INVESTMENT AND STOCKHOLDERS AGREEMENT
Investment and Stockholders Agreement dated as of November 17, 1997
(the "Agreement"), by and among CUC International Inc., a Delaware corporation
with principal offices at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, Conn. 06901 ("CUC"), Net
Grocer Inc., a Delaware corporation with principal offices at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ("NetGrocer" or the "Company"), and the
stockholders of the Company listed on the signature pages hereto (the
"Stockholders").
WHEREAS, the Company operates an Internet-based service (the
"NetGrocer Service"), currently under the name "NetGrocer", which, among other
things, provides grocery shopping services to individuals, businesses and other
groups;
WHEREAS, the NetGrocer Service is accessible for usage through its
World Wide Web site on the Internet (the "NetGrocer Website"), which is
currently identified as "▇▇▇.▇▇▇▇▇▇▇▇▇.▇▇▇";
WHEREAS, CUC operates an Internet-based business under the name
"NetMarket" (such business, "NetMarket"), which provides online, membership-
based consumer services, in such areas as travel, shopping, auto and dining, to
its members as well as to other individuals, businesses and groups;
WHEREAS, NetMarket is accessible for membership and usage through its
World Wide Web site on the Internet (the "NetMarket Website"), which is
currently identified as "▇▇▇.▇▇▇▇▇▇▇▇▇.▇▇▇";
WHEREAS, concurrently with the execution of this Agreement, CUC and
the Company are also entering into a Marketing Agreement (the "Marketing
Agreement"), pursuant to which, among other things, NetMarket will offer direct
access from the NetMarket Website to the NetGrocer Website to all users of
NetMarket and NetGrocer will offer direct access from the NetGrocer Website to
the NetMarket Website to all users of NetGrocer;
WHEREAS, CUC desires to acquire a convertible debenture of the Company
in the form attached hereto as Exhibit A (the "Convertible Debenture"), which
Convertible Debenture may be converted at any time at CUC's option into a
certain number of shares of common stock, par value $.01 per share, of the
Company (the "Common Stock"), and the Company desires to issue and sell to CUC
such Convertible Debenture (and, upon conversion of such Convertible Debenture,
the shares of Common Stock issuable upon such conversion), in each case upon
the terms and subject to the conditions of this Agreement;
WHEREAS, the Stockholders believe it to be in their best interests and
in the best interests of the Company that they enter into this Agreement
providing
for, among other things, certain rights and restrictions with respect to the
shares of Common Stock owned by them and their transferees.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, and intending to be legally bound hereby, CUC and
NetGrocer agree as follows:
ARTICLE I
DEFINITIONS; INTERPRETATION
1.1 Definitions. As used in this Agreement, unless the context
requires otherwise, the following terms shall have the meanings ascribed to
them below (such terms to be equally applicable to both singular and plural
forms of the terms defined or referred to):
"Affiliate" or "affiliate" means, with respect to any specified
person, (x) any general partner, director or senior executive of, or any person
or entity that beneficially owns at least a majority of the issued and
outstanding capital stock or other equity interests of, such specified person,
or (y) any other person or group of persons directly or indirectly controlling,
controlled by or under common control with, such specified person, at any time
during the period for which such affiliation is being determined.
"Associate" or "associate" means, with respect to any specified
person, (x) any limited partner or employee of such specified person, (y) any
lineal descendant, spouse, member of the immediate family, heir, executor,
administrator, testamentary trustee, legatee or beneficiary of such specified
person, or (z) any "associate" (as such term is defined in Rule 12b-2 under the
Securities Exchange Act of 1934, as amended) of such specified person.
"Board" means the Board of Directors of the Company as constituted
from time to time.
"Business Day" means any calendar day which is not a Saturday, Sunday
or public holiday under the laws of New York State.
"Capital Stock" means any (i) capital stock of any class or classes of
the Company, and any other equity securities of, or other equity or ownership
interests in, the Company and (ii) any securities or rights convertible into,
or exercisable or exchangeable for, or evidencing the right to subscribe for,
any of the items referred to in clause (i) above, including, but not limited
to, the Common Stock and any options to purchase Common Stock. The term
"Capital Stock" shall include, except as otherwise provided herein, any and all
shares of capital stock or other equity securities of or interests in the
Company or any successor or assign of the Company (whether by merger,
consolidation, sale of assets or otherwise), which may be issued
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in respect of, in exchange for, or in substitution for any shares of Capital
Stock, by reason of any stock dividend, split, reverse split, combination,
recapitalization, reclassification, merger, consolidation or otherwise.
