deliver (or cause to be delivered) to the Holder a certificate or
certificates representing the aggregate number of full shares of Common Stock
issuable upon such exercise, together with cash in lieu of any fraction of a
share, as hereafter provided. The stock certificate or certificates so delivered
shall be, to the extent possible, in such denomination or denominations as the
exercising Holder shall reasonably request in the Exercise Notice and shall be
registered in the name of the Holder or, subject to Section 8 below, such other
name as shall be designated in the Exercise Notice. This Warrant shall be deemed
to have been exercised, and such stock certificate or certificates shall be
deemed to have been issued, and the Holder or any other person so designated to
be named therein shall be deemed to have become a holder of record of the shares
evidenced by such stock certificate or certificates for all purposes, as of the
Exercise Date.
(c) Payment of the Warrant Price shall be made at the option of the Holder
by one or more of the following methods: (i) by delivery of a certified or
official bank check in the amount of such Warrant Price payable to the order of
the Company, (ii) by instructing the Company to withhold a number of shares of
Warrant Stock then issuable upon exercise of this Warrant with an aggregate Fair
Value equal to such Warrant Price (the "Share Withholding Option"), (iii) by
surrendering to the Company shares of Common Stock previously acquired by the
Holder with an aggregate Fair Value equal to such Warrant Price, (iv) by
surrendering to the Company dividends due and owing by the Company to the Holder
equal to such Warrant Price, or (v) by providing to the Company goods or
services with a fair value as specified in any contract pursuant to which such
goods or services are provided or, if not specified, as determined by the Board
of Directors equal to such Warrant Price (or if the Majority Warrant Holders
object in writing to such determination within thirty (30) days after receiving
notice of same, as determined by an independent expert of national recognition
in the relevant industry, which expert shall be reasonably acceptable to the
Board of Directors and the Majority Warrant Holders, and if the Board of
Directors and the Majority Warrant Holders are unable to agree upon an
acceptable independent expert within ten (10) days after the date either party
proposed that one be selected, the independent expert will be selected by an
arbitrator located in New York City, New York, selected by the American
Arbitration Association (or if such organization ceases to exist, the arbitrator
shall be chosen by a court of competent jurisdiction)). In the event of any
withholding of Warrant Stock or surrender of Common Stock pursuant to clause
(ii) or (iii) above where the number of shares whose Fair Value is equal to the
Warrant Price is not a whole number, the number of shares withheld by or
surrendered to the Company shall be rounded up to the nearest whole share and
the Company shall make a cash payment to the Holder based on the incremental
fraction of a share being so withheld by or surrendered to the Company in an
amount determined in accordance with Section 2.3 hereof.
(d) If this Warrant shall have been exercised in part, the Company shall,
at the time of delivery of the certificate or certificates representing the
shares of Common Stock being issued, deliver to the Holder a new Warrant
evidencing the rights of the Holder to purchase the unpurchased shares of Common
Stock called for by this Warrant. Such new Warrant shall in all other respects
be identical to this Warrant. Notwithstanding any provision herein to the
contrary, the Company shall not be required to register shares of Common Stock
in the name of any person who acquired this Warrant (or part hereof) or any
shares of Warrant Stock otherwise than in accordance with this Warrant.
(e) All Warrants delivered for exercise shall be canceled by the Company.
(f) On the date of exercise of the Warrants the Company shall use
commercially reasonable efforts to satisfy all the conditions set forth in
Section 7.2 of the Purchase Agreement other than the condition set forth in
Section 7.2(n), provided that if the Company shall have used its commercially
reasonable efforts to satisfy such conditions and such conditions shall not have
been satisfied, the Holder shall have no rights or remedies arising as a result
of such failure.
2.2 Payment of Taxes. All shares of Common Stock issuable upon the exercise
of this Warrant pursuant to the terms hereof shall be validly issued, fully paid
and nonassessable, issued without violation of any preemptive rights and free
and clear of all Liens (other than any created by actions of the Holder). The
Company shall pay all expenses in connection with, and all issuance, transfer,
stamp and other similar taxes and other governmental charges that may be imposed
with respect to, the issue or delivery thereof, unless such tax or charge is
imposed by law upon the Holder, in which case such taxes or charges shall be
paid by the Holder and the Company shall reimburse the Holder therefor on an
After-Tax Basis. The Company shall not, however, be required to pay any tax or
governmental charge which may be payable in respect of any Transfer involved in
the issue and delivery of shares of Common Stock issuable upon exercise of this
Warrant in a name other than that of the Holder of the Warrants to be exercised,
and no such issue or delivery shall be made unless and until the person
requesting such issue has paid to the Company the amount of any such tax, or has
established to the satisfaction of the Company that such tax has been paid.
2.3 Fractional Shares. The Company shall not be required to issue a
fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share that the Holder of one or more Warrants, the rights under
which are exercised in the same transaction, would otherwise be entitled to
purchase upon such exercise, the Company shall pay to such Holder an amount in
cash equal to such fraction multiplied by the Fair Value.
2.4 Reduced Exercise Price. On the Outside Date, in the event that the HSR
Approval or the Stockholders Approval shall not have been obtained, the Exercise
Price shall be reduced to an amount equal to 50% of the Exercise Price in effect
immediately prior to the Outside Date.
3. TRANSFER, DIVISION AND COMBINATION
3.1 Transfer. Subject to compliance with Section 8 hereof, each transfer of
this Warrant and all rights hereunder, in whole or in part, shall be registered
on the books of the Company to be maintained for such purpose, upon surrender of
this Warrant at the Designated Office, together with a written assignment of
this Warrant in the form of Annex B hereto duly executed by the Holder or its
agent or attorney and funds sufficient to pay any transfer taxes described in
Section 2.2 in connection with the making of such transfer. Upon such surrender
and delivery and, if required, such payment, the Company shall, subject to
Section 8, execute and deliver a new Warrant or Warrants in the name of the
assignee or assignees and in the denominations specified in such instrument of
assignment, and shall issue to the assignor a new Warrant evidencing the portion
of this Warrant not so assigned and this Warrant shall promptly be cancelled. A
Warrant, if properly assigned in compliance with Section 8, may be exercised by
the new Holder for the purchase of shares of Common Stock without having a new
Warrant issued.
3.2 Division and Combination. Subject to compliance with the applicable
provisions of this Warrant including, without limitation, Section 8, this
Warrant may be divided or combined with other Warrants upon presentation hereof
at the Designated Office, together with a written notice specifying the names
and denominations in which new Warrants are to be issued, signed by the Holder
or its agent or attorney. Subject to compliance with the applicable provisions
of this Warrant as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.
3.3 Expenses. The Company shall prepare, issue and deliver at its own
expense (other than pursuant to Section 2.2 hereof) any new Warrant or Warrants
required to be issued under this Section 3.
3.4 Maintenance of Books. The Company agrees to maintain, at the Designated
Office, books for the registration and transfer of the Warrants.
4. ANTIDILUTION PROVISIONS
The number of shares of Common Stock for which this Warrant is exercisable
and the Exercise Price shall be subject to adjustment from time to time as set
forth in this Section 4.
4.1 Upon Issuance of Common Stock. If the Company shall, at any time or
from time to time after the Original Issuance Date, issue any shares of Common
Stock, options to purchase or rights to subscribe for Common Stock, securities
by their terms convertible into or exchangeable for Common Stock, or options to
purchase or rights to subscribe for such convertible or exchangeable securities,
other than shares of Series B Preferred Stock issued to the Purchaser or
Excluded Securities, without consideration or for consideration per share less
than either (a) the Exercise Price or (b) the Fair Value of the Common Stock, in
each case, in effect immediately prior to the issuance of such Common Stock or
securities, then such Exercise Price shall forthwith be adjusted to a price
equal to the lower of (x) the Exercise Price in effect immediately prior
thereto, or (y) the lowest consideration per share for which such shares of
Common Stock or such options, rights or convertible or exchangeable securities
are issued (plus the additional consideration required to be paid upon exercise,
exchange or conversion of such options, rights or convertible or exchangeable
securities).
4.2 Upon Acquisition of Common Stock. If the Company or any Subsidiary
shall, at any time or from time to time after the Original Issuance Date,
directly or indirectly, redeem, purchase or otherwise acquire (a) any shares of
Common Stock for a consideration per share greater than the Fair Value of shares
of Common Stock immediately prior to such event, or (b) any options to purchase
or rights to subscribe for Common Stock, securities by their terms convertible
into or exchangeable for Common Stock (other than shares of Series B Preferred
Stock issued to the Purchaser that are redeemed according to their terms), or
options to purchase or rights to subscribe for such convertible or exchangeable
securities, in either case, for a consideration per share of Common Stock for
which such options, rights or convertible or exchangeable securities are
exercisable, convertible or exchangeable, that is greater than the amount, if
any, by which the Fair Value of shares of Common Stock immediately prior to such
event exceeds the per share exercise, exchange, subscription, conversion or
purchase price applicable to such options, rights or convertible or exchangeable
securities, then, in the case of (a) or (b), the Exercise Price shall forthwith
be lowered to a price equal to the price obtained by multiplying:
(i) the Exercise Price in effect immediately prior to such event, by
(ii) a fraction of which (x) the denominator shall be the Fair Value
per share of Common Stock immediately prior to such event and (y) the
numerator shall be the result of dividing:
(A) (1) the product of (a) the number of shares of Common Stock
outstanding on a fully-diluted basis and (b) the Fair Value per share
of Common Stock, in each case, immediately prior to such event, minus
(2) the aggregate consideration paid by the Company in such event, by
(B) the number of shares of Common Stock outstanding on a
fully-diluted basis immediately prior to such event, minus the number
of shares of Common Stock purchased or acquired, or for which the
options, rights or convertible or exchangeable securities acquired
were exercisable, convertible or exchangeable.
For purposes of this Section 4, "fully diluted basis" shall be determined
in accordance with the treasury method of GAAP and Section 4.3.
4.3 Provisions Applicable to Adjustments. For the purposes of any
adjustment of an Exercise Price pursuant to Sections 4.1 and 4.2, the following
provisions shall be applicable:
(i) In the case of the issuance of Common Stock for cash in a public
offering or private placement, the consideration shall be deemed to be the
amount of cash paid therefor before deducting therefrom any discounts,
commissions or placement fees payable by the Company to any underwriter or
placement agent in connection with the issuance and sale thereof.
(ii) In the case of the issuance of Common Stock for a consideration
in whole or in part other than cash, the consideration other than cash
shall be deemed to be the Fair Value thereof as determined in accordance
with the Appraisal Procedure.
(iii) In the case of the issuance of options to purchase or rights to
subscribe for Common Stock, securities by their terms convertible into or
exchangeable for Common Stock, or options to purchase or rights to
subscribe for such convertible or exchangeable securities, except for
shares of Series B Preferred Stock issued to the Purchaser or options to
acquire Excluded Securities:
(A) the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options to purchase or rights to
subscribe for Common Stock shall be deemed to have been issued at the
time such options or rights were issued and for a consideration equal
to the consideration (determined in the manner provided in
subparagraphs (i) and (ii) above), if any, received by the Company
upon the issuance of such options or rights plus the minimum purchase
price provided in such options or rights for the Common Stock covered
thereby;
(B) the aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange of any such convertible
or exchangeable securities or upon the exercise of options to purchase
or rights to subscribe for such convertible or exchangeable securities
and subsequent conversion or exchange thereof shall be deemed to have
been issued at the time such securities, options, or rights were
issued and for a consideration equal to the consideration received by
the Company for any such securities and related options or rights
(excluding any cash received on account of accrued interest or accrued
dividends), plus the additional consideration, if any, to be received
by the Company upon the conversion or exchange of such securities or
the exercise of any related options or rights (the consideration in
each case to be determined in the manner provided in paragraphs (i)
and (ii) above);
(C) on any change in the number of shares or exercise price of
Common Stock deliverable upon exercise of any such options or rights
or conversions of or exchanges for such securities, other than a
change resulting from the antidilution provisions thereof, the
applicable Exercise Price shall forthwith be readjusted to such
Exercise Price as would have been obtained had the adjustment made
upon the issuance of such options, rights or securities not converted
prior to such change or options or rights related to such securities
not converted prior to such change been made upon the basis of such
change;
(D) upon the expiration of any such options or the termination of
any rights, convertible securities or exchangeable securities, the
applicable Exercise Price shall forthwith be readjusted to such
Exercise Price as would have been in effect at the time of such
expiration or termination had such options, rights, convertible
securities or exchangeable securities, to the extent outstanding
immediately prior to such expiration or termination, never been
issued; and
(E) no further adjustment of the Exercise Price adjusted upon the
issuance of any such options, rights, convertible securities or
exchangeable securities shall be made as a result of the actual
issuance of Common Stock on the exercise of any such rights or options
or any conversion or exchange of any such securities.
4.4 Upon Stock Dividends or Splits. If, at any time after the Original
Issuance Date, the number of shares of Common Stock outstanding is increased by
a stock dividend payable in shares of Common Stock or by a subdivision or
split-up of shares of Common Stock, then, following the record date for the
determination of holders of Common Stock entitled to receive such stock
dividend, or to be affected by such subdivision or split-up, the Exercise Price
shall be appropriately decreased so that the number of shares of Common Stock
purchasable on exercise of the Warrants shall be increased in proportion to such
increase in outstanding shares.
4.5 Upon Combinations. If, at any time after the Original Issuance Date,
the number of shares of Common Stock outstanding is decreased by a combination
of the outstanding shares of Common Stock into a smaller number of shares of
Common Stock, then, following the record date to determine shares affected by
such combination, the Exercise Price shall be appropriately increased so that
the number of shares of Common Stock purchasable on exercise of each of the
Warrants shall be decreased in proportion to such decrease in outstanding
shares.
4.6 Upon Reclassifications, Reorganizations, Consolidations or Mergers. In
the event of any capital reorganization of the Company, any reclassification of
the stock of the Company (other than a change in par value or from par value to
no par value or from no par value to par value or as a result of a stock
dividend or subdivision, split-up or combination of shares), any sale or
transfer to another Person of the property of the Company as an entirety or
substantially as an entirety, or any consolidation or merger of the Company with
or into another corporation (where the Company is not the surviving corporation
or where there is a change in or distribution with respect to the Common Stock),
each Warrant shall after such reorganization, reclassification, consolidation,
transfer or merger be exercisable for the kind and number of shares of stock or
other securities or property of the Company or of the successor corporation
resulting from such consolidation, transfer or surviving such merger, if any, to
which the holder of the number of shares of Common Stock deliverable
(immediately prior to the time of such reorganization, reclassification,
consolidation or merger) upon exercise of such Warrant would have been entitled
upon such reorganization, reclassification, consolidation, transfer or merger.
The provisions of this clause shall similarly apply to successive
reorganizations, reclassifications, consolidations, transfers, or mergers.
Notwithstanding anything contained in this Agreement to the contrary, in
the event that the Company shall effect any of the transactions described in
this Section 4.6, each person (other than the Company) which may be required to
issue a new Warrant as provided above shall assume by written instrument
delivered to, and reasonably satisfactory to, the Majority Warrant Holders
(i) the obligations of the Company under this Agreement (and if the Company
shall survive the consummation of such transaction, such assumption shall be in
addition to, and shall not release the Company from, any continuing obligations
of the Company under this Agreement) and (ii) the obligation to deliver to all
Holders such new Warrants as, in accordance with the foregoing provisions of
this Section 4.6, such Holders may be entitled to receive, and such Person shall
have similarly delivered to such Holders an opinion of counsel for such Person,
which counsel shall be reasonably satisfactory to the Majority Warrant Holders,
stating that this Agreement shall thereafter continue in full force and effect
and that the terms hereof (including, without limitation, all of the provisions
of this Section 4.6, shall be applicable to the stock, securities, cash or
property which such person may be required to deliver upon any exercise of any
of the Warrants or such new Warrant or the exercise of any rights pursuant
hereto.
4.7 Deferral in Certain Circumstances. In any case in which the provisions
of this Section 4 shall require that an adjustment shall become effective
immediately after a record date of an event, the Company may defer until the
occurrence of such event issuing to the Holder of any Warrant exercised after
such record date and before the occurrence of such event the shares of capital
stock issuable upon such exercise by reason of the adjustment required by such
event and issuing to such Holder only the shares of capital stock issuable upon
such exercise before giving effect to such adjustments; provided, however, that
the Company shall deliver to such Holder an appropriate instrument or due bills
evidencing such Holder's right to receive such additional shares.
4.8 Other Anti-Dilution Provisions. If the Company has issued or issues any
securities on or after the Original Issuance Date containing provisions
protecting the holder or holders thereof against dilution in any manner more
favorable to such holder or holders thereof than those set forth in this Section
4, such provisions (or any more favorable portion thereof) shall be deemed to be
incorporated herein as if fully set forth in this Warrant and, to the extent
inconsistent with any provision of this Warrant, shall be deemed to be
substituted therefor.
4.9 Appraisal Procedure. In any case in which the provisions of this
Section 4 shall necessitate that the Appraisal Procedure be utilized for
purposes of determining an adjustment to the Exercise Price, the Company may
defer until the completion of the Appraisal Procedure and the determination of
the adjustment (1) issuing to the Holder of any Warrant exercised after the date
of the event that requires the adjustment and before completion of the Appraisal
Procedure and the determination of the adjustment, the shares of capital stock
issuable upon such exercise by reason of the adjustment required by such event
and issuing to such Holder only the shares of capital stock issuable upon such
exercise before giving effect to such adjustment and (2) paying to such Holder
any amount in cash in lieu of a fractional share of capital stock pursuant to
Section 2.3 above; provided, however, that the Company shall deliver to such
holder an appropriate instrument or due bills evidencing such holder's right to
receive such additional shares or cash.
4.10 Adjustment of Number of Shares Purchasable. Upon any adjustment of the
Exercise Price as provided in Section 4.1, 4.2, 4.4, 4.5 or 4.6, the Holders of
the Warrants shall thereafter be entitled to purchase upon the exercise thereof,
at the Exercise Price resulting from such adjustment, the number of shares of
Common Stock (calculated to the nearest 1/100th of a share) obtained by
multiplying the Exercise Price in effect immediately prior to such adjustment by
the number of shares of Common Stock issuable on the exercise hereof immediately
prior to such adjustment and dividing the product thereof by the Exercise Price
resulting from such adjustment.
4.11 Exceptions. Section 4 shall not apply to (i) any issuance of Common
Stock upon exercise of any options or warrants outstanding on April 14, 2000,
(ii) the issuance of shares of Common Stock, in an aggregate amount not to
exceed 500,000 shares to McLane Group, L.P., (iii) the issuance of shares of
Common Stock, in an aggregate amount not to exceed 2,600,000 shares upon
exercise of options or warrants that have been approved by the Board of
Directors, or any issuance of such options or warrants, (iv) shares of Common
Stock issued pursuant to the Company's current employee stock purchase plan in
an amount not to exceed 114,000 shares (the securities referred to in clauses
(i), (ii), (iii) and (iv) being collectively referred to as "Excluded
Securities"), (iv) any issuance of Common Stock in an underwritten public
offering at a price per share at least equal to the Exercise Price then in
effect if the underwriting discount does not exceed 7%, or (v) the issuance of
Series B Preferred Stock to the Purchaser pursuant to the Purchase Agreement.
4.12 Notice of Adjustment of Exercise Price. Whenever the Exercise Price is
adjusted as herein provided:
(i) the Company shall compute the adjusted Exercise Price in
accordance with this Section 4 and shall prepare a certificate signed by
the Company's independent accounting firm, setting forth the adjusted
Exercise Price and showing in reasonable detail the facts upon which such
adjustment is based, and such certificate shall forthwith be filed at each
office or agency maintained for such purpose or exercise of Warrants; and
(ii) a notice stating that the Exercise Price has been adjusted and
setting forth the adjusted Exercise Price shall forthwith be prepared by
the Company, and as soon as practicable after it is prepared, such notice
shall be mailed by the Company at its expense to all Holders at their last
addresses as they shall appear in the stock register.
4.13 Other Dilutive Events. If any event occurs as to which the provisions
of this Section 4 are not strictly applicable or, if strictly applicable, would
not fairly and adequately protect the conversion rights of the Holders in
accordance with the essential intent and principles of such provisions, then the
Board of Directors shall make such adjustments in the application of such
provisions, in accordance with such essential intent and principles, as shall be
reasonably necessary to protect such purchase rights as aforesaid; provided that
no such adjustment will increase the Exercise Price or decrease the number of
shares of Common Stock obtainable as otherwise determined pursuant to this
Section 4.
5. NO IMPAIRMENT; REGULATORY COMPLIANCE AND COOPERATION; NOTICE OF EXPIRATION
(a) The Company shall not by any action, including, without limitation,
amending its charter documents or through any reorganization, reclassification,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other similar voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of the Holder against impairment. Without limiting the generality of the
foregoing, the Company shall take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of Common Stock upon the exercise of this Warrant, free
and clear of all Liens, and shall use its best efforts to obtain all such
authorizations, exemptions or consents from any public regulatory body having
jurisdiction thereof as may be necessary to enable the Company to perform its
obligations under this Warrant.
(b) The Company shall deliver to each Holder of Warrants on or before six
months prior to the tenth anniversary of the Original Issue Date, but no earlier
than nine months prior to the tenth anniversary of the Original Issue Date,
advance notice of such tenth anniversary and of the anticipated Expiration Date.
If the Company fails to fulfill in a timely manner the notice obligation set
forth in the prior sentence, it shall provide such notice as soon as possible
thereafter.
6. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH OR
APPROVAL OF ANY GOVERNMENTAL AUTHORITY
From and after the Original Issue Date, the Company shall at all times
reserve and keep available for issuance upon the exercise of the Warrants such
number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of all outstanding Warrants. All
shares of Common Stock issuable pursuant to the terms hereof, when issued upon
exercise of this Warrant with payment therefor in accordance with the terms
hereof, shall be duly and validly issued and fully paid and nonassessable, not
subject to preemptive rights and shall be free and clear of all Liens. Before
taking any action that would result in an adjustment in the number of shares of
Common Stock for which this Warrant is exercisable or in the Exercise Price, the
Company shall obtain all such authorizations or exemptions thereof, or consents
thereto, as may be necessary from any public regulatory body or bodies having
jurisdiction over such action. If any shares of Common Stock required to be
reserved for issuance upon exercise of Warrants require registration or
qualification with any governmental authority under any federal or state law
(other than under the Securities Act or any state securities law) before such
shares may be so issued, the Company will in good faith and as expeditiously as
possible and at its expense endeavor to cause such shares to be duly registered.
7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS
7.1 Notices of Corporate Actions.
In case:
(a) the Company shall take an action or an event shall occur, that would
require an Exercise Price adjustment pursuant to Section 4; or
(b) the Company shall grant to the holders of its Common Stock rights or
warrants to subscribe for or purchase any shares of capital stock of any class;
or
(c) of any reclassification of the Common Stock (other than a subdivision
or combination of the outstanding shares of Common Stock), or of any
consolidation, merger or share exchange to which the Company is a party and for
which approval of any stockholders of the Company is required, or of the sale or
transfer of all or substantially all of the assets of the Company; or
(d) of the voluntary or involuntary dissolution, liquidation or winding up
of the Company; or
(e) the Company or any Subsidiary shall commence a tender offer for all or
a portion of the outstanding shares of Common Stock (or shall amend any such
tender offer to change the maximum number of shares being sought or the amount
or type of consideration being offered therefor);
then the Company shall cause to be filed at each office or agency maintained for
such purpose, and shall cause to be mailed to all Holders of Warrants at their
last addresses as they shall appear in the stock register, at least 30 days
prior to the applicable record, effective or expiration date hereinafter
specified, a notice stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution or granting of rights or warrants,
or, if a record is not to be taken, the date as of which the holders of Common
Stock of record who will be entitled to such dividend, distribution, rights or
warrants are to be determined, (y) the date on which such reclassification,
consolidation, merger, share exchange, sale, transfer, dissolution, liquidation
or winding up is expected to become effective, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities, cash or other property deliverable
upon such reclassification, consolidation, merger, share exchange, sale,
transfer, dissolution, liquidation or winding up, or (z) the date on which such
tender offer commenced, the date on which such tender offer is scheduled to
expire unless extended, the consideration offered and the other material terms
thereof (or the material terms of the amendment thereto). Such notice shall also
set forth such facts with respect thereto as shall be reasonably necessary to
indicate the effect of such action on the Exercise Price and the number and kind
or class of shares or other securities or property which shall be deliverable or
purchasable upon the occurrence of such action or deliverable upon exercise of
the Warrants. Neither the failure to give any such notice nor any defect therein
shall affect the legality or validity of any action described in clauses (a)
through (e) of this Section 7.1.
7.2 Taking of Record. In the case of all dividends or other distributions
by the Company to the holders of its Common Stock with respect to which any
provision of any Section hereof refers to the taking of a record of such
holders, the Company will in each such case take such a record and will take
such record as of the close of business on a Business Day.
7.3 Closing of Transfer Books. The Company shall not at any time, except
upon dissolution, liquidation or winding up of the Company, close its stock
transfer books or Warrant transfer books so as to result in preventing or
delaying the exercise or transfer of any Warrant.
8. TRANSFER RESTRICTIONS
The Holder, by acceptance of this Warrant, agrees to be bound by the
provisions of this Section 8.
8.1 Restrictions on Transfers. Neither this Warrant nor any shares of
Restricted Common Stock issued upon the exercise hereof shall be transferred,
sold, assigned, exchanged, mortgaged, pledged, hypothecated or otherwise
disposed of or encumbered except in compliance with the provisions of the
Securities Act, the rules and regulations thereunder and this Warrant. Each
certificate, if any, evidencing such shares of Restricted Common Stock issued
upon any such Transfer, other than in a public offering pursuant to an effective
registration statement, shall bear the restrictive legend set forth in Section
8.2(a), and each Warrant issued upon such Transfer shall bear the restrictive
legend set forth in Section 8.2(b), unless the Company determines that, or the
Holder delivers to the Company an Opinion of Counsel to the effect that, such
legend is not required for the purposes of compliance with the Securities Act.
Holders of the Warrants or the Restricted Common Stock, as the case may be,
shall not be entitled to Transfer such Warrants or such Restricted Common Stock
except in accordance with this Section 8.1.
8.2 Restrictive Legends.
(a) Except as otherwise provided in this Section 8, each certificate for
Warrant Stock initially issued upon the exercise of this Warrant, and each
certificate for Warrant Stock issued to any subsequent transferee of any such
certificate, shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAW. THE SHARES REPRESENTED BY
THIS CERTIFICATE MAY NOT BE TRANSFERRED, SOLD, ASSIGNED,
EXCHANGED, MORTGAGED, PLEDGED, HYPOTHECATED OF OTHERWISE DISPOSED
OF OR ENCUMBERED WITHOUT COMPLIANCE WITH THE PROVISIONS OF, AND
ARE OTHERWISE RESTRICTED BY THE PROVISIONS OF, THE ACT AND THE
RULES AND REGULATIONS THEREUNDER."
(b) Except as otherwise provided in this Section 8, each Warrant shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
"NEITHER THIS WARRANT NOR ANY OF THE SECURITIES ISSUABLE
UPON EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW.
