<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
(RULE 13D-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13D-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13D-2(a)
(AMENDMENT NO. __)*
HA-LO Industries, Inc.
------------------------------------------
(Name of Issuer)
Common Stock, no par value
------------------------------------------
(Title of Class of Securities)
404-429-10-2
------------------------------------------
(CUSIP Number)
Coventry Partners Family Limited Partnership, Coventry Associates, Inc.,
Eric P. Lefkofsky, Elizabeth B. Lefkofsky, Lefkofsky Family Limited Liability
Company,
Steve Lefkofsky and Jodi Neff
1225 West Morse Avenue
Chicago, Illinois 60626-3517
with a copy to:
John E. Lowe, Esq.
Altheimer & Gray
10 South Wacker Drive
Chicago, Illinois 60606
(312) 715-4020
-----------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
May 3, 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(e), 13d-1(f) or 13d-1(g), check the following
box. / /
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. SEE Rule 13d-7(b) for other
parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934, as amended ("Act"), or otherwise subject to the liabilities of that
section of the Act but shall be subject to all other provisions of the Act
(however, SEE the NOTES).
<PAGE>
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CUSIP No. 404-429-10-2 13D Page 2 of 18 Pages
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON
IRS IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY):
Coventry Partners Family Limited Partnership
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) / /
(b) /x/
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS: None
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e):
/ /
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware
-------------------------------------------------------------
NUMBER OF 7. SOLE VOTING POWER: 5,618,636 (1)
SHARES -------------------------------------------------------------
BENEFICIALLY 8. SHARED VOTING POWER: 0
OWNED BY -------------------------------------------------------------
EACH 9. SOLE DISPOSITIVE POWER: 5,618,636 (1)
REPORTING -------------------------------------------------------------
PERSON 10. SHARED DISPOSITIVE POWER: 0
WITH
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
5,618,636 (1)
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES: / /
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 8.74% (2)
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON: PN
- --------------------------------------------------------------------------------
(1) 5,085,178 shares of Common Stock, no par value, of Issuer (the "Common
Stock") and 533,458 shares of Series A Convertible Participating Preferred
Stock, no par value, of Issuer (the "Preferred Stock") that are convertible
into shares of Common Stock. SEE Item 6.
(2) Based on 63,729,673 shares of Common Stock outstanding as of May 3, 2000.
<PAGE>
- --------------------------------------------------------------------------------
CUSIP No. 404-429-10-2 13D Page 3 of 18 Pages
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON
IRS IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY):
Coventry Associates, Inc.
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) / /
(b) /x/
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS: None
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e): / /
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware
-------------------------------------------------------------
NUMBER OF 7. SOLE VOTING POWER: 0
SHARES -------------------------------------------------------------
BENEFICIALLY 8. SHARED VOTING POWER: 5,618,636 (1)
OWNED BY -------------------------------------------------------------
EACH 9. SOLE DISPOSITIVE POWER: 0
REPORTING
PERSON -------------------------------------------------------------
WITH 10. SHARED DISPOSITIVE POWER: 0
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
5,618,636 (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): 8.74% (2)
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON: CO
- --------------------------------------------------------------------------------
(1) Solely in its capacity as the general partner of Coventry Partners Family
Limited Partnership, which itself is the beneficial holder of 5,085,178
shares of Common Stock and 533,458 shares of Preferred Stock of the Issuer.
SEE Item 2.
(2) Based on 63,729,673 shares of Common Stock outstanding as of May 3, 2000.
<PAGE>
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CUSIP No. 404-429-10-2 13D Page 4 of 18 Pages
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON
IRS IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY):
Eric P. Lefkofsky
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) / /
(b) /x/
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS: None
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e): / /
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION: United States
-------------------------------------------------------------
NUMBER OF 7. SOLE VOTING POWER: 0
SHARES -------------------------------------------------------------
BENEFICIALLY 8. SHARED VOTING POWER: 5,826,734 (1)
OWNED BY -------------------------------------------------------------
EACH 9. SOLE DISPOSITIVE POWER: 0
REPORTING
PERSON -------------------------------------------------------------
WITH 10. SHARED DISPOSITIVE POWER: 0
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
5,826,734 (1)
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES: / /
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 9.06% (2)
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON: IN
- --------------------------------------------------------------------------------
(1) Includes 5,085,178 shares of Common Stock and 533,458 shares of Preferred
Stock that are convertible into shares of Common Stock held by Coventry
Partners Family Limited Partnership. SEE Item 6. These 5,618,636 shares
of such 5,826,734 shares are held solely in his capacity as the holder, by
tenancy by the entirety with his wife, Elizabeth B. Lefkofsky, of 100% of
the outstanding voting common stock of Coventry Associates, Inc., a
Delaware corporation, which is the general partner of Coventry Partners
Family Limited Partnership. SEE Item 2. Additionally, Eric Lefkofsky has a
proxy to vote (i) 150,672 shares of Common Stock and 15,806 shares of
Series A Convertible Participating Preferred Stock held by Lefkofsky Family
Limited Liability Company and (ii) 18,834 shares of Common Stock and 1,976
shares of Series A Convertible Participating Preferred Stock held by each
of Steve Lefkofsky and Jodi Neff.
(2) Based on 63,729,673 shares of Common Stock outstanding as of May 3, 2000.
<PAGE>
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CUSIP No. 404-429-10-2 13D Page 5 of 18 Pages
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON
IRS IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY):
Elizabeth B. Lefkofsky
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) / /
(b) /x/
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS: None
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e): / /
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION: United States
-------------------------------------------------------------
NUMBER OF 7. SOLE VOTING POWER: 0
SHARES -------------------------------------------------------------
BENEFICIALLY 8. SHARED VOTING POWER: 5,618,636 (1)
OWNED BY -------------------------------------------------------------
EACH 9. SOLE DISPOSITIVE POWER: 0
REPORTING
PERSON -------------------------------------------------------------
WITH 10. SHARED DISPOSITIVE POWER: 0
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
5,618,636 (1)
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES: / /
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 8.74% (2)
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON: IN
- --------------------------------------------------------------------------------
(1) Includes 5,085,178 shares of Common Stock and 533,458 shares of Preferred
Stock that are convertible into shares of Common Stock held by Coventry
Partners Family Limited Partnership. SEE Item 6. These 5,618,636 shares
are held solely in her capacity as the holder, by tenancy by the entirety
with her husband, Eric P. Lefkofsky, of 100% of the outstanding voting
common stock of Coventry Associates, Inc., a Delaware corporation, which is
the general partner of Coventry Partners Family Limited Partnership. SEE
Item 2.
(2) Based on 63,729,673 shares of Common Stock outstanding as of May 3, 2000.
<PAGE>
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CUSIP No. 404-429-10-2 13D Page 6 of 18 Pages
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON
IRS IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY):
Lefkofsky Family Limited Liability Company
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) / /
(b) /x/
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS: None
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e): / /
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION: Michigan
-------------------------------------------------------------
NUMBER OF 7. SOLE VOTING POWER: 0
SHARES -------------------------------------------------------------
BENEFICIALLY 8. SHARED VOTING POWER: 166,478 (1)
OWNED BY -------------------------------------------------------------
EACH 9. SOLE DISPOSITIVE POWER: 166,478 (1)
REPORTING
PERSON -------------------------------------------------------------
WITH 10. SHARED DISPOSITIVE POWER: 0
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
166,476 (1)
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES: / /
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 0.26% (2)
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON: 00
- --------------------------------------------------------------------------------
(1) 150,672 shares of Common Stock and 15,806 shares of Preferred Stock that
are convertible into shares of Common Stock. SEE Item 6. Eric Lefkofsky
has a proxy to vote the 150,670 shares of Common Stock and 15,806 shares of
Series A Convertible Participating Preferred Stock held by Lefkofsky Family
Limited Liability Company.
(2) Based on 63,729,673 shares of Common Stock outstanding as of May 3, 2000.
<PAGE>
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CUSIP No. 404-429-10-2 13D Page 7 of 18 Pages
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON
IRS IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY):
Steve Lefkofsky
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) / /
(b) /x/
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS: None
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e): / /
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION: United States
-------------------------------------------------------------
NUMBER OF 7. SOLE VOTING POWER: 0
SHARES -------------------------------------------------------------
BENEFICIALLY 8. SHARED VOTING POWER: 20,810 (1)
OWNED BY -------------------------------------------------------------
EACH 9. SOLE DISPOSITIVE POWER: 20,810 (1)
REPORTING
PERSON -------------------------------------------------------------
WITH 10. SHARED DISPOSITIVE POWER: 0
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
20,810 (1)
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES: / /
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 0.03% (2)
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON: IN
- --------------------------------------------------------------------------------
(1) 18,834 shares of Common Stock and 1,976 shares of Preferred Stock that are
convertible into shares of Common Stock. SEE Item 6. Eric Lefkofsky has a
proxy to vote the 18,834 shares of Common Stock and 1,976 shares of Series
A Convertible Participating Preferred Stock held by Steve Lefkofsky.
(2) Based on 63,729,673 shares of Common Stock outstanding as of May 3, 2000.
<PAGE>
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CUSIP No. 404-429-10-2 13D Page 8 of 18 Pages
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON
IRS IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY):
Jodi Neff
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) / /
(b) /x/
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS: None
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e): / /
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION: United States
-------------------------------------------------------------
NUMBER OF 7. SOLE VOTING POWER: 0
SHARES -------------------------------------------------------------
BENEFICIALLY 8. SHARED VOTING POWER: 20,810 (1)
OWNED BY -------------------------------------------------------------
EACH 9. SOLE DISPOSITIVE POWER: 20,810 (1)
REPORTING
PERSON -------------------------------------------------------------
WITH 10. SHARED DISPOSITIVE POWER: 0
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
20,810 (1)
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES: / /
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 0.03% (2)
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON: IN
- --------------------------------------------------------------------------------
(1) 18,834 shares of Common Stock and 1,976 shares of Preferred Stock that are
convertible into shares of Common Stock. SEE Item 6. Eric Lefkofsky has a
proxy to vote the 18,834 shares of Common Stock and 1,976 shares of Series
A Convertible Participating Preferred Stock held by Jodi Neff.
(2) Based on 63,729,673 shares of Common Stock outstanding as of May 3, 2000.
<PAGE>
Item 1. SECURITY AND ISSUER.
This Schedule 13D relates to the shares of common stock, no par value
(the "Common Stock") and shares of Series A Convertible Participating Preferred
Shares, no par value (the "Preferred Stock"), of HA-LO Industries, Inc., an
Illinois corporation ("Issuer"). This statement relates to the Preferred Stock
only to the extent that such shares are convertible into shares of Common
Stock.
The principal executive offices of Issuer are located at 5980 Touhy
Avenue, Niles, Illinois 60714.
Item 2. IDENTITY AND BACKGROUND.
(a) This Schedule 13D is filed by Coventry Partners Family Limited
Partnership, a Delaware limited partnership ("Purchaser"), Coventry Associates,
Inc., a Delaware corporation ("Coventry Associates"), Eric P. Lefkofsky, an
individual, Elizabeth B. Lefkofsky, an individual (Eric P. Lefkofsky and
Elizabeth B. Lefkofsky being collectively referred to herein as the
"Lefkofskys"), the Lefkofsky Family Limited Liability Company, a Michigan
limited liability company ("Lefkofsky LLC"), Steve Lefkofsky, an individual and
Jodi Neff, an individual (Purchaser, Coventry Associates, the Lefkofskys, the
Lefkofsky LLC, Steve Lefkofsky and Jodi Neff being collectively referred to
herein as the "Reporting Persons"). The Reporting Persons are making this
single, joint filing because they may be deemed to constitute a "group" within
the meaning of Section 13d-3 of the Act, although neither the fact of this
filing nor anything contained herein shall be deemed to be an admission by the
Reporting Persons that a group exists.
(b) - (c)
Purchaser is a Delaware limited partnership, the principal business of
which is asset management. The principal business and office address of
Purchaser is 501 Silverside Road, Suite 87AF, Wilmington, Delaware 19809.
Coventry Associates is a Delaware corporation, the principal business of
which is asset management. Coventry Associates is the general partner of
Purchaser. The principal business and office address of Coventry Associates is
501 Silverside Road, Suite 87AE, Wilmington, Delaware 19809.
The Lefkofskys are individuals. The Lefkofskys, through a tenancy by
the entirety, are the holders of 100% of the outstanding voting common stock of
Coventry Associates. The Lefkofskys reside at 2823 North Racine, Chicago,
Illinois 60657
Lefkofsky LLC is a Michigan limited liability company, the principal
business of which is asset management. The sole members of Lefkofsky LLC are
Sandra and Bill Lefkofsky. The principal business and office address of
Lefkofsky LLC is 5355 Pleasant Lake Drive, West Bloomfield, Michigan 48323.
Steve Lefkofsky is an individual. Steve Lefkofsky resides at 4041
Hanover Court, West Bloomfield, Michigan 48323.
Jodi Neff is an individual. Jodi Neff resides at 6771 Torbrook Circle,
West Bloomfield, Michigan 48323.
Page 9 of 18
<PAGE>
The general partner of Purchaser is Coventry Associates. The limited
partners of Purchaser are Coventry Wealth Protection Trust, a Delaware trust,
Lefkofsky Children's Trust, an Illinois trust, and Coventry Wealth Protection
Management, Inc., a Delaware corporation. Purchaser has no executive officers.
The sole director of Coventry Associates is Eric P. Lefkosfky. The
executive officers of Coventry Associates are Eric P. Lefkofsky, President and
Treasurer and Elizabeth B. Lefkofsky, Vice President and Secretary.
The managing member of Lefkofsky LLC is Sandra Lefkofsky. Lefkofsky LLC
has no executive officers.
For each of the individuals identified above, the following table sets
forth each such individual's principal occupation and business address:
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATION AND BUSINESS ADDRESS
---- ------------------------------------------
<S> <C>
Eric P. Lefkofsky Chief Operating Officer and Vice President
HA-LO Industries, Inc.
5980 West Touhy Avenue
Chicago, Illinois 60714
Elizabeth B. Lefkofsky Art Project Director
Gallery 37
Center for the Arts
66 East Randolph Street
Chicago, Illinois 60601
Sandra Lefkofsky Office Manager
L&A, Inc.
30840 Northwestern Hwy, Suite 310,
Farmington Hills, Michigan 48334
Steve Lefkofsky Attorney
Peterson & Lefkofsky
1533 North Woodward Avenue, Suite 170
Bloomfield Hills, Michigan 48304
Jodi Neff Housewife
6771 Torbrook Circle
West Bloomfield, Michigan 48323
</TABLE>
(d) None of the entities or persons identified in this Item 2 has,
during the last five years, been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors).
(e) None of the entities or persons identified in this Item 2 has,
during the last five years, been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
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.
Page 10 of 18
<PAGE>
(f) Purchaser, Coventry Associates, Coventry Wealth Protection Trust
and Coventry Wealth Protection Management, Inc. are all Delaware entities. The
Lefkofsky Children's Trust is an Illinois entity. All of the individuals named
are United States citizens.
Item 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
On May 3, 2000, Purchaser acquired 5,085,178 shares of Common Stock and
533,458 shares of Preferred Stock in exchange for 6,750,000 shares of Class B
common stock which Purchaser owned in Starbelly.com, Inc., a Delaware
corporation ("Starbelly") in the merger ("Merger"), pursuant to an Agreement and
Plan of Merger and Plan of Reorganization, dated as of January 17, 2000, as
amended on April 11, 2000 (the "Merger Agreement"), by and among Issuer,
Starbelly and HA-LO Industries, Inc., a Delaware corporation ("Merger Sub"). As
a result of the Merger, Starbelly was merged with and into Merger Sub and the
separate corporate existence of Starbelly ceased. Merger Sub continued as the
surviving corporation and assumed the name "Starbelly.com, Inc."
Item 4. PURPOSE OF TRANSACTION.
On May 3, 2000, 5,085,178 shares of Common Stock and 533,458 shares of
Preferred Stock were issued by the Issuer to the Purchaser in consideration for
the acquisition of the ownership interest in Starbelly formerly held by
Purchaser. Purchaser has acquired the Common Stock and Preferred Stock for
investment purposes. Purchaser intends to sell an as yet undetermined amount of
shares of Common Stock, as market conditions permit and after effectiveness of
the registration statement filed by the Issuer pursuant to the Registration
Rights Agreement between the Issuer and Purchaser.
In connection with the Merger, Eric P. Lefkofsky became Chief
Operating Officer and Vice President and a member of the Board of Directors
of Issuer as of May 3, 2000.
Mr. Lefkofsky currently plans to request that he and Mr. Richard Heise
serve on the Issuer's Board of Directors pursuant to the terms of his employment
agreement described in Item 6 of this Schedule.
PRESENT PLANS OR PROPOSALS. Except as set forth in this Item 4 the
Reporting Persons have no present plans or proposals that relate to or that
would result in any of the actions specified in clauses (a) through (j) of
Item 4 of Schedule 13D of the Act.
Item 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) The aggregate number of shares that Purchaser owns beneficially,
pursuant to Rule 13d-3 of the Act, is 5,085,178 shares of Common Stock and
533,458 shares of Preferred Stock, which constitute approximately 8.74% of the
outstanding voting shares, based on 63,729,673 shares of Common Stock
outstanding as of May 3, 2000.
Because of their position as the owners of 100% of the voting stock of
Coventry Associates, which is the general partner of the Purchaser, the
Lefkofskys may, pursuant to Rule 13d-3 of the Act, be deemed to be the
beneficial owners of the shares beneficially owned directly by Purchaser.
Additionally, because Eric Lefkofsky has a proxy to vote the 166,476 shares held
by Lefkofsky LLC and the 20,810 shares held by each of Steve Lefkofsky and Jodi
Neff, Eric Lefkofsky may, pursuant to Rule 13d-3 of the Act, be deemed to be the
beneficial owner of such shares.
Page 11 of 18
<PAGE>
To the best of the knowledge of each of the Reporting Persons, other than
as set forth above, none of the persons named in Item 2 hereof is the beneficial
owner of any shares of the Issuer.
<TABLE>
<S> <C> <C>
(b) Purchaser:
(i) sole power to vote or to direct the vote: 5,618,636
(ii) shared power to vote or to direct the vote: 0
(iii) sole power to dispose or to direct the disposition of: 5,618,636
(iv) shared power to dispose or to direct the disposition of: 0
Coventry Associates*:
(i) sole power to vote or to direct the vote: 5,618,636
(ii) shared power to vote or to direct the vote: 0
(iii) sole power to dispose or to direct the disposition of: 5,618,636
(iv) shared power to dispose or to direct the disposition of: 0
Eric P. Lefkofsky*:
(i) sole power to vote or to direct the vote: 0
(ii) shared power to vote or to direct the vote: 5,826,734
(iii) sole power to dispose or to direct the disposition of: 0
(iv) shared power to dispose or to direct the disposition of: 0
Elizabeth B. Lefkofsky*:
(i) sole power to vote or to direct the vote: 0
(ii) shared power to vote or to direct the vote: 5,618,636
(iii) sole power to dispose or to direct the disposition of: 0
(iv) shared power to dispose or to direct the disposition of: 0
Lefkofsky Family Limited Liability Company*:
(i) sole power to vote or to direct the vote: 0
(ii) shared power to vote or to direct the vote: 166,476
(iii) sole power to dispose or to direct the disposition of: 166,476
(iv) shared power to dispose or to direct the disposition of: 0
Steve Lefkofsky*:
(i) sole power to vote or to direct the vote: 0
(ii) shared power to vote or to direct the vote: 20,810
(iii) sole power to dispose or to direct the disposition of: 20,810
(iv) shared power to dispose or to direct the disposition of: 0
Jodi Neff*:
(i) sole power to vote or to direct the vote: 0
(ii) shared power to vote or to direct the vote: 20,810
(iii) sole power to dispose or to direct the disposition of: 20,810
(iv) shared power to dispose or to direct the disposition of: 0
</TABLE>
Page 12 of 18
<PAGE>
*Coventry Associates, the Lefkofskys, Lefkofsky LLC, Steve
Lefkofsky and Jodi Neff each disclaim beneficial ownership of the
shares reported as beneficially owned by it or them.
(c) Except as set forth in Item 4 above, to the best of the knowledge
of each of the Reporting Persons, none of the persons named in response to
paragraph (a) of this Item 5 has effected any other transactions in shares
during the past sixty (60) days.
(d) None.
(e) It is inapplicable for the purposes herein to state the date on
which the Reporting Persons ceased to be the owners of more than five percent
(5%) of the outstanding shares.
Item 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
TERMS OF PREFERRED STOCK. The Purchaser, as a holder of Preferred Stock
of the Issuer, is entitled, at Purchaser's option and at any time prior to
redemption, to convert all or any portion of Purchaser's Preferred Stock into
shares of the Issuer's Common Stock. Each share of Preferred Stock is
convertible initially into one share of the Issuer's Common Stock. The
conversion price is subject to adjustment from time to time in order to prevent
dilution of the conversion rights granted in the Certificate of Designation
Establishing Series A Convertible Participating Preferred Stock of the Issuer
(the "Certificate of Designation"). In the event that the average closing
price of the Issuer's Common Stock equals or exceeds $24.00 per share for ten
consecutive trading days, each share of Preferred Stock will automatically
convert into Common Stock at the then effective conversion ratio.
REGISTRATION RIGHTS. Purchaser has certain registration rights with
respect to the registration of the shares of Common Stock and shares of
Preferred Stock pursuant to a Registration Rights Agreement. The Company is
required to register in four steps the shares of Common Stock and the shares of
the Company's Common Stock issuable upon conversion of Preferred Stock issued to
the Starbelly stockholders in the Merger. The Company is required to register
25% of these shares within ten days after completion of the Merger, an
additional 15% within three months after completion of the Merger, an additional
33 1/3% of these shares within nine months after completion of the Merger and
the remaining shares within two years after completion of the Merger.
STOCKHOLDER AGREEMENTS. As an inducement and a condition to Issuer
entering into the Merger Agreement, Purchaser and Eric Lefkofsky each entered
into a Stockholder's Agreement, dated as of January 17, 2000 (Eric P. Lefkofsky
and Purchaser being collectively referred to as the "Stockholder"), in which
Stockholder agreed to vote the shares of Starbelly held by Purchaser (the
"Purchaser Shares") and to deliver an irrevocable proxy to Issuer to vote the
Purchaser Shares at a meeting of Starbelly's stockholders, in favor of approval
and adoption of the Merger Agreement and the Merger.
The Stockholder Agreements also contain certain standstill and transfer
restrictions which are applicable during all periods when the Stockholder and
its affiliates beneficially own in the aggregate five percent (5%) or more of
the voting power represented by the fully diluted shares of Issuer then
outstanding. Pursuant to those restrictions, Stockholder agreed that, for a
period of three years after the Closing Date, without the prior written consent
of two-thirds of the members of the Board of Directors of Issuer, Stockholder
will not, and will cause each of its affiliates whom it controls not to,
directly or indirectly, alone or in concert with others:
Page 13 of 18
<PAGE>
(i) acquire, offer or propose to acquire or agree to acquire, with
certain exceptions, any securities issued by Issuer which are
entitled to vote for the election of directors or any direct or
indirect rights or options to acquire any such securities in
excess of 1% of the fully diluted shares outstanding of Issuer
immediately following the effective time of the Merger;
(ii) knowingly make or participate in any solicitation of proxies or
consents or make proposals for the approval of stockholders of
Issuer;
(iii) knowingly form, join or participate in a "group" with respect to
Issuer securities;
(iv) deposit any Issuer securities in any voting trust or knowingly
subject any Issuer securities to any voting agreement;
(v) knowingly act to control the management, Board of Directors or
policies of Issuer, with certain exceptions;
(vi) offer, pledge, sell, contract to sell, grant any option, right or
warrant for the sale of, or otherwise dispose of or transfer
("Transfer"), any Issuer securities, if following the Transfer,
the transferee would own in excess of 10% of the voting power
represented by the then outstanding Issuer securities, with
certain exceptions; or
(vii) make any agreement to do any of the foregoing to the extent
restricted.
Notwithstanding anything in the Stockholder's Agreements to the contrary,
each Stockholder's Agreement provides that the foregoing shall not restrict the
Stockholder from taking actions in his capacity as a director or officer of the
Company to the extent and in the circumstances permitted by the Merger Agreement
or as required by applicable law or by his fiduciary duty as a director or
officer of the Company.
In connection with the Merger, the Issuer's board of directors was
expanded from seven to ten directors and Eric Lefkofsky has a right to
designate two persons to fill vacancies created by such expansion; Mr.
Lefkofsky designated himself to fill one of these vacancies and has not yet
designated another party to fill the second vacancy. Additionally, Mr.
Lefkofsky entered into a three year employment agreement with the Issuer and
became its Chief Operating Officer and Vice President on May 3, 2000. So
long as Mr. Lefkofsky's employment agreement is in full effect, he will have
the right to request the board of directors to nominate two of his designees,
and if he does so, Issuer's board of directors (within legal limits) is
required to present such designees to Issuer's shareholders as nominees for
election to the board of directors.
ESCROW AGREEMENTS. As an additional inducement and condition to Issuer
entering into the Merger Agreement, the Purchaser, and four other principal
stockholders of Starbelly, each entered into an escrow agreement to provide the
Issuer with limited protections in the event the Issuer is entitled to
indemnification under the Merger Agreement after the Merger.
In addition, Purchaser entered into an Indemnification Escrow Agreement
pursuant to which the Purchaser deposited 716,750 shares of the Issuer's Common
Stock issued in the Merger, with American National Bank and Trust Company of
Chicago (the "Escrow Agent"). The Escrow Agent will hold such shares in escrow
as security for Starbelly's indemnification obligations under the Merger
Agreement. If
Page 14 of 18
<PAGE>
the Issuer has a proper claim for indemnification, the Issuer will be
entitled to recover the number of shares held in escrow with a value (valued
at $10 per share) equal to the Issuer's claim pro rata from Purchaser and the
other principal stockholders of Starbelly who entered into escrow agreements.
If the Issuer's claim is disputed, the Escrow Agent will retain the number of
shares held in escrow with a value equal to the Purchaser pro rata portion of
the disputed amount (but any undisputed portion will be released to the
Issuer). Unless the Issuer has a claim pending one year after the Merger
closed, all remaining shares in the escrow will be released to the Purchaser.
In addition, Purchaser entered into an Employment Escrow Agreement
pursuant to which Purchaser, deposited 1,165,346 shares of the Issuer's Common
Stock, with the Escrow Agent to secure Eric P. Lefkofsky's performance of his
three-year employment agreement after the Merger. If Mr. Lefkofsky's employment
is terminated for cause as defined in this Employment Agreement or if he
terminates his employment other than for good reason as defined in that
agreement, Purchaser will forfeit shares held in escrow under this agreement.
Under the agreement, 25% of the shares will be released to Purchaser after the
first anniversary of the closing of the Merger, 33-1/3% of the shares will be
released after the second anniversary of the closing of the Merger, the balance
will be released on the third anniversary of the closing of the Merger, subject
to the forfeiture provisions of the agreement.
EXHIBITS. The Articles Amendment, the Merger Agreement, Amendment No. 1
to the Merger Agreement, the Registration Rights Agreement, the Stockholder
Agreements, each of the Escrow Agreements, the Employment Agreement and the
Agreement and Covenant Not to Compete are attached hereto, or incorporated from
the Issuer's other filings, as Exhibits 2, 3, 4, 5, 6, 7, 8, 9, 10 and 11,
respectively and are incorporated herein by this reference. The above brief
summaries of some of the provisions of these documents are subject to
qualification in their entirety by reference to the full text of such documents
attached hereto.
