Exhibit 99.3
February 14, 2000
Peapod, Inc.
0000 Xxxxx Xxxxx
Xxxxxx, XX 00000
Re: Proposal to Purchase Convertible Preferred Stock and Detachable
Warrants of the Company
Ladies and Gentlemen:
This letter agreement concerns the sale by Peapod, Inc. (the "Company") of
Convertible Preferred Stock and Detachable Warrants to one or more affiliates
of; Apollo Management, L.P. ("Apollo"), Ares Management, L.P. ("Ares"), GRP,
Xxxxxxx (or another affiliate of Groupe Rallye ("Rallye")) Pequot Private Equity
Fund II, L.P. ("Pequot"), and The Yucaipa Companies ("Yucaipa" and together with
Xxxxxx, Xxxx, GRP, Rallye and Pequot, the "Initial Purchasers"), and is intended
to summarize the basis on which the undersigned (the "Initial Purchaser") would
participate in this transaction. Notwithstanding the minimum commitment set
forth on the attached term sheet, Apollo will purchase $45 million of the
Convertible Preferred Stock with appurtenant Detachable Warrants; provided,
however, that this commitment will be subject to automatic reduction as follows:
(i) upon the receipt of a signed letter agreement from Rallye, substantially in
the form of this letter agreement, pursuant to which Rallye agrees to
participate in this transaction on the terms set forth in the attached term
sheet, Xxxxxx's commitment will be immediately reduced by $5 million; and (ii)
upon Xxxxxx's assignment to Xxxx of the right, and the assumption by Xxxx of the
obligation, hereunder to purchase up to $10 million of such Convertible
Preferred Stock with Detachable Warrants, Xxxxxx's commitment will be
immediately reduced by the amount so assigned. The respective rights and
obligations of the Initial Purchasers are several and not joint. In this letter
agreement, the undersigned Initial Purchaser and the Company are sometimes
called the "Parties".
1. Definitive Agreements. The Parties hereby agree to negotiate in good
faith definitive written agreements ("Definitive Agreements") providing for the
sale by the Company to the Initial Purchaser of Convertible Preferred Stock and
Detachable Warrants, and other transactions, all as described on the attached
term sheet (collectively, the "Transactions"). The Definitive Agreements shall
provide the Initial Purchaser with representations, warranties, indemnities and
opinions, and contain other terms and provisions customary for transactions of
this type. The Parties shall use their reasonable best efforts to consummate
the Transactions by March 3, 2000, but in no event shall the parties consummate
the Transactions later than March 31, 2000 (the "Termination Date"). The
Initial Purchaser's obligation to execute and deliver any such Definitive
Agreements and complete the Transactions are subject to (i) the Definitive
Agreements being reasonably satisfactory to the Initial Purchaser, (ii) the
satisfactory completion of the Initial Purchaser's legal, tax and accounting due
diligence investigation of the Company, and (iii) no material adverse change
having occurred in the business, condition (financial or otherwise), operations,
performance, properties or prospects of the Company. The Company's obligation
to execute and deliver any such Definitive Agreements and complete the
Transactions are subject to (i) the Definitive Agreements being reasonably
satisfactory to the Company and (ii) approval of the form of Definitive
Agreements by the Board of Directors of the Company (the "Board").
2. Due Authorization. Each of the Parties represent and warrant that it
is duly authorized to execute this letter agreement, and that this letter
agreement is valid, binding and enforceable against such Party in accordance
with its terms. This letter agreement and the Transactions have been approved
by the Board, and the Board has taken all action (if any) as may be required in
order for the Initial Purchasers and their affiliates to avoid being, as a
result of the execution and delivery of this letter agreement, (i) one or more
"Acquiring Persons" under the Company's Stockholder Rights Agreement, dated as
of June 9, 1997, or (ii) one or more "interested stockholders" under Section 203
of the Delaware General Corporation Law.
3. Access. During the period from the date this letter agreement is
signed by the Company (the "Signing Date") until the Termination Date, the
Company will afford the Initial Purchaser and its representatives full and free
access to the Company, its personnel, properties, contracts, books and records,
and all other documents and data.