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE STOCK
ISSUABLE UPON EXERCISE HEREOF MAY NOT BE TRANSFERRED, SOLD,
ASSIGNED, EXCHANGED, MORTGAGED, PLEDGED, HYPOTHECATED OF
OTHERWISE DISPOSED OF OR ENCUMBERED WITHOUT COMPLIANCE WITH THE
PROVISIONS OF, AND ARE OTHERWISE RESTRICTED BY THE PROVISIONS OF,
THE ACT, THE RULES AND REGULATIONS THEREUNDER AND THIS WARRANT."
8.3 Termination of Securities Law Restrictions. Notwithstanding the
foregoing provisions of this Section 8, the restrictions imposed by Section 8.1
upon the transferability of the Warrants and the Restricted Common Stock and the
legend requirements of Section 8.2(a) and (b) shall terminate as to any
particular Warrant or shares of Restricted Common Stock when the Company shall
have received from the Holder thereof an Opinion of Counsel to the effect that
such legend is not required in order to ensure compliance with the Securities
Act. Whenever the restrictions imposed by Section 8.1 shall terminate as to this
Warrant, as herein above provided, the Holder hereof shall be entitled to
receive from the Company, at the expense of the Company, a new Warrant with no
restrictive legend, and none of the Warrants issued upon registration of
transfer, division or combination of, or in substitution for, such Warrant or
Warrants shall have any similar restrictive legend endorsed thereon. Whenever
the restrictions imposed by this Section shall terminate as to any share of
Restricted Common Stock, as herein above provided, the Holder thereof shall be
entitled to receive from the Company, at the Company's expense, a new
certificate representing such Common Stock not bearing the restrictive legend
set forth in Section 8.2(a).
9. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and an indemnity reasonably satisfactory to it (it
being understood that the written indemnification agreement of or affidavit of
loss of the Holder shall be a sufficient indemnity) and, in case of mutilation,
upon surrender and cancellation hereof, the Company will execute and deliver in
lieu hereof a new Warrant of like tenor to such Holder; provided, however, that,
in the case of mutilation, no indemnity shall be required if this Warrant in
identifiable form is surrendered to the Company for cancellation.
10. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the Company shall
maintain an office or agency, which may be the principal executive offices of
the Company (the "Designated Office"), where the Warrants may be presented for
exercise, registration of transfer, division or combination as provided in this
Warrant. Such Designated Office shall initially be the office of the Company at
9933 Woods Drive, Skokie, Illinois 60077. The Company may from time to time
change the Designated Office to another office of the Company or its agent
within the United States by notice given to all registered Holders at least ten
(10) Business Days prior to the effective date of such change.
11. FINANCIAL AND BUSINESS INFORMATION
If at any time prior to the Expiration Date, the Company is not required to
file reports under Section 13 or 15(d) of the Exchange Act, the Company shall
furnish to Holders of Warrants the following:
(a) Quarterly Reports. As soon as available, but not later than 45
days after the end of each quarterly accounting period, (A) a consolidated
balance sheet of the Company as of the end of such period and consolidated
statements of income, cash flows and changes in stockholders' equity for
such quarterly accounting period and for the period commencing at the end
of the previous fiscal year and ending with the end of such period, setting
forth in each case in comparative form the corresponding figures for the
corresponding period of the preceding fiscal year, all prepared in
accordance with generally accepted accounting principles consistently
applied, subject to normal year-end adjustments and the absence of footnote
disclosure, and (B) a report by management of the Company of the operating
and financial highlights of the Company and its Subsidiaries for such
period, which shall include an analysis of the operations of the Company
and its Subsidiaries for such period.
(b) Annual Reports. As soon as available, but not later than 90 days
after the end of each fiscal year of the Company, audited consolidated
financial statements of the Company, which shall include statements of
income, cash flows and changes in stockholders' equity for such fiscal year
and a balance sheet as of the last day thereof, each prepared in accordance
with generally accepted accounting principles, consistently applied, and
accompanied by the report of a "Big 5" firm of independent certified public
accountants selected by the Company's Board of Directors (the
"Accountants"). The Company and its Subsidiaries shall maintain a system of
accounting sufficient to enable its Accountants to render the report
referred to in this Section 11(b).
(c) Miscellaneous. Promptly upon becoming available, each of the
following:
(i) notification in writing of the existence of any default under
any material agreement or instrument to which the Company or any of
its Subsidiaries is a party or by which any of their assets are bound;
(ii) upon request, copies of all reports prepared for or
delivered to the management of the Company or its Subsidiaries by its
accountants; and
(iii) upon request, any other routinely collected financial or
other information available to management of the Company or its
Subsidiaries (including, without limitation, routinely collected
statistical data).
The Company shall comply with any written request from any Holder that the
Company not provide such Holder with any of the foregoing information for any
period of time.
12. DILUTION FEE
In the event any dividends are declared with respect to the Common Stock,
as of the record date established by the Board of Directors the Company shall
pay the Holder of this Warrant as a dilution fee (the "Dilution Fee") an amount
(whether in the form of cash, securities or other property) equal to the amount
(and in the form) of the dividends that such Holder would have received had this
Warrant been exercised for purchase of Common Stock immediately prior to the
record date of such dividend, such Dilution Fee to be payable on the payment
date of the dividend established by the Board of Directors (the "Dilution Fee
Payment Date"). The record date for any such Dilution Fee shall be the record
date for the applicable dividend, and any such Dilution Fee shall be payable to
the persons in whose name this Warrant is registered at the close of business on
the applicable record date.
13. MISCELLANEOUS
13.1 Nonwaiver. No course of dealing or any delay or failure to exercise
any right hereunder on the part of the Company or the Holder shall operate as a
waiver of such right or otherwise prejudice the rights, powers or remedies of
such person.
13.2 Notice Generally. Any notice, demand, request, consent, approval,
declaration, delivery or communication hereunder to be made pursuant to the
provisions of this Warrant shall be sufficiently given or made if in writing and
either delivered in person with receipt acknowledged or by reputable air courier
service with tracking capability and charges prepaid or by facsimile, addressed
as follows:
(a) if to any Holder of this Warrant or of Warrant Stock issued upon
the exercise hereof, at its last known address appearing on the books of
the Company maintained for such purpose;
(b) if to the Company, at the Designated Office;
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, or three (3) Business Days after the same
shall have been deposited in the United States mail, or one (1) Business Day
after the same shall have been sent by Federal Express or another recognized
overnight courier service.
13.3 Indemnification. If the Company fails to make, when due, any payments
provided for in this Warrant, the Company shall pay to the Holder hereof (a)
interest at the Agreed Rate on any amounts due and owing to such Holder and (b)
such further amounts as shall be sufficient to cover any costs and expenses
including, but not limited to, reasonable attorneys' fees and expenses incurred
by such Holder in collecting any amounts due hereunder. The Company shall
indemnify, save and hold harmless the Holder hereof and the Holders of any
Warrant Stock issued upon the exercise hereof from and against any and all
liability, loss, cost, damage, reasonable attorneys' and accountants' fees and
expenses, court costs and all other out-of-pocket expenses incurred in
connection with or arising from any default hereunder by the Company. This
indemnification provision shall be in addition to the rights of such Holder or
Holders to bring an action against the Company for breach of contract based on
such default hereunder.
13.4 Limitation of Liability. No provision hereof, in the absence of
affirmative action by the Holder to purchase shares of Common Stock, and no
enumeration herein of the rights or privileges of the Holder hereof, shall give
rise to any liability of such Holder to pay the Exercise Price for any Warrant
Stock other than pursuant to an exercise of this Warrant or any liability as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
13.5 Remedies. Each Holder of Warrants and/or Warrant Stock, in addition to
being entitled to exercise its rights granted by law, including recovery of
damages, shall be entitled to specific performance of its rights provided under
this Warrant. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions
of this Warrant and hereby agrees, in an action for specific performance, to
waive the defense that a remedy at law would be adequate.
13.6 Successors and Assigns. Subject to the provisions of Sections 3.1, 8.1
and 8.2, this Warrant and the rights evidenced hereby shall inure to the benefit
of and be binding upon the successors of the Company and the permitted
successors and assigns of the Holder hereof. The provisions of this Warrant are
intended to be for the benefit of all Holders from time to time of this Warrant
and to the extent applicable, all Holders of shares of Warrant Stock issued upon
the exercise hereof (including transferees), and shall be enforceable by any
such Holder.
13.7 Amendment. This Warrant and all other Warrants may be modified or
amended or the provisions hereof waived with the written consent of the Company
and the Majority Warrant Holders, provided that no such Warrant may be modified
or amended to reduce the number of shares of Common Stock for which such Warrant
is exercisable or to increase the price at which such shares may be purchased
upon exercise of such Warrant (before giving effect to any adjustment as
provided therein) without the written consent of the Holder thereof.
13.8 Severability. Wherever possible, each provision of this Warrant shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Warrant shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Warrant.
13.9 Headings. The headings used in this Warrant are for the convenience of
reference only and shall not, for any purpose, be deemed a part of this Warrant.
13.10 GOVERNING LAW; JURISDICTION. (a) IN ALL RESPECTS, INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS WARRANT AND THE
OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, EXCEPT WITH RESPECT TO
THE VALIDITY OF THIS WARRANT, THE ISSUANCE OF WARRANT STOCK UPON EXERCISE HEREOF
AND THE RIGHTS AND DUTIES OF THE COMPANY WITH RESPECT TO REGISTRATION OF
TRANSFER, WHICH SHALL BE GOVERNED BY THE LAWS OF THE STATE OF DELAWARE.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS WARRANT MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK AND, BY EXECUTION AND DELIVERY OF
THIS WARRANT, THE COMPANY HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS. THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT
OF ANY OF THE AFOREMENTIONED COURTS IN ANY ACTION OR PROCEEDING BY THE MAILING
OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE
COMPANY AT ITS ADDRESS PROVIDED PURSUANT TO SECTION 13.2, SUCH SERVICE TO BECOME
EFFECTIVE SEVEN DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT
OF THE HOLDER OF THIS WARRANT TO SERVE PROCESS IN ANY OF THE MATTERS PERMITTED
BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY
IN ANY OTHER JURISDICTION. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE
AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS
WARRANT BROUGHT IN THE COURTS REFERRED TO ABOVE AND HEREBY FURTHER IRREVOCABLY
WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION
OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM.
(c) THE COMPANY HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING ARISING UNDER OR WITH RESPECT HERETO.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
and its corporate seal to be impressed hereon and attested by its Secretary or
an Assistant Secretary.
PEAPOD, INC.
By:_________________________________
Name:
Title:
Attest:
By:_____________________________
Name:
Title:
<PAGE>
ANNEX A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned Holder of this Warrant irrevocably exercises this Warrant
for the purchase of ______ shares Common Stock of Peapod, Inc. and herewith
makes payment of the Warrant Price as follows (check one or more of the
following):
o by delivery herewith of a certified or official bank check in the
amount of such Warrant Price payable to the order of the Company;
o hereby instructs the Company to withhold a number of shares of Warrant
Stock then issuable upon exercise of this Warrant with an aggregate
Fair Value equal to such Warrant Price;
o herewith surrenders to the Company shares of Common Stock previously
acquired by the Holder with an aggregate Fair Value equal to such
Warrant Price;
o herewith surrenders to the Company dividends due and owing by the
Company to the Holder equal to such Warrant Price; or
o by providing to the Company goods or services with a fair value equal
to such Warrant Price;
all at the price and on the terms and conditions specified in this Warrant and
requests that certificates for the shares of Common Stock hereby purchased (and
any securities or other property issuable upon such exercise) be issued in the
name of and delivered to ______________ whose address is
_________________________________ and, if such shares of Common Stock shall not
include all of the shares of Common Stock issuable as provided in this Warrant,
that a new Warrant of like tenor and date for the balance of the shares of
Common Stock issuable hereunder be delivered to the undersigned.
___________________________________
(Name of Registered Owner)
___________________________________
(Signature of Registered Owner)
___________________________________
(Street Address)
___________________________________
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
<PAGE>
ANNEX B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby
sells, assigns and transfers unto the assignee named below all of the rights of
the undersigned under this Warrant, with respect to the number of shares of
Common Stock set forth below:
No. of Shares of
Name and Address of Assignee Common Stock
- - ---------------------------- ----------------
and does hereby irrevocably constitute and appoint _____________________
attorney-in-fact to register such transfer onto the books of Peapod, Inc.
maintained for the purpose, with full power of substitution in the premises.
Dated: _____________ Print Name: ________________________
Signature: _________________________
Witness: ___________________________
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
EX-10.8
CERTIFICATE OF DESIGNATIONS
OF
SERIES B CONVERTIBLE
PREFERRED STOCK
OF
PEAPOD, INC.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
PEAPOD, INC., a Delaware corporation (the "Company"), hereby certifies that
the following resolution was duly approved and adopted by the Board of Directors
of the Company at a meeting duly held on April 13, 2000, which resolution
remains in full force and effect on the date hereof:
RESOLVED, that pursuant to the authority expressly granted to and vested in
the Board of Directors of the Company (the "Board of Directors") by the
provisions of the Amended and Restated Certificate of Incorporation of the
Company (the "Certificate of Incorporation") and its Restated By-Laws (the
"Bylaws"), and in accordance with Section 151 of the General Corporation Law of
the State of Delaware, there is hereby created, out of the 5,000,000 shares of
Preferred Stock, par value $0.01 per share, of the Company authorized and
unissued in Article Fourth of the Certificate of Incorporation (the "Preferred
Stock"), a series of the Preferred Stock consisting of 730,000 shares, which
series shall have the following powers, designations, preferences and relative,
participating, optional or other rights, and the following qualifications,
limitations and restrictions (in addition to any powers, designations,
preferences and relative, participating, optional or other rights, and any
qualifications, limitations and restrictions, set forth in the Certificate of
Incorporation which are applicable to the Preferred Stock):
Section 1. Designation of Amount. The 730,000 shares of Preferred Stock
shall be designated the "Series B Convertible Preferred Stock" (the "Series B
Preferred Stock"), par value $0.01 per share and the authorized number of shares
constituting such series shall be 730,000.
Section 2. Certain Definitions,
Unless the context otherwise requires, the terms defined in this Section 1
shall have, for all purposes of this resolution, the meanings specified (with
terms defined in the singular having comparable meanings when used in the
plural).
"Additional Dividend Payment Date" shall have the meaning set forth in
Section 3(g).
"Additional Dividends" shall have the meaning set forth in Section 3(g).
"Affiliate" shall mean, with respect to any person, any other person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified person and, in the case of a person who is an
individual, shall include (i) members of such specified person's immediate
family (as defined in Instruction 2 of Item 404(a) of Regulation S-K under the
Securities Act) and (ii) trusts, the trustee and all beneficiaries of which are
such specified person or members of such person's immediate family as determined
in accordance with the foregoing clause (i). For the purposes of this
definition, "control," when used with respect to any person means the power to
direct the management and policies of such person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "affiliated," "controlling" and "controlled" have meanings
correlative to the foregoing. Notwithstanding the foregoing, for purposes of
this Certificate of Designations, the Purchaser and its Affiliates shall not be
deemed Affiliates of the Company.
"Appraisal Procedure" if applicable, shall mean the following procedure to
determine the fair market value, as to any security, for purposes of the
definition of "Fair Market Value" or the fair market value, as to any other
property (in either case, the "valuation amount"). The valuation amount shall be
determined in good faith by the Board of Directors; provided, however, that if
the Requisite Holders disagree with such valuation amount within a reasonable
period of time (not to exceed twenty (20) days after notice thereof), the
valuation amount shall be determined by an investment banking firm of national
recognition, which firm shall be reasonably acceptable to the Board of Directors
and the Requisite Holders. If the Board of Directors and the Requisite Holders
are unable to agree upon an acceptable investment banking firm within ten (10)
days after the date either party proposed that one be selected, the investment
banking firm will be selected by an arbitrator located in New York City, New
York, selected by the American Arbitration Association (or if such organization
ceases to exist, the arbitrator shall be chosen by a court of competent
jurisdiction). The arbitrator shall select the investment banking firm (within
ten (10) days of its appointment) from a list, jointly prepared by the Board of
Directors and the Requisite Holders, of not more than six investment banking
firms of national standing in the United States, of which no more than three may
be named by the Board of Directors and no more than three may be named by the
Requisite Holders. The arbitrator may consider, within the ten-day period
allotted, arguments from the parties regarding which investment banking firm to
choose, but the selection by the arbitrator shall be made in its sole discretion
from the list of six. The Board of Directors and the Requisite Holders shall
submit their respective valuations and other relevant data to the investment
banking firm, and the investment banking firm shall as soon as practicable
thereafter make its own determination of the valuation amount. The final
valuation amount for purposes hereof shall be the average of the two valuation
amounts closest together, as determined by the investment banking firm, from
among the valuation amounts submitted by the Company and the Requisite Holders
and the valuation amount calculated by the investment banking firm. The
determination of the final valuation amount by such investment-banking firm
shall be final and binding upon the parties. The Company shall pay the fees and
expenses of the investment banking firm and arbitrator (if any) used to
determine the valuation amount. If required by any such investment banking firm
or arbitrator, the Company shall execute a retainer and engagement letter
containing reasonable terms and conditions, including, without limitation,
customary provisions concerning the rights of indemnification and contribution
by the Company in favor of such investment banking firm or arbitrator and its
officers, directors, partners, employees, agents and affiliates.
"Business Day" shall mean a day other than a Saturday, Sunday or day on
which banking institutions in New York are authorized or required to remain
closed.
"Change of Control" shall mean the occurrence of any of the following
events:
(i) the adoption or approval by the Board of Directors of the Company
of a plan or proposal relating to the sale or other disposition of all or
substantially all of the assets of the Company;
(ii) the adoption or approval by the Board of Directors of the Company
of a plan or proposal relating to the liquidation, dissolution or winding
up of the Company;
(iii) the acquisition by any individual, entity or group (other than a
group including the Purchaser), including any "person," within the meaning
of Section 13(d)(3) or 14(d)(2) of the Exchange Act, of beneficial
ownership within the meaning of Rule 13d-3 promulgated under the Exchange
Act, of more than 50% of the then outstanding shares of Common Stock;
(iv) the first day on which the individuals (other than the Preferred
Stock Directors) who are members of the Board of Directors as of April 14,
2000 (collectively, the "Incumbent Board") cease for any reason to
constitute a majority of the Board of Directors; provided that any
individual who becomes a director of the Company subsequent to April 14,
2000, whose appointment or nomination for election by the Company's
stockholders, was approved by the vote of at least a majority of the
directors then comprising the Incumbent Board shall be deemed a member of
the Incumbent Board; and provided, further, that any individual who was
initially elected as a director of the Company as a result of an actual or
threatened election contest, as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act, or any other actual or
threatened solicitation of proxies or consents by or on behalf of any
person other than the Board of Directors shall not be deemed to be a member
of the Incumbent Board;
(v) the 30th consecutive day on which the Common Stock is no longer
listed for trading on a United States national securities exchange or
authorized for quotation in the NASDAQ Stock Market; or
(vi) the Company shall have failed to comply in any material respect
with any of its agreements contained in any of the Documents, provided,
that, if such failure to comply is capable of being cured, 30 days shall
have elapsed since such failure to comply and such failure shall not have
been cured.
"Change of Control Election" shall have the meaning set forth in Section
6(a).
"Change of Control Redemption Price" shall have the meaning set forth in
Section 6(a).
"Common Stock" shall mean the common stock, par value $.01 per share, of
the Company.
"Conversion Date" shall have the meaning set forth in Section 8(e).
"Conversion Price" shall have the meaning set forth in Section 8(b).
"Credit and Security Agreements" shall have the meaning set forth in the
Purchase Agreement.
"Daily Market Price" shall mean, with respect to one share of Common Stock
and for any Business Day: (i) if the Common Stock is then listed on a national
securities exchange or is authorized for quotation on NASDAQ and is designated
as a National Market System security, the last sale price of one share of Common
Stock, regular way, on such day on the principal stock exchange or market system
on which such Common Stock is then listed or authorized for quotation, or, if no
such sale takes place on such day, the average of the closing bid and asked
prices for one share of Common Stock on such day as reported on such stock
exchange or market system or (ii) if the Common Stock is not then listed or
authorized for quotation on any national securities exchange or designated as a
National Market System security on NASDAQ but is traded over-the-counter, the
average of the closing bid and asked prices for one share of Common Stock as
reported on NASDAQ or the Electronic Bulletin Board or in the National Daily
Quotation Sheets, as applicable.
"Dividend Rate" shall have the meaning set forth in Section 3(a).
"Documents" shall mean the Purchase Agreement, the Warrants, the
Registration Rights Agreement, the Services Agreement, the Certificate of
Incorporation, the Bylaws, the Credit and Security Agreements, the Joint
Development and Licensing Agreement, the Voting Agreements and this Certificate
of Designations.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Exercise Period" shall have the meaning set forth in Section 6(a).
"Event of Non-Compliance" shall mean (i) any failure of the Company or the
Board of Directors to comply with Section 7 of this Certificate of Designations,
Article VIII of the Bylaws of the Company, (ii) any failure of the Company or
the Board of Directors to comply with Section 3 of this Certificate of
Designations or any failure of the Board of Directors of the Company to declare
a quarterly dividend payment provided for in Section 3(a) or to pay such
dividend on the dividend payment date provided therefor in Section 3(b), (iii)
any failure of the Company or the Board of Directors to comply with Section 5,
6, 8 or 9 of this Certificate of Designations; provided, that a failure to give
a notice within a specified time period shall be deemed an Event of
Non-Compliance only until such notice is given (unless the delay in giving such
notice adversely affects the ability of the person to whom such notice was given
to exercise the rights with respect to which such notice was given) (iv) any
other failure of the Company to comply in any material respect with any of its
agreements in any of the Documents; provided, however, that if any such failure
to comply is capable of being cured, 30 days shall have elapsed since such
failure has not been cured or (v) any obligation of the Company, whether as
principal, guarantor, surety or other obligor, for the payment of indebtedness
for borrowed money in excess of $10,000,000 (x) shall become or shall be
declared due and payable prior to the expressed maturity thereof, or (y) shall
not be paid when due or within any grace period for the payment thereof, and
such default shall remain uncured for 30 days.
"Excluded Securities" shall have the meaning set forth in Section 8(d).
"Fair Market Value" shall mean, as of any specified date and as to any
security, the Ten Day Average of the closing prices of such security's sales on
all domestic securities exchanges on which such security may at the time be
listed, or, if there have been no sales on any such exchange on any day included
in the Ten Day Average, the average of the highest bid and lowest asked prices
on all such exchanges at the end of such day, or, if on any day included in the
Ten Day Average, such security is not so listed, the average of the
representative bid and asked prices quoted in the NASDAQ Stock Market as of 4:00
P.M., New York City time, on such day, or, if on any day included in the Ten Day
Average such security is not quoted in the NASDAQ Stock Market, the average of
the highest bid and lowest asked prices on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau,
Incorporated, or any similar or successor organization (and in each such case
excluding any trades that are not bona fide, arm's length transactions). If at
any time such security is not listed on any domestic securities exchange or
quoted in the NASDAQ Stock Market or the domestic over-the-counter market, the
"Fair Market Value" of such security shall be the fair market value thereof as
determined in accordance with the Appraisal Procedure, using any appropriate
valuation method, assuming an arms-length sale to an independent party. In
determining the fair market value of Common Stock, a sale of all of the issued
and outstanding Common Stock will be assumed, without giving regard to the lack
of liquidity of such stock due to any restrictions (contractual or otherwise)
applicable thereto or any discount for minority interests and assuming the
conversion or exchange of all securities then outstanding that are convertible
into or exchangeable for Common Stock and the exercise of all rights and
warrants then outstanding and exercisable to purchase shares of such stock or
securities convertible into or exchangeable for shares of such stock; provided,
however that such assumption will not include those securities, rights and
warrants convertible into Common Stock where the conversion, exchange or
exercise price per share is greater than the fair market value; provided,
further, however, that fair market value shall be determined with regard to the
relative priority of each class or series of Common Stock (if more than one
class or series exists.) "Fair Market Value" means with respect to property
other than securities, the "fair market value" determined in accordance with the
Appraisal Procedure.
"GAAP" shall mean generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board, which are in effect from time to time,
consistently applied.
"HSR Approval" shall mean the expiration of all waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and applicable
rules and regulations and any similar state acts applicable to the issuance of
Series B Preferred Stock as contemplated by the Documents.
"Joint Development and Licensing Agreement" shall have the meaning set
forth in the Purchase Agreement.
"Liquidation Preference" shall have the meaning set forth in Section 4.
"New Securities" shall mean any shares of capital stock of the Company,
whether or not now authorized, and securities of any type whatsoever that are,
or may become, convertible into or exchangeable or exercisable for shares of
capital stock, other than (i) Excluded Securities; (ii) the Series B Preferred
Stock (or the Common Stock issuable upon conversion thereof); (iii) the Warrants
(and Common Stock issuable upon exercise thereof); (iv) securities issued
pursuant to the Company's bona fide acquisition of another corporation by
merger, purchase of substantially all assets or other reorganization, which
acquisition has been approved by the Board of Directors; and (v) securities
issued in connection with any stock split, stock dividend or recapitalization of
the Company for which an adjustment is made to the terms of conversion of the
Series B Preferred Stock hereunder.
"Original Issuance Date" shall mean, with respect to any shares of Series B
Preferred Stock, the date of issuance of such shares.
"Outside Date" shall mean the date that is one hundred and twenty (120)
days after the date hereof or, if the Purchaser exercises any Warrants and as a
direct result of such exercise, the Stockholders Meeting (as defined in the
Purchase Agreement) is delayed, one hundred and twenty (120) days plus the
number of days of such delay after the date hereof.
"Permitted Transferee" shall mean, with respect to any person, any other
person.
"person" shall mean any individual, partnership, corporation, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or agency or political subdivision
thereof, or other entity.
"Preferred Stock Director" shall have the meaning set forth in Section
7(b).
"Previously Issued Warrant" shall mean the warrant, dated as of April 10,
2000, issued by the Company in favor of the Purchaser for 100,000 shares of
Common Stock.
"Pro Rata Amount" shall mean, at any time, with respect to any holder of
shares of Series B Preferred Stock, the ratio of (i) the number of shares of
Common Stock held by such holder (on a fully-diluted basis), to (ii) the total
number of shares of Common Stock of the Company outstanding (on a fully-diluted
basis), in the case of both clauses (i) and (ii), including all outstanding
securities convertible into or exchangeable or exercisable for Common Stock on
an as-converted or exercised basis (including, but not limited to, the Series B
Preferred Stock and outstanding options and warrants exercisable for Common
Stock).
"Purchase Agreement" shall mean the Purchase Agreement, dated as of April
13, 2000, by and between the Company and the Purchaser.
"Purchaser" shall mean Koninklijke Ahold N.V., a public company with
limited liability incorporated under the laws of the Netherlands.
"Redemption Date" shall have the meaning set forth in Section 5.
"Redemption Price" shall have the meaning set forth in Section 5.
"Registration Rights Agreement" shall mean the registration rights
agreement to be entered into by the Company and the Purchaser pursuant to the
Purchase Agreement.
"Requisite Holders" shall mean the holders of at least a majority of the
then outstanding Shares.