Except as set forth herein or in the Exhibits filed herewith, there are
no contracts, arrangements, understandings or relationships of the type required
to be disclosed in response to Item 6 of Schedule 13D of the Act with respect to
the shares owned by the Reporting Persons.
Item 7. MATERIALS TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
<S> <C>
Exhibit 1 Agreement pursuant to Rule 13d-1(k)(1)(iii) of
Regulation 13D-G.
Exhibit 2 Certificate of Designation Establishing Series A
Convertible Participating Preferred Stock of HA-LO
Industries, Inc. filed with the Secretary of State
of the State of Illinois on May 3, 2000.
Exhibit 3 Agreement and Plan of Merger and Plan of
Reorganization dated as of January 17, 2000, between
HA-LO Industries, Inc., an Illinois corporation,
Starbelly.com, Inc., a Delaware corporation and HA-LO Industries, Inc., a Delaware corporation, is
incorporated herein by reference to the Issuer's
Form 8-K dated May 12, 2000.
Page 15 of 18
<PAGE>
Exhibit 4 Amendment No. 1 dated as of April 11, 2000 to
Agreement and Plan of Merger and Plan of
Reorganization dated as of January 17, 2000, between
HA-LO Industries, Inc., an Illinois corporation,
Starbelly.com, Inc., a Delaware corporation and HA-LO Industries, Inc., a Delaware corporation, is
incorporated herein by reference to the Issuer's
Form 8-K dated May 12, 2000.
Exhibit 5 Registration Rights Agreement dated as of May 3,
2000, between Coventry Partners Family Limited
Partnership and HA-LO Industries, Inc.
Exhibit 6 Stockholder's Agreement dated as of January 17,
2000, between Coventry Partners Family Limited
Partnership and HA-LO Industries, Inc.
Exhibit 7 Stockholder's Agreement dated as of January 17,
2000, between Eric P. Lefkofsky and HA-LO
Industries, Inc.
Exhibit 8 Indemnification Escrow Agreement dated as of May 3,
2000, between Coventry Partners Family Limited
Partnership, HA-LO Industries, Inc., and American
National Bank and Trust Company of Chicago, as
escrow agent.
Exhibit 9 Employment Escrow Agreement dated as of May 3, 2000,
between Coventry Partners Family Limited Partnership
and HA-LO Industries, Inc. and American National
Bank and Trust Company of Chicago, as escrow agent.
Exhibit 10 Employment Agreement dated as of May 3, 2000,
between HA-LO Industries, Inc and Eric Lefkofsky.
Exhibit 11 Agreement and Covenant Not to Compete dated as of
May 3, 2000 between HA-LO Industries, Inc. and Eric
Lefkofsky.
</TABLE>
Page 16 of 18
<PAGE>
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: May 10, 2000 COVENTRY PARTNERS FAMILY LIMITED PARTNERSHIP,
A Delaware Limited Partnership
Coventry, Associates, Inc., a Delaware
corporation, its General Partner
By: /s/ Eric P. Lefkofsky
----------------------
Name: Eric P. Lefkofsky
Title: President and Treasurer
COVENTRY ASSOCIATES, INC., a Delaware Corporation
By: /s/ Eric P. Lefkofsky
----------------------
Name: Eric P. Lefkofsky
Title: President and Treasurer
LEFKOFSKY FAMILY LIMITED LIABILITY COMPANY, a Michigan
limited liability company
By: /s/ Sandra Lefkofsky
----------------------
Name: Sandra Lefkofsky
Title: Managing Member
ERIC P. LEFKOFSKY, an Individual
/s/ Eric P. Lefkofsky
----------------------
Eric P. Lefkofsky
ELIZABETH B. LEFKOFSKY, an Individual
/s/ Elizabeth B. Lefkofsky
---------------------------
Elizabeth B. Lefkofsky
STEVE LEFKOFSKY, an Individual
/s/ Steve Lefkofsky
--------------------
Steve Lefkofsky
JODI NEFF, an Individual
/s/ Jodi Neff
--------------
Jodi Neff
Page 17 of 18
<PAGE>
EXHIBIT 1
Pursuant to Rule 13d-1(k)(1)(iii) of Regulation 13D-G of the General Rules
and Regulations under the Securities Exchange Act of 1934, as amended, the
undersigned agree that the statement to which this Exhibit is attached is filed
on behalf of each of them in the capacities set forth below.
Dated: May 10, 2000 COVENTRY PARTNERS FAMILY LIMITED PARTNERSHIP,
A Delaware Limited Partnership
Coventry, Associates, Inc., a Delaware
corporation, its General Partner
By: /s/ Eric P. Lefkofsky
----------------------
Name: Eric P. Lefkofsky
Title: President and Treasurer
COVENTRY ASSOCIATES, INC., a Delaware Corporation
By: /s/ Eric P. Lefkofsky
----------------------
Name: Eric P. Lefkofsky
Title: President and Treasurer
LEFKOFSKY FAMILY LIMITED LIABILITY COMPANY, a Michigan
limited liability company
By: /s/ Sandra Lefkofsky
---------------------
Name: Sandra Lefkofsky
Title: Managing Member
ERIC P. LEFKOFSKY, an Individual
/s/ Eric P. Lefkofsky
----------------------
Eric P. Lefkofsky
ELIZABETH B. LEFKOFSKY, an Individual
/s/ Elizabeth B. Lefkofsky
---------------------------
Elizabeth B. Lefkofsky
STEVE LEFKOFSKY, an Individual
/s/ Steve Lefkofsky
--------------------
Steve Lefkofsky
JODI NEFF, an Individual
/s/ Jodi Neff
--------------
Jodi Neff
Page 18 of 18
<PAGE>
Exhibit 2
CERTIFICATE OF DESIGNATION ESTABLISHING SERIES A
CONVERTIBLE PARTICIPATING PREFERRED STOCK OF
HA-LO INDUSTRIES, INC.
HA-LO Industries, Inc., an Illinois corporation (the "CORPORATION"),
acting pursuant to Section 6.10 of the Illinois Business Corporation Act, does
hereby submit this Certificate of Designation Establishing Series A Convertible
Participating Preferred Stock.
WHEREAS, Article Fourth of the Articles of Incorporation of the
Corporation authorizes Preferred Stock consisting of 20,000,000 shares, without
par value, issuable from time to time in one or more series;
WHEREAS, the Board of Directors of the Corporation is authorized,
subject to limitations prescribed by law and by the provisions of Article Fourth
of the Corporation's Articles of Incorporation, as amended, to establish and fix
the number of shares to be included in any series of Preferred Stock and the
designations, rights, preferences, privileges, powers, restrictions, limitations
and qualifications of the shares of such series; and
WHEREAS, it is the desire of the Board of Directors to establish and
fix the number of shares to be included in a new series of Preferred Stock
entitled "Series A Convertible Participating Preferred Stock," and with the
designations, rights, preferences, privileges, powers, restrictions, limitations
and qualifications as set forth herein.
NOW, THEREFORE, BE IT RESOLVED, that pursuant to Article Four of the
Corporation's Articles of Incorporation, there is hereby established Series A
Convertible Participating Preferred Stock, of which the Corporation is
authorized to issue 5,100,000 shares (the "SERIES A PREFERRED"), which shares
shall have the designations, rights, preferences, privileges, powers,
restrictions, limitations and qualifications set forth in a supplement to
Article Fourth of the Articles of Incorporation of the Corporation as follows:
SECTION 1. DIVIDENDS.
1A. GENERAL OBLIGATION. Except as otherwise provided herein,
no preferential dividends shall accrue on any share of the Series A Preferred (a
"SHARE").
1B. PARTICIPATING DIVIDENDS. If the Corporation declares or
pays any dividends upon the Common Stock (whether payable in cash, securities or
other property), other than dividends payable solely in shares of Common Stock,
the Corporation shall also declare and pay to the holders of the Series A
Preferred at the same time that it declares and pays such dividends to the
holders of the Common Stock, the dividends which would have been declared and
paid with respect to the Common Stock
1
<PAGE>
issuable upon conversion of the Series A Preferred had all of the outstanding
Series A Preferred been converted immediately prior to the record date for
such dividend, or if no record date is fixed, the date as of which the record
holders of Common Stock entitled to such dividends are to be determined.
Dividends payable to the holders of the Shares pursuant to this Section 1B
are referred to as "PARTICIPATING DIVIDENDS."
SECTION 2. LIQUIDATION PREFERENCE. Upon any liquidation,
dissolution or winding up of the Corporation (whether voluntary or involuntary),
each holder of Series A Preferred shall be entitled to be paid (i) before any
distribution or payment is made upon any Junior Securities, an amount in cash
equal to the aggregate Liquidation Value of all Shares held by such holder (plus
all accrued but unpaid Participating Dividends), and (ii) in addition to the
payment under foregoing clause (i), an amount equal to such holder's pro rata
portion (based upon the aggregate number of Shares then outstanding) of the
Participating Liquidation Amount (such amounts, collectively the "SERIES A
PREFERENCE AMOUNT"). If, upon any such liquidation, dissolution or winding up of
the Corporation, the Corporation's assets to be distributed among the holders of
the Series A Preferred hereunder are insufficient to permit payment to such
holders of the aggregate Liquidation Value to which they are entitled, then the
entire assets available to be distributed to the Corporation's stockholders
shall be distributed pro rata among the holders of Series A Preferred. Not less
than 30 days prior to any payments under this Section 2A, the Corporation shall
mail written notice of the liquidation, dissolution or winding up to each record
holder of Series A Preferred, setting forth in reasonable detail the amount of
proceeds to be paid with respect to each Share and each share of Common Stock in
connection with such liquidation, dissolution or winding up.
SECTION 3. REDEMPTIONS.
3A. REDEMPTIONS UPON REQUEST.
(i) Each holder of Shares may require the
Corporation to redeem all or any part of such holder's Shares of Series A
Preferred by delivering a written request for redemption, together with a
certificate or certificates representing the Series A Preferred to be
redeemed (collectively, a "REDEMPTION NOTICE"), to the principal office of
the Corporation at any time during the 30-day period commencing on the one
year anniversary of the Date of Issuance (such 30-day period, the "REDEMPTION
PERIOD"); the redemption right provided by this Section 3A shall terminate
and cease to be exercisable with respect to any Shares for which the
Corporation has not received a Redemption Notice within the Redemption
Period. The Corporation shall redeem all Shares of Series A Preferred
properly surrendered for redemption at a price per Share equal to the
Liquidation Value plus all accrued and unpaid Participating Dividends, if
any. As soon as practicable following the Corporation's receipt of a
Redemption Notice timely delivered in accordance with this Section 3A, but in
any event within 60 days thereafter, the Corporation shall deliver to the
holder of the Shares surrendered for redemption cash in an amount equal to
the product of the Liquidation Value multiplied by the number of Shares being
redeemed, plus all accrued but unpaid Participating Dividends (the
"REDEMPTION PAYMENT AMOUNT"). If the funds of the Corporation legally
2
<PAGE>
available for redemption of Shares are insufficient to pay the Redemption
Payment Amount in full, then those funds that are legally available will be
used to redeem the maximum possible number of such Shares ratably among the
holders of Shares required to be redeemed.
(ii) Upon the occurrence of an Event of
Noncompliance, any Shares properly tendered for redemption for which the
Redemption Payment Amount has not been paid ("DEFAULT SHARES") shall remain
outstanding and entitled to all the rights and preferences of Series A Preferred
provided herein. If and for so long as an Event of Noncompliance continues, the
Default Shares shall accrue dividends, at a rate of 8% per annum on the Issuance
Price (the "INTEREST RATE"), for the period commencing on the date such Event of
Noncompliance first occurs with respect to such Default Shares until the date
the Corporation pays in full the Redemption Payment Amount plus interest payable
pursuant to this Section 3A for such Default Shares. If an Event of
Noncompliance continues for six months or longer, the Interest Rate with respect
to the Default Shares that are the subject of such Event of Noncompliance shall
increase by 4% per annum on each six month anniversary of the date the Event of
Noncompliance first occurred.
(iii) At any time prior to a redemption pursuant to
this Section 3A, the holder of such Shares shall be entitled instead to convert
all or any portion of the Shares pursuant to Section 5 hereof.
3B. REDEMPTION UPON SIGNIFICANT SALE. If the Corporation sells
all of the capital stock, or all or substantially all of the assets, of any
Subsidiary or significant business division of the Corporation for consideration
consisting, in whole or in part, of cash (each such sale, a "SIGNIFICANT SALE")
while any Shares of Series A Preferred remain outstanding, then the Corporation
shall use all of the cash proceeds of such Significant Sale to fund the working
capital and general corporate needs of the Corporation (including repayment of
outstanding indebtedness under the Corporation's line of credit or other
commercial bank loan) and/or to redeem the maximum possible number of Shares of
Series A Preferred that can be redeemed with such cash proceeds. The Corporation
shall deliver written notice of each Significant Sale to each holder of Series A
Preferred no later than 15 days after the Significant Sale has been consummated.
To the extent that the Corporation does not use all of the cash proceeds of any
Significant Sale for working capital and general corporate purposes within 90
days of such Significant Sale, the Corporation, within 15 days after the
expiration of such 90-day period, shall deliver a written purchase offer to all
holders of Series A Preferred then outstanding and promptly shall purchase
Shares of Series A Preferred from the holders who accept such offer, pro rata
among all such accepting holders based on the number of Shares then held by
each. The purchase price per Share shall equal the Liquidation Value plus all
accrued and unpaid Participating Dividends, if any.
3C. DIVIDENDS AFTER REDEMPTION DATE. No Share shall be
entitled to any dividends accruing after the date on which the Redemption
Payment Amount (plus accrued interest pursuant to Section 3A) in respect of all
Shares tendered for redemption pursuant hereto has been paid to the holder of
such Share in full in cash. On such date,
3
<PAGE>
all rights of the holder of such Shares shall cease, and such Shares shall no
longer be deemed to be issued and outstanding.
3D. REDEEMED OR OTHERWISE ACQUIRED SHARES. Any Shares which
are redeemed or otherwise acquired by the Corporation shall, at the
Corporation's election, be held in treasury, canceled and retired to authorized
but unissued shares and shall not be reissued, sold or transferred.
3E. OTHER REDEMPTIONS OR ACQUISITIONS. The Corporation shall
not be entitled to redeem or otherwise acquire any Shares of Series A Preferred,
except as expressly authorized herein or pursuant to a purchase offer made pro
rata to all holders of Series A Preferred on the basis of the number of Shares
owned by each such holder and, in such event, such offer shall be subject to the
acceptance of the applicable holder (in each case in such holder's sole
discretion).
3F. PROHIBITIONS ON REDEMPTIONS. In the event of any
prohibition on the redemption (whether pursuant to this Section 3 or otherwise)
of the Shares pursuant to any agreement, instrument or other arrangement to
which the Corporation is a party or its assets are bound, the Corporation will
use best efforts to obtain waivers or other appropriate relief from such
restrictions in order to permit any redemptions required pursuant to these
Articles of Incorporation and use commercially reasonable efforts to obtain
replacement financing for the Shares in order to permit any such required
redemption. This Section 3F shall not be interpreted as authorizing or otherwise
empowering the Corporation to enter into any such agreement, instrument or other
arrangement.
3G. OPTIONAL REDEMPTION UPON A CHANGE OF CONTROL. Upon the
consummation of a Change of Control, each holder of Series A Preferred shall be
entitled, at such holder's option and in such holder's sole discretion, to
require the Corporation to redeem all but not less than all Shares of Series A
Preferred owned by such holder for a redemption price equal to the greater of
(i) the aggregate Liquidation Value of such Shares (plus all accrued but unpaid
Participating Dividends), or (ii) the amount of consideration that would be
payable to such holder if such holder had converted all Shares owned by such
holder into Common Stock immediately prior to the effective time of the Change
of Control. Each holder of Series A Preferred shall have the right to elect the
benefits of either this Section 3G, Section 5A or Section 5G hereof in
connection with any such transaction.
SECTION 4. VOTING RIGHTS. The holders of the Series A
Preferred shall be entitled to notice of all stockholder meetings in accordance
with the Corporation's bylaws, and shall be entitled to vote on all matters
submitted to the stockholders for a vote together with the holders of the Common
Stock and any other classes of capital stock voting with the Common Stock all
voting together as a single class. Each Share of Series A Preferred (including
any Default Shares not yet redeemed pursuant to Section 3) shall be entitled to
one vote for each share of Common Stock issuable upon conversion of
4
<PAGE>
such Share of Series A Preferred as of the record date for such vote or, if
no record date is specified, as of the date of such vote.
SECTION 5. CONVERSION.
5A. OPTIONAL CONVERSIONS. At any time and from time
to time, any holder of Series A Preferred may convert all or any portion of the
Series A Preferred held by such holder into a number of shares of Conversion
Stock computed by multiplying the number of Shares to be converted by a fraction
("CONVERSION RATIO"), the numerator of which is the Issuance Price and the
denominator of which is the Conversion Price then in effect.
5B. AUTOMATIC CONVERSIONS. Each Share of Series A
Preferred automatically, without action on the part of the Corporation or the
holder thereof, shall be converted into shares of Common Stock, at the then
effective Conversion Ratio, in the event that the average of the closing prices
of the Common Stock on the New York Stock Exchange (or, if the Common Stock at
any time is not listed on the New York Stock Exchange, on the primary securities
exchange on which the Common Stock may at the time be listed) equals or exceeds
$24.00 per share for any 10 consecutive trading days that occur on or after the
Date of Issuance. Any such automatic conversion shall be deemed to have occurred
as of the close of trading on the 10th such consecutive trading day.
5C. CONVERSION PROCEDURE.
(ii) Except as otherwise provided herein, each
conversion of Series A Preferred shall be deemed to have been effected as of the
close of business on the date on which the certificate or certificates
representing the Series A Preferred to be converted have been surrendered for
conversion at the principal office of the Corporation. In the event of an
automatic conversion pursuant to Section 5B, all Shares of Series A Preferred
then outstanding shall be converted automatically without any further action by
the holders of such shares and whether or not the certificates representing such
shares are surrendered to the Corporation or its transfer agent; PROVIDED,
HOWEVER, that the Corporation shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon such automatic conversion
unless the certificates evidencing such Shares of Series A Preferred are
delivered to the Corporation or its transfer agent as provided above. On the
date any such conversion has been effected, the rights of the holder of the
Shares converted, as a holder of Series A Preferred, shall cease and the Person
or Persons in whose name or names any certificate or certificates for shares of
Conversion Stock are to be issued upon such conversion shall be deemed to have
become the holder or holders of record of the shares of Conversion Stock
represented thereby.
(iii) The conversion rights with respect to any Share
surrendered to the Corporation for redemption shall terminate on the date such
Share has been redeemed, unless the Corporation has failed to pay to the holder
thereof the full Redemption Payment Amount payable with respect to such Share.
5
<PAGE>
(iv) Notwithstanding any other provision hereof,
if a conversion of Series A Preferred is to be made in connection with a
Change of Control or other transaction affecting the Corporation, the
conversion of any Shares may, at the election of the holder thereof, be
conditioned upon the consummation of such transaction, in which case such
conversion shall not be deemed to be effective until such transaction has
been consummated.
(v) As soon as possible after a conversion has been
effected (but in any event within three business days), the Corporation shall
deliver to the converting holder:
(a) a certificate or certificates
representing the number of shares of Conversion Stock issuable by
reason of such conversion in such name or names and such denomination
or denominations as the converting holder has specified;
(b) the amount of all Participating
Dividends declared and remaining unpaid with respect to the Shares
converted, plus the amount payable under subsection (viii) below with
respect to such conversion; and
(c) a certificate representing any Shares
which were represented by the certificate or certificates delivered to
the Corporation in connection with such conversion but which were not
converted.
(vi) The Corporation shall not close its books
against the transfer of Series A Preferred or of Conversion Stock issued or
issuable upon conversion of Series A Preferred in any manner which significantly
interferes with the timely conversion of Series A Preferred. The Corporation
shall assist and cooperate with any holder of Shares required to make any
governmental filings or obtain any governmental approval prior to or in
connection with any conversion of Shares hereunder (including, without
limitation, making any filings required to be made by the Corporation).
(vii) The Corporation shall at all times reserve and
keep available out of its authorized but unissued shares of Conversion Stock,
solely for the purpose of issuance upon the conversion of the Series A
Preferred, such number of shares of Conversion Stock issuable upon the
conversion of all outstanding Series A Preferred. All shares of Conversion Stock
which are so issuable shall, when issued, be duly and validly issued, fully paid
and nonassessable and free from all taxes, liens and charges. The Corporation
shall take all such actions as may be necessary to assure that all such shares
of Conversion Stock may be so issued without violation of any applicable law or
governmental regulation or any requirements of the New York Stock Exchange
and/or any other domestic securities exchange upon which shares of Conversion
Stock may be listed (except for official notice of issuances which shall be
immediately delivered by the Corporation upon each such issuance). The
Corporation shall not take any action which would cause the number of authorized
but unissued shares of Conversion Stock to be less
6
<PAGE>
than the number of such shares required to be reserved hereunder for issuance
upon conversion of the Series A Preferred.
(viii) In lieu of any fractional shares to which the
holder of Series A Preferred Stock otherwise would be entitled, the Corporation
shall pay to such holder cash equal to such fraction multiplied by the closing
price of the Common Stock on the New York Stock Exchange, or any other domestic
securities exchange on which the Common Stock is listed or admitted to unlisted
trading privileges, on the trading date immediately prior to the conversion
date.
5D. CONVERSION PRICE.
(i) In order to prevent dilution of the conversion
rights granted under this Section 5, the Conversion Price shall be subject to
adjustment from time to time pursuant to this Section 5D.
(ii) If and whenever the Corporation issues or sells
or, in accordance with paragraph 5E is deemed to have issued or sold, any shares
of its Common Stock for a consideration per share less than the Conversion Price
in effect immediately prior to the time of such issuance or sale, then
immediately upon such issue or sale (or deemed issue or sale) the Conversion
Price shall, except with respect to the Shares then held by any holder of Shares
who actually purchases any such securities from the Corporation in such issuance
or sale (or deemed issuance or sale), be reduced to the Conversion Price
determined by dividing (a) the sum of (x) the product derived by multiplying the
Conversion Price in effect immediately prior to such issue or sale (or deemed
issue or sale) by the number of shares of Common Stock Deemed Outstanding
immediately prior to such issue or sale, plus (y) the consideration, if any,
received by the Corporation upon such issue or sale, by (b) the number of shares
of Common Stock Deemed Outstanding immediately after such issue or sale.
(iii) Notwithstanding the foregoing, there shall be
no adjustment in the Conversion Price as a result of any issue or sale (or
deemed issue or sale) of shares of Common Stock (a) issued to, or issued upon
exercise of options granted to, employees, directors or consultants of the
Corporation and its Subsidiaries pursuant to stock option plans and stock
ownership plans approved by the Corporation's Board of Directors, (b) issuable
upon the conversion of the Series A Preferred, or (c) issued by the Corporation
in connection with acquisitions, bank financing, the formation of strategic
partnership and similar transactions approved by the Corporation's Board of
Directors.
5E. EFFECT ON CONVERSION PRICE OF CERTAIN EVENTS. For purposes
of determining the adjusted Conversion Price under paragraph 5D, the following
shall be applicable:
(i) ISSUANCE OF RIGHTS OR OPTIONS. If the
Corporation in any manner grants or sells any Options and the price per share
for which Common Stock is issuable upon the exercise of such Options, or upon
conversion or exchange of any
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Convertible Securities issuable upon exercise of such Options, is less than
the Conversion Price in effect immediately prior to the time of the granting
or sale of such Options, then the total maximum number of shares of Common
Stock issuable upon the exercise of such Options or upon conversion or
exchange of the total maximum amount of such Convertible Securities issuable
upon the exercise of such Options shall be deemed to be outstanding and to
have been issued and sold by the Corporation at the time of the granting or
sale of such Options for such price per share. For purposes of this
paragraph, the "price per share for which Common Stock is issuable" shall be
determined by dividing (a) the total amount, if any, received or receivable
by the Corporation as consideration for the granting or sale of such Options,
plus the minimum aggregate amount of additional consideration payable to the
Corporation upon exercise of all such Options, plus in the case of such
Options which relate to Convertible Securities, the minimum aggregate amount
of additional consideration, if any, payable to the Corporation upon the
issuance or sale of such Convertible Securities and the conversion or
exchange thereof, by (b) the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon the conversion or exchange
of all such Convertible Securities issuable upon the exercise of such
Options. No further adjustment of the Conversion Price shall be made when
Convertible Securities are actually issued upon the exercise of such Options
or when Common Stock is actually issued upon the exercise of such Options or
the conversion or exchange of such Convertible Securities.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the
Corporation in any manner issues or sells any Convertible Securities and the
price per share for which Common Stock is issuable upon conversion or exchange
thereof is less than the Conversion Price in effect immediately prior to the
time of such issue or sale, then the maximum number of shares of Common Stock
issuable upon conversion or exchange of such Convertible Securities shall be
deemed to be outstanding and to have been issued and sold by the Corporation at
the time of the issuance or sale of such Convertible Securities for such price
per share. For the purposes of this paragraph, the "price per share for which
Common Stock is issuable" shall be determined by dividing (a) the total amount
received or receivable by the Corporation as consideration for the issue or sale
of such Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the conversion or
exchange thereof, by (b) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities. No
further adjustment of the Conversion Price shall be made when Common Stock is
actually issued upon the conversion or exchange of such Convertible Securities,
and if any such issue or sale of such Convertible Securities is made upon
exercise of any Options for which adjustments of the Conversion Price had been
or are to be made pursuant to other provisions of this Section 5, no further
adjustment of the Conversion Price shall be made by reason of such issue or
sale.
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If
the purchase price provided for in any Options, the additional consideration, if
any, payable upon the conversion or exchange of any Convertible Securities or
the rate at which any
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Convertible Securities are convertible into or exchangeable for Common Stock
changes at any time, the Conversion Price in effect at the time of such
change shall be immediately adjusted to the Conversion Price which would have
been in effect at such time had such Options or Convertible Securities still
outstanding provided for such changed purchase price, additional
consideration or conversion rate, as the case may be, at the time initially
granted, issued or sold. For purposes of this Section 5E, if the terms of any
Option or Convertible Security which was outstanding as of the date of the
initial issuance of the Series A Preferred are changed in the manner
described in the immediately preceding sentence, then such Option or
Convertible Security and the Common Stock deemed issuable upon exercise,
conversion or exchange thereof shall be deemed to have been issued as of the
date of such change; PROVIDED THAT no such change shall at any time cause the
Conversion Price hereunder to be increased.
(iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED
CONVERTIBLE SECURITIES. Upon the expiration of any Option or the termination of
any right to convert or exchange any Convertible Security without the exercise
of any such Option or right, the Conversion Price then in effect hereunder shall
be adjusted immediately to the Conversion Price which would have been in effect
at the time of such expiration or termination had such Option or Convertible
Security, to the extent outstanding immediately prior to such expiration or
termination, never been issued. For purposes of paragraph 5E, the expiration or
termination of any Option or Convertible Security which was outstanding as of
the date of the initial issuance of the Series A Preferred shall not cause the
Conversion Price hereunder to be adjusted unless, and only to the extent that, a
change in the terms of such Option or Convertible Security caused it to be
deemed to have been issued after the date of issuance of the Series A Preferred.