4. Exclusive Dealing. From the Signing Date until the close of business
on March 3, 2000 (or such earlier date, if any, that the Initial Purchasers
shall have advised the Company that the Initial Purchasers are not willing to
proceed with the negotiation of Definitive Agreements on terms and conditions
consistent in all material respects with the terms and conditions described in
this letter agreement), the Company will not, directly or indirectly, through
any representative or otherwise, knowingly 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 the acquisition of the
Company, shares of its capital stock, securities convertible into or
exchangeable for shares of its capital stock or the Company's assets or
business, in whole or in part, whether directly or indirectly, through purchase,
merger, consolidation, or otherwise (other than sales of inventory in the
ordinary course and shares issued upon the exercise of existing stock options);
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
Securities Exchange Act of 1934, as amended. The Company will immediately
notify the Initial Purchasers regarding any contact between the Company or its
representatives and any other person regarding any such offer or proposal or any
related inquiry prior to the Termination Date.
5. Conduct of Business. During the period from the Signing Date until the
Termination Date, the Company shall operate its business in the ordinary course
and shall refrain from any extraordinary transactions.
6. Disclosure. From the Signing Date until the Termination Date, the
Company may disclose the terms of this letter agreement, but only if such
disclosure has been previously approved by the Initial Purchaser. The Parties
agree that the Company may file this letter agreement in its entirety as an
exhibit to a Current Report on Form 8-K, provided that a mutually agreeable
press release has been publicly disseminated at or before the time of filing of
such Current Report on Form 8-K. From the Signing Date until the Termination
Date, without the prior approval of the Initial Purchaser, except as, and only
to the extent, required by law, the Company will not, and will not permit its
representatives to, make, directly or indirectly, any public comment, statement,
or communication inconsistent with the provisions of this letter agreement.
7. Costs. The Company will be responsible for and bear all of its own
costs and expenses (including any broker's or finder's fees and the expenses of
its representatives) incurred at any time in connection with pursuing or
consummating the Transactions. In addition, whether or not the Transactions are
consummated, the Company shall reimburse all of the Initial Purchaser's
reasonable out-of-pocket expenses, including, without limitation (i) fees
associated with any governmental filings, and (ii) fees and expenses of legal
counsel for such Purchaser, which shall not exceed $500,000 in the aggregate for
all Purchasers (excluding Apollo).
8. Entire Agreement. This letter agreement constitutes the entire
agreement between the Parties, and supersedes all prior oral or written
agreements, understandings, representations and warranties, and courses of
conduct and dealing between the parties on the subject matter hereof. Except as
otherwise provided herein, this letter agreement may be amended or modified only
by a writing executed by all of the Parties.
9. Governing Law. This letter agreement will be governed by and construed
under the laws of the State of New York.
10. Counterparts. This letter agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this letter
agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
If you are in agreement with the foregoing, please sign and return one copy
of this letter agreement, which thereupon will constitute our agreement with
respect to its subject matter.
Very truly yours,
INITIAL PURCHASER:
APOLLO MANAGEMENT, L.P.
By: /s/ Xxxxx Xxxxxx
---------------------------
Name: Xxxxx Xxxxxx
Title:
Xxxx executed and agreed on February 14, 2000
PEAPOD, INC
By: /s/ Xxxx Xxxxxx
------------------------------
Xxxx Xxxxxx
President
Term Sheet
Issuer: Peapod, Inc.
Security: Convertible Preferred Stock (the "Preferred Stock"), which will
be structured such that it will be considered common stock for
U.S. Federal income tax purposes.
Amount: $120,000,000 liquidation preference in the aggregate, issued as
1,200,000 convertible preferred shares, each with a liquidation
preference of $100 (together with any paid in kind shares, the
"Shares") of which the Initial Purchasers will initially own at
least $75,000,000 and buy or place the remainder with
purchaser(s) mutually acceptable to the Company and the Initial
Purchasers (such purchasers, together with the Initial
Purchasers, the "Purchasers").
Each Purchaser will acquire the shares of Preferred Stock, and
any share of stock purchased upon exercise of the Warrants
(unless such purchase has been registered under the Securities
Act of 1933 (the "Securities Act")), for its own account for
investment purposes and not with a view to reselling or
distributing such securities in any transaction that would
constitute a "distribution" within the meaning of the Securities
Act. Each Purchaser will acquire the shares of Preferred Stock
as an individual entity and not as part of a "group" (as defined
under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), except for its affiliates.
Each Purchaser shall be required to purchase the "Minimum
Commitment" set forth below opposite such Purchaser's name.
