EXHIBIT 10.3
PURCHASE AGREEMENT
among
PEAPOD, INC.,
a Delaware corporation
and
KONINKLIJKE AHOLD N.V.
__________________________
Dated
April 14, 2000
___________________________
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS....................................................................1
ARTICLE II
SALE AND PURCHASE..............................................................9
SECTION 2.1. Sale and Issuance of Shares and Warrants................9
SECTION 2.2. Closings...............................................10
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................................11
SECTION 3.1. Organization and Standing..............................11
SECTION 3.2. Capital Stock..........................................11
SECTION 3.3. Subsidiaries...........................................12
SECTION 3.4. Authorization; Enforceability..........................12
SECTION 3.5. No Violation; Consents.................................13
SECTION 3.6. Permits................................................14
SECTION 3.7. Litigation.............................................14
SECTION 3.8. SEC Documents; Financial Statements....................14
SECTION 3.9. Change in Condition....................................15
SECTION 3.10. Employee Benefit Plans and Labor Matters..............16
SECTION 3.11. Interests in Real Property............................20
SECTION 3.12. Leases................................................21
SECTION 3.13. Compliance with Law...................................21
SECTION 3.14. Related Party Transactions............................21
SECTION 3.15. Tax Matters...........................................22
SECTION 3.16. Environmental Matters.................................23
SECTION 3.17. Intellectual Property.................................25
SECTION 3.18. Registration Rights...................................28
SECTION 3.19. Insurance.............................................28
SECTION 3.20. Contracts.............................................29
SECTION 3.21. Questionable Payments.................................30
SECTION 3.22. Accuracy of Information...............................31
SECTION 3.23. Private Offering......................................31
SECTION 3.24. Split Pea.............................................31
SECTION 3.25. Brokers...............................................31
SECTION 3.26. Voting and Proxy Agreements...........................32
SECTION 3.27. Rights Agreement......................................32
SECTION 3.28. Determination of Amount of Capital....................33
SECTION 3.29. Fairness Opinion......................................33
SECTION 3.30 State Takeover Statutes................................33
SECTION 3.31. ▇▇▇▇▇▇ Stock, Options and Note........................33
SECTION 3.32 Other Interests........................................33
SECTION 3.33 Books and Records......................................33
SECTION 3.34 Personal Property......................................34
SECTION 3.35 Accounts Receivable....................................34
SECTION 3.36 Inventory..............................................34
SECTION 3.37 Product Liability......................................34
SECTION 3.38 Copies of Documents....................................35
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER...............................35
SECTION 4.1. Authorization; Enforceability; No Violations...........35
SECTION 4.2. Consents...............................................35
SECTION 4.3. Private Placement......................................36
ARTICLE V
COVENANTS OF THE COMPANY......................................................36
SECTION 5.1. Operation of Business..................................36
SECTION 5.2. Negative Covenants.....................................37
SECTION 5.3. Access to Books and Records............................41
SECTION 5.4. Agreement to Take Necessary and
Desirable Actions....................................42
SECTION 5.5. Compliance with Conditions;
Commercially Reasonably Efforts......................42
SECTION 5.6. Consents and Approvals.................................42
SECTION 5.7. Stockholder Approval...................................42
SECTION 5.8. Tax Treatment of Preferred Stock.......................43
SECTION 5.9. Other Activities of Purchaser..........................43
SECTION 5.10. HSR Act Filings.......................................43
SECTION 5.11. No Solicitation.......................................44
SECTION 5.12. Use of Proceeds.......................................46
SECTION 5.13. Reduction of Capital..................................46
SECTION 5.14. Amendment of Bylaws...................................46
SECTION 5.15. Transfer Agent; CUSIP.................................46
SECTION 5.16. Notification of Certain Matters.......................46
SECTION 5.17. ▇▇▇▇▇▇ Shares.........................................47
ARTICLE VI
COVENANTS OF THE PURCHASER....................................................47
SECTION 6.1. Agreement to Take Necessary and Desirable Actions......47
SECTION 6.2. Compliance with Conditions; Commercially
Reasonable Efforts...................................47
SECTION 6.3. HSR Act Filings........................................47
SECTION 6.4. Confidential Information...............................48
SECTION 6.5 Notification of Certain Matters........................48
SECTION 6.6 Restrictions on Mergers................................49
ARTICLE VII
CONDITIONS PRECEDENT TO CLOSING...............................................49
SECTION 7.1. Conditions to the Company's Obligations................49
SECTION 7.2. Conditions to The Purchaser's Obligations..............50
ARTICLE VIII
INFORMATION; DIRECTORS; RESERVATION OF STOCK..................................53
SECTION 8.1. Access to Information..................................53
SECTION 8.2. Information Rights of Purchaser........................53
SECTION 8.3. Information Rights.....................................55
SECTION 8.4. Directors..............................................55
SECTION 8.5. Reservation of Common Stock.............................57
ARTICLE IX
MISCELLANEOUS.................................................................58
SECTION 9.1. Survival; Indemnification..............................58
SECTION 9.2. Notices................................................60
SECTION 9.3. Governing Law..........................................62
SECTION 9.4. Termination; Fees......................................62
SECTION 9.5. Entire Agreement.......................................63
SECTION 9.6. Modifications and Amendments...........................63
SECTION 9.7. Waivers and Extensions.................................63
SECTION 9.8. Titles and Headings; Interpretation....................63
SECTION 9.9. Exhibits and Schedules.................................63
SECTION 9.10. Expenses; Brokers.....................................63
SECTION 9.11. Press Releases and Public Announcements...............64
SECTION 9.12. Assignment; No Third Party Beneficiaries..............64
SECTION 9.13. Severability..........................................64
SECTION 9.14. Counterparts; Facsimile...............................64
SECTION 9.15. Further Assurances....................................65
SECTION 9.16. Remedies Cumulative...................................65
SCHEDULES
Schedule I Series B Preferred Stock and Warrants to be Purchased
Schedule 3.2 Capital Stock
Schedule 3.3 Subsidiaries
Schedule 3.5 No Violation; Consents
Schedule 3.7 Litigation
Schedule 3.8 SEC Documents; Financial Statements
Schedule 3.9 Change in Condition
Schedule 3.10 Employee Benefit Plans and Labor Matters
Schedule 3.10(n) Employee Severance Arrangements
Schedule 3.11 Interests in Real Property
Schedule 3.12 Leases
Schedule 3.13 Compliance with Law
Schedule 3.14 Related Party Transactions
Schedule 3.17 Intellectual Property
Schedule 3.18 Registration Rights
Schedule 3.20 Contracts
Schedule 3.31 ▇▇▇▇▇▇ Agreement
Schedule 3.32 Other Interests
Schedule 5.1(d) Key Employees
Schedule 5.2 Negative Covenants
EXHIBITS
Exhibit A......... Credit Agreement
Exhibit B......... Amended and Restated Security Agreement
Exhibit C Amended and Restated Collateral Assignment of
Intellectual Property Agreement
Exhibit D......... Registration Rights Agreement
Exhibit E......... Services Agreement
Exhibit F......... Voting Agreement
Exhibit G......... Warrant (Credit Agreement)
Exhibit H......... Warrant (Preferred Stock)
Exhibit I......... Certificate of Designation
Exhibit J......... Opinion of Sidley & Austin
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") is made as of April 14, 2000, by
and among Peapod, Inc., a Delaware corporation (the "Company"), and KONINKLIJKE
AHOLD N.V., a public company with limited liability organized and existing under
the laws of the Netherlands (the "Purchaser").
WHEREAS, in contemplation of this Agreement, the Company issued the
Promissory Note dated April 5, 2000 in favor of BEW, Inc., a Delaware
Corporation ("BEW"), an Affiliate of the Purchaser, and entered into a Security
Agreement dated April 5, 2000 with BEW (as amended, the "Note and Security
Agreement"), whereby BEW advanced $3,000,000 to the Company;
WHEREAS, in connection with the Note and Security Agreement the Company
issued a warrant (the "Previously Issued Warrant") dated April 10, 2000 in favor
of the Purchaser, for 100,000 shares of Common Stock (as defined below);
WHEREAS, in connection with the execution of this Agreement, the Company
will enter into the Credit and Security Agreements (as defined below) to
refinance the Note and Security Agreement;
WHEREAS, on the date hereof A. ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇, nominees of the Purchaser, have been appointed as directors of the
Company;
WHEREAS, the Board of Directors of the Company has approved the issue of
the Securities (as defined below) by the Company to the Purchaser and each of
the Supervisory Board and the Executive Board of the Purchaser has approved the
subscription of the Securities by the Purchaser; and
WHEREAS, in connection with the execution of this Agreement, the Company
will enter into a Services Agreement (as defined below) for the provision of
services between the Company and the Purchaser and its Affiliates, and the other
Documents (as defined below);
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
"Affiliate" shall mean, with respect to any person, any other person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified person and, shall include (a) in the case of
a person who is an individual, (i) members of such specified person's immediate
family (as defined in Instruction 2 of Item 404(a) of Regulation S-K under the
Securities Act) and (ii) trusts, the trustee and all beneficiaries of which are
such specified person or members of such person's immediate family as determined
in accordance with the foregoing clause (i), and (b) any person that directly or
indirectly owns more than 5% of any class of capital stock or other interest of
such specified person. For the purposes of this definition, "control," when used
with respect to any person means the power to direct the management and policies
of such person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "affiliated," "controlling"
and "controlled" have meanings correlative to the foregoing. Notwithstanding the
foregoing, for purposes of this Agreement, Nevis, Tribune, the Purchaser and its
Affiliates shall not be deemed Affiliates of the Company.
"Associates" shall have the meaning provided in the Rights Agreement.
"Aggregate Number" shall have the meaning set forth in Section 2.1(b).
"Agreement" shall have the meaning set forth in the Preamble.
"Alternative Transaction" shall have the meaning set forth in Section 5.11.
"Alternative Transaction Documentation" shall have the meaning set forth in
Section 5.11.
"Applicable Law" shall mean, with respect to any person, any law, statute,
rule, regulation, order, writ, injunction, judgment or decree of any
Governmental Authority to which such person or any of its subsidiaries is bound
or to which any of their respective properties is subject.
"Audited Financial Statements" shall have the meaning set forth in
Section 3.8.
"Benefit Plan" shall have the meaning set forth in Section 3.10.
"BEW" shall have the meaning set forth in the Recitals.
"Business Day" shall mean any day except a Saturday, a Sunday or any other
day on which commercial banks are required or authorized to close in Chicago,
Illinois or New York, New York.
"Certificate of Designation" shall have the meaning set forth in Section
2.1.
"Charter" with respect to any corporation shall mean the certificate of
incorporation or articles of incorporation of such corporation.
"Closing" shall have the meaning set forth in Section 2.1(b).
"Closing Date" shall have the meaning set forth in Section 2.2(a).
"Code" shall mean have the meaning set forth in Section 3.10.
"Commission" shall mean the United States Securities and Exchange
Commission.
"Commitments" shall have the meaning set forth in Section 3.20.
"Common Stock" shall mean the common stock, par value $.01 per share, of
the Company.
"Company" shall have the meaning set forth in the Preamble.
"Credit and Security Agreements" shall mean the Credit Agreement, to be
entered into by and between the Company and the Purchaser on the date hereof,
substantially in the form attached as Exhibit A hereto (the "Credit Agreement"),
the Amended and Restated Security Agreement, dated as of April 5, 2000, by and
among BEW, the Purchaser and the Company, substantially in the form attached as
Exhibit B hereto, the Amended and Restated Collateral Assignment of Intellectual
Property Agreement, to be entered into by and between the Purchaser and the
Company, on the date hereof, substantially in the form attached as Exhibit C
hereto, together with all documents, agreements, certificates and instruments
entered into in connection therewith on or after the date hereof.
"Date Data" shall have the meaning set forth in Section 3.17(l).
"DGCL" shall mean the Delaware General Corporation Law.
"Documents" shall mean (i) this Agreement, (ii) the Warrants, (iii) the
Certificate of Designation, (iv) the Registration Rights Agreement, (v) the
Credit and Security Agreements, (v) the Services Agreement, (vi) the Wareroom
License Agreement, (vii) the Technology Partnership and License Agreement, and
(viii) the Voting Agreements.
"Employee" shall have the meaning set forth in Section 3.10.
"Environmental Claim" shall have the meaning set forth in Section 3.16(c).
"Environmental Laws" shall have the meaning set forth in Section 3.16(a).
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" shall mean with respect to any person (within the meaning
of section 3(9) of ERISA) any other person that would be regarded together with
such person as a single employer under section 414(b), (c), (m) or (o) of the
Code.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Final Closing" shall have the meaning set forth in Section 2.1(b).
"Final Closing Date" shall have the meaning set forth in Section 2.1(b).
"Financial Statements" shall mean the Audited Financial Statements and the
Interim Financial Statements.
"GAAP" shall mean generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board, which are in effect from time to time,
consistently applied.
"Governmental Authority" shall mean any foreign, Federal, state or local
court or governmental or regulatory authority.
"Holder" shall mean any person that is the beneficial owner of Shares,
Warrants, or shares of Common Stock issued upon conversion of Shares or upon
exercise of Warrants, as a result of the sale, assignment or other transfer of
Securities originally issued to the Purchaser or issuable or issued upon the
conversion or exercise of any such Securities.
"▇▇▇▇▇▇▇▇ ▇▇▇▇▇" shall have the meaning set forth in Section 3.25.
"HSR Act" shall mean the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended, and applicable rules and regulations and any similar state
acts.
"HSR Approval" shall mean the expiration of all waiting periods under the
HSR Act applicable to the issuance of Series B Preferred Stock as contemplated
by the Documents.
"Indemnified Party" shall have the meaning set forth in Section 9.1(c).
"Indemnifying Party" shall have the meaning set forth in Section 9.1(c).
"Intellectual Property" shall mean all domestic and foreign trademarks,
service marks, trade names, corporate and business names, brand names, Internet
domain names, universal resource locators ("URLs"), designs, logos, trade dress,
slogans, and general intangibles of like nature, together with all goodwill,
registrations and applications related to the foregoing (collectively,
"Trademarks"); patents and industrial designs (including any continuations,
divisionals, continuations-in-part, renewals, provisionals, reissues, and
applications for any of the foregoing); copyrights (including any registrations
and applications for any of the foregoing); Software; "mask works" (as defined
under 17 USC section 901) and any registrations and applications for "mask
works"; inventions (whether or not patentable), invention disclosures, moral and
economic rights of authors and inventors (however denominated), technical data
and customer lists; technology, trade secrets and other confidential
information, know-how, proprietary processes, formulae, algorithms, models, and
methodologies (whether or not patentable) (collectively, "Trade Secrets"); all
improvements and refinements of any of the foregoing; rights of publicity and
privacy relating to the use of the names, likenesses, voices, signatures and
biographical information of real persons; in each case used in or necessary for
the business of the Company and any Subsidiary.
"Key Stockholders" shall mean Tribune, Nevis, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. Coin, ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇.
"Leases" shall have the meaning set forth in Section 3.12.
"License Agreements" shall have the meaning set forth in Section 3.17.
"Lien" shall mean any pledge, lien, claim, restriction, charge or
encumbrance of any kind.
"▇▇▇▇▇▇ Agreement" shall have the meaning set forth in Section 3.31.
"Material Adverse Effect" shall mean a material adverse effect (i) on the
business, operations, prospects, properties, earnings, assets, liabilities or
condition (financial or other) of the Company and its Subsidiaries, taken as a
whole, or (ii) on the ability of the Company or any of its Subsidiaries to
perform its obligations hereunder or under any of the other Documents.
"Materials of Environmental Concern" shall have the meaning set forth in
Section 3.16.
"NASD" shall mean the National Association of Security Dealers.
"NASDAQ" shall mean the NASDAQ quotation system, or any successor reporting
system.
"Nevis" shall mean Nevis Capital Management, Inc., a Maryland corporation.
"Note and Security Agreement" shall have the meaning set forth in the
Recitals.
"Notices" shall have the meaning set forth in Section 9.2.
"PBGC" shall have the meaning set forth in Section 3.10.
"Permitted Liens" shall mean: (i) liens for Taxes and other governmental
charges and assessments arising in the ordinary course of business which are not
yet due and payable, (ii) liens of landlords and liens of carriers,
warehousemen, mechanics and materialmen and other like liens arising in the
ordinary course of business for sums not yet due and payable (iii) other liens
or imperfections on property which are not material in amount, do not interfere
with, and are not violated by, the consummation of the transactions contemplated
by this Agreement, and do not impair the marketability of, or materially detract
from the value of or materially impair the existing use of, the property
affected by such lien or imperfection, and (iv) liens created or permissible
under the Credit and Security Agreements.
"Permitted Transferee" shall mean any person.
"person" shall mean any individual, partnership, corporation, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or agency or political subdivision
thereof, or other entity.
"Preferred Stock" shall mean the preferred stock, par value $.01 per share,
of the Company.
"Previously Issued Warrant" shall have the meaning set forth in the
Recitals.
"Purchaser" shall have the meaning set forth in the Preamble.
"Purchaser Nominees" shall mean the nominees of the Purchaser to serve as
directors of the Company.
"Registration Rights Agreement" shall mean the Registration Rights
Agreement to be entered into by and among the Company and the Purchaser on the
date hereof, substantially in the form attached as Exhibit D hereto.
"Related Party" shall have the meaning set forth in Section 3.14.
"Rights" shall have the meaning set forth in Section 3.27.
"Rights Agreement" shall have the meaning set forth in Section 3.5.
"SEC Documents" shall have the meaning set forth in Section 3.8(c).
"Securities" shall mean the Shares and the Warrants.
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Series B Preferred Stock" shall mean the Series B Convertible Preferred
Stock, par value $0.01 per share, of the Company.
"Services Agreement" shall mean the Supply and Services Agreement to be
entered into by and between the Company and the Purchaser or its Affiliate, on
the date hereof, substantially in the form attached as Exhibit E hereto.
"Shares" shall mean the shares of Series B Preferred Stock to be issued and
sold by the Company to the Purchaser under Section 2.1(b) hereof.
"Software" shall mean any and all (a) computer programs, including any and
all software implementation of algorithms, models and methodologies, whether in
source code or object code form, (b) databases and compilations, including any
and all data and collections of data, (c) designs, processes, procedures and
data collectors, and (d) all documentation, including user manuals and training
materials, relating to any of the foregoing.
"Split Pea" shall have the meaning set forth in Section 3.24.
"Stockholder Approval" shall have the meaning set forth in Section 5.7.
"Stockholder Meeting" shall have the meaning set forth in Section 5.7.
"Subsequent Filings" shall have the meaning set forth in Section 3.8.