(v) CALCULATION OF CONSIDERATION RECEIVED. If any
Common Stock, Option or Convertible Security is issued or sold or deemed to have
been issued or sold for cash, the consideration received therefor shall be
deemed to be the amount received by the Corporation therefor (net of
non-customary discounts, commissions and related expenses). If any Common Stock,
Option or Convertible Security is issued or sold for a consideration other than
cash, the amount of the consideration other than cash received by the
Corporation shall be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of consideration
received by the Corporation shall be the Market Price thereof as of the date of
receipt. If any Common Stock, Option or Convertible Security is issued to the
owners of the non-surviving entity in connection with any merger in which the
Corporation or any Subsidiary of the Corporation is the surviving corporation,
the amount of consideration therefor shall be deemed to be the fair value of
such portion of the assets and business of the non-surviving entity as is
attributable to such Common Stock, Option or Convertible Security, as the case
may be. The fair value of any consideration other than cash and securities shall
be determined by the Board of Directors of the Corporation, in good faith, and
reported to the holders of Series A Preferred in writing. If any holders of
Shares object to such determination of fair value within 20 days after receipt
of such written notice, the Board of Directors and such holder shall negotiate
in good faith to reach agreement regarding such fair market value; provided
that, if such parties are unable to reach
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agreement within a reasonable period of time, the fair value of such
consideration shall be determined by an independent appraiser experienced in
valuing such type of consideration selected by the Corporation and approved
by the holders of at least a majority of the then outstanding Shares (such
approval not to be unreasonably withheld). The determination of such
appraiser shall be final and binding upon the parties, and the fees and
expenses of such appraiser shall be borne by the Corporation.
(vi) INTEGRATED TRANSACTIONS. In case any Option is
issued in connection with the issue or sale of other securities of the
Corporation, together comprising one integrated transaction in which no specific
consideration is allocated to such Option by the parties thereto, the Option
shall be deemed to have been issued for the Market Price of the shares of Common
Stock issuable thereunder (taking into account the securities issued in such
integrated transaction).
(vii) TREASURY SHARES. The number of shares of Common
Stock outstanding at any given time shall not include shares owned or held by or
for the account of the Corporation or any Subsidiary, and the disposition of any
shares so owned or held shall be considered an issue or sale of Common Stock.
(viii) RECORD DATE. If the Corporation takes a record
of the holders of Common Stock for the purpose of entitling them (a) to receive
a dividend or other distribution payable in Common Stock, Options or in
Convertible Securities, or (b) to subscribe for or purchase Common Stock,
Options or Convertible Securities, then such record date shall be deemed to be
the date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or upon the making of such
other distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
(ix) MINIMAL ADJUSTMENTS. All calculations under
this Section 5 shall be made to the nearest cent or to the nearest one
hundredth (1/100) of a share, as the case may be. No adjustment in the
Conversion Price shall be made if such adjustment would result in a change in
the Conversion Price of less than $0.01; however, any adjustment of less than
$0.01 that is not made shall be carried forward and shall be made at the time
of and together with any subsequent adjustment which, on a cumulative basis,
amounts to an adjustment of $0.01 or more in the Conversion Price.
5F. SUBDIVISION OR COMBINATION OF COMMON STOCK. If the
Corporation at any time subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding shares of
Common Stock into a greater number of shares, the Conversion Price in effect
immediately prior to such subdivision shall be proportionately reduced, and if
the Corporation at any time combines (by reverse stock split or otherwise) one
or more classes of its outstanding shares of Common Stock into a smaller number
of shares, the Conversion Price in effect immediately prior to such combination
shall be proportionately increased.
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5G. CONVERSION UPON A RECAPITALIZATION. Prior to the
consummation of any recapitalization, reorganization, reclassification,
consolidation or merger involving the Corporation which is effected in such a
manner that the holders of Common Stock are entitled to receive (either directly
or upon subsequent liquidation) stock, securities, cash or assets with respect
to or in exchange for Common Stock (any such event, a "RECAPITALIZATION"), the
Corporation shall make appropriate provisions (in form and substance
satisfactory to the holders of a majority of the then outstanding Shares of
Series A Preferred Stock) to insure that each of the holders of Series A
Preferred shall thereafter have the right to acquire and receive, in lieu of or
in addition to (as the case may be) the shares of Conversion Stock immediately
theretofore acquirable and receivable upon the conversion of such holder's
Series A Preferred, such shares of stock, securities, cash or assets as such
holder would have received in connection with such Recapitalization if such
holder had converted its Series A Preferred immediately prior to such
Recapitalization. In each such case, the Corporation also shall make appropriate
provisions (in form and substance satisfactory to the holders of a majority of
the then outstanding Shares of Series A Preferred Stock) to insure that the
provisions of this Section 5 thereafter shall be applicable to the Series A
Preferred (including, in the case of any such consolidation, merger or sale in
which the successor entity or purchasing entity is not the Corporation, an
immediate adjustment of the Conversion Price to the value for the Common Stock
reflected by the terms of such Recapitalization, and a corresponding immediate
adjustment in the number of shares of Conversion Stock acquirable and receivable
upon conversion of Series A Preferred, if the value so reflected is less than
the Conversion Price in effect immediately prior to such Recapitalization).
5H. CERTAIN EVENTS. If any event occurs of the type
contemplated by the provisions of this Section 5 but not expressly provided for
by such provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with equity features),
then the Corporation's Board of Directors shall make an appropriate adjustment
in the Conversion Price so as to protect the rights of the holders of Series A
Preferred; provided that no such adjustment shall increase the Conversion Price
as otherwise determined pursuant to this Section 5 or decrease the number of
shares of Conversion Stock issuable upon conversion of each Share of Series A
Preferred.
5I. NOTICES.
(i) Promptly upon any adjustment of the Conversion
Price, the Corporation shall give written notice thereof to all holders of
Series A Preferred, setting forth in reasonable detail and certifying the
calculation of such adjustment.
(ii) The Corporation shall give written notice to all
holders of Series A Preferred at least 20 days prior to the date on which the
Corporation closes its books or takes a record (a) with respect to any dividend
or distribution upon Common Stock, (b) with respect to any pro rata subscription
offers to holders of Common Stock or (c) for determining rights to vote with
respect to any Change of Control, dissolution or liquidation.
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(iii) The Corporation shall also give written notice
to all holders of Series A Preferred at least 20 days prior to the date on which
any Recapitalization shall take place.
SECTION 6. PROTECTIVE PROVISIONS. In addition to any other
class vote that may be required by law or as provided herein, so long as any
Shares of Series A Preferred are outstanding, the Corporation shall not, without
first obtaining the affirmative vote of the holders of at least a majority of
the Shares of Series A Preferred then outstanding, voting as a class:
(i) increase the number of authorized Series A Preferred or
issue any additional shares of Series A Preferred, except as
contemplated by the terms of the Series A Preferred;
(ii) amend or modify the powers, preferences or rights of the
Series A Preferred or amend, alter or repeal any of the provisions of
the Corporation's Articles of Incorporation or By-laws (including by
merger or similar transaction or otherwise) so as to eliminate the
Series A Preferred or otherwise affect adversely the powers,
preferences or rights of the holders of Series A Preferred; or
(iii) other than the Series A Preferred, create, authorize,
issue or permit to exist any class of capital stock or series of
preferred shares that ranks senior to the Series A Preferred with
respect to dividend rights or rights on liquidation, winding up or
dissolution, or reclassify any class or series of any junior stock
into, or authorize any securities exchangeable for, convertible into or
evidencing the right to purchase, any such class or series.
SECTION 7. TRANSFERS; REGISTRATION OF TRANSFER. The Shares of
Series A Preferred shall be freely transferable, subject to compliance with
applicable securities laws. The Corporation shall keep at its principal office a
register for the registration of Series A Preferred. Upon the surrender of any
certificate representing Series A Preferred at such place, the Corporation
shall, at the request of the record holder of such certificate, execute and
deliver (at the Corporation's expense) a new certificate or certificates in
exchange therefor representing in the aggregate the number of Shares represented
by the surrendered certificate. Each such new certificate shall be registered in
such name and shall represent such number of Shares as is requested by the
holder of the surrendered certificate and shall be substantially identical in
form to the surrendered certificate, and dividends shall accrue on the Series A
Preferred represented by such new certificate from the date to which dividends
have been fully paid on such Series A Preferred represented by the surrendered
certificate.
SECTION 8. REPLACEMENT OF CERTIFICATES. Upon receipt of
evidence reasonably satisfactory to the Corporation (an affidavit of the
registered holder shall be satisfactory) of the ownership and the loss,
theft, destruction or mutilation of any certificate evidencing Shares of
Series A Preferred, and in the case of any such loss, theft
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or destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation (provided that if the holder is a financial institution or other
institutional investor its own agreement shall be satisfactory), or, in the
case of any such mutilation upon surrender of such certificate, the
Corporation shall (at its expense) execute and deliver in lieu of such
certificate a new certificate of like kind representing the number of Shares
of such class represented by such lost, stolen, destroyed or mutilated
certificate and dated the date of such lost, stolen, destroyed or mutilated
certificate, and dividends shall accrue on the Series A Preferred represented
by such new certificate from the date to which dividends have been fully paid
on such lost, stolen, destroyed or mutilated certificate.
SECTION 9. DEFINITIONS.
"CHANGE OF CONTROL" means any (i) reorganization or merger of
the Corporation with or into any other corporation or entity (other than a
consolidation or merger in which the Corporation is the continuing entity and
which does not result in any adverse change in the rights, preferences or
privileges of the Common Stock), (ii) a sale, lease, exchange or transfer of all
or substantially all of the assets of the Corporation in one transaction or
series of related transactions, (iii) a change in the majority of the Board of
Directors, occurring during any 13-month period commencing on January 17, 2000
that was not approved by a majority of the directors serving on January 17, 2000
or by a majority of those subsequently elected directors whose election or
nomination for election was approved by a majority of the directors then serving
on the Board of Directors, (iv) merger, consolidation, reorganization or similar
transaction involving the Corporation, or the issuance, sale or transfer of
voting capital stock of the Corporation, by the Corporation or otherwise, in one
transaction or series of related transactions, such that, after the consummation
of any such transaction(s), the stockholders of the Corporation prior to the
transaction(s) own less than 50% of the voting securities of the surviving
corporation or entity or the Corporation, as the case may be, or (v) the
acquisition by any "person" (as such term is used in Sections 13(d) and 14(d)(2)
of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT")), or two
or more persons acting in concert, of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of 51% or more of the
outstanding shares of voting stock of the Corporation; PROVIDED, HOWEVER, that
the foregoing shall exclude any such acquisition (A) made by the Corporation or
any Subsidiary, or (B) made by an employee benefit plan (or related trust)
sponsored or maintained by the Corporation.
"COMMON STOCK" means, collectively, the Corporation's no par
value common stock and any capital stock of any class of the Corporation
hereafter authorized that is not limited to a fixed sum or percentage of par or
stated value in respect to the rights of the holders thereof to participate in
dividends or in the distribution of assets upon any liquidation, dissolution or
winding up of the Corporation.
"COMMON STOCK DEEMED OUTSTANDING" means, at any given time,
without duplication, the number of shares of Common Stock actually outstanding
at such time, plus the number of shares of Common Stock deemed to be outstanding
pursuant to subparagraphs 5D(i) and 5D(ii) hereof whether or not the Options or
Convertible
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Securities are actually exercisable at such time, plus the number of shares
of Common Stock issuable upon conversion of the outstanding Series A
Preferred, plus the number of shares of Common Stock issuable upon exercise
of outstanding options and warrants to purchase Common Stock as such number
of shares is proportionately adjusted for stock splits, stock dividends,
stock combinations and other recapitalizations.
"CONVERSION PRICE" initially shall be equal to $10.00, but is
subject to adjustment in accordance with Section 5.
"CONVERSION STOCK" means shares of the Corporation's Common
Stock; provided that if there is a change such that the securities issuable upon
conversion of the Series A Preferred are issued by an entity other than the
Corporation or there is a change in the type or class of securities so issuable,
then the term "Conversion Stock" shall mean the security issuable upon
conversion of each share of the Series A Preferred if such security is issuable
in shares, or shall mean the smallest unit in which such security is issuable if
such security is not issuable in shares.
"CONVERTIBLE SECURITIES" means any stock or securities
directly or indirectly convertible into or exchangeable for Common Stock.
"DATE OF ISSUANCE" means the date on which the Corporation
initially issues any Shares, regardless of the number of times transfer of such
Share is made on the stock records maintained by or for the Corporation and
regardless of the number of certificates which may be issued to evidence such
Share.
"EVENT OF NONCOMPLIANCE" means, with respect to any Shares for
which a redemption notice and the certificates representing such Shares have
been timely received by the Corporation, the failure by the Corporation to have
paid, within the 60-day period described in Section 3A, the Redemption Payment
Amount (including any accrued and unpaid Participating Dividends).
"ISSUANCE PRICE" shall be equal to $10.00 (as proportionately
adjusted for stock splits, stock dividends, stock combinations and other
recapitalizations).
"JUNIOR SECURITIES" means the Common Stock and any capital
stock or other equity securities of the Corporation with rights and preferences
(including with respect to liquidation) subordinate to the Series A Preferred.
"LIQUIDATION VALUE" of any Share as of any particular date
shall be equal to $10.00 (as proportionately adjusted for stock splits, stock
dividends, stock combinations and other recapitalizations).
"MARKET PRICE" of any security means the average of the
closing prices of such security's sales on the primary securities exchange on
which such security may at the time be listed, or, if there has been no sales on
such exchange on any day, the average of the highest bid and lowest asked prices
on such exchange at the end of such day, or, if
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on any day such security is not so listed, the average of the representative
bid and asked prices quoted in the Nasdaq System as of 4:00 P.M., New York
time, or, if on any day such security is not quoted in the Nasdaq System, 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 successor organization, in each such
case averaged over a period of 21 trading days consisting of the days as of
which "Market Price" is being determined and the 20 consecutive business days
prior to such day. If at any time such security is not listed on any
securities exchange or quoted in the Nasdaq System or the over-the-counter
market, the "Market Price" shall be the fair value thereof determined jointly
by the Corporation and the designee of holders of at least a majority of the
then outstanding Shares. If such parties are unable to reach agreement within
a reasonable period of time, such fair value shall be determined by an
independent appraiser experienced in valuing securities selected by the
Corporation and approved by the designee of holders of at least a majority of
the then outstanding Shares (such approval not to be unreasonably withheld).
The determination of such appraiser shall be final and binding upon the
parties, and the Corporation shall pay the fees and expenses of such
appraiser.
"OPTIONS" means any rights, warrants or options to subscribe
for or purchase Common Stock or Convertible Securities.
"PARTICIPATING LIQUIDATION AMOUNT" means that portion of all
remaining assets and funds of the Corporation available for distribution to the
stockholders of the Corporation after payment in full of the aggregate
Liquidation Value with respect to the Shares of Series A Preferred then
outstanding, expressed as a fraction the numerator of which is the number of
shares of Common Stock issuable upon the conversion under Section 6 of all
Series A Preferred outstanding immediately prior to such event and the
denominator of which is the sum of the number of shares of Common Stock
outstanding immediately prior to such event plus the number of all shares of
Common Stock issuable upon conversion under Section 6 of all Series A Preferred
outstanding immediately prior to such event.
"PERSON" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization or a governmental entity or any
department, agency or political subdivision thereof.
"SUBSIDIARY" means, with respect to any Person, any
corporation, limited liability company, partnership, association or other
business entity of which (i) if a corporation, a majority of the total voting
power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by that Person or
one or more of the other Subsidiaries of that Person or a combination thereof,
or (ii) if a limited liability company, partnership, association or other
business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more
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Subsidiaries of that person or a combination thereof. For purposes hereof, a
Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other business entity
if such Person or Persons shall be allocated a majority of limited liability
company, partnership, association or other business entity gains or losses or
shall be or control the managing general partner of such limited liability
company, partnership, association or other business entity.
SECTION 10. AMENDMENTS AND WAIVERS. No amendment, modification
or waiver shall be binding or effective with respect to any provision of this
Statement of Resolution without the prior written consent of the holders of at
least 60% of the then outstanding Shares; provided that no change in the terms
hereof may be accomplished by merger or consolidation of the Corporation with
another corporation or entity unless the Corporation has obtained the prior
written consent of the holders of the applicable percentage of the Series A
Preferred then outstanding.
SECTION 11. NOTICES. Except as otherwise expressly provided
hereunder, all notices referred to herein shall be in writing and shall be
delivered by reputable overnight courier service, charges prepaid, and shall be
deemed to have been given when so sent (i) to the Corporation, at its principal
executive offices and (ii) to any stockholder, at such holder's address as it
appears in the stock records of the Corporation (unless otherwise indicated by
any such holder).
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Exhibit 5
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
May 3, 2000, between the undersigned former stockholder ("Stockholder") of
Starbelly.com, Inc., a Delaware corporation f/k/a TheZebra.com, Inc. (the
"Company"), and HA-LO Industries, Inc., an Illinois corporation ("Acquiror").
WHEREAS, the Company, Acquiror and HA-LO Industries, Inc., a Delaware
corporation and wholly owned subsidiary of Acquiror ("Acquiror Sub"), have
entered into an Agreement and Plan of Merger and Plan of Reorganization (the
"Merger Agreement"), providing for the merger (the "Merger") of the Company with
and into Acquiror Sub pursuant to the terms and conditions of the Merger
Agreement;
WHEREAS, upon consummation of the Merger, the stockholders of the Company
(the "Stockholders") will receive shares of Common Stock, no par value, of
Acquiror ("Common Stock") and shares of Series A Convertible Preferred Stock, no
par value, of Acquiror ("Preferred Stock");
WHEREAS, Acquiror has agreed to register the shares of Common Stock issued
to the Stockholder in the Merger, together with the shares of Common Stock
issuable upon conversion of Preferred Stock issued to the Stockholder in the
Merger (together, "Acquiror Stock"), and any shares of capital stock issued or
issuable, from time to time (with any adjustments), on or in exchange for or
otherwise with respect to the Acquiror Stock and such shares of capital stock
(collectively, the "Registrable Securities").
NOW, THEREFORE, for good and valuable consideration, the receipt,
sufficiency and adequacy of which is hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. Defined Terms. The following terms shall have the meanings set
forth below. All of the capitalized terms used herein but not otherwise defined
shall have the meanings specified in the Merger Agreement.
(a) "Damages" means, with respect to any Registration Statement, any
losses, claims, damages, or liabilities (or actions in respect thereof)
that arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in such Registration Statement,
including any preliminary prospectus or final prospectus contained therein
or any amendments or supplements thereto, the omission or alleged omission
to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or any violation
or alleged violation of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities
Act, the Exchange Act or any state securities law.
(b) "register," "registered" and "registration" refer to a
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registration effected by preparing and filing a Registration Statement or
Statements in compliance with the U.S. Securities Act of 1933 ("Securities
Act") and pursuant to Rule 415 under the Securities Act or any successor
rule providing for offering securities on a continuous basis ("Rule 415"),
and the declaration or ordering of effectiveness of such Registration
Statement by the United States Securities and Exchange Commission (the
"Commission"); and
(c) "Registration Statement" means a registration statement of the
Company registered under the Securities Act pursuant to the provisions of
this Agreement.
(d) "Representatives" means, with respect to any person or entity,
the officers, directors, partners, members, trustees, agents, employees
and successors of such person or entity.
SECTION 2. Step Registration of Acquiror Stock. Within ten (10) days
following the Effective Time, Acquiror shall, for the benefit of the
Stockholder, effect the registration for resale of twenty-five percent (25%) of
the Registrable Securities. Acquiror further agrees that (i) it shall effect the
registration for resale of an additional fifteen percent (15%) of the original
total of Registrable Securities (including any Registrable Securities issued
with respect thereto after the Merger) on or prior to the last day of the three
(3) month period beginning at the Effective Time, (ii) it shall effect the
registration for resale of an additional thirty-three and one-third percent (33
1/3%) of the original total of Registrable Securities (including any Registrable
Securities issued with respect thereto after the Merger) on or prior to the last
day of the nine (9) month period beginning at the Effective Time, and (iii) it
shall effect the registration for resale of the balance of such Registrable
Securities on or prior to the second anniversary of the Effective Time, to the
extent such Registrable Securities are then owned by the Stockholder. The
percentage of Registrable Securities registered from time to time shall consist
of outstanding Common Stock and Common Stock issuable upon conversion of
outstanding Preferred Stock, in such proportions as shall be identified by the
Stockholder pursuant to Section 2(i). Acquiror shall use all reasonable efforts
to effect the registration of the Registrable Securities of Acquiror Stock for
resale under the Securities Act, by performing the following:
(a) The registration for resale shall be effected through a shelf
registration statement and related prospectus (collectively, "Resale
Prospectus") covering the applicable Registrable Securities, prepared and
filed by Acquiror with the Commission. Acquiror shall cause each Resale
Prospectus to become effective and remain effective until all Registrable
Securities have either been sold or may be resold under Rule 144(k) of the
Securities Act without limitation as to volume or manner of sale.
(b) Acquiror shall, if reasonably requested by the Stockholder, use
its best efforts to register, or obtain and maintain exemption from
registration or qualification for, such Registrable Securities under the
Blue Sky Laws of each state as the Stockholder shall reasonably request,
and update and amend such
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registration, qualification or exemption and take any other action which
may be reasonably necessary or advisable to enable the Stockholder to
consummate the sale or disposition of Acquiror Stock in such states;
provided, however, that Acquiror shall not be required to (i) qualify to
do business as a foreign corporation in any such state, or (ii) consent to
general service of process in any such state.
(c) Acquiror shall identify and cause there to be provided at all
times to the Stockholder a transfer agent for all the Acquiror Stock
required to be registered under this Agreement.
(d) Acquiror shall provide, or cause there to be provided, such
certificates, instruments and any other documents required under the
Securities Act, requested by the Commission in connection with the sale by
the Stockholder of Registrable Securities covered by a Resale Prospectus,
or otherwise necessary or reasonably required in connection with, or to
facilitate, the sale of Registrable Securities in accordance with this
Agreement.
(e) Acquiror shall file with the appropriate stock exchange or
trading system upon which Acquiror Shares are then listed or qualified a
notification form for the listing of additional shares with respect to the
Registrable Securities at the time(s) and in the manner required by each
such exchange or trading system.
(f) Acquiror shall promptly prepare and file with the Commission
such required amendments and supplements to each Resale Prospectus as may
be necessary to update and keep such Resale Prospectus effective and
available for use during the Registration Period and to comply with the
provisions of the Securities Act with respect to the sale of securities
covered by such Resale Prospectus; provided, however, that Acquiror shall
be entitled to postpone or suspend, for a reasonable period of time (the
"Blackout Period"), the filing, effectiveness or use of any Registration
Statement in the event that (i) there shall be a proposed, material
merger, acquisition, financing or other major event (any such event, a
"Corporate Opportunity") as to which Acquiror has entered into a
definitive heads of agreement, letter of intent, term sheet or other
similar arrangement required to be disclosed under applicable securities
laws and (ii) the Board of Directors of Acquiror shall reasonably believe
that public disclosure with respect to such Corporate Opportunity at that
time would materially jeopardize Acquiror's ability to effect the
Corporate Opportunity or the benefit to Acquiror presented by such
Corporate Opportunity and that the failure to pursue such Corporate
Opportunity at such time would materially and adversely affect Acquiror's
business; provided, however, that Acquiror shall only be entitled to
exercise its rights with respect to all Blackout Periods for a total of 90
days during any rolling 12-month period during the term of this Agreement.
Acquiror shall use all reasonable efforts to minimize the duration of any
Blackout Period and make appropriate public disclosure as soon as
practicable and to terminate the Blackout Period, consistent with the
foregoing. At the expiration of any Blackout Period and without any
further request from the Stockholder, Acquiror shall effect
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its obligations pursuant to Section 2 of this Agreement.
(g) Acquiror shall furnish the Stockholder, promptly after the same
is prepared and publicly distributed or filed with the Commission, one
copy of the Registration Statement and any amendment thereto, each
preliminary prospectus and prospectus and each amendment or supplement
thereto. Acquiror shall furnish the Stockholder with such number of copies
of the preliminary and final Resale Prospectus as the Stockholder may
reasonably request in order to facilitate the sale of registered shares of
Acquiror Stock ("Registered Shares") owned by him or it.
(h) All expenses incurred by Acquiror in effecting the registration
for resale of Registable Securities including, without limitation, all
registration and filing fees with any governmental entity, printing
expenses, and fees and disbursements of counsel for Acquiror, shall be
paid by and be the sole obligation of Acquiror. All selling commissions
applicable to sales of Registrable Securities and all fees and
disbursements of counsel for the Stockholder in connection therewith shall
be paid by and be the sole obligation of the Stockholder.
(i) The Stockholder shall timely furnish such information as may
reasonably be requested by Acquiror (including without limitation a plan
of distribution) for inclusion in, or necessary to the preparation of, a
Resale Prospectus, or other filings ancillary thereto. The information
supplied by the Stockholder for inclusion in a Resale Prospectus shall
not, at the time such Resale Prospectus is declared effective, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
(j) As soon as practicable after becoming aware of such event,
Acquiror shall notify (by telephone and also by facsimile and reputable
overnight courier) the Stockholder of the happening of any event, of which
Acquiror has knowledge, as a result of which the Resale Prospectus
included in the Registration Statement, as then in effect, includes an
untrue statement of a material fact or omission to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading, and use all reasonable efforts as soon as possible (but in
any event within five (5) business days) to prepare a supplement or
amendment to the Registration Statement (and make all required filings
with the Commission) to correct such untrue statement or omission, and
Acquiror shall simultaneously (and thereafter as requested) deliver such
number of copies of such supplement or amendment (or other applicable
document) to the Stockholder as the Stockholder may request in writing.
Unless such an event is publicly announced, Acquiror shall not, without
the consent of the Stockholder, give the Stockholder any material
non-public information, but shall inform the Stockholders that such Resale
Prospectus includes an untrue statement of a material fact or omission to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading
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(k) Acquiror shall use all reasonable efforts to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, and, if an order is issued, to obtain the
withdrawal of such order and the termination of such suspension at the
earliest practicable time and Acquiror shall immediately notify via
facsimile the Stockholder (at the facsimile number for the Stockholder set
forth on the signature page hereto) of the issuance of such order and the
resolution thereof.
(l) Each Resale Prospectus shall not, at the time such Resale
Prospectus is declared effective, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading; provided,
however, that the foregoing shall not apply to the extent of statements or
omissions based upon information furnished in writing by the Stockholder
for inclusion in such Resale Prospectus.
SECTION 3. Piggyback Registration. If (but without any obligation to do
so) Acquiror proposes to register any of its other securities in a firm
commitment underwritten public offering in which officers and directors of
Acquiror are participating, Acquiror shall give the Stockholder at least 20 days
advance written notice of such registration. Upon the written request of the
Stockholder given within 10 days after receipt of Acquiror's written notice,
Acquiror shall, subject to the terms of this Section 3, cause to be registered
in such underwritten offering all of the Registrable Securities that the
Stockholder has requested to be registered; provided, however, if the managing
underwriter of such offering advises Acquiror that marketing factors require a
limitation of the number of shares to be underwritten, then the number of shares
that may be included in the underwriting shall be allocated pro rata among all
stockholders who are entitled to require Acquiror to register their shares in
such offering. The rights of the Stockholder to include Registrable Securities
in such offering shall be conditioned upon the Stockholder's entering into an
underwriting agreement, lock-up agreement, custody agreement and other
agreements, in customary form, with the underwriters selected by Acquiror and
furnishing such information regarding the Stockholder as may reasonably be
requested. Notwithstanding any other provision of this Section 3, (i) the
Stockholder shall not be entitled to register any Registrable Securities earlier
than the Stockholder is entitled to register such Registrable Securities under
Section 2, (ii) the Stockholder's rights under this Section 3 are subject (and
may be subordinate) to existing registration rights granted by Acquiror to third
parties prior to the date hereof, and (iii) this Section 3 shall not limit
Acquiror's rights or remedies under the Escrow Agreement with Stockholder, if
any, or under the Merger Agreement
SECTION 4. Indemnification for Securities Matters.
