Exhibit 99.1
--------------------------------------------------------------------------------
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......................................................... 7
SECTION 2.1. Sale and Issuance of Shares and Warrants................... 7
SECTION 2.2. Closings................................................... 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................. 8
SECTION 3.1. Organization and Standing.................................. 8
SECTION 3.2. Capital Stock.............................................. 8
SECTION 3.3. Subsidiaries............................................... 9
SECTION 3.4. Authorization; Enforceability.............................. 9
SECTION 3.5. No Violation; Consents..................................... 9
SECTION 3.6. Permits.................................................... 10
SECTION 3.7. Litigation................................................. 10
SECTION 3.8. SEC Documents; Financial Statements........................ 10
SECTION 3.9. Change in Condition........................................ 11
SECTION 3.10. Employee Benefit Plans and Labor Matters.................. 11
SECTION 3.11. Interests in Real Property................................ 14
SECTION 3.12. Leases.................................................... 14
SECTION 3.13. Compliance with Law....................................... 15
SECTION 3.14. Related Party Transactions................................ 15
SECTION 3.15. Tax Matters............................................... 15
SECTION 3.16. Environmental Matters..................................... 16
SECTION 3.17. Intellectual Property..................................... 17
SECTION 3.18. Registration Rights....................................... 20
SECTION 3.19. Insurance................................................. 20
SECTION 3.20. Contracts................................................. 20
SECTION 3.21. Questionable Payments..................................... 21
SECTION 3.22. Accuracy of Information................................... 21
SECTION 3.23. Private Offering.......................................... 21
SECTION 3.24. Split Pea................................................. 21
SECTION 3.25. Brokers................................................... 22
SECTION 3.26. Voting and Proxy Agreements............................... 22
SECTION 3.27. Rights Agreement.......................................... 22
SECTION 3.28. Determination of Amount of Capital........................ 22
SECTION 3.29. Fairness Opinion.......................................... 23
SECTION 3.30. State Takeover Statutes................................... 23
SECTION 3.31. ▇▇▇▇▇▇ Stock, Options and Note............................ 23
SECTION 3.32. Other Interests........................................... 23
SECTION 3.33. Books and Records......................................... 23
SECTION 3.34. Personal Property......................................... 23
SECTION 3.35. Accounts Receivable....................................... 23
i
Page
----
SECTION 3.36. Inventory................................................ 24
SECTION 3.37. Product Liability........................................ 24
SECTION 3.38. Copies of Documents...................................... 24
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.......................... 24
SECTION 4.1. Authorization; Enforceability; No Violations.............. 24
SECTION 4.2. Consents.................................................. 25
SECTION 4.3. Private Placement......................................... 25
ARTICLE V
COVENANTS OF THE COMPANY................................................. 25
SECTION 5.1. Operation of Business..................................... 25
SECTION 5.2. Negative Covenants........................................ 26
SECTION 5.3. Access to Books and Records............................... 28
SECTION 5.4. Agreement to Take Necessary and Desirable Actions......... 29
SECTION 5.5. Compliance with Conditions; Commercially Reasonably
Efforts............................................................... 29
SECTION 5.6. Consents and Approvals.................................... 29
SECTION 5.7. Stockholder Approval...................................... 29
SECTION 5.8. Tax Treatment of Preferred Stock.......................... 30
SECTION 5.9. Other Activities of Purchaser............................. 30
SECTION 5.10. HSR Act Filings.......................................... 30
SECTION 5.11. No Solicitation.......................................... 30
SECTION 5.12. Use of Proceeds.......................................... 32
SECTION 5.13. Reduction of Capital..................................... 32
SECTION 5.14. Amendment of Bylaws...................................... 32
SECTION 5.15. Transfer Agent; CUSIP.................................... 32
SECTION 5.16. Notification of Certain Matters.......................... 32
SECTION 5.17. ▇▇▇▇▇▇ Shares............................................ 32
ARTICLE VI
COVENANTS OF THE PURCHASER............................................... 33
SECTION 6.1. Agreement to Take Necessary and Desirable Actions......... 33
SECTION 6.2. Compliance with Conditions; Commercially Reasonable
Efforts............................................................... 33
SECTION 6.3. HSR Act Filings........................................... 33
SECTION 6.4. Confidential Information.................................. 33
SECTION 6.5. Notification of Certain Matters........................... 33
SECTION 6.6. Restrictions on Mergers................................... 34
ARTICLE VII
CONDITIONS PRECEDENT TO CLOSING.......................................... 34
SECTION 7.1. Conditions to the Company's Obligations................... 34
SECTION 7.2. Conditions to The Purchaser's Obligations................. 34
ii
ARTICLE VIII
Page
----
INFORMATION; DIRECTORS; RESERVATION OF STOCK.............................. 36