"subsidiary" shall mean, with respect to any person, (a) a corporation a
majority of whose capital stock with voting power, under ordinary circumstances,
to elect directors is at the time, directly or indirectly, owned by such person,
by a subsidiary of such person, or by such person and one or more subsidiaries
of such person, (b) a partnership in which such person or a subsidiary of such
person is, at the date of determination, a general partner of such partnership,
or (c) any other person (other than a corporation) in which such person, a
subsidiary of such person or such person and one or more subsidiaries of such
person, directly or indirectly, at the date of determination thereof, has (i) at
least a majority ownership interest, (ii) the power to elect or direct the
election of the directors or other governing body of such person, or (iii) the
power to direct or cause the direction of the affairs or management of such
person. For purposes of this definition, a person is deemed to own any capital
stock or other ownership interest if such person has the right to acquire such
capital stock or other ownership interest, whether through the exercise of any
purchase option, conversion privilege or similar right.
"Subsidiary" shall mean a subsidiary of the Company.
"Taxes" shall mean all foreign, Federal, State and local taxes, including,
without limitation, any interest, penalties or additions to tax that may become
payable in respect thereof, imposed by any Governmental Authority, which taxes
shall include, without limiting the generality of the foregoing, all income
taxes, profits, capital gains, payroll and employee withholding taxes,
unemployment insurance, social security, sales and use taxes, excise taxes,
franchise taxes, gross receipts taxes, occupation taxes, real and personal
property taxes, stamp taxes, transfer taxes, workmen's compensation taxes and
other obligations of the same or a similar nature, whether arising before, on or
after the Closing Date and shall include any liability for such amounts as a
result of either being a member of a combined, consolidated, unitary or
affiliated group or of a contractual obligation to indemnify any person or other
entity.
"Tax Returns" shall mean all returns, declarations, statements, schedules,
forms, reports, information returns or other documents (including any related or
supporting information), and any amendments thereto, filed or required to be
filed with any Governmental Authority in connection with the determination,
assessment, collection or administration of any Taxes.
"Technology Partnership and License Agreement" shall mean the Technology
Partnership and License Agreement to be entered into by and between the Company
and the Purchaser or its Affiliate, on or prior to the first Closing, in form
and substance, reasonably satisfactory to the Company and the Purchaser.
"Threshold Securities" shall mean a number of securities of the Company
that constitute, or if exercised, exchanged or converted into Common Stock would
constitute, at least 10% of the aggregate issued and outstanding Common Stock.
"Trade Secrets" shall have the meaning set forth in the definition of
"Intellectual Property" in this Article I.
"Trademarks" shall have the meaning set forth in the definition of
"Intellectual Property" in this Article I.
"Tribune" shall mean Tribune National Marketing Company, a Delaware
corporation.
"Voting Agreements" shall mean one or more voting agreements dated April
14, 2000, by and among the Key Stockholders substantially in the form of Exhibit
F hereto.
"Wareroom License Agreement" shall mean the Wareroom License Agreement to
be entered into by and between the Company and the Purchaser or its Affiliate,
on or prior to the first Closing, substantially in the form of Exhibit B
attached to the Services Agreement.
"WARN Act" shall mean the Worker Adjustment and Retraining Notification Act
of 1988, as amended, and any applicable state or local law with regard to "plant
closings" or "mass layoffs" as such terms are defined in the WARN Act or
applicable state or local law.
"Warrants" shall mean the Warrant (Credit Agreement) to be issued on the
date hereof by the Company in favor of the Purchaser to purchase Common Stock,
substantially in the form of Exhibit G attached hereto, and the Warrant
(Preferred Stock) to be issued by the Company in favor of the Purchaser to
purchase Common Stock, substantially in the form of Exhibit H attached hereto,
in accordance with Section 2.1(b).
"▇▇▇▇▇▇▇▇▇▇▇" shall have the meaning set forth in Section 3.25.
"Year 2000 Compliance" shall have the meaning set forth in Section 3.17.
ARTICLE II
SALE AND PURCHASE
SECTION 2.1. Sale and Issuance of Shares and Warrants.
(a) On the date hereof and concurrently with the execution of the Credit
and Security Agreements, the Purchaser shall purchase and accept from the
Company the Warrants (Credit Agreement) for the purchase price indicated on
Schedule I.
(b) Upon the terms and subject to the conditions set forth in this
Agreement, the Company shall issue and the Purchaser shall purchase and accept
from the Company the number (the "Aggregate Number") of shares of Series B
Preferred Stock and Warrants (Preferred Stock) for the purchase prices indicated
on Schedule I as soon as practicable after all of the conditions set forth in
Article VII hereof shall have been satisfied or duly waived, including, without
limitation, receipt of Stockholder Approval, but in no event later than three
Business Days thereafter (the "Final Closing Date"). Notwithstanding the
foregoing, the Purchaser shall have the right to purchase shares of Series B
Preferred Stock and Warrants (Preferred Stock) in one or more closings, but no
more than three closings (each, a "Closing", and the Closing occurring on the
Final Closing Date, the "Final Closing") such that the number of shares of
Series B Preferred Stock and Warrants equals the Aggregate Number; provided,
that, any such purchase by Purchaser shall be in accordance with and not in
violation of NASD rules and regulations. At each Closing, the Purchaser shall
purchase and accept from the Company shares of Series B Preferred Stock and
Warrants (Preferred Stock) on a pro rata basis (for example, if at a Closing,
the Purchaser purchases 10% of the shares of Series B Preferred Stock set forth
in Schedule I, the Purchaser shall purchase 10% of the Warrants (Preferred
Stock) set forth in Schedule I).
(c) On or before the first Closing, the Company shall adopt and file with
the Secretary of State of Delaware the Certificate of Designation relating to
the Series B Preferred Stock (the "Certificate of Designation"), substantially
in the form attached as Exhibit I hereto.
SECTION 2.2. Closings.
(a) Each Closing (other than the Final Closing), shall take place at 9:00
a.m., New York time, on the date five Business Days after the Purchaser has
provided written notice to the Company that all of the conditions relating to
such Closing set forth in Article VII hereof shall have been satisfied or duly
waived or at such other time and date as the parties hereto shall agree in
writing (the "Closing Date"), at the offices of White & Case LLP, 1155 Avenue of
the Americas, New York, New York or at such other place as the parties hereto
shall agree in writing.
(b) The Final Closing, shall take place at 9:00 a.m., New York time on the
Final Closing Date or at such other time and date as the parties hereto shall
agree in writing, at the offices of White & Case LLP, 1155 Avenue of the
Americas, New York, New York or at such other place as the parties hereto shall
agree in writing.
(c) On each Closing Date (i) the Purchaser shall deposit into a bank
account designated by the Company not later than one Business Day prior to such
Closing Date, by wire transfer of immediately available funds, an amount equal
to the aggregate purchase price of the Securities being purchased by the
Purchaser from the Company pursuant to Section 2.2(a), and (ii) the Company
shall deliver to the Purchaser, against payment of the purchase price therefor,
certificates representing the Shares and Warrants, being purchased by the
Purchaser pursuant to Section 2.2(a). The Shares and Warrants shall be in
definitive form and registered in the name of the Purchaser or its nominee or
designee and in such denominations (including fractional shares) as the
Purchaser shall request not later than one Business Day prior to the Closing
Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchaser as follows:
SECTION 3.1. Organization and Standing. The Company is duly incorporated,
validly existing and in good standing as a domestic corporation under the laws
of the State of Delaware and has all requisite corporate power and authority to
own its properties and assets and to carry on its business as it is now being
conducted and as proposed to be conducted. The Company is duly qualified to
transact business as a foreign corporation and is in good standing in each
jurisdiction in which the character of the properties owned or leased by it or
the nature of its business makes such qualification necessary, except where the
failure to so qualify or be in good standing could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
SECTION 3.2. Capital Stock. On the date hereof, the authorized capital
stock of the Company will consist solely of (a) 50,000,000 shares of Common
Stock and (b) 5,000,000 shares of Preferred Stock. Immediately prior to the
Closing, or if there is more than one Closing, the Final Closing, following the
filing of the amendment to the Company's Charter increasing the authorized
shares of stock of the Company, the authorized capital stock of the Company will
consist solely of (a) 100,000,000 shares of Common Stock and (b) 10,000,000
shares of Preferred Stock. As of the date hereof, of the 50,000,000 shares of
Common Stock authorized, (i) 18,260,842 shares of Common Stock are issued and
outstanding, (ii) 3,611,716 shares are reserved for issuance pursuant to
outstanding options and warrants and existing employee stock plans, (iii)
19,369,873 shares are reserved for issuance upon conversion of the shares of
Series B Preferred Stock, (iv) 100,000 shares will be reserved for issuance upon
exercise of the Previously Issued Warrant and 36,460,937 shares will be reserved
for issuance upon exercise of the Warrants. As of the date hereof, of the
5,000,000 shares of Preferred Stock authorized, (i) 1,000,000 shares have been
designated Series A Preferred Stock, none of which will be issued or outstanding
but all of which have been reserved for issuance upon the exercise of rights
under the Rights Agreement. Immediately prior to the first Closing, or if there
is more than one Closing, the Final Closing, 730,000 shares will have been
designated Series B Preferred Stock. As of the date hereof, there are securities
convertible, exchangeable or exercisable into 661,319 shares of Common Stock at
or below $3.75 per share of Common Stock. Immediately following each Closing,
each share of capital stock of the Company that is issued and outstanding will
be duly authorized, validly issued, fully paid and nonassessable, and will not
be subject to nor issued in violation of, any preemptive rights. All shares of
Series B Preferred Stock issued in a Closing, or as a dividend on any
outstanding shares of Series B Preferred Stock, will be duly authorized, validly
issued, fully paid and nonassessable. The Previously Issued Warrant and all
Warrants issued at a Closing will be duly authorized, validly issued, fully paid
and nonassessable. Upon conversion of any shares of Series B Preferred Stock in
accordance with their terms, all of the Common Stock issued upon such conversion
will be duly authorized, validly issued, fully paid and nonassessable. Upon
exercise of the Previously Issued Warrant and the Warrants in accordance with
their terms, the Common Stock issued upon such exercise will be duly authorized,
validly issued, fully paid and nonassessable. Except for the Previously Issued
Warrant and as set forth on Schedule 3.2 or as contemplated by this Agreement,
at the date hereof there are, and immediately following each Closing there will
be (a) no outstanding or authorized options, warrants, agreements, conversion
rights, preemptive rights, other rights, subscriptions, claims of any character,
obligations, convertible or exchangeable securities, or other commitments,
contingent or otherwise, relating to shares of capital stock of the Company or
any of its Subsidiaries or pursuant to which the Company or any of its
Subsidiaries is or may become obligated to issue shares of its capital stock or
any securities convertible into, exchangeable for, or evidencing the right to
subscribe for, purchase or acquire, any shares of the capital stock of the
Company or any of its Subsidiaries, (b) no restrictions upon the dividends,
voting or transfer of any shares of capital stock of the Company pursuant to its
Charter, Bylaws or other governing documents or any agreement or other
instruments to which it is a party or by which it is bound, and (c) no shares of
Common Stock or Preferred Stock held by the Company in its treasury. The holders
of the Series B Preferred Stock will, upon issuance thereof, have the rights set
forth in the Certificate of Designation. Neither the Company nor any of its
Subsidiaries has authorized or outstanding bonds, debentures, notes or other
indebtedness the holders of which have the right to vote (or convertible or
exercisable for or exchangeable into securities the holders of which have the
right to vote) with the stockholders of such person on any matter. Except as
contemplated by this Agreement or the Rights Agreement or as set forth on
Schedule 3.2, there are no outstanding contractual obligations of the Company or
any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of
Common Stock or the capital stock of the Company or any of its Subsidiaries.
SECTION 3.3. Subsidiaries. The Company has no Subsidiaries.
SECTION 3.4. Authorization; Enforceability. The Company has the corporate
power to execute, deliver and perform its obligations under each of the
Documents and has taken all necessary corporate action to authorize the
execution, delivery and performance by it of each of the Documents and to
consummate the transactions contemplated hereby and thereby except, with respect
to the Closing, or the Final Closing if the Purchaser elects to have more than
one Closing, the Stockholder Approval. No other corporate proceedings on the
part of the Company are necessary therefor. The Company has duly executed and
delivered this Agreement. This Agreement constitutes, and each of the other
Documents, when executed and delivered by the Company and, assuming due
execution by the other parties hereto and thereto (other than the Subsidiaries),
will constitute legal, valid and binding obligations of the Company enforceable
against it in accordance with their terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and by
general principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
SECTION 3.5. No Violation; Consents.
(a) The execution, delivery and performance by the Company of each of the
Documents to which it is a party, all actions taken in connection with the
execution of the Voting Agreement, the consummation of the transactions
contemplated hereby and thereby does not and will not contravene any Applicable
Law, except for any such contraventions that could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. No actions
taken in connection with the execution of the Voting Agreement contravenes any
Applicable Law. The execution, delivery and performance by the Company of the
Documents to which it is a party and the consummation of the transactions
contemplated hereby and thereby (i) will not (x) violate, result in a breach of
or constitute (with due notice or lapse of time or both) a default under any
contract, lease, loan agreement, Benefit Plan, mortgage, security agreement,
trust indenture or other agreement or instrument to which the Company or any of
its Subsidiaries is a party or by which any of them is bound or to which any of
their properties or assets is subject, except to the extent any such conflict or
breach, singly or in the aggregate, would not have a Material Adverse Effect,
(y) result in the creation or imposition of any Lien (other than a Permitted
Lien) upon any of the properties or assets of any of them, or (z) except as set
forth on Schedule 3.5(a), obligate the Company to make any payment or incur any
additional obligation, or give rise to any right of any person with respect to
the Company, under any term or provision of any contract or agreement, the
Charter or Bylaws of the Company, any Benefit Plan or any Applicable Law, that
relates to a change of control or ownership of the Company or any similar
provision, (ii) will not violate any provision of its Charter or Bylaws, and
(iii) will not result in the Purchaser or any of its Affiliates, Associates or
Permitted Transferees being (x) an "Acquiring Person" under the Amended and
Restated Stockholder Rights Agreement, dated as of April 14, 2000 (the "Rights
Agreement"), by and between the Company and First Chicago Trust Company of New
York, a division of Equiserve, as Rights Agent, or (y) an "interested
stockholder," under Section 203 of the DGCL.
(b) Except as set forth on Schedule 3.5(b), no consent, authorization or
order of, or filing or registration with, any Governmental Authority or other
person is required to be obtained or made by the Company or any of its
Subsidiaries for the execution, delivery and performance of any of the
Documents, or the consummation of any of the transactions contemplated hereby or
thereby, except (i) the HSR Approval, and (ii) the Stockholder Approval, which
will have been obtained on or prior to the Closing Date, or the Final Closing
Date if the Purchaser elects to have more than one Closing.
SECTION 3.6. Permits. Each of the Company and its Subsidiaries has such
licenses, permits, exemptions, consents, waivers, authorizations, orders and
approvals from appropriate Governmental Authorities ("Permits") as are necessary
to own, lease or operate their properties and to conduct their businesses as
currently owned and conducted and all such Permits are valid and in full force
and effect, except such Permits that the failure to have or to be in full force
and effect could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect. No action by the Company or any of its
Subsidiaries outside the normal course of business is required in order that all
material Permits shall remain in full force and effect following either of the
Closings.
SECTION 3.7. Litigation. Except as set forth on Schedule 3.7, there are no
pending or, to the best knowledge of the Company, threatened claims, actions,
suits, labor disputes, grievances, administrative or arbitration or other
proceedings or, to the best knowledge of the Company, investigations against the
Company, its Subsidiaries or their respective assets or properties before or by
any Governmental Authority or before any arbitrator that could, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect. None
of the transactions contemplated by any of the Documents is restrained or
enjoined (either temporarily, preliminarily or permanently), and no material
adverse conditions have been imposed thereon by any Governmental Authority or
arbitrator. None of the Company, its Subsidiaries or any of their respective
assets or properties, is subject to any order, writ, judgment, award, injunction
or decree of any Governmental Authority or arbitrator, that could, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
SECTION 3.8. SEC Documents; Financial Statements.
(a) The Company has provided to the Purchaser copies of the audited
consolidated balance sheet of the Company and its consolidated Subsidiaries as
of December 31, 1998 (the "1998 Financials") and December 31, 1999 (the "1999
Financials"), together with the related audited consolidated statements of
operations, stockholders' equity and cash flows for the fiscal year then ended,
and the notes thereto, accompanied with respect to the 1998 Financials by the
unqualified opinion thereon of KPMG LLP and with respect to the 1999 Financials
by the qualified opinion of KPMG (collectively, the "Audited Financial
Statements"). The Audited Financial Statements (including the notes thereto)
were prepared in accordance with GAAP and present fairly, in all material
respects, the consolidated financial position and results of operation of the
Company and its consolidated Subsidiaries as of December 31, 1998 and December
31, 1999 and for the periods then ended.
(b) Neither the Company nor any of its Subsidiaries has any material
claims, liabilities or indebtedness, contingent or otherwise of any kind
whatsoever (whether accrued, absolute, contingent or otherwise and whether or
not required to be reflected in the Company's financial statements in accordance
with GAAP), except (i) as set forth in the Audited Financial Statements, (ii)
the Credit and Security Agreements, and (iii) liabilities to trade creditors
incurred subsequent to December 31, 1999 in the ordinary course of business
consistent with past practices not involving borrowings by the Company or any
Subsidiary.
(c) Since January 1, 1997, the Company has filed all forms, reports and
documents with the Commission (including all exhibits thereto) required under
the Securities Act or the Exchange Act or the rules and regulations promulgated
thereunder (collectively, the "SEC Documents"), each of which complied in all
material respects with all applicable requirements of the Securities Act and the
Exchange Act as in effect on the dates so filed. None of the SEC Documents (as
of their respective filing dates) contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. Any forms, reports and
documents filed by the Company with the Commission subsequent to the date hereof
and prior to the Final Closing Date (collectively, the "Subsequent Filings")
will comply in all material respects with all applicable requirements of the
Securities Act and the Exchange Act and will not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The Company has
heretofore furnished to the Purchaser copies of each of the SEC Documents (other
than exhibits or schedules to the SEC Documents) and will furnish to the
Purchaser copies of each Subsequent Filing promptly after the date of such
filing.
(d) No representation or warranty of the Company contained in any document,
certificate or written statement furnished to the Purchaser by or at the
direction of the Company for use in connection with the transactions
contemplated by this Agreement, contains any untrue statement of a material fact
or omits to state any material fact (known to the Company, in the case of
information not furnished by them) necessary in order to make the statements
contained herein or therein not misleading in light of the circumstances in
which the same were made. There are no facts known to any of the Company or its
Subsidiaries (other than matters of a general economic nature) that could,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect and that have not been disclosed in the SEC Documents, this
Agreement or in such other documents, certificates and statements furnished to
the Purchaser for use in connection with the transactions contemplated by this
Agreement.
SECTION 3.9. Change in Condition.
(a) Except as set forth on Schedule 3.9, since December 31, 1999, the
Company and its Subsidiaries have operated their respective businesses only in
the ordinary course consistent with past practices and there has not occurred
(i) any event, occurrence or conditions, or to the best knowledge of the
Company, any circumstance or development that could, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect, or (ii) any
action specified in Section 5.2 of this Agreement.