(a) In connection with the registration of the Registrable
Securities pursuant to a Resale Prospectus, Acquiror will indemnify and
hold harmless the Stockholder, the Stockholder's Representatives, if any,
and each other person, if any, who controls such Stockholder within the
meaning of Section 15 of the Securities Act, against any Damage, joint or
several, to which the Stockholder,
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such Representative or such controlling person may become subject under
the Securities Act or otherwise, insofar as such Damages (or actions or
proceedings in respect thereof) arise out of or are based upon any untrue
statement of a material fact contained in any Resale Prospectus (or any
amendment or supplement thereto), or any omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading; and Acquiror will reimburse the
Stockholder, such Representative and such controlling person for any legal
or other expenses reasonably incurred by the Stockholder, such
Representative or such controlling person in connection with investigating
or defending against any such Damage; provided, however, that Acquiror
shall not be liable in any such case to the Stockholder to the extent that
any such Damage (or action or proceeding in respect thereof) arises out of
or is based upon an untrue statement or omission of a material fact made
in such Resale Prospectus (or amendment or supplement thereto) in reliance
upon and in conformity with information furnished in writing by the
Stockholder for inclusion in such Resale Prospectus.
(b) In connection with the registration of the Registrable
Securities pursuant to a Resale Prospectus, the Stockholder, severally and
not jointly with any other selling stockholders whose shares are included
in such Resale Prospectus, will indemnify and hold harmless Acquiror,
Acquiror's Representatives, each person, if any, who controls the Acquiror
within the meaning of Section 15 of the Securities Act, each officer of
Acquiror who signs the Resale Prospectus and each director of Acquiror,
against any Damage, joint or several, to which Acquiror, such
Representative or such officer, director, or controlling person may become
subject under the Securities Act or otherwise, and will reimburse
Acquiror, such Representative or such officer, director, or controlling
person for any legal or other expenses reasonably incurred by Acquiror,
such Representative or such officer, director, or controlling person in
connection with investigating or defending against any such Damage, but
only insofar as such Damage (or actions in respect thereof) arises out of
or is based upon an untrue statement or omission of a material fact
referred to in subsection (a) above made by the Stockholder.
(c) It shall be a condition of Acquiror's obligations to effect the
registration of Registrable Securities that the Stockholder provide
Acquiror with all material facts, including, without limitation,
furnishing such certificates, questionnaires and legal opinions as may be
required by Acquiror concerning the Stockholder and the Registrable
Securities which are reasonably required to be stated in the Resale
Prospectus or are otherwise required in connection with the offering.
(d) If the indemnification provided in this Section 4 is for any
reason unavailable or insufficient to hold an indemnified party harmless
hereunder, then the indemnifying party shall contribute the amount paid or
payable by such indemnified party as a result of the Damage referred to
herein in such proportion as is appropriate to reflect the relative fault
of Acquiror, on the one hand, and the
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indemnifying Stockholder, on the other hand, in connection with the
statements or omissions that resulted in such Damage, as well as any other
relevant equitable considerations. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from a person who was not guilty of
fraudulent misrepresentation. Each party entitled to contribution agrees
that upon the service of a summons or other initial legal process upon it
in any action in respect of which contribution may be sought, it shall
promptly give written notice of such service to the party or parties from
whom contribution may be sought, but the omission to so notify such party
or parties shall not relieve the party from whom contribution may be
sought from any obligation it may have hereunder.
SECTION 5. Term of Agreement; Termination. This Agreement and the
obligations of Acquiror hereunder shall terminate on the date on which all of
the Registrable Securities have either been sold or may be resold under Rule
144(k) of the Securities Act, without limitation as to volume or manner of sale.
SECTION 6. Assignment of Rights Hereunder. The Stockholder may assign its
rights to cause Acquiror to register Registrable Securities pursuant to this
Agreement to any of the following persons or entities to whom or which the
Stockholder transfers or assigns Registrable Securities: (i) any member of the
Stockholder's immediate family; (ii) any stockholder, partner or member of the
Stockholder; any corporation, partnership, limited liability company, joint
venture, trust or individual who or which, directly or indirectly through one or
more intermediaries, is controlled by or under common control with the
Stockholder or which controls, directly or indirectly through one or more
intermediaries, the Stockholder; (iii) any trust for the benefit of, or
partnership, corporation, limited liability company or other entity owned or
controlled by, any of the foregoing, (iv) any person who acquires at least
100,000 shares of Registrable Securities from the Stockholder in assignment, or
(v) any pledgee who or which forecloses on Registrable Securities pursuant to a
bona fide pledge made by the Stockholder; provided, however, that no such
assignee from the Stockholder shall be entitled to further assign its
registration rights under this Agreement to any other person; provided, further,
that the Stockholder shall retain its rights under this Agreement as to all
Registrable Securities not transferred or assigned by the Stockholder. For
purposes of this Section 6, the terms "control", "controlled" and "common
control with" mean the ability, whether by the direct or indirect ownership of
voting securities or other equity interest, by contract or otherwise, to elect a
majority of the directors of a corporation, to select the managing partner of a
partnership, or otherwise to select a majority of those persons exercising
governing authority over an entity.
SECTION 7. Entire Agreement. This Agreement supersedes all prior
agreements, written or oral, among the parties hereto with respect to the
subject matter hereof and contains the entire agreement among the parties with
respect to the subject matter hereof. This Agreement may not be amended,
supplemented or modified, and no provisions hereof may be modified or waived,
except by an instrument in writing signed by all parties hereto. No waiver of
any provisions hereof by any party shall be deemed a
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waiver of any other provisions hereof by any such party, nor shall any such
waiver be deemed a continuing waiver of any provision hereof by such party.
SECTION 7. Notices. All notices, requests, claims, demands or other
communications hereunder shall be in writing and shall be deemed given when
delivered personally, upon receipt of a transmission confirmation if sent by
telecopy or like transmission (with confirmation) and on the next business day
when sent by a reputable, overnight courier service to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
If to Acquiror: HA-LO Industries, Inc.
5980 West Touhy Avenue
Niles, IL 60714
Attn: Gregory J. Kilrea, CFO
With a copy to: Neal, Gerber & Eisenberg
Two North LaSalle Street
Suite 2100
Chicago, IL 60602
Attn: Barry J. Shkolnik, Esq.
If to Stockholder:
At the Stockholder's address as set forth on
the books and records of the Company.
With a copy to:
Altheimer & Gray
10 South Wacker Drive, Suite 4000
Chicago, Illinois 60606
Attn: John E. Lowe, Esq.
SECTION 8. Miscellaneous.
(a) This Agreement shall be deemed a contract made under, and for all
purposes shall be construed in accordance with, the laws of the State of
Illinois, without reference to its conflicts of law principles.
(b) If any provision of this Agreement or the application of such
provision to any person or circumstances shall be held invalid or unenforceable
by a court of competent jurisdiction, such provision or application shall be
unenforceable only to the extent of such invalidity or unenforceability, and the
remainder of the provision held invalid or unenforceable and the application of
such provision to persons or circumstances, other than the party as to which it
is held invalid, and the remainder of this Agreement shall not be affected.
(c) This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.
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(d) All Section headings herein are for convenience of reference only and
are not part of this Agreement, and no construction or reference shall be
derived therefrom.
(e) The obligations of the Stockholder set forth in this Agreement shall
not be effective or binding upon the Stockholder until the Effective Time, and
the parties agree that there is not and has not been any other agreement,
arrangement or understanding between the parties hereto with respect to the
matters set forth herein.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
ACQUIROR:
HA-LO INDUSTRIES, INC.
By: /s/ John Kelley
---------------------
Name: John Kelley
Title: Chief Executive Officer
STOCKHOLDER:
By: Coventry Partners Family L.P.,
a Delaware limited partnership
By: Coventry Associates, Inc.,
a Delaware corporation,
its general partner
By: /s/ Eric Lefkofsky
-------------------
Eric Lefkosky
President
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Exhibit 6
STOCKHOLDER'S AGREEMENT
STOCKHOLDER'S AGREEMENT (this "Agreement"), dated as of January 17, 2000,
between the undersigned stockholder ("Stockholder") of Starbelly.com, Inc., a
Delaware corporation f/k/a TheZebra.com, Inc. (the "Company"), and HA-LO
Industries, Inc., an Illinois corporation ("Acquiror").
WHEREAS, concurrently with the execution of this Agreement, the Company,
Acquiror and HA-LO Industries, Inc., a Delaware corporation and wholly owned
subsidiary of Acquiror ("Acquiror Sub"), have entered into an Agreement and Plan
of Merger and Plan of Reorganization (the "Merger Agreement"), providing for the
merger (the "Merger") of the Company with and into Acquiror Sub pursuant to the
terms and conditions of the Merger Agreement;
WHEREAS, upon consummation of the Merger, the stockholders of the Company
(the "Stockholders") will receive a number of shares of Common Stock, no par
value, of Acquiror and/or a number of shares of Series A Convertible Preferred
Stock, no par value, of Acquiror (collectively, "Acquiror Stock") for each share
of capital stock of the Company owned by them;
WHEREAS, Stockholder owns of record and beneficially shares of capital
stock of the Company as set forth on Schedule I hereto (the "Shares"); and
WHEREAS, in order to induce Acquiror to enter into the Merger Agreement,
Stockholder has agreed, upon the terms and subject to the conditions set forth
herein, to vote the Shares and to deliver an irrevocable proxy to Acquiror to
vote the Shares at a meeting of the Company's stockholders, in favor of approval
and adoption of the Merger Agreement and the Merger.
NOW, THEREFORE, for good and valuable consideration, the receipt,
sufficiency and adequacy of which is hereby acknowledged, the parties hereto
agree as follows:
1. Defined Terms. All of the capitalized terms used herein but not
otherwise defined shall have the meanings specified in the Merger Agreement.
2. Agreement to Vote Shares.
(a) Stockholder agrees that during the period from the date hereof
until the earlier of the Effective Time of the Merger and the termination
of the Merger Agreement in accordance with its terms, Stockholder shall
vote the Shares, in person or by proxy, at every meeting of the
stockholders of the Company at which such matters are considered and at
every adjournment thereof or by written consent in lieu of such meeting
(i) in favor of the Merger, the adoption by the Company of the Merger
Agreement and the approval of the other transactions contemplated by the
Merger Agreement, (ii) against any merger agreement or merger (other than
the Merger Agreement and the Merger), consolidation, combination, sale of
substantial assets, reorganization, recapitalization, dissolution,
liquidation or winding up of or by the Company or any other Competing
Transaction (as defined in the Merger Agreement ) (collectively,
"Alternative Transactions") or (iii) against any amendment of the
Company's Articles of Incorporation of By-laws or
<PAGE>
other proposal or transaction involving the Company or any of its
subsidiaries, which amendment or other proposal or transaction would in
any manner impede, frustrate, prevent or nullify the Merger, the Merger
Agreement or any of the other transactions contemplated by the Merger
Agreement (collectively, "Frustrating Transactions"). Stockholder has
delivered to Acquiror on the date hereof a proxy substantially in the form
attached hereto as Annex A (the "Proxy"), which Proxy is irrevocable from
the date hereof until the earlier of the Effective Time of the Merger and
the termination of the Merger Agreement in accordance with its terms to
the extent permitted under Delaware Law, and Acquiror agrees to vote the
Shares subject to such Proxy (A) in favor of the Merger, the adoption by
the Company of the Merger Agreement and the approval of the other
transactions contemplated by the Merger Agreement, (B) against any
Alternative Transaction, or (C) against any Frustrating Transaction.
(b) If, at any time prior to the expiration of this Agreement,
Stockholder, or a representative of Stockholder, is a member of the Board
of Directors of the Company or an officer of the Company, subject to the
Merger Agreement, nothing in this Agreement shall limit or restrict such
director or officer from acting in his capacity and exercising his
fiduciary duties and responsibilities as a director or officer of the
Company, as the case may be. It is understood that this Agreement shall
apply to Stockholder solely in its capacity as a stockholder of the
Company and shall not apply to the director's or officer's actions,
judgments or decisions as a director or officer of the Company.
3. No Voting Trusts. Stockholder agrees that during the period from the
date hereof until the earlier of the Effective Time of the Merger and the
termination of the Merger Agreement, he or it will not, directly or indirectly,
and will not cause or permit any entity or person under Stockholder's control
to, deposit any of the Shares in a voting trust or subject any of its Shares to
or otherwise enter into any arrangement (written or oral) with respect to the
voting of the Shares inconsistent with this Agreement.
4. Limitation on Dispositions and Proxies. During the period from the date
hereof until the earlier of the Effective Time of the Merger and the termination
of the Merger Agreement in accordance with its terms, Stockholder agrees not to
sell, assign, pledge, transfer or otherwise dispose of, or grant any proxies
with respect to any of the Shares (except for the Proxy or a proxy which is not
inconsistent with the terms of this Agreement, the Proxy or a sale, transfer or
other disposition to a party to hold the Shares subject to the terms of this
Agreement and any other agreement entered into pursuant to the Merger Agreement
and to which the Shares are subject) or take any other action that would in any
way restrict, limit or interfere with the performance of its obligations
hereunder or the transactions contemplated hereby.
5. Specific Performance. Each party acknowledges that it will be
impossible to measure in money the damage to the other party if a party hereto
fails to comply with the obligations imposed by this Agreement, and that, in the
event of any such failure, the other party will not have an adequate remedy at
law or in damages. Accordingly, each party hereto agrees that injunctive relief
or other equitable remedy, in addition to remedies at law or damages (including
without limitation pursuant to Section 9), is the appropriate remedy for any
such failure and will not oppose the granting of such relief on the basis that
the other party has an
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adequate remedy at law. Each party hereto agrees that it will not seek, and
agrees to waive any requirement for, the securing or posting of a bond in
connection with any other party's seeking or obtaining such equitable relief.
6. Status of Stockholders. Stockholder represents to the Buyer that it is
either an officer, director or holder of 5% or more of the outstanding voting
securities of the Company or an Affiliate of an officer, director or holder of
5% or more of the outstanding voting securities of the Company.
7. Taking Necessary Action; Further Action. Stockholder agrees that during
the period from the date hereof until the earlier of the Effective Time of the
Merger and the termination of the Merger Agreement in accordance with its terms,
he or it shall each use reasonable efforts to take all actions as may be
reasonably necessary or appropriate to effectuate the Merger as soon as possible
consistent with the terms of this Agreement and the Merger Agreement, including
(a) actions of Stockholder in his or its capacity as a stockholder of the
Company, and (b) making any required filings under (including with respect to
the acquisition by any Stockholder of shares of Acquiror Stock in the Merger),
and providing each other with information with respect to filings required
under, the HSR Act.
8. Investment Representations. Shares of Acquiror Stock are being issued
by Acquiror to Stockholder in connection with the Merger in reliance upon the
following representations, warranties and agreements of Stockholder, each of
which shall be true and correct as of the date hereof and at the Effective Time,
and each of which shall survive the Effective Time.
(a) Stockholder acknowledges that shares of Acquiror Stock issued
and issuable to him or it at the Effective Time of the Merger will not
have been registered under the Securities Act or under applicable state
securities laws.
(b) All shares of Acquiror Stock delivered or deliverable to
Stockholder in the Merger are being acquired by Stockholder solely for
investment purposes and for the account of Stockholder, and not as a
nominee or agent for others or with a view to or for sale in connection
with any distribution, and Stockholder has no present intention of selling
or otherwise distributing such shares of Acquiror Stock and has not
entered into any arrangement or understanding with respect thereto, except
in each case in accordance with the terms of this Agreement, pursuant to
the Registration Rights Agreement or otherwise in compliance with
applicable securities laws.
(c) The Stockholder acknowledges that his or its shares of Acquiror
Stock must be held indefinitely unless subsequently registered under the
Securities Act or an exemption from such registration is available. The
Stockholder agrees that he or it shall not make a disposition of any
shares of Acquiror Stock issued to him or it in the Merger unless such
shares have been registered under the Securities Act, including without
limitation in accordance with a Registration Rights Agreement with
Acquiror, or are sold in accordance with an exemption from registration
under Rule 144 or 144A under the Securities Act, or unless an exemption
from the registration requirements of the Securities Act and applicable
state securities laws (other than under Rule 144 or 144A) is available and
Acquiror shall have received an opinion of counsel reasonably satisfactory
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to Acquiror to the effect that such exemption from the registration
requirements of the Securities Act is valid and available.
(d) Stockholder acknowledges that his or its investment in shares of
Acquiror Stock is a speculative investment and is subject to significant
risks, including the risks described in Acquiror's Registration Statement
on Form S-3 dated December 10, 1999. The foregoing representation shall
not limit any rights or remedies Stockholder may have under the Merger
Agreement or otherwise in connection with the Merger. Stockholder
represents and warrants to Acquiror that he or it is able to fend for
himself or itself in the transactions contemplated by this Agreement, has
such knowledge and expertise in financial and business matters as to be
capable of evaluating the merits and risks of his or its investment and
has the ability to bear the economic risks (including the risk of loss) of
his or its investment.
(e) The Stockholder is an "Accredited Investor" as defined in Rule
501 to Regulation D promulgated under the Securities Act inasmuch as he or
it is:
(i) A director or executive officer of Acquiror;
(ii) A natural person whose individual net worth, or joint net
worth with his or her spouse, is currently over $1,000,000;
(iii) A natural person who had, or will have had, an
individual income in excess of $200,000 in each of the two
most recent years (1999 and 1998) or joint income with his or
her spouse was in excess of $300,000 in each of those years
(1999 and 1998) and has a reasonable expectation of reaching
the same income level in the current year (2000);
(iv) A broker or dealer registered pursuant to Section 15 of
the Exchange Act;
(v) A bank (as defined in Section 3(a)(2) of the Securities
Act), or a savings and loan association or other institution
(as defined in Section 3(a)(5)(A) of the Securities Act
whether acting in its individual or fiduciary capacity; a
broker or dealer registered pursuant to Section 15 of the
Exchange Act; an insurance company (as defined in Section
2(13) of the Securities Act; an investment company registered
under the Investment Company Act of 1940 or a business
development company (as defined in Section 2(a)(48) of that
Act; a Small Business Investment Company licensed by the U.S.
Small Business Administration under Section 301(c) or (d) of
the Small Business Investment Act of 1958; a plan established
and maintained by a state, its political subdivisions, or an
agency or instrumentality of a state or its political
subdivisions, for the benefit of its employees, if such plan
has total assets in excess of $5,000,000; an employee benefit
plan within the meaning of the Employee Retirement Income
Security Act of 1974 if the investment decision is made by a
plan fiduciary (as defined in Section 3(21) of such act),
which
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is either a bank, savings and loan association, insurance
company or registered investment adviser, or if the employee
benefit plan has total assets in excess of $5,000,000 or, if a
self-directed plan, with investment decisions made solely by
persons that are accredited investors;
(vi) A private business development company (as defined in
Section 202(a)(22) of the Investment Advisers Act of 1940;
(vii) An organization described in Section 501(c)(3) of the
Internal Revenue Code, a corporation, a Massachusetts or a
similar business trust, or partnership, not formed for the
specific purpose of acquiring Acquiror Stock, with total
assets in excess of $5,000,000; or
(viii) A trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring Acquiror Stock,
whose purchase is directed by a sophisticated person (as
described in Rule 506(b)(2)(ii) of the Securities Act).
(f) Stockholder represents and warrants that he or it has had the
opportunity to ask questions of Acquiror concerning its business and to
obtain any information which Stockholder considered necessary to verify
the accuracy of or to amplify upon Acquiror's disclosures, including the
Acquiror Reports attached as Exhibit A hereto, and have had all questions
which have been asked by Stockholder answered by Acquiror to Stockholder's
satisfaction.
9. Standstill and Transfer Restrictions on Acquiror Securities.
(a) Stockholder agrees that from the Effective Time and for a period
of three years after the Effective Time (the "Restriction Period"),
without the prior written consent of the Board of Directors of Acquiror as
evidenced in a resolution adopted by two-thirds of the directors of
Acquiror, Stockholder will not, and will cause each of its Affiliates whom
it controls not to, directly or indirectly, alone or in concert with
others:
(i) acquire, offer or propose to acquire, or agree to acquire
(except, in any case, upon consummation of the Merger, by way
of option grants approved by the Board of Directors of
Acquiror or the compensation committee thereof, or upon the
conversion, exercise or exchange of Acquiror Securities (as
defined below)) whether by purchase, tender or exchange offer,
or through the acquisition of control of another person or
entity or knowingly otherwise, any securities issued by
Acquiror which are entitled to vote generally for the election
of directors or any direct or indirect rights or options to
acquire any such securities or any securities convertible or
exercisable into or exchangeable for such securities
(collectively, "Acquiror Securities"); provided, that
Stockholder and its Affiliates may purchase or acquire, in the
aggregate during the Restriction Period, additional Acquiror
Securities in an amount which in the aggregate does not exceed
one percent (1%) of the fully diluted shares outstanding of
5
<PAGE>
Acquiror immediately following the Effective Time (as
appropriately adjusted for stock splits, etc.);
(ii) knowingly make or participate in any "solicitation" of
"proxies" or "consents" (as such terms are used in the proxy
rules of the United States Securities and Exchange Commission)
with respect to any Acquiror Securities, or make proposals for
the approval of stockholders of Acquiror;
(iii) knowingly form, join or participate in a "group" (within
the meaning of Section 13(d)(3) of the Exchange Act) with
respect to Acquiror Securities;
(iv) deposit any Acquiror Securities in any voting trust or
knowingly subject any Acquiror Securities to any agreement
with respect to the voting of any Acquiror Securities;
(v) otherwise knowingly act to control or seek to control the
management, Board of Directors or policies of Acquiror (except
with respect to actions taken by Stockholder solely in his
capacity as an officer or director of Acquiror in the exercise
of his fiduciary duties);
(vi) make or disclose any request to amend, waive or terminate
any provision of this Section 9 (including this clause
(9)(a)(vi));
(vii) offer, pledge, sell, contract to sell, grant any option,
right or warrant for the sale of, or otherwise dispose of or
transfer ("Transfer"), any Acquiror Securities, whether now
owned or hereafter acquired by Stockholder or with respect to
which Stockholder has or hereafter acquires the power of
disposition, if following such Transfer, the transferee of
such Acquiror Securities together with its Affiliates and
Associates would own in excess of 10% of the voting power
represented by the then outstanding Acquiror Securities
(assuming conversion by such transferee and its Affiliates and
Associates of all securities convertible or exercisable into
or exchangeable for shares of Acquiror Securities); provided,
that this Subsection 9(a)(vii) shall not limit the ability of
Stockholder to (A) make a bona fide pledge of its Acquiror
Securities to a nationally recognized financial institution
engaged in such transactions in the normal course of its
business to secure indebtedness so long as pledgee agrees to
be bound by the terms of this Section 9 in the event it
forecloses on Acquiror Securities representing in excess of
10% of the voting power represented by the then outstanding
Acquiror Securities, unless such pledgee has agreed to sell
such Acquiror Securities in open-market transactions over a
national securities exchange, (B) enter into bona fide hedging
transactions with respect to its Acquiror Securities with a
nationally recognized financial institution engaged in such
transactions in the normal course of its business or (C) sell
Acquiror Securities pursuant to an underwritten
6
<PAGE>
public offering or over a national securities exchange (other
than in prearranged block transactions); or
(viii) make any agreement to do any of the foregoing to the
extent restricted thereby.
(b) Acquiror acknowledges and agrees that, solely as a result of
Stockholder's execution of this Agreement and compliance with the
provisions hereof, (i) neither Stockholder nor its Affiliates shall, and
neither Stockholder nor its Affiliates shall be deemed to, be acting
together or agreeing to act together with any other person or entity with
respect to Acquiror Securities, and (ii) Stockholder has not acted other
than independently and individually, without regard to the purposes or
intention of any other person or entity and without the purpose or intent
of acting together with any other person or entity for any reason. With
respect to obligations of Stockholder pursuant to any provision of this
Section 9 qualified by the "knowledge" of Stockholder, it is understood
and agreed that upon receipt by Stockholder of notice from Acquiror that
Stockholder has breached a provision of this Section 9 (notwithstanding
any requirement relating to knowledge of Stockholder contained in such
provision), Stockholder's receipt of such notice shall evidence the
requisite knowledge of Stockholder under this Section 9 with respect to
such activities constituting a breach on a going forward basis, and
Stockholder shall be required to use its reasonable best efforts to
promptly remedy any such activities which so constitute a breach without
regard to the knowledge qualifier, whether or not such breach is then
continuing.
(c) If at any time during the Restricted Period, Stockholder and its
Affiliates "beneficially own" (as defined in Rule 13d-3 under the Exchange
Act) in the aggregate less than five percent (5%) of the voting power
represented by the fully diluted Acquiror Securities then outstanding,
Stockholder and its Affiliates shall no longer be subject to the
provisions of this Section 9; provided, that if at any time following such
occurrence, Stockholder and its Affiliates "beneficially own" (as defined
in Rule 13d-3 under the Exchange Act) in the aggregate five percent (5%)
or more of the voting power represented by the fully diluted Acquiror
Securities then outstanding, the provisions of this Section 9 shall once
again apply and be in full force and effect with respect to Stockholder
and its Affiliates for the remainder of the Restriction Period, if any.
(d) Notwithstanding Section 5 hereof, Acquiror shall not be
restricted from seeking or obtaining monetary damages from Stockholder for
breach of this Section 9, up to a maximum of $5.0 million; provided that
such $5.0 million maximum liability shall be a joint cap applicable to the
aggregate liability of Stockholder under this Section 9 and of Eric
Lefkofsky under Section 9 of that certain Stockholders Agreement between
Eric Lefkofsky and Acquiror dated the date hereof.
10. Waiver of Company Liquidation Preference. To the extent that
Stockholder owns shares of Company Preferred Stock, Stockholder hereby
waives any right to a liquidation preference resulting from the Merger
pursuant to Section 2(b) of Article V of the Company's Second Amended and
Restated Certificate of Incorporation.
7
<PAGE>
11. Term of Agreement; Termination. Subject to Section 14(e), the term of
this Agreement shall commence on the date hereof and such term and this
Agreement shall terminate upon the earliest to occur of (i) the Effective Time,
and (ii) the date on which the Merger Agreement is terminated in accordance with
its terms; provided, however, that the provisions of Section 9 shall survive the
Effective Time in accordance with the terms of Section 9. Upon such termination,
no party shall have any further obligations or liabilities hereunder; provided,
that such termination shall not relieve any party from liability for any breach
of this Agreement prior to such termination.
12. Representations and Warranties of the Stockholder. Stockholder
represents and warrants to Acquiror that, as of the date hereof, (a) Stockholder
has full legal power and authority to execute and deliver this Agreement and the
Proxy, and (b) the Shares are free and clear of all proxies (except for a proxy
which is not inconsistent with the terms of this Agreement).
13. Entire Agreement. This Agreement supersedes all prior agreements,
written or oral, among the parties hereto with respect to the subject matter
hereof and contains the entire agreement among the parties with respect to the
subject matter hereof (other than the Merger Agreement and the Registration
Rights Agreement). This Agreement may not be amended, supplemented or modified,
and no provisions hereof may be modified or waived, except by an instrument in
writing signed by all parties hereto. No waiver of any provisions hereof by any
party shall be deemed a waiver of any other provisions hereof by any such party,
nor shall any such waiver be deemed a continuing waiver of any provision hereof
by such party.