SECTION 8.1. Access to Information...................................... 36
SECTION 8.2. Information Rights of Purchaser............................ 37
SECTION 8.3. Information Rights......................................... 38
SECTION 8.4. Directors.................................................. 38
SECTION 8.5. Reservation of Common Stock................................ 39
ARTICLE IX
MISCELLANEOUS............................................................. 40
SECTION 9.1. Survival; Indemnification.................................. 40
SECTION 9.2. Notices.................................................... 41
SECTION 9.3. Governing Law.............................................. 42
SECTION 9.4. Termination; Fees.......................................... 43
SECTION 9.5. Entire Agreement........................................... 43
SECTION 9.6. Modifications and Amendments............................... 43
SECTION 9.7. Waivers and Extensions..................................... 43
SECTION 9.8. Titles and Headings; Interpretation........................ 44
SECTION 9.9. Exhibits and Schedules..................................... 44
SECTION 9.10. Expenses; Brokers......................................... 44
SECTION 9.11. Press Releases and Public Announcements................... 44
SECTION 9.12. Assignment; No Third Party Beneficiaries.................. 44
SECTION 9.13. Severability.............................................. 44
SECTION 9.14. Counterparts Counterparts; Facsimile...................... 44
SECTION 9.15. Further Assurances........................................ 44
SECTION 9.16. Remedies Cumulative....................................... 45
iii
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 3.10 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 3.14 Related Party Transactions
Schedule 3.16 Environmental
Schedule 3.17 Intellectual Property
Schedule 3.18 Registration Rights
Schedule 3.20 Contracts
Schedule 3.31 ▇▇▇▇▇▇ Agreement
Schedule 3.32 Other Equity 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 & ▇▇▇▇▇▇
▇▇
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, (the "Parent") 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 Parent 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.
2
"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,
3
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.
4
"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.
5
"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.
6
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.
7
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
exerciscable 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,
8
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.
9
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
10
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).
11
(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).
12
(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 tortious 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.
13
(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.
14
(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.
15
(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
16
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
17
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
18
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
19
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;
20
(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.
21
(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
22
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
23
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 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).
24
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
25
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 ▇▇▇▇▇▇ 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;
26
(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;
27
(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,
28
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
29
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
30
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
31
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.
32
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
33
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.
34
(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
35
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
36
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).
37
(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 no 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 no 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.
38
(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.
(j) 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).
39
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
40
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
41
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
42
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.
43
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
44
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.
* * *
45
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
PEAPOD, INC.
a Delaware corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------
Title: Chairman
-------------------------
KONINKLIJKE AHOLD N.V.
a Netherlands corporation
By: /s/ Ton van Tielraden
----------------------------
Name: Ton van Tielraden
--------------------------
Title: Senior Vice President and
General Counsel
-------------------------
Purchase Agreement
S-1
SCHEDULE I
Series B Preferred Stock and Warrants to be Purchased
Security Number Purchase Price
-------- ---------- -------------------
Warrants (Credit Agreement)..................... 3,566,667 $ 100
Shares of Series B Preferred Stock.............. 726,371 $72,637,024
Warrants (Preferred Stock)...................... 32,894,270 No additional price
above price of
Shares of Series B
Preferred Stock
Purchase Agreement
S I-1