SECTION 3.10. Employee Benefit Plans and Labor Matters.
(a) For purposes of this Agreement:
(i) "Benefit Plan" means any employee benefit plan, arrangement,
policy or commitment, including, without limitation, any employment,
consulting, severance or deferred compensation agreement, executive
compensation, bonus, incentive, pension, profit-sharing, savings,
retirement, stock option, stock purchase or severance pay plan, any life,
health, disability or accidental death and dismemberment insurance plan,
any holiday and vacation practice or any other employee benefit plan,
within the meaning of section 3(3) of ERISA, whether formal or informal,
written or oral and whether legally binding or not, that is maintained,
administered or contributed to or was maintained, administered or
contributed to at any time by the Company or any of its ERISA Affiliates
for the benefit of any employee, former employee, consultant, officer or
director of the Company or any ERISA Affiliate;
(ii) "Code" means the Internal Revenue Code of 1986, as amended;
(iii) "Employee" means any individual employed by the Company or any
of its ERISA Affiliates;
(iv) "IRS" means the United States Internal Revenue Service; and
(v) "PBGC" means the Pension Benefit Guaranty Corporation.
(b) Schedule 3.10 lists all Benefit Plans. With respect to each such plan,
the Company has delivered or made available to the Purchasers correct and
complete copies of (i) all plan documents and agreements and related trust or
other funding arrangements (including all amendments thereto); (ii) all summary
plan descriptions and material employee communications; (iii) the annual report
and actuarial report (including all schedules thereto) if required under ERISA
or other applicable law, for the last three most recently completed plan years;
(iv) the most recent annual audited financial statement; (v) if the plan is
intended to qualify under Code section 401(a) or 403(a), the most recent
determination letter, if any, received from the IRS; and (vi) all material
communications with any Governmental Authority (including, without limitation,
the PBGC, the U.S. Department of Labor and the IRS).
(c) There are no Benefit Plans that (i) are covered by or subject to any
liability under Code section 412, ERISA section 302 or Title IV of ERISA and no
condition exists that presents a material risk to the Company or any ERISA
Affiliate of incurring such liability; (ii) are intended to qualify under Code
section 401(a) or 403(a) other than the Peapod 401(k) Savings Plan; (iii)
provide benefits to current or former Employees or their respective
beneficiaries beyond their retirement or other termination of service (other
than coverage mandated by Code section 4980B or Part 6 of Title I of ERISA); or
(iv) are self-insured "multiple employer welfare arrangements," as such term is
defined in section 3(40) of ERISA.
(d) Each Benefit Plan conforms in all respects to, and its administration
is in all respects in compliance with, its terms and all Applicable Law,
including but not limited to ERISA and the Code, except to the extent that the
failure to conform or to be administered would not reasonably be expected to
result in a material liability.
(e) The consummation of the transactions contemplated by this Agreement
will not (i) entitle any current or former Employee, officer or director of the
Company or any ERISA Affiliate to severance pay, unemployment compensation or
any similar payment; or (ii) accelerate the time of payment or vesting of any
right or privilege, or increase the amount of any compensation due to, any
current or former Employee, officer or director of the Company.
(f) No Benefit Plan is a "multiple employer plan" or a "multiemployer plan"
within the meaning of the Code or ERISA.
(g) In the six years preceding the date hereof, (i) no Benefit Plan that is
or was subject to Title IV of ERISA has been terminated; (ii) no reportable
event within the meaning of section 4043 of ERISA has occurred; (iii) no filing
of a notice of intent to terminate such a Benefit Plan has been made; (iv) the
PBGC has not initiated any proceeding to terminate any such Benefit Plan and no
condition exists that presents a material risk that such proceeding will be
initiated; and (v) no prohibited transaction (within the meaning of Section 406
of ERISA or Section 4975 of the Code), breach of fiduciary duty (pursuant to
Section 409 of ERISA) or civil action (pursuant to Section 502 of ERISA) has
occurred that could result in a material liability to the Company or any
Subsidiary.
(h) Except for the Executive Employment Agreement between ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
and the Company, dated as of September 27, 1999, neither the Company nor any of
its Subsidiaries has any existing arrangement with any of its Employees
providing for an excise tax gross up in respect of any excise taxes imposed by
section 4999 of the Code.
(i) Except as set forth on Schedule 3.10, none of the Company, any
Subsidiary or any ERISA Affiliate has any commitment or formal plan, whether
legally binding or not, to create any additional employee benefit plan or modify
or change any existing Benefit Plan that would affect any Employee, former
Employee or director of the Company.
(j) Except as set forth on Schedule 3.10, (i) no amounts payable under the
Benefit Plans will fail to be deductible for federal income tax purposes by
virtue of section 162(a)(1), 162(m) or 280G of the Code and (ii) all
contributions (including all employer contributions and employee salary
reduction contributions) required to be made to any Benefit Plan by applicable
law or regulation or by any plan document or other contractual undertaking, and
all premiums due or payable with respect to insurance policies funding any
Benefit Plan, have been timely made or paid in full or, to the extent not
required to be made or paid on or before the date hereof, have been fully
reflected on the financial statements in accordance with GAAP. Each Benefit Plan
that is an employee welfare benefit plan under Section 3(1) of ERISA either (i)
is funded through an insurance company contract and is not a "welfare benefit
fund" with the meaning of Section 419 of the Code or (ii) has benefits paid as
needed solely from the general assets of the Company and its Subsidiaries.
(k) No liability, claim, action or litigation has been made, commenced or,
to the Company's knowledge, threatened with respect to any Benefit Plan (other
than routine claims for benefits payable in the ordinary course, and appeals of
such desired claims).
(l) Except as set forth on Schedule 3.10,
(i) there is no labor strike, dispute, slowdown, stoppage or lockout
actually pending, or to the knowledge of the Company or any of its
Subsidiaries, threatened against or affecting the Company or any of its
Subsidiaries and during the past five years there has not been any such
action;
(ii) to the knowledge of the Company and any of its Subsidiaries,
there are no union claims to represent the employees of the Company or any
of its Subsidiaries;
(iii) neither the Company nor any of its Subsidiaries is a party to or
bound by any collective bargaining or similar agreement with any labor
organization, or work rules or practices agreed to with any labor
organization or employee association applicable to employees of the Company
or any of its Subsidiaries;
(iv) none of the employees of the Company or any of its Subsidiaries
are represented by any labor organization and none of the Company or any of
its Subsidiaries have any knowledge of any current union organizing
activities among the employees of the Company or any of its Subsidiaries,
nor does any question concerning representation exist concerning such
employees;
(v) true, correct and complete copies of all written personnel
policies, rules and procedures applicable to employees of the Company or
any of its Subsidiaries have heretofore been delivered to the Purchaser;
(vi) the Company and its Subsidiaries are, and have at all times been,
in material compliance with all applicable laws respecting employment and
employment practices, terms and conditions of employment, wages, hours of
work and occupational safety and health, and are not engaged in any unfair
labor practices as defined in the National Labor Relations Act or other
applicable law, ordinance or regulation;
(vii) there is no unfair labor practice charge or complaint against
the Company or any Subsidiary pending or, to the knowledge of the Company
and any of its Subsidiaries, threatened before the National Labor Relations
Board or any similar state or foreign agency;
(viii) there is no grievance or arbitration proceeding arising out of
any collective bargaining agreement or other grievance procedure relating
to the Company or any of its Subsidiaries;
(ix) to the knowledge of the Company and any of its Subsidiaries, no
charges with respect to or relating to the Company or any of its
Subsidiaries are pending before the Equal Employment Opportunity Commission
or any other agency responsible for the prevention of unlawful employment
practices
(x) to the knowledge of the Company and any of its Subsidiaries, no
federal, state, local or foreign agency responsible for the enforcement of
labor or employment laws intends to conduct an investigation with respect
to or relating to the Company and any of its Subsidiaries and no such
investigation is in progress; and
(xi) there are no complaints, controversies, lawsuits or other
proceedings pending or, to the knowledge of the Company or any of its
Subsidiaries, any applicant for employment or classes of the foregoing
alleging breach of any express or implied contract or employment, any law
or regulation governing employment or the termination thereof or other
discriminatory, wrongful or tortuous conduct in connection with the
employment relationship. Except as set forth in Schedule 3.10, there are no
employment contracts or severance agreements with any employees of the
Company or any of its Subsidiaries. The execution of this Agreement and the
consummation of the transactions contemplated hereby shall not result in a
breach or other violation of any collective bargaining agreement to which
the Company or any of its Subsidiaries is a party.
(m) Since the enactment of the WARN Act, neither the Company nor any of its
Subsidiaries have effectuated (i) a "plant closing" (as defined in the WARN Act)
affecting any site of employment or one or more facilities or operating units
within any site of employment or facility of the Company or any of its
Subsidiaries, or (ii) a "mass layoff" (as defined in the WARN Act) affecting any
site of employment or facility of the Company or any of its Subsidiaries; nor
has the Company or any of its Subsidiaries been affected by any transaction or
engaged in layoffs or employment terminations sufficient in number to trigger
application of any similar state or local law. Except as set forth in Schedule
3.10, none of the employees of the Company or any of its Subsidiaries has
suffered an "employment loss" (as defined in the WARN Act) with regard to their
employment with the Company or any of its Subsidiaries since March 1, 1995.
(n) Except as set forth on Schedule 3.10(n) neither the Company nor any of
its Subsidiaries have any employment or severance agreements with any Employees
or former employees (to the extent the Company continues to have obligations
with respect to former employees).
SECTION 3.11. Interests in Real Property.
(a) Schedule 3.11 sets forth a true and complete list of all real
properties owned and all material real property leased by the Company or any of
its Subsidiaries. Each of the Company and its Subsidiaries has good and
marketable title in fee simple to all real properties owned by it, free and
clear of all Liens, except for Permitted Liens, and valid and enforceable
leasehold interests in all real estate leased by it, except where the lack of
such title or the invalidity or unenforceability of such leasehold interests
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(b) None of the real properties owned by, or the leasehold estates of, the
Company or any Subsidiary are subject to (i) any Liens or (ii) any easements,
rights of way, licenses, grants, building or use restrictions, exceptions,
reservations, limitations or other impediments that, in either case (i) or (ii),
will materially adversely affect the value thereof for their present use, taken
as a whole, or that materially interfere with or impair the present and
continued use thereof, taken as a whole, in the usual and normal conduct of the
business of any such person.
(c) To the best knowledge of the Company, all improvements on such real
properties and the operations therein conducted conform in all material respects
to all applicable health, fire, environmental, safety, zoning and building laws,
ordinances and administrative regulations (whether through grandfathering
provisions, permitted use exceptions, variances or otherwise), except for
possible nonconforming uses or violations that do not and will not interfere
with the present use, operation or maintenance thereof as now used, operated or
maintained or access thereto, and that do not and will not materially affect the
value thereof for their present use. Neither the Company nor any Subsidiary has
received notice of any violation of or noncompliance with any such laws,
ordinances or administrative regulations from any applicable governmental or
regulatory authority, except for notices of violations or failures so to comply,
if any, that could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.
SECTION 3.12. Leases.
(a)(i) Neither the Company nor any Subsidiary is in breach of or default
(and no event has occurred which, with due notice or lapse of time or both, may
constitute a breach or default) under any lease required to be set forth on
Schedule 3.11 (the "Leases") and (ii) no party to any Lease has given, or to the
best knowledge of the Company threatened to give, or advised that it will be
giving the Company or any Subsidiary written notice of or made a claim with
respect to any breach or default, the consequences of which, in either case (i)
or (ii) could, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect.
(b) Except as set forth on Schedule 3.12, after taking into account the
exercise of any options (which are exercisable solely at the discretion of the
Company or any Subsidiary), none of the Leases terminates by its terms before
January 1, 2002.
(c) None of the Leases require a consent to be obtained for the execution,
delivery and performance of any of the Documents or the consummation of any of
the transactions contemplated hereby or thereby.
(d) Neither the Company nor any Subsidiary has any ownership, financial or
other interest in the landlords under any of the Leases.
SECTION 3.13. Compliance with Law. The operations of the Company and its
Subsidiaries have been conducted in accordance with all Applicable Laws,
including, without limitation, all Applicable Laws relating to consumer
protection, currency exchange, employment (including, without limitation, equal
opportunity and wage and hour), safety and health, environmental protection,
conservation, wetlands, architectural barriers to the handicapped, fire, zoning
and building, occupation safety, pension and securities, except for violations
or failures so to comply, if any, that could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. Neither the
Company nor any Subsidiary has received notice of any violation of or
noncompliance with any Applicable Laws except as set forth on Schedule 3.13 and
except for notices of violations or failures so to comply, if any, that could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
SECTION 3.14. Related Party Transactions. Except as set forth on Schedule
3.14 and except for the consummation of the transactions contemplated by the
Documents (including, without limitation, the Voting Agreements) (i) neither the
Company nor any of its Subsidiaries is a party to any agreement or arrangement
with or for the benefit of any person who, to the Company's knowledge, based on
a review of Schedule 13Ds and Schedule 13Gs filed under the Exchange Act, is a
holder of 5% or more of the outstanding equity securities of the Company or any
officer, director, partner or Affiliate of any such person ("Related Party");
(ii) all transactions between the Company and its Subsidiaries, on the one hand,
and a Related Party, on the other hand, are on terms and conditions which could
be obtained from an unaffiliated third party in an arm's length transaction; and
(iii) no Affiliate of the Company or Related Party is a supplier, lessor, lessee
or competitor of the Company or any of its Subsidiaries.
SECTION 3.15. Tax Matters.
(a) The Company and its Subsidiaries have duly and properly filed, or will
duly and properly file, on a timely basis, all material Tax Returns which were
or will be required to be filed by them for all periods ending on or before any
Closing Date. All such Tax Returns of the Company and its Subsidiaries were (or
will be) true, correct and complete in all material respects when filed. The
Company and its Subsidiaries have paid all material Taxes and Tax liabilities
required to be paid by them for periods ending on or before any Closing Date, or
with respect to any period that ends after any Closing Date, the portion of such
period up to and including any Closing Date, other than those Taxes being
contested in good faith or those Taxes currently payable without penalty or
interest, in each case which have been adequately disclosed and for which an
adequate reserve or accrual has been established in the Financial Statements in
accordance with GAAP.
(b) All material Taxes that the Company and its Subsidiaries are or were
required by law to withhold or collect through any Closing Date have been duly
withheld or collected and, to the extent required, have been paid to the proper
Governmental Authority. There are no Liens with respect to Taxes upon any of the
properties or assets, real or personal, tangible or intangible, of the Company
or any Subsidiary except for statutory liens for Taxes not yet due or
delinquent.
(c) Neither the Company nor any of its Subsidiaries is currently the
beneficiary of any waivers or extensions with respect to any Tax Returns, no Tax
Returns of the Company or any Subsidiary are currently under audit or
examination by any Governmental Authority and to the best knowledge of the
Company and its Subsidiaries, no such audit or examination is threatened.
Neither the Company nor any Subsidiary has received any notices from any
Governmental Authority relating to any issue which could materially affect the
Tax liability of the Company or any Subsidiary. No issue was raised in any audit
or examination of Tax Returns by any Governmental Authority that, if raised with
respect to any period not so audited or examined, could be expected to result in
a proposed deficiency.
(d) Neither the Company nor any of its Subsidiaries is party to, bound by
or has an obligation under any Tax allocation, Tax indemnity, or Tax sharing
agreement or similar contract arrangement. Neither the Company nor any of its
Subsidiaries (i) has been a member of an affiliated group filing a consolidated
Tax Return (other than a group the common parent of which was the Company), or
(ii) has been included in any "consolidated," "unitary" or "combined" Tax Return
provided for under the law of any foreign jurisdiction or any state or locality
with respect to Taxes for any taxable period for which the statute of
limitations has not expired (other than a group the common parent of which was
the Company), or (iii) has any liability for the Taxes of any person (other than
the Company and its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or
any similar provision of state, local or foreign law), as a transferee or
successor, by contract, agreement to indemnify or otherwise. Neither the Company
nor any of its Subsidiaries has any obligation by contract, agreement,
arrangement or otherwise to permit any person, other than the Company and its
Subsidiaries, to use the benefit of a refund, credit or offset of Tax of any of
the Company and its Subsidiaries.
(e) Neither the Company nor any of its Subsidiaries has been a United
States real property holding corporation within the meaning of section 897(c)(2)
of the Code during the period specified in section 897(c)(1)(A)(ii) of the Code.
(f) Neither the Company nor any of its Subsidiaries has filed (or will file
prior to any Closing) a consent under section 341(f) of the Code.
(g) The Company has not applied for, been granted, or agreed to any
accounting method change for which it will be required to take into account any
adjustment under Section 481 of the Code or any similar provision of the Code or
the corresponding tax laws of any nation, state or locality.
SECTION 3.16. Environmental Matters.
(a) The Company and its Subsidiaries are in compliance in all material
respects with all applicable federal, state, local and foreign laws and
regulations relating to pollution or protection of human health or the
environment, including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata, and natural resources (together
"Environmental Laws" and including, without limitation, laws and regulations
relating to emissions, discharges, releases or threatened releases of chemicals,
pollutants, contaminants, wastes, toxic or hazardous substances or wastes,
petroleum and petroleum products, asbestos or asbestos-containing materials,
polychlorinated biphenyls, lead or lead-based paints or materials, or radon
("Materials of Environmental Concern")), or otherwise relating to the
manufacture, generation, processing, distribution, use, treatment, storage,
disposal, transport or handling of Materials of Environmental Concern, or the
preservation of the environment or mitigation of adverse effects thereon and
each law and regulation with regard to record keeping, notification, disclosure,
and reporting requirements respecting Materials of Environmental Concern. The
Company and its Subsidiaries possess all permits and other governmental
authorizations required under all applicable Environmental Laws, and are in
compliance in all material respects with the terms and conditions thereof.
(b) The Company and its Subsidiaries have not received any communication
(written or oral), whether from a Governmental Authority, citizens group,
employee or otherwise, that alleges that the Company or any of its Subsidiaries
are not in full compliance with any Environmental Laws and, to the best
knowledge of the Company, there are no circumstances that may prevent or
interfere with such full compliance in the future.
(c) There is no claim, action, written or oral notice or cause of action
pending or, to the best knowledge of the Company, any investigation or notice of
violation threatened (together, "Environmental Claim") by any person or entity
alleging potential liability (including, without limitation, potential liability
for investigatory costs, cleanup costs, governmental response costs, natural
resources damages, property damages, personal injuries, or penalties) arising
out of, based on or resulting from (a) the presence, or release into the
environment, of any Material of Environmental Concern at any location, whether
or not owned, leased or operated by the Company or any of its Subsidiaries or
(b) circumstances forming the basis of any violation, or alleged violation, of
any Environmental Law, that in either case is pending or threatened against the
Company, or any of its Subsidiaries or against any person or entity whose
liability for any Environmental Claim the Company or any of its Subsidiaries has
retained or assumed either contractually or by operation of law.