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Series B Preferred Stock" shall mean the Series B Preferred Stock
authorized hereby.
"Shares" shall mean, collectively, shares of converted Common Stock and
shares of Series B Preferred Stock. Whenever this Certificate refers to a number
or percentage of Shares, such number or percentage shall be calculated as if,
immediately prior to such calculation, all shares of Series B Preferred Stock
and all other convertible or exchangeable securities and all warrants and
options held by the Purchaser and its Permitted Transferees had been converted
into shares of Common Stock in accordance with their terms, regardless of the
existence of any restrictions on such conversion or exercise.
"Stockholder Approval" shall mean the approval by the Company's
stockholders of the issuance of all shares of Series B Preferred Stock and
Warrants pursuant to the Purchase Agreement.
"subsidiary" means, with respect to any person, (a) a corporation a
majority of whose capital stock with voting power, under ordinary circumstances,
to elect directors is at the time, directly or indirectly, owned by such person,
by a subsidiary of such person, or by such person and one or more subsidiaries
of such person, (b) a partnership in which such person or a subsidiary of such
person is, at the date of determination, a general partner of such partnership,
or (c) any other person (other than a corporation) in which such person, a
subsidiary of such person or such person and one or more subsidiaries of such
person, directly or indirectly, at the date of determination thereof, has (i) at
least a majority ownership interest, (ii) the power to elect or direct the
election of the directors or other governing body of such person, or (iii) the
power to direct or cause the direction of the affairs or management of such
person. For purposes of this definition, a person is deemed to own any capital
stock or other ownership interest if such person has the right to acquire such
capital stock or other ownership interest, whether through the exercise of any
purchase option, conversion privilege or similar right.
"Subsidiary" shall mean a subsidiary of the Company.
"Ten Day Average" means, with respect to any prices and in connection with
the calculation of Fair Market Value, the average of such prices over the ten
consecutive Business Days ending on the Business Day immediately prior to the
day as of which "Fair Market Value" is being determined.
"Voting Agreements" shall have the meaning set forth in the Purchase
Agreement.
"Warrants" shall have the meaning set forth in the Purchase Agreement.
Section 3. Dividends. (a) The holders of the outstanding shares of Series B
Preferred Stock shall be entitled to receive, when, as and if declared by the
Board of Directors out of funds of the Company legally available therefor,
cumulative dividends, accumulating on a daily basis at the Dividend Rate from
the Original Issuance Date for such shares through and including the date on
which such dividends are paid. The "Dividend Rate" shall be (i) if either
Stockholder Approval or HSR Approval has not been obtained prior to the Outside
Date or there shall exist any Event of Non-Compliance, in each case, 12.5% per
annum for all quarterly dividend periods commencing on or after the Outside Date
and ending on or before the date, if any, on which both Stockholder Approval and
HSR Approval have been obtained or, as the case may be, commencing on the date
of the occurrence of such Event of Non-Compliance and ending on the date that
such Event of Non-Compliance is cured and (ii) for all other quarterly dividend
periods, 8% per annum. The amount of any dividends per share of Series B
Preferred Stock for any full quarterly period shall be computed by multiplying
the Dividend Rate for such quarterly dividend period by the Liquidation
Preference per share and dividing the result by four. Dividends payable on the
shares of Series B Preferred Stock for any period less than a full quarterly
dividend period shall be computed on the basis of a 360-day year of twelve
30-day months and the actual number of days elapsed for any period less than one
month.
(b) Dividends shall be payable in arrears on the last day of each of March,
June, September and December, commencing on June 30, 2000; provided that: (i) if
any such payment date is not a Business Day, then such dividend shall be payable
on the next Business Day, and (ii) accumulated and unpaid dividends for any
prior quarterly period may be paid at any time. Dividends shall accumulate on
shares of Series B Preferred Stock from their Original Issuance Date and be
cumulative whether or not earned or declared and whether or not there are
profits, surplus or other funds of the Company legally available for the payment
of dividends. Each such dividend shall be paid to the holders of record of the
Series B Preferred Stock as they shall appear on the stock register of the
Company on such record date, not exceeding forty-five (45) days nor less than
ten (10) days preceding any dividend payment date, as shall be fixed by the
Board of Directors of the Company or a duly authorized committee thereof.
(c) [intentionally omitted]
(d) Holders of shares of the Series B Preferred Stock shall be entitled to
full cumulative dividends, as herein provided, on the Series B Preferred Stock
and no additional amounts, except as set forth in paragraph (g) below. No
interest, or sum of money in lieu of interest, shall be payable in respect of
any dividend payment or payments on the Series B Preferred Stock that may be in
arrears.
(e) Unless and until full cumulative dividends on the shares of Series B
Preferred Stock in respect of all past quarterly dividend periods have been
paid, and the full amount of dividends on the shares of Series B Preferred Stock
in respect of the then current quarterly dividend period shall have been or are
contemporaneously declared in full and sums set aside for the payment thereof,
(i) no dividends shall be paid or declared or set aside for payment or other
distribution upon the Common Stock, or any other capital stock of the Company
ranking junior to the Series B Preferred Stock as to dividends (together with
the Common Stock, "Junior Stock"), other than in shares of, or warrants or
rights to acquire, Junior Stock; and (ii) no shares of Junior Stock or any other
Securities of the Company or any warrants, rights, calls or options (other than
any cashless exercises of options or option buybacks) exercisable for or
convertible into a share of Junior Stock or any other Securities of the Company
shall be redeemed, retired, purchased or otherwise acquired for any
consideration (or any payment made to or available for a sinking fund for the
redemption of any such shares) by the Company or any Subsidiary (except by
conversion into or exchange for shares of Junior Stock).
(f) The terms "accumulated dividends," "accrued dividends," "dividends
accumulated," "dividends accrued" and "dividends in arrears," whenever used
herein with reference to shares of Series B Preferred Stock shall be deemed to
mean an amount which shall be equal to dividends thereon at the Dividend Rate
per share from the date or dates on which such dividends commence to accumulate
to the end of the then current quarterly dividend period for such Preferred
Stock (or, in the case of redemption, to the date of redemption), whether or not
earned or declared and whether or not assets for the Company are legally
available therefor, and if full dividends are not declared or paid, then such
dividends shall cumulate, with additional dividends thereon, compounded
quarterly, at the Dividend Rate, for each quarterly period during which such
dividends remain unpaid, less the amount of all such dividends paid, or declared
in full and sums set aside for the payment thereof, upon such shares of Series B
Preferred Stock.
(g) In the event any dividends are declared or paid with respect to the
Common Stock or any Junior Stock, the holders of the Series B Preferred Stock as
of the record date established by the Board of Directors for such dividend shall
be entitled to receive as additional dividends (the "Additional Dividends") an
amount (whether in the form of cash, securities or other property) equal to the
amount (and in the form) of the dividends that such holder would have received
had the Series B Preferred Stock been converted into Common Stock as of the date
immediately prior to the record date of such dividend, such Additional Dividends
to be payable on the payment date of the dividend established by the Board of
Directors (the "Additional Dividend Payment Date"). The record date for any such
Additional Dividends shall be the record date for the applicable dividend, and
any such Additional Dividends shall be payable to the persons in whose name this
Series B Preferred Stock is registered at the close of business on the
applicable record date.
(h) Notwithstanding anything to the contrary herein, in the event any
conversion, redemption or liquidation occurs as of a date other than on a
dividend payment date, the holders of Series B Preferred Stock shall be paid a
pro rata dividend equal to the dividend payable for that quarterly dividend
period multiplied by a fraction, the numerator of which is the number of days
that have elapsed since the last dividend payment date and the denominator of
which is the number of days in the quarterly dividend period in which the
conversion, redemption or liquidation occurs.
(i) Immediately prior to authorizing or making any distribution in
redemption or liquidation with respect to the Series B Preferred Stock (other
than a purchase or acquisition of Series B Preferred Stock pursuant to a
purchase or exchange offer made on the same terms to holders of all outstanding
Series B Preferred Stock), the Board of Directors shall, to the extent of any
funds legally available therefor, declare a dividend on the Series B Preferred
Stock payable on the distribution date in an amount equal to any accumulated and
unpaid dividends on the Series B Preferred Stock as of such date.
Section 4. Liquidation Preference. In the event of a liquidation,
dissolution or winding up of the Company, whether voluntary or involuntary, the
holders of Series B Preferred Stock then outstanding shall be entitled to
receive out of the available assets of the Company, whether such assets are
stated capital or surplus of any nature, an amount on such date equal to the
greater of (a) $100 per share of Series B Preferred Stock (the "Liquidation
Preference") plus the amount of any accumulated and unpaid dividends as of such
date, calculated pursuant to Section 3 hereinabove, or (b) the amount that
holders of the Series B Preferred Stock would be entitled to receive if they had
converted all of their shares of Series B Preferred Stock into Common Stock
immediately prior to such liquidation, dissolution or winding up. Such payment
shall be made before any payment shall be made or any assets distributed to the
holders of any class or series of the Common Stock or any other class or series
of the Company's capital stock ranking junior as to liquidation rights to the
Series B Preferred Stock. If upon any such liquidation, dissolution or winding
up of the Company the assets available for payment of the Liquidation Preference
are insufficient to permit the payment to the holders of the Series B Preferred
Stock of the full preferential amounts described in this paragraph, then all the
remaining available assets shall be distributed among the holders of the then
outstanding Series B Preferred Stock pro rata according to the number of then
outstanding shares of Series B Preferred Stock held by each holder thereof. The
merger or consolidation of the Company shall be considered a liquidation,
dissolution or winding up of the Company for purposes of this Section 4 (unless
in connection therewith the liquidation of the Company is specifically
approved).
Section 5. Mandatory Redemption. On the eighth anniversary of the date
hereof (the "Redemption Date"), the Company shall redeem for cash all shares of
Series B Preferred Stock that are then outstanding and any shares of Series B
Preferred Stock then issuable in respect of accumulated but unpaid dividends, in
each case, at a redemption price per share equal to the Liquidation Preference
thereof plus the amount of any accumulated and unpaid dividends as of such date
("Redemption Price"). Not more than sixty (60) nor less than thirty (30) days
prior to the Redemption Date, notice by first class mail, postage prepaid, shall
be given to each holder of record of the Series B Preferred Stock, at such
holder's address as it shall appear upon the stock transfer books of the Company
on such date. Each such notice of redemption shall be irrevocable and shall
specify the date that is the Redemption Date, the Redemption Price, the
identification of the shares to be redeemed, the place or places of payment and
that payment will be made upon presentation and surrender of the certificate(s)
evidencing the shares of Series B Preferred Stock to be redeemed and that
dividends on the shares of the Series B Preferred Stock cease to accumulate on
the Redemption Date. On or after the Redemption Date, each holder of shares of
Series B Preferred Stock shall surrender the certificate evidencing such shares
to the Company at the place designated in such notice and shall thereupon be
entitled to receive payment of the Redemption Price in the manner set forth in
the notice. If, on the Redemption Date, funds in cash in an amount sufficient to
pay the aggregate Redemption Price for all outstanding shares of Series B
Preferred Stock shall be available therefor and shall have been irrevocably set
aside and deposited with a bank or trust company in trust for purposes of
payment of such Redemption Price, then, notwithstanding that the certificates
evidencing any shares so called for redemption shall not have been surrendered,
the shares shall no longer be deemed outstanding, the holders thereof shall
cease to be stockholders, and all rights whatsoever with respect to the shares
so called for redemption (except the right of the holders to receive the
Redemption Price upon surrender of their certificates therefor) shall terminate.
If at the Redemption Date, the Company does not have sufficient funds legally
available to redeem all the outstanding shares of Series B Preferred Stock, the
Company shall take all measures permitted under the Delaware General Corporation
Law to increase the amount of its capital and surplus legally available, and the
Company shall purchase as many shares of Series B Preferred Stock as it may
legally redeem, ratably from the holders thereof in proportion to the number of
shares held by them, and shall thereafter from time to time, as soon as it shall
have funds available therefor, redeem as many shares of Series B Preferred Stock
as it legally may until it has redeemed all of the outstanding shares of Series
B Preferred Stock.
Section 6. Optional Redemption.
(a) Change of Control. In the event that any Change of Control shall occur
at any time while any shares of Series B Preferred Stock are outstanding, each
holder of Series B Preferred Stock shall have the right to give notice that it
is exercising a Change of Control election (a "Change of Control Election"),
with respect to all or any number of such holder's shares of Series B Preferred
Stock, during the period (the "Exercise Period") beginning on the 10th day and
ending on the 30th day after the date of such Change of Control. Upon any such
election, the Company shall redeem for cash each of such holder's shares to the
extent permitted by applicable law, at a redemption price per share equal to the
Liquidation Preference thereof plus the amount of accumulated and unpaid
dividends as of the date of redemption, plus an amount per share equal to the
dividends that would have accumulated on the Series B Preferred Stock, at the
Dividend Rate then in effect, from the date of redemption to and including the
fifth anniversary of April 14, 2000 (the "Change of Control Redemption Price").
(b) On or before the tenth (10th) day after a Change of Control, the
Company shall mail to all holders of record of the Series B Preferred Stock at
their respective addresses as the same shall appear on the books of the Company
as of such date, a notice disclosing (i) the Change of Control, (ii) the Change
of Control Redemption Price per share of the Series B Preferred Stock applicable
hereunder, and (iii) the procedure which the holder must follow to exercise the
redemption right provided above. To exercise the Change of Control Election, if
applicable, a holder of the Series B Preferred Stock must deliver during the
Exercise Period written notice to the Company (or an agent designated by the
Company for such purpose) of the holder's exercise of the Change of Control
Election, accompanied by each certificate evidencing shares of the Series B
Preferred Stock with respect to which the Change of Control Election is being
exercised, duly endorsed for transfer. On or prior to the fifth (5th) Business
Day after expiration of the Exercise Period, the Company shall accept for
payment all shares of Series B Preferred Stock properly surrendered to the
Company (or an agent designated by the Company for such purpose) during the
Exercise Period for redemption in connection with the exercise of the Change of
Control Election and shall cause payment to be made in cash for such shares of
Series B Preferred Stock. If at the time of any Change of Control, the Company
does not have sufficient capital and surplus legally available to purchase all
of the outstanding shares of Series B Preferred Stock, the Company shall take
all measures permitted under the Delaware General Corporation Law to increase
the amount of its capital and surplus legally available, and the Company shall
offer in its written notice of such Change of Control to purchase as many shares
of Series B Preferred Stock as it has capital and surplus legally available
therefor, ratably from the holders thereof in proportion to the total number of
shares tendered, and shall thereafter from time to time, as soon as it shall
have capital and surplus legally available therefor, offer to purchase as many
shares of Series B Preferred Stock as it has capital and surplus available
therefor until it has offered to purchase all of the outstanding shares of
Series B Preferred Stock.
(c) Optional Redemption by Company. At any time after the eighth
anniversary of April 14, 2000, the Company may, upon sixty (60) days notice to
the holders of the Series B Preferred Stock, redeem all, but not less than all,
of the then outstanding shares of Series B Preferred Stock for cash in an amount
per share equal to 103% of the Redemption Price.
(d) Status of Redeemed Shares. Any shares of Series B Preferred Stock which
shall at any time have been redeemed pursuant to Section 5 or 6 hereof shall,
after such redemption, have the status of authorized but unissued shares of
Preferred Stock, without designation as to series.
Section 7. Voting Rights. (a) Except as otherwise provided by applicable
law and in addition to any voting rights provided by law, the holders of Series
B Preferred Stock:
(i) shall be entitled to vote together with the holders of the Common
Stock as a single class on all matters submitted for a vote of holders of
Common Stock;
(ii) shall have such other voting rights as are specified in the
Certificate of Incorporation or as otherwise provided by Delaware General
Corporation Law; and
(iii) shall be entitled to receive notice of any stockholders' meeting
in accordance with the Certificate of Incorporation and Bylaws of the
Company.
Each share of Series B Preferred Stock shall entitle the holder thereof to
cast one vote for each vote that such holder would be entitled to cast had such
holder converted its Series B Preferred Stock into shares of Common Stock as of
the date immediately prior to the record date for determining the stockholders
of the Company eligible to vote on any such matter.
(b) In addition to the other voting rights set forth herein, for so long as
the Purchaser shall own at least one share of Series B Preferred Stock and the
Purchaser and its Permitted Transferees collectively hold a number of Shares
that equals or exceeds the following percentages, the following provisions shall
apply:
(i) The holders of Series B Preferred Stock shall have the exclusive
right, voting as a single class, to elect the following number of directors
to serve on the Board of Directors (each such director is referred to as a
"Preferred Stock Director") in the event that the Purchaser and its
Permitted Transferees collectively beneficially own securities of the
Company that constitute, or if converted into Common Stock would constitute
the following percentages of the aggregate issued and outstanding Common
Stock: (w) less than 10%, no Preferred Stock Directors; (x) at least 10%
but no more than 33-1/3%, three (3) Preferred Stock Directors (for the
purposes of this clause (x), the Previously Issued Warrant and the Warrants
shall be included in the calculation of the Purchaser's beneficial
ownership); (y) at least 33-1/3% but no more than 70%, six (6) Preferred
Stock Directors (for the purposes of this clause (y), the Previously Issued
Warrant and the Warrants shall be included in the calculation of the
Purchaser's beneficial ownership); and (z) at least 70%, seven (7)
Preferred Stock Directors (for the purposes of this clause (z), the
Previously Issued Warrant and the Warrants shall not be included in the
calculation of the Purchaser's beneficial ownership); provided that, so
long as any loans or commitments made to the Company by the holders of
Series B Preferred Stock or any of their respective affiliates are
outstanding, the holders of Series B Preferred Stock shall have the
exclusive right, voting as a single class, to elect three (3) Preferred
Stock Directors. In any such election the holders of Series B Preferred
Stock shall be entitled to cast one vote per share of Series B Preferred
Stock held of record on the record date for the determination of the
holders of Series B Preferred Stock entitled to vote on such election. Each
of the initial Preferred Stock Directors shall be appointed by the Board of
Directors on or before April 14, 2000 and shall be apportioned by the Board
of Directors among the three classes of directors so as to ensure that no
one class has more than one director more than any other class; and
thereafter the Preferred Stock Directors shall be elected at the same time
as the other directors of the same class are elected. The Preferred Stock
Directors shall serve until the annual meeting of stockholders of the
Company at which the term of other directors of the same class expire or
until their respective successors shall be elected and shall qualify. Any
Preferred Stock Director may be removed by, and shall not be removed other
than by, the vote of the Requisite Holders, at a vote of the holders of
then outstanding shares of Series B Preferred Stock, voting as a separate
class, at a meeting called for such purpose or by written consent as
permitted by law and the Certificate of Incorporation and Bylaws of the
Company. If for any reason a vacancy exists in the Preferred Stock
Directors, by reason of death, resignation, retirement, disqualification,
removal or otherwise, such vacancy shall be filled by the holders of the
Series B Preferred Stock voting as a separate class in accordance with the
voting procedures set forth in this Section 7(b). The Preferred Stock
Directors shall be appointed by the Board of Directors to serve on each
committee of the Board of Directors in at least the same proportions that
the number of Preferred Stock Directors bears to the total number of
directors then comprising the Board of Directors.
(ii) The Company will not, and will not permit any of its Subsidiaries
to, directly or indirectly, without approval of the Requisite holders,
voting as a separate class, take action (or fail to take action) prohibited
by the Purchase Agreement.
Section 8. Conversion Rights.
(a) General. Subject to and upon compliance with the provisions of this
Section 8, the holders of the shares of Series B Preferred Stock shall be
entitled, at their option, at any time prior to the date fixed for redemption of
such shares, to convert all or any such shares of Series B Preferred Stock into
a number of fully paid and nonassessable shares of Common Stock (calculated as
to each conversion to the nearest 1/100th of a share). The number of shares of
Common Stock to which a holder of Series B Preferred Stock shall be entitled
upon conversion shall be determined by dividing (i) the Liquidation Preference
of such Series B Preferred Stock (including shares issuable in respect of
accumulated but unpaid dividends), plus the amount of any accumulated but unpaid
dividends as of the Conversion Date by (ii) the Conversion Price in effect at
the close of business on the Conversion Date (determined as provided in this
Section 8).
(b) Conversion Price. The conversion price (the "Conversion Price") shall
initially be $3.75 per share of Preferred Stock, subject to adjustment from time
to time in accordance with Section 8(d).
(c) Fractions of Shares. No fractional shares of Common Stock shall be
issued upon conversion of shares of Series B Preferred Stock. If more than one
share of Series B Preferred Stock shall be surrendered for conversion at one
time by the same holder, the number of full shares of Common Stock to be issued
and which shall be computed on the basis of the aggregate number of shares of
Series B Preferred Stock so surrendered. Instead of any fractional shares of
Common Stock which would otherwise be issuable upon conversion of any shares of
Series B Preferred Stock, the Company shall pay a cash adjustment in respect of
such fractional share in an amount equal to the product of such fraction
multiplied by the Fair Market Value of one share of Common Stock on the
Conversion Date.
(d) Adjustments to Conversion Price. The Conversion Price shall be subject
to adjustment from time to time as follows:
(i) Upon Issuance of Common Stock. If the Company shall, at any time
or from time to time after April 14, 2000, issue any shares of Common
Stock, options to purchase or rights to subscribe for Common Stock,
securities by their terms convertible into or exchangeable for Common
Stock, or options to purchase or rights to subscribe for such convertible
or exchangeable securities, other than Series B Preferred Stock or Excluded
Securities, without consideration or for consideration per share less than
either (x) the Conversion Price in effect immediately prior to the issuance
of such Common Stock or securities or (y) the Daily Market Price of the
Common Stock on the Business Day on which the pricing of such issuance
occurs, then the Conversion Price shall forthwith be adjusted to a price
equal to the lower of (I) the Conversion Price in effect immediately prior
thereto, or (II) the lowest consideration per share for which such shares
of Common Stock or such options, rights or convertible or exchangeable
securities are issued (plus the additional consideration required to be
paid upon exercise, exchange or conversion of such options, rights or
convertible or exchangeable securities).
(ii) Upon Acquisition of Common Stock. If the Company or any
Subsidiary shall, at any time or from time to time after April 14, 2000,
directly or indirectly, redeem, purchase or otherwise acquire (x) any
shares of Common Stock for a consideration per share greater than the Fair
Market Value of the Common Stock immediately prior to such event, or (y)
any options to purchase or rights to subscribe for Common Stock, any
securities by their terms convertible into or exchangeable for Common Stock
(other than shares of Series B Preferred Stock that are redeemed according
to their terms), or any options to purchase or rights to subscribe for such
convertible or exchangeable securities, in either case, for a consideration
per share of Common Stock for which such options, rights or convertible or
exchangeable securities are exercisable, convertible or exchangeable, that
is greater than the amount, if any, by which the Fair Market Value of
Common Stock immediately prior to such event exceeds the per share
exercise, exchange, subscription, conversion or purchase price applicable
to such options, rights or convertible or exchangeable securities, then, in
the case of (x) or (y), the Conversion Price shall forthwith be lowered to
a price equal to the price obtained by multiplying:
(A) the Conversion Price in effect immediately prior to such
event, by
(B) a fraction of which (x) the denominator shall be the Fair
Market Value per share of Common Stock immediately prior to such event
and (y) the numerator shall be the result of dividing:
a) (1) the product of (A) the number of shares of Common Stock
outstanding on a fully-diluted basis immediately prior to
such event and (B) the Fair Market Value per share of Common
Stock, in each case immediately prior to such event, minus
(2) the aggregate consideration paid by the Company in such
event, by
b) the number of shares of Common Stock outstanding on a
fully-diluted basis immediately prior to such event, minus
the number of shares of Common Stock purchased or acquired,
or for which options, rights or convertible or exchangeable
securities purchased or acquired were exercisable,
convertible or exchangeable.
For purposes of this Section 8(d), "fully diluted basis" shall be
determined in accordance with the treasury method of GAAP and
paragraph (iii) of this Section 8(d).
(iii) For the purposes of any adjustment of a Conversion Price
pursuant to paragraphs (i) and (ii) of this Section 8(d), the
following provisions shall be applicable:
(1) In the case of the issuance of Common Stock for cash in
a public offering or private placement, the consideration shall
be deemed to be the amount of cash paid therefor before deducting
therefrom any discounts, commissions or placement fees payable by
the Company to any underwriter or placement agent in connection
with the issuance and sale thereof.
(2) In the case of the issuance of Common Stock for a
consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the Fair
Market Value thereof as determined in accordance with the
Appraisal Procedure.
(3) In the case of the issuance of options to purchase or
rights to subscribe for Common Stock, securities by their terms
convertible into or exchangeable for Common Stock, or options to
purchase or rights to subscribe for such convertible or
exchangeable securities, except for Shares of Series B Preferred
Stock or options to acquire Excluded Securities:
(a) the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options to purchase
or rights to subscribe for Common Stock shall be deemed
to have been issued at the time such options or rights
were issued and for a consideration equal to the
consideration (determined in the manner provided in
subparagraphs (1) and (2) above), if any, received by
the Company upon the issuance of such options or rights
plus the minimum purchase price provided in such
options or rights for the Common Stock covered thereby;
(b) the aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange of any
such convertible or exchangeable securities or upon the
exercise of options to purchase or rights to subscribe
for such convertible or exchangeable securities and
subsequent conversion or exchange thereof shall be
deemed to have been issued at the time such securities,
options, or rights were issued and for a consideration
equal to the consideration received by the Company for
any such securities and related options or rights
(excluding any cash received on account of accrued
interest or accrued dividends), plus the additional
consideration, if any, to be received by the Company
upon the conversion or exchange of such securities or
the exercise of any related options or rights (the
consideration in each case to be determined in the
manner provided in paragraphs (1) and (2) above);
(c) on any change in the number of shares or exercise price
of Common Stock deliverable upon exercise of any such
options or rights or conversions of or exchanges for
such securities, other than a change resulting from the
anti-dilution provisions thereof, the applicable
Conversion Price shall forthwith be readjusted to such
Conversion Price as would have been obtained had the
adjustment made upon the issuance of such options,
rights or securities not converted prior to such change
or options or rights related to such securities not
converted prior to such change been made upon the basis
of such change;
(d) upon the expiration of any such options or the
termination of any rights, convertible securities or
exchangeable securities, the applicable Conversion
Price shall forthwith be readjusted to such Conversion
Price as would have been in effect at the time of such
expiration or termination had such options, rights,
convertible securities or exchangeable securities, to
the extent outstanding immediately prior to such
expiration or termination, never been issued; and
(e) no further adjustment of the Conversion Price adjusted
upon the issuance of any such options, rights,
convertible securities or exchangeable securities shall
be made as a result of the actual issuance of Common
Stock on the exercise of any such rights or options or
any conversion or exchange of any such securities.
(iv) Upon Stock Dividends, Subdivisions or Splits. If, at any time
after April 14, 2000, the number of shares of Common Stock outstanding is
increased by a stock dividend payable in shares of Common Stock or by a
subdivision or split-up of shares of Common Stock, then, following the
record date for the determination of holders of Common Stock entitled to
receive such stock dividend, or to be affected by such subdivision or
split-up, the Conversion Price shall be appropriately decreased so that the
number of shares of Common Stock issuable on conversion of Series B
Preferred Stock shall be increased in proportion to such increase in
outstanding shares.