"Charter Documents" means the Certificate of Incorporation and By-Laws
of the Company, as may be in effect from time to time.
"control" (including, with correlative meanings, such similar terms as
"controlling", "controlled by" or "under common control with"), as applied to
any specified person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
specified person, whether through the ownership of voting securities, by
contract or otherwise.
"Default" means, with respect to any particular agreement, (x) any
material breach of or default under such agreement, (y) any event which could
(either with or without notice or lapse of time or both) give rise to any right
of termination, cancellation or acceleration or any obligation to repay with
respect to such agreement, or (z) any event which could result in either a
material increase in the obligations or liabilities of, or a material loss of
any benefit to which, the party in question or any of its affiliates may be
entitled or subject to under such agreement.
"Duly Endorsed" means (i) duly endorsed in blank by the person or
persons in whose name a stock certificate or certificate representing a debt
security is registered or (ii) accompanied by a duly executed stock or security
assignment separate from the certificate, in each case with the signature(s)
thereon guaranteed by a commercial bank or trust company or a member of a
national securities exchange or the National Association of Securities Dealers,
Inc.
"Fully-Diluted Basis" means taking into account all of the outstanding
capital stock of, and other equity interests in, the Company owned or held by
the person or persons in question, including the number of shares of capital
stock and other equity interests which would be issued to or received by such
person or persons assuming (x) the conversion of all outstanding shares of
convertible capital stock and other convertible securities of the Company held
by such person or persons and (y) the exercise of all warrants, options and
other rights (including, without limitation, employee stock options), whether
vested or unvested, to purchase capital stock of, or other equity interests in,
the Company which are then owned or held by such person or persons; provided
that, for purposes of this definition of "Fully-Diluted Basis", in calculating
the amount of shares or other equity interests which would be outstanding upon
the conversion of any options referred to in clause (y) above, there shall not
be included in such amount (i) an amount equal to ten percent (10%) of the
number of shares covered by those employee stock options which have been
granted by the Company prior to the date hereof but which are not yet fully
vested as of the date hereof, and (ii) any shares covered by those employee
stock options which may be granted by the Company after the date hereof either
in compliance with the
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provisions of clauses (A) and (B) of Section 5.1(b)(i) below or with CUC's
prior written consent.
"GAAP" means U.S. generally accepted accounting practices, as in
effect on the date any calculation or financial statement preparation hereunder
is made, applied on a basis consistent with prior periods.
"Governmental Entity" means any governmental authority, court,
administrative agency or commission or other governmental or regulatory body or
entity, whether federal, state, local or foreign.
"Intellectual Property" means any patent, copyright, trademark, trade
name, service ▇▇▇▇, service name, brand ▇▇▇▇, brand name, logo, Internet domain
name or industrial design, any registrations thereof and pending applications
therefor (to the extent applicable), any other intellectual property right
(including, without limitation, any proprietary know-how, trade secret, trade
right, formula, confidential or proprietary report or information, any
marketing data, customer list or membership list, and any computer program,
software, database right or data right), any license or other contract relating
to any of the foregoing, and any goodwill associated with any business owning,
holding or using any of the foregoing.
"IPO" means an initial public offering of common equity securities of
the Company involving both (x) the sale of either (i) forty percent (40%) or
more of the total common equity of the Company (calculated on a Fully-Diluted
Basis) to the general public, or (ii) common equity of the Company to the
general public with net proceeds to the Company of not less than $25 million,
in either case whether involving a primary offering or secondary offering or a
combined primary and secondary offering of such securities, and (y) the listing
of such securities on a national securities exchange or on the NASDAQ Stock
Market or NASDAQ National Market.
"Law" means any statute, law, ordinance, rule, regulation or
administrative ruling or any governmental permit, franchise or license or any
injunction, judgment, order or consent or similar decree or agreement, whether
federal, state, local or foreign.