(d) To the best knowledge of the Company, there are no past or present
actions, activities, circumstances, conditions, events or incidents, including,
without limitation, the release, emission, discharge, presence or disposal of
any Material of Environmental Concern, that could form the basis of any
Environmental Claim against the Company or any of its Subsidiaries or, to the
Company's and any of its Subsidiaries' best knowledge, against any person or
entity whose liability for any Environmental Claim the Company or any of its
Subsidiaries has retained or assumed either contractually or by operation of
law.
(e) Without in any way limiting the generality of the foregoing, (i) there
are no on-site or off-site locations where the Company or any of its
Subsidiaries has (previously or currently) stored, disposed or arranged for the
disposal of Materials of Environmental Concern, (ii) there are no underground
storage tanks located on any property owned, leased, operated or controlled by
the Company or any of its Subsidiaries, (iii) there is no asbestos contained in
or forming part of any building, building component, structure or office space
owned, leased, operated or controlled by the Company or any of its Subsidiaries,
and (iv) there are no PCBs or PCB-containing items are used or stored at any
property owned, leased, operated or controlled by the Company or any of its
Subsidiaries.
(f) The Company and its Subsidiaries have provided to the Purchaser all
assessments, reports, data, results of investigations or audits, and other
information that is in the possession of or reasonably available to the Company
or any of its Subsidiaries regarding environmental matters pertaining to the
environmental condition of the business of the Company or any of its
Subsidiaries, or the compliance (or noncompliance) by the Company or any of its
Subsidiaries with any Environmental Laws.
(g) Neither the Company nor any of its Subsidiaries is required by virtue
of the transactions set forth herein and contemplated hereby, or as a condition
to the effectiveness of any transactions contemplated hereby, (i) to perform a
site assessment for Materials of Environmental Concern, (ii) to remove or
remediate Materials of Environmental Concern, (iii) to give notice to or receive
approval from any Governmental Authority, or (iv) to record or deliver to any
person or entity any disclosure document or statement pertaining to
environmental matters.
SECTION 3.17. Intellectual Property.
(a) Schedule 3.17(a) sets forth, for the Intellectual Property owned by the
Company or any Subsidiary, a complete and accurate list of all U.S. and foreign
(i) patents and patent applications; (ii) trademark registrations (including
Internet domain registrations), trademark applications, and material
unregistered trademarks; (iii) copyright and mask work registrations, copyright
and mask work applications, and material unregistered copyrights; and (iv) all
Software (other than readily available "off-the-shelf" commercial software
programs having an acquisition price of less than $5,000) which are owned,
licensed, or leased, by the Company or any Subsidiary, identifying which
Intellectual Property is owned, licensed, or leased, as the case may be. The
Intellectual Property constitutes all the intellectual property necessary to
operate the business of the Company and its Subsidiaries as of the Closing Date
in substantially the manner in which it is currently operated. To the extent
indicated on Schedule 3.17(a), the Intellectual Property has been duly
registered in, filed in or issued by the United States Patent and Trademark
Office, United States Copyright Office, a duly authorized and appropriate domain
name registrar, the appropriate offices in the various states of the United
States and the appropriate offices of other jurisdictions (foreign and
domestic), and each such registration, filing and issuance remains in full force
and effect as of the Closing Date.
(b) Schedule 3.17(b) sets forth a complete and accurate list of all
material oral or written agreements (whether between the Company or a Subsidiary
and third parties or inter-corporate) to which the Company or any Subsidiary is
a party or otherwise bound, (i) granting or obtaining any right to use or
practice any rights under any Intellectual Property (other than licenses for
readily available "off-the-shelf" commercial software programs having an
acquisition price of less than $5,000), or (ii) restricting the Company's or any
Subsidiary's right to use any Intellectual Property, including, without
limitation, license agreements, development agreements, distribution agreements,
settlement agreements, consent to use agreements, and covenants not to ▇▇▇
(collectively, the "License Agreements"). The License Agreements are valid and
binding obligations of the Company or a Subsidiary, as applicable, enforceable
in accordance with their terms, and to the Company's knowledge, there exists no
event or condition which will result in a violation or breach of, or constitute
(with or without due notice of lapse of time or both) a default by any party
under any such License Agreement. Except as set forth in Schedule 3.17(b),
neither the Company nor any of its Subsidiaries have licensed or sublicensed its
rights in any material Intellectual Property other than pursuant to the License
Agreements. No royalties, honoraria or other fees are currently payable by the
Company or any Subsidiary to any third parties for the use of or right to use
any Intellectual Property except pursuant to the License Agreements and set
forth on Schedule 3.17(b).
(c) The Company or a Subsidiary owns, or to the Company's best knowledge
has a valid right to use, free and clear of all Liens, all of the Intellectual
Property. The Company or a Subsidiary is listed in the records of the
appropriate United States, state, or foreign registry as the sole current owner
of record for each application and registration and has the exclusive right to
file, prosecute and maintain all applications and registrations with respect to
the Intellectual Property that is listed on Schedule 3.17(a).
(d) The Intellectual Property owned by the Company or any Subsidiary and,
to the Company's knowledge, any material Intellectual Property licensed to the
Company or any Subsidiary, has not been canceled, expired, abandoned or
otherwise terminated and all renewal fees in respect thereof have been duly
paid, and to the Company's knowledge is valid and enforceable.
(e) Neither the Company nor any of its Subsidiaries has received any
written notice or claim and there is no pending or, to the best of the Company's
knowledge, threatened claim, suit, arbitration, interference or other
adversarial or contested proceeding before any court, agency, arbitral tribunal,
or registration authority in any jurisdiction (foreign or domestic) involving
the Intellectual Property owned by the Company or its Subsidiaries, or, to the
best of the Company's knowledge, the material Intellectual Property licensed to
the Company or any Subsidiary, alleging that the activities or the conduct of
the Company's or any Subsidiary's businesses infringe upon, dilute, violate or
constitute the unauthorized use, misuse or misappropriation of the intellectual
property rights of any third party or challenging the Company's or any
Subsidiary's ownership, use, validity, enforceability or registrability of any
Intellectual Property. There are no settlements, forebearances to ▇▇▇, consents,
judgments, or orders or similar obligations to which the Company or any
Subsidiary is a party other than the License Agreements which (i) restrict the
Company's or any Subsidiary's right to use any Intellectual Property, (ii)
restrict the Company's or any Subsidiary's businesses in order to accommodate a
third party's intellectual property rights or (iii) permit third parties to use
any Intellectual Property owned by the Company or any Subsidiary. To the best
knowledge of the Company, neither the Company nor any of its Subsidiaries know
of any valid basis for any such claims.
(f) The conduct of the Company's and any Subsidiary's business as currently
conducted or planned to be conducted does not infringe upon (either directly or
indirectly such as through contributory infringement or inducement to infringe)
any intellectual property rights owned or controlled by any third party. To the
Company's knowledge, no third party is misappropriating, infringing, diluting or
violating any Intellectual Property owned by the Company or any Subsidiary and
no such claims, suits, arbitrations or other adversarial proceedings have been
brought or threatened against any third party by the Company or any Subsidiary.
(g) The Company and each Subsidiary take reasonable measures to protect the
confidentiality of its Trade Secrets, including requiring their employees and
other parties having access thereto to execute written non-disclosure
agreements. To the best of the Company's knowledge, no Trade Secret of the
Company or its Subsidiaries has been disclosed or authorized to be disclosed to
any third party other than pursuant to a non-disclosure agreement. To the best
of the Company's knowledge, no party to any non-disclosure agreement relating to
its Trade Secrets is in breach or default thereof. The Purchaser has been
provided with a copy of the Company's form of non-disclosure agreement and the
non-disclosure agreements referred to in this clause (g) contain substantially
the same terms and conditions as the form of non-disclosure agreement.
(h) No current or former partner, director, officer, or employee of the
Company or any Subsidiary (or any of their respective predecessors in interest)
will, after giving effect to the transactions contemplated herein, directly own
or retain any rights to use any of the Intellectual Property owned or used by
the Company or any Subsidiary.
(i) With respect to the Software set forth in Schedule 3.17(a) which is
owned by the Company, such Software was either developed (i) by employees of the
Company or any Subsidiary within the scope of their employment or (ii) by
independent contractors who have assigned their rights to the Company or any
Subsidiary pursuant to signed, written agreements.
(j) Except as set forth in Schedule 3.17(a), for the twelve month period
prior to the Closing Date, the Internet domain names and URL's of the
Intellectual Property (together with any content and other materials accessible
and/or displayed thereon, the "Sites") direct and resolve to the appropriate
Internet protocol addresses and are and have been maintained and accessible to
Internet users on those certain computers used by the Company to make the Sites
so accessible (the "Server") approximately twenty-four (24) hours per day, seven
(7) days per week ("24/7") and are and have been operational for downloading
content from the Server on a 24/7 basis. The Company has fully operational
back-up copies of the Sites (and all related software, databases and other
information), made from the current versions of the Sites as accessible to
Internet users on the Server (and copied directly therefrom) which copies will
have been made at least every two weeks from the date hereof until the Closing
Date. Such back-up copies are kept in a safe and secure environment, fit for the
back-up of media, and are not located at the same location of the Server. The
Company has no reason to believe that the Sites will not operate on the Server
or will not continue to be accessible to Internet users on a 24/7 basis prior
to, at the time of, and after the Closing Date.
(k) The Trademarks listed on Schedule 3.17(a), for which the Company or any
Subsidiary has obtained or applied for a registration have been continuously
used in the form appearing in, and in connection with the goods and services
listed in, their respective registration certificates, and are all the
Trademarks that are material to the Company and its Subsidiaries. To the
knowledge of the Company, there has been no prior use of such Trademarks by any
third party which would confer upon said third party superior rights in such
Trademarks. The Company and its Subsidiaries have undertaken reasonable policing
of such Trademarks against third party infringement.
(l) All material Software and systems used by the Company and each
Subsidiary are Year 2000 Compliant. As used herein, "Year 2000 Compliant" and
"Year 2000 Compliance" shall mean for all dates and times, including, without
limitation dates and times after December 31, 1999 and in the multi-century
scenario, when used on a stand-alone system or in combination with other
software or systems: (i) the application system functions and receives,
processes, manipulates and calculates dates, times and date-related data
correctly without abnormal results; (ii) there is no century ambiguity; (iii)
all reports and displays are sorted correctly; and (iv) leap years are accounted
for and correctly identified (including, without limitation, that 2000 is
recognized as a leap year). The Company and each Subsidiary have obtained
written representations or assurances from each entity that (x) provides
material data of any type that includes date information or which is otherwise
derived from, dependent on or related to date information ("Date Data") to the
Company or any Subsidiary, (y) processes in any way Date Data for the Company or
any Subsidiary or (z) otherwise provides any material product or service to the
Company or any Subsidiary that is dependent on Year 2000 Compliance, that all of
such entity's Date Data and related material software and systems that are used
for, or on behalf of, the Company or any Subsidiary are Year 2000 Compliant.
Neither the Company nor any Subsidiary has experienced any material disruptions
to the business of the Company and its Subsidiaries as a result of a failure by
the Company, a Subsidiary, or any third party to be Year 2000 Compliant. The
Company and its Subsidiaries have established and put in place, commercially
reasonable contingency plans to address, correct and otherwise attend to any
material problems that may occur with its material Software and systems as a
result of a failure of such Software or systems to be Year 2000 Compliant.
SECTION 3.18. Registration Rights. Except as set forth on Schedule 3.18,
neither the Company nor any of its Subsidiaries is under any obligation to
register any of its outstanding securities pursuant to the Securities Act.
SECTION 3.19. Insurance. The Company and its Subsidiaries maintain, with
reputable insurers, insurance in such amounts, including deductible
arrangements, and of such a character as is customary for companies engaged in
the same or similar business. All policies of title, fire, liability, casualty,
business interruption, workers' compensation and other forms of insurance
including, but not limited to, directors and officers insurance, held by the
Company and its Subsidiaries as of the date hereof, are in full force and effect
in accordance with their terms. Neither the Company nor any of its Subsidiaries
is in default under any provisions of any such policy of insurance and neither
the Company nor any of its Subsidiaries has received notice of cancellation of
any such insurance.
SECTION 3.20. Contracts.
(a) Schedule 3.20 sets forth a true and complete list of all contracts and
other instruments to which the Company or any of its Subsidiaries is a party
that are material to the business, operations, properties, prospects or
financial condition of any of them (collectively, the "Commitments"), including
without limitation:
(i) any material agreement, contract or commitment relating to the
employment of any person by the Company or any of its Subsidiaries, or any
bonus, deferred compensation, pension, profit sharing, stock option,
employee stock purchase, retirement or other employee benefit plan;
(ii) any material agreement, indenture or other instrument which
contains restrictions with respect to payment of dividends or any other
distribution in respect of its capital stock;
(iii) any agreement, contract or commitment relating to capital
expenditures in excess of $100,000 in any fiscal year;
(iv) any agreement to acquire, directly or indirectly, any equity
interest in or assets of any other person (other than purchases of
supplies, inventory, or equipment in the ordinary course of business)
whether or not the transactions contemplated thereby have been consummated,
and under which the Company or any of its Subsidiaries continues to have
any outstanding obligations;
(v) any loan (other than accounts receivable from trade debtors
arising in the ordinary course of business) or advance to (other than
travel or entertainment advances to employees made in the ordinary course
of business), or investment in, any person or any agreement, contract or
commitment relating to the making of any such loan, advance or investment;
(vi) any agreement relating to indebtedness in excess of $500,000;
(vii) any guarantee or other contingent liability in respect of any
indebtedness or obligation of any other person (other than the endorsement
of negotiable instruments for collection in the ordinary course of
business) in excess of $500,000;
(viii) any material management service, consulting, financial advisory
or any other similar type contract including, without limitation, any
contract with any investment or commercial bank;
(ix) any material agreement, contract or commitment limiting the
ability of the Company or any of its Subsidiaries to engage in any line of
business or to compete with any person;
(x) any agreement, contract or commitment which involves payments in
excess of $100,000 in any calendar year and is not cancelable without
penalty within 30 days;
(xi) any agreement, contract or commitment for the disposal of a
material amount of assets or properties of the Company or any of its
Subsidiaries (other than sales to customers in the ordinary course of
business);
(xii) any agreement, contract or commitment which is material to the
Company or any of its Subsidiaries and contain a "change in control" or
similar provision;
(xiii) any agreement, contract or commitment relating to any material
joint venture, partnership, strategic alliance or similar arrangement;
(xiv) any collective bargaining agreement, labor contract or other
written arrangement with any labor union or any employee organization;
(xv) any material agreement, contract or commitment with any
Affiliate; and
(xvi) any other material agreement, contract or commitment.
(b) Each Commitment is in full force and effect on the date hereof. Neither
the Company nor any of its Subsidiaries is in default in respect of any
Commitment, and no event has occurred which, with due notice or lapse of time or
both, would constitute such a default, except for any such defaults that could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. To the best knowledge of the Company, no other party to any of
the Commitments is in default in respect thereof, and no event has occurred
which, with due notice or lapse of time or both, would constitute such a
default.
SECTION 3.21. Questionable Payments. None of the Company, any of its
Subsidiaries nor, to the Company's knowledge, any employee, agent or
representative of the Company or any of its Subsidiaries acting on their behalf
has, directly or indirectly, made any bribes, kickbacks, illegal payments or
illegal political contributions using corporate funds of the Company or any
Subsidiary or made any illegal payments to obtain or retain business using
corporate funds of the Company or any Subsidiary in violation of the U.S.
Foreign Corrupt Practices Act of 1977.
SECTION 3.22. Accuracy of Information. None of the representations,
warranties or statements of the Company contained in this Agreement or in the
exhibits hereto contains any untrue statement of a material fact or, taken as a
whole together with the SEC Documents, omits to state any material fact
necessary in order to make any of such representations, warranties or statements
not misleading. All information relating to the Company and its Subsidiaries
that may be material to a purchaser for value of the Securities has been
disclosed to the Purchaser and any such information arising on or after the date
hereof will forthwith be disclosed to the Purchaser. Nothing contained in the
schedules hereto could, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.
SECTION 3.23. Private Offering. None of the Company, any of its
Subsidiaries, nor anyone acting on their behalf, has offered or sold or will
offer or sell any securities, or has taken or will take any other action, which
could reasonably be expected to subject the offer, issuance or sale of the
Securities, as contemplated hereby, to the registration provisions of the
Securities Act.
SECTION 3.24. Split Pea.
(a) On the liquidation of Split Pea Software, Inc. ("Split Pea"), the
Company received good, valid and marketable title to all the assets, properties
and rights of Split Pea, free and clear of any Liens. The liquidation of Split
Pea was effected in accordance with the liquidation plan approved by the
Company, and the shareholders of Split Pea other the Company received nothing
other than the forgiveness of the promissory note dated December 31, 1998, in
favor of the Company as part of the liquidation. This liquidation of Split Pea
was effected in accordance with Applicable Law.
(b) The Company owns, licenses, leases or has any right to use or license
the SuRF Software (as defined in that certain ▇▇▇▇ of Sale and Assignment of
Assets dated as of December 31, 1998 between the Company and Split Pea Software,
Inc.) and any modifications, enhancements or new versions thereof. The SuRF
Software is not material to the business of the Company or any of its
Subsidiaries and neither the Company nor any of its Subsidiaries utilizes,
relies on, or licenses the SuRF Software in its business or operations as
currently conducted or proposed to be conducted (other than in connection with
the Software License Agreement dated December 12, 1997, between Coles ▇▇▇▇ Ltd.
and the Company).
SECTION 3.25. Brokers. The Company and its Subsidiaries and their agents
and representatives have incurred no obligation or liability, contingent or
otherwise, for brokerage or finders' fees, agents' commissions, investment
banking fees, or other similar payment in connection with this Agreement except
fees payable in cash to ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co., Inc. ("▇▇▇▇▇▇▇▇▇▇▇") that do
not exceed $6,000,000, pursuant to a letter agreement dated August 3, 1999, as
amended by a letter agreement dated April 13, 2000, and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ &
▇▇▇▇▇ Financial Advisors, Inc. ("▇▇▇▇▇▇▇▇ ▇▇▇▇▇") that do not exceed $400,000,
pursuant to a letter agreement dated February 14, 2000, as supplemented by the
addendum dated April 4, 2000, correct and complete copies of which has been
delivered to the Purchaser.
SECTION 3.26. Voting and Proxy Agreements. Each of the Voting Agreements
are in full force and effect and constitute a valid and binding obligation of
each of the Key Stockholders, enforceable against each in accordance with its
terms.