(v) Upon Combinations. If, at any time after April 14, 2000, the
number of shares of Common Stock outstanding is decreased by a combination
of the outstanding shares of Common Stock into a smaller number of shares
of Common Stock, then, following the record date to determine shares
affected by such combination, the Conversion Price shall be appropriately
increased so that the number of shares of Common Stock issuable on
conversion of each share of Series B Preferred Stock shall be decreased in
proportion to such decrease in outstanding shares.
(vi) Upon Reclassifications, Reorganizations, Consolidations or
Mergers. In the event of any capital reorganization of the Company, any
reclassification of the stock of the Company (other than a change in par
value or from par value to no par value or from no par value to par value
or as a result of a stock dividend or subdivision, split-up or combination
of shares), or any consolidation or merger of the Company with or into
another corporation (where the Company is not the surviving corporation or
where there is a change in or distribution with respect to the Common
Stock), each share of Series B Preferred Stock shall after such
reorganization, reclassification, consolidation, or merger be convertible
into the kind and number of shares of stock or other securities or property
of the Company or of the successor corporation resulting from such
consolidation or surviving such merger, if any, to which the holder of the
number of shares of Common Stock deliverable (immediately prior to the time
of such reorganization, reclassification, consolidation or merger) upon
conversion of such Series B Preferred Stock would have been entitled upon
such reorganization, reclassification, consolidation or merger. The
provisions of this clause shall similarly apply to successive
reorganizations, reclassifications, consolidations, or mergers.
Notwithstanding anything contained in this Certificate of Designations
to the contrary, in the event that the Company shall effect any of the
transactions described in this clause (vi), each person (other than the
Company) which may be required to issue a new share of Series B Preferred
Stock as provided above, shall assume by written instrument delivered to,
and reasonably satisfactory to, the Requisite Holders (i) the obligations
of the Company under this Certificate of Designations (and if the Company
shall survive the consummation of such transaction, such assumption shall
be in addition to, and shall not release the Company from, any continuing
obligations of the Company under this Certificate of Designations) and (ii)
the obligation to deliver to all holders of Series B Preferred Stock such
new share of Series B Preferred Stock as, in accordance with the foregoing
provisions of this clause (vi), such holders of Series B Preferred Stock
may be entitled to receive, and such person shall have similarly delivered
to such holders of Series B Preferred Stock an opinion of counsel for such
person, which counsel shall be reasonably satisfactory to the Requisite
Holders, stating that this Certificate of Designations shall thereafter
continue in full force and effect and that the terms hereof (including,
without limitation, all of the provisions of this clause (vi), shall be
applicable to the stock, securities, cash or property which such person may
be required to deliver upon any conversion of any of the Series B Preferred
Stock or such new share of Series B Preferred Stock or the exercise of any
right pursuant hereto.
(vii) Deferral in Certain Circumstances. In any case in which the
provisions of this Section 8(d) shall require that an adjustment shall
become effective immediately after a record date of an event, the Company
may defer until the occurrence of such event (1) issuing to the holder of
any Series B Preferred Stock converted after such record date and before
the occurrence of such event the shares of capital stock issuable upon such
conversion by reason of the adjustment required by such event and issuing
to such holder only the shares of capital stock issuable upon such
conversion before giving effect to such adjustments, and (2) paying to such
holder any amount in cash in lieu of a fractional share of capital stock
pursuant to Section 8(c) above; provided, however, that the Company shall
deliver to such holder an appropriate instrument or due bills evidencing
such holder's right to receive such additional shares and such cash.
(viii) Other Anti-Dilution Provisions. (1) If the Company has issued
or issues any securities on or after April 14, 2000 containing provisions
protecting the holder or holders thereof against dilution in any manner
more favorable to such holder or holders thereof than those set forth in
this Section 8(d), such provisions (or any more favorable portion thereof)
shall be deemed to be incorporated herein as if fully set forth in this
Certificate of Designations and, to the extent inconsistent with any
provision of this Certificate of Designations, shall be deemed to be
substituted therefor; or (2) if any event occurs as to which the foregoing
provisions of this Section 8(d) are not strictly applicable or, if strictly
applicable, would not fairly and adequately protect the conversion rights
of the holders of the Series B Preferred Stock in accordance with the
essential intent and principles of such provisions, then the Board of
Directors shall make such adjustments in the application of such
provisions, in accordance with such essential intent and principles, as
shall be reasonably necessary to protect such purchase rights as aforesaid,
but in no event shall any such adjustment have the effect of increasing the
Conversion Price or decreasing the number of shares of Common Stock
issuable upon the conversion of the Series B Preferred Stock.
(ix) Appraisal Procedure. In any case in which the provisions of this
Section 8(d) shall necessitate that the Appraisal Procedure be utilized for
purposes of determining an adjustment to the Conversion Price, the Company
may defer until the completion of the Appraisal Procedure and the
determination of the adjustment (1) issuing to the holder of any share of
Series B Preferred Stock converted after the date of the event that
requires the adjustment and before completion of the Appraisal Procedure
and the determination of the adjustment, the shares of capital stock
issuable upon such conversion by reason of the adjustment required by such
event and issuing to such holder only the shares of capital stock issuable
upon such conversion before giving effect to such adjustment and (2) paying
to such holder any amount in cash in lieu of a fractional share of capital
stock pursuant to Section 8(c) above; provided, however, that the Company
shall deliver to such holder an appropriate instrument or due bills
evidencing such holder's right to receive such additional shares and such
cash.
(x) Exceptions. Section 8(d) shall not apply to (1) any issuance of
Common Stock upon exercise of any options or warrants outstanding on the
date hereof, (2) the issuance of shares of Common Stock in an aggregate
amount not to exceed 500,000 shares to McLane Group, L.P., (3) the issuance
of shares of Common Stock in an aggregate amount not to exceed 2,600,000
shares upon exercise of options or warrants that have been approved by the
Board of Directors, or any issuance of such options or warrants, (4) shares
of Common Stock issued pursuant to the Company's current employee stock
purchase plan in an amount not to exceed 114,000 shares (the securities
referred to in clauses (1), (2), (3) and (4) being collectively referred to
as "Excluded Securities"), or (5) any issuance of Common Stock in a widely
distributed underwritten public offering at a price per share at least
equal to the Conversion Price then in effect if the underwriting discount
does not exceed 7%.
(xi) On the Outside Date, in the event that the Company shall not have
obtained the HSR Approval, the Conversion Price shall be reduced to an
amount equal to 50% of the Conversion Price in effect immediately prior to
the Outside Date.
Notwithstanding the foregoing, in the case of shares of Series B Preferred
Stock called for redemption, conversion rights will expire at the close of
business on the redemption date unless the Company defaults in making the
payment due upon redemption.
(e) Exercise of Conversion Privilege. In order to exercise the conversion
privilege, the holder of any share of Series B Preferred Stock shall surrender
the certificate evidencing such share of Series B Preferred Stock, duly endorsed
or assigned to the Company in blank, at any office or agency of the Company
maintained for such purpose, accompanied by written notice to the Company at
such office or agency that the holder elects to convert such Series B Preferred
Stock or, if less than the entire amount thereof is to be converted, the portion
thereof to be converted. Series B Preferred Stock shall be deemed to have been
converted immediately prior to the close of business on the date (the
"Conversion Date") of surrender of such shares of Series B Preferred Stock for
conversion in accordance with the foregoing provisions, and at such time the
rights of the holder of such shares of Series B Preferred Stock as a holder
shall cease, and the person or persons entitled to receive the Common Stock
issuable upon conversion shall be treated for all purposes as the record holder
or holders of such Common Stock as and after such time. As promptly as
practicable on or after the Conversion Date, the Company shall issue and shall
deliver at any office or agency of the Company maintained for the surrender of
Series B Preferred Stock a certificate or certificates for the number of full
shares of Common Stock issuable upon conversion, together with payment in lieu
of any fraction of a share, as provided in Section 8(c). In the case of any
certificate evidencing shares of Series B Preferred Stock which is converted in
part only, upon such conversion the Company shall execute and deliver a new
certificate evidencing the number of shares of Series B Preferred Stock that are
not converted.
(f) Notice of Adjustment of Conversion Price. Whenever the Conversion Price
is adjusted as herein provided:
(i) the Company shall compute the adjusted Conversion Price in
accordance with Section 8(d) and shall prepare a certificate signed by the
Company's independent accounting firm setting forth the adjusted Conversion
Price and showing in reasonable detail the facts upon which such adjustment
is based, and such certificate shall forthwith be filed at each office or
agency maintained for such purpose for conversion of shares of Series B
Preferred Stock; and
(ii) a notice stating that the Conversion Price has been adjusted and
setting forth the adjusted Conversion Price shall forthwith be prepared by
the Company and, as soon as practicable after it is prepared, such notice
shall be mailed by the Company at its expense to all holders of Series B
Preferred Stock at their last addresses as they shall appear in the stock
register.
(g) Notice of Certain Corporate Action.
In case:
(i) the Company shall take an action, or an event shall occur, that
would require a Conversion Price adjustment pursuant to Section 8(d);
(ii) the Company shall grant to the holders of its Common Stock rights
or warrants to subscribe for or purchase any shares of capital stock of any
class;
(iii) of any reclassification of the Common Stock (other than a
subdivision or combination of the outstanding shares of Common Stock), or
of any consolidation, merger or share exchange to which the Company is a
party and for which approval of any stockholders of the Company is
required, or of the sale or transfer of all or substantially all of the
assets of the Company;
(iv) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
(v) the Company or any Subsidiary shall commence a tender offer for
all or a portion of the outstanding shares of Common Stock (or shall amend
any such tender offer to change the maximum number of shares being sought
or the amount or type of consideration being offered therefor);
then the Company shall cause to be filed at each office or agency maintained for
such purpose, and shall cause to be mailed to all holders of Series B Preferred
Stock at their last addresses as they shall appear in the stock register, at
least 30 days prior to the applicable record, effective or expiration date
hereinafter specified, a notice stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution or granting of rights or
warrants, or, if a record is not to be taken, the date as of which the holders
of Common Stock of record who will be entitled to such dividend, distribution,
rights or warrants are to be determined, (y) the date on which such
reclassification, consolidation, merger, share exchange, sale, transfer,
dissolution, liquidation or winding up is expected to become effective, and the
date as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation, merger, share
exchange, sale, transfer, dissolution, liquidation or winding up, or (z) the
date on which such tender offer commenced, the date on which such tender offer
is scheduled to expire unless extended, the consideration offered and the other
material terms thereof (or the material terms of the amendment thereto). Such
notice shall also set forth such facts with respect thereto as shall be
reasonably necessary to indicate the effect of such action on the Conversion
Price and the number, kind or class of shares or other securities or property
which shall be deliverable or purchasable upon the occurrence of such action or
deliverable upon conversion of the Series B Preferred Stock. Neither the failure
to give any such notice nor any defect therein shall affect the legality or
validity of any action described in clauses (i) through (v) of this Section
8(g).
(h) Company to Reserve Common Stock. The Company shall at all times reserve
and keep available, free from preemptive rights, out of the authorized but
unissued Common Stock or out of the Common Stock held in treasury, for the
purpose of effecting the conversion of Series B Preferred Stock, the full number
of shares of Common Stock then issuable upon the conversion of all outstanding
shares of Series B Preferred Stock. Before taking any action that would cause an
adjustment reducing the conversion price below the then par value (if any) of
the shares of Common Stock deliverable upon conversion of the Series B Preferred
Stock, the Company will take any corporate action that, in the opinion of its
counsel, is necessary in order that the Company may validly and legally issue
fully paid and non-assessable shares of Common Stock at such adjusted conversion
price.
(i) Taxes on Conversions. The Company will pay any and all original
issuance, transfer, stamp and other similar taxes that may be payable in respect
of the issue or delivery of shares of Common Stock on conversion of Series B
Preferred Stock pursuant hereto. The Company shall not, however, be required to
pay any tax which may be payable in respect of any transfer involved in the
issue and delivery of shares of Common Stock in a name other than that of the
holder of the share(s) of Series B Preferred Stock to be converted, and no such
issue or delivery shall be made unless and until the person requesting such
issue has paid to the Company the amount of any such tax, or has established to
the satisfaction of the Company that such tax has been paid.
Section 9. Preemptive Rights. (a) Each holder of Series B Preferred Stock
shall have the right to purchase its Pro Rata Amount of any New Securities that
the Company may, from time to time, propose to sell and issue. In the event the
Company proposes to issue any New Securities, it shall give all holders of
Series B Preferred Stock written notice, at their last addresses as they shall
appear in the stock register, at least 20 Business Days before such issuance,
describing the type of New Securities, the price and number of shares (or
principal amount) and the general terms upon which the Company proposes to issue
the same. Each such holder shall have 20 Business Days from the date of receipt
of any such notice to agree to purchase up to the amount of New Securities equal
to such holder's Pro Rata Amount of such New Securities for the price and upon
the general terms specified in the notice by giving written notice to the
Company, at its principal office or such other address as may be specified by
the Company in its written notice to the holders, of such holder's intention to
purchase such New Securities at the initial closing of the sale of New
Securities and the number of such New Securities that such holder intends to
purchase.
(b) In the event a holder of Series B Preferred Stock fails to exercise in
full its right of participation within said 20 Business Day period as set forth
in Section 9(a) above, the Company shall have thirty (30) days thereafter to
sell additional amounts of New Securities respecting which such holder's option
was not exercised, at the price and upon the terms specified in the Company's
notice. The Company shall not issue or sell any additional amounts of New
Securities after the expiration of such 30-day period without first offering
such securities to the holders of Series B Preferred Stock in the manner
provided above.
(c) The rights set forth in this Section 9, including the notice provisions
relating thereto, may be waived by the Requisite Holders.
Section 10. Event of Non-Compliance. Upon the occurrence of any Event of
Non-Compliance, the Company shall give the holders of Series B Preferred Stock
prompt notice of such occurrence and shall use reasonable commercial efforts to
cure promptly such Event of Non-Compliance.
Section 11. Indemnification and Insurance. (a) The Company shall indemnify
its directors to the fullest extent authorized or permitted by law, as now or
hereafter in effect, and such right to indemnification shall continue as to a
person who has ceased to be a director of the Company and shall inure to the
benefit of his or her heirs, executors and personal and legal representatives;
provided, however, that, except for proceedings to enforce rights to
indemnification, the Company shall not be obligated to indemnify any director
(or his or her heirs, executors or personal or legal representatives) in
connection with a proceeding (or part thereof) initiated by such person unless
such proceeding (or part thereof) was authorized or consented to by the Board of
Directors. The right to indemnification conferred by this Section 11 shall
include the right to be paid by the Company the expenses incurred in defending
or otherwise participating in any proceeding in advance of its final
disposition. The rights to indemnification and to the advance of expenses
conferred in this Section 11 shall not be exclusive of any other right which any
person may have or hereafter acquire under the Company's Certificate of
Incorporation or Bylaws, any statute, agreement, vote of stockholders or
disinterested directors or otherwise. Any repeal or modification of this Section
11 or this Certificate of Designations shall not adversely affect any rights to
indemnification and to the advancement of expenses of a director of the Company
existing at the time of such repeal or modification with respect to any acts or
omissions occurring prior to such repeal or modification.
(b) The Company shall purchase and maintain insurance on behalf of any
person who is or was a director of the Company against any liability asserted
against such person and incurred by such person in any such capacity, or arising
out of such person's status as such, whether or not the Company would have the
power or the obligation to indemnify such person against such liability under
the provisions of Section 11(a). Such insurance shall be in amounts and on other
terms as are customary for corporations similar in size to the Company.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Certificate of Designations
to be signed by ________________, its _________, and attested by ___________,
its Secretary, this ____ day of __________, 2000.
By:_________________________________
Name:
Title:
Attested:
By:_________________________
Secretary
EX-10.9
================================================================================
REGISTRATION RIGHTS AGREEMENT
among
PEAPOD, INC.,
and
KONINKLIJKE AHOLD N.V.
-----------------
Dated as of
April 14, 2000
-----------------
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS..................................................1
Section 1.1. Definitions..................................................1
ARTICLE II REGISTRATION RIGHTS..........................................4
Section 2.1. Shelf Registration...........................................4
Section 2.2. Demand Registration..........................................4
Section 2.3. Piggy-Back Registration......................................5
Section 2.4. Reduction of Offering........................................6
ARTICLE III REGISTRATION PROCEDURES......................................8
Section 3.1. Filings; Information.........................................8
Section 3.2. Registration Expenses.......................................13
ARTICLE IV INDEMNIFICATION AND CONTRIBUTION............................13
Section 4.1. Indemnification by the Company..............................13
Section 4.2. Indemnification by Holders of Registrable Securities........14
Section 4.3. Conduct of Indemnification Proceedings......................15
Section 4.4. Contribution................................................16
ARTICLE V MISCELLANEOUS...............................................17
Section 5.1. Participation in Underwritten Registrations.................17
Section 5.2. Distribution................................................17
Section 5.3. SEC Reporting...............................................17
Section 5.4. Restrictions on Sale........................................18
Section 5.5. Notices.....................................................18
Section 5.6. Governing Law...............................................19
Section 5.7. Entire Agreement............................................20
Section 5.8. Modifications and Amendments................................20
Section 5.9. Waivers and Extensions......................................20
Section 5.10. Titles and Headings.........................................20
Section 5.11. Assignment..................................................20
Section 5.12. Severability................................................21
Section 5.13. Counterparts................................................21
Section 5.14. Further Assurances..........................................21
Section 5.15. Remedies Cumulative; Specific Performance...................21
Section 5.16. Other Registration Rights...................................21
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made
as of April 14, 2000, by and among Peapod, Inc., a Delaware corporation (the
"Company"), and Koninklijke Ahold N.V., a public company with limited liability
incorporated under the laws of the Netherlands (the "Purchaser").
NOW, THEREFORE, the parties hereto hereby agree as follows.
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. As used in this Agreement, the following terms
shall have the following meanings:
"Additional Piggy-Back Holder" shall mean McLane Group, L.P.
"Affiliate" shall mean, with respect to any person, any other person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified person and, in the case of a person who is an
individual, shall include (i) members of such specified person's immediate
family (as defined in Instruction 2 of Item 404(a) of Regulation S-K under the
Securities Act) and (ii) trusts, the trustee and all beneficiaries of which are
such specified person or members of such person's immediate family as determined
in accordance with the foregoing clause (i). For the purposes of this
definition, "control," when used with respect to any person means the power to
direct the management and policies of such person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "affiliated," "controlling" and "controlled" have meanings
correlative to the foregoing. Notwithstanding the foregoing, for purposes of
this Agreement, the Purchaser and its Affiliates shall not be deemed Affiliates
of the Company.
"Agreement" shall have the meaning set forth in the Preamble.
"Commission" shall mean the United States Securities and Exchange
Commission.
"Common Stock" shall mean the common stock, par value $.01 per share, of
the Company.
"Company" shall have the meaning set forth in the Preamble.
"Demanding Holder" shall have the meaning set forth in Section 2.2.
"Demand Notice" shall have the meaning set forth in Section 2.2.
"Demand Registration" shall have the meaning set forth in Section 2.2.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Final Closing" shall have the meaning set forth in the Purchase Agreement.
"Holder" shall mean (i) the Purchaser, as the beneficial owner of
Registrable Securities and (ii) any other person (a) that is the beneficial
owner of Registrable Securities, and (b) to whom the registration rights set
forth herein have been assigned in accordance with Section 5.11; provided, that
a person shall be deemed the beneficial owner of Registrable Securities if that
person has the right to acquire such Registrable Securities, whether or not such
acquisition has been effected and disregarding any legal restrictions upon the
exercise of such right.
"Initiating Holders" shall have the meaning set forth in Section 2.2.
"Minimum Effective Period" shall mean (i) in the case of the Shelf
Registration, as long as Holders hold any of the Registrable Securities, and
(ii) in the case of a Demand Registration, a period of at least one hundred
eighty (180) days beyond the effective date thereof (or, in either case, such
shorter period as is required to complete the distribution of the Registrable
Securities included in such registration statement).
"NASD" shall have the meaning set forth in Section 3.1.
"Notices" shall have the meaning set forth in Section 5.5.
"Outside Date" shall mean the date that is one hundred and twenty (120)
days after the date hereof or, if the Purchaser exercises any Warrants and as a
direct result of such exercise, the Stockholders Meeting (as defined in the
Purchase Agreement) is delayed, one hundred and twenty (120) days plus the
number of days of such delay after the date hereof.
"person" shall mean any individual, partnership, corporation, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or agency or political subdivision
thereof, or other entity.
"Piggy-Back Registration" shall have the meaning set forth in Section 2.3.
"Piggy-Back Holders" shall have the meaning set forth in Section 2.3.
"Preemptive Rights" shall mean the rights of holders of Series B Preferred
Stock to purchase securities pursuant to Section 9 of the Certificate of
Designations relating to the Series B Preferred Stock.
"Purchaser" shall have the meaning set forth in the Preamble.
"Purchase Agreement" shall mean the purchase agreement, dated as of April
14, 2000, by and between the Company and the Purchaser.
"Registrable Securities" shall mean (i) shares of Series B Preferred Stock
and Warrants issued and sold by the Company to the Purchaser pursuant to the
Purchase Agreement, (ii) any securities acquired by the Purchaser pursuant to
the exercise of its Preemptive Rights, (iii) shares of Common Stock or any other
security received or receivable upon conversion or exercise of any Registrable
Securities, (iv) any security received or receivable as a dividend or other
distribution with respect to any Registrable Securities, (v) any security
received in exchange for or in replacement of any Registrable Securities, (vi)
any security issued or issuable with respect to any Registrable Securities as a
result of a change or reclassification of Registrable Securities or any capital
reorganization of the Company, and (vii) any security received or receivable by
a holder in respect of Registrable Securities as a result of a merger or
consolidation of the Company; provided, however, that "Registrable Securities"
shall not include (a) any securities sold to the public pursuant to a
registration statement or Rule 144 under the Securities Act or any similar rule
promulgated by the Commission thereunder, or (b) any securities sold in a
private transaction in which the transferor's rights hereunder are not assigned
in accordance with the requirements of Section 5.11; provided further, that the
Company shall have no obligation to register those Registrable Securities of the
Holder with respect to which the Company delivers to the Holder an opinion of
counsel reasonably satisfactory to such Holder and its counsel to the effect
that the proposed sale or disposition of such Registrable Securities for which
registration was requested does not require registration under the Securities
Act and may be sold pursuant to Rule 144(k) under the Securities Act (or any
successor provision thereto).
"register," "registered" and "registration" shall refer to a registration
of securities effected by preparing and filing a registration statement in
compliance with the Securities Act and the effectiveness of such registration
statement.
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Selling Holder" means a Holder who sells or proposes to sell Registrable
Securities pursuant to any registration statement provided for in this
Agreement.
"Series B Preferred Stock" shall mean the Series B Convertible Preferred
Stock, par value $.01 per share, of the Company.
"Shares" shall mean, collectively, the Common Stock, the Series B Preferred
Stock and the Warrants. Whenever this Agreement refers to a number or percentage
of Shares, such number or percentage shall be calculated as if, immediately
prior to such calculation, all shares of Series B Preferred Stock had been
converted into, and all Warrants had been exercised for, shares of Common Stock
in accordance with their terms, regardless of the existence of any restrictions
on such conversion or exercise.
"Shelf Registration" shall have the meaning set forth in Section 2.1.
"Warrants" shall mean the warrants to purchase Common Stock issued pursuant
to the Purchase Agreement.
ARTICLE II
REGISTRATION RIGHTS
Section 2.1. Shelf Registration. Within forty-five (45) days of delivery of
a written notice by Holders of more than 50% of the Registrable Securities which
notice may be delivered at any time after the earlier to occur of (a) the Final
Closing or (b) the termination of the Purchase Agreement, the Company shall
prepare and file a shelf registration statement (the "Shelf Registration") on
Form S-3, or such other form as the Company may at the time be eligible to use
for the registration of securities under the Securities Act providing for the
sale by the Holders of all of their Registrable Securities then outstanding, and
all Registrable Securities issuable thereafter. The Company may include in the
Shelf Registration shares of Common Stock sold for the account of the Company,
but no other person.
Section 2.2. Demand Registration.
(a) Request for Registration. At any time, and from time to time, the
Holders of more than fifty percent (50%) of any type, class or series of
Registrable Securities then outstanding shall have the right, by written notice
(a "Demand Notice") delivered to the Company, to require the Company to register
("Demand Registration") Registrable Securities having an aggregate offering
price to the public in excess of $5,000,000; provided, however, that (i) (x)
until the earlier to occur of the Outside Date or the date of the consummation
of the Final Closing, the Holders of Registrable Securities shall not have any
right to demand a Demand Registration, (y) in the period commencing on the
Outside Date and ending on the date of the consummation of the Final Closing, if
the Final Closing occurs, the Holders of Registrable Securities shall have the
right to demand four (4) Demand Registrations, and (z) at any time after the
consummation of the Final Closing, the Holders of Registrable Securities shall
have the right to demand an unlimited number of Demand Registrations, and (ii)
the Company shall not be required to effect a Demand Registration if within six
(6) months prior to the date of such Demand Notice a Demand Registration
pursuant to this Section 2.2(a) shall have been declared or ordered effective by
the Commission. The Holders who deliver a Demand Notice (the "Initiating
Holders") shall specify in the Demand Notice the number and type, class or
series of Registrable Securities to be registered and the intended methods of
disposition thereof.
The Company shall give written notice of any Demand Notice within ten (10)
days after the receipt thereof, to each Holder other than the Initiating
Holders. Within twenty (20) days after receipt of such notice, any such Holder
may request in writing that its Registrable Securities be included in such
registration, and the Company shall include in the Demand Registration the
Registrable Securities of all such Holders who request to be so included
(together with the Initiating Holders, the "Demanding Holders"), subject to the
provisions of Section 2.4. Each such request shall specify the number of
Registrable Securities proposed to be sold and the intended method of
disposition thereof.
(b) Effective Registration. A registration will be deemed to have been
effected as a Demand Registration if it has been declared effective by the
Commission and the Company has complied in all material respects with its
obligations under this Agreement with respect thereto; provided that a Demand
Registration will not be deemed to have been effected, and the Company shall
continue to be obligated to effect an additional Demand Registration, if (i)
after such registration has become effective, the offering of Registrable
Securities pursuant to such registration is or becomes the subject of any stop
order, injunction or other order or requirement of the Commission or any other
governmental or administrative agency (for any reason other than the acts or
omissions of the Demanding Holders), (ii) any court prevents or otherwise limits
the sale of Registrable Securities pursuant to such registration (for any reason
other than the acts or omissions of the Demanding Holders), (iii) such
registration does not remain effective for the Minimum Effective Period, (iv) an
event specified in clause (v), (vi) or (vii) of Section 3.1(d) occurs that
results in a delay of an underwritten offering and, as a direct result of such
delay, the managing underwriter(s) determine that the Registrable Securities
cannot be sold at the originally anticipated offering price, or (v) after an
event specified in clause (vi) of Section 3.1(d) occurs, Selling Holders
determine to withdraw a majority of the Registrable Securities previously
included in such registration.