14. Notices. All notices, requests, claims, demands or other
communications hereunder shall be in writing and shall be deemed given when
delivered personally, upon receipt of a transmission confirmation if sent by
telecopy or like transmission (with confirmation) and on the next business day
when sent by a reputable, national overnight courier service to the parties at
the following addresses (or at such other address for a party as shall be
specified by like notice): ):
If to Acquiror: HA-LO Industries, Inc.
5980 West Touhy Avenue
Niles, IL 60714
Attn: Gregory J. Kilrea, CFO
With a copy to: Neal, Gerber & Eisenberg
Two North LaSalle Street
Suite 2100
Chicago, IL 60602
Attn: Barry J. Shkolnik, Esq.
If to Stockholder: Altheimer & Gray
10 South Wacker Drive
Chicago, IL 60606
Attn: Peter H. Lieberman
8
<PAGE>
With a copy to: _____________________________
_____________________________
_____________________________
_____________________________
Attention:___________________
15. Miscellaneous.
(a) This Agreement shall be deemed a contract made under, and for
all purposes shall be construed in accordance with, the laws of the State of
Delaware, without reference to its conflicts of law principles.
(b) If any provision of this Agreement or the application of such
provision to any person or circumstances shall be held invalid or unenforceable
by a court of competent jurisdiction, such provision or application shall be
unenforceable only to the extent of such invalidity or unenforceability, and the
remainder of the provision held invalid or unenforceable and the application of
such provision to persons or circumstances, other than the party as to which it
is held invalid, and the remainder of this Agreement shall not be affected.
(c) This Agreement may be executed in one or more counterparts, each
of which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.
(d) All Section headings herein are for convenience of reference
only and are not part of this Agreement, and no construction or reference shall
be derived therefrom.
(e) The obligations of Stockholder shall not be effective or binding
upon Stockholder until after such time as the Merger Agreement is executed and
delivered by the Company, Acquiror and Acquiror Sub, and the parties agree that
there is not and has not been any other agreement, arrangement or understanding
between the parties hereto with respect to the matters set forth herein, other
than the Merger Agreement and the Registration Rights Agreement.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
ACQUIROR:
HA-LO INDUSTRIES, INC.
By: /s/ John Kelley
----------------------
John Kelley, President
STOCKHOLDER:
By: Coventry Partners Family L.P., a Delaware
Limited Partnership
By: Coventry Associates, Inc., a Delaware
corporation its general partner
By: /s/ Eric Lefkofsky
--------------------
Eric Lefkofsky
10
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Number of
shares of Number of shares Number of shares Number of Shares
Company Class A of Company Class of Company Series of Company Series
Common Stock, B Common Stock, A Preferred Stock, B Preferred Stock,
Name of par value par value par value par value
Stockholder $.001 per share $.001 per share $.001 per share $.001 per share
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Coventry Partners
Family L.P. 0 6,750,000 0 0
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
Total
- -----------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
APPENDIX A
FORM OF PROXY
The undersigned, for consideration received, hereby appoints John Kelley
and Greg Kilrea, or either of them, or any other officer of HA-LO INDUSTRIES,
INC., an Illinois corporation ("Acquiror"), its proxy to vote the shares of
capital stock (the "Shares") of Starbelly.com, Inc., a Delaware corporation
f/k/a TheZebra.com, Inc. (the "Company"), owned by the undersigned and described
in that certain Stockholders Agreement dated January 17, 2000 between the
undersigned and Acquiror (a copy of such Agreement being attached hereto (the
"Stockholders Agreement") and which the undersigned is entitled to vote at any
meeting of stockholders of the Company, and at any adjournment thereof with
respect to all matters specified in Section 2 of the Stockholder's Agreement.
This proxy is subject to the terms of the Stockholder's Agreement, is coupled
with an interest and revokes all prior proxies granted by the undersigned with
respect to such Shares, is irrevocable and shall terminate and be of no further
force and effect automatically at such time as the Stockholder's Agreement
terminates in accordance with its terms. The undersigned also constitutes and
appoints John Kelley and Greg Kilrea, or either of them, as the undersigned's
true and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, to execute, for the undersigned and in the undersigned's name,
any written consent of stockholders that is executed in lieu of any meeting of
stockholders at which such persons (or either of them) would be entitled to
exercise the proxy granted hereby.
Dated: January 17, 2000
STOCKHOLDER:
By: Coventry Partners Family L.P., a Delaware
Limited Partnership
By: Coventry Associates, Inc., a Delaware
corporation, its general partner
By: /s/ Eric Lefkofsky
--------------------
Eric Lefkofsky
<PAGE>
Exhibit 7
STOCKHOLDER'S AGREEMENT
STOCKHOLDER'S AGREEMENT (this "Agreement"), dated as of January 17, 2000,
between the undersigned stockholder ("Stockholder") of Starbelly.com, Inc., a
Delaware corporation f/k/a TheZebra.com, Inc. (the "Company"), and HA-LO
Industries, Inc., an Illinois corporation ("Acquiror").
WHEREAS, concurrently with the execution of this Agreement, the Company,
Acquiror and HA-LO Industries, Inc., a Delaware corporation and wholly owned
subsidiary of Acquiror ("Acquiror Sub"), have entered into an Agreement and Plan
of Merger and Plan of Reorganization (the "Merger Agreement"), providing for the
merger (the "Merger") of the Company with and into Acquiror Sub pursuant to the
terms and conditions of the Merger Agreement;
WHEREAS, upon consummation of the Merger, the stockholders of the Company
(the "Stockholders") will receive a number of shares of Common Stock, no par
value, of Acquiror and/or a number of shares of Series A Convertible Preferred
Stock, no par value, of Acquiror (collectively, "Acquiror Stock") for each share
of capital stock of the Company owned by them;
WHEREAS, Stockholder owns of record and beneficially shares of capital
stock of the Company as set forth on Schedule I hereto (the "Shares"); and
WHEREAS, in order to induce Acquiror to enter into the Merger Agreement,
Stockholder has agreed, upon the terms and subject to the conditions set forth
herein, to vote the Shares and to deliver an irrevocable proxy to Acquiror to
vote the Shares at a meeting of the Company's stockholders, in favor of approval
and adoption of the Merger Agreement and the Merger.
NOW, THEREFORE, for good and valuable consideration, the receipt,
sufficiency and adequacy of which is hereby acknowledged, the parties hereto
agree as follows:
1. Defined Terms. All of the capitalized terms used herein but not
otherwise defined shall have the meanings specified in the Merger Agreement.
2. Agreement to Vote Shares.
(a) Stockholder agrees that during the period from the date hereof
until the earlier of the Effective Time of the Merger and the termination
of the Merger Agreement in accordance with its terms, Stockholder shall
vote the Shares, in person or by proxy, at every meeting of the
stockholders of the Company at which such matters are considered and at
every adjournment thereof or by written consent in lieu of such meeting
(i) in favor of the Merger, the adoption by the Company of the Merger
Agreement and the approval of the other transactions contemplated by the
Merger Agreement, (ii) against any merger agreement or merger (other than
the Merger Agreement and the Merger), consolidation, combination, sale of
substantial assets, reorganization, recapitalization, dissolution,
liquidation or winding up of or by the Company or any other Competing
Transaction (as defined in the Merger Agreement ) (collectively,
"Alternative Transactions") or (iii) against any amendment of the
Company's Articles of Incorporation of By-laws or
<PAGE>
other proposal or transaction involving the Company or any of its
subsidiaries, which amendment or other proposal or transaction would in
any manner impede, frustrate, prevent or nullify the Merger, the Merger
Agreement or any of the other transactions contemplated by the Merger
Agreement (collectively, "Frustrating Transactions"). Stockholder has
delivered to Acquiror on the date hereof a proxy substantially in the form
attached hereto as Annex A (the "Proxy"), which Proxy is irrevocable from
the date hereof until the earlier of the Effective Time of the Merger and
the termination of the Merger Agreement in accordance with its terms to
the extent permitted under Delaware Law, and Acquiror agrees to vote the
Shares subject to such Proxy (A) in favor of the Merger, the adoption by
the Company of the Merger Agreement and the approval of the other
transactions contemplated by the Merger Agreement, (B) against any
Alternative Transaction, or (C) against any Frustrating Transaction.
(b) If, at any time prior to the expiration of this Agreement,
Stockholder, or a representative of Stockholder, is a member of the Board
of Directors of the Company or an officer of the Company, subject to the
Merger Agreement, nothing in this Agreement shall limit or restrict such
director or officer from acting in his capacity and exercising his
fiduciary duties and responsibilities as a director or officer of the
Company, as the case may be. It is understood that this Agreement shall
apply to Stockholder solely in its capacity as a stockholder of the
Company and shall not apply to the director's or officer's actions,
judgments or decisions as a director or officer of the Company.
3. No Voting Trusts. Stockholder agrees that during the period from the
date hereof until the earlier of the Effective Time of the Merger and the
termination of the Merger Agreement, he or it will not, directly or indirectly,
and will not cause or permit any entity or person under Stockholder's control
to, deposit any of the Shares in a voting trust or subject any of its Shares to
or otherwise enter into any arrangement (written or oral) with respect to the
voting of the Shares inconsistent with this Agreement.
4. Limitation on Dispositions and Proxies. During the period from the date
hereof until the earlier of the Effective Time of the Merger and the termination
of the Merger Agreement in accordance with its terms, Stockholder agrees not to
sell, assign, pledge, transfer or otherwise dispose of, or grant any proxies
with respect to any of the Shares (except for the Proxy or a proxy which is not
inconsistent with the terms of this Agreement, the Proxy or a sale, transfer or
other disposition to a party to hold the Shares subject to the terms of this
Agreement and any other agreement entered into pursuant to the Merger Agreement
and to which the Shares are subject) or take any other action that would in any
way restrict, limit or interfere with the performance of its obligations
hereunder or the transactions contemplated hereby.
5. Specific Performance. Each party acknowledges that it will be
impossible to measure in money the damage to the other party if a party hereto
fails to comply with the obligations imposed by this Agreement, and that, in the
event of any such failure, the other party will not have an adequate remedy at
law or in damages. Accordingly, each party hereto agrees that injunctive relief
or other equitable remedy, in addition to remedies at law or damages (including
without limitation pursuant to Section 9), is the appropriate remedy for any
such failure and will not oppose the granting of such relief on the basis that
the other party has an
- 2 -
<PAGE>
adequate remedy at law. Each party hereto agrees that it will not seek, and
agrees to waive any requirement for, the securing or posting of a bond in
connection with any other party's seeking or obtaining such equitable relief.
6. Status of Stockholders. Stockholder represents to the Buyer that it is
either an officer, director or holder of 5% or more of the outstanding voting
securities of the Company or an Affiliate of an officer, director or holder of
5% or more of the outstanding voting securities of the Company.
7. Taking Necessary Action; Further Action. Stockholder agrees that during
the period from the date hereof until the earlier of the Effective Time of the
Merger and the termination of the Merger Agreement in accordance with its terms,
he or it shall each use reasonable efforts to take all actions as may be
reasonably necessary or appropriate to effectuate the Merger as soon as possible
consistent with the terms of this Agreement and the Merger Agreement, including
(a) actions of Stockholder in his or its capacity as a stockholder of the
Company, and (b) making any required filings under (including with respect to
the acquisition by any Stockholder of shares of Acquiror Stock in the Merger),
and providing each other with information with respect to filings required
under, the HSR Act.
8. Investment Representations. Shares of Acquiror Stock are being issued
by Acquiror to Stockholder in connection with the Merger in reliance upon the
following representations, warranties and agreements of Stockholder, each of
which shall be true and correct as of the date hereof and at the Effective Time,
and each of which shall survive the Effective Time.
(a) Stockholder acknowledges that shares of Acquiror Stock issued
and issuable to him or it at the Effective Time of the Merger will not
have been registered under the Securities Act or under applicable state
securities laws.
(b) All shares of Acquiror Stock delivered or deliverable to
Stockholder in the Merger are being acquired by Stockholder solely for
investment purposes and for the account of Stockholder, and not as a
nominee or agent for others or with a view to or for sale in connection
with any distribution, and Stockholder has no present intention of selling
or otherwise distributing such shares of Acquiror Stock and has not
entered into any arrangement or understanding with respect thereto, except
in each case in accordance with the terms of this Agreement, pursuant to
the Registration Rights Agreement or otherwise in compliance with
applicable securities laws.
(c) The Stockholder acknowledges that his or its shares of Acquiror
Stock must be held indefinitely unless subsequently registered under the
Securities Act or an exemption from such registration is available. The
Stockholder agrees that he or it shall not make a disposition of any
shares of Acquiror Stock issued to him or it in the Merger unless such
shares have been registered under the Securities Act, including without
limitation in accordance with a Registration Rights Agreement with
Acquiror, or are sold in accordance with an exemption from registration
under Rule 144 or 144A under the Securities Act, or unless an exemption
from the registration requirements of the Securities Act and applicable
state securities laws (other than under Rule 144 or 144A) is available and
Acquiror shall have received an opinion of counsel reasonably satisfactory
- 3 -
<PAGE>
to Acquiror to the effect that such exemption from the registration
requirements of the Securities Act is valid and available.
(d) Stockholder acknowledges that his or its investment in shares of
Acquiror Stock is a speculative investment and is subject to significant
risks, including the risks described in Acquiror's Registration Statement
on Form S-3 dated December 10, 1999. The foregoing representation shall
not limit any rights or remedies Stockholder may have under the Merger
Agreement or otherwise in connection with the Merger. Stockholder
represents and warrants to Acquiror that he or it is able to fend for
himself or itself in the transactions contemplated by this Agreement, has
such knowledge and expertise in financial and business matters as to be
capable of evaluating the merits and risks of his or its investment and
has the ability to bear the economic risks (including the risk of loss) of
his or its investment.
(e) The Stockholder is an "Accredited Investor" as defined in Rule
501 to Regulation D promulgated under the Securities Act inasmuch as he or
it is:
(i) A director or executive officer of Acquiror;
(ii) A natural person whose individual net worth, or joint net
worth with his or her spouse, is currently over $1,000,000;
(iii) A natural person who had, or will have had, an
individual income in excess of $200,000 in each of the two
most recent years (1999 and 1998) or joint income with his or
her spouse was in excess of $300,000 in each of those years
(1999 and 1998) and has a reasonable expectation of reaching
the same income level in the current year (2000);
(iv) A broker or dealer registered pursuant to Section 15 of
the Exchange Act;
(v) A bank (as defined in Section 3(a)(2) of the Securities
Act), or a savings and loan association or other institution
(as defined in Section 3(a)(5)(A) of the Securities Act
whether acting in its individual or fiduciary capacity; a
broker or dealer registered pursuant to Section 15 of the
Exchange Act; an insurance company (as defined in Section
2(13) of the Securities Act; an investment company registered
under the Investment Company Act of 1940 or a business
development company (as defined in Section 2(a)(48) of that
Act; a Small Business Investment Company licensed by the U.S.
Small Business Administration under Section 301(c) or (d) of
the Small Business Investment Act of 1958; a plan established
and maintained by a state, its political subdivisions, or an
agency or instrumentality of a state or its political
subdivisions, for the benefit of its employees, if such plan
has total assets in excess of $5,000,000; an employee benefit
plan within the meaning of the Employee Retirement Income
Security Act of 1974 if the investment decision is made by a
plan fiduciary (as defined in Section 3(21) of such act),
which
- 4 -
<PAGE>
is either a bank, savings and loan association, insurance
company or registered investment adviser, or if the employee
benefit plan has total assets in excess of $5,000,000 or, if a
self-directed plan, with investment decisions made solely by
persons that are accredited investors;
(vi) A private business development company (as defined in
Section 202(a)(22) of the Investment Advisers Act of 1940;
(vii) An organization described in Section 501(c)(3) of the
Internal Revenue Code, a corporation, a Massachusetts or a
similar business trust, or partnership, not formed for the
specific purpose of acquiring Acquiror Stock, with total
assets in excess of $5,000,000; or
(viii) A trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring Acquiror Stock,
whose purchase is directed by a sophisticated person (as
described in Rule 506(b)(2)(ii) of the Securities Act).
(f) Stockholder represents and warrants that he or it has had the
opportunity to ask questions of Acquiror concerning its business and to
obtain any information which Stockholder considered necessary to verify
the accuracy of or to amplify upon Acquiror's disclosures, including the
Acquiror Reports attached as Exhibit A hereto, and have had all questions
which have been asked by Stockholder answered by Acquiror to Stockholder's
satisfaction.
9. Standstill and Transfer Restrictions on Acquiror Securities.
(a) Stockholder agrees that from the Effective Time and for a period
of three years after the Effective Time (the "Restriction Period"),
without the prior written consent of the Board of Directors of Acquiror as
evidenced in a resolution adopted by two-thirds of the directors of
Acquiror, Stockholder will not, and will cause each of its Affiliates whom
it controls not to, directly or indirectly, alone or in concert with
others:
(i) acquire, offer or propose to acquire, or agree to acquire
(except, in any case, upon consummation of the Merger, by way
of option grants approved by the Board of Directors of
Acquiror or the compensation committee thereof, or upon the
conversion, exercise or exchange of Acquiror Securities (as
defined below)) whether by purchase, tender or exchange offer,
or through the acquisition of control of another person or
entity or knowingly otherwise, any securities issued by
Acquiror which are entitled to vote generally for the election
of directors or any direct or indirect rights or options to
acquire any such securities or any securities convertible or
exercisable into or exchangeable for such securities
(collectively, "Acquiror Securities"); provided, that
Stockholder and its Affiliates may purchase or acquire, in the
aggregate during the Restriction Period, additional Acquiror
Securities in an amount which in the aggregate does not exceed
one percent (1%) of the fully diluted shares outstanding of
- 5 -
<PAGE>
Acquiror immediately following the Effective Time (as
appropriately adjusted for stock splits, etc.);
(ii) knowingly make or participate in any "solicitation" of
"proxies" or "consents" (as such terms are used in the proxy
rules of the United States Securities and Exchange Commission)
with respect to any Acquiror Securities, or make proposals for
the approval of stockholders of Acquiror;
(iii) knowingly form, join or participate in a "group" (within
the meaning of Section 13(d)(3) of the Exchange Act) with
respect to Acquiror Securities;
(iv) deposit any Acquiror Securities in any voting trust or
knowingly subject any Acquiror Securities to any agreement
with respect to the voting of any Acquiror Securities;
(v) otherwise knowingly act to control or seek to control the
management, Board of Directors or policies of Acquiror (except
with respect to actions taken by Stockholder solely in his
capacity as an officer or director of Acquiror in the exercise
of his fiduciary duties);
(vi) make or disclose any request to amend, waive or terminate
any provision of this Section 9 (including this clause
(9)(a)(vi));
(vii) offer, pledge, sell, contract to sell, grant any option,
right or warrant for the sale of, or otherwise dispose of or
transfer ("Transfer"), any Acquiror Securities, whether now
owned or hereafter acquired by Stockholder or with respect to
which Stockholder has or hereafter acquires the power of
disposition, if following such Transfer, the transferee of
such Acquiror Securities together with its Affiliates and
Associates would own in excess of 10% of the voting power
represented by the then outstanding Acquiror Securities
(assuming conversion by such transferee and its Affiliates and
Associates of all securities convertible or exercisable into
or exchangeable for shares of Acquiror Securities); provided,
that this Subsection 9(a)(vii) shall not limit the ability of
Stockholder to (A) make a bona fide pledge of its Acquiror
Securities to a nationally recognized financial institution
engaged in such transactions in the normal course of its
business to secure indebtedness so long as pledgee agrees to
be bound by the terms of this Section 9 in the event it
forecloses on Acquiror Securities representing in excess of
10% of the voting power represented by the then outstanding
Acquiror Securities, unless such pledgee has agreed to sell
such Acquiror Securities in open-market transactions over a
national securities exchange, (B) enter into bona fide hedging
transactions with respect to its Acquiror Securities with a
nationally recognized financial institution engaged in such
transactions in the normal course of its business or (C) sell
Acquiror Securities pursuant to an underwritten
- 6 -
<PAGE>
public offering or over a national securities exchange (other
than in prearranged block transactions); or
(viii) make any agreement to do any of the foregoing to the
extent restricted thereby.
(b) Acquiror acknowledges and agrees that, solely as a result of
Stockholder's execution of this Agreement and compliance with the
provisions hereof, (i) neither Stockholder nor its Affiliates shall, and
neither Stockholder nor its Affiliates shall be deemed to, be acting
together or agreeing to act together with any other person or entity with
respect to Acquiror Securities, and (ii) Stockholder has not acted other
than independently and individually, without regard to the purposes or
intention of any other person or entity and without the purpose or intent
of acting together with any other person or entity for any reason. With
respect to obligations of Stockholder pursuant to any provision of this
Section 9 qualified by the "knowledge" of Stockholder, it is understood
and agreed that upon receipt by Stockholder of notice from Acquiror that
Stockholder has breached a provision of this Section 9 (notwithstanding
any requirement relating to knowledge of Stockholder contained in such
provision), Stockholder's receipt of such notice shall evidence the
requisite knowledge of Stockholder under this Section 9 with respect to
such activities constituting a breach on a going forward basis, and
Stockholder shall be required to use its reasonable best efforts to
promptly remedy any such activities which so constitute a breach without
regard to the knowledge qualifier, whether or not such breach is then
continuing.
(c) If at any time during the Restricted Period, Stockholder and its
Affiliates "beneficially own" (as defined in Rule 13d-3 under the Exchange
Act) in the aggregate less than five percent (5%) of the voting power
represented by the fully diluted Acquiror Securities then outstanding,
Stockholder and its Affiliates shall no longer be subject to the
provisions of this Section 9; provided, that if at any time following such
occurrence, Stockholder and its Affiliates "beneficially own" (as defined
in Rule 13d-3 under the Exchange Act) in the aggregate five percent (5%)
or more of the voting power represented by the fully diluted Acquiror
Securities then outstanding, the provisions of this Section 9 shall once
again apply and be in full force and effect with respect to Stockholder
and its Affiliates for the remainder of the Restriction Period, if any.
(d) Notwithstanding Section 5 hereof, Acquiror shall not be
restricted from seeking or obtaining monetary damages from Stockholder for
breach of this Section 9, up to a maximum of $5.0 million; provided that
such $5.0 million maximum liability shall be a joint cap applicable to the
aggregate liability of Stockholder under this Section 9 and of Coventry
Partners Family L.P., a Delaware limited partnership, under Section 9 of
that certain Stockholders Agreement between Coventry Partners Family L.P.
and Acquiror dated the date hereof.
10. Waiver of Company Liquidation Preference. To the extent that
Stockholder owns shares of Company Preferred Stock, Stockholder hereby waives
any right to a liquidation preference resulting from the Merger pursuant to
Section 2(b) of Article V of the Company's Second Amended and Restated
Certificate of Incorporation.
- 7 -
<PAGE>
11. Term of Agreement; Termination. Subject to Section 14(e), the term of
this Agreement shall commence on the date hereof and such term and this
Agreement shall terminate upon the earliest to occur of (i) the Effective Time,
and (ii) the date on which the Merger Agreement is terminated in accordance with
its terms; provided, however, that the provisions of Section 9 shall survive the
Effective Time in accordance with the terms of Section 9. Upon such termination,
no party shall have any further obligations or liabilities hereunder; provided,
that such termination shall not relieve any party from liability for any breach
of this Agreement prior to such termination.
12. Representations and Warranties of the Stockholder. Stockholder
represents and warrants to Acquiror that, as of the date hereof, (a) Stockholder
has full legal power and authority to execute and deliver this Agreement and the
Proxy, and (b) the Shares are free and clear of all proxies (except for a proxy
which is not inconsistent with the terms of this Agreement).
13. Entire Agreement. This Agreement supersedes all prior agreements,
written or oral, among the parties hereto with respect to the subject matter
hereof and contains the entire agreement among the parties with respect to the
subject matter hereof (other than the Merger Agreement and the Registration
Rights Agreement). This Agreement may not be amended, supplemented or modified,
and no provisions hereof may be modified or waived, except by an instrument in
writing signed by all parties hereto. No waiver of any provisions hereof by any
party shall be deemed a waiver of any other provisions hereof by any such party,
nor shall any such waiver be deemed a continuing waiver of any provision hereof
by such party.
14. Notices. All notices, requests, claims, demands or other
communications hereunder shall be in writing and shall be deemed given when
delivered personally, upon receipt of a transmission confirmation if sent by
telecopy or like transmission (with confirmation) and on the next business day
when sent by a reputable, national overnight courier service to the parties at
the following addresses (or at such other address for a party as shall be
specified by like notice): ):
If to Acquiror: HA-LO Industries, Inc.
5980 West Touhy Avenue
Niles, IL 60714
Attn: Gregory J. Kilrea, CFO
With a copy to: Neal, Gerber & Eisenberg
Two North LaSalle Street
Suite 2100
Chicago, IL 60602
Attn: Barry J. Shkolnik, Esq.
If to Stockholder: Altheimer & Gray
10 South Wacker Drive
Chicago, IL 60606
Attn: Peter H. Lieberman
- 8 -
<PAGE>
With a copy to: ______________________________
______________________________
______________________________
______________________________
Attention:____________________
15. Miscellaneous.
(a) This Agreement shall be deemed a contract made under, and for
all purposes shall be construed in accordance with, the laws of the State of
Delaware, without reference to its conflicts of law principles.
(b) If any provision of this Agreement or the application of such
provision to any person or circumstances shall be held invalid or unenforceable
by a court of competent jurisdiction, such provision or application shall be
unenforceable only to the extent of such invalidity or unenforceability, and the
remainder of the provision held invalid or unenforceable and the application of
such provision to persons or circumstances, other than the party as to which it
is held invalid, and the remainder of this Agreement shall not be affected.
(c) This Agreement may be executed in one or more counterparts, each
of which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.
(d) All Section headings herein are for convenience of reference
only and are not part of this Agreement, and no construction or reference shall
be derived therefrom.
(e) The obligations of Stockholder shall not be effective or binding
upon Stockholder until after such time as the Merger Agreement is executed and
delivered by the Company, Acquiror and Acquiror Sub, and the parties agree that
there is not and has not been any other agreement, arrangement or understanding
between the parties hereto with respect to the matters set forth herein, other
than the Merger Agreement and the Registration Rights Agreement.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
ACQUIROR:
HA-LO INDUSTRIES, INC.
By: /s/ John Kelley
----------------------
John Kelley, President
STOCKHOLDER:
/s/ Eric Lefkofsky
--------------------
Eric Lefkofsky
- 10 -
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Number of shares Number of shares of Number of shares of Number of Shares of
of Company Company Class B Company Series A Company Series B
Class A Common Common Stock, par Preferred Stock, par Preferred Stock, par
Name of Stock, par value value $.001 per value $.001 per share value $.001 per
Stockholder $.001 per share share share
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Eric Lefkofsky 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Total
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
APPENDIX A
FORM OF PROXY
The undersigned, for consideration received, hereby appoints John Kelley
and Greg Kilrea, or either of them, or any other officer of HA-LO INDUSTRIES,
INC., an Illinois corporation ("Acquiror"), its proxy to vote the shares of
capital stock (the "Shares") of Starbelly.com, Inc., a Delaware corporation
f/k/a TheZebra.com, Inc. (the "Company"), owned by the undersigned and described
in that certain Stockholders Agreement dated January 17, 2000 between the
undersigned and Acquiror (a copy of such Agreement being attached hereto (the
"Stockholders Agreement") and which the undersigned is entitled to vote at any
meeting of stockholders of the Company, and at any adjournment thereof with
respect to all matters specified in Section 2 of the Stockholder's Agreement.