Purchaser Minimum Commitment
--------- ------------------
Apollo $ 30,000,000
Yucaipa 30,000,000
Pequot 25,000,000
GRP 20,000,000
Ares 10,000,000
Rallye 5,000,000
------------
Total $120,000,000
Dividends: The holders of the Preferred Stock shall be entitled to receive
cumulative dividends, payable quarterly in arrears at an annual
rate of 7.5%, subject to reduction to 5.0% after the Company
completes a Qualified Equity Offering (as defined below).
Dividends shall be payable as follows:
(i) through the fifth anniversary of the Closing Date, only in
additional shares of Preferred Stock with an aggregate
liquidation preference equal to the dividend then due; and
(ii) thereafter in cash.
The holders of shares of Preferred Stock shall share in any
dividends declared on the Company's common stock (the "Common
Stock") on an as-converted basis.
"Qualified Equity Offering" means a sale by the Company, in a
single underwritten public offering, of Common Stock for net
proceeds of at least $75 million at a price per share in
excess of (i) if the sale occurs within one year after the
Closing Date, two times the Conversion Price (as defined
below) of the Preferred Stock, and (ii) if the sale occurs
more than one year after the Closing Date, three times the
Conversion Price.
Liquidation
Preference: Upon any liquidation, dissolution or other winding up of the
affairs of the Company, before any distribution or payment is
made to any equity security of the Company ranking junior to
the Preferred Stock, the holders of the Preferred Stock shall
be paid a liquidation preference equal to the greater of (i)
$100 per share, plus the value of accumulated and unpaid
dividends through and including the date of determination,
whether or not earned or declared, or (ii) the amount that
such holders would receive if they had converted their shares
of Preferred Stock into Common Stock.
Use of Proceeds: The proceeds of this offering shall be used to provide capital
for the development of distribution facilities, advertising
and marketing expenses and general corporate purposes.
Conversion: Each holder of Preferred Stock shall have the right to convert
its shares at any time into shares of Common Stock. The number
of shares of Common Stock into which shares of Preferred Stock
may be converted shall be determined by dividing the
liquidation preference of such shares, plus all accumulated
and unpaid dividends thereon, by the Conversion Price. The
conversion price shall initially be $8.00 (the "Initial
Conversion Price"), and shall be subject to adjustment
pursuant to the antidilution provisions below (as so adjusted,
the "Conversion Price").
Antidilution
Provisions: Full ratchet antidilution protection shall be provided for
reorganizations, stock splits, stock dividends, combinations,
consolidations, stock distributions, recapitalizations,
reclassifications or other similar events. Full ratchet
antidilution protection shall also be provided for (i) future
issuances of Common Stock (or securities convertible or
exercisable into Common Stock) below the Conversion Price or
below the then current market price of the Common Stock,
except for (x) issuances of Excluded Securities or (y)
underwritten public offerings at a price per share not below
the Conversion Price and with an underwriting discount that
does not exceed 7%; and (ii) redemptions above the then
current market price of the Common Stock. "Excluded
Securities" shall mean (a) shares of Common Stock issued
pursuant to the exercise of options and warrants which are
currently outstanding, (b) options and warrants to purchase,
in the aggregate, up to 500,000 shares of Common Stock (and
the shares issued upon exercise thereof) approved by the Board
and (c) in addition to options and warrants
referred to in clause (b), options and warrants to purchase
shares of Common Stock (and the shares issued upon exercise
thereof) issued pursuant to stock option plans for the benefit of
employees which plans have been approved by the Board and the
Company's stockholders.
Mandatory
Redemption: The Preferred Stock shall be mandatorily redeemable on the
twelfth anniversary of the original issuance date.
Optional
Redemption: Upon a Change of Control, (i) the liquidation preference of the
Preferred Stock shall be increased by the amount of dividends
that would have been paid on the shares then outstanding from the
date of the Change of Control through the fifth anniversary of
the Closing Date; and (ii) the Company shall offer to purchase
the shares of Preferred Stock at 100% of their minimum stated
liquidation preference plus all accumulated and unpaid dividends
and dividends accelerated pursuant to (i) above.
"Change of Control" means (i) the sale or other disposition of
all or substantially all assets of the Company, (ii) the adoption
of a plan relating to the liquidation or dissolution of the
Company, (iii) any person or group (other than a group including
any of the Initial Purchasers) becoming the beneficial owner of a
majority of the outstanding Common Stock, (iv) the first day on
which the continuing directors (i.e., directors who were
directors on the closing date or were subsequently elected with
the approval of a majority of the then continuing directors)
cease to represent at least a majority of the directors then
serving, or (v) delisting of the Common Stock (after a reasonable
cure period).