(c) Withdrawal. The Demanding Holders may withdraw all or any part of their
Registrable Securities from a Demand Registration at any time (whether before or
after the filing or effective date of such Demand Registration) and, if all such
Registrable Securities are withdrawn, may withdraw the demand related thereto.
If a registration statement is filed pursuant to a Demand Registration, and
subsequently a sufficient number of Registrable Securities are withdrawn from
the Demand Registration so that such registration statement does not cover at
least the required amount specified by Section 2.2(a), the Company may (or
shall, if requested by the Demanding Holders) withdraw the registration
statement and if such registration statement is withdrawn prior to the
consummation of the Final Closing, it will count as a Demand Registration;
provided that if the Demanding Holders bear the expenses associated with such
withdrawn registration statement, such registration statement will not count as
a Demand Registration and the Company shall continue to be obligated to effect
an additional Demand Registration. If the Demanding Holders determine to bear
such expenses, such expenses shall be borne ratably by the Demanding Holder(s)
whose withdrawal of Registrable Securities resulted in such registration
statement not covering the specified required amounts.
(d) Selection of Underwriter. If the Demanding Holders so elect, the
offering of Registrable Securities pursuant to a Demand Registration shall be in
the form of an underwritten offering. The majority of the Demanding Holders
shall select one or more nationally recognized firms of investment bankers to
act as the book-running managing underwriter or underwriters in connection with
such offering and shall select any additional investment bankers and managers to
be used in connection with the offering; provided that such investment bankers
and managers must be reasonably satisfactory to the Company.
Section 2.3. Piggy-Back Registration. If the Company proposes to file a
registration statement (a "Piggy-Back Registration") under the Securities Act
with respect to an offering or other sale of equity securities by the Company
for its own account or for the account of any holders of any class of its equity
securities (other than (i) a Demand Registration, (ii) a registration statement
on Form S-4 or S-8 (or any substitute form that may be adopted by the
Commission), or (iii) a registration statement filed in connection with an
exchange offer or offering of securities solely to the Company's existing
securityholders), then the Company shall give written notice of such proposed
filing to the Holders as soon as practicable, in any event at least thirty (30)
days before the anticipated filing date, and such notice shall offer each Holder
the opportunity to include in such registration such number of Registrable
Securities as such Holder may request (which request shall specify the
Registrable Securities intended to be disposed of by such Holder and the
intended method of distribution thereof). Such Holders shall have twenty (20)
days after receipt of such notice from the Company to make such request. All
Holders requesting inclusion in the Piggy-Back Registration are referred to
herein as "Piggy-Back Holders".
Any Holder shall have the right to withdraw its request for inclusion of
its Registrable Securities in any Piggy-Back Registration by giving written
notice to the Company of its request to withdraw prior to the date on which the
registration statement becomes effective. The Company may withdraw a Piggy-Back
Registration at any time prior to the time it becomes effective, provided that
the Company shall reimburse the Piggy-Back Holders for all reasonable
out-of-pocket expenses (including counsel fees and expenses) incurred prior to
such withdrawal.
No Piggy-Back Registration shall relieve the Company of its obligation to
effect any Demand Registration or a Shelf Registration, and no failure to effect
a Piggy-Back Registration or complete the sale of securities in connection
therewith shall relieve the Company of any other obligation under this Agreement
(including, without limitation, the Company's obligations under Sections 3.2 and
4.1).
Section 2.4. Reduction of Offering.
(a) Demand Registration. The Company may include in a Demand Registration
Registrable Securities for the account of the Demanding Holders and shares of
Common Stock for the account of the Company or other stockholders exercising
contractual piggy-back registration rights or other stockholders, on the same
terms and conditions as the Registrable Securities are included therein for the
account of the Demanding Holders; provided, however, that (i) if the managing
underwriter(s) of any underwritten offering that is the subject of such Demand
Registration have informed the Company in writing that in their opinion the
total number of securities that the Demanding Holders, the Company and any other
stockholders intend to include in such offering exceeds the number which can be
sold in such offering within a price range acceptable to the Holders of a
majority of the Registrable Securities requested to be included therein, then
(x) the number of Shares to be offered for the account of any stockholders other
than the Demanding Holders shall be reduced (to zero, if necessary) pro rata in
proportion to the respective number of Shares requested to be registered by such
stockholders, and (y) thereafter, if necessary, the number of Shares to be
offered for the account of the Company shall be reduced (to zero, if necessary),
to the extent necessary to reduce the total number of Shares requested to be
included in such offering to the number of Shares, if any, recommended by such
managing underwriter(s) (and if the number of Shares to be offered for the
account of stockholders other than the Demanding Holders and for the account of
the Company has been reduced to zero, and the number of Shares requested to be
included in such offering by the Demanding Holders exceeds the number of Shares
recommended by such managing underwriter(s), then the number of Shares to be
offered for the account of the Demanding Holders shall be reduced pro rata in
proportion to the respective number of Shares requested to be registered by the
Demanding Holders) and (ii) if the offering that is the subject of such Demand
Registration is not underwritten, only Demanding Holders, and no other party
(including the Company), shall be permitted to include securities in such Demand
Registration unless the Demanding Holders owning a majority of the Shares
included in such Demand Registration consent in writing to the inclusion of such
securities therein.
(b) Piggy-Back Registration.
(i) Notwithstanding anything to the contrary contained herein, if the
managing underwriter(s) of any underwritten offering that is the subject of a
Piggy-Back Registration have informed the Company in writing that in their
opinion the total number of Shares that the Company, the Piggy-Back Holders and
any other persons desiring to participate in such registration intend to include
in such offering exceeds the number which can be sold in such offering without
materially and adversely affecting the marketability of the offering, then (x)
the number of Shares to be offered for the account of all other persons (other
than the Company, the Piggy-Back Holders, the Additional Piggy-Back Holder and
any securityholder(s) for whom such registration constitutes an exercise of
their demand registration rights) that have requested to include Shares in such
registration shall be reduced (to zero, if necessary) pro rata in proportion to
the respective number of Shares requested to be included, (y) thereafter, if
necessary, the number of Shares to be offered for the account of the Company (if
any) shall be reduced (to zero, if necessary), and (z) thereafter, if necessary,
the number of Shares to be offered for the account of Piggy-Back Holders and
Additional Piggy-Back Holder shall be reduced (to zero, if necessary) pro rata
in proportion to the respective number of Shares requested to be included, to
the extent necessary to reduce the total number of Shares requested to be
included in such offering to the number of Shares, if any, that such managing
underwriter(s) believe can be included without materially and adversely
affecting the success of the offering; provided that, if such registration
contemplates an "over-allotment option" on the part of underwriters, to the
extent such over-allotment option is exercised and Holders of the Registrable
Securities were excluded from registering any of the Registrable Securities they
requested be included in such registration pursuant to the cutback provisions of
this Section 2.4(b), then the over-allotment option shall be fulfilled through
the registration and sale of such excluded Registrable Securities.
(ii) If the managing underwriter(s) of any underwritten offering that is
the subject of a Piggy-Back Registration notify the Company that the kind of
securities that the Piggy-Back Holders intend to include is such as to
materially and adversely affect the success of such offering, then (x) the
Company shall afford the Piggy-Back Holders the opportunity to exercise, convert
or exchange such securities for or into Common Stock concurrently with the
consummation of such offering and include such shares of Common Stock in such
offering, in which case such shares of Common Stock shall be included subject to
clause (i) above, and (y) if one or more Piggy-Back Holders do not so exercise,
convert or exchange such securities, such securities to be included in such
offering by such Piggy-Back Holders shall be reduced as described in clause (i)
above or if such reduction would, in the judgment of the managing
underwriter(s), be insufficient to substantially eliminate the adverse effect
that inclusion of such securities requested to be included would have on such
offering, such securities will be excluded from such offering.
ARTICLE III
REGISTRATION PROCEDURES
Section 3.1. Filings; Information. Whenever the Company is required to
effect or cause the registration of Registrable Securities pursuant to Section
2.1 or Section 2.2, the Company will use its reasonable best efforts to effect
the registration of such Registrable Securities in accordance with the intended
method of disposition thereof as quickly as practicable, and in connection with
any such request:
(a) The Company will as expeditiously as possible prepare and file
with the Commission a registration statement on any form for which the
Company then qualifies or which counsel for the Company shall deem
appropriate and which form shall be available for the sale of the
Registrable Securities to be registered thereunder in accordance with the
intended method of distribution thereof, and use its reasonable best
efforts to cause such filed registration statement to become and remain
effective for the Minimum Effective Period; provided, however, that the
Company may postpone the filing of a registration statement, or suspend
sales under an effective shelf registration statement, for a period of not
more than thirty (30) days if the Company furnishes to each Selling Holder
a certificate signed by the Chairman of the Board stating that in the good
faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its stockholders for the Company
to file a registration statement, or permit sales to be made under an
effective shelf registration statement, at such time because (i) it would
interfere with any proposed or pending material transaction or (ii) the
Company would be required to disclose material non-public information that
the Company has a bona fide business purpose for not disclosing; provided,
further, that the Company shall only be entitled to postpone a filing or
suspend sales once in any twelve-month period. If the Company postpones the
filing of a registration statement, or suspends sales under an effective
shelf registration statement, it shall promptly notify the Holders in
writing when the events or circumstances permitting such postponement or
suspension have ended. In the event of any suspension of sales under any
registration statement pursuant to this Section 3.1(a), the Company shall
extend the period during which such registration statement shall be
maintained effective by the number of days in such suspension period.
(b) The Company will promptly prepare and file with the Commission
such amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep such
registration statement continuously effective (subject to paragraph (a) and
the penultimate paragraph of this Section 3.1) for the Minimum Effective
Period and comply with the provisions of the Securities Act with respect to
the disposition of all securities covered by such registration statement
during such period in accordance with the intended methods of disposition
by each Selling Holder included in such registration statement.
(c) The Company will, at least fifteen (15) days prior to filing a
registration statement or prospectus or any amendment or supplement
thereto, furnish to each Selling Holder, counsel representing such Selling
Holders, and each underwriter, if any, of the Registrable Securities
covered by such registration statement copies of such registration
statement as proposed to be filed, together with exhibits thereto, which
documents will be subject to review and comment by the foregoing as
promptly as practicable, but in any event within ten (10) days after
delivery, and thereafter furnish to such Selling Holder, counsel and
underwriter, if any, for their review and comment such number of copies of
such registration statement, each amendment and supplement thereto (in each
case, including all exhibits thereto and documents incorporated by
reference therein), the prospectus included in such registration statement
(including each preliminary prospectus) and such other documents or
information as such Selling Holder, counsel or underwriter may reasonably
request in order to facilitate the disposition of the Registrable
Securities owned by such Selling Holder.
(d) After the filing of the registration statement, the Company will
promptly notify each Selling Holder of Registrable Securities covered by
such registration statement, and confirm such notice in writing, (i) when a
prospectus or any prospectus supplement or post- effective amendment has
been filed and, with respect to a registration statement or any post-
effective amendment, when the same has become effective, (ii) of any
request by the Commission or any other Federal or state governmental
authority for amendments or supplements to a registration statement or
related prospectus or for additional information, (iii) of the issuance by
the Commission or any other Federal or state governmental authority of any
stop order suspending the effectiveness of a registration statement or any
order preventing or suspending the use of any prospectus or the initiation
of any proceedings for that purpose, (iv) if, at any time when a prospectus
is required by the Securities Act to be delivered in connection with sales
of the Registrable Securities, the representations and warranties of the
Company contained in any agreement contemplated by Section 3.1(h)
(including any underwriting agreement) cease to be true and correct in any
material respect, (v) of the receipt by the Company of any notification
with respect to the suspension of the qualification or exemption from
qualification of any of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose, and (vi) of the happening of any event which makes any statement
made in such registration statement or related prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue in
any material respect or which requires the making of any changes in a
registration statement, prospectus or documents incorporated therein by
reference so that, in the case of the registration statement, it will not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, and that, in the case of the prospectus,
it will not contain any untrue statement of a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. After the filing
of the registration statement, the Company will promptly furnish to each
Selling Holder and the managing underwriter, without charge, at least one
signed copy of the registration statement.
(e) The Company will use its reasonable best efforts to (i) register
or qualify the Registrable Securities under such other securities or blue
sky laws of such jurisdictions in the United States as any Selling Holder,
the managing underwriters, if any, or their respective counsel reasonably
(in light of such Selling Holder's intended plan of distribution) request,
and (ii) cause such Registrable Securities to be registered with or
approved by such other governmental agencies or authorities in the United
States as may be necessary by virtue of the business and operations of the
Company and do any and all other acts and things that may be reasonably
necessary or advisable to enable such Selling Holder to consummate the
disposition of the Registrable Securities owned by such Selling Holder;
provided that the Company will not be required to (A) qualify generally to
do business in any jurisdiction where it would not otherwise be required to
qualify but for this paragraph (e) or (B) subject itself to taxation in any
such jurisdiction or (C) consent to general service of process in any such
jurisdiction.
(f) The Company will promptly use its reasonable best efforts to
prevent the entry, or obtain the withdrawal, of any order suspending the
effectiveness of a registration statement, or the lifting of any suspension
of the qualification (or exemption from qualification) of any Registrable
Securities for sale in any jurisdiction.
(g) Upon the occurrence of any event contemplated by clause (vi) of
Section 3.1(d), the Company will (i) promptly prepare a supplement or
post-effective amendment to such registration statement or a supplement to
the related prospectus or any document incorporated therein by reference or
file any other required document so that, as thereafter delivered to the
purchasers of the Registrable Securities being sold thereunder, such
prospectus will not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, and (ii) promptly make available to each Selling
Holder any such supplement or amendment.
(h) The Company will enter into customary agreements (including, if
applicable, an underwriting agreement in customary form) and take such
other actions as are reasonably required in order to expedite or facilitate
the disposition of such Registrable Securities. All of the representations,
warranties and covenants of the Company to or for the benefit of such
underwriters shall also be made to and for the benefit of such Selling
Holders. None of such agreements shall increase the potential liability of
the Selling Holders beyond that otherwise provided in Article IV of this
Agreement.
(i) The Company will make available to each Selling Holder (and will
deliver to their counsel) and each underwriter, if any, copies of all
correspondence between the Commission and the Company, its counsel or
auditors and will also make available for inspection by any Selling Holder,
any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other professional
retained by any such Selling Holder or underwriter (collectively, the
"Inspectors"), all financial and other records, pertinent corporate
documents and properties of the Company (collectively, the "Records") as
shall be reasonably necessary to enable them to exercise their due
diligence responsibility, and cause the Company's officers and employees to
supply all information reasonably requested by any Inspectors in connection
with such registration statement. Records which the Company determines, in
good faith, to be confidential and which it notifies the Inspectors are
confidential shall not be disclosed by the Inspectors unless (i) the
disclosure of such Records is necessary to avoid or correct a misstatement
or omission in such registration statement or (ii) the disclosure or
release of such Records is requested or required pursuant to oral
questions, interrogatories, requests for information or documents or a
subpoena or other order from a court of competent jurisdiction or other
process; provided that prior to any disclosure or release pursuant to
clause (ii), the Inspectors shall provide the Company, to the extent
possible, with prompt notice of any such request or requirement so that the
Company may seek an appropriate protective order or waive such Inspectors'
obligation not to disclose such Records; and, provided further, that if
failing the entry of a protective order or the waiver by the Company
permitting the disclosure or release of such Records, the Inspectors, upon
advice of counsel, are compelled to disclose such Records, the Inspectors
may disclose that portion of the Records which counsel has advised the
Inspectors that the Inspectors are compelled to disclose. Each Selling
Holder agrees that information obtained by it solely as a result of such
inspections (not including any information obtained from a third party who,
insofar as is known to the Selling Holder after reasonable inquiry, is not
prohibited from providing such information by a contractual, legal or
fiduciary obligation to the Company) shall be deemed confidential and shall
not be used by it as the basis for any market transactions in the
securities of the Company or its Affiliates unless and until such
information is made generally available to the public other than as a
result of disclosure by such Selling Holder in breach of this provision.
Each Selling Holder further agrees that it will, upon learning that
disclosure of such Records is sought in a court of competent jurisdiction,
give notice to the Company and allow the Company, at its expense, to
undertake appropriate action to prevent disclosure of the Records deemed
confidential.
(j) In the case of an underwritten offering, the Company will furnish
to each Selling Holder and to each underwriter, a signed counterpart,
addressed to such Selling Holder or underwriter, of (i) an opinion or
opinions of outside counsel to the Company, and (ii) a comfort letter or
comfort letters from the Company's independent certified public accountants
(and if necessary, any other independent certified public accountants of
any subsidiary of the Company or of any business acquired by the Company
for which financial statements and/or financial data are, or are required
to be, included in the registration statement), each in customary form and
covering such matters of the type customarily covered by opinions or
comfort letters, as the case may be, as the Selling Holders or the managing
underwriter therefor reasonably requests.
(k) The Company will otherwise use its reasonable best efforts to
comply with all applicable rules and regulations of the Commission, and
make available to its securityholders, as soon as reasonably practicable,
an earnings statement covering a period of 12 months, beginning on the
first day of any fiscal quarter next succeeding the effective date of the
registration statement, which earnings statement shall cover such twelve
month period and shall satisfy the provisions of Section 11(a) of the
Securities Act.
(l) If requested by the Selling Holders owning a majority of the
Shares that constitute Registrable Securities included in such registration
statement, the Company will use its reasonable best efforts (a) to cause
any class of Registrable Securities to be listed on a national securities
exchange (if such securities are not already so listed) and on each
additional national securities exchange on which similar securities issued
by the Company are then listed (if any), if the listing of such Registrable
Securities is then permitted under the rules of such exchange or (b) to
secure designation of all such Registrable Securities covered by such
registration statement as a NASDAQ "national market system security" within
the meaning of Rule 11Aa2-1 of the Commission or, failing that, to secure
NASDAQ authorization for such Registrable Securities and, without limiting
the generality of the foregoing, to arrange for at least two market makers
to register as such with respect to such Registrable Securities with the
National Association of Securities Dealers, Inc. (the "NASD").
(m) In connection with an underwritten offering, the Company will
participate, to the extent reasonably requested by the managing underwriter
for the offering or the Selling Holders, in customary efforts to sell the
securities under the offering, including, without limitation, participating
in "road shows"; provided that the Company shall not be obligated so to
participate in more than one such offering pursuant to a Shelf Registration
or a Demand Registration in any 12-month period.
The Company may require each Selling Holder to promptly furnish in writing
to the Company such information regarding the distribution of the Registrable
Securities by such Selling Holder as the Company may from time to time
reasonably request and such other information as may be legally required in
connection with such registration including, without limitation, all such
information as may be requested by the Commission or the NASD. The Company may
exclude from such registration any Holder who fails to provide such information.
Each Selling Holder agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in clauses (iii),
(v) and (vi) of Section 3.1(d), such Selling Holder will forthwith discontinue
disposition of Registrable Securities pursuant to the registration statement
covering such Registrable Securities until such Selling Holder's receipt of the
copies of the supplemented or amended prospectus contemplated by Section 3.1(g),
and, if so directed by the Company, such Selling Holder will deliver to the
Company (at the Company's expense) all copies, other than permanent file copies,
then in such Selling Holder's possession of the most recent prospectus covering
such Registrable Securities at the time of receipt of such notice. In the event
the Company shall give such notice, the Company shall extend the period during
which such registration statement shall be maintained effective by the number of
days during the period from and including the date of the giving of notice
pursuant to clause (iii), (v) or (vi) of Section 3.1(d) to the date when the
Company shall make available to the Selling Holders a prospectus supplemented or
amended to conform with the requirements of Section 3.1(g).
In connection with any Piggy-Back Registration that includes Registrable
Securities, the Company will take the actions contemplated by paragraphs (c),
(d), (e), (f), (g), (i), (j), (k) and (l) above.
Section 3.2. Registration Expenses. In connection with the Shelf
Registration, every Demand Registration and every Piggy-Back Registration that
includes Registrable Securities, the Company shall pay the following
registration expenses incurred in connection with such registration (the
"Registration Expenses"): (i) all registration and filing fees, (ii) fees and
expenses of compliance with securities or blue sky laws and of determination of
eligibility of the Registrable Securities for investment under the laws of such
jurisdiction as the managing underwriters or Holders of a majority of the
Registrable Securities being sold may designate (including reasonable fees and
disbursements of counsel in connection therewith), (iii) printing expenses
(including printing certificates for the Registrable Securities to be sold and
the prospectuses), messenger and delivery expenses, duplication, word
processing, and telephone expenses, (iv) the Company's internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties, the expenses of any annual
audit or quarterly review, the expense of any liability insurance) and all fees
and expenses incident to the performance of or compliance with this Agreement by
the Company, (v) the fees and expenses incurred in connection with the listing
of the Registrable Securities, (vi) fees and disbursements of counsel for the
Company and fees and expenses for independent certified public accountants
retained by the Company (including the expenses of any comfort letters or costs
associated with the delivery by independent certified public accountants of a
comfort letter or comfort letters requested pursuant to Section 3.1(j)),
reasonable fees and disbursements of all underwriters (excluding discounts,
commissions or fees of underwriters, selling brokers, dealer managers or similar
securities industry professionals relating to the distribution of the
Registrable Securities), (vii) the fees and expenses of any special experts
retained by the Company in connection with such registration, (viii) reasonable
fees and expenses of one firm of counsel for the Holders, which counsel shall be
chosen by Holders of a majority of the Shares included in such registration
statement, and (ix) fees and disbursements of any transfer agent for the
Registrable Securities. The Company shall have no obligation to pay any
underwriting fees, discounts or commissions attributable to the sale of
Registrable Securities.
ARTICLE IV
INDEMNIFICATION AND CONTRIBUTION
Section 4.1. Indemnification by the Company. The Company agrees to
indemnify, to the fullest extent permitted by law, and hold harmless each
Selling Holder, its partners, officers, directors, employees and agents, and
each person, if any, who controls such Selling Holder within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act, together
with the partners, officers, directors, employees and agents of such controlling
person (collectively, the "Controlling Persons"), from and against any loss,
claim, damage, liability, reasonable attorneys' fee, cost or expense and costs
and expenses (including, without limitation, costs of preparation and attorneys'
fees and disbursements) of investigating and defending any such claim
(collectively, the "Damages"), joint or several, and any action in respect
thereof to which such Selling Holder, its partners, officers, directors,
employees or agents, or any such Controlling Person may become subject under the
Securities Act or otherwise, insofar as such Damages (or proceedings in respect
thereof) arise out of, or are based upon, any untrue statement or alleged untrue
statement of a material fact contained in any registration statement or
prospectus relating to the Registrable Securities or any preliminary prospectus,
or any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
except insofar as the same are based upon information furnished in writing to
the Company by a Selling Holder or underwriter expressly for use therein, and
shall reimburse each Selling Holder, its partners, officers, directors,
employees and agents, and each such Controlling Person for any legal and other
expenses reasonably incurred by that Selling Holder, its partners, officers,
directors, employees and agents, or any such Controlling Person in investigating
or defending or preparing to defend against any such Damages or proceedings;
provided, however, that the Company shall not be liable to any Selling Holder to
the extent that (a) any such Damages arise out of or are based upon an untrue
statement or omission made in any preliminary prospectus if (i) such offering
does not involve an underwriter, (ii) such Selling Holder was informed by the
Company of such untrue statement or omission and such Selling Holder was
provided copies of the final prospectus by the Company and was informed by the
Company of the correction therein of the untrue statement or omission, but such
Selling Holder failed to send or deliver a copy of the final prospectus with or
prior to the delivery of written confirmation of the sale by such Selling Holder
to the person asserting the claim from which such Damages arise, and (iii) the
final prospectus would have corrected such untrue statement or such omission; or
(b) any such Damages arise out of or are based upon an untrue statement or
omission in any prospectus if (i) such offering does not involve an underwriter,
(ii) such untrue statement or omission is corrected in an amendment or
supplement to such prospectus, and (iii) such Selling Holder was informed by the
Company of such untrue statement or omission and, having previously been
furnished by or on behalf of the Company with copies of such prospectus as so
amended or supplemented sufficiently prior to the sale of Registrable Securities
and informed by the Company of the correction therein of the untrue statement or
omission, such Selling Holder thereafter fails to deliver such prospectus as so
amended or supplemented prior to or concurrently with the sale of a Registrable
Security to the person asserting the claim from which such Damages arise. The
Company also agrees to indemnify any underwriters, selling brokers, dealer
managers and similar securities industry professionals participating in the
distribution of the Registrable Securities, their respective officers and
directors and each person who controls such underwriters on substantially the
same basis as that of the indemnification of the Selling Holders provided in
this Section 4.1.
Section 4.2. Indemnification by Holders of Registrable Securities. Each
Selling Holder agrees, severally but not jointly, to indemnify and hold harmless
the Company, its officers, directors, employees and agents and each person, if
any, who controls the Company within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act, together with the partners, officers,
directors, employees and agents of such controlling person, to the same extent
as the foregoing indemnity from the Company to such Selling Holder, but only
with reference to information related to such Selling Holder, or its plan of
distribution, furnished in writing by such Selling Holder or on such Selling
Holder's behalf expressly for use in any registration statement or prospectus
relating to such Selling Holder's Registrable Securities, or any amendment or
supplement thereto, or any preliminary prospectus. In case any action or
proceeding shall be brought against the Company or its officers, directors,
employees or agents or any such controlling person or its partners, officers,
directors, employees or agents, in respect of which indemnity may be sought
against such Selling Holder, such Selling Holder shall have the rights and
duties given to the Company, and the Company or its officers, directors,
employees or agents, controlling person, or its partners, officers, directors,
employees or agents, shall have the rights and duties given to such Selling
Holder, under Section 4.1. Each Selling Holder also agrees to indemnify and hold
harmless each other Selling Holder and any underwriters of the Registrable
Securities, and their respective officers and directors and each person who
controls each such other Selling Holder or underwriter on substantially the same
basis as that of the indemnification of the Company provided in this Section
4.2. The Company shall be entitled to receive indemnities from underwriters,
selling brokers, dealer managers and similar securities industry professionals
participating in the distribution, to the same extent as provided above, with
respect to information so furnished in writing by such persons specifically for
inclusion in any prospectus or registration statement. In no event shall the
liability of any Selling Holder be greater in amount than the dollar amount of
the net proceeds received by such Selling Holder upon the sale of the
Registrable Securities giving rise to such indemnification obligation.