This proxy is subject to the terms of the Stockholder's Agreement, is coupled
with an interest and revokes all prior proxies granted by the undersigned with
respect to such Shares, is irrevocable and shall terminate and be of no further
force and effect automatically at such time as the Stockholder's Agreement
terminates in accordance with its terms. The undersigned also constitutes and
appoints John Kelley and Greg Kilrea, or either of them, as the undersigned's
true and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, to execute, for the undersigned and in the undersigned's name,
any written consent of stockholders that is executed in lieu of any meeting of
stockholders at which such persons (or either of them) would be entitled to
exercise the proxy granted hereby.
Dated: January 17, 2000
STOCKHOLDER:
/s/ Eric Lefkofsky
-------------------
Eric Lefkofsky
<PAGE>
Exhibit 8
INDEMNIFICATION ESCROW AGREEMENT
THIS INDEMNIFICATION ESCROW AGREEMENT (this "Escrow Agreement") is made
and entered into as of May 3, 2000 by and among COVENTRY PARTNERS FAMILY LIMITED
PARTNERSHIP, a Delaware limited partnership ("Escrower"), HA-LO INDUSTRIES,
INC., an Illinois corporation ("Escrowee"), and AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO, as escrow agent ("Escrow Agent").
WHEREAS, in order to induce Escrowee to enter into that certain Agreement
and Plan of Merger and Plan of Reorganization (the "Agreement"), dated January
17, 2000, as amended, among Escrowee and others pertaining to the merger of
Starbelly.com, Inc., a Delaware corporation f/k/a TheZebra.com, Inc. ("SBC"),
with and into HA-LO Industries, Inc., a Delaware corporation, and to secure
Escrowee's rights of indemnification, pursuant to the Agreement (collectively,
the "Indemnification Obligations"), Escrower has agreed to deposit into escrow
with the Escrow Agent those shares of unregistered common stock and/or Series A
Convertible Preferred Stock of Escrowee, owned by Escrower, as more fully
described on Schedule A attached hereto and incorporated herein (collectively,
the "Shares");
NOW, THEREFORE, in consideration of the foregoing, and the mutual
agreements of the parties hereto, Escrower, Escrowee and Escrow Agent hereby
agree as follows:
1. Definitions. All capitalized terms used but not otherwise defined
herein shall have the meanings specified in the Agreement.
2. The Collateral. For the consideration hereinabove set forth and to
secure the payment and performance of all Indemnification Obligations, Escrower
hereby deposits, and agrees to deposit in the future, into the escrow created
hereby the following:
a. The Shares, with stock powers attached thereto, all duly endorsed
in blank, herewith delivered to Escrow Agent;
b. Any and all other securities deposited with Escrow Agent from
time to time in accordance with the provisions hereof (such securities,
together with the Shares, the "Securities"), each of which shall be
deposited with stock powers attached thereto, all duly endorsed in blank;
and
c. Any and all proceeds received by Escrower (or Escrow Agent on
Escrower's behalf) upon the sale or other disposition of any of the
Securities; provided, however, that none of the Securities may be sold or
otherwise disposed of without the prior written consent of Escrowee,
except that, without such consent, Escrower may exercise any right
Escrower may have in the Certificate of Designation Establishing Series of
Series A Convertible Preferred Stock
<PAGE>
of HA-LO Industries, Inc. to require Escrowee to redeem all or any part of
the Series A Convertible Preferred Stock comprising a part of the
Securities.
The Escrow Agent will hold the Collateral in accordance with the terms of this
Escrow Agreement.
Escrower shall direct investment of any cash held by the Escrow Agent,
provided that investment shall be limited to institutional money market
accounts, governmental bonds and such other securities as are acceptable to
Escrowee, in Escrowee's reasonable discretion. Unless and until the Escrower
shall give other instructions to the Escrow Agent, monies held hereunder shall
be invested in One Group Prime Money Market Fund-Class-A. The Securities and any
interest, dividends and distributions thereon are hereinafter referred to,
collectively, as the "Collateral." Prior to the termination of this Escrow
Agreement, the (i) holding, (ii) cancellation, (iii) release from the provisions
of this Escrow Agreement (in part or in whole), and (iv) any other actions with
respect to the Collateral shall be governed by the applicable provisions of the
Agreement and this Escrow Agreement.
3. Representations and Warranties.
a. Escrower hereby represents and warrants to Escrowee that:
(i) The execution, delivery and performance by Escrower of
this Escrow Agreement will not violate any provision of law, any
order of any court or other agency of government, or any agreement
or other instrument to which Escrower is a party or by which
Escrower is bound, or conflict with, result in a breach of or
constitute (with due notice or lapse of time, or both) a default
under any such agreement or other instrument, or result in the
creation or imposition of any lien, charge, security interest,
claim, or encumbrance of any nature whatsoever ("Lien") upon any of
Escrower's property or assets, except as contemplated by the
provisions of this Escrow Agreement and the Agreement;
(ii) This Escrow Agreement constitutes a legal, valid and
binding obligation of Escrower; and
(iii) As to such of the Collateral deposited with Escrow Agent
on the date hereof or hereafter: (A) the Escrower is the sole legal
and beneficial owner of such Collateral; (B) the stock transfer
forms attached to each of the certificates representing any of the
Securities have been duly executed and delivered by the Escrower to
Escrow Agent; and (C) none of such
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<PAGE>
Collateral is subject to any Lien, other than the interest granted
to Escrowee hereby and in the Agreement.
b. Escrowee hereby represents and warrants to the Escrower that:
(i) The execution, delivery and performance by Escrowee of
this Escrow Agreement will not violate any provision of law, any
order of any court or other agency of government, or any agreement
or other instrument to which Escrowee is a party or by which
Escrowee is bound, or conflict with, result in a breach of or
constitute (with due notice or lapse of time, or both) a default
under any such agreement or other instrument; and
(ii) This Escrow Agreement constitutes a legal, valid and
binding obligation of Escrowee.
4. Stock Splits, Stock Dividends, Etc.
a. In the event that Escrower, by virtue of Escrower's ownership of
the Collateral, now is, or hereafter becomes, entitled (without additional
consideration) to other or additional securities as the result of any
corporate reorganization, merger or consolidation, stock split or
combination, stock dividend or otherwise, Escrower shall promptly:
(i) deliver to Escrow Agent the certificates evidencing
Escrower's ownership thereof, and agrees if such certificates are
delivered to Escrower, to take possession thereof in trust for
Escrowee and forthwith deliver the same to Escrow Agent;
(ii) deliver to Escrow Agent a stock transfer form with
respect to such securities, executed in blank by Escrower;
(iii) deliver to Escrowee a certificate, executed by Escrower
and dated the date of such delivery, as to the truth and correctness
on such date of the representations and warranties set forth in
Section 3(a)(iii) hereof; and
(iv) deliver to Escrowee such other certificates, forms and
other instruments as Escrowee may reasonably request in connection
with such delivery.
b. Escrower agrees that such securities shall constitute a portion
of the Collateral and be subject to this
- 3 -
<PAGE>
Escrow Agreement in the same manner and to the extent as the Securities
deposited into escrow on the date hereof.
5. Collateral Cancellations and Releases. Except as otherwise provided in
Section 8 hereof, Escrow Agent shall hold and release the Collateral to the
Escrower, free of the escrow created hereby, as follows:
a. Within five (5) business days following the twelve (12) month
anniversary of the Closing Date, Escrow Agent shall automatically, without
further direction, release from escrow and deliver to Escrower one hundred
percent (100%) of the Collateral not previously released, less that number
of shares of the Securities or other investment which are then being held
by the Escrow Agent in respect of any previously asserted claims by
Escrowee or the Surviving Corporation under the Agreement and this Escrow
Agreement which have not been resolved. The Securities which are released
by the Escrow Agent to Escrower shall be registered in the name of and/or
payable to, as the case may be, Escrower.
b. Notwithstanding clause (a) above, any and all cash dividends and
cash interest received by the Escrow Agent during any calendar quarter, if
any, shall be released from escrow and delivered to Escrower promptly
after the end of such quarter or, if applicable, the termination of this
Escrow Agreement.
c. If, for any reason, Escrow Agent fails to release the Collateral,
or any part thereof, as provided in this Escrow Agreement and the
Agreement, Escrower and Escrowee agree to provide joint directions to
Escrow Agent to release the Collateral as provided in this Escrow
Agreement and in the Agreement.
d. Upon release of the Collateral pursuant to this Section 5, the
Collateral shall no longer be subject to the escrow created hereby.
6. Voting Power. Escrower shall be entitled to exercise all voting powers
pertaining to their respective portions of the Collateral for any purpose not
inconsistent with, or in violation of, the provisions of the Agreement or this
Escrow Agreement, in all matters, to the extent such Collateral has not been
released to Escrowee pursuant to this Escrow Agreement.
- 4 -
<PAGE>
7. Escrow Agent.
a. Escrowee shall pay the Escrow Agent reasonable compensation for
its services hereunder, in accordance with Schedule B, and shall reimburse
the Escrow Agent for all reasonable expenses, disbursements and advances
incurred or made by the Escrow Agent in performance of its duties
hereunder. Notwithstanding the foregoing, in the event of any dispute
hereunder between Escrower and Escrowee, the non-prevailing party in any
such dispute shall pay the prevailing party's and the Escrow Agent's
reasonable expenses (including without limitation reasonable attorney's
fees and court costs) incurred in such dispute.
b. The Escrow Agent may resign and be discharged from its duties
hereunder at any time by giving notice of such resignation to Escrowee and
Escrower specifying a date when such resignation shall take effect. Upon
such notice, a successor Escrow Agent shall be appointed with the mutual
consent of Escrowee and Escrower, such successor Escrow Agent to become
Escrow Agent hereunder upon the receipt of the Collateral. If Escrowee and
Escrower are unable to agree upon a successor Escrow Agent within thirty
(30) days after such notice, the Escrow Agent shall be entitled to appoint
its successor or to petition a court of competent jurisdiction to appoint
a successor. The Escrow Agent shall continue to act until its successor
accepts the escrow and receives the Collateral. Escrowee and Escrower
shall have the right at any time upon mutual consent to substitute a new
Escrow Agent by giving notice thereof to the Escrow Agent then acting.
c. The Escrow Agent undertakes to perform such duties as are
specifically set forth herein and may conclusively rely, and shall be
protected in acting or refraining from acting, on any written notice,
instrument or signature believed by it to be genuine and to have been
signed or presented by the proper party or parties duly authorized to do
so. The Escrow Agent shall have no responsibility for the contents of any
writing contemplated herein and may rely without any liability upon the
contents thereof.
d. The Escrow Agent shall not be liable for any action taken or
omitted by it in good faith and believed by it to be authorized hereby or
within the rights or powers conferred upon it hereunder, nor for action
taken or omitted by it in good faith, and in accordance with advice of
counsel (which counsel may be of the Escrow Agent's own choosing), and
shall not be liable for any mistake of fact or error of judgment or for
any acts or omissions of any kind unless caused by willful misconduct or
gross negligence.
e. Each of Escrower and Escrowee agrees to indemnify
- 5 -
<PAGE>
the Escrow Agent and hold it harmless against any and all liabilities
incurred by it hereunder as a consequence of such party's wrongful action,
and Escrower and Escrowee agree jointly to indemnify the Escrow Agent and
hold it harmless against any and all liabilities incurred by it hereunder
that are not a consequence of Escrower's or Escrowee's wrongful action,
except in either case for liabilities incurred by the Escrow Agent
resulting from its own willful misconduct or gross negligence. The
obligations of the Escrower and the Escrowee under this clause (e) shall
survive the termination of this Agreement and the resignation or removal
of the Escrow Agent.
f. No assignment of the interest of any of the parties hereto shall
be binding upon the Escrow Agent unless and until written evidence of such
assignment in form satisfactory to the Escrow Agent shall be filed with
and accepted by the Escrow Agent.
g. In the event that any escrow property shall be attached,
garnished, or levied upon by any court order, or the delivery thereof
shall be stayed or enjoined by an order of a court, or any order, judgment
or decree shall be made or entered by any court order affecting the
property deposited under this Escrow Agreement, or any part thereof, the
Escrow Agent is hereby expressly authorized, in its sole discretion, to
obey and comply with all writs, orders or decrees so entered or issued,
which it is advised by legal counsel of its own choosing is binding upon
it, whether with or without jurisdiction, and in the event that the Escrow
Agent obeys or complies with any such writ, order or decree, it shall not
be liable to any of the parties hereto or to any other person, firm or
corporation, by reason of such compliance notwithstanding such writ, order
or decree be subsequently reversed, modified, annulled, set aside or
vacated.
h. If the Escrow Agent becomes involved in litigation on account of
this Escrow Agreement, it shall have the right to retain counsel. The
parties hereto (other than the Escrow Agent), jointly, agree to pay to the
Escrow Agent on demand its reasonable attorney's fees, disbursements and
expenses in connection with any such litigation.
i. In the event that conflicting demands are made upon the Escrow
Agent for any situation not addressed in this Escrow Agreement, the Escrow
Agent may withhold performance of the terms of this Escrow Agreement until
such time as said conflicting demands shall have been withdrawn or the
rights of the respective parties shall have been settled by court
adjudication, arbitration, joint order or otherwise.
j. Any corporation or association into which the Escrow Agent may be
converted or merged, or with which it may
- 6 -
<PAGE>
be consolidated, or to which it may sell or transfer its corporate trust
business and assets as a whole or substantially as a whole, or any
corporation or association resulting from any such conversion, sale,
merger, consolidation or transfer to which it is a party, shall be and
become the successor Escrow Agent hereunder and vested with all of the
title to the whole property or trust estate and all of the trusts, powers,
immunities, privileges, protections and all other matters as was its
predecessor, without the execution or filing of any instrument or any
further act, deed or conveyance on the part of any of the parties hereto,
anything herein to the contrary notwithstanding.
8. Delivery of Collateral to Escrowee. From time to time, Escrowee may, to
the extent Escrowee believes in good faith that it is entitled to
indemnification under Article IX of the Agreement, deliver to Escrow Agent and
Escrower a certification signed by a duly authorized officer of Escrowee (i)
certifying that, pursuant to the terms of the Agreement, Escrowee is entitled to
receive a specified portion of the Collateral (e.g., a number of shares) as is
identified in any such certificate, and that a copy of the certification has
been deliver to Escrower in the manner set forth in Section 10(e) hereof, (ii)
describing in reasonable detail the basis of the claim and the amount and
calculation of Damages arising from such claim, and (iii) acknowledging
Escrower's responsibility only for its "Percentage Interest" (as set forth on
Schedule A) of such Damages (a "Default Certification"). In the event that
Escrow Agent does not receive a notice from Escrower, within twenty (20)
calendar days of receipt of such a Default Certification, disputing Escrowee's
right to indemnification, then Escrow Agent shall promptly deliver to Escrowee
the portion of the Collateral identified in such Default Certification;
provided, however, that to the extent a partial release of the Collateral can
only be effected through release of shares represented by a stock or other
ownership certificate representing shares in addition to those released, stock
or other ownership certificates representing as large a portion of the entire
partial release as possible will be released to the Escrowee or Escrower, as
applicable, and a certificate in excess of the balance will be delivered to the
Escrowee (in which event (a) Escrowee shall cause a new certificate in the
amount of such balance to be promptly issued and delivered to Escrowee or
Escrower, as applicable, (b) Escrowee shall cause new certificates to be issued
in the amount of any such excess and promptly deposited with Escrow Agent
hereunder, (c) Escrower shall execute stock powers endorsed in blank and deliver
the same to Escrow Agent to be attached to such new certificates, and (d) such
new certificates, together with such stock powers, shall constitute a part of
the Collateral and be subject to this Escrow Agreement in the same manner and to
the extent as the Securities deposited into escrow on the date hereof). Any
portion of the Collateral as is not the subject of any particular Default
Certification delivered
- 7 -
<PAGE>
by Escrowee pursuant to this Section 8 shall continue to be held by Escrow Agent
in accordance with the terms hereof. In the event that Escrow Agent receives a
notice from Escrower, within twenty (20) calendar days of receipt of such a
Default Certification, disputing Escrowee's right to indemnification, then
Escrow Agent shall continue to hold the disputed portion of the Collateral
identified in such Default Certification, shall release such non-disputed
portion to Escrowee (in the manner stated earlier in this Section 8) and shall
release such disputed portion upon receiving either a joint written direction
signed by Escrower and Escrowee or as directed by court order resolving the
dispute in accordance with the terms of the Agreement and this Escrow Agreement.
The Escrow Agent shall have no liability with respect to the issuance of the new
certificates evidencing excess shares after a partial distribution, which shall
be the sole responsibility of the Escrowee and its transfer agent, if any. The
Escrow Agent's sole responsibility shall be to deliver the certificates on
deposit with it hereunder as directed by the Escrowee and/or Escrower, as
applicable. If Escrowee fails to deliver a new certificate to Escrower for the
balance of any partial distribution within 10 days of release of the certificate
to Escrowee, then upon notice from Escrower the Escrow Agent shall promptly
deliver to Escrower the smallest certificate in excess of the balance then held
by the Escrow Agent. Escrower shall be obligated to redeposit the shares in
excess of those to be otherwise released in the same manner as Escrowee was so
obligated and upon release to Escrower of such certificate Escrowee may
redeposit the certificate released to it with respect to the balance.
Notwithstanding anything to the contrary contained herein, Escrowee shall
not be entitled to receive from the Collateral, nor is Escrower obligated
hereunder for, more than Escrower's "Percentage Interest" of the Damages with
respect to any claim. Escrower shall not have any liability with respect to
aggregate Damages in excess of the Collateral.
9. Termination of Escrow Agreement. This Escrow Agreement shall be
terminated when no Collateral remains subject hereto. In addition, upon proper
release of any Collateral to Escrower or Escrowee in accordance with the terms
of this Escrow Agreement, such released Collateral shall no longer be subject to
this Escrow Agreement.
10. Tax Consequences.
Notwithstanding anything to the contrary contained in this Escrow
Agreement, all income tax consequences with respect to this Escrow Agreement and
escrow and any transactions in connection therewith, including, without
limitation, sales, purchases, forfeitures and releases, shall be borne out of,
and by, the Collateral itself and Escrower shall not suffer any adverse tax
consequences as a result thereof; and to the extent any such tax consequences
are nonetheless payable by Escrower, there shall be
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<PAGE>
released to Escrower, if available and upon request, sufficient Collateral to
satisfy such tax consequence in such amount as is certified in good faith by
Escrower to Escrowee and the Escrow Agent. Under no circumstances shall Escrowee
have any liability or responsibility for taxes arising out of the matters
covered in the immediately preceding sentence, except as may otherwise be
required by law. The Escrow Agent shall be under no obligation to return any
interest or earnings on the Escrow Funds to Escrower until it has received a
Form W-9 from such party, regardless of whether such party is exempt from
reporting or withholding requirements under the Internal Revenue Code of 1986,
as amended. As and to the extent required by law, the Escrow Agent shall report
to the Internal Revenue Service, as of each calendar year-end, all income earned
from the investment of any sum held in the Escrow Funds. The Escrow Agent shall
be responsible for the preparation and/or filing of any tax return with respect
to any income earned by the Escrow Funds (Form 1099-Int). The Escrow Agent shall
have no obligation to pay any taxes or estimated taxes.
11. Miscellaneous.
a. Should Escrowee at any time assign any of its rights under this
Escrow Agreement, the assignee shall thereupon have all of the rights of
Escrowee hereunder.
b. Each and every right, remedy and power granted to a party
hereunder shall be cumulative and in addition to any other right, remedy
or power herein specifically granted or now or hereafter existing in
equity, at law, by virtue of statute or otherwise and may be exercised by
such party, from time to time, concurrently or independently and as often
and in such order as such party may deem expedient, subject to the
limitations set forth in the Agreement. Any failure or delay on the part
of such party in exercising any such right, remedy or power, or
abandonment or discontinuance of steps to enforce the same, shall not
operate as a waiver thereof or affect such party's right thereafter to
exercise the same, and any single or partial exercise of any such right,
remedy or power shall not preclude any other or further exercise thereof
or the exercise of any other right, remedy or power.
Notwithstanding anything to the contrary contained in this Escrow
Agreement, as between Escrower and Escrowee, the escrow created hereby
will be treated as a pledge such that Escrowee shall be entitled to all
the rights, remedies and powers as if a pledgee under applicable law in
addition to any other rights, remedies and powers Escrowee may have.
c. Any modification or waiver of any provision of this Escrow
Agreement, or any consent to any departure by Escrowee or Escrower
therefrom, shall not be effective in any event unless the same is in
writing and signed by Escrow
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<PAGE>
Agent, Escrowee and Escrower, and then such modification, waiver or
consent shall be effective only in the specific instance and for the
specific purpose given. Any notice to or demand on Escrower or Escrowee in
any event not specifically required of the other party hereunder shall not
entitle the receiving party to any other or further notice or demand in
the same, similar or other circumstances unless specifically required
hereunder.
d. Each party agrees that at any time, and from time to time, after
the execution and delivery of this Escrow Agreement, it will, upon the
request of the other party, execute and deliver such further documents and
do such further acts and things as the other party may reasonably request
in order to fully effect the purpose of this Escrow Agreement.
e. Any notice, request, demand, consent, approval, certification or
other communication provided or permitted hereunder shall be in writing
and be given by personal delivery or courier service, addressed to the
party for whom it is intended, as follows:
If to Escrowee:
HA-LO Industries, Inc.
5980 West Touhy Avenue
Niles, IL 60714
Attention: Greg Kilrea
Facsimile number: 847/647-4970
with a copy to:
Neal, Gerber & Eisenberg
Two N. LaSalle Street
Suite 2100
Chicago, Illinois 60602
Attention: Barry J. Shkolnik
Facsimile number: 312/269-1747
If to Escrower:
Coventry Partners Family Limited Partnership
c/o Eric Lefkofsky
Starbelly.com, Inc.
1225 W. Morse Avenue
Chicago, Illinois 60626-3517
Facsimile number: 773/262-6694
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<PAGE>
with a copy to:
Altheimer & Gray
10 S. Wacker Drive
Suite 4000
Chicago, Illinois 60606
Attention: Peter Lieberman
Facsimile number: 312/715-4800
If to Escrow Agent:
American National Bank and Trust Company of Chicago
Corporate Trust Department
120 South LaSalle Street
Mail Code IL1-1250
Chicago, Illinois 60603
Attention: Kevin M. Ryan
Facsimile Number: 312/661-6491
provided, however, that each party may change its address for purposes of
receipt of any such communication by giving five (5) days' written notice
of such change to the other party in the manner above prescribed. Notices
shall be deemed to have been given when received.
f. This Escrow Agreement shall be deemed to have been made under,
and shall be governed by, the laws of the State of Illinois in all
respects, including matters of construction, validity and performance.
g. If any provision of this Escrow Agreement is prohibited by, or is
unlawful or unenforceable under, any applicable law of any jurisdiction,
such provision shall, as to such jurisdiction, be ineffective to the
extent of such prohibition without invalidating the remaining provisions
hereof, provided, however, that any such prohibition in any jurisdiction
shall not invalidate such provision in any other jurisdiction; and
provided, further, that where the provisions of any such applicable law
may be waived, they hereby are waived by Escrower to the full extent
permitted by law to the end that this Escrow Agreement shall be deemed to
be valid and binding in accordance with its terms.
h. This Escrow Agreement shall inure to the benefit of the
successors and permitted assigns of Escrowee and Escrower and shall be
binding upon the heirs, executors, administrators, legal representatives,
successors and assigns of Escrower.
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<PAGE>
IN WITNESS WHEREOF, Escrower has executed and the Escrowee and Escrow
Agent have caused to be executed this Escrow Agreement as of the date first
above written.
ESCROW AGENT: ESCROWEE:
AMERICAN NATIONAL BANK AND HA-LO INDUSTRIES, INC.
TRUST COMPANY OF CHICAGO,
AS ESCROW AGENT
By: /s/ Kevin M. Ryan By: /s/ John Kelley
------------------------- ------------------------------
Name: Kevin M. Ryan Name: John Kelley
-------------------- -------------------------
Title: Authorized Officer Title: Chief Executive Officer
------------------- ------------------------
ESCROWER:
By: Coventry Partners Family L.P.,
a Delaware limited
partnership
By: Coventry Associates, Inc.,
a Delaware corporation,
its general partner
By: /s/ Eric Lefkofsky
------------------------------
Eric Lefkofsky
President
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<PAGE>
SCHEDULE A
SHARES
<TABLE>
<CAPTION>
====================================================================================================================
Common Stock No. of Preferred Stock No. of Shares
Certificate Shares of Certificate of Preferred Percentage
Escrower No. Common Stock No. Stock Interest
-------- ----------- ------------ --------------- ------------- ----------
<S> <C> <C> <C>
Coventry Partners 6077 250,000
Family Limited 6078 250,000
Partnership 6079 216,750
--------------- ------------- ----------
100%
====================================================================================================================
</TABLE>
<PAGE>
SCHEDULE B
COMPENSATION
Annual Fee $3,500
Any out-of-pocket expenses, or extraordinary fees or expenses such as
attorney fees or messenger costs, are additional and are not included in the
above schedule.
The annual fee is billed in advance and payable prior to that year's
service.
<PAGE>
Exhibit 9
EMPLOYMENT ESCROW AGREEMENT
THIS EMPLOYMENT ESCROW AGREEMENT (this "Escrow Agreement") is made and
entered into as of May 3, 2000 by and among COVENTRY PARTNERS FAMILY LIMITED
PARTNERSHIP, a Delaware limited partnership ("Escrower"), HA-LO INDUSTRIES,
INC., an Illinois corporation ("Escrowee"), and AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO, as escrow agent ("Escrow Agent").
RECITALS
Concurrently with the execution of this Escrow Agreement, (i) the
transactions contemplated by that certain Agreement and Plan of Merger and Plan
of Reorganization, dated January 17, 2000, as amended, among Escrowee and others
(the "Merger Agreement") are being consummated, and (ii) as contemplated by the
Merger Agreement, Escrowee and Eric Lefkofsky (the "Employee") are entering into
an Employment Agreement of even date herewith (the "Employment Agreement"). The
Employee has certain material relationships with Escrower, and is also an
officer and director of Starbelly.com, Inc., a Delaware corporation f/k/a
TheZebra.com, Inc. ("SBC"), the entity being merged into a subsidiary of
Escrowee pursuant to the Merger Agreement. Escrower is a principal stockholder
of SBC and, pursuant to the Merger Agreement, is being issued 5,085,178 shares
of common stock, no par value, and 533,458 shares of Series A Convertible
Preferred Stock, no par value, of Escrowee as part of the merger consideration,
a portion of which shall be escrowed in the manner and for the purposes set
forth in this Escrow Agreement.
Accordingly, in order to induce Escrowee to consummate the transaction
contemplated by the Merger Agreement and enter into the Employment Agreement,
Escrower has agreed to deposit into escrow with the Escrow Agent those shares of
unregistered common stock and Series A Preferred Stock of Escrowee issued
pursuant to the Merger, owned by Escrower, as more fully described on Schedule A
attached hereto and incorporated herein (collectively, the "Shares").
NOW, THEREFORE, in consideration of the foregoing, and the mutual
agreements of the parties hereto, Escrower, Escrowee and the Escrow Agent hereby
agree as follows:
1. Definitions. All capitalized terms used but not otherwise defined
herein shall have the meanings specified in the Employment Agreement.
2. The Collateral. For the consideration hereinabove set forth and to
secure the continued performance of the Employee under the Employment Agreement
in the manner contemplated below, Escrower hereby deposits, and agrees to
deposit in the future, into the escrow created hereby the following:
a. The Shares, with stock powers attached thereto,
<PAGE>
all duly endorsed in blank, herewith delivered to Escrow Agent;
b. Any and all other securities deposited with Escrow Agent from
time to time in accordance with the provisions hereof (such securities,
together with the Shares, the "Securities"), each of which shall be
deposited with stock powers attached thereto, all duly endorsed in blank;
and
c. Any and all proceeds received by Escrower (or Escrow Agent on
Escrower's behalf) upon the sale of any of the Securities.