SECTION 3.27. Rights Agreement. The Company, with the approval of the
Board, has duly amended the Rights Agreement so as (a) to grant to the Purchaser
a number of rights under such agreement ("Rights") equivalent to the number that
would be associated with the number of shares of Common Stock into which the
shares of Series B Preferred Stock purchased by the Purchaser hereunder are
convertible, as such number may be adjusted from time to time pursuant to the
provisions in the Rights Agreement and the Certificate of Designation, (b) to
grant, upon each issuance of shares of Series B Preferred Stock as a dividend on
the outstanding shares of Series B Preferred Stock, to the recipient of such
dividend, a number of Rights equivalent to the number that would be associated
with the number of shares of Common Stock into which such shares of Series B
Preferred Stock so issued as dividends are convertible, as such number may be
adjusted from time to time pursuant to the provisions in the Rights Agreement
and the Certificate of Designation, and (c) to exclude the Purchaser and its
Affiliates, Associates and Permitted Transferees from the definition of
"Acquiring Person" in the Rights Agreement. A copy of the Rights Agreement has
been furnished to the Purchaser. During such time as the Purchaser or any of its
Affiliates is an owner of any shares of Series B Preferred Stock, shares of
Common Stock into which such shares of Series B Preferred Stock may have been
converted, or warrants to purchase shares of Common Stock, and while the Rights
are outstanding, (i) the Company shall not amend or supplement the Rights
Agreement in any manner that would result in it or any of its Affiliates,
Associates or Permitted Transferees becoming an Acquiring Person (as defined in
the Rights Agreement) or being the cause or occasion of a Trigger Event (as
defined in the Rights Agreement) occurring, and shall amend or supplement the
Rights Agreement as necessary to ensure that the Purchaser and its Affiliates,
Associates or Permitted Transferees does not so become an Acquiring Person or be
the cause or occasion of a Trigger Event occurring, and (ii) the Company may
amend the Rights Agreement or may adopt a new rights agreement similar to the
Rights Agreement only if (A) such amendment or new agreement provides for the
issuance to the holders of the shares of Series B Preferred Stock (I) of rights
identical per share of Common Stock to those to be issued to holders of other
shares of Common Stock, and (II) of a number of rights with respect to each
share of Series B Preferred Stock equal to the number of shares of Common Stock
into which such shares of Series B Preferred Stock are then convertible,
multiplied by the number of rights to be issued with respect to each such share
of Common Stock, and (B) the Company's amendment, adoption of such new
agreement, or of any amendment or supplement to either thereto, complies with
clause (i) (in the case of an adoption of such new agreement, such new agreement
being deemed an amendment to the Rights Agreement under clause (i)).
SECTION 3.28. Determination of Amount of Capital. The Board of Directors of
the Company has, by resolution, duly resolved in accordance with Section 154 of
the DGCL that $7,300 (constituting the aggregate par value of the 730,000 shares
of Series B Preferred Stock to be issued by the Company to the Purchaser) shall
constitute "capital" and the remainder of the consideration received by the
Company for such shares shall constitute "surplus" (in each case, as such terms
are used in Section 154 of the DGCL).
SECTION 3.29. Fairness Opinion. The Company's Board of Directors has
received oral opinions of each of ▇▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ that the
proposed consideration to be received by the Company pursuant to this Agreement
is fair to the Company and from a financial point of view. A complete and
correct signed copy of a written opinion confirming each such oral opinion shall
be delivered to the Company on April 17, 2000. Promptly upon receipt thereof,
the Company shall deliver such written opinions to the Purchaser.
SECTION 3.30 State Takeover Statutes. The Company has taken all necessary
actions to render inapplicable Section 203 of the DGCL to the Purchaser, its
Affiliates, Associates and their transferees. No other takeover statute or
similar statute or regulation of any state is applicable to this Agreement, the
Previously Issued Warrants or the Warrants (including all of the transactions
contemplated hereby and thereby).
SECTION 3.31. ▇▇▇▇▇▇ Stock, Options and Note. The Company and ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇ have executed a Separation Agreement (the "▇▇▇▇▇▇ Agreement") in the form
previously delivered to the Purchaser.
SECTION 3.32 Other Interests. Except for the Company's interest in its
Subsidiaries, or as set forth in Schedule 3.32, neither the Company nor its
Subsidiaries owns directly or indirectly any interest or investment (whether
equity or debt) in, nor is the Company or any of its Subsidiaries subject to any
obligation or requirement to provide for or to make any investment (in the form
of a loan, capital contribution or otherwise) to or in, any person.
SECTION 3.33 Books and Records. The respective minute books of the Company
and its Subsidiaries, to the extent previously made available to the Purchaser
and its representatives, contain, and the respective minutes of books of the
Company and its Subsidiaries made available to the Purchaser after the date
hereof will contain, accurate records of all meetings of, and corporate actions
taken by (including action taken by written consent) the respective shareholders
and Board of Directors of the Company and its Subsidiaries, it being understood
that certain of such minutes are in draft form and are marked as such. None of
the Company or any of its Subsidiaries has any of its records, systems,
controls, data or information recorded, stored, maintained, operated or
otherwise wholly or partly dependent upon or held by any means (including any
electronic, mechanical or photographic process, whether computerized or not)
which (including all means of access thereto and therefrom) are not under the
exclusive ownership and direct control the Company or its Subsidiaries.
SECTION 3.34 Personal Property. Except for properties and assets reflected
in the Financial Statements, or acquired since December 31, 1999, which have
been sold or otherwise disposed of in the ordinary course of business, each of
the Company and its Subsidiaries has good, valid and marketable title to (a) all
of its owned personal properties and assets (tangible and intangible),
including, without limitation, all of the personal properties and assets
reflected in the Audited Financial Statements, except as may be indicated in the
notes thereto, and (b) all of the personal properties and assets (tangible or
intangible) purchased by the Company and its Subsidiaries since December 31,
1999, in each case free and clear of all Liens, except for Permitted Liens. All
of the tangible personal property owned by each of the Company and its
Subsidiaries is in good operating condition and repair, ordinary wear and tear
excepted, and is adequate and suitable for the purposes for which they are
presently being used.
SECTION 3.35 Accounts Receivable. The amount of all accounts receivable,
unbilled invoices and other debts due or recorded in the respective records and
books of account of the Company and its Subsidiaries as being due to the Company
and its Subsidiaries as of the date hereof (less the amount of any provision or
reserve therefor made in accordance with GAAP in the respective records and
books of account of the Company and its Subsidiaries) are good and collectible
in full in the ordinary course of business; and none of such accounts receivable
or other debts is subject to any counterclaim or set-off except to the extent of
any such provision or reserve. The reserve for doubtful accounts reflected in
the Audited Financial Statements has been established in accordance with GAAP
and no receivable which should have been written down or reserved against in
accordance with GAAP has not been written down or reserved against. There has
been no material adverse change since December 31, 1999 in the amount of
accounts receivable or other debts due to the Company and its Subsidiaries or
the allowances with respect thereto, or accounts payable of the Company and its
Subsidiaries, from that reflected in the Audited Financial Statements.
SECTION 3.36 Inventory. The inventory of the Company and its Subsidiaries
consists of items that are in all material respects good and merchantable and
are of a quality and quantity presently usable in the ordinary course of
business. The inventory is valued (on an average cost basis) at the lower of
cost or market value. All items of the inventory have been properly recorded on
the books and records of the Company (including appropriate provisions for items
which are obsolete, below standard quality or unusable given the current state
of operations of the Company), all in accordance with GAAP. Since December 31,
1999, none of the Company nor any of its Subsidiaries has changed the method of
valuing its respective inventory.
SECTION 3.37 Product Liability. There are no recalls in progress, or the
best knowledge of the Company, threatened or pending under the Consumer Products
Safety Act, as amended, or any similar act or statute (collectively, "Consumer
Protection Legislation") with respect to any products sold by the Company or its
Subsidiaries, and no report has been filed under any Consumer Protection
Legislation or is required to be filed with respect to any product sold by the
Company or its Subsidiaries.
SECTION 3.38 Copies of Documents. The Company has made available for
inspection and copying by the Purchaser and their advisers, true, complete and
correct copies of (i) all documents referred to in this Article III or in any
schedule hereto, and (ii) execution versions of all documents prepared in
connection with the proposed transaction involving Apollo Investment Fund IV,
L.P., Apollo Overseas Partners IV, L.P., Ares Leveraged Investment Fund, L.P.,
Ares Leveraged Investment Fund II, L.P., ▇▇▇▇▇▇▇, S.A.S., GRP II, L.P., GRP II
Partners, L.P., Pequot Private Equity Fund II, L.P. and Internet Grocery
Partners, L.P.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Company as follows:
SECTION 4.1. Authorization; Enforceability; No Violations.
(a) The Purchaser is duly organized and validly existing in good standing
as a corporation under the laws of its jurisdiction of organization and has all
requisite corporate power and authority to own its properties and assets and to
carry on its business as it is now being conducted. The Purchaser has the
corporate power to execute, deliver and perform the terms and provisions of the
Documents and has taken all necessary corporate action to authorize the
execution, delivery and performance by it of such Documents and to consummate
the transactions contemplated hereby and thereby. No other corporate proceedings
on the part of the Purchaser is necessary therefor.
(b) The Purchaser has duly executed and delivered this Agreement and will
duly execute and deliver the other Documents to which it is a party. This
Agreement constitutes, and the other Documents to which the Purchaser is a
party, when executed and delivered by the Purchaser, and, assuming the due
execution by the other parties hereto and thereto, will constitute the legal,
valid and binding obligations of the Purchaser, enforceable against the
Purchaser in accordance with their terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and by
general principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
SECTION 4.2. Consents. No consent, authorization or order of, or filing or
registration with, any Governmental Authority or other person is required to be
obtained or made by the Purchaser for the execution, delivery and performance by
the Purchaser of this Agreement or any of the other Documents or the
consummation of any of the transactions contemplated hereby or thereby other
than those required for a Closing that will have been made or obtained on or
prior to such Closing.
SECTION 4.3. Private Placement.
(a) The Purchaser understands that (i) the offering and sale of the
Securities by the Company to the Purchaser is intended to be exempt from
registration under the Securities Act pursuant to section 4(2) thereof, and (ii)
there is no existing public or other market for the Securities.
(b) The Securities to be acquired by the Purchaser pursuant to this
Agreement are being acquired for its own account and without a view to making a
distribution thereof in violation of the Securities Act, without prejudice,
however, to its right to sell or otherwise dispose of all or any part of such
Securities in compliance with the provisions of the Securities Act and
applicable state securities or "blue sky" laws.
(c) The Purchaser has sufficient knowledge and experience in financial and
business matters so as to be capable of evaluating the merits and risks of its
investment in the Securities and the Purchaser is capable of bearing the
economic risks of such investment, including a complete loss of its investment
in the Securities.
(d) The Purchaser is an "accredited investor," as such term is defined in
Regulation D under the Securities Act.
(e) The Purchaser acknowledges that the Company and, for purposes of the
opinions to be delivered to the Purchaser pursuant to Section 7.2(n) hereof,
Sidley & Austin will rely on the accuracy and truth of its representations in
this Section 4.3, and the Purchaser hereby consents to such reliance.
(f) The Purchaser has had the opportunity to ask questions of, and receive
answers from, representatives of the Company concerning the Company and the
terms and conditions of this transaction, as well as to obtain any information
requested by the Purchaser. Any questions raised by the Purchaser concerning the
transaction have been answered to the satisfaction of the Purchaser. The
Purchaser's decision to enter into the transactions contemplated hereby is based
in part on the answers to such questions as the Purchaser has raised concerning
the transaction and on the Purchaser's own evaluation of the risks and merits of
the purchase and the Company's proposed business activities.
ARTICLE V
COVENANTS OF THE COMPANY
SECTION 5.1. Operation of Business.
(a) Except as contemplated hereby or as consented to in writing by the
Purchaser, between the date hereof and the Final Closing Date, and thereafter
for so long as the Purchaser, together with its Affiliates, or any Permitted
Transferee, beneficially owns Threshold Securities, the Company shall, and shall
cause each of the Subsidiaries to: (i) in all material respects carry on their
respective businesses in, and not enter into any material transaction other than
in accordance with, the regular and ordinary course (including related Internet
ventures), (ii) use their commercially reasonable efforts to preserve intact
their business organizations, (iii) keep available the services of their
officers and employees, and (iv) preserve their relationships with customers,
suppliers and others having material business dealings with them, and (v)
maintain, in all material respects, its assets and properties and keep its books
in accordance with present practices in a condition suitable for its current
use.
(b) Between the date hereof and the Final Closing Date, and thereafter for
so long as the Purchaser, together with its Affiliates, or any Permitted
Transferee, beneficially owns Threshold Securities, except as provided for
herein, or contemplated hereby, and except as consented to or approved by the
Purchaser, the Company shall not, and shall not permit any of the Subsidiaries
to, take any action that would reasonably be expected to cause any of the
representations and warranties made by the Company in this Agreement not to
remain true and correct as if made at and as of each Closing Date.
(c) Notwithstanding Section 5.2, the Company and Purchaser shall cooperate
and take all actions reasonably necessary to appoint, within ten Business Days
from the date hereof, as Chief Executive Officer the person selected by the
Purchaser and reasonably satisfactory to the Company, on terms and conditions
mutually satisfactory to the Company and the Purchaser. The Company shall not,
and shall not permit any of its Subsidiaries to, directly or indirectly, without
the approval of the Purchaser, terminate the employment of, amend the employment
terms or reduce the responsibility or authority of the Chief Executive Officer.
(d) The Company shall use its reasonable best efforts to enter into
employment agreements (with incentive compensation plans) with the key employees
who are of vice president level or above identified on the employment term sheet
provided by the Purchaser to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ on or
about the date hereof, on the terms and conditions set forth in such term sheet.
SECTION 5.2. Negative Covenants. Without limiting the generality of Section
5.1, and, except as otherwise expressly permitted or required by this Agreement
or set forth in Schedule 5.2, between the date hereof and the Final Closing
Date, and thereafter for so long as the Purchaser, together with its Affiliates,
or any Permitted Transferee, beneficially owns Threshold Securities, the Company
shall not, and shall not permit any of its Subsidiaries to, without the prior
written consent of the Purchaser, except to the extent that any of the
restrictions set forth below are also restrictions contained in the Credit
Agreement in effect as of the date hereof, the Company shall only be restricted
herein to the extent the Company is restricted from taking such action in the
Credit Agreement.
(a) (i) declare, set aside or pay any dividends on (whether in cash, shares
of capital stock of the Company, or other property), or make any other actual,
constructive or deemed distributions in respect of, any of its capital stock, or
otherwise make any payments to shareholders of the Company in their capacity as
such, except Series B Preferred Stock and dividends payable to the Company
declared by any of the Company's Subsidiaries, (ii) split, combine or reclassify
any of its capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock or (iii) other than in connection with the liquidation of Split
Pea, purchase, redeem or otherwise acquire any shares of capital stock of the
Company or any of its Subsidiaries or any other securities thereof or any
rights, warrants or options to acquire any such shares or other securities or
set apart money or other property for any mandatory purchase or analogous fund
for the redemption, purchase or acquisition of any shares of capital stock of
the Company (other than shares of Series B Preferred Stock that are redeemed
according to their terms);
(b) authorize, issue, deliver, sell, pledge, dispose of or otherwise
encumber any shares of its capital stock or other voting securities or equity
equivalent or any securities convertible into or exchangeable or exercisable
for, or any rights, warrants or options to acquire, any such shares or voting
securities or convertible securities or equity equivalent or any phantom stock
or stock appreciation rights or enter into any agreement or contract with
respect to the sale or issuance of any of such securities; other than (i) any
issuance of Common Stock upon exercise of any options or warrants outstanding on
the date hereof, (ii) the issuance of stock options pursuant to employee stock
option plans providing for the issuance of shares of Common Stock in an
aggregate amount not to exceed 2,600,000 shares and the issuance of Common Stock
upon exercise thereof (iii) the issuance of 500,000 warrants to the McLane Group
and the issuance of Common Stock upon exercise thereof and (iv) the issuance of
shares of Common Stock to employees under the Company's employee stock purchase
plan in effect as of the date hereof.
(c) amend its Charter or Bylaws, the Certificate of Designation or the
Rights Agreement or equivalent governing documents;
(d) acquire or agree to acquire by merging with, or by purchasing a
material amount of assets of or equity in, or by any other manner, any business
or any corporation, partnership, association or other business organization or
division thereof or otherwise acquire or agree to acquire any assets other than
(i) inventory in the ordinary course of business or assets having a purchase
price not in excess of $100,000 individually or $500,000 in the aggregate;
(e) sell, lease or otherwise dispose of or agree to sell, lease or
otherwise dispose of, any of its assets, other than sales of inventory in the
ordinary course of business, or which involve assets having a current value not
in excess of $100,000 individually or $500,000 in the aggregate or allow any
properties or assets (including, without limitation, Intellectual Property) to
become subject to any Lien other than a Permitted Lien;
(f) incur any indebtedness for borrowed money in excess of $100,000 in any
calendar year or guarantee any such indebtedness or issue or sell any debt
securities or guarantee any debt securities of others, or make any loans,
advances or capital contributions to, or investments, in each case in excess of
$100,000 in the aggregate in any calendar year in, any other person other than a
wholly owned subsidiary, enter into any "keep-well" or other agreement to
maintain any financial state and condition of another person or enter into any
arrangement having the economic effect of any of the foregoing;
(g) grant any severance or termination pay not currently required to be
paid under existing severance plans or enter into or adopt, or materially amend
any existing, severance plan, agreement or arrangement, or enter into or
materially amend any employee benefit plan except as required by Applicable Law,
or enter into, materially amend or terminate any employment or consulting
agreement, except, in each case as required by Applicable Law;
(h) enter into any contract or commitment with respect to capital
expenditures other than expenditures within a capital budget approved by the
Purchaser for a calendar year or capital expenditures not in excess of $100,000
in the aggregate in any calendar year;
(i) except to the extent required under existing employee and director
benefit plans, agreements or arrangements as in effect on the date of this
Agreement or as required under Applicable Law, make a material amendment or
modification of the compensation, bonus or fringe benefits of any of its
directors, officers or employees of the Company or any of its Subsidiaries;
(j) agree to the settlement of any material claim or litigation;
(k) make or rescind any material tax election or settle or compromise any
material tax liability;
(l) except as required by Applicable Law or GAAP, make any change in its
method of accounting or accounting policies;
(m) except as set forth on the Schedules hereto, accelerate the payment,
right to payment or vesting of any bonus, severance, profit sharing, retirement,
deferred compensation, stock option, insurance or other compensation or
benefits;
(n) pay, discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction of any such
claims, liabilities or obligations in the ordinary course of business and
consistent with past practice;
(o) enter into any agreement, understanding or commitment that
significantly restrains, limits or impedes the Company's or any of its
Subsidiaries' ability to compete with or conduct any business or line of
business, including, but not limited to, geographic limitations on the Company's
or any of its Subsidiaries' activities;
(p) materially modify, amend or terminate any Commitment or waive any of
its rights or claims thereunder or enter into any contract, agreement,
commitment or arrangement that, if in existence on the date hereof, would be a
Commitment;
(q) establish, adopt, enter into, amend or terminate any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any directors, officers or employees, except, in
the case of collective bargaining, pension or retirement arrangements, or
trusts, as required by Applicable Law;
(r) execute any new lease or sublease for real property requiring payments
in excess of $100,000 in any calendar year, or cancel, modify, terminate or
amend any lease or sublease for real property;
(s) close any distribution center, office or other premises of the Company
or any of its Subsidiaries;
(t) adopt or enter into a plan of complete or partial liquidation,
dissolution, winding up, merger, consolidation, restructuring, recapitalization
or other reorganization of the Company or any of its Subsidiaries, other than
liquidations, dissolutions, mergers, consolidations, restructurings,
recapitalizations, or other reorganizations involving only wholly-owned
Subsidiaries of the Company and no other person;
(u) plan, announce, implement or effect any reduction in force, lay-off,
early retirement program, severance program or other program or effort
concerning the termination of employment of employees of the Company or its
Subsidiaries;
(v) fail to maintain its Intellectual Property as currently maintained, or
allow any material Intellectual Property to expire or to become abandoned,
canceled or otherwise terminated;
(w) commence or terminate the employment of, or materially amend the
employment terms of, or change the responsibilities or duties of, the Chairman,
Chief Executive Officer, President, Chief Operating Officer, Chief Financial
Officer or Chief Technology Officer or any other executive officer of the
Company;
(x) transfer, license, sell or otherwise dispose of any materially
Intellectual Property or Software;
(y) enter into any agreement, arrangement or transaction with or for the
benefit of any person who is an Affiliate of the Company;
(z) in any way change the preferences, rights or powers with respect to the
Series B Preferred Stock, so as to affect the Series B Preferred Stock
adversely;
(aa) create any Subsidiary;
(bb) cause or permit the number of directors of the Company to be greater
than 11;
(cc) take any action including, without limitation, the adoption of any
shareholder rights plan or amendments to its Charter, Bylaws or other governing
documents, which would, directly or indirectly, restrict or impair the ability
of the Purchaser to vote, or otherwise to exercise the rights and receive the
benefits of a stockholder with respect to, securities of the Company that may be
acquired or controlled by the Purchaser; or
(dd) agree to any restriction on the Company's ability to satisfy its
obligations under the Certificate of Designation to holders of Series B
Preferred Stock or the Company's ability to honor the exercise of any rights of
the holders of the Series B Preferred Stock;
(ee) increase the number of authorized shares of Series B Preferred Stock
or authorize the issuance of or issue any shares of the Series B Preferred Stock
(other than the issuance of additional shares of Series B Preferred Stock to be
paid as dividends on the Series B Preferred Stock pursuant to the terms of the
Certificate of Designation); and
(ff) agree, in writing or otherwise, to take any of the foregoing actions.