Section 4.3. Conduct of Indemnification Proceedings. Promptly after receipt
by any person in respect of which indemnity may be sought pursuant to Section
4.1 or 4.2 (an "Indemnified Party") of notice of any claim or the commencement
of any action, the Indemnified Party shall, if a claim in respect thereof is to
be made against the person against whom such indemnity may be sought (an
"Indemnifying Party"), notify the Indemnifying Party in writing of the claim or
the commencement of such action, provided that the failure to notify the
Indemnifying Party shall not relieve it from any liability except to the extent
that the Indemnifying Party is materially prejudiced as a result of such
failure. If any such claim or action shall be brought against an Indemnified
Party, and it shall notify the Indemnifying Party thereof, the Indemnifying
Party shall be entitled to participate therein, and, to the extent that it
wishes, jointly with any other similarly notified Indemnifying Party, to assume
the defense thereof with counsel reasonably satisfactory to the Indemnified
Party; provided, that the Indemnifying Party acknowledges, in a writing in form
and substance reasonably satisfactory to such Indemnified Party, such
Indemnifying Party's liability for all Damages of such Indemnified Party to the
extent specified in, and in accordance with, this Article IV. After notice from
the Indemnifying Party to the Indemnified Party of its election to assume the
defense of such claim or action, the Indemnifying Party shall not be liable to
the Indemnified Party for any legal or other expenses subsequently incurred by
the Indemnified Party in connection with the defense thereof other than
reasonable costs of investigation; provided that the Indemnified Party shall
have the right to employ separate counsel to represent the Indemnified Party and
its controlling persons who may be subject to liability arising out of any claim
in respect of which indemnity may be sought by the Indemnified Party against the
Indemnifying Party, but the fees and expenses of such counsel shall be for the
account of such Indemnified Party unless (i) the Indemnifying Party and the
Indemnified Party shall have mutually agreed to the retention of such counsel or
(ii) in the reasonable judgment of such Indemnified Party, representation of
both parties by the same counsel would be inappropriate due to actual or
potential conflicts of interest between them, it being understood, however, that
the Indemnifying Party shall not, in connection with any one such claim or
action or separate but substantially similar or related claims or actions in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable for the fees and expenses of more than one separate firm of attorneys
(together with appropriate local counsel) at any time for all Indemnified
Parties. No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any claim or pending or threatened
proceeding in respect of which the Indemnified Party is or could have been a
party and indemnity could have been sought hereunder by such Indemnified Party,
unless such settlement includes an unconditional release of such Indemnified
Party from all liability arising out of such claim or proceeding. Whether or not
the defense of any claim or action is assumed by the Indemnifying Party, such
Indemnifying Party will not be subject to any liability for any settlement made
without its consent, which consent will not be unreasonably withheld.
Section 4.4. Contribution. If the indemnification provided for in this
Article IV is unavailable to the Indemnified Parties in respect of any Damages
referred to herein, then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Damages (i) as between the Company and the
Selling Holders, on the one hand, and the underwriters, on the other, in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Selling Holders, on the one hand, and the underwriters, on the
other, from the offering of the Registrable Securities, or if such allocation is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits but also the relative fault of the Company and
the Selling Holders, on the one hand, and of the underwriters, on the other, in
connection with the statements or omissions which resulted in such Damages, as
well as any other relevant equitable considerations, and (ii) as between the
Company, on the one hand, and each Selling Holder, on the other, in such
proportion as is appropriate to reflect the relative fault of the Company and of
each Selling Holder in connection with such statements or omissions, as well as
any other relevant equitable considerations. The relative benefits received by
the Company and the Selling Holders, on the one hand, and the underwriters, on
the other, shall be deemed to be in the same proportion as the total proceeds
from the offering (net of underwriting discounts and commissions but before
deducting expenses) received by the Company and the Selling Holders bear to the
total underwriting discounts and commissions received by the underwriters, in
each case, as set forth in the table on the cover page of the prospectus. The
relative fault of the Company and the Selling Holders, on the one hand, and of
the underwriters, on the other, shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company and the Selling Holders or by the underwriters. The
relative fault of the Company, on the one hand, and of each Selling Holder, on
the other, shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by such party,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company and the Selling Holders agree that it would not be just and
equitable if contribution pursuant to this Section 4.4 were determined by pro
rata allocation (even if the Selling Holders were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an Indemnified Party as a result of the Damages
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such Indemnified Party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 4.4, no underwriter shall be required to contribute any amount in excess
of the amount by which the total price at which the Registrable Securities
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any Damages which such underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission, and no Selling Holder shall be required to contribute any
amount in excess of the amount by which the total price at which the Registrable
Securities of such Selling Holder were offered to the public (less underwriting
discounts and commissions) exceeds the amount of any Damages which such Selling
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. Each Selling Holder's obligation to contribute
pursuant to this Section 4.4 is several and not joint.
The indemnity, contribution and expense reimbursement obligations contained
in this Article IV are in addition to any liability any Indemnifying Party may
otherwise have to an Indemnified Party or otherwise. The provisions of this
Article IV shall survive, notwithstanding any transfer of the Registrable
Securities by any Holder or any termination of this Agreement.
ARTICLE V
MISCELLANEOUS
Section 5.1. Participation in Underwritten Registrations. No person may
participate in any underwritten registration hereunder unless such person (a)
agrees to sell such person's securities on the basis provided in any
underwriting arrangements approved by the persons entitled hereunder to approve
such arrangements, and (b) timely completes and executes all questionnaires,
indemnities, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements and this Agreement; provided
that (i) no Selling Holder shall be required to make any representations or
warranties except those which are customary for a selling holder of securities,
and (ii) the liability of each Selling Holder to any underwriter under such
underwriting agreement will be limited to liability arising from material
misstatements or omissions in the relevant registration statement or the
relevant prospectus regarding such Selling Holder and its intended method of
distribution that were based upon information furnished in writing by such
Selling Holder to the Company expressly for use therein and any such liability
shall not exceed an amount equal to the amount of net proceeds such Selling
Holder derives from such registration.
Section 5.2. Distribution. During such time as any Selling Holder may be
engaged in a distribution (within the meaning of Regulation M promulgated under
the Exchange Act) of the Registrable Securities, such Selling Holder shall
comply with Regulation M and pursuant thereto it shall, among other things; (i)
not engage in any stabilization activity in connection with the securities of
the Company in contravention of such regulation.
Section 5.3. SEC Reporting.
(a) Rules 144 and 144A. The Company shall timely file any reports required
to be filed by it under the Securities Act and the Exchange Act and, if at any
time the Company is not required to file such reports, the Company will, upon
the request of any Holder or prospective purchaser from such Holder, make
available such information necessary to permit sales pursuant to Rule 144A, and
shall take such further action as any Holder may reasonably request, all to the
extent required from time to time to enable Holders to sell Registrable
Securities without registration under the Securities Act within the limitation
of the exemptions provided by (a) Rule 144 or Rule 144A under the Securities
Act, as such Rules may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Commission. Upon the request of any Holder,
the Company will deliver to such Holder a written statement as to whether it has
complied with such requirements.
(b) S-3 Eligibility. The Company shall use its best efforts to maintain its
eligibility to use Form S-3 under the Securities Act.
Section 5.4. Restrictions on Sale.
(a) By the Company. The Company agrees, and shall use its best efforts to
cause its Affiliates to agree, (i) not to effect any public sale or distribution
of any equity securities, or any securities convertible into or exchangeable or
exercisable for such securities, during the 7 days prior to, and during the
90-day period beginning on, the effective date of any registration statement
(except as part of such registration statement) filed by the Company, in the
case of an underwritten offering, if, and to the extent, reasonably requested by
the managing underwriter or underwriters, and (ii) to use its best efforts to
ensure that any agreement entered into after the date hereof pursuant to which
the Company issues or agrees to issue any privately placed securities (other
than to officers or employees) shall contain a provision under which holders of
such securities agree not to effect any sale or distribution of any such
securities during the periods described in (i) above, in each case, including a
sale pursuant to Rule 144 or Rule 144A under the Securities Act (except as part
of any such registration, if permitted); provided, however, that the provisions
of this paragraph shall not prevent (x) the conversion or exchange of any
securities pursuant to their terms into or for other securities or (y) the
issuance of any securities to employees of the Company or pursuant to any
employee plan.
(b) By the Holders. Each Holder agrees, and shall use its best efforts to
cause its Affiliates to agree, not to effect any public sale or distribution of
any equity securities, or any securities convertible into or exchangeable or
exercisable for such securities, during the 7 days prior to, and during the
90-day period beginning on, the effective date of any registration statement
(except as part of such registration statement) filed by the Company, in the
case of an underwritten offering if, and to the extent, reasonably requested by
the managing underwriter(s); provided that all executive officers and directors
of the Company agree to similar restrictions, which the Company will use its
reasonable best efforts to enforce and provided further that the Company informs
such Holder of the expected effective date at least fifteen (15) days prior
thereto. Notwithstanding the provisions of the preceding sentence, a Holder may
sell any or all of its Registrable Securities in a private sale.
Section 5.5. Notices. All notices, demands, requests, consents, approvals
or other communications (collectively, "Notices") required or permitted to be
given hereunder or which are given with respect to this Agreement shall be in
writing and shall be personally served, delivered by a reputable air courier
service with tracking capability, with charges prepaid, or transmitted by hand
delivery or facsimile, addressed as set forth below, or to such other address as
such party shall have specified most recently by written notice. Notice shall be
deemed given on the date of service or transmission if personally served or
transmitted by facsimile. Notice otherwise sent as provided herein shall be
deemed given on the next business day following delivery of such notice to a
reputable air courier service.
If to the Company, to it at:
Peapod, Inc.
9933 Woods Drive
Skokie, IL 60077
Attention: Andrew Parkinson, Chairman
Facsimile: (847) 583-9495
with a copy (which shall not constitute notice) to:
Sidley & Austin
Bank One Plaza
10 South Dearborn Street
Chicago, IL 60603
Attn: Christine A. Leahy
Facsimile: (312) 853-7036
if to the Purchaser:
Koninklijke Ahold N.V.
Albert Heijnweg 1
1507 EH Zaandam, The Netherlands
Attention: Ton van Tielraden, Esq.
Facsimile: (31-75) 659-8366
and a copy (which shall not constitute notice) to:
White & Case LLP
1155 Avenue of the Americas
New York, New York 10036
Attention: Maureen S. Brundage, Esq./John M. Reiss, Esq.
Facsimile: (212) 354-8113
If to any other Holder, to it at the address(es) or facsimile number(s) set
forth in the notice referred to in Section 5.11 with respect to such
Holder.
Section 5.6. Governing Law. This Agreement and the rights and obligations
of the parties hereunder shall be governed by, and construed in accordance with,
the laws of the State of New York, and each party hereto submits to the
non-exclusive jurisdiction of the state and federal courts within the County of
New York in the State of New York. Any legal action or proceeding with respect
to this Agreement may be brought in the courts of the State of New York or of
the United States of America for the Southern District of New York and, by
execution and delivery of this Agreement, each party hereto hereby accepts for
itself and in respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts. Each party hereto further irrevocably
consents to the service of process out of any of the aforementioned courts in
any action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to such party at its address set forth in
Section 5.5, such service to become effective seven days after such mailing.
Nothing herein shall affect the right of either party to serve process in any of
the matters permitted by law or to commence legal proceedings or otherwise
proceed against the other party in any other jurisdiction. Each party hereto
hereby irrevocably waives any objection which it may now or hereafter have to
the laying of venue of any of the aforesaid actions or proceedings arising out
of or in connection with this Agreement brought in the courts referred to above
and hereby further irrevocably waives and agrees not to plead or claim in any
such court that any such action or proceeding brought in any such court has been
brought in an inconvenient forum.
Section 5.7. Entire Agreement. This Agreement (including all agreements
entered into pursuant hereto and all certificates and instruments delivered
pursuant hereto and thereto) constitutes the entire agreement of the parties
with respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements, representations, understandings, negotiations and
discussions between the parties, whether oral or written, with respect to the
subject matter hereof, including, without limitation, the Letter Agreement.
Section 5.8. Modifications and Amendments. No amendment, modification or
termination of this Agreement shall be binding upon any other party unless
executed in writing by (a) the Company and (b) by the Holders of a majority of
the Shares held by all Holders that constitute Registrable Securities.
Section 5.9. Waivers and Extensions. Any party to this Agreement may waive
any right, breach or default which such party has the right to waive, provided
that such waiver will not be effective against the waiving party unless it is in
writing, is signed by such party, and specifically refers to this Agreement.
Waivers may be made in advance or after the right waived has arisen or the
breach or default waived has occurred. Any waiver may be conditional. No waiver
of any breach of any agreement or provision herein contained shall be deemed a
waiver of any preceding or succeeding breach thereof nor of any other agreement
or provision herein contained. No waiver or extension of time for performance of
any obligations or acts shall be deemed a waiver or extension of the time for
performance of any other obligations or acts.
Section 5.10. Titles and Headings. Titles and headings of sections of this
Agreement are for convenience only and shall not affect the construction of any
provision of this Agreement.
Section 5.11. Assignment. This Agreement and the rights, duties and
obligations hereunder may not be assigned or delegated by the Company. This
Agreement and the rights, duties and obligations hereunder may be assigned or
delegated by any Holder to a transferee or assignee of Registrable Securities;
provided, however, that the Company shall not be obligated to recognize any such
assignment or delegation, and such transferee or assignee shall not become a
Holder, unless (a) the Company has received written notice of the name and
address of such transferee or assignee and of the Registrable Securities with
respect to which such assignment and/or delegation has been made, and (b) such
transferee or assignee agrees to be bound by this Agreement as if such
transferee or assignee was an original Purchaser. This Agreement and the
provisions hereof shall be binding upon and shall inure to the benefit of each
of the parties and their respective successors and permitted assigns.
Section 5.12. Severability. This Agreement shall be deemed severable, and
the invalidity or unenforceability of any term or provision hereof shall not
affect the validity or enforceability of this Agreement or of any other term or
provision hereof. Furthermore, in lieu of any such invalid or unenforceable term
or provision, the parties hereto intend that there shall be added as a part of
this Agreement a provision as similar in terms to such invalid or unenforceable
provision as may be possible and be valid and enforceable.
Section 5.13. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which taken
together shall constitute one and the same instrument.
Section 5.14. Further Assurances. Each party hereto, upon the request of
any other party hereto, shall take all such further acts and execute,
acknowledge and deliver all such further instruments and documents as may be
necessary or desirable to carry out the transactions contemplated by this
Agreement.
Section 5.15. Remedies Cumulative; Specific Performance. The remedies
provided herein shall be cumulative and shall not preclude the assertion by any
party hereto of any other rights or the seeking of any remedies against the
other party hereto. In the event of a breach or a threatened breach by any party
to this Agreement of its obligations under this Agreement, any party injured or
to be injured by such breach will be entitled to specific performance of its
rights under this Agreement or to injunctive relief, in addition to being
entitled to exercise all rights provided in this Agreement and granted by law.
The parties agree that the provisions of this Agreement shall be specifically
enforceable, it being agreed by the parties that the remedy at law, including
monetary damages, for breach of any such provision will be inadequate
compensation for any loss and that any defense or objection in any action for
specific performance or injunctive relief that a remedy at law would be adequate
is waived.
Section 5.16. Other Registration Rights. Without the written consent of the
Holders of a majority of the Shares held by all Holders that constitute
Registrable Securities, the Company shall not grant to any person the right to
request the Company to register any securities of the Company under the
Securities Act unless the rights so granted are subject to the prior rights of
the Holders of Registrable Securities set forth herein, and are not otherwise in
conflict or inconsistent with the provisions of, this Agreement.
* * *
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
PEAPOD, INC.
a Delaware corporation
By: ______________________________
Name: ______________________________
Title: ______________________________
KONINKLIJKE AHOLD N.V.
By: _____________________________
Name:
Title:
Nominee (if different than name of Purchaser): _______________
Securities to be Purchased at first Closing
_______ shares of Series B Preferred Stock
_______ Warrants
Securities to be Purchased at second Closing
_______ shares of Series B Preferred Stock
_______ Warrants
Securities to be Purchased at third Closing
_______ shares of Series B Preferred Stock
_______ Warrants
EX-10.10
================================================================================
VOTING AGREEMENT
among
THE STOCKHOLDERS NAMED HEREIN
and
KONINKLIJKE AHOLD N.V.
------------------
Dated as of
April 14, 2000
------------------
================================================================================
<PAGE>
VOTING AGREEMENT
THIS VOTING AGREEMENT (the "Agreement") is made as of April 14, 2000, by
and among Thomas L. Parkinson, Andrew B. Parkinson, Trygve E. Myhren, Robert S.
Goodale, Tasso H. Coin, Seth L. Pierrepont, Mark VanStekelenburg, Drayton McLane
(each a "Stockholder" and collectively, the "Stockholders", each such
Stockholder acting in his capacity as a stockholder of PEAPOD, INC., a Delaware
corporation (the "Company") and not as an officer or director of the Company)
and KONINKLIJKE AHOLD N.V., a public company with limited incorporated liability
incorporated under the laws of the Netherlands (the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Company proposes to enter into a Purchase Agreement, dated as
of April 14, 2000 (the "Purchase Agreement") with the Purchaser, providing for
the sale by the Company of shares of its Series B Convertible Preferred Stock,
par value $.01 per share ("Series B Preferred Stock"), and certain warrants (the
"Warrants") to purchase shares of Common Stock, par value $.01 per share (the
"Common Stock"), of the Company to the Purchaser; and
WHEREAS, the Purchase Agreement contemplates the purchase by the Purchaser
of the Series B Preferred Stock and the Warrants in one or more closings, but
not to exceed three (3) (each, a "Closing"), with each Closing subject to
certain conditions, including the approval by the holders of the outstanding
shares of Common Stock of the Purchase Agreement and other Documents (as defined
below) and the transactions contemplated thereby; and
WHEREAS, as a condition to the willingness of the Purchaser to enter into
the Purchase Agreement, and as an inducement to the Purchaser to do so, each
Stockholder has agreed for the benefit of the Company as set forth in this
Agreement.
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements contained in this Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound hereby, agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. As used in this Agreement, the following terms
have the following meanings:
"Affiliate" shall mean, with respect to any specified person, any other
person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified person and, in the case of a person
who is an individual, shall include (i) members of such specified person's
immediate family (as defined in Instruction 2 of Item 404(a) of Regulation S-K
under the Securities Act) and (ii) trusts, the trustee and all beneficiaries of
which are such specified person or members of such person's immediate family as
determined in accordance with the foregoing clause (i). For the purposes of this
definition, "control" when used with respect to any person means the power to
direct the management and policies of such person (in particular the voting and
disposition of shares of Common Stock held directly or indirectly by such
person), directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "affiliated," "controlling"
and "controlled" have meanings correlative to the foregoing. Notwithstanding the
foregoing, neither the Purchaser nor any of its Affiliates shall be deemed
Affiliates of the Company for purposes of this Agreement.
"Agreement" shall have the meaning set forth in the Preamble.
"Alternative Transaction" shall have the meaning set forth in Section
3.7(a).
"Amended and Restated Bylaws" shall mean the Amended and Restated By-Laws
of the Company.
"Amended and Restated Certificate of Incorporation" shall mean the Amended
and Restated Certificate of Incorporation of the Company.
"beneficial owner" of a security shall mean any person who, directly or
indirectly, through any contract, arrangement, understanding, relationship, or
otherwise has (i) the power to vote, or to direct the voting of, such security
or (ii) the power to dispose, or to direct the disposition of, such security, or
the ability to acquire such voting or dispositive power.
"Certificate of Designations" shall mean the Certificate of Designations
relating to the Series B Preferred Stock.
"Closing" shall have the meaning set forth in the Recitals.
"Common Stock" shall have the meaning set forth in the Recitals.
"Company" shall have the meaning set forth in the Recitals.
"Credit and Security Agreements" shall have the meaning set forth in the
Purchase Agreement.
"Documents" shall mean (i) this Agreement, (ii) the Purchase Agreement,
(iii) the Warrants, (iv) the Certificate of Designations, (v) the Registration
Rights Agreement, (vi) the Services Agreement, (vii) the Institutional
Stockholders Voting Agreement, (viii) the Joint Development and License
Agreement and (ix) the Credit and Security Agreements.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Governmental Authority" shall mean any foreign, Federal, state or local
court or governmental or regulatory authority.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and applicable rules and regulations and any similar state
acts.
"Institutional Stockholders Voting Agreement" shall mean the Voting
Agreement, dated as of the date hereof, by and among the Purchaser, Tribune
National Marketing Company and Nevis Capital Management, Inc.
"Joint Development and License Agreement" shall have the meaning set forth
in the Purchase Agreement.
"Lien" shall mean any pledge, lien, claim, restriction, charge or
encumbrance of any kind.
"Notices" shall have the meaning set forth in Section 4.6.
"person" shall mean any individual, partnership, corporation, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or agency or political subdivision
thereof, or other entity.
"Purchase Agreement" shall have the meaning set forth in the Recitals.
"Purchaser" shall have the meaning set forth in the Recitals.
"Registration Rights Agreement" shall mean the registration rights
agreement to be entered into by the Company and the Purchaser pursuant to the
Purchase Agreement.
"Rights Agreement" shall have the meaning set forth in the Purchase
Agreement.
"Securities" shall mean all shares of Common Stock (and all other shares or
securities issued or issuable in respect thereof) together with the associated
Rights (as defined in the Rights Agreement) as of the date hereof and hereafter
acquired.
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Services Agreement" shall mean the services agreement to be entered into
by the Company and the Purchaser or one of its Affiliates pursuant to the
Purchase Agreement.
"Stockholder" or "Stockholders" shall have the meaning set forth in the
Preamble.
"subsidiary" shall mean, with respect to any person, (a) a corporation a
majority of whose capital stock with voting power, under ordinary circumstances,
to elect directors is at the time, directly or indirectly, owned by such person,
by a subsidiary of such person, or by such person and one or more subsidiaries
of such person, (b) a partnership in which such person or a subsidiary of such
person is, at the date of determination, a general partner of such partnership,
or (c) any other person (other than a corporation) in which such person, a
subsidiary of such person or such person and one or more subsidiaries of such
person, directly or indirectly, at the date of determination thereof, has (i) at
least a majority ownership interest, (ii) the power to elect or direct the
election of the directors or other governing body of such person, or (iii) the
power to direct or cause the direction of the affairs or management of such
person. For purposes of this definition, a person is deemed to own any capital
stock or other ownership interest if such person has the right to acquire such
capital stock or other ownership interest, whether through the exercise of any
purchase option, conversion privilege or similar right.
"Subsidiary" shall mean a subsidiary of the Company.
"Termination Date" shall have the meaning set forth in Section 4.3.
"Warrants" shall have the meaning set forth in the Recitals.
ARTICLE II
COVENANTS OF THE STOCKHOLDERS
Section 2.1 Agreement to Vote. At any meeting of the stockholders of the
Company held on or prior to the Termination Date (as defined in Section 4.3),
however called, and at every adjournment or postponement thereof, or in
connection with any written consent of the holders of any class or classes of
the capital stock of the Company prior to the Termination Date, each Stockholder
shall vote and cause each of its controlled Affiliates to vote all of the
Securities with respect to which it has the right to vote or direct the vote (as
of the record date for such meeting of stockholders), (a) in favor of the
Purchase Agreement, the other Documents and all of the transactions contemplated
by the Purchase Agreement and the other Documents, all matters requiring
approval of stockholders under the listing requirements of the Nasdaq Stock
Market in connection with such transactions, and any actions required in
furtherance hereof, including, without limitation, (i) the issuance of the
Series B Preferred Stock and Warrants at the Closings, (ii) the amendment and
restatement of the Amended and Restated Certificate of Incorporation to read in
its entirety as set forth in the Purchase Agreement, and (iii) the election of
the directors nominated by the Purchaser to the Board of Directors of the
Company who are in the class of directors to be voted upon at the Company's
Stockholder's Meeting (as defined in the Purchase Agreement), (b) against any
Alternative Transaction, (c) except as otherwise agreed to in writing in advance
by the Purchaser, against the following actions (other than the transactions
contemplated by the Purchase Agreement or any of the other Documents): (i) any
extraordinary corporate transaction, such as a merger, consolidation or other
business combination involving the Company or any of its Subsidiaries; (ii) a
sale, lease or transfer of substantially all of the assets of the Company or any
of its Subsidiaries, or a reorganization, recapitalization, dissolution or
liquidation of the Company or any of its Subsidiaries; (iii) (A) any change in
the persons who constitute the board of directors of the Company inconsistent
with the composition of the board of directors as contemplated by the Documents;
(B) any change in the present capitalization of the Company or any amendment of
the Amended and Restated Certificate of Incorporation or the Amended and
Restated Bylaws; (C) any other material change in the Company's corporate
structure or business; or (D) any other action or agreement that, directly or
indirectly, is inconsistent with or that could reasonably be expected, directly
or indirectly, to impede, interfere with, delay, postpone or materially
adversely affect the transactions contemplated by the Purchase Agreement and the
other Documents and (d) in favor of the Purchaser's nominees to the Board of
Directors as contemplated by the Purchase Agreement. None of the Stockholders
shall enter into, or permit any of its controlled Affiliates to enter into, any
agreement or understanding with any person prior to the Termination Date,
directly or indirectly, to vote, grant any proxy or power of attorney, give
instructions or enter into a voting agreement with respect to the voting of his
or its Securities in any manner inconsistent with the preceding sentence.
Section 2.2 Proxies and Voting Agreements.
(a) Each Stockholder has revoked, and caused its controlled Affiliates to
revoke, any and all previous proxies granted with respect to his or its
Securities with respect to the matters set forth in Section 2.1.
(b) Prior to the Termination Date, each of the Stockholders shall not, and
shall cause each of its controlled Affiliates not to, directly or indirectly,
except as contemplated hereby, grant any proxies or powers of attorney with
respect to their Securities, deposit any of their Securities into a voting trust
or enter into a voting agreement with respect to any of their Securities, in
each case with respect to the matters set forth in Section 2.1.
Section 2.3 Irrevocable Proxy. Concurrently with the execution of this
Agreement, each Stockholder shall deliver, and shall cause each of its
Affiliates to deliver, to Ton van Tielraden a proxy in the form attached hereto
as Exhibit A, which, prior to the Termination Date, shall be irrevocable to the
extent provided by the Delaware General Corporation Law, covering such
Stockholder's or Affiliate's Securities. Each Stockholder shall take further
action or execute such other instruments as may be reasonably necessary to
effectuate the intent of this proxy.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND
ADDITIONAL COVENANTS OF THE STOCKHOLDERS
Each Stockholder represents, warrants and covenants to the Company, as to
himself that:
Section 3.1 Ownership. Each Stockholder is the record and beneficial owner
of the equity securities of the Company listed beside such Stockholder's name on
Schedule I attached hereto as of the date hereof. The equity securities set
forth beside the name of each Stockholder on Schedule I constitute all of the
shares of capital stock of the Company owned of record or beneficially by such
Stockholder as of the date hereof. All of such securities are issued and
outstanding, and except as set forth on Schedule I attached hereto, such
Stockholder does not own, of record or beneficially, any warrants, options or
other rights to acquire any shares of capital stock of the Company. The
securities listed beside each such Stockholder's name on Schedule I attached
hereto and the certificates representing such securities are now, and at all
times during the term hereof will be, held by such Stockholder, or by a nominee
or custodian for the benefit of such Stockholder, free and clear of all Liens,
proxies, voting trusts or other agreement, arrangement or restriction with
respect to the voting of such securities that would prohibit such Stockholder
from complying with Section 2.1 hereof with respect to such securities (other
than as contemplated by this Agreement).