Call: At any time after the fifth anniversary of the Closing Date, the
Company may, upon 60 days notice, redeem all, but not less than
all, of the outstanding shares of Preferred Stock for an amount
per share equal to 103% of the liquidation preference thereof,
plus any accumulated and unpaid dividends thereon.
Warrants: Upon any purchase of Preferred Stock hereunder, each Purchaser
shall receive detachable warrants (the "Warrants") to purchase
one share of Common Stock for each share of Common Stock into
which such Purchaser's Preferred Stock is then convertible. The
strike price per share for each Warrant shall be equal to the
lowest of (i) $8.00; (ii) 105% of the average closing price of
the Common Stock over the 10 trading days prior to first
announcement by the Company of the investment in the Preferred
Stock contemplated by this term sheet; and (iii) either (x) if
the initial purchase of Preferred Stock by the Purchasers occurs
on or before March 3, 2000, 105% of the average closing price of
the Common Stock over the 10 trading days prior to such purchase,
or (y) if such purchase occurs after March 3, 2000, 105% of the
average closing price of the Common Stock over the 15 trading
days prior to such purchase (the "Warrant Strike Price"). The
Warrants shall have a term of ten years from their date of
issuance and may be exercised on a cashless basis. The Warrant
Strike Price shall be subject to the same
antidilution provisions described above in connection with the
Initial Conversion Price. If necessary to comply with applicable
antitrust laws, the Warrants will be exercisable for shares of
common stock that are non-voting, but only for so long and only
to the extent necessary to comply with such laws. If the
shareholder approval necessary for the Company's Common Stock to
continue to be listed on the Nasdaq National Market is not
obtained by the date 150 days after the Closing Date, (i) the
Warrant Strike Price will be reduced by 50%, and (ii) until such
shareholder approval is obtained, the Warrants will be
exercisable for shares of non-voting common stock.
Standstill: Each Purchaser will execute a standstill agreement with the
Company pursuant to which the Purchaser and its affiliates will
agree, for a period of 5 years, not to increase their aggregate
Common Stock interest (on an as-converted basis) above their
aggregate Common Stock interest represented by the Shares
purchased by them, as described in this term sheet, except for
(i) pay-in-kind dividends on the Preferred Stock, (ii)
conversion of Preferred Stock, (iii) the exercise of Warrants,
and (iv) the exercise of preemptive rights described herein.
Each Purchaser will agree under the standstill agreement that
neither it nor its affiliates will (w) solicit proxies or
consents to vote or otherwise encourage a proxy contest in
opposition to management's approved slate; (x) solicit or
otherwise encourage any shareholder proposal not supported by
the Board; (y) form, join or in any way participate in a "group"
(as defined under the Exchange Act), except with its affiliates;
or (z) enter into any arrangements with any third party with
respect to the foregoing. The foregoing restrictions in the
standstill agreement shall immediately and automatically be
suspended upon the occurrence and during the continuation of any
of the following events: (a) the filing with the SEC of a
Schedule 13D (or any successor filing) by any person, entity or
group, other than the Initial Purchasers, indicating that such
person, entity or group has acquired 15% or more of the
outstanding shares of Common Stock and intends to effect a
change of control of the Company, whether by tender offer,
merger, proxy contest or otherwise; (b) the commencement of a
tender offer by any person, entity or group, other than the
Initial Purchasers, to acquire 30% or more of the outstanding
shares of Common Stock; (c) the solicitation of proxies by any
party, other than a Purchaser, that is intended to effect a
change in the majority of members of the Board; or (d) failure
of the Company to comply with any of its material agreements
with such Purchaser to the extent that it has a material adverse
impact on the Purchaser's rights or their investment in the
Company.
In addition, each Purchaser will agree not to exercise its
Warrants for a period of one year following the initial closing
date unless the Company is involved in a significant
transaction, including, without limitation, a merger, tender
offer, recapitalization, reorganization, liquidation, sale of
substantially all of its assets or similar transaction.
Voting Rights: The holders of Preferred Stock shall vote together with the
holders of shares of Common Stock on all matters, except as
specifically provided herein or as otherwise required by law.
Each share of Preferred Stock shall have a
number of votes equal to the total number of shares of
Common Stock then issuable upon conversion of such shares.
In addition, holders of shares of Preferred Stock, voting
separately as a class, will have the right to approve (i)
amendments to the charter or bylaws that adversely affect
the holders of Preferred Stock and (ii) as long as at least
33% of the shares of Preferred Stock originally issued to
the Initial Purchasers is outstanding, any issuance of
senior or parity stock or any junior stock other than Common
Stock, any subdivision of Preferred Stock and any
reclassification or change in the outstanding capital stock.