SECTION 5.3. Access to Books and Records. Upon reasonable notice, the
Company shall afford, and shall cause each of the Subsidiaries to afford, to the
Purchaser and the Purchaser's accountants, counsel and representatives full
access to all the Company's and the Subsidiaries' properties, books, contracts,
commitments, records (including, but not limited to, tax returns), employees,
customers, suppliers and accountants and, shall furnish promptly to the
Purchaser (a) a copy of each report, schedule and other document filed or
received by the Company or any of the Subsidiaries pursuant to the requirements
of federal or state securities laws, and (b) all other information concerning
the Company's and the Subsidiaries' business, properties and personnel as the
Purchaser may reasonably request, provided that no investigation or receipt of
information pursuant to this Section 5.3 shall affect any representation or
warranty of the Company or the conditions to the obligations of the Purchaser.
SECTION 5.4. Agreement to Take Necessary and Desirable Actions. The Company
shall execute and deliver the Documents and such other documents, certificates,
agreements and other writings and take such other actions as may be necessary,
desirable or reasonably requested by the Purchaser in order to consummate or
implement as expeditiously as practicable the transactions contemplated hereby.
SECTION 5.5. Compliance with Conditions; Commercially Reasonably Efforts.
The Company shall use its commercially reasonable efforts to cause all of the
obligations imposed upon it in this Agreement to be duly complied with and to
cause all conditions precedent to the obligations of the Company and the
Purchaser to be satisfied. Upon the terms and subject to the conditions of this
Agreement, the Company shall use its commercially reasonable efforts to take, or
cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable consistent with Applicable Law to consummate and
make effective in the most expeditious manner practicable the transactions
contemplated hereby.
SECTION 5.6. Consents and Approvals. The Company shall (a) use its
commercially reasonable efforts to obtain all necessary consents, waivers,
authorizations and approvals of all Governmental Authorities and of all other
persons, firms or corporations required in connection with the execution,
delivery and performance by them of this Agreement, any other Document or any of
the transactions contemplated hereby or thereby, and (b) diligently assist and
cooperate with the Purchaser in preparing and filing all documents required to
be submitted by the Purchaser to any Governmental Authority in connection with
such transactions and in obtaining any governmental consents, waivers,
authorizations or approvals which may be required to be obtained by the
Purchaser in connection with such transactions (which assistance and cooperation
shall include, without limitation, timely furnishing to the Purchaser all
information concerning the Company and its Subsidiaries that counsel to the
Purchaser determines is required to be included in such documents or would be
helpful in obtaining any such required consent, waiver, authorization or
approval).
SECTION 5.7. Stockholder Approval The Company shall (a) as soon as
practicable, but not later than 30 days after the date hereof, prepare and file
a proxy statement with the Commission with respect to the holding of a
stockholders' meeting (the "Stockholder Meeting") for the purpose of obtaining
stockholder approval ("Stockholder Approval") of, amongst other things, (i) the
issuance of the Series B Preferred Stock and Warrants to the extent required by
Applicable Law and NASD rules and regulations, (ii) the amendment and
restatement of the Company's Certificate of Incorporation in a manner reasonably
satisfactory to the Purchaser and to reflect the corporate governance provided
for herein, and (iii) more generally, if requested by the Purchaser, the
approval of this Agreement, the other Documents and the transactions
contemplated hereby and thereby, (b) promptly call and give notice of such
meeting following the Commission's clearance of such proxy statement and (c) on
or before the fortieth (40th) day following the Commission's clearance of such
proxy statement, convene and hold such meeting. The Company shall use its
commercially reasonable best efforts to obtain such Stockholder Approval,
including, but not limited to, responding promptly to the Commission's comments
in order to obtain clearance of such proxy statement. The Company shall, through
its Board of Directors, recommend to its stockholders that Stockholder Approval
be given, and the Company shall use its best efforts to cause each member of the
Company's Board of Directors and all other Key Stockholders to vote their shares
of Common Stock to approve the items set forth in clause (a) of this Section
5.7. The Company shall otherwise use its best efforts to obtain the requisite
vote of its stockholders to obtain the Stockholder Approval. The Company shall
afford the Purchaser and its counsel an opportunity to review and comment upon
any description of the Purchaser or its Affiliates, this Agreement, the other
Documents or the transactions contemplated hereby and thereby set forth in such
proxy statement (including all drafts or amendments thereto). The Purchaser
shall provide the Company with all necessary information reasonably requested
with respect to itself and its Affiliates solely for inclusion by the Company in
such proxy statement. The Company shall notify the Purchaser promptly of the
receipt of any comments from the Commission or its staff and of any request by
the Commission or its staff for amendments or supplements to such proxy
statement or for additional information and will supply the Purchaser with
copies of all correspondence between the Company or any of its representatives,
on the one hand, and the Commission or its staff, on the other hand, with
respect to such proxy statement. If at any time prior to such stockholders
meeting there shall occur any event that would be required, under the Exchange
Act and the rules and regulations thereunder, to be set forth in an amendment or
supplement to such proxy statement, the Company will promptly prepare and mail
to its stockholders such an amendment or supplement.
SECTION 5.8. Tax Treatment of Preferred Stock. The Company covenants and
agrees not to take any action inconsistent with the Series B Preferred Stock
being considered common stock for U.S. Federal income tax purposes.
SECTION 5.9. Other Activities of Purchaser. Nothing contained in this
Agreement or any other agreement of the Company shall be deemed to prohibit the
Purchaser or any of its Affiliates from forming or investing in other entities
engaged in activities similar to, or competitive with, those of the Company, or
from competing with the Company or any of its Subsidiaries; provided, however,
in no event shall this provision override any restriction contained in the
Services Agreement.
SECTION 5.10. HSR Act Filings.
(a) As promptly as practicable after the date hereof but in any event no
later than 10 Business Days thereafter, the Company shall file all reports and
documents as may be necessary to comply with the HSR Act. The Company shall
cooperate with and assist the Purchaser and take such action as may be
reasonably required and as permitted under law in connection with such filings
(including cooperating with additional requests for information, documents and
interviews of officers and personnel by either of the antitrust enforcement
agencies).
(b) The Company shall use commercially reasonable efforts to resolve such
objections, if any, as may be asserted under any antitrust law with respect to
the transactions contemplated by this Agreement. If any administrative, judicial
or legislative action or proceeding is instituted (or threatened to be
instituted) challenging any transaction contemplated by this Agreement as
violative of any antitrust law, the Company shall, (i) cooperate with and assist
the Purchaser to contest and resist any such action or proceeding, and to have
vacated, lifted, reversed or overturned any decree, judgment, injunction or
other order (whether temporary, preliminary or permanent) that is in effect and
that restricts, prevents or prohibits consummation of the transactions as
contemplated by this Agreement, including, without limitation, by pursuing all
reasonable avenues of administrative and judicial appeal.
SECTION 5.11. No Solicitation.
(a) From the date hereof until the Closing Date, or the Final Closing Date
if the Purchaser elects to have more than one Closing, the Company shall not and
shall cause its Affiliates and each of their respective officers, directors,
employees, auditors, agents, representatives, consultants, advisors, investment
bankers, attorneys, accountants and other agents (collectively,
"Representatives") not to, directly or indirectly, (i) initiate, solicit or
entertain offers from, negotiate with or in any manner knowingly encourage,
discuss, accept, or consider any proposal of any other person relating to (w)
the acquisition of capital stock of the Company or any of its Subsidiaries,
securities convertible into or exchangeable for shares of capital stock of the
Company or any of its Subsidiaries, (x) the acquisition of the Company's or any
of its Subsidiaries' assets or business, in whole or in part, whether directly
or indirectly, through purchase, merger, consolidation, business combination,
recapitalization, liquidation, dissolution or otherwise, (y) the incurrence of
indebtedness for borrowed money by the Company or any of its Subsidiaries, or
(z) any other transaction the consummation of which could reasonably be expected
to impede, interfere with, prevent, delay or dilute the benefits to the
Purchaser of the transactions contemplated hereby, including, without
limitation, by taking any action that would make Section 203 of the DGCL or the
Rights Agreement inapplicable to an Alternative Transaction (other than the
transactions contemplated by this Agreement, sales of inventory in the ordinary
course and shares issued upon the exercise of existing stock options) (any of
the foregoing being an "Alternative Transaction"), (ii) initiate, participate
engage in, or agree to initiate, participate or engage in negotiations or
discussions concerning, or provide to any person or entity any information or
data relating to the Company or any Subsidiary, or otherwise cooperate with or
assist or participate in, facilitating or encouraging, any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to lead
to an Alternative Transaction, (iii) in connection with any Alternative
Transaction, require it to abandon, terminate or fail to consummate the
transactions contemplated by this Agreement or the other Documents, (iv) grant
any waiver or release under or amend any standstill, confidentiality or similar
agreement entered into by the Company or any of its Affiliates or
representatives; (v) agree to, approve or recommend any Alternative Transaction,
or (vi) take any other action inconsistent with the obligations and commitments
assumed by the Company pursuant to this Section 5.11; provided, however, that
nothing contained herein shall limit the ability of the Company to comply with
Rule 14d-9 and Rule 14e-2 promulgated under the Exchange Act; and provided
further that if, in respect of an offer, proposal or inquiry relating to a
possible Alternative Transaction from a third party or entity made after the
date hereof which has not been solicited or encouraged in violation of clause
(i) or (ii) above, the Board of Directors of the Company determines in good
faith, after consultation with counsel, that its fiduciary duties so require,
the Company and its Representatives may participate or engage in discussions or
negotiations with such third party or entity concerning such Alternative
Transaction, or provide such third party with information or data relating to
the Company or any Subsidiary, in each case for purposes of complying with its
disclosure obligations to its stockholders in connection with the Stockholders'
Meeting. The Company shall immediately cease and cause to be terminated any
existing activities, discussions or negotiations by the Company, its Affiliates
or their respective Representatives with any person conducted heretofore with
respect to any of the foregoing. Without limiting the foregoing, it is agreed
that any violation of the restrictions set forth in this Section 5.11 by any
Representative of the Company or any of its Affiliates whether or not such
person is purporting to act on behalf of the Company or any of its Affiliates,
shall constitute a breach of this Section 5.11 by the Company.
(b) From the date hereof until the Closing Date, or the Final Closing Date
if the Purchaser elects to have more than one Closing, neither the Board of
Directors of the Company nor any committee thereof shall (i) withdraw or modify
the approval or recommendation by such Board of Directors or such committee of
this Agreement, the other Documents or any of the transactions contemplated
hereby or thereby, (ii) approve or recommend any Alternative Transaction or
(iii) cause or permit the Company or any Affiliate to enter into any letter of
intent, agreement in principle or other arrangement or agreement with respect to
an Alternative Transaction.
(c) In addition to the obligations of the Company set forth in paragraphs
(a) and (b) of this Section 5.11, the Company shall promptly (but in any event
within 24 hours of receipt or occurrence thereof), (i) advise the Purchaser
orally and in writing of any request for information with respect to, or any
inquiry or proposal regarding any Alternative Transaction, or of any information
received from Tribune or Nevis in respect of a request for information directed
to such stockholder with respect to, or of any inquiry or proposal regarding any
Alternative Transaction, (ii) advise the Purchaser of the terms and conditions
of such request or inquiry, and (iii) provide to the Purchaser copies of any
written documentation material to understanding or evaluating such request,
Alternative Transaction or inquiry (the "Alternative Transaction Documentation")
which is received by the Company from the person (or from any Representatives of
such person) making such Alternative Transaction, inquiry or proposal and the
identity of the person making any such request, Alternative Transaction or such
inquiry or proposal. The Company shall (x) keep the Purchaser fully informed of
the status and material details (including amendments or proposed amendments) of
any such request or Alternative Transaction, (y) keep the Purchaser fully
informed as to the material details of any information requested, and (z)
provide to the Purchaser within one day of receipt thereof all copies of any
additional Alternative Transaction Documentation received by the Company from
the person (or from any Representatives of such person) making such Alternative
Transaction, inquiry or proposal. The Company shall promptly provide to the
Purchaser any information concerning the Company provided to any other person in
connection with any Alternative Transaction which was not previously provided to
the Purchaser.
(d) The Company shall immediately request each person which has heretofore
executed a confidentiality agreement in connection with its consideration of
acquiring the Company or any portion thereof to return or destroy all
confidential information heretofore furnished to such person by or on behalf of
the Company and the Company shall use its commercially reasonable efforts to
have such information returned.
SECTION 5.12. Use of Proceeds. The Company shall use the proceeds from the
sale of Securities hereunder first to repay any indebtedness owing pursuant to
the Credit and Security Agreements and thereafter for the development of
distribution facilities, advertising and marketing expenses and general
corporate purposes.
SECTION 5.13. Reduction of Capital. In the event that at any time the
Company has insufficient "surplus" and "net profits" required under Section 170
of the DGCL to declare dividends on the shares of Series B Preferred Stock in
accordance with the terms of the Certificate of Designation, the Company shall
reduce its capital by transferring a portion of the capital to surplus to the
maximum extent permitted under Section 244 of the DGCL.
SECTION 5.14. Amendment of Bylaws. Prior to first Closing Date, or if there
is only one Closing, the Final Closing Date, the Company shall amend its bylaws
in a manner reasonably satisfactory to the Purchaser and to reflect the
corporate governance provided for herein.
SECTION 5.15. Transfer Agent; CUSIP Prior to the effective date of any
registration statement covering the Securities, the Company shall (i) appoint a
transfer agent and registrar for the Securities, (ii) provide the transfer agent
with printed certificates for the Securities in a form eligible for deposit with
The Depository Trust Company, and (iii) provide a CUSIP number for the
Securities.
SECTION 5.16. Notification of Certain Matters. The Company shall promptly
notify the Purchaser of the occurrence or non-occurrence of any fact or event
which has caused or could reasonably likely cause (x) any representation or
warranty made by it in this Agreement or the other Documents to be untrue or
inaccurate in any material respect at any time or (y) any covenant, condition or
agreement under this Agreement or the other Documents not to be complied with or
satisfied by it in any material respect; provided, however, that no such
notification shall modify the representations or warranties of any party or the
conditions to the obligations of any party hereunder. The Company shall promptly
notify the Purchaser of any notice or other communication from any third party
alleging that the consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement or the other
Documents.
SECTION 5.17. ▇▇▇▇▇▇ Shares. If the Company purchases less than 311,891
shares of Common Stock from ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, the Company and the Purchaser
agree to equitably adjust (i) the conversion price of the Shares, such that on
conversion of all the Shares only, the Purchaser shall beneficially own 51% of
the aggregate issued and outstanding shares of Common Stock, and (ii) the
exercise price of the Warrants, such that on exercise of all the Warrants only,
the Purchaser shall beneficially own 25% of the aggregate issued and outstanding
shares of Common Stock.
ARTICLE VI
COVENANTS OF THE PURCHASER
SECTION 6.1. Agreement to Take Necessary and Desirable Actions. The
Purchaser agrees to execute and deliver each of the Documents and such other
documents, certificates, agreements and other writings and to take such other
actions as may be necessary, desirable or reasonably requested by the Company in
order to consummate or implement as expeditiously as practicable the
transactions contemplated hereby.
SECTION 6.2. Compliance with Conditions; Commercially Reasonable Efforts.
The Purchaser will use its commercially reasonable efforts to cause all of the
obligations imposed upon it in this Agreement to be duly complied with, and to
cause all conditions precedent to the obligations of the Company and the
Purchaser to be satisfied. Upon the terms and subject to the conditions of this
Agreement, the Purchaser shall use its commercially reasonable efforts to take,
or cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable consistent with Applicable Law to consummate and
make effective in the most expeditious manner practicable the transactions
contemplated hereby.
SECTION 6.3. HSR Act Filings.
(a) As promptly as practicable after the date hereof but in any event no
later than 10 Business Days thereafter, the Purchaser shall file all reports and
documents as may be necessary to comply with the HSR Act. The Purchaser shall
cooperate with and assist the Company and take such action as may be reasonably
required and as permitted under law in connection with such filings (including
cooperating with additional requests for information, documents and interviews
of officers and personnel by either of the antitrust enforcement agencies).
(b) The Purchaser shall use commercially reasonable efforts to resolve such
objections, if any, as may be asserted under any antitrust law with respect to
the transactions contemplated by this Agreement. If any administrative, judicial
or legislative action or proceeding is instituted (or threatened to be
instituted) challenging any transaction contemplated by this Agreement as
violative of any antitrust law, the Purchaser shall cooperate with and assist
the Company to contest and resist any such action or proceeding, and to have
vacated, lifted, reversed or overturned any decree, judgment, injunction or
other order (whether temporary, preliminary or permanent) that is in effect and
that restricts, prevents or prohibits consummation of the transactions as
contemplated by this Agreement, including, without limitation, by pursuing all
reasonable avenues of administrative and judicial appeal.