Section 3.2 Authority; No Conflicts. Each Stockholder has the authority and
has been duly authorized by all necessary action (including consultation,
approval or other action by or with any other person), to execute, deliver and
perform this Agreement and consummate the transactions contemplated hereby. Such
actions by such Stockholder require no action by, or in respect of, or filing
with, any Governmental Authority with respect to such Stockholder other than any
required filings under Section 13 of the Exchange Act. None of the execution and
delivery of this Agreement by such Stockholder, the consummation by such
Stockholder of the transactions contemplated hereby or compliance by such
Stockholder with any of the provisions hereof shall (A) conflict with or result
in any breach of or constitute (with or without notice or lapse of time or both)
a default (or give rise to any third party right of termination, cancellation,
material modification or acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument or
obligation of any kind to which such Stockholder is a party or by which such
Stockholder or any of such Stockholder's properties or assets may be bound, or
(B) violate any order, writ, injunction, decree, judgment, order, statute, rule
or regulation applicable to such Stockholder or any of such Stockholder's
properties or assets.
Section 3.3 Binding Effect. This Agreement has been duly executed and
delivered by such Stockholder and is the valid and binding agreement of such
Stockholder, enforceable against such Stockholder in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency, moratorium or
other similar laws relating to creditors' rights generally and by equitable
principles to which the remedies of specific performance and injunctive and
similar forms of relief are subject.
Section 3.4 No Finder's Fees. Except as disclosed pursuant to the Purchase
Agreement, no broker, investment banker, financial advisor or other person is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of such Stockholder.
Section 3.5 Reliance by the Purchaser. Each Stockholder understands and
acknowledges that the Purchaser is entering into the Purchase Agreement in
reliance upon such Stockholder's execution and delivery of this Agreement.
Section 3.6 Commercially Reasonable Efforts. Prior to the Termination Date,
each Stockholder, in his or her capacity as a stockholder of the Company, shall
use commercially reasonable efforts to assist and cooperate with the Company in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the transactions
contemplated by the Documents, including (i) the obtaining of all necessary
actions or nonactions, waivers, consents and approvals from Governmental
Authorities and the making of all necessary registrations and filings (including
any necessary filings under the HSR Act, if any) and the taking of all
reasonable steps as may be necessary to obtain an approval or waiver from, or to
avoid an action or proceeding by, any Governmental Authority, (ii) the obtaining
of all necessary consents, approvals or waivers from third parties, (iii) the
defending of any lawsuits or other legal proceedings, whether judicial or
administrative, challenging any of the Documents or the consummation of any of
the transactions contemplated by any of the Documents, including seeking to have
any stay or temporary restraining order entered by any court or other
Governmental Authority vacated or reversed, and (iv) the execution and delivery
of any additional instruments necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of, the Documents.
Section 3.7 No Solicitation; Restrictions on Transfers. (a) Prior to the
Termination Date, such Stockholder, in his capacity as a stockholder of the
Company, shall not, and shall not permit any of its controlled Affiliates or
representatives to, directly or indirectly, (i) initiate, solicit or entertain
offers from, negotiate with or in any manner knowingly encourage, discuss,
accept, or consider any proposal of any other person relating to (w) the
acquisition of the capital stock of the Company, or any Subsidiary, securities
convertible into or exchangeable for shares of capital stock of the Company or
any Subsidiary, (x) the acquisition of the Company's assets or business, in
whole or in part, whether directly or indirectly, through purchase, merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or otherwise, (y) the incurrence of indebtedness by the Company or any
Subsidiary, or (z) any other transaction the consummation of which could
reasonably be expected to impede, interfere with, prevent, delay or dilute the
benefits to the Purchaser of the transactions contemplated by the Documents
(other than the transactions contemplated by the Purchase Agreement, sales of
inventory in the ordinary course, and shares issued upon the exercise of
existing stock options or warrants, and the shares permitted to be sold by each
Stockholder pursuant to the proviso in Section 3.7(c)) (any of the foregoing
being an "Alternative Transaction"), (ii) initiate, participate, engage in, or
agree to initiate, participate or engage in negotiations or discussions
concerning, or provide to any person or entity any information or data relating
to the Company or any Subsidiary, or otherwise cooperate with or assist or
participate in, knowingly facilitating or encouraging, any inquiries or the
making of any proposal that constitutes an Alternative Transaction, (iii) in
connection with any Alternative Transaction, require the Company to abandon,
terminate or fail to consummate the transactions contemplated by the Documents,
(iv) grant any waiver or release under or amend any standstill, confidentiality
or similar agreement entered into by the Company or any of his Affiliates or
representatives; (v) agree to, approve or recommend any Alternative Transaction,
or (vi) take any other action inconsistent with the obligations and commitments
assumed by such Stockholder and its controlled Affiliates pursuant to this
Agreement. Such Stockholder shall, and shall cause his controlled Affiliates to,
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing.
(b) Prior to the Termination Date, such Stockholder shall, and shall cause
his Affiliates to promptly (but in any event within twenty-four (24) hours of
receipt or occurrence thereof) advise the Company and the Purchaser orally and
in writing of any request for information directed to him with respect to, or of
any inquiry or proposal regarding any Alternative Transaction directed to him,
the material terms and conditions of such proposal and the identity of the
person making such proposal and provide to the Purchaser copies of any written
documentation provided to such Stockholder by such person making such proposal
or by any representative of such person that is material to understanding or
evaluating such request, Alternative Transaction or inquiry which is received by
it from the person (or from any representatives of such person) making such
Alternative Transaction, inquiry or proposal. Each Stockholder and its
Affiliates will keep the Company and the Purchaser fully informed of any such
proposal.
(c) Prior to the Termination Date, such Stockholder shall not (i) directly
or indirectly, offer for sale, sell, transfer, tender, pledge, encumber, assign
or otherwise dispose of, or enter into any contract, option or other arrangement
or understanding with respect to or consent to the offer for sale, transfer,
tender, pledge, encumbrance, assignment or other disposition of, any or all of
the securities listed beside its name on Schedule I attached hereto or any
interest therein or any shares of Common Stock issuable upon the exercise of
stock options or warrants; (ii) except as contemplated by this Agreement, grant
any proxies or powers of attorney, deposit any such securities into a voting
trust or enter into a voting agreement with respect to any such securities; or
(iii) take any action that would make any representation or warranty of such
Stockholder contained herein untrue or incorrect or have the effect of
preventing such Stockholder from performing such Stockholder's obligations under
this Agreement; provided however, that each of Tasso H. Coin and Seth L.
Pierrepont shall each be permitted to sell, transfer or otherwise dispose of up
to 100,000 shares in one or more transactions, during any period of ninety (90)
consecutive days from the date hereof through the Termination Date.
(d) Andrew Parkinson and Thomas Parkinson shall not, for a period of two
(2) years from the date hereof (i) directly or indirectly, offer for sale, sell,
transfer, tender, pledge, encumber, assign or otherwise dispose of, or enter
into any contract, option or other arrangement or understanding with respect to
or consent to the offer for sale, transfer, tender, pledge, encumbrance
assignment or other disposition of, more than 10,000 shares of the Company in
any fiscal quarter and (ii) except as contemplated by this Agreement, grant any
proxies or powers of attorney, deposit such shares into a voting trust or enter
into a voting agreement with respect to any such shares; provided, however, that
each of Andrew Parkinson and Thomas Parkinson may transfer or assign such shares
held by each in the Company to their respective children or to a trust for the
sole benefit of their respective children so long as Andrew Parkinson or, as the
case may be, Thomas Parkinson continue to be employed by the Company.
Section 3.8 Releases. Each Stockholder hereby fully, unconditionally and
irrevocably releases, effective as of the first Closing, any and all claims and
causes of action that such Stockholder has or may have against the Company or
any Subsidiary or any present or former director, officer, employee or agent of
the Company or any Subsidiary arising or resulting from or relating to any act,
omission, event or occurrence prior to the date hereof.
ARTICLE IV
MISCELLANEOUS
Section 4.1 Expenses. All costs and expenses incurred in connection with
this Agreement shall be paid by the party incurring such cost or expense.
Section 4.2 Specific Performance. Each Stockholder agrees that the
Purchaser would be irreparably damaged if for any reason such Stockholder fails
to perform any of such Stockholder's obligations under this Agreement, and that
the Purchaser would not have an adequate remedy at law for money damages in such
event. Accordingly, the Purchaser shall be entitled to seek specific performance
and injunctive and other equitable relief to enforce the performance of this
Agreement by each Stockholder. This provision is without prejudice to any other
rights that the Purchaser may have against such Stockholder for any failure to
perform its obligations under this Agreement.
Section 4.3 Amendments; Termination. Neither this Agreement, nor any of the
terms or provisions contained herein, may be waived, modified or amended without
the prior written consent of the Purchaser, which consent may be withheld in the
sole and absolute discretion of any Purchaser. No amendment, modification or
termination of this Agreement shall be binding upon any other party unless
executed in writing by the parties hereto intending to be bound thereby. This
Agreement shall terminate, except with respect to liability for prior breaches
thereof, upon the earlier to occur of (i) May 1, 2000 if the Purchase Agreement
has not yet been entered into, (ii) immediately following the Stockholder
Meeting (as defined in the Purchase Agreement), and (iii) the expiration of the
seven-month period commencing on the date hereof (the date of the earliest of
such events being the "Termination Date"); provided that, the provisions of
Section 2.1(c)(iii)(A); Section 2.1(d) and Section 3.7(d) shall survive any
termination of this Agreement pursuant to Section 4.3(ii) if Stockholder
Approval (as defined in the Purchase Agreement) is obtained at the Stockholder
Meeting.
Section 4.4 Successors and Assigns. This Agreement and the rights, duties
and obligations hereunder may not be assigned or delegated by any Stockholder
without the prior written consent of the Purchaser. Except as provided in the
preceding sentence, any assignment or delegation of rights, duties or
obligations hereunder made without the prior written consent of the Purchaser
shall be void and of no effect. This Agreement and the provisions hereof shall
be binding upon and shall inure to the benefit of each of the parties and their
respective successors and permitted assigns.
Section 4.5 Certain Events. Each Stockholder agrees that this Agreement and
the obligations hereunder shall attach to the Securities of such Stockholder
and, except with respect to the Securities transferred in accordance with
Section 3.7(c), shall be binding upon any person to which legal or beneficial
ownership of such shares shall pass, whether by operation of law or otherwise.
Section 4.6 Notices. All notices, demands, requests, consents, approvals or
other communications (collectively, "Notices") required or permitted to be given
hereunder or which are given with respect to this Agreement shall be in writing
and shall be personally served, delivered by a reputable air courier service
with tracking capability, with charges prepaid, or transmitted by hand delivery
or facsimile, addressed as set forth below, or to such other address as such
party shall have specified most recently by written notice. Notice shall be
deemed given on the date of service or transmission if personally served or
transmitted by facsimile. Notice otherwise sent as provided herein shall be
deemed given on the next business day following delivery of such notice to a
reputable air courier service (a) if to any Stockholder, to it at the
address(es) or facsimile number(s) set forth on Schedule II hereto, with a copy
to the Company at 9933 Woods Drive, Skokie, Illinois 60077, Attention: Andrew
Parkinson, and (b) if to the Purchaser, to it at the following contact
information:
Koninklijke Ahold NV
Albert Heijnweg 1
1507 EH Zaandam, The Netherlands
Attention: Ton van Tielraden, Esq.
Facsimile: (31-75) 659-8366
with a copy (which shall not constitute notice) to:
White & Case LLP
1155 Avenue of the Americas
New York, New York 10036
Attn.: Maureen S. Brundage, Esq. / John M. Reiss, Esq.
Facsimile: (212) 354-8113
Section 4.7 Governing Law. This Agreement and the rights and obligations of
the parties hereunder shall be governed by, and construed in accordance with,
the laws of the State of New York, and each party hereto submits to the
non-exclusive jurisdiction of the state and federal courts within the County of
New York in the State of New York. Any legal action or proceeding with respect
to this Agreement may be brought in the courts of the State of New York or of
the United States of America for the Southern District of New York and, by
execution and delivery of this Agreement, each party hereto hereby accepts for
itself and in respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts. Each party hereto further irrevocably
consents to the service of process out of any of the aforementioned courts in
any action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to such party at its address set forth in
Section 4.6, such service to become effective seven days after such mailing.
Nothing herein shall affect the right of the Purchaser to serve process in any
of the matters permitted by law or to commence legal proceedings or otherwise
proceed against any of the Stockholders in any other jurisdiction. Each party
hereto hereby irrevocably waives any objection which it may now or hereafter
have to the laying of venue of any of the aforesaid actions or proceedings
arising out of or in connection with this Agreement
Section 4.8 Entire Agreement. This Agreement (including all agreements
entered into pursuant hereto and all certificates and instruments delivered
pursuant hereto and thereto) constitutes the entire agreement of the parties
with respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements, representations, understandings, negotiations and
discussions between the parties, whether oral or written, with respect to the
subject matter hereof.
Section 4.9 Waivers and Extensions. Subject to Section 4.3, any party to
this Agreement may waive any right, breach or default which such party has the
right to waive, provided that such waiver will not be effective against the
waiving party unless it is in writing, is signed by such party and the
Purchaser, and specifically refers to this Agreement. Waivers may be made in
advance or after the right waived has arisen or the breach or default waived has
occurred. Any waiver may be conditional. No waiver of any breach of any
agreement or provision herein contained shall be deemed a waiver of any
preceding or succeeding breach thereof nor of any other agreement or provision
herein contained. No waiver or extension of time for performance of any
obligations or acts shall be deemed a waiver or extension of the time for
performance of any other obligations or acts.
Section 4.10 Titles and Headings. Titles and headings of sections of this
Agreement are for convenience only and shall not affect the construction of any
provision of this Agreement.
Section 4.11 Exhibits and Schedules. Each of the annexes, exhibits and
schedules referred to herein and attached hereto is an integral part of this
Agreement and is incorporated herein by reference.
Section 4.12 Attorneys' Fees. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs and necessary
disbursements, in addition to any other relief to which such party may be
entitled.
Section 4.13 Severability. This Agreement shall be deemed severable, and
the invalidity or unenforceability of any term or provision hereof shall not
affect the validity or enforceability of this Agreement or of any other term or
provision hereof. Furthermore, in lieu of any such invalid or unenforceable term
or provision, the parties hereto intend that there shall be added as a part of
this Agreement a provision as similar in terms to such invalid or unenforceable
provision as may be possible and be valid and enforceable.
Section 4.14 Counterparts; Facsimile. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original, and all of
which taken together shall constitute one and the same instrument. This
Agreement may be delivered by a party via facsimile; provided, that, the
originally executed signature pages and original documents are delivered to the
appropriate parties within two (2) business days.
Section 4.15 Further Assurances. Each party hereto, upon the request of any
other party hereto, shall do all such further acts and execute, acknowledge and
deliver all such further instruments and documents as may be necessary or
desirable to carry out the transactions contemplated by this Agreement.
Section 4.16 Remedies Cumulative. The remedies provided herein shall be
cumulative and shall not preclude the assertion by any party hereto, including
any Purchaser, of any other rights or the seeking of any remedies against any
other party hereto.
<PAGE>
IN WITNESS WHEREOF, the Company and the Stockholders have caused this
Agreement to be duly executed as of the day and year first above written.
KONINKLIJKE AHOLD N.V.
By:__________________
Name:
Title:
<PAGE>
THOMAS L. PARKINSON
_________________________
ANDREW B. PARKINSON
_________________________
TRYGVE E. MYHREN
_________________________
ROBERT S. GOODALE
_________________________
TASSO H. COIN
_________________________
SETH L. PIERREPONT
_________________________
MARK VANSTEKELENBURG
_________________________
DRAYTON MCLANE
_________________________
EX-10.11
================================================================================
VOTING AGREEMENT
among
THE STOCKHOLDERS NAMED HEREIN
and
KONINKLIJKE AHOLD N.V.
------------------
Dated as of
April 14, 2000
------------------
================================================================================
<PAGE>
VOTING AGREEMENT
THIS VOTING AGREEMENT (the "Agreement") is made as of April 14, 2000, by
and among Tribune National Marketing Company, a Delaware corporation
("Tribune"), Nevis Capital Management, Inc., a Maryland corporation ("Nevis")
(each a "Stockholder" and collectively, the "Stockholders", each such
Stockholder acting in its capacity as a stockholder of Peapod, Inc., a Delaware
corporation (the "Company")) and Koninklijke Ahold N.V., a public company with
limited liability incorporated under the laws of the Netherlands (the
"Purchaser").
W I T N E S S E T H:
WHEREAS, the Company proposes to enter into a Purchase Agreement, dated as
of April 14, 2000 (the "Purchase Agreement") with the Purchaser, providing for
the sale by the Company of shares of its Series B Convertible Preferred Stock,
par value $.01 per share ("Series B Preferred Stock"), and certain warrants (the
"Warrants") to purchase shares of Common Stock, par value $.01 per share (the
"Common Stock"), of the Company to the Purchaser; and
WHEREAS, the Purchase Agreement contemplates the purchase by the Purchaser
of the Series B Preferred Stock and the Warrants in one or more closings, but
not to exceed three (3) (each, a "Closing"), with each Closing subject to
certain conditions, including the approval by the holders of the outstanding
shares of Common Stock of the Purchase Agreement and other Documents (as defined
below) and the transactions contemplated thereby; and
WHEREAS, as a condition to the willingness of the Purchaser to enter into
the Purchase Agreement, and as an inducement to the Purchaser to do so, each
Stockholder has agreed for the benefit of the Company as set forth in this
Agreement.
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements contained in this Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound hereby, agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. As used in this Agreement, the following terms
have the following meanings:
"Affiliate" shall mean, with respect to any specified person, any other
person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified person and, in the case of a person
who is an individual, shall include (i) members of such specified person's
immediate family (as defined in Instruction 2 of Item 404(a) of Regulation S-K
under the Securities Act) and (ii) trusts, the trustee and all beneficiaries of
which are such specified person or members of such person's immediate family as
determined in accordance with the foregoing clause (i). For the purposes of this
definition, "control" when used with respect to any person means the power to
direct the management and policies of such person (in particular the voting and
disposition of shares of Common Stock held directly or indirectly by such
person), directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "affiliated," "controlling"
and "controlled" have meanings correlative to the foregoing. Notwithstanding the
foregoing, neither the Purchaser nor any of its Affiliates shall be deemed
Affiliates of the Company for purposes of this Agreement.
"Agreement" shall have the meaning set forth in the Preamble.
"Alternative Transaction" shall have the meaning set forth in Section
3.7(a).
"Amended and Restated Bylaws" shall mean the Amended and Restated By-Laws
of the Company.
"Amended and Restated Certificate of Incorporation" shall mean the Amended
and Restated Certificate of Incorporation of the Company.
"beneficial owner" of a security shall mean any person who, directly or
indirectly, through any contract, arrangement, understanding, relationship, or
otherwise has (i) the power to vote, or to direct the voting of, such security
or (ii) the power to dispose, or to direct the disposition of, such security, or
the ability to acquire such voting or dispositive power.
"Certificate of Designations" shall mean the Certificate of Designations
relating to the Series B Preferred Stock.
"Closing" shall have the meaning set forth in the Recitals.
"Common Stock" shall have the meaning set forth in the Recitals.
"Company" shall have the meaning set forth in the Recitals.
"Credit and Security Agreements" shall have the meaning set forth in the
Purchase Agreement.
"Documents" shall mean (i) this Agreement, (ii) the Purchase Agreement,
(iii) the Warrants, (iv) the Certificate of Designations, (v) the Registration
Rights Agreement, (vi) the Services Agreement, (vii) the Individual Stockholders
Voting Agreement, (viii) the Joint Development and License Agreement, and (ix)
the Credit and Security Agreements.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Governmental Authority" shall mean any foreign, Federal, state or local
court or governmental or regulatory authority.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and applicable rules and regulations and any similar state
acts.
"Individual Stockholders Voting Agreement" shall mean the Voting Agreement,
dated as of the date hereof, by and among the Purchaser and the stockholders of
the Company named therein.
"Joint Development and License Agreement" shall have the meaning set forth
in the Purchase Agreement.
"Lien" shall mean any pledge, lien, claim, restriction, charge or
encumbrance of any kind.
"Nevis" shall have the meaning set forth in the Recitals.
"Notices" shall have the meaning set forth in Section 4.6.
"person" shall mean any individual, partnership, corporation, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or agency or political subdivision
thereof, or other entity.
"Purchase Agreement" shall have the meaning set forth in the Recitals.
"Purchaser" shall have the meaning set forth in the Recitals.
"Registration Rights Agreement" shall mean the registration rights
agreement to be entered into by the Company and the Purchaser pursuant to the
Purchase Agreement.
"Rights Agreement" shall have the meaning set forth in the Purchase
Agreement.
"Securities" shall mean all shares of Common Stock (and all other shares or
securities issued or issuable in respect thereof) together with the associated
Rights (as defined in the Rights Agreement) as of the date hereof and hereafter
acquired.
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Services Agreement" shall mean the services agreement to be entered into
by the Company and the Purchaser or one of its Affiliates pursuant to the
Purchase Agreement.
"Stockholder" or "Stockholders" shall have the meaning set forth in the
Preamble.
"subsidiary" shall mean, with respect to any person, (a) a corporation a
majority of whose capital stock with voting power, under ordinary circumstances,
to elect directors is at the time, directly or indirectly, owned by such person,
by a subsidiary of such person, or by such person and one or more subsidiaries
of such person, (b) a partnership in which such person or a subsidiary of such
person is, at the date of determination, a general partner of such partnership,
or (c) any other person (other than a corporation) in which such person, a
subsidiary of such person or such person and one or more subsidiaries of such
person, directly or indirectly, at the date of determination thereof, has (i) at
least a majority ownership interest, (ii) the power to elect or direct the
election of the directors or other governing body of such person, or (iii) the
power to direct or cause the direction of the affairs or management of such
person. For purposes of this definition, a person is deemed to own any capital
stock or other ownership interest if such person has the right to acquire such
capital stock or other ownership interest, whether through the exercise of any
purchase option, conversion privilege or similar right.
"Subsidiary" shall mean a subsidiary of the Company.
"Termination Date" shall have the meaning set forth in Section 4.3.
"Tribune" shall have the meaning set forth in the Recitals.
"Warrants" shall have the meaning set forth in the Recitals.
ARTICLE II
COVENANTS OF THE STOCKHOLDERS
Section 2.1 Agreement to Vote. At any meeting of the stockholders of the
Company held on or prior to the Termination Date (as defined in Section 4.3),
however called, and at every adjournment or postponement thereof, or in
connection with any written consent of the holders of any class or classes of
the capital stock of the Company prior to the Termination Date, each Stockholder
shall vote and cause each of its controlled Affiliates to vote all of the
Securities with respect to which it has the right to vote or direct the vote (as
of the record date for such meeting of stockholders), (a) in favor of the
Purchase Agreement, the other Documents and all of the transactions contemplated
by the Purchase Agreement and the other Documents, all matters requiring
approval of stockholders under the listing requirements of the Nasdaq Stock
Market in connection with such transactions, and any actions required in
furtherance hereof, including, without limitation, (i) the issuance of the
Series B Preferred Stock and Warrants at the Closings, (ii) the amendment and
restatement of the Amended and Restated Certificate of Incorporation to read in
its entirety as set forth in the Purchase Agreement, and (iii) the election of
the directors nominated by the Purchaser to the Board of Directors of the
Company who are in the class of directors to be voted upon at the Company's
Stockholder's Meeting (as defined in the Purchase Agreement), (b) against any
Alternative Transaction, and (c) except as otherwise agreed to in writing in
advance by the Purchaser, against the following actions (other than the
transactions contemplated by the Purchase Agreement or any of the other
Documents): (i) any extraordinary corporate transaction, such as a merger,
consolidation or other business combination involving the Company or any of its
Subsidiaries; (ii) a sale, lease or transfer of substantially all of the assets
of the Company or any of its Subsidiaries, or a reorganization,
recapitalization, dissolution or liquidation of the Company or any of its
Subsidiaries; (iii) (A) any change in the persons who constitute the board of
directors of the Company inconsistent with the composition of the board of
directors as contemplated by the Documents; (B) any change in the present
capitalization of the Company or any amendment of the Amended and Restated
Certificate of Incorporation or the Amended and Restated Bylaws; (C) any other
material change in the Company's corporate structure or business; or (D) any
other action or agreement that, directly or indirectly, is inconsistent with or
that could reasonably be expected, directly or indirectly, to impede, interfere
with, delay, postpone or materially adversely affect the transactions
contemplated by the Purchase Agreement and the other Documents. None of the
Stockholders shall enter into, or permit any of its controlled Affiliates to
enter into, any agreement or understanding with any person prior to the
Termination Date, directly or indirectly, to vote, grant any proxy or power of
attorney, give instructions or enter into a voting agreement with respect to the
voting of his or its Securities in any manner inconsistent with the preceding
sentence.
Section 2.2 Proxies and Voting Agreements.
(a) Each Stockholder has revoked, and caused its controlled Affiliates to
revoke, any and all previous proxies granted with respect to his or its
Securities with respect to the matters set forth in Section 2.1.
(b) Prior to the Termination Date, each of the Stockholders shall not, and
shall cause each of its controlled Affiliates not to, directly or indirectly,
except as contemplated hereby, grant any proxies or powers of attorney with
respect to their Securities, deposit any of their Securities into a voting trust
or enter into a voting agreement with respect to any of their Securities, in
each case with respect to the matters set forth in Section 2.1.
Section 2.3 Irrevocable Proxy. Concurrently with the execution of this
Agreement, each Stockholder shall deliver, and shall cause each of its
Affiliates to deliver, to Ton van Tielraden a proxy in the form attached hereto
as Exhibit A, which, prior to the Termination Date, shall be irrevocable to the
extent provided by the Delaware General Corporation Law, covering such
Stockholder's or Affiliate's Securities. Each Stockholder shall take further
action or execute such other instruments as may be reasonably necessary to
effectuate the intent of this proxy.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND
ADDITIONAL COVENANTS OF THE STOCKHOLDERS
Each Stockholder represents, warrants and covenants to the Company, as to
itself that:
Section 3.1 Ownership. Each Stockholder is the record and beneficial owner
of the equity securities of the Company listed beside such Stockholder's name on
Schedule I attached hereto as of the date hereof. The equity securities set
forth beside the name of each Stockholder on Schedule I constitute all of the
shares of capital stock of the Company owned of record or beneficially by such
Stockholder as of the date hereof. All of such securities are issued and
outstanding, and except as set forth on Schedule I attached hereto, such
Stockholder does not own, of record or beneficially, any warrants, options or
other rights to acquire any shares of capital stock of the Company. The
securities listed beside each such Stockholder's name on Schedule I attached
hereto and the certificates representing such securities are now, and at all
times during the term hereof will be, held by such Stockholder, or by a nominee
or custodian for the benefit of such Stockholder, free and clear of all Liens,
proxies, voting trusts or other agreement, arrangement or restriction with
respect to the voting of such securities that would prohibit such Stockholder
from complying with Section 2.1 hereof with respect to such securities (other
than as contemplated by this Agreement and other than securities held by Nevis
for the account of any client in the event that such client terminates its
arrangement with Nevis with respect to such securities).