Protective
Provisions: So long as the Initial Purchasers hold shares of Preferred
Stock and such shares (taken together with any shares of
Common Stock held by such Purchasers which were issued upon
conversion of Preferred Stock) equal at least 51% of the
shares of Common Stock issuable upon conversion of shares of
Preferred Stock outstanding on the Closing Date, the Company
shall not, and shall not permit any of its subsidiaries to,
(A) without the consent of the holders of a majority of the
shares of Preferred Stock then outstanding, (i) merge or
consolidate with any person or entity unless the per share
consideration received by the holders of shares of Preferred
Stock in such transaction exceeds three times the Conversion
Price, (ii) effect, approve or authorize any liquidation or
any recapitalization or reorganization of the Company or any
subsidiary unless the per share consideration received by
the holders of shares of Preferred Stock in such transaction
exceeds three times the Conversion Price, (iii) directly or
indirectly pay or declare any dividend, make any
distribution upon, redeem or repurchase any shares of
capital stock (except a dividend on, distribution upon or
redemption of Preferred Stock), (iv) agree to, or permit any
subsidiary to agree to, any provision in any agreement that
would impose any restriction on the Company's ability to
honor the exercise of any rights of the holders of the
Shares, or (v) enter into any transaction with any affiliate
of the Company, except upon terms which are not less
favorable and reasonable than those obtainable in an arm's-
length transaction with a party that is not an affiliate, or
(B) without the approval of the Board, including a majority
of directors (if any) nominated by holders of the Preferred
Stock, (i) materially alter or change the business of the
Company as it is currently conducted (including related
Internet ventures), (ii) hire or fire, or amend the
employment terms, of the CEO, COO or CFO of the Company,
(iii) make or commit to capital expenditures or acquire or
dispose of any business or assets for consideration with a
value in excess of $2.5 million (including all assumed debt,
all cash payments, and the fair market value of all
securities or other property issued as consideration) or
incur, assume or otherwise become obligated for indebtedness
in excess of $10 million, or (iv) alter any equity incentive
plan or materially alter any cash bonus plan for executive
officers.
Preemptive Rights: Holders of Preferred Stock will have the opportunity to
purchase their pro rata portions of any future private
placements or public offerings by the Company of equity or
equity-linked securities, other than (i) Excluded
Securities, and (ii) securities issued as consideration
in bona fide acquisitions which have been approved by the
Board.
Restrictions on
Transfer: None of the Preferred Stock, the Warrants or the Common
Stock issuable upon conversion of the Preferred Stock
(collectively, the "Securities") has been registered
under the Securities Act and the Securities may not be
sold or transferred without registration under the
Securities Act or an exemption therefrom. In connection
with a transfer by a Purchaser pursuant to an exemption
from registration, the Company will have the right to
require such Purchaser to deliver an opinion of counsel
stating that such transfer is being made in compliance
with the Securities Act.
Information Rights: The Company shall provide the Initial Purchasers access
to all books and records of the Company and shall deliver
to each Purchaser (i) monthly, quarterly and annual
financial statements, (ii) copies of all filings made
with the Securities and Exchange Commission, (iii)
notification of any material defaults or litigation, and
(iv) any other information reasonably requested. The
Company shall provide each holder of Shares with copies
of SEC required filings or, if the Company no longer is
required by the SEC to make such filings, the equivalent
thereof.
Board of Directors: The Board of Directors shall consist of not more than
eleven members and shall not include more than three
members of management. The holders of the Preferred
Stock, voting separately as a class, shall have the right
to elect five directors, at least one of whom will not be
an employee or officer of any of the Initial Purchasers
and will be a person reasonably acceptable to the
Company. The directors elected by the holders of the
Preferred Stock shall be represented on each committee of
the Board of Directors in at least the same proportion as
they are represented on the Board.
At such time as the Initial Purchasers (i) hold no shares
of Preferred Stock or (ii) hold shares of Preferred Stock
which, taken together with any shares of Common Stock
held by such Purchasers which were issued upon conversion
of Preferred Stock, equal less than 51% of the shares of
Common Stock issuable upon conversion of shares of
Preferred Stock owned by the Initial Purchasers on the
Closing Date, the paragraph immediately above shall no
longer be operable, though the Initial Purchasers shall
be entitled to representation on the Board proportional
to the Initial Purchasers' ownership of the Company,
rounded up to the nearest whole person.