SECTION 6.4. Confidential Information. The Purchaser acknowledges that the
information being provided under Section 5.3 may be material non-public
information and hereby covenants and agrees to keep, and cause its Affiliates
and representatives to keep, confidential any information identified by the
Company as confidential, in a writing delivered to the Purchaser unless (a) such
information becomes generally available to the public (other than as a result of
a breach of this provision by the Purchaser), (b) such information was available
to the Purchaser on a non-confidential basis from a source (other than the
Company or its representatives) that, to the Purchaser's knowledge, is not and
was not prohibited from disclosing such information to the Purchaser by a
contractual, legal or fiduciary obligation or (c) the Purchaser is required by
law to disclose such information; provided, that in an event specified in clause
(c), the Purchaser shall provide the Company with prompt prior written notice of
such required disclosure, the Purchaser shall disclose only that portion of the
confidential information that the Purchaser is advised by counsel is legally
required. The Purchaser agrees that it will comply, and will cause its
representatives to comply, with all U.S. securities laws applicable to the
receipt of material non-public information and restrictions on trading in
securities when in possession of such information. The Purchaser agrees not to
use any confidential information in violation of any law.
SECTION 6.5 Notification of Certain Matters. From the date hereof through
the Final Closing Date, the Purchaser shall promptly notify the Company of the
occurrence or non-occurrence of any fact or event of which the Company is aware
which has caused or could reasonably likely cause (x) any representation or
warranty made by it in this Agreement or the other Documents to be untrue or
inaccurate in any material respect at any time or (y) any covenant, condition or
agreement under this Agreement or the other Documents not to be complied with or
satisfied by it in any material respect; provided, however, that no such
notification shall modify the representations or warranties of any party or the
conditions to the obligations of any party hereunder. The Purchaser shall
promptly notify the Company of any notice or other communication from any third
party alleging that the consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement or the other
Documents.
SECTION 6.6 Restrictions on Mergers. During the one-year period beginning
on the date hereof, the Purchaser, and its Affiliates, and its Permitted
Transferees shall not propose, or vote any securities in favor of, a merger,
reorganization, recapitalization or other similar transaction involving the
Company that would result in the elimination of the outstanding shares of Common
Stock other than the shares held beneficially by the Purchaser, its Affiliates
and its Permitted Transferees, unless any such transaction is approved by an
independent committee of the Board of Directors of the Company.
ARTICLE VII
CONDITIONS PRECEDENT TO CLOSING
SECTION 7.1. Conditions to the Company's Obligations. The obligations of
the Company hereunder required to be performed on each Closing Date with respect
to the Purchaser shall be subject, at its election, to the satisfaction or
waiver (which waiver, if so requested by the Purchaser, shall be made in
writing), at or prior to the Closing occurring on such Closing Date, of the
following conditions:
(a) The representations and warranties of the Purchaser contained in this
Agreement shall be true and correct in all material respects on and as of such
Closing Date.
(b) The Purchaser shall have performed in all material respects all
obligations and agreements, and complied in all material respects with all
covenants, contained in this Agreement, to be performed and complied with by the
Purchaser at or prior to such Closing Date.
(c) All material governmental and regulatory approvals and clearances and
all third-party consents necessary for the consummation of the transactions
contemplated by the Documents to occur on such Closing Date shall have been
obtained and shall be in full force and effect, the consummation of such
transactions does not and will not contravene any Applicable Law, except to the
extent any contravention or contraventions, individually or in the aggregate,
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(d) The Purchaser shall have delivered to the Company a certificate,
executed by the Purchaser or on its behalf by a duly authorized representative,
dated as of such Closing Date, certifying that each of the conditions specified
in this Section 7.1 has been satisfied with respect to the Purchaser.
(e) All documents, instruments, agreements and arrangements relating to the
transactions contemplated by the Documents shall be reasonably satisfactory to
the Company, shall have been executed and delivered by the parties thereto and
no party to any of the foregoing (other than the Company) shall have breached
any of its material obligations thereunder.
SECTION 7.2. Conditions to The Purchaser's Obligations. The obligations of
the Purchaser hereunder required to be performed at each Closing shall be
subject, at its election, to the satisfaction or waiver (which waiver, if so
requested by the Company, shall be made in writing), at or prior to the Closing,
of the following conditions:
(a) The representations and warranties of the Company contained in this
Agreement shall be true and correct in all material respects when made and on
and as of such Closing Date.
(b) The Company shall have performed in all material respects all
obligations and agreements, and complied in all material respects with all
covenants, contained in this Agreement and the other Documents, to be performed
and complied with by it at or prior to such Closing Date, and there shall exist
no Event of Default (as defined in the Credit Agreement) under the Credit and
Security Agreements.
(c) The Company shall have entered into or caused to become effective such
agreements and governing documents as the Purchaser may deem reasonably
appropriate to effect the provisions of the Voting Agreement, and each of such
agreements and documents shall be in full force and effect.
(d) The Company's Board of Directors shall consist of not more than 11
directors. If immediately following the subject Closing, the Purchaser would
beneficially own securities of the Company that constitute, or if exercised,
exchanged or converted into Common Stock would constitute, at least 33-1/3% of
the aggregate issued and outstanding Common Stock, provided that the Purchaser
has given notice to the Company at least two Business Day's prior to a Closing
(without duplication) of its Purchaser Nominees, the Company shall have
appointed a total of six of such Purchaser Nominees (or such lessor number as
provided by the Purchaser) to serve as members of the Company's Board of
Directors.
(e) All Documents and all documents, instruments, agreements and
arrangements relating to the transactions contemplated by the Documents shall be
reasonably satisfactory to the Purchaser, shall have been executed and delivered
by the parties thereto, be in full force and effect and no party to any of the
foregoing (other than the Purchaser) shall have breached any of its material
obligations thereunder.
(f) (i) Since December 31, 1999, no change, occurrence or development shall
have occurred, been threatened or become known to the Purchaser that could
reasonably be expected to have a Material Adverse Effect, (ii) the Purchaser
shall not have become aware of any information or other matter relating to the
Company (x) of which the Company (but not the Purchaser) had knowledge on or
prior to the date of this Agreement, (y) that, in the Purchaser's reasonable
judgment, is inconsistent with any information or other matter relating to the
Company disclosed to the Purchaser by the Company or any of its representatives
prior to the date of this Agreement, and (z) would have been viewed by the
Purchaser, in its reasonable judgment, as having materially and adversely
altered the total mix of information made available to the Purchaser prior to
the date of this Agreement. For purposes of this Section 7.2(f), the Company
shall be deemed to have "knowledge" of a particular fact or other matter if (I)
any individual who is serving, or who has at any time served, as a director,
officer or management-level employee of the Company is actually aware of such
fact or other matter; or (II) a prudent individual serving as a director,
officer or management-level employee of the Company could be expected to
discover or otherwise become aware of such fact or other matter in the diligent
exercise of his or her duties in such capacity. There shall have been no
material adverse development in any pending litigation that in the reasonable
good faith judgment of the board of directors of the Purchaser, after
consultation with legal counsel, could reasonably be likely to result in a
material adverse judgment against the Company resulting in damages (after taking
into account any recoveries under available insurance) in an amount in excess of
$3,000,000.
(g) Since December 31, 1999, the business of the Company shall have been
operated in compliance with all Applicable Laws, except where the failure to do
so could not reasonably be expected to have a Material Adverse Effect.
(h) There shall be no litigation, proceeding or other action seeking an
injunction or other restraining order, damages or other relief from a
Governmental Authority pending or threatened which, in the reasonable judgment
of the Purchaser, would materially adversely affect the consummation of the
transactions contemplated by the Documents on the terms contemplated hereby and
thereby and there shall be no litigation, proceeding or other action (including,
without limitation, relating to environmental matters or the Benefit Plans)
pending or threatened against the Company or its Subsidiaries which could,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(i) During the seven-calendar-day period ending on such Closing Date, (A)
trading in securities generally on the New York Stock Exchange or the American
Stock Exchange or the over-the-counter market shall not have been suspended and
minimum prices shall not have been established on either of such exchanges or
such market by such exchange or by the Commission, and (B) a general banking
moratorium shall not have been declared by Federal or New York or California
authorities.
(j) All registration rights agreements with the Company shall have been
amended to provide that no other person will exercise any demand or piggy back
registration rights without the prior written consent of the Purchaser.
(k) All governmental and regulatory approvals and clearances and all
third-party consents necessary for the consummation of all of the transactions
contemplated by the Documents to occur on such Closing Date shall have been
obtained and shall be in full force and effect, and the Purchaser shall be
reasonably satisfied that the consummation of such transactions does not and
will not contravene any Applicable Law, except to the extent any contravention
or contraventions, individually or in the aggregate, could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect.
(l) The Company shall have delivered to the Purchaser a certificate,
executed by it or on its behalf by a duly authorized representative, dated as of
such Closing Date, certifying that each of the conditions (other than any
condition the fulfillment of which is subject to the reasonable satisfaction of
the Purchaser) specified in this Section 7.2 has been satisfied.
(m) Sidley & Austin, counsel to the Company, shall have delivered to the
Purchaser an opinion, dated such Closing Date, addressed to the Purchaser,
substantially in the form attached as Exhibit J hereto.
(n) The Purchaser shall have received delivery of the Securities as set
forth hereunder.
(o) The Company shall have delivered to the Purchaser certificates of the
appropriate public officials to the effect that each of the Purchaser and its
Subsidiaries is a validly existing corporation in good standing in its
jurisdiction of organization dated not more than 5 days prior to the Closing
Date.
(p) The Company shall have delivered to the Purchaser a certificate of the
Secretary of the Company (i) certifying that a true and correct copy of the
Charter, Bylaws and all resolutions of the Board of Directors authorizing the
execution and delivery of this Agreement and each Document to which the Company
is a party and authorizing the performance by the Company of the transactions
contemplated hereby and thereby is attached thereto and (ii) containing the
incumbency and specimen signature of each of the officers of the Company.
(q) The Company shall have taken all necessary action so that at least two
thirds of the Company's then current Board of Directors shall have approved the
election of the Purchaser Nominees.
(r) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall not have revoked the ▇▇▇▇▇▇ Agreement with
respect to the waiver of discrimination claims contained in such agreement or if
such agreement has been revoked, a substitute agreement containing substantially
similar terms shall have been entered into by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and the Company.
(s) The Purchaser shall have received a complete and correct signed copy of
the written opinions confirming the oral opinions of ▇▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇
▇▇▇▇▇ referred to in Section 3.29.
(t) The Purchaser shall have received such other certificates, instruments
and documents in furtherance of the transactions contemplated by this Agreement
or the other Documents as it may reasonably request.
ARTICLE VIII
INFORMATION; DIRECTORS; RESERVATION OF STOCK
SECTION 8.1. Access to Information. As long as the Purchaser, together with
its Affiliates, or Permitted Transferees, beneficially owns Threshold
Securities, upon the request of the Purchaser, the Company shall afford the
Purchaser and its accountants, counsel and other representatives full access to
all of the properties, books, contracts, commitments, and records (including,
but not limited to, tax returns), employees, customers, suppliers and
accountants of the Company and its Subsidiaries. The Purchaser will, and will
cause its agents to, conduct any such investigations on reasonable advance
notice, during normal business hours, with reasonable numbers of persons and in
such a manner as not to interfere unreasonably with the normal operations of the
Company and its Subsidiaries.
SECTION 8.2. Information Rights of Purchaser. As long as the Purchaser,
together with its Affiliates, or Permitted Transferees, beneficially owns
Threshold Securities, the Company shall furnish to the Purchaser, the following:
(a) Monthly Reports. As soon as available, but not later than 30 days after
the end of each fiscal month (or 45 days in the case of the report for the month
of April 2000), beginning with the report for the month of April 2000, a
consolidated balance sheet of the Company and its Subsidiaries as of the end of
such period and consolidated statements of income of the Company and its
Subsidiaries for such period and for the period commencing at the end of the
previous fiscal year and ending with the end of such period, setting forth, in
each case, in comparative form the corresponding figures for the corresponding
period of the preceding fiscal year, and including comparisons to the budget or
business plan and an analysis of the variances from the budget or plan, all
prepared in accordance with GAAP (except for the absence of footnotes, and
quarter-end and year-end adjustments).
(b) Quarterly Reports. As soon as available, but not later than 45 days
after the end of each quarterly accounting period, (i) a consolidated balance
sheet of the Company and its Subsidiaries as of the end of such period and
consolidated statements of income, cash flows and changes in stockholders'
equity for such quarterly accounting period and for the period commencing at the
end of the previous fiscal year and ending with the end of such period, setting
forth in each case in comparative form the corresponding figures for the
corresponding period of the preceding fiscal year, and including comparisons to
the budget or business plan and an analysis of the variances from the budget or
plan, all prepared in accordance with GAAP, subject to normal year-end
adjustments and the absence of footnote disclosure, and (ii) a report by
management of the Company of the operating and financial highlights of the
Company and its Subsidiaries for such period, which shall include (x) a
comparison between operating and financial results and budget and (y) an
analysis of the operations of the Company and its Subsidiaries for such period.
(c) Annual Audit. As soon as available, but not later than 90 days after
the end of each fiscal year of the Company, audited consolidated financial
statements of the Company and its Subsidiaries, which shall include statements
of income, cash flows and changes in stockholders' equity for such fiscal year
and a balance sheet as of the last day thereof, each prepared in accordance with
GAAP, and accompanied by the report of a "Big 5" firm of independent certified
public accountants selected by the Company's Board of Directors. The Company and
its Subsidiaries shall maintain a system of accounting sufficient to enable its
accountants to render the report referred to in this Section 8.2(c).
(d) Notice of Litigation, Disputes and Adverse Changes. Prompt notice of:
(i) each material legal action, suit, arbitration or other
administrative or governmental investigation or proceeding (whether
federal, state, local or foreign) instituted or, to the Company's
knowledge, threatened against the Company or any of its Subsidiaries (or of
any occurrence or dispute which involves a reasonable likelihood of any
such action, suit, arbitration, investigation or proceeding being
instituted), and
(ii) any other occurrence or change of circumstance relating to the
Company which, in either such case, could reasonably be expected to
materially and adversely affect the Company's condition (financial or
otherwise), properties, assets, liabilities, business or operations (except
for any changes that are the effect or result of economic factors generally
affecting the economy as a whole).
(e) Miscellaneous. Promptly upon becoming available, each of the following:
(i) copies of all financial statements, reports, press releases,
notices, proxy statements and other documents sent by the Company or its
Subsidiaries to its stockholders generally or released to the public and
copies of all regular and periodic reports, if any, filed by the Company or
its Subsidiaries with the Commission, any securities exchange or NASDAQ;
(ii) notification in writing of the existence of any default, which
continues uncured for a period of more than 10 days thereafter, under any
material agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which any of their assets are bound;
(iii) upon request, copies of all reports prepared for or delivered to
the management of the Company or its Subsidiaries by its accountants; and
(iv) upon request, any other information reasonably requested.
SECTION 8.3. Information Rights. Without duplication of any document or
information provided pursuant to Section 8.2, as long as the Purchaser
beneficially owns any shares of Common Stock, the Company shall provide to the
Purchaser the following:
(a) as soon as available, but not later than 45 days after the end of
each quarterly accounting period, a Quarterly Report on Form 10-Q or, if
the Company does not then file quarterly reports with the Commission, the
documents referred to in Section 8.2(b);
(b) as soon as available, but not later than 90 days after the end of
each fiscal year, an Annual Report on Form 10-K or, if the Company does not
then file annual reports with the Commission, the audited consolidated
financial statements referred to in Section 8.2(c); and
(c) simultaneously with any distribution of any document to the
stockholders of the Company generally, any such document so distributed.
SECTION 8.4. Directors.
(a) At all times, the Company shall use its reasonable best efforts to
ensure that the Company's Board of Directors shall consist of not more than 11
directors.
(b) (i) As of the date hereof, the Company shall have appointed three
Purchaser Nominees to be directors of the Company. (ii) As long as the Purchaser
beneficially owns securities of the Company that constitute, or if converted
into Common Stock would constitute, at least 70% of the aggregate issued and
outstanding Common Stock, the Company shall use its reasonable best efforts to
ensure that a total of seven Purchaser Nominees are members of the Company's
Board of Directors. For the purposes of this clause (ii), the Previously Issued
Warrants and the Warrants shall not be included in the calculation of the
Purchaser's beneficial ownership. (iii) As long as the Purchaser beneficially
owns securities of the Company that constitute, or if exercised, exchanged or
converted into Common Stock would constitute, at least 33- 1/3% but less than
70% of the aggregate issued and outstanding Common Stock, the Company shall use
its reasonable best efforts to ensure that a total of six Purchaser Nominees are
members of the Company's Board of Directors. (iv) As long as the Purchaser
beneficially owns securities of the Company that constitute, or if exercised,
exchanged or converted into Common Stock would constitute, at least 10% but less
than 33- 1/3% of the aggregate issued and outstanding Common Stock, the Company
shall use its reasonable best efforts to ensure that a total of three Purchaser
Nominees are members of the Company's Board of Directors. For the purposes of
clauses (iii) and (iv) of this Section 8.4(b), the Previously Issued Warrants
and the Warrants shall be included in the calculation of the Purchaser's
beneficial ownership. Notwithstanding the foregoing, as long as any loan or
commitment is outstanding under the Credit Agreement, the Company shall use its
reasonable best efforts to ensure that no less than a total of three Purchaser
Nominees are members of the Company's Board of Directors. The Company and the
Board of Directors may not take any action, without due cause, to remove the
Purchaser Nominees serving as directors of the Company.
(c) The Company shall ensure that the Board of Directors (and the Company's
nominating committee, if any) shall recommend the inclusion of the Purchaser
Nominees such persons in the slate of nominees recommended to stockholders for
election as directors at each annual meeting of stockholders of the Company.
(d) The Board of Directors shall appoint Purchaser Nominees to serve on
each committee of the Board of Directors in at least the same proportions that
the number of Purchaser Nominees serving on the Board of Directors bears to the
total number of directors then comprising the Board of Directors, provided,
however, that the Company and the Purchaser shall cooperate in order to comply
with any NASD rules or regulations (or the rules and regulations of any national
exchange on which the Company's Common Stock is traded) relating to director
independence on committees.
(e) If at any time, a vacancy is created on the Board of Directors by
reason of the incapacity, death, removal or resignation of any Purchaser
Nominees, then the Board of Directors shall appoint an individual designated by
the Purchaser to fill such vacancy until the next meeting of stockholders.
(f) The Company shall provide the Purchaser Nominees serving as directors
notice of each meeting of the Board of Directors at the same time and in the
same manner as other members of the Board of Directors.