Section 3.2 Authority; No Conflicts. Each Stockholder has the authority and
has been duly authorized by all necessary action (including consultation,
approval or other action by or with any other person), to execute, deliver and
perform this Agreement and consummate the transactions contemplated hereby. Such
actions by such Stockholder require no action by, or in respect of, or filing
with, any Governmental Authority with respect to such Stockholder other than any
required filings under Section 13 of the Exchange Act. None of the execution and
delivery of this Agreement by such Stockholder, the consummation by such
Stockholder of the transactions contemplated hereby or compliance by such
Stockholder with any of the provisions hereof shall (A) conflict with or result
in any breach of or constitute (with or without notice or lapse of time or both)
a default (or give rise to any third party right of termination, cancellation,
material modification or acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument or
obligation of any kind to which such Stockholder is a party or by which such
Stockholder or any of such Stockholder's properties or assets may be bound, or
(B) violate any order, writ, injunction, decree, judgment, order, statute, rule
or regulation applicable to such Stockholder or any of such Stockholder's
properties or assets.
Section 3.3 Binding Effect. This Agreement has been duly executed and
delivered by such Stockholder and is the valid and binding agreement of such
Stockholder, enforceable against such Stockholder in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency, moratorium or
other similar laws relating to creditors' rights generally and by equitable
principles to which the remedies of specific performance and injunctive and
similar forms of relief are subject.
Section 3.4 No Finder's Fees. Except as disclosed pursuant to the Purchase
Agreement, no broker, investment banker, financial advisor or other person is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of such Stockholder.
Section 3.5 Commercially Reasonable Efforts. Prior to the Termination Date,
each Stockholder, in its capacity as a stockholder of the Company, shall use
commercially reasonable efforts to assist and cooperate with the Company in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the transactions
contemplated by the Documents (other than the Services Agreement), including (i)
the obtaining of all necessary actions or nonactions, waivers, consents and
approvals from Governmental Authorities and the making of all necessary
registrations and filings (including any necessary filings under the HSR Act, if
any) and the taking of all reasonable steps as may be necessary to obtain an
approval or waiver from, or to avoid an action or proceeding by, any
Governmental Authority, (ii) the obtaining of all necessary consents, approvals
or waivers from third parties, (iii) the defending of any lawsuits or other
legal proceedings, whether judicial or administrative, challenging any of the
Documents (other than the Services Agreement) or the consummation of any of the
transactions contemplated by any of the Documents (other than the Services
Agreement), including seeking to have any stay or temporary restraining order
entered by any court or other Governmental Authority vacated or reversed, and
(iv) the execution and delivery of any additional instruments necessary to
consummate the transactions contemplated by, and to fully carry out the purposes
of, the Documents (other than the Services Agreement).
Section 3.6 No Solicitation; Restrictions on Transfers. (a) Prior to the
Termination Date, such Stockholder, in its capacity as a stockholder of the
Company, shall not, and shall not permit any of its controlled Affiliates or
representatives to, directly or indirectly, (i) initiate, solicit or entertain
offers from, negotiate with or in any manner knowingly encourage, discuss,
accept, or consider any proposal of any other person relating to (w) the
acquisition of the capital stock of the Company, or any Subsidiary, securities
convertible into or exchangeable for shares of capital stock of the Company or
any Subsidiary, (x) the acquisition of the Company's assets or business, in
whole or in part, whether directly or indirectly, through purchase, merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or otherwise, (y) the incurrence of indebtedness by the Company or any
Subsidiary, or (z) any other transaction the consummation of which could
reasonably be expected to impede, interfere with, prevent, delay or dilute the
benefits to the Purchaser of the transactions contemplated by the Documents
(other than the transactions contemplated by the Purchase Agreement or sales of
inventory in the ordinary course) (any of the foregoing being an "Alternative
Transaction"), (ii) initiate, participate, engage in, or agree to initiate,
participate or engage in negotiations or discussions concerning, or provide to
any person or entity any information or data relating to the Company or any
Subsidiary, or otherwise cooperate with or assist or participate in, knowingly
facilitating or encouraging, any inquiries or the making of any proposal that
constitutes an Alternative Transaction, (iii) in connection with any Alternative
Transaction, require the Company to abandon, terminate or fail to consummate the
transactions contemplated by the Documents, (iv) grant any waiver or release
under or amend any standstill, confidentiality or similar agreement entered into
by the Company or any of its Affiliates or representatives; (v) agree to,
approve or recommend any Alternative Transaction, or (vi) take any other action
inconsistent with the obligations and commitments assumed by such Stockholder
and its controlled Affiliates pursuant to this Agreement. Such Stockholder
shall, and shall cause his controlled Affiliates to, immediately cease and cause
to be terminated any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any of the foregoing.
(b) Prior to the Termination Date, such Stockholder shall, and shall cause
its Affiliates to promptly (but in any event within twenty-four (24) hours of
receipt or occurrence thereof) advise the Company orally and in writing of any
request for information directed to such Stockholder with respect to, or of any
inquiry or proposal regarding any Alternative Transaction directed to such
Stockholder, the material terms and conditions of such proposal and the identity
of the person making such proposal and provide to the Company copies of any
written documentation material to understanding or evaluating such request,
Alternative Transaction or inquiry which is received by the Company (or from the
person or from any representatives of such person) making such Alternative
Transaction, inquiry or proposal. Each Stockholder and its Affiliates will keep
the Company fully informed of any such proposal.
(c) Such Stockholder shall not (i) directly or indirectly, offer for sale,
sell, transfer, tender, pledge, encumber, assign or otherwise dispose of, or
enter into any contract, option or other arrangement or understanding with
respect to or consent to the offer for sale, transfer, tender, pledge,
encumbrance, assignment or other disposition of, any or all of the securities
listed beside its name on Schedule I attached hereto or any interest therein or
any shares of Common Stock issuable upon the exercise of stock options or
warrants (other than in the event that any client of Nevis terminates its
arrangements with Nevis); (ii) except as contemplated by this Agreement, grant
any proxies or powers of attorney, deposit any such securities into a voting
trust or enter into a voting agreement with respect to any such securities; or
(iii) take any action that would make any representation or warranty of such
Stockholder contained herein untrue or incorrect or have the effect of
preventing or disabling such Stockholder from performing such Stockholder's
obligations under this Agreement. Nevis shall not terminate any client account
that holds equity securities of the Company.
ARTICLE IV
MISCELLANEOUS
Section 4.1 Expenses. All costs and expenses incurred in connection with
this Agreement shall be paid by the party incurring such cost or expense.
Section 4.2 Specific Performance. Each Stockholder agrees that the
Purchaser would be irreparably damaged if for any reason such Stockholder fails
to perform any of such Stockholder's obligations under this Agreement, and that
the Purchaser would not have an adequate remedy at law for money damages in such
event. Accordingly, the Purchaser shall be entitled to seek specific performance
and injunctive and other equitable relief to enforce the performance of this
Agreement by each Stockholder. This provision is without prejudice to any other
rights that the Purchaser may have against such Stockholder for any failure to
perform its obligations under this Agreement.
Section 4.3 Amendments; Termination. Neither this Agreement, nor any of the
terms or provisions contained herein, may be waived, modified or amended without
the prior written consent of the Purchaser, which consent may be withheld in the
sole and absolute discretion of any Purchaser. No amendment, modification or
termination of this Agreement shall be binding upon any other party unless
executed in writing by the parties hereto intending to be bound thereby. This
Agreement shall terminate, except with respect to liability for prior breaches
thereof, upon the earlier to occur of (i) May 1, 2000 if the Purchase Agreement
has not yet been entered into, (ii) immediately following the Stockholder
Meeting (as defined in the Purchase Agreement), and (iii) the expiration of the
seven-month period commencing on the date hereof (the date of the earliest of
such events being the "Termination Date").
Section 4.4 Successors and Assigns. This Agreement and the rights, duties
and obligations hereunder may not be assigned or delegated by any Stockholder
without the prior written consent of the Purchaser. Except as provided in the
preceding sentence, any assignment or delegation of rights, duties or
obligations hereunder made without the prior written consent of the Purchaser
shall be void and of no effect. This Agreement and the provisions hereof shall
be binding upon and shall inure to the benefit of each of the parties and their
respective successors and permitted assigns.
Section 4.5 Certain Events. Each Stockholder agrees that this Agreement and
the obligations hereunder shall attach to the Securities of such Stockholder and
shall be binding upon any person to which legal or beneficial ownership of such
shares shall pass, whether by operation of law or otherwise.
Section 4.6 Notices. All notices, demands, requests, consents, approvals or
other communications (collectively, "Notices") required or permitted to be given
hereunder or which are given with respect to this Agreement shall be in writing
and shall be personally served, delivered by a reputable air courier service
with tracking capability, with charges prepaid, or transmitted by hand delivery
or facsimile, addressed as set forth below, or to such other address as such
party shall have specified most recently by written notice. Notice shall be
deemed given on the date of service or transmission if personally served or
transmitted by facsimile. Notice otherwise sent as provided herein shall be
deemed given on the next business day following delivery of such notice to a
reputable air courier service (a) if to any Stockholder, to it at the
address(es) or facsimile number(s) set forth on Schedule II hereto, with a copy
to the Company at 9933 Woods Drive, Skokie, Illinois 60077, Attention: Andrew
Parkinson, and (b) if to the Purchaser, to it at the following contact
information:
with a copy (which shall not constitute notice) to:
Koninklijke Ahold NV
Albert Heijnweg 1
1507 EH Zaandam, The Netherlands
Attention: Ton van Tielraden, Esq.
Facsimile: (31-75) 659-8366
with a copy (which shall not constitute notice) to:
White & Case LLP
1155 Avenue of the Americas
New York, New York 10036
Attn.: Maureen S. Brundage, Esq. / John M. Reiss, Esq.
Facsimile: (212) 354-8113
Section 4.7 Governing Law. This Agreement and the rights and obligations of
the parties hereunder shall be governed by, and construed in accordance with,
the laws of the State of New York, and each party hereto submits to the
non-exclusive jurisdiction of the state and federal courts within the County of
New York in the State of New York. Any legal action or proceeding with respect
to this Agreement may be brought in the courts of the State of New York or of
the United States of America for the Southern District of New York and, by
execution and delivery of this Agreement, each party hereto hereby accepts for
itself and in respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts. Each party hereto further irrevocably
consents to the service of process out of any of the aforementioned courts in
any action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to such party at its address set forth in
Section 4.6, such service to become effective seven days after such mailing.
Nothing herein shall affect the right of the Purchaser to serve process in any
of the matters permitted by law or to commence legal proceedings or otherwise
proceed against any of the Stockholders in any other jurisdiction. Each party
hereto hereby irrevocably waives any objection which it may now or hereafter
have to the laying of venue of any of the aforesaid actions or proceedings
arising out of or in connection with this Agreement
Section 4.8 Entire Agreement. This Agreement (including all agreements
entered into pursuant hereto and all certificates and instruments delivered
pursuant hereto and thereto) constitutes the entire agreement of the parties
with respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements, representations, understandings, negotiations and
discussions between the parties, whether oral or written, with respect to the
subject matter hereof.
Section 4.9 Waivers and Extensions. Subject to Section 4.3, any party to
this Agreement may waive any right, breach or default which such party has the
right to waive, provided that such waiver will not be effective against the
waiving party unless it is in writing, is signed by such party and the
Purchaser, and specifically refers to this Agreement. Waivers may be made in
advance or after the right waived has arisen or the breach or default waived has
occurred. Any waiver may be conditional. No waiver of any breach of any
agreement or provision herein contained shall be deemed a waiver of any
preceding or succeeding breach thereof nor of any other agreement or provision
herein contained. No waiver or extension of time for performance of any
obligations or acts shall be deemed a waiver or extension of the time for
performance of any other obligations or acts.
Section 4.10 Titles and Headings. Titles and headings of sections of this
Agreement are for convenience only and shall not affect the construction of any
provision of this Agreement.
Section 4.11 Exhibits and Schedules. Each of the annexes, exhibits and
schedules referred to herein and attached hereto is an integral part of this
Agreement and is incorporated herein by reference.
Section 4.12 Attorneys' Fees. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs and necessary
disbursements, in addition to any other relief to which such party may be
entitled.
Section 4.13 Severability. This Agreement shall be deemed severable, and
the invalidity or unenforceability of any term or provision hereof shall not
affect the validity or enforceability of this Agreement or of any other term or
provision hereof. Furthermore, in lieu of any such invalid or unenforceable term
or provision, the parties hereto intend that there shall be added as a part of
this Agreement a provision as similar in terms to such invalid or unenforceable
provision as may be possible and be valid and enforceable.
Section 4.14 Counterparts; Facsimile. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original, and all of
which taken together shall constitute one and the same instrument. This
Agreement may be delivered by a party via facsimile; provided, that, the
originally executed signature pages and original documents are delivered to the
appropriate parties within two (2) business days.
Section 4.15 Further Assurances. Each party hereto, upon the request of any
other party hereto, shall do all such further acts and execute, acknowledge and
deliver all such further instruments and documents as may be necessary or
desirable to carry out the transactions contemplated by this Agreement.
Section 4.16 Remedies Cumulative. The remedies provided herein shall be
cumulative and shall not preclude the assertion by any party hereto, including
any Purchaser, of any other rights or the seeking of any remedies against any
other party hereto.
<PAGE>
IN WITNESS WHEREOF, the Company and the Stockholders have caused this
Agreement to be duly executed as of the day and year first above written.
KONINKLIJKE AHOLD N.V.
By:___________________
Name:
Title:
TRIBUNE NATIONAL
MARKETING COMPANY
By_______________________
Name:
Title:
NEVIS CAPITAL MANAGEMENT, INC.
By_______________________
Name:
Title:
EX-24.1
POWER OF ATTORNEY
By this Power of Attorney I, Robert G. Tobin, an Executive Vice-President
and member of the Corporate Executive Board of Koninklijke Ahold N.V., a public
company with limited liability organized and existing under the laws of the
Netherlands ("Ahold"), hereby appoint A.H.P.M. van Tielraden, a Senior Vice
President and General Counsel of Ahold, as my true and lawful attorney-in-fact,
to sign and execute on behalf of Ahold (i) the following agreements (a) the
Purchase Agreement between Peapod, Inc. ("Peapod"), a Delaware corporation, and
Ahold, (b) the Registration Rights Agreement, (c) the Credit Agreement, (d) the
Supply and Service Agreement, (e) the Joint Development and License Agreement,
(f) the Amended and Restated Security Agreement by and among BEW, Inc., Ahold
and Peapod, and (ii) the Amended and Restated Collateral Assignment of
Intellectual Property by and among Ahold and Peapod, and in general, to do all
things and to perform all acts required or contemplated by, or deemed advisable
in connection with the execution of, the Purchase Agreement and the consummation
of the transactions contemplated thereby, including, without limiting the
generality of the foregoing, the execution of any documents and papers required
or deemed necessary or advisable in connection with the execution of the
Purchase Agreement.
This Power shall be irrevocable for a period of two weeks from the date
hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
individually and in his own name this __ day of April, 2000.
Robert G. Tobin
/s/ Robert G. Tobin
------------------------
EX-99.1
PROMISSORY NOTE
U.S. $3,000,000.00 Dated: April 5, 2000
FOR VALUE RECEIVED, the undersigned, PEAPOD, INC. , a Delaware
corporation (the "Borrower"), HEREBY UNCONDITIONALLY PROMISES TO PAY to the
order of BEW, Inc., a Delaware corporation (the "Lender"), or its registered and
permitted assigns, in lawful money of the United States of America the principal
sum of THREE MILLION AND NO/100 U.S. DOLLARS (U.S. $3,000,000.00), such amount
representing the original aggregate principal amount of two term loans evidenced
hereby, one in the principal amount of U.S. $2,000,000.00 made on April 5, 2000
and the other in the principal amount of U.S. $1,000,000.00 made on April 10,
2000 (collectively, the "Term Loan") owed by the Borrower to the Lender pursuant
to this Promissory Note and that certain Letter, dated as of April 4, 2000 by
and between the Borrower and the Lender (as amended as of the date hereof, the
"Letter Agreement").
The Borrower promises to pay all principal due hereunder in one (1)
installment, payable on May 19, 2000 (the "Maturity Date"). The Borrower
promises to pay interest on the unpaid principal amount of the Term Loan from
the date hereof (or as to any portion of the Term Loan advanced after the date
hereof, from the date so advanced) until such principal amount is paid in full
on the Maturity Date. Interest shall be computed on the basis of a year of 365
days and actual days elapsed at a per annum rate equal to nine percent (9.00%).
The Borrower shall prepay the Term Loan with the cash proceeds (after
deducting reasonable out-of-pocket expenses) from any equity issuances by, or
capital contributions to, the Borrower or any of its Subsidiaries (other than up
to U.S. $100,000.00 of such proceeds from the exercise of employee options),
from any incurrences of Indebtedness by the Borrower or any of its Subsidiaries
and from any asset sales by the Borrower or any of its Subsidiaries (other than
asset sales not exceeding $100,000.00 and other than sales of inventory in the
ordinary course of business consistent with past practice).
The indebtedness evidenced hereby may be prepaid in whole or in part
at any time and from time to time without premium or penalty.
All payments of principal and interest in respect of this Promissory
Note shall be made payable to the Lender in lawful money of the United States of
America for the Lender's account at Fleet Bank, 100 Federal St., Boston, MA
02106, Re: Payment for Peapod, Inc. Term Loan, or at such other place as shall
be designated by the Lender for such purpose.
This Promissory Note is the Term Note referred to in, and is entitled
to the benefits of, and all amounts due hereunder are secured pursuant to the
terms of an Amended and Restated Security Agreement (as from time to time
amended, supplemented or restated, (the "Security Agreement") among the
Borrower, the Lender and Koninklijke Ahold NV and a Collateral Assignment of
Intellectual Property (as from time to time amended, supplemented or restated,
the "Intellectual Property Assignment" and, collectively, together with the
Security Agreement the "Security Documents") between the Borrower and the
Lender. Capitalized terms used but not defined herein shall have the meanings
given to such terms in the Security Agreement.
THE BORROWER WAIVES ANY AND ALL REQUIREMENTS OF DEMAND, PRESENTMENT,
PROTEST, NOTICE OF DISHONOR OR FURTHER NOTICE OF ANY KIND IN CONNECTION WITH
THIS PROMISSORY NOTE.
Should any payment of principal or interest become due and payable on
any day other than a Business Day ("Business Day" being any day not a Saturday,
Sunday or legal holiday in Chicago, Illinois), the maturity thereof shall be
extended to the next succeeding Business Day and interest shall continue to
accrue at the applicable rate until such payment is made.
Should the indebtedness represented by this Promissory Note or any
part hereof be collected at law or in equity or in bankruptcy, receivership or
other court proceeding, or should this Promissory Note be placed in the hands of
attorneys for collection after default, Borrower agrees to pay, in addition to
the principal, interest due and payable hereon and any other sums due and
payable hereon, all costs of collecting or attempting to collect this Promissory
Note, including reasonable attorneys' fees and expenses (including those
incurred in connection with any appeal).
This Promissory Note shall not require the payment nor permit the
collection of interest or any late payment charge in excess of the maximum rate
permitted by law. If any excess interest or late payment charge in such respect
is provided for under this Promissory Note or shall be adjudicated to provide
for such terms, neither Borrower nor its successors or assigns shall be
obligated to pay such interest or late payment charge in excess of the maximum
amount permitted by law, and the right to demand the payment of any such excess
shall be and hereby is waived. In the event Lender shall collect monies which
are deemed to constitute interest which would increase the effective interest
rate to a rate in excess of the maximum rate permitted by law, all such sums
deemed to constitute interest in excess of the maximum rate permitted by law
shall, upon such determination, at the option of Lender, be returned to Borrower
or credited against the principal balance of Borrower's obligation then
outstanding under this Promissory Note. This provision shall control any other
provision of this Promissory Note.
Upon the occurrence of any of the following events (each an "Event of
Default"): (i) the Borrower shall (a) fail to pay the principal amount of the
Term Loan when due or (b) fail to pay interest on the Term Loan or any other
amount due hereunder; (ii) if any representation or warranty made by the
Borrower herein, in any Security Document or with respect to the obligations of
the Borrower evidenced hereby shall be false or misleading in any material
respect when made or deemed made; (iii) if the Borrower shall fail to perform or
observe any other term or condition binding upon it hereunder or in the Letter
Agreement or in any Security Document; or (iv) (a) if the Borrower shall
generally not pay its debts as such debts become due or shall make a general
assignment for the benefit of creditors; (b) if any proceeding shall be
instituted by or, unless dismissed within thirty (30) days, against, the
Borrower seeking to adjudicate it a bankrupt or insolvent or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief, or composition of it or its debts under any law relating to bankruptcy,
insolvency, or relief of debtors generally, or seeking the entry of an order for
relief or for the appointment of a receiver, trustee, custodian, or other
similar officer for it or for any part of its assets; or (c) if the Borrower
shall take any action to authorize any of the actions set forth in subclauses
(iv) (a) and (iv) (b) of this paragraph; then the Lender may, without demand,
notice or legal process of any kind, declare the outstanding principal amount of
the Term Loan together with all accrued and unpaid interest thereon and all
other amounts due hereunder (collectively, the "Indebtedness") to be, whereupon
the Indebtedness shall become, immediately due and payable; provided, however,
that upon the occurrence of any Event of Default specified in subclause (iv) of
this paragraph, the Indebtedness shall automatically become due and payable.
The Borrower hereby represents and warrants on and as of the date
hereof that: (i) it has the requisite power and authority to execute, deliver,
and perform its obligations under this Promissory Note, each Security Document
and the Letter Agreement and has taken all necessary action to authorize the
same, and such execution, delivery, and performance do not violate or contravene
its organizational documents or any law, regulation, agreement, writ, or order
applicable to or binding upon it; and (ii) this Promissory Note, each Security
Document and the Letter Agreement have been duly executed and delivered, and
constitute the legal, valid, and binding obligation of the Borrower, enforceable
against the Borrower in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally.
The Borrower further agrees to indemnify and hold harmless the Lender
(and its subsequent assigns), and each affiliate thereof and each director,
officer, employee, agent or representative thereof (each, an "indemnified
person") in connection with any losses, claims, damages, liabilities or other
expenses (whether asserted by the Borrower or any third party) to which such
indemnified persons may become subject, insofar as such losses, claims, damages,
liabilities (or actions or other proceedings commenced or threatened in respect
thereof) or other expenses arise out of or in any way relate to or result from
this Promissory Note or any Security Document, the extensions of credit
contemplated hereby or any lien or security interest granted under any Security
Document, or in any way arise from any use or intended use of the Term Loan or
the proceeds thereof, and the Borrower agrees to reimburse each indemnified
person for any legal or other expenses incurred in connection with
investigating, defending or participating in any such loss, claim, damage,
liability or action or other proceeding (whether or not such indemnified person
is a party to any action or proceeding out of which indemnified expenses arise)
(all of the foregoing, collectively, the "indemnified liabilities" and each an
"indemnified liability"), provided that the Borrower shall have no obligation
hereunder to indemnify any indemnified person (i) for any loss, claim, damage,
liability or expense which resulted primarily from the gross negligence or
willful misconduct of such indemnified person; (ii) which is for reimbursement
of amounts paid by an indemnified person on any final, non-appealable judgment
in the Borrower's favor against an indemnified person by a court of competent
jurisdiction; or (iii) which is for reimbursement of amounts paid by the party
seeking indemnification in any settlement of any claim constituting an
indemnified liability with a party other than the Borrower which has properly
effected by an indemnified person without the prior consent of the Borrower,
unless either (x) the Borrower has had a reasonable opportunity to defend such
indemnified person against such claim and has not promptly and diligently
prosecuted such defense by counsel reasonably satisfactory to such indemnified
person or (y) the Debtor has failed to provide evidence reasonably satisfactory
to the Lender of the Borrower's financial ability to satisfy its indemnity
obligations hereunder in respect of such claim. All amounts owing to the Lender
or other indemnified person pursuant to this paragraph shall be paid by the
Borrower promptly following any demand by the person or entity entitled to such
payment pursuant to the terms of this paragraph. None of the Lender or its
subsequent permitted assigns shall be responsible or liable to the Borrower or
any other person for damages which may be alleged as a result of this Promissory
Note. The provisions of this paragraph shall survive repayment of the Term Loan
and all other Obligations.
All payments made by, or on behalf of, the Borrower hereunder will be
made without setoff, counterclaim or other defense.
THIS PROMISSORY NOTE SHALL BE INTERPRETED, GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK. THE BORROWER
HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING
UNDER OR WITH RESPECT HERETO.
Any legal action or proceeding with respect to this Promissory Note or
any Security Document may be brought in the courts of the State of New York or
of the United States of America for the Southern District of New York and, by
execution and delivery of this Promissory Note, the Borrower hereby accepts for
itself and in respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts. The Borrower further irrevocably consents
to the service of process out of any of the aforementioned courts in any action
or proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to the Borrower at its address designated below, such service
to become effective seven days after such mailing. Nothing herein shall affect
the right of the Lender or any holder of this Promissory Note to serve process
in any of the matters permitted by law or to commence legal proceedings or
otherwise proceed against the Borrower in any other jurisdiction. The Borrower
hereby irrevocably waives any objection which it may now or hereafter have to
the laying of venue of any of the aforesaid actions or proceedings arising out
of or in connection with this Promissory Note brought in the courts referred to
above and hereby further irrevocably waives and agrees not to plead or claim in
any such court that any such action or proceeding brought in any such court has
been brought in an inconvenient forum.
Neither the failure nor delay on the part of the Lender to exercise
any right, power or privilege under this Promissory Note and no course of
dealing between the Borrower and the Lender shall operate as a waiver thereof,
nor shall any single or partial exercise of any right, power or privilege under
this Promissory Note preclude any other or further exercise thereof, or the
exercise of any other right, power or privilege. The rights and remedies herein
expressly provided are cumulative and not exclusive of any rights or remedies
which the Lender would otherwise have. No notice to or demand on the Borrower in
any case shall entitle the Borrower to any other or further notice or demand in
similar or other circumstances or constitute a waiver of the right of the Lender
to any other or further action in any circumstances without notice or demand.
At any time and from time to time, the Borrower agrees that the
Borrower will cooperate with the Lender and will execute and deliver, or cause
to be executed and delivered, all such further instruments and documents, and
will take all such further actions, as the Lender may reasonably request in
order to carry out the provisions and purposes of this Promissory Note and each
Security Document.
Whenever in this Promissory Note reference is made to Lender or
Borrower, such reference shall be deemed to include, as applicable, a reference
to their respective successors and assigns; provided, that notwithstanding
anything to the contrary set forth herein, this Promissory Note shall not be
pledged, transferred or assigned by the Lender without the prior written consent
of the Borrower (other than affiliates of the Lender). The provisions of this
Promissory Note shall be binding upon and shall inure to the benefit of said
successors and assigns. Borrower's successors and assigns shall include, without
limitation, a receiver, trustee or debtor-in-possession of or for Borrower.
The Borrower may not assign or delegate any of its obligations or
agreements hereunder. No amendment, modification or waiver of any provision of
this Promissory Note shall be effective unless it is in writing and signed by
the Lender and the Borrower.
<PAGE>
This Promissory Note supersedes the Promissory Note dated April 5,
2000 in the principal amount of U.S. $2,000,000.00 issued by the Borrower to the
Lender.
PEAPOD, INC.
By: ____________________________
Name: Dan Rabinowitz
Title: Senior VP and Chief
Financial Officer
Address: 9933 Woods Drive
Skokie, IL 60077