The Escrow Agent will hold the Collateral in accordance with the terms of this
Escrow Agreement.
Escrower shall direct investment of any cash held by the Escrow Agent,
including cash proceeds received upon the sale of any of the Securities,
provided that investment shall be limited to institutional money market
accounts, cash or cash equivalents, governmental bonds and other marketable
securities. Unless and until the Escrower shall give other instructions to the
Escrow Agent, monies held hereunder shall be invested in the One Group Prime
Money Market Fund-Class A. The Securities, the proceeds received upon the sale
of any of the Securities and any interest, dividends and distributions thereon
are hereinafter referred to, collectively, as the "Collateral." Prior to the
termination of this Escrow Agreement, the (i) holding, (ii) cancellation, (iii)
release from the provisions of this Escrow Agreement (in part or in whole), and
(iv) any other actions with respect to the Collateral shall be governed by the
applicable provisions of this Escrow Agreement.
3. Representations and Warranties.
a. Escrower hereby represents and warrants to Escrowee that:
(i) The execution, delivery and performance by Escrower of
this Escrow Agreement will not violate any provision of law, any
order of any court or other agency of government, or any agreement
or other instrument to which Escrower is a party or by which
Escrower is bound, or conflict with, result in a breach of or
constitute (with due notice or lapse of time, or both) a default
under any such agreement or other instrument, or result in the
creation or imposition of any lien, charge, security interest,
claim, or encumbrance of any nature whatsoever ("Lien") upon any of
Escrower's property or assets, except as contemplated by the
provisions of this Escrow Agreement and the Merger Agreement;
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<PAGE>
(ii) This Escrow Agreement constitutes a legal, valid and
binding obligation of Escrower; and
(iii) As to such of the Collateral deposited with Escrow Agent
on the date hereof or hereafter: (A) Escrower is the sole legal and
beneficial owner of such Collateral; (B) the stock transfer forms
attached to each of the certificates representing any of the
Securities have been duly executed and delivered by Escrower to
Escrow Agent; and (C) none of such Collateral is subject to any
Lien, other than the interest granted to Escrowee hereby and in the
Merger Agreement.
b. Escrowee hereby represents and warrants to the Escrower that:
(i) The execution, delivery and performance by Escrowee of
this Escrow Agreement will not violate any provision of law, any
order of any court or other agency of government, or any agreement
or other instrument to which Escrowee is a party or by which
Escrowee is bound, or conflict with, result in a breach of or
constitute (with due notice or lapse of time, or both) a default
under any such agreement or other instrument; and
(ii) This Escrow Agreement constitutes a legal, valid and
binding obligation of Escrowee.
4. Stock Splits, Stock Dividends, Etc.
a. In the event that Escrower, by virtue of Escrower's ownership of
the Collateral, now is, or hereafter becomes, entitled (without additional
consideration) to other or additional securities as the result of any
corporate reorganization, merger or consolidation, stock split or
combination, stock dividend or otherwise, Escrower shall promptly:
(i) deliver to Escrow Agent the certificates evidencing
Escrower's ownership thereof, and agrees if such certificates are
delivered to Escrower, to take possession thereof in trust for
Escrowee and forthwith deliver the same to Escrow Agent;
(ii) deliver to Escrow Agent a stock transfer form with
respect to such securities, executed in blank by Escrower;
(iii) deliver to Escrowee a certificate,
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<PAGE>
executed by Escrower and dated the date of such delivery, as to the
truth and correctness on such date of the representations and
warranties set forth in Section 3(a)(iii) hereof; and
(iv) deliver to Escrowee such other certificates, forms and
other instruments as Escrowee may reasonably request in connection
with such delivery.
b. Escrower agrees that such securities shall constitute a portion
of the Collateral and be subject to this Escrow Agreement in the same
manner and to the extent as the Securities deposited into escrow on the
date hereof.
5. Sale and Purchase of Securities.
a. Notwithstanding anything to the contrary contained herein,
Escrower shall have the right to sell the Securities or any part thereof
but only if all of the following conditions are satisfied:
(i) Escrower delivers to Escrowee and the Escrow Agent written
notice with respect to the sale of specifically identified
Securities prior to, concurrently with or promptly after the
placement of a sell order;
(ii) The sale is a bona fide, arms'-length transaction
effected for cash on a national securities exchange, through NASDAQ
or in an underwritten securities offering; and
(iii) Prior to such sale, Escrower makes such arrangements as
are reasonably acceptable to Escrowee and the Escrow Agent (which
arrangements may be blanket arrangements agreed upon in advance to
be applicable to all such sales) to assure that the proceeds of such
sale are promptly deposited with or remain with the Escrow Agent
pursuant to this Escrow Agreement.
b. Escrower shall have the right to purchase securities listed on a
national securities exchange or quoted on NASDAQ (with the exception of
unhedged options) using cash constituting a part of the Collateral if all
of the following conditions are satisfied:
(i) Escrower delivers to Escrowee and the Escrow Agent written
notice with respect to the purchase of specifically identified
securities prior to, concurrently with or promptly after the
placement of a buy order;
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<PAGE>
(ii) The purchase is a bona fide, arms'-length transaction
effected on a national securities exchange or through NASDAQ;
(iii) Prior to such purchase, Escrower makes such arrangements
as are reasonably acceptable to Escrowee and the Escrow Agent (which
arrangements may be blanket arrangements agreed upon in advance to
be applicable to all such purchases) to assure that the certificates
evidencing the purchased securities are promptly deposited with the
Escrow Agent pursuant to this Escrow Agreement; and
(iv) Escrower delivers to Escrow Agent the document
contemplated by Section 4(a)(ii) hereof.
The purchased securities shall constitute a part of the Collateral under this
Escrow Agreement.
6. Voting Power. Escrower shall be entitled to exercise all voting powers
pertaining to the Collateral for any purpose not inconsistent with, or in
violation of, the provisions of this Escrow Agreement, in all matters, unless
and until the Collateral is released and delivered to Escrowee.
7. Escrow Agent.
a. Escrowee shall pay the Escrow Agent reasonable compensation for
its services hereunder, in accordance with Schedule B, and shall reimburse
the Escrow Agent for all reasonable expenses, disbursements and advances
incurred or made by the Escrow Agent in performance of its duties
hereunder. Notwithstanding the foregoing, in the event of any dispute
hereunder between Escrower and Escrowee, the non-prevailing party in any
such dispute shall pay the prevailing party's and the Escrow Agent's
reasonable expenses (including without limitation reasonable attorney's
fees and court costs) incurred in such dispute.
b. The Escrow Agent may resign and be discharged from its duties
hereunder at any time by giving notice of such resignation to Escrowee and
Escrower specifying a date when such resignation shall take effect. Upon
such notice, a successor Escrow Agent shall be appointed with the mutual
consent of Escrowee and Escrower, such successor Escrow Agent to become
Escrow Agent hereunder upon the receipt of the Collateral. If Escrowee and
Escrower are unable to agree upon a successor Escrow Agent within thirty
(30) days after such notice, the Escrow Agent shall be entitled to appoint
its successor or to petition a court of competent jurisdiction to appoint
a successor. The Escrow Agent shall
- 5 -
<PAGE>
continue to act until its successor accepts the escrow and receives the
Collateral. Escrowee and Escrower shall have the right at any time upon
mutual consent to substitute a new Escrow Agent by giving notice thereof
to the Escrow Agent then acting.
c. The Escrow Agent undertakes to perform such duties as are
specifically set forth herein and may conclusively rely, and shall be
protected in acting or refraining from acting, on any written notice,
instrument or signature believed by it to be genuine and to have been
signed or presented by the proper party or parties duly authorized to do
so. The Escrow Agent shall have no responsibility for the contents of any
writing contemplated herein and may rely without any liability upon the
contents thereof.
d. The Escrow Agent shall not be liable for any action taken or
omitted by it in good faith and believed by it to be authorized hereby or
within the rights or powers conferred upon it hereunder, nor for action
taken or omitted by it in good faith, and in accordance with advice of
counsel (which counsel may be of the Escrow Agent's own choosing), and
shall not be liable for any mistake of fact or error of judgment or for
any acts or omissions of any kind unless caused by willful misconduct or
gross negligence.
e. Each of Escrower and Escrowee agrees to indemnify the Escrow
Agent and hold it harmless against any and all liabilities incurred by it
hereunder as a consequence of such party's wrongful action, and Escrower
and Escrowee agree jointly to indemnify the Escrow Agent and hold it
harmless against any and all liabilities incurred by it hereunder that are
not a consequence of Escrower's or Escrowee's wrongful action, except in
either case for liabilities incurred by the Escrow Agent resulting from
its own willful misconduct or gross negligence. The obligations of the
Escrower and the Escrowee under this clause (e) shall survive the
termination of this Agreement and the resignation or removal of the Escrow
Agent.
f. No assignment of the interest of any of the parties hereto shall
be binding upon the Escrow Agent unless and until written evidence of such
assignment in form satisfactory to the Escrow Agent shall be filed with
and accepted by the Escrow Agent.
g. In the event that any escrow property shall be attached,
garnished, or levied upon by any court order, or the delivery thereof
shall be stayed or enjoined by an order of a court, or any order, judgment
or decree shall be made or entered by any court order affecting the
property deposited under this Escrow Agreement, or any part thereof, the
Escrow
- 6 -
<PAGE>
Agent is hereby expressly authorized, in its sole discretion, to obey and
comply with all writs, orders or decrees so entered or issued, which it is
advised by legal counsel of its own choosing is binding upon it, whether
with or without jurisdiction, and in the event that the Escrow Agent obeys
or complies with any such writ, order or decree, it shall not be liable to
any of the parties hereto or to any other person, firm or corporation, by
reason of such compliance notwithstanding such writ, order or decree be
subsequently reversed, modified, annulled, set aside or vacated.
h. If the Escrow Agent becomes involved in litigation on account of
this Escrow Agreement, it shall have the right to retain counsel. The
parties hereto (other than the Escrow Agent), jointly agree to pay to the
Escrow Agent on demand its reasonable attorney's fees, disbursements and
expenses in connection with any such litigation.
i. In the event that conflicting demands are made upon the Escrow
Agent for any situation not addressed in this Escrow Agreement, the Escrow
Agent may withhold performance of the terms of this Escrow Agreement until
such time as said conflicting demands shall have been withdrawn or the
rights of the respective parties shall have been settled by court
adjudication, arbitration, joint order or otherwise.
j. Any corporation or association into which the Escrow Agent may be
converted or merged, or with which it may be consolidated, or to which it
may sell or transfer its corporate trust business and assets as a whole or
substantially as a whole, or any corporation or association resulting from
any such conversion, sale, merger, consolidation or transfer to which it
is a party, shall be and become the successor Escrow Agent hereunder and
vested with all of the title to the whole property or trust estate and all
of the trusts, powers, immunities, privileges, protections and all other
matters as was its predecessor, without the execution or filing of any
instrument or any further act, deed or conveyance on the part of any of
the parties hereto, anything herein to the contrary notwithstanding.
8. Release of Collateral. For purposes of this Escrow Agreement, an
"Employee Default" shall be deemed to have occurred if the Term of the
Employment Agreement is terminated (i) by reason of Cause or (ii) as a result of
a termination by the Employee of the Term of the Employment Agreement other than
for Good Reason (it being understood and agreed that neither the death or
disability (as such term is defined in the Employment Agreement) of the Employee
nor the termination of the Term as a result thereof shall constitute an Employee
Default). In the event that an Employee Default occurs on or before the third
- 7 -
<PAGE>
anniversary of the date hereof, the Escrow Agent shall release to Escrowee one
hundred percent (100%) of the Collateral (as then constituted and to the extent
not previously released), as more fully set forth in the next paragraph. In the
event that no Employee Default occurs on or prior to the third anniversary of
the date hereof, the Escrow Agent shall release to Escrower (automatically and
without further instruction) one hundred percent (100%) of the Collateral (as
then constituted and to the extent not previously released).
If an Employee Default occurs on or prior to the third anniversary of the
date hereof, then Escrowee may, within twenty (20) calendar days after the
occurrence of such Employee Default, deliver to the Escrow Agent and Escrower a
certification signed by a duly authorized officer of Escrowee certifying that an
Employee Default has occurred and the date of occurrence of the Employee Default
and that a copy of the certification has been delivered to Escrower in the
manner set forth in Section 11(e) hereof (a "Default Certification"). In the
event that the Escrow Agent does not receive a notice from Escrower, within
twenty (20) calendar days of receipt of a Default Certification, disputing the
Default Certification, the Escrow Agent shall promptly release and deliver the
Collateral to Escrowee (automatically and without further instruction). In the
event that the Escrow Agent receives a notice from Escrower, within twenty (20)
calendar days of receipt of a Default Certification, disputing the Default
Certification, the Escrow Agent shall continue to hold the Collateral and
thereafter release and deliver the Collateral in accordance with a joint written
direction signed by Escrower and Escrowee or as directed by court order
resolving the dispute in accordance with the terms of this Escrow Agreement
(consistent with the terms of the Employment Agreement).
Notwithstanding anything to the contrary contained herein, (i) if the
Escrow Agent has not, by the twentieth (20th) calendar day after the first
anniversary of the date hereof, received a Default Certification, then the
Escrow Agent shall promptly release (automatically and without further
instruction) from the Collateral and deliver to Escrower twenty-five (25%) of
each component of Collateral then subject to this Escrow Agreement (e.g., if the
Collateral is then comprised of two different Securities and cash, then
one-quarter (1/4) of each of the Securities and one-quarter (1/4) of the cash
shall be so released and delivered), (ii) if the Escrow Agent has not, by the
twentieth (20th) calendar day after the second anniversary of the date hereof,
received a Default Certification, then the Escrow Agent shall promptly release
(automatically and without further instruction) from the Collateral and deliver
to Escrower thirty-three and one-third percent (33-1/3%) of each component of
Collateral then subject to this Escrow Agreement and (iii) upon the death or
disability (as such term is defined in the Employment Agreement) of the
Employee, and receipt by the Escrow Agent and
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<PAGE>
Escrowee of a certificate to that effect from Escrower or the Employee's estate
or personal representative, as appropriate, the Escrow Agent shall promptly
release to Escrower one hundred percent (100%) of the Collateral then subject to
this Escrow Agreement. To the extent a partial release of the Collateral can
only be effected through release of shares represented by a stock or other
ownership certificate representing shares in addition to those released, stock
or other ownership certificates representing as large a portion of the entire
partial release as possible will be released to the Escrower and a certificate
in excess of the balance will be delivered to the Escrowee (in which event (a)
Escrowee shall cause a new certificate in the amount of such balance to be
promptly issued and delivered to Escrower, (b) Escrowee shall cause new
certificates to be issued in the amount of any such excess and promptly
deposited with Escrow Agent hereunder, (c) Escrower shall execute stock powers
endorsed in blank and deliver the same to Escrow Agent to be attached to the new
certificates delivered to Escrow Agent, and (d) such new certificates together
with such stock powers, shall constitute a part of the collateral and be subject
to this Escrow Agreement in the same manner and to the extent as the Securities
deposited into escrow on the date hereof), Escrower and Escrowee shall cooperate
with the Escrow Agent to effect such release and delivery. At the request of the
Escrow Agent or Escrowee, Escrower shall execute and deliver to the Escrow Agent
stock powers and such other instruments pertaining to the remaining Collateral
as may be necessary or appropriate in order to continue this Escrow Agreement in
full force and effect in accordance with its terms and the intent of the
parties. The Escrow Agent shall have no liability with respect to the issuance
of the new certificates evidencing such partial distribution or the excess
shares after a partial distribution, which shall be the sole responsibility of
the Escrowee and its transfer agent, if any. The Escrow Agent's sole
responsibility shall be to deliver the certificates on deposit with it hereunder
as directed by the Escrower and/or Escrowee, as applicable. If Escrowee fails to
deliver a new certificate to Escrower for the balance of any partial
distribution within 10 days of release of the certificate to Escrowee, then upon
notice from Escrower the Escrow Agent shall promptly deliver to Escrower the
smallest certificate in excess of the balance then held by the Escrow Agent.
Escrower shall be obligated to redeposit the shares in excess of those to be
otherwise released in the same manner as Escrowee was so obligated and upon
release to Escrower of such certificate Escrowee may redeposit the certificate
released to it with respect to the balance.
9. Termination of Escrow Agreement. This Escrow Agreement shall be
terminated when no Collateral remains subject hereto. In addition, upon proper
release of any Collateral to Escrower or Escrowee in accordance with the terms
of this Escrow Agreement, such released Collateral shall no longer be subject to
this Escrow
- 9 -
<PAGE>
Agreement.
10. Tax Consequences. Notwithstanding anything to the contrary contained
in this Escrow Agreement, all income tax consequences with respect to this
Escrow Agreement and escrow and any transactions in connection therewith,
including, without limitation, sales, purchases, forfeitures and releases, shall
be borne out of, and by, the Collateral itself and Escrower shall not suffer any
adverse tax consequences as a result thereof; and to the extent any such tax
consequences are nonetheless payable by Escrower, there shall be released to
Escrower, if available and upon request, sufficient Collateral to satisfy such
tax consequence in such amount as is certified in good faith by Escrower to
Escrowee and the Escrow Agent. Under no circumstances shall Escrowee have any
liability or responsibility for taxes arising out of the matters covered in the
immediately preceding sentence, except as may otherwise be required by law. The
Escrow Agent shall be under no obligation to return any interest or earnings on
the Escrow Funds to Escrower until it has received a Form W-9 from such party,
regardless of whether such party is exempt from reporting or withholding
requirements under the Internal Revenue Code of 1986, as amended. As and to the
extent required by law, the Escrow Agent shall report to the Internal Revenue
Service, as of each calendar year-end, all income earned from the investment of
any sum held in the Escrow funds. The Escrow Agent shall be responsible for the
preparation and/or filing of any tax return with respect to any income earned by
the Escrow Funds (Form 1099-Int.). The Escrow Agent shall have no obligation to
pay any taxes or estimated taxes.
11. Miscellaneous.
a. Should Escrowee at any time assign any of its rights under this
Escrow Agreement, the assignee shall thereupon have all of the rights of
Escrowee hereunder.
b. Each and every right, remedy and power granted to a party
hereunder shall be cumulative and in addition to any other right, remedy
or power herein specifically granted or now or hereafter existing in
equity, at law, by virtue of statute or otherwise and may be exercised by
such party, from time to time, concurrently or independently and as often
and in such order as such party may deem expedient. Any failure or delay
on the part of such party in exercising any such right, remedy or power,
or abandonment or discontinuance of steps to enforce the same, shall not
operate as a waiver thereof or affect such party's right thereafter to
exercise the same, and any single or partial exercise of any such right,
remedy or power shall not preclude any other or further exercise thereof
or the exercise of any other right, remedy or power.
- 10 -
<PAGE>
Notwithstanding anything to the contrary contained in this Escrow
Agreement, as between Escrower and Escrowee, the escrow created hereby
will be treated as a pledge such that Escrowee shall be entitled to all
the rights, remedies and powers as if a pledgee under applicable law in
addition to any other rights, remedies and powers Escrowee may have.
c. Any modification or waiver of any provision of this Escrow
Agreement, or any consent to any departure by Escrowee or Escrower
therefrom, shall not be effective in any event unless the same is in
writing and signed by Escrow Agent, Escrowee and Escrower, and then such
modification, waiver or consent shall be effective only in the specific
instance and for the specific purpose given. Any notice to or demand on
Escrower or Escrowee in any event not specifically required of the other
party hereunder shall not entitle the receiving party to any other or
further notice or demand in the same, similar or other circumstances
unless specifically required hereunder.
d. Each Party agrees that at any time, and from time to time, after
the execution and delivery of this Escrow Agreement, it will, upon the
request of the other party, execute and deliver such further documents and
do such further acts and things as the other party may reasonably request
in order to fully effect the purpose of this Escrow Agreement.
e. Any notice, request, demand, consent, approval, certification or
other communication provided or permitted hereunder shall be in writing
and be given by personal delivery or courier service addressed to the
party for whom it is intended, as follows:
If to Escrowee:
HA-LO Industries, Inc.
5980 West Touhy Avenue
Niles, IL 60714
Attention: Greg Kilrea
Facsimile number: 847/647-4970
with a copy to:
Neal, Gerber & Eisenberg
Two N. LaSalle Street
Suite 2100
Chicago, Illinois 60602
Attention: Barry J. Shkolnik
Facsimile number: 312/269-1747
- 11 -
<PAGE>
If to Escrower:
Coventry Partners Family Limited Partnership
c/o Eric Lefkofsky
Starbelly.com, Inc.
1225 W. Morse Avenue
Chicago, Illinois 60626-3517
Facsimile number: 773/262-6694
with a copy to:
Altheimer & Gray
10 S. Wacker Drive
Suite 4000
Chicago, Illinois 60602
Attention: Peter Lieberman
Facsimile number: 312/715-4800
If to Escrow Agent:
American National Bank and Trust Company of Chicago
Corporate Trust Department
120 South LaSalle Street
Mail Code IL1-1250
Chicago, Illinois 60603
Attention: Kevin M. Ryan
Facsimile Number: 312/661-6491
provided, however, that each party may change its address for purposes of
receipt of any such communication by giving five (5) days' written notice
of such change to the other party in the manner above prescribed. Notices
shall be deemed to have been given when received.
f. This Escrow Agreement shall be deemed to have been made under,
and shall be governed by, the laws of the State of Illinois in all
respects, including matters of construction, validity and performance.
g. If any provision of this Escrow Agreement is prohibited by, or is
unlawful or unenforceable under, any applicable law of any jurisdiction,
such provision shall, as to such jurisdiction, be ineffective to the
extent of such prohibition without invalidating the remaining provisions
hereof, provided, however, that any such prohibition in any jurisdiction
shall not invalidate such provision in any other jurisdiction; and
provided, further, that where the provisions of any such applicable law
may be waived, they hereby are waived by Escrower to the full extent
permitted by law to the end that this Escrow Agreement shall be deemed to
be valid and binding in accordance with its terms.
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<PAGE>
h. This Escrow Agreement shall inure to the benefit of the
successors and permitted assigns of Escrowee and Escrower and shall be
binding upon the heirs, executors, administrators, legal representatives,
successors and assigns of Escrower.
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<PAGE>
IN WITNESS WHEREOF, Escrower, Escrowee and Escrow Agent have caused to be
executed this Escrow Agreement as of the date first above written.
ESCROW AGENT: ESCROWEE:
AMERICAN NATIONAL BANK AND HA-LO INDUSTRIES, INC.
TRUST COMPANY OF CHICAGO,
AS ESCROW AGENT
By: /s/ Kevin M. Ryan By: /s/ John Kelley
------------------------- ------------------------------
Name: Kevin M. Ryan Name: John Kelley
-------------------- -------------------------
Title: Authorized Officer Title: Chief Executive Officer
------------------- ------------------------
ESCROWER:
COVENTRY PARTNERS FAMILY
LIMITED PARTNERSHIP
By: Coventry Associates, Inc.,
a Delaware corporation,
its general partner
By: /s/ Eric Lefkofsky
---------------------
Name: Eric Lefkofsky
----------------
Title: President
---------------
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<PAGE>
SCHEDULE A
SHARES
<TABLE>
<CAPTION>
====================================================================================================================
Common Stock No. of Preferred Stock No. of Shares
Certificate Shares of Certificate of Preferred Percentage
Escrower No. Common Stock No. Stock Interest
-------- ------------ ------------ --------------- -------------- ----------
<S> <C> <C> <C> <C> <C>
Coventry Partners 6081 291,337
Family Limited 6082 291,336
Partnership 6080 200,501
6083 382,172 --------------- -------------- ----------
100%
====================================================================================================================
</TABLE>
<PAGE>
SCHEDULE B
COMPENSATION
Annual Fee $3,500
Any out-of-pocket expenses, or extraordinary fees or expenses such as
attorney fees or messenger costs, are additional and are not included in the
above schedule.
The annual fee is billed in advance and payable prior to that year's
service.
<PAGE>
Exhibit 10
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Employment Agreement") is made and entered
effective as of this 3rd day of May 2000, by and between HA-LO Industries,
Inc., an Illinois corporation ("Employer"), and Eric Lefkofsky (hereafter
"Executive").
WHEREAS, the Employer is engaged in the business of the sale, marketing
and distribution of advertising specialty, premium and promotional products,
promotion marketing, brand strategy and identity, presence marketing, consumer
event marketing and telemarketing (the "Business");
WHEREAS, the Employer provides products and services to a wide range of
customers throughout the world, and during the course thereof, Employer has
established (and will continue to establish) customer bases, customer lists and
ongoing relationships with its customers;
WHEREAS, contemporaneously with the execution hereof, a subsidiary of the
Employer has merged with Starbelly.com, Inc., a Delaware corporation f/k/a
TheZebra.com, Inc. ("SBC"), pursuant to that certain Agreement and Plan of
Merger and Plan of Reorganization dated January 17, 2000 by and among such
subsidiary, the Employer and SBC (the "Merger Agreement");
WHEREAS, Executive has had, as an employee of SBC, direct and substantial
exposure to the customers and prospective customers of SBC;
WHEREAS, Executive will continue to be granted direct and substantial
exposure to the customers and prospective customers of the Employer, and during
the term of this Employment Agreement, Executive may have direct and substantial
exposure to the customers and prospective customers of other entities owned or
controlled by the Employer (all such entities, inclusive of the Employer, are
hereafter collectively "Related Entities");
NOW, THEREFORE, in consideration of the foregoing premises, and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
mutually acknowledged, Executive and the Employer, intending to be legally
bound, hereby agree as follows:
1. Recitals. Each of the above recitals is incorporated in this Employment
Agreement and shall be binding upon the parties hereto. This Employment
Agreement supersedes any and all previous agreements, understandings and
commitments relating to Executive's employment with the Employer. Executive
understands and agrees that each such agreement, understanding and commitment
relating to his continued employment with the Employer is revoked and cancelled,
with no further rights or obligations on the part of either party thereto.
Executive acknowledges and agrees that
<PAGE>
Executive's execution and performance of this Employment Agreement is a material
inducement to and a condition of the Employer's execution of the Merger
Agreement.
2. Employment; Duties. The Employer hereby agrees to employ Executive, and
Executive hereby accepts such employment, as the Chief Operating Officer of
Employer, on the terms and subject to the conditions set forth herein. During
the "Term" (as hereafter defined), Executive shall devote his best efforts and
substantially all of his business time to the performance of all duties
pertaining to such position as are customary for similarly situated executives
of companies engaged in businesses similar to the Employer or as shall be
assigned to him consistent with such position from time to time by the chief
executive officer of the Employer (the "CEO"). Further, Executive shall not be
gainfully employed other than pursuant to this Agreement. However, Executive may
be involved in charitable work, service on boards of directors of other
companies, manage his personal investments, offer guidance to others and
wind-down his historical business activities (other than the business of SBC) so
long as such activities do not unreasonably interfere with Executive's time
commitment to the Employer as contemplated by this Agreement and do not
constitute a breach by Executive of any of his covenants contained in Sections 8
through 12 hereof. Any compensation or remuneration received by Executive on
account of the activities in the immediately preceding sentence may be retained
by Executive. The performance of Executive's duties hereunder shall be, at all
times, subject to the supervision, advice and direction of the CEO.
Executive shall have the right during the Term to nominate himself and one
other person to serve on the Board; provided, however, that the right to
nominate a second person to serve on the Board shall terminate if and when the
number of shares of Common Stock of the Employer owned of record by Coventry
Partners Family Limited Partnership is reduced to below four and one-half
percent (4-1/2%) of the then outstanding shares of Common Stock of the Employer.