(g) The Purchaser Nominees serving as directors shall be entitled to
compensation and indemnification rights consistent with those of other directors
of the Company, including, without limitation, any rights to participate in
stock option or similar plans. At all times on and after the date hereof, the
Company shall be a party to and comply with indemnification agreements (in such
form as is currently available to the Company's directors or such other form
mutually satisfactory to the Purchaser and the Company) with each of the
nominees of the Purchaser serving as directors. The Company shall at all times
maintain a directors' and officers' insurance policy covering the Company's
directors and officers that provides, in the aggregate, at least $10,000,000 of
liability coverage and, in any event, substantially no less coverage than the
policy covering the current directors of the Company as of the date of this
Agreement.
(h) The provisions of this Section 8.4 shall be further effected pursuant
to an amendment to the Company's Bylaws in a form acceptable to the Purchaser,
which shall not be further amended by the Board of Directors in a manner that,
individually or in the aggregate, adversely affects the Purchaser.
(i) If at any time the Board of Directors shall consist of more than 11
Directors or the number of Purchaser Nominees serving as directors of the
Company (or members of committees) shall be less than the number required
pursuant to this Section 8.4 and the requirement that the Company appoint such
number of Purchaser Nominees as directors of the Company does not violate
Applicable Laws or NASD rules or regulations (or the rules or regulations of any
national exchange on which the Company's Common Stock is traded), then for all
purposes of the Documents, the Company shall be deemed to have failed to comply
in a material respect with its agreements contained in this Agreement; provided,
however, if the number of Purchaser Nominees is less than the number required
pursuant to this Section 8.4 solely because of the resignation, death or
incapacity of a Purchaser Nominee, then the Company shall not have failed to
comply with its agreements contained in this Agreement.
(i) The Purchaser and its Affiliates shall vote the Securities and any
shares of Common Stock it owns in favor of the appointment of the Purchaser
Nominees to the Board of Directors.
SECTION 8.5. Reservation of Common Stock. Prior to any Closing Date, the
Company shall reserve and keep available out of its authorized but unissued
Common Stock, the number of shares required for issuance upon the conversion of
the Series B Preferred Stock and the exercise of the Warrants being purchased at
such Closing (including any additional shares which may become so issuable by
reason of the operation of anti-dilution provisions of the Certificate of
Designation and the Warrants).
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. Survival; Indemnification.
(a) All representations, warranties, covenants and agreements (except
covenants and agreements which are expressly required to be performed and are
performed in full on or before a Closing Date) contained in this Agreement shall
be deemed made at each Closing as if made at such time and shall survive such
Closing for two years, except that (i) with respect to claims asserted pursuant
to this Section 9.1 before the expiration of the applicable representation or
warranty, such claims shall survive until the date they are finally liquidated
or otherwise resolved, (ii) Sections 3.10, 3.15 and 3.16 shall survive until the
end of the applicable statute of limitations (as waived, tolled or amended), and
(iii) Section 3.2 and this Section 9.1 shall survive indefinitely. All
statements as to factual matters contained in any certificate, document or other
instrument executed and delivered by the parties pursuant hereto shall be deemed
to be representations, warranties and covenants by such party hereunder. No
claim may be commenced under this Section 9.1 (or otherwise) following
expiration of the applicable period of survival, and upon such expiration the
Indemnifying Party shall be released from all liability with respect to claims
under each such section not theretofore made by the Indemnified Party. A claim
shall be made or commenced hereunder by the Indemnified Party delivering to the
Indemnifying Party a written notice specifying in reasonable detail the nature
of the claim, the amount claimed (if known or reasonably estimable), and the
factual basis for the claim.
(b) (i) The Company agrees to indemnify and hold harmless the Purchaser,
its Affiliates, and their respective officers, directors, employees and duly
authorized agents and each of their affiliates and each other person controlling
the Purchaser or any of their Affiliates within the meaning of either section 15
of the Securities Act or section 20 of the Exchange Act and any partner of any
of them from and against all losses, claims, damages or liabilities resulting
from any claim, lawsuit or other proceeding by any person to which any party
indemnified under this clause may become subject which is related to or arises
out of (A) the transactions contemplated by this Agreement and the other
Documents, whether or not consummated, (B) any breach of, or failure to perform
any of the representations, warranties, covenants or agreements made in any of
the Documents by the Company or (C) any action or omission of the Company or any
of its Subsidiaries in connection with the transactions contemplated hereby or
by the other Documents, and will reimburse the Purchaser and any other party
indemnified under this clause for all reasonable out-of-pocket expenses
(including, without limitation, reasonable counsel fees and disbursements)
incurred by the Purchaser or any such other party indemnified under this clause
and further agrees that the indemnification and reimbursements commitments
herein shall apply whether or not the Purchaser or any such other party
indemnified under this clause is a formal party to any such lawsuits, claims or
other proceedings. The foregoing provisions are expressly intended to cover,
without limitation, reimbursement of legal and other expenses incurred in a
deposition or other discovery proceeding.
(ii) Notwithstanding the foregoing clause (i), the Company shall not be
liable to any party otherwise entitled to indemnification pursuant thereto: (A)
in respect of any loss, claim, damage, liability or expense to the extent the
same is determined, in final judgment by a court having jurisdiction, to have
resulted from the gross negligence or willful misconduct of such party or (B)
for any settlement effected by such party without the written consent of the
Company, which consent shall not be unreasonably withheld.
(c) If a person entitled to indemnity hereunder (an "Indemnified Party")
asserts that any party hereto (the "Indemnifying Party") has become obligated to
the Indemnified Party pursuant to Section 9.1(b), or if any suit, action,
investigation, claim or proceeding is begun, made or instituted as a result of
which the Indemnifying Party may become obligated to the Indemnified Party
hereunder, the Indemnified Party agrees to notify the Indemnifying Party
promptly and to cooperate with the Indemnifying Party, at the Indemnifying
Party's expense, to the extent reasonably necessary for the resolution of such
claim or in the defense of such suit, action or proceeding, including making
available any information, documents and things in the possession of the
Indemnified Party which are reasonably necessary therefor.
Notwithstanding the foregoing notice requirement, the right to
indemnification hereunder shall not be affected by any failure to give, or delay
in giving, notice unless, and only to the extent that, the rights and remedies
of the Indemnifying Party shall have been prejudiced as a result of such failure
or delay.
(d) In fulfilling its obligations under this Section 9.1, after providing
each Indemnified Party with a written acknowledgment of any liability under this
Section 9.1 as between such Indemnified Party and the Indemnifying Party, the
Indemnifying Party shall have the right to investigate, defend, settle or
otherwise handle, with the aforesaid cooperation, any claim, suit, action or
proceeding brought by a third party in such manner as the Indemnifying Party may
in its sole discretion deem appropriate; provided, however, that (i) counsel
retained by the Indemnifying Party is reasonably satisfactory to the Indemnified
Party and (ii) the Indemnifying Party shall not, except with the consent of the
Indemnified Party, enter into any settlement that does not include as an
unconditional term thereof the giving by the person or persons asserting such
claim to all Indemnified Parties of an unconditional release from all liability
with respect to such claim or consent to entry of any judgment. Notwithstanding
anything to the contrary contained herein, the Indemnifying Party may retain one
firm of counsel to represent all Indemnified Parties in such claim, action or
proceeding; provided, however, that in the event that the defendants in, or
targets of, any such claim, action or proceeding include more than one
Indemnified Party, and any Indemnified Party shall have reasonably concluded,
based on the opinion of its own counsel, that there may be one or more legal
defenses available to it which are in conflict with those available to any other
Indemnified Party, then such Indemnified Party may employ separate counsel to
represent or defend it or any other person entitled to indemnification and
reimbursement hereunder with respect to any such claim, action or proceeding in
which it or such other person may become involved or is named as defendant and
the Indemnifying Party shall pay the reasonable fees and disbursement of such
counsel. Notwithstanding the Indemnifying Party's election to assume the defense
or investigation of such claim, action or proceeding, the Indemnified Party
shall have the right to employ separate counsel at the expense of the
Indemnifying Party and to direct the defense or investigation of such claim,
action or proceeding if (A) in the written opinion of counsel to the Indemnified
Party, use of counsel of the Indemnifying Party's choice could reasonably be
expected to give rise to a conflict of interest, or (B) the Indemnifying Party
shall not have employed counsel reasonably satisfactory to the Indemnified Party
to represent the Indemnified Party within a reasonable time after notice of the
assertion of any such claim or institution of any such action or proceeding. In
all other situations, the Indemnified Party shall have the right to participate
in the defense or investigation of such claim, action or proceeding if the
Indemnifying Party shall authorize the Indemnified Party to employ separate
counsel at the Indemnifying Party's expense or if the fees and expenses of
counsel for the Indemnified Party shall be borne by the Indemnified Party. If
the Indemnifying Party does not notify the Indemnified Party within 30 days
after the receipt of the Indemnified Party's notice of a claim of indemnity
hereunder that it elects to undertake the defense thereof, the Indemnified Party
shall have the right to contest, settle or compromise the claim but shall not
thereby waive any right to indemnity therefor pursuant to this Agreement.
(e) If for any reason (other than the gross negligence or willful
misconduct referred to in subclause (b)(ii) above) the foregoing indemnification
by the Company is unavailable to any Indemnified Party or is insufficient to
hold it harmless as and to the extent contemplated by subclauses (b), (c) and
(d) above, then the Company shall contribute to the amount paid or payable by
such Indemnified Party as a result of such loss, claim, damage or liability in
such proportion as is appropriate to reflect the relative benefits received by
the Company and its Affiliates, on the one hand, and the Purchaser and any other
applicable Indemnified Party, as the case may be, on the other hand, as well as
any other relevant equitable considerations.
SECTION 9.2. Notices. All notices, demands, requests, consents, approvals
or other communications (collectively, "Notices") required or permitted to be
given hereunder or which are given with respect to this Agreement shall be in
writing and shall be personally served, delivered by a reputable air courier
service with tracking capability, with charges prepaid, or transmitted by hand
delivery or facsimile, addressed as set forth below, or to such other address as
such party shall have specified most recently by written notice. Notice shall be
deemed given on the date of service or transmission if personally served or
transmitted by facsimile. Notice otherwise sent as provided herein shall be
deemed given on the next Business Day following delivery of such notice to a
reputable air courier service.
If to the Company, to it at:
Peapod, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Chairman
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which shall not constitute notice) to:
Sidley & Austin
Bank ▇▇▇ ▇▇▇▇▇
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Purchaser:
Koninklijke Ahold N.V.
c/o The Stop and Shop Supermarket Company
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
and:
Koninklijke Ahold NV
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Attention: Ton van Tielraden, Esq.
Facsimile: (▇▇-▇▇) ▇▇▇-▇▇▇▇
and a copy (which shall not constitute notice) to:
White & Case
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq./▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
SECTION 9.3. Governing Law. This Agreement and the rights and obligations
of the parties hereunder shall be governed by, and construed in accordance with,
the laws of the State of New York, and each party hereto submits to the
non-exclusive jurisdiction of the state and federal courts within the County of
New York in the State of New York. Any legal action or proceeding with respect
to this Agreement may be brought in the courts of the State of New York or of
the United States of America for the Southern District of New York and, by
execution and delivery of this Agreement, the Company hereby accepts for itself
and in respect of its property, generally and unconditionally, the jurisdiction
of the aforesaid courts. The Company further irrevocably consents to the service
of process out of any of the aforementioned courts in any action or proceeding
by the mailing of copies thereof by registered or certified mail, postage
prepaid, to the Company at its address set forth in Section 9.2, such service to
become effective seven days after such mailing. Nothing herein shall affect the
right of the Purchaser to serve process in any of the matters permitted by law
or to commence legal proceedings or otherwise proceed against the Company in any
other jurisdiction. The Company hereby irrevocably waives any objection which it
may now or hereafter have to the laying of venue of any of the aforesaid actions
or proceedings arising out of or in connection with this Agreement brought in
the courts referred to above and hereby further irrevocably waives and agrees
not to plead or claim in any such court that any such action or proceeding
brought in any such court has been brought in an inconvenient forum.
SECTION 9.4. Termination; Fees.
(a) This Agreement may be terminated in accordance with the next two
sentences. This Agreement may be terminated by (i) by mutual agreement of the
parties at any time, (ii) by either party if the Stockholder Approval is not
obtained on or prior to the seventh month anniversary of the date hereof, or
(iii) by either party, if the Company's stockholders vote against this Agreement
and the transactions contemplated hereby at the Stockholders' Meeting.
Termination pursuant to the foregoing clauses (i), (ii) or (iii)
notwithstanding, Sections 3, 4, (for the purposes of Section 9.1), 5, 6.4, 8 and
9 hereof shall remain in effect. No termination of this Agreement shall affect
any party's liability for willful breach of this Agreement.
(b) If this Agreement is terminated by the Purchaser in accordance with
clauses (ii) or (iii) of Section 9.4(a), and the Purchaser shall have voted in
favor of this Agreement and the transactions contemplated hereby at the
Stockholders' Meeting, all securities of the Company held by it (and eligible to
vote, it being understood that the Purchaser shall have no obligation to
exercise any Warrants) as of the record date for such Stockholders' Meeting, on
the day next succeeding the date of such termination, the Company shall (x)
reimburse the Purchaser in immediately available funds for the out-of-pocket
expenses of the Purchaser (including, without limitation, printing fees, filing
fees and fees and expenses of its legal and financial advisors and all fees and
expenses payable to any financing sources) related to this Agreement or the
other Documents, the transactions contemplated hereby and thereby and any
related financing and (y) pay to the Purchaser in immediately available funds an
amount equal to $1,000,000.
SECTION 9.5. Entire Agreement. This Agreement (including all agreements
entered into pursuant hereto and all certificates and instruments delivered
pursuant hereto and thereto) constitutes the entire agreement of the parties
with respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements, representations, understandings, negotiations and
discussions between the parties or their Affiliates, whether oral or written,
with respect to the subject matter hereof, including, without limitation, the
letter dated April 4, 2000 from the Purchaser to the Company, together with the
letter in response dated April 4, 2000 from the Company to the Purchaser, and
the letter agreement, dated March 28, 2000, entered into by the Company with
Ahold USA, Inc.
SECTION 9.6. Modifications and Amendments. No amendment, modification or
termination of this Agreement shall be binding upon any other party unless
executed in writing by the parties hereto intending to be bound thereby.
SECTION 9.7. Waivers and Extensions. Any party to this Agreement may waive
any right, breach or default which such party has the right to waive, provided
that such waiver will not be effective against the waiving party unless it is in
writing, is signed by such party, and specifically refers to this Agreement.
Waivers may be made in advance or after the right waived has arisen or the
breach or default waived has occurred. Any waiver may be conditional. No waiver
of any breach of any agreement or provision herein contained shall be deemed a
waiver of any preceding or succeeding breach thereof nor of any other agreement
or provision herein contained. No waiver or extension of time for performance of
any obligations or acts shall be deemed a waiver or extension of the time for
performance of any other obligations or acts.
SECTION 9.8. Titles and Headings; Interpretation. Titles and headings of
sections of this Agreement are for convenience only and shall not affect the
construction of any provision of this Agreement. Where any representation or
warranty contained in this Agreement is expressly qualified by reference to the
best knowledge of the Company, the Company confirms that it has made due and
diligent inquiry as to the matters that are the subject of such representations
and warranties.
SECTION 9.9. Exhibits and Schedules. Each of the annexes, exhibits and
schedules referred to herein and attached hereto is an integral part of this
Agreement and is incorporated herein by reference.
SECTION 9.10. Expenses; Brokers. The Company shall pay or cause to be paid,
whether or not any Closing occurs hereunder, all reasonable out-of-pocket fees
and expenses incurred by the Purchaser and its respective Affiliates, in
connection with the transactions contemplated by this Agreement, the other
Documents and all matters related thereto (including, without limitation, HSR
Act filing fees, and reasonable fees and disbursements of counsel and
consultants). Each of the parties represents to the others that neither it nor
any of its Affiliates has used a broker or other intermediary, in connection
with the transactions contemplated by this Agreement for whose fees or expenses
any other party will be liable and respectively agrees to indemnify and hold the
others harmless from and against any and all claims, liabilities or obligations
with respect to any such fees or expenses asserted by any person on the basis of
any act or statement alleged to have been made by such party or any of its
Affiliates.
SECTION 9.11. Press Releases and Public Announcements. All press releases
and similar public announcements relating to the transactions contemplated by
the Documents shall be made only if mutually agreed upon by the Company and the
Purchaser, except to the extent that such disclosure is, in the opinion of
counsel, required by law or by stock exchange regulation; provided that any such
required disclosure shall only be made by one party, to the extent consistent
with law, after consultation with the other party.
SECTION 9.12. Assignment; No Third Party Beneficiaries. This Agreement and
the rights, duties and obligations hereunder may not be assigned or delegated by
either the Company or the Purchaser without the prior written consent of the
other; provided that the Purchaser may assign or delegate its rights, duties and
obligations hereunder to a Permitted Transferee, provided, however, to the
extent rights in this Agreement are subject to the Purchaser owning a minimum
amount of capital stock of the Company, the Permitted Transferee will not be
entitled to exercise such rights unless it owns such minimum amount of capital
stock. Except as provided in the preceding sentence, any assignment or
delegation of rights, duties or obligations hereunder made without the prior
written consent of the other party hereto shall be void and of no effect. This
Agreement and the provisions hereof shall be binding upon and shall inure to the
benefit of each of the parties and their respective successors and permitted
assigns. This Agreement is not intended to confer any rights or benefits on any
persons that are not party hereto other than as expressly set forth in Section
9.1.
SECTION 9.13. Severability. This Agreement shall be deemed severable, and
the invalidity or unenforceability of any term or provision hereof shall not
affect the validity or enforceability of this Agreement or of any other term or
provision hereof. Furthermore, in lieu of any such invalid or unenforceable term
or provision, the parties hereto intend that there shall be added as a part of
this Agreement a provision as similar in terms to such invalid or unenforceable
provision as may be possible and be valid and enforceable.
SECTION 9.14. Counterparts; Facsimile. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original, and all of
which taken together shall constitute one and the same instrument. All documents
and closing deliveries for the transactions contemplated by this Agreement and
the other Documents may be delivered by a party at the Closing via facsimile;
provided, that, the originally executed signature pages and original documents
are delivered to the appropriate parties within two (2) Business Days following
the Closing.
SECTION 9.15. Further Assurances. Each party hereto, upon the request of
any other party hereto, shall do all such further acts and execute, acknowledge
and deliver all such further instruments and documents as may be necessary or
desirable to carry out the transactions contemplated by this Agreement,
including, in the case of the Company, such acts, instruments and documents as
may be necessary or desirable to convey and transfer to the Purchaser the Shares
to be purchased by it hereunder.
SECTION 9.16. Remedies Cumulative. The remedies provided herein shall be
cumulative and shall not preclude the assertion by any party hereto of any other
rights or the seeking of any remedies against the other party hereto.
* * *
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
PEAPOD, INC.
a Delaware corporation
By: ______________________________
Name: ______________________________
Title: ______________________________
KONINKLIJKE AHOLD N.V.
a Netherlands corporation
By: ______________________________
Name: ______________________________
Title: ______________________________