Upon (i) a payment default under, or an acceleration of,
indebtedness of the Company exceeding $10 million (which
default shall go uncured for more than 30 days) or (ii) a
material breach by the Company of the certificate of
designation governing the Preferred Stock, the holders of
the Preferred Stock, voting separately as a class, shall
have to right to elect a majority of the Board of
Directors. The Board of Directors shall use reasonably
commercial efforts to cure promptly the event that
triggered such special right and, upon such cure, such
special right shall terminate and the Board of Directors
shall be restored in accordance with the two paragraphs
above.
The Company shall indemnify its directors to the fullest
extent permitted by law and maintain customary directors
and officers insurance.
Registration Rights: Pursuant to a registration rights agreement between the
Company and the Initial Purchasers, the Company will grant
customary registration rights to the Initial Purchasers
with respect to the Shares, Warrants and the underlying
shares of Common Stock into which the Shares are
convertible and the Warrants are exercisable. The
registration rights agreement will include unlimited
piggyback rights and two demand registrations, which
demand registrations may be made by Purchasers holding at
least 50% of the shares of Common Stock then held by the
Initial Purchasers (assuming the conversion of all shares
of Preferred Stock and the exercise of all Warrants),
provided that the registration is for a minimum of $10
million. With respect to shelf registrations, the Company
shall have the right to suspend the use of shelf
registrations from time to time, but not for more than 45
days in any consecutive 12 month period, if the Company
would otherwise be required to disclose material non-
public information and the Company has a bona fide
business purpose for not disclosing such information. The
Initial Purchasers may assign their rights under the
registration rights agreement to any transferee of Shares,
Warrants or shares of Common Stock into which the Shares
are converted or for which the Warrants are exercised.
Indemnification: The Company shall indemnify each Purchaser and its
affiliates, partners, officers, directors, employees,
agents and representatives against any demand, claim, or
action by any third party (including derivative actions
brought through or in the name of the Company) in
connection with (i) the status or conduct of the Company,
(ii) the execution, delivery and performance of the
documents entered into in connection with the purchase of
the Shares and the transactions contemplated thereby, or
(iii) the indemnified party's role with the Company or
such transactions, in each case, except to the extent of
(A) any willful misconduct or gross negligence of the
indemnified party or (B) any breach by an indemnified
party of its obligations under any agreement between such
party and the Company, including, without limitation, the
standstill agreement and the purchase agreement for the
Preferred Stock.
Shareholder and
Board Approval: The Preferred Stock will be divided into $28,000,000 of Series
B Preferred Stock and $92,000,000 of Series C Preferred Stock.
Upon payment therefore, the Series B Preferred Stock will be
issued on the Closing Date, prior to the expiration or
termination of the Xxxx-Xxxxx-Xxxxxx waiting period, and shall
initially be non-voting securities that will convert into
voting securities at such time as the Xxxx-Xxxxx-Xxxxxx waiting
period has expired or is terminated. If Xxxx-Xxxxx-Xxxxxx
approval has not been obtained within 120 days, until such
approval has been obtained, the dividend rate on the Preferred
Stock will increase to 12.5% per year, the Conversion Price
will be reduced by 50%, and the Preferred Stock will be
convertible into common stock which is non-voting only to the
extent necessary to comply with antitrust laws. The Series C
Preferred Stock (and related Warrants) shall be issued upon the
date (the "Subsequent Closing Date") which is 10 days after
written notice from the Company of (i) the expiration or
termination of the Xxxx-Xxxxx-Xxxxxx waiting period, and (ii)
the Company has obtained any shareholder approval necessary for
the Company to continue to be listed on the NASDAQ National
Market following the conversion of all outstanding Series B and
Series C Preferred Stock. If such shareholder approval is not
obtained by the date 120 days after the Closing Date (the
"Outside Date"), the dividend rate on the Preferred Stock shall
increase to 12.5% per annum until such approval is obtained.
The Company will commit to use its best efforts to obtain such
shareholder approval. The Board shall take appropriate action
to approve the documents and transactions contemplated hereby,
including, without limitation, such action as may be required
in order for the Initial Purchasers and their affiliates to
avoid being (i) one or more "Acquiring Persons" under the
Company's Stockholder Rights Agreement, dated as of June 9,
1997, or (ii) one or more "interested stockholders" under
Section 203 of the Delaware General Corporation Law.