Subject to the fiduciary duties of the Board as required under applicable law,
the Employer agrees to cause such nominees to be included in the Board and
management slate of nominees presented to stockholders for election as
directors.
3. Compensation.
(a) Base Salary. In consideration of the services to be rendered by
Executive to the Employer pursuant to this Agreement, during the Term, the
Employer agrees to pay to Executive an annual Base Salary of Three Hundred
Thousand Dollars ($300,000) (subject to applicable withholdings), payable
in installments in accordance with the Employer's normal payroll practices
("Base Salary").
-2-
<PAGE>
(b) Bonus. Executive shall participate, in a manner commensurate
with other key executives of the Employer, in an Executive Bonus Plan to
be adopted by the Employer and mutually agreeable to Executive and the CEO
("Bonus Compensation").
4. Fringe Benefits. Subject to applicable law, and the rules and policies
adopted by the Board from time to time, the Employer shall provide Executive
with such non-performance related fringe benefits, as are provided generally to
the executive employees of the Employer, as a group.
5. Expense Reimbursement. Subject to the rules, policies and regulations
of the Employer in effect from time to time and applicable to its employees,
Executive shall be entitled to reimbursement by the Employer of the reasonable
and customary travel, business entertainment and other business-related expenses
incurred by him in carrying out his duties under this Employment Agreement.
6. Termination.
(a) Termination. The term of this Employment Agreement (the "Term")
and Executive's employment hereunder shall commence as of the date hereof
and, except as otherwise provided herein, terminate at the earlier of (i)
the third (3rd) anniversary of the date hereof, or (ii) the first to occur
of any of the following events: (A) the mutual agreement of the Employer
and Executive to so terminate this Employment Agreement, (B) the death or
"disability" (as hereafter defined) of Executive, (C) the Employer's
written election to terminate this Employment Agreement and Executive's
employment hereunder "for Cause" (as hereafter defined) or not for Cause
or (D) the Executive's written election to terminate this Employment
Agreement and Executive's employment hereunder "for Good Reason" (as
hereinafter defined) or without Good Reason, provided, however, that
Executive may not terminate without Good Reason prior to the first
anniversary of the date hereof.
(b) Disability Defined. As used in this Employment Agreement, the
term "disability" shall mean any mental, physical or emotional disability
or condition which shall last for a continuous period of one hundred and
eighty (180) days or more, which disability prevents the Executive from
substantially performing his duties hereunder. A disability shall be
determined by a physician selected by the Board and reasonably acceptable
to Executive who shall be a specialist in internal medicine.
(c) "For Cause" Defined. As used in this Employment Agreement, the
term "for Cause" shall mean any one or more of
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<PAGE>
the following: (1) Executive's conviction of a felony or (2) Executive's
refusal to comply with the reasonable directives of the Board of Directors
of the Employer (the "Board") which are consistent with Executive's
position, and failure to cure same within thirty (30) days following
written notice by the Employer. Any decision to terminate for Cause shall
only be made by the Board, in good faith, based upon the facts and after
having given Executive a reasonable opportunity to appear before the Board
to discuss, and make a presentation with respect to, and to cure the
matter underlying any prospective termination for Cause.
(d) "For Good Reason" Defined. As used in this Employment Agreement,
the term "for Good Reason" shall mean any one or more of the following:
(1) any material change in the duties of Executive inconsistent with his
position or reduction in Base Salary, (2) a reassignment of Executive to a
primary business location outside of the metropolitan Chicago area or (3)
upon the Employer's breach of any material representation or covenant set
forth in this Employment Agreement and failure to cure same within thirty
(30) days following written notice by Executive.
(e) Effect Upon Termination.
(i) In the event the Term of this Employment Agreement is
terminated by reason of death or disability, all rights, duties and
obligations of the parties pursuant to this Employment Agreement
shall terminate, except to the extent of (A) Executive's Base
Salary, Bonus Compensation and unpaid business expenses otherwise
payable pursuant to the terms of Section 5 hereof through the date
of termination and (B) death or disability benefits receivable
pursuant to the Employer's benefit plans.
(ii) In the event the Term of this Employment Agreement is
terminated (x) by the Employer for Cause or (y) by Executive other
than for Good Reason, death or disability, (A) all duties and
obligations of the Employer hereunder shall terminate, except to the
extent of Executive's Base Salary, Bonus Compensation, benefits and
unpaid business expenses otherwise payable pursuant to the terms of
Section 5 hereof through the date of termination and (B) all other
rights and remedies of the Employer shall remain in full force and
effect, including but not limited to rights arising from breach of
contract (but only if the event resulting in termination occurs
prior to the first anniversary of the date hereof) and rights
arising pursuant to the matters discussed in Section 6(f) hereof,
all such remedies being cumulative.
-4-
<PAGE>
Notwithstanding anything to the contrary herein, money damages and
the remedies for breach of contract (other than with respect to a
breach of Sections 8 through 12 hereof) shall not be available if
the event resulting in termination occurs on or after the first
anniversary of the date hereof.
(iii) In the event that the Term of this Employment Agreement
is terminated (x) by Executive for Good Reason or (y) by the
Employer other than for Cause, (A) all duties and obligations of
Executive hereunder (other than pursuant to Sections 8 and 12) shall
terminate and Executive shall continue to be entitled to receive his
Base Salary, Bonus Compensation and benefits under the Employer's
benefit plans through the end of the Term (as if not terminated), as
well as all unpaid business expenses, and (B) all other rights and
remedies of Executive shall remain in full force and effect,
including but not limited to rights arising from breach of contract,
all such remedies being cumulative.
(iv) In the event Executive's employment shall terminate by
reason of the expiration of the Term, unless otherwise provided
herein, Executive shall not be entitled to severance pay
notwithstanding any contrary policies and practices of HA-LO or the
Employer.
(v) Except in the case of clause (iii) above, all compensation
payable upon the termination of the Term of the Agreement shall be
paid to Executive within thirty (30) days of the date of the
termination of the Term.
(f) Return of Shares. Pursuant to the Merger Agreement, Coventry
Partners Family Limited Partnership, a Delaware limited partnership
("Executive's Partnership"), is being issued shares of Common Stock, no
par value, and shares of Series A Convertible Preferred Stock, no par
value, of HA-LO (the "Merger Shares"). Concurrently with the execution of
this Employment Agreement, Executive's Partnership, the Employer and
American National Bank and Trust Company of Chicago, as escrow agent, are
entering into an Employment Escrow Agreement pursuant to which the Merger
Shares described therein (the "Escrow Shares") shall be deposited into
escrow and subject (in whole or in part) to forfeiture and return to HA-LO
in the circumstances described therein. Executive agrees and acknowledges
that the disposition of the Escrow Shares (and any proceeds, if any, from
the sale or other transfer thereof) shall be governed by such Employment
Escrow Agreement and that Executive shall not, in his
-5-
<PAGE>
individual capacity, have any authority or rights under or pursuant to
such escrow agreement.
(g) Survival of Covenants. Notwithstanding anything herein to the
contrary, upon termination of the Term of this Employment Agreement for
any reason (other than in the circumstances described in Section 6(e)(iii)
hereof), the provisions of this Section 6, and the terms and conditions of
Sections 8 through 15 of this Employment Agreement, shall remain in full
force and effect, and shall be binding on and enforceable against
Executive and the Employer as though (for purposes of Sections 8 through
15) such termination had not occurred. Executive hereby acknowledges that
his agreement to the survival of the terms and conditions of Sections 8
through 15 of this Employment Agreement constitute a material inducement
to the Employer to enter into this Employment Agreement.
7. Executive's Representations. Executive hereby represents and warrants
to and with the Employer that Executive is not bound by or subject to, and that
he has not entered into, any covenants, agreements or restrictions which would
be breached or violated by Executive's execution of this Employment Agreement or
by Executive's performance of his duties hereunder. Without limiting the
generality of the foregoing, Executive is not subject or party to any continuing
covenants, agreements or restrictions, whether or not limited in time or
geographical scope, arising out of any prior work engagement involving Executive
and another party. Executive further represents and warrants to and with
Employer that, as of the date hereof, he has not breached or violated any
representation, warranty, covenant or agreement set forth in this Employment
Agreement, and as of the date hereof there does not exist any breach or
violation of any representation, warranty, covenant or agreement set forth in
this Employment Agreement.
8. Confidentiality. Executive acknowledges that by virtue of the corporate
offices and positions he maintains pursuant to the terms of this Employment
Agreement and while employed by SBC and Employer, he has been and will continue
to be granted access to, and has learned and may continue to learn of,
information regarding the Related Entities which is of a confidential, private
or sensitive nature (e.g., business strategies and goals, financial projections
and objectives, advertising campaigns and strategies, graphic designs and other
materials, use and utilization of tradenames, trademarks, patents, copyrights
and other registrable properties, pricing systems, product and service costs,
product and service designs, product and service margins, customer lists and
records, customer information, purchaser lists and records, purchaser
information, mark-ups and margins, marketing techniques, supplier and vendor
information, product content, and, generally, such other confidential
information,
-6-
<PAGE>
trade secrets and proprietary information) which give, or may give, the Related
Entities an advantage in the marketplace against competitors (all of the
foregoing, together with such other data and information intended by its holder
to constitute an asset or property the rights in or to which are protectable as
against third parties, are hereafter collectively referred to as "Proprietary
Information"). The term Proprietary Information does not include any information
generally known in the Employer's industry or publicly available other than as a
result of a wrongful disclosure by Executive. Executive agrees that during the
Term and thereafter, for any reason whatsoever, Executive shall hold and keep
confidential all Proprietary Information previously known to him or at any time
hereafter disclosed to or learned by him, and Executive shall not directly or
indirectly disclose such Proprietary Information to any person, firm, court,
governmental agency or corporation, or in any manner use the same, except in
connection with the business and affairs of Employer, as required by law or
legal process or in connection with any legal proceeding between Executive and
the Employer pertaining to this Agreement.
9. Non-Competition. Subject to Section 6(e)(iii) hereof, Executive
covenants that during the Term and for a period of two (2) years thereafter,
Executive shall not, directly or indirectly, anywhere in the world, for his own
account or as an employee, consultant, agent, partner, joint venturer, owner or
officer of any other person, firm, partnership, corporation or other entity, or
any other capacity, in any way conduct or engage in any business directly
competitive (i) with the Business, (ii) with any other business actually engaged
in by a Related Party during the Term or (iii) with the business reasonably
contemplated or anticipated to be engaged in by the Related Entities during the
period from the date of this Employment Agreement through ______ __, 2005 of
which Executive has actual knowledge during the Term or in which Executive has
been involved, and for which substantial steps, actions or documentation (such
as, without limitation, research and development, hiring and preparation of a
business plan) have taken place or been prepared prior to termination of
employment ((i), (ii) and (iii), collectively, the "Post-Termination Business").
Notwithstanding any other provision of this Agreement, nothing in this Agreement
will restrict or be construed to restrict or preclude Executive from engaging or
participating in any business which is not engaged in the Post-Termination
Business directly or over the Internet.
10. Non-Solicitation. Subject to Section 6(e)(iii) hereof, Executive
hereby covenants and agrees that during the Term and for a period of two (2)
years thereafter, he shall not, as it relates to the Post-Termination Business,
directly or indirectly, for his own account, or as an employee, consultant,
agent, partner, joint venturer, owner or officer of any other person, firm,
partnership, corporation or other entity, or in any other capacity, in any way
-7-
<PAGE>
solicit, any person or entity which then is, or at any time prior thereto was, a
customer or Prospective Customer of a Related Entity which Executive, directly
or indirectly, solicited or sold products or services to prior to or during the
Term hereof. For purposes of this Employment Agreement, the term "Prospective
Customer" shall mean any person, firm, partnership, corporation or other entity
to which Employee has made a written presentation or proposal, or presented
written materials at a meeting, within the one (1) year period immediately prior
to the expiration of the Term.
11. Non-Disturbance. Subject to Section 6(e)(iii) hereof, Executive hereby
covenants and agrees that during the Term and for a period of two (2) years
thereafter, he shall not, directly or indirectly, for his own account, or as an
employee, consultant, agent, partner, joint venturer, owner or officer of any
other person, firm, partnership, corporation or other entity, or in any other
capacity, engage, hire or solicit any employee of a Related Entity (other than
Brad Keywell) which solicitation or contact may reasonably lead such employee to
terminate his employment with such Related Entity.
12. Inventions and Other Matters. Executive agrees that all ideas,
inventions, artwork, images, designs, concepts, discoveries or improvement
(collectively the "Inventions") which Executive, individually or with others,
may originate or develop (or has heretofore originated and developed) while
employed with Employer, relating to the Business or any other business actually
engaged in by a Related Party during the Term, or a Related Entity's actual or
demonstrably anticipated research or development, shall belong to and be the
sole property of the Employer. Executive further agrees to promptly disclose
each such Invention to the Employer and to execute such applications,
assignments and other documents as may be necessary or convenient to vest in the
Employer full title to each such Invention and as may be necessary or convenient
to obtain United States and foreign patents, copyrights and trademarks thereon
to the extent the Employer may so choose.
For purposes of this Agreement, an Invention shall be deemed to have been
made during the period of the Executive's employment if, during such period, the
Invention was conceived, in part or in whole, or first actually reduced to
practice, and the Executive agrees that any patent, trademark or copyright
application filed within six (6) months after termination of his employment
shall be presumed to relate to an Invention made during the term of his
employment unless Executive can provide evidence as to the contrary.
Executive represents and warrants to the Employer that all inventions
heretofore developed by Executive during the course of Executive's employment
with SBC to be used in respect of the
-8-
<PAGE>
business of SBC belong to and are the sole property of HA-LO Industries, Inc., a
Delaware corporation (as the surviving corporation in the merger contemplated by
the Merger Agreement), that he has not sold, transferred or assigned any such
invention or rights therein to a third party, and that Executive shall execute
such applications, assignments or other documents as may be necessary or
convenient to vest in such surviving corporation full title to each such
invention and as may be necessary or convenient to obtain United States and
foreign patents, copyrights and trademarks thereon to the extent the Employer
may so choose.
This Section 12 shall not apply to an invention for which no material
equipment, supplies or facility, and no confidential information or other trade
secret information, of a Related Entity was used and which was developed,
consistent with this Agreement, entirely on Executive's own time, unless the
invention relates to the Post-Termination Business.
13. Remedies. Executive acknowledges that compliance with the restrictive
covenants set forth in Sections 8 through 12 herein is necessary to protect the
business, goodwill and Proprietary Information of the Related Entities, and that
a breach of these restrictions may irreparably and continually damage such
entity, for which monetary damages may not be adequate. Consequently, Executive
agrees that, in the event that he violates or breaches any of such covenants in
Sections 8 through 12 of this Agreement, the Employer shall be entitled to both
(1) a temporary, preliminary or permanent injunction in order to prevent the
continuation of such harm, and (2) monetary damages insofar as they can be
determined. Nothing in this Employment Agreement, however, shall be construed to
prohibit an aggrieved entity from pursuing any and all remedies available to it
with respect to a violation or breach of any of such covenants in Sections 8
through 12 of this Agreement, the parties having agreed that all remedies are to
be cumulative. The parties expressly agree that the Employer may, in its sole
discretion, choose to enforce the restrictive covenants in Sections 8 through 12
hereof, in part, or to enforce any of said restrictive covenants to a lesser
extent than that set forth herein.
14. Revision. In the event that any of the provisions, covenants,
warranties or agreements in Sections 8 through 12, inclusive, of this Employment
Agreement are held to be in any respect an unreasonable or unenforceable
restriction or otherwise invalid, for whatsoever cause, then the court so
holding shall reduce, and is so authorized to reduce, the territory to which it
pertains and/or the period of time in which it operates and/or the scope of
activity to which it pertains or effect any other change to the extent necessary
to render such provision, covenant, warranty or agreement reasonable,
enforceable and valid.
15. General Provisions.
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<PAGE>
(a) Severability. Each of the terms and provisions of this
Employment Agreement is to be deemed severable in whole or in part and, if
any term or provision or the application thereof in any circumstances
should be invalid, illegal or unenforceable, the remaining terms and
provisions or the application thereof to circumstances other than those as
to which it is held invalid, illegal or unenforceable, shall not be
affected thereby and shall remain in full force and effect.
(b) Binding Agreement. This Employment Agreement shall be binding
upon the parties, their heirs, successors, personal representatives and
assigns. The Employer may assign this Agreement to its successors in
interest to the business, or part thereof, of the Employer, provided that
the assignee assumes all of the liabilities of the assignor hereunder.
Executive may not assign any of his obligations or duties hereunder.
(c) Controlling Law and Jurisdiction. This Employment Agreement
shall be governed by and interpreted and construed according to the laws
of the State of Illinois. Executive and the Employer hereby consent to the
sole and exclusive jurisdiction of the state and federal courts in
Illinois in the event that any disputes arise under this Employment
Agreement.
(d) Attorneys Fees. In the event of a dispute between the parties
hereto relative to this Employment Agreement, the prevailing party shall
be entitled to reimbursement of its reasonable attorneys fees and
expenses.
(e) Entire Agreement. This instrument and the Agreement and Covenant
Not to Compete between the parties hereto contain the entire agreement of
the parties with regard to the subject matter hereof, and may not be
changed orally, but only by an agreement in writing signed by the parties
hereto.
(f) Failure to Enforce. The failure to enforce any of the provisions
of this Employment Agreement shall not be construed as a waiver of such
provisions. Further, any express waiver by any party with respect to any
breach of any provision hereunder by any other party shall not constitute
a waiver of such party's right to thereafter fully enforce each and every
provision of the Employment Agreement.
(g) Headings. All numbers and Section headings are for reference
only and are not intended to qualify, limit or otherwise affect the
meaning or interpretation of any such Section.
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<PAGE>
(h) Notices. All notices which are required, permitted or
contemplated hereunder to be given or made shall be given or made in
writing by certified mail (return receipt requested) to the Employer at
5980 West Touhy Avenue, Niles, Illinois, 60174, Attention: Chief Executive
Officer, and to Executive at the last address shown in Executive's
personnel file.
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<PAGE>
(i) Gender. The masculine, feminine or neuter pronouns used herein
shall be interpreted without regard to gender, and the use of the singular
or plural shall be deemed to include the other whenever the context so
requires.
(j) Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
WHEREFORE, the parties have executed this Agreement on the date and year
first above written.
HA-LO INDUSTRIES, INC.
By: /s/ John Kelley
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John Kelley
-----------------------
Chief Executive Oficer
-----------------------
/s/ Eric Lefkofsky
-------------------
Eric Lefkofsky
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<PAGE>
Exhibit 11
AGREEMENT AND COVENANT NOT TO COMPETE
This Agreement and Covenant Not to Compete (the "Agreement") is made and
entered into as of May 3, 2000 by and between HA-LO INDUSTRIES, INC., an
Illinois corporation (and together with that entity's direct and indirect
wholly- and majority-owned subsidiaries and affiliates, sometimes referred to
herein, collectively, as "HA-LO"), and Eric Lefkofsky, a resident of the State
of Illinois ("Executive").
W I T N E S S E T H:
WHEREAS, Executive is a shareholder, executive officer and director of
Starbelly.com, Inc., a Delaware corporation f/k/a TheZebra.com, Inc. ("SBC"),
which is engaged in the business of the development, sale, marketing and
distribution of advertising specialty, premium and promotional products and
services to businesses through the Internet (the "Business");
WHEREAS, SBC, HA-LO Industries, Inc. and others have entered into an
Agreement and Plan of Merger and Plan of Reorganization dated January 17, 2000
(the "Purchase Agreement"), pursuant to which a subsidiary of HA-LO Industries,
Inc. will merge with SBC;
WHEREAS, Executive possesses specialized knowledge and skill pertaining to
the Business; and
WHEREAS, in consideration of the consummation by HA-LO Industries, Inc. of
the transactions contemplated under the Purchase Agreement and other good and
valuable consideration, Executive agrees to execute and be bound by this
Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants and agreements contained herein, the parties agree as follows:
1. Recitals; Defined Terms. Each of the above recitals is hereby
incorporated in this Agreement and shall be binding upon the parties hereto.
Unless otherwise provided in this Agreement, all capitalized terms herein shall
have the meanings ascribed to them in the Purchase Agreement.
2. Non-Competition Covenants. Executive covenants that during the
Restricted Period (as herein defined), Executive shall not, directly or
indirectly, anywhere in the world, for his own account, or as an employee,
consultant, agent, partner, joint venturer, owner or officer of any other
person, firm, partnership, corporation or other entity, or in any other
capacity, in any way conduct or engage in a business (i) which competes with the
Business or (ii) in which Executive, directly or indirectly, uses or discloses
Proprietary Information (as herein defined). For
<PAGE>
purposes of this Agreement, (a) the term "Restricted Period" shall mean the
period beginning on the date hereof and ending on the fifth (5th) anniversary of
the date hereof and (b) the term "Proprietary Information" shall mean
information regarding SBC which is of a confidential, proprietary, private or
sensitive nature (including, without limitation, trade secrets, business
strategies and goals, accounting methodology, pricing systems, advertising
brochures and materials, graphics and other designs, marketing programs and
techniques, copyrighted and non-copyrighted software source codes or object
codes, technology applications and advances, client and client prospect lists or
records, client information, information regarding independent contractors and
vendors, confidential information and trade secrets of third parties, supplier
information, and generally, such other confidential information, trade secrets
and proprietary information) which give HA-LO or which gave SBC an advantage in
the marketplace against competitors. The term Proprietary Information does not
include any information generally known in SBC's industry or publicly available
other than as a result of a wrongful disclosure by Executive. Notwithstanding
any other provision of this Agreement, nothing in this Agreement will restrict
or be construed to restrict or preclude Executive from engaging or participating
in any business which is not engaged in the Business directly or over the
Internet.
3. Non-Solicitation. Executive hereby covenants and agrees that during the
Restricted Period, for any reason whatsoever, he shall not, as it relates to the
Business, directly or indirectly, for his own account, or as an employee,
consultant, agent, partner, joint venturer, owner or officer of any other
person, firm, partnership, corporation or other entity, or in any other
capacity, in any way call upon or solicit, any person or entity which was a
Customer or Prospective Customer of SBC to sell products or render services
which compete with the Business. For purposes of this Agreement, (i) the term
"Customer" shall mean any person, corporation or other entity that is reasonably
known to Executive to whom SBC has sold goods or rendered services within the
twelve (12) month period prior to the date hereof, and (ii) the term
"Prospective Customer" shall mean any person, corporation or other entity that
is reasonably known to Executive to whom SBC has made a written presentation or
proposal, or presented written materials at a meeting, within the twelve (12)
month period prior to the date hereof.
4. Non-Disturbance. Executive hereby covenants and agrees that during the
Restricted Period, for any reason whatsoever, he shall not, directly or
indirectly, for his own account, or as an employee, consultant, agent, partner,
joint venturer, owner or officer of any other person, firm, partnership,
corporation or other entity, or in any other capacity, solicit any employee of
SBC (other than Brad Keywell) which solicitation or contact could reasonably be
expected to lead such employee to terminate his
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employment or engagement with SBC or HA-LO.
5. Remedies.
(a) Executive further acknowledges that he will be able to earn a
livelihood during the Restricted Period without violating the foregoing
restrictions and that his ability to earn such a livelihood without
violating such restrictions is a material condition to the agreements of
HA-LO Industries, Inc. under the Purchase Agreement.
(b) Executive acknowledges that compliance with the restrictive
covenants set forth in Paragraphs 2, 3 and 4 herein are necessary to
protect the business, goodwill and Proprietary Information of HA-LO and
that a breach of these restrictions will irreparably and continually
damage HA-LO for which money damages may not be adequate. Consequently,
Executive agrees that, in the event that he breaches any of such covenants
in Paragraphs 2, 3 and 4 of this Agreement, HA-LO Industries, Inc. shall
be entitled to both (i) a temporary, preliminary or permanent injunction
in order to prevent the continuation of such harm, and (ii) money damages
insofar as they can be determined. Nothing in this Agreement, however,
shall be construed to prohibit HA-LO Industries, Inc. from also pursuing
any other remedy, the parties having agreed that all remedies are to be
cumulative. The parties expressly agree that HA-LO Industries, Inc. may,
in its sole discretion, choose to enforce the restrictive covenants in
Paragraphs 2, 3 and 4 hereof, in part, or to enforce any of said
restrictive covenants to a lesser extent than that set forth herein.
Executive acknowledges and agrees that his execution and performance of
this Agreement is a material inducement to the execution of the Purchase
Agreement by HA-LO Industries, Inc.
6. Scope. The covenants contained in Section 2 of this Agreement shall be
construed to extend to each country of the world and to each state, province and
political subdivision thereof (each, a "Jurisdiction"). To the extent that any
covenant herein shall be illegal and/or unenforceable with respect to any one of
said Jurisdictions, said covenants shall not be affected thereby with respect to
each other Jurisdiction, such covenants with respect to each such Jurisdiction
being construed as severable and independent.
7. Revision. In the event that any of the provisions, covenants,
warranties or agreements in this Agreement is held to be in any respect an
unreasonable or unenforceable restriction otherwise invalid, for whatsoever
cause, then the court so holding shall reduce, and is so authorized to reduce,
the territory to which it pertains and/or the period of time in which it
operates and/or the scope of activity to which it pertains or effect any
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<PAGE>
other change to the extent necessary to render such provision, covenant,
warranty or agreement reasonable, enforceable and valid.
8. Severability. Each of the terms and provisions of this Agreement is to
be deemed severable in whole or in part and, if any term or provision or the
application thereof in any circumstances should be invalid, illegal or
unenforceable, the remaining terms and provisions or the application thereof to
circumstances other than those as to which it is held invalid, illegal or
unenforceable, shall not be affected thereby and shall remain in full force and
effect.
9. Binding Agreement. This Agreement shall be binding upon the parties,
their heirs, successors, personal representatives and assigns. HA-LO Industries,
Inc. may assign this Agreement to any successor in interest, or part thereof.
Executive may not assign any of his obligations or duties hereunder.
10. Controlling Law and Jurisdiction. This Agreement shall be governed by
and interpreted and construed according to the laws of the State of Illinois.
Executive hereby consents to the sole and exclusive jurisdiction of the state
and federal courts in Illinois in the event that any disputes arise under this
Agreement.
11. Attorneys Fees. In the event of a dispute between the parties hereto
pertaining to this Agreement, the prevailing party shall be entitled to
reimbursement of its reasonable attorneys fees and expenses.
12. Entire Agreement. This instrument and the Employment Agreement between
the parties hereto contain the entire agreement of the parties with regard to
the subject matter hereof, and may not be changed orally, but only by an
agreement in writing signed by the parties hereto.
13. Failure to Enforce. The failure to enforce any of the provisions of
this Agreement shall not be construed as a waiver of such provisions. Further,
any express waiver by any party with respect to any breach of any provision
hereunder by any other party shall not constitute a waiver of such party's right
to thereafter fully enforce each and every provision of the Agreement.
14. Headings. All numbers and heading of paragraphs are for reference only
and are not intended to qualify, limit or otherwise affect the meaning or
interpretation of any paragraph.
15. Notices. All notices which are required, permitted or contemplated
hereunder to be given or made shall be given or made in writing by certified
mail (return receipt requested) to the
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<PAGE>
address of the appropriate party set forth in the Purchase Agreement.
16. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
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<PAGE>
WHEREFORE, the parties have executed this Agreement on the date and year
first above written.
HA-LO:
HA-LO INDUSTRIES, INC.
By: /s/ John Kelley
------------------------------
Name: John Kelley
Title: Chief Executive Officer
EXECUTIVE:
/s/ Eric Lefkofsky
--------------------------------
Eric Lefkofsky
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