"Losses" means any and all deficiencies, judgments, settlements,
demands, claims, actions or causes of action, assessments, liabilities, losses,
damages (whether direct, indirect, incidental or consequential), interest
amounts, fines, penalties, costs and expenses (including, without limitation,
reasonable legal, accounting and other costs and expenses incurred in
connection with investigating, defending, settling or satisfying any and all
demands, claims, actions, causes of action, suits, proceedings, assessments,
judgments or appeals, and in seeking indemnification therefor).
"Permitted Transferee" means the Company and CUC and, in the case of
any party hereto (including CUC and each Stockholder) or any other person
admitted as
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a stockholder of the Company pursuant to the terms of this Agreement: (i) any
Affiliate of such party or person, (ii) any Associate of such party or person
or of any Affiliate of such party or person, or (iii) any trust, the
beneficiaries of which, or corporation or partnership, the stockholders or
general or limited partners of which, include only a person specified in
clauses (i) or (ii) immediately above; provided that the term "Permitted
Transferee" shall only include (x) any bona fide transferee who or which has
agreed in writing, in accordance with Section 6.5 hereof, to be bound by the
terms and conditions of this Agreement to the same extent and in the same
manner as the Stockholder transferring such Shares (except that neither the
Company nor CUC need enter into any such separate written agreement), and (y)
any bona fide transferee to whom or to which such transfer is in compliance
with all applicable securities and other laws.
"person" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture or
other entity of whatever nature.
"Purchase Price" means, with respect to any Capital Stock subject to
the provisions of this Agreement, a cash amount equal to the fair market value
of the consideration to be paid for such Capital Stock (whether such
consideration is in the form of cash, securities, other assets or the
assumption of liabilities, or any combination thereof), without assigning any
value to the terms of the particular transaction which are generally
non-economic in nature (e.g., the representations, warranties, covenants,
conditions and indemnification and other such provisions, if any, relating to
such transaction) and without assigning any value to any business relationships
arising as a result of the consummation of the transaction in question (unless
the Board and each of the CUC Nominees mutually agrees to assign a specific
value to any such business relationships).
"Share Ownership Interest" means an amount, expressed as a percentage,
equal to the proportionate amount of the Capital Stock and other equity
interests in the Company (calculated on a Fully-Diluted Basis) that a
particular person owns or holds, in comparison to the total amount of all
Capital Stock and other equity interests in the Company (calculated on a
Fully-Diluted Basis) that are owned or held by all Stockholders and other
persons (including the particular person in question), in each case as of the
date in question.
"Stockholder" shall have the same meaning as set forth in the preamble
to this Agreement; provided that the term "Stockholder" shall include both such
Stockholder and such Stockholder's Permitted Transferees who or which acquire
Capital Stock from such Stockholder and enter into supplementary agreements in
accordance with the terms of Section 6.5 of this Agreement, as well as any
other person admitted as a stockholder of the Company pursuant to the terms of
Section 6.5 of this Agreement.
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"Taxes" means (A) all taxes, charges, fees, levies, or other similar
assessments, including without limitation, income, gross receipts, ad valorem,
premium, excise, real property, personal property, windfall profit, sales, use,
transfer, licensing, withholding, employment, payroll, estimated and franchise
taxes imposed by the United States, any state, local, or foreign government, or
any subdivision, agency, or other similar entity of the United States, or any
such government, and any interest, fines, penalties, assessments, or additions
to tax resulting from, attributable to, or incurred in connection with any such
tax or any contest or dispute thereof, and (B) any Taxes (as defined in clause
(A)) for which the Company is liable as a transferee, indemnitor, guarantor,
surety or in a similar capacity under any contract, arrangement, understanding
or commitment, whether oral or written, or by reason of having been a member of
any affiliated, consolidated, combined or unitary group.
"Tax Returns" means any report, return, statement, or other
information required to be supplied to a federal, state, local or foreign
taxing authority in connection with Taxes.
"Third Party" means, with respect to any Stockholder, any person other
than such Stockholder's Permitted Transferees.
"Transfer" means any direct or indirect sale, assignment, transfer,
pledge, mortgage, charge, encumbrance or other disposition of the whole or any
part of any Stockholder's Capital Stock (or any beneficial interest or voting
rights therein) or any grant by such Stockholder of a warrant, option or other
right to acquire the whole or any part of such Stockholder's Capital Stock;
provided that the term `Transfer' shall not include any bona fide pledge or
hypothecation of the whole or any part of such Stockholder's Capital Stock to a
financial institution in connection with any loan from such financial
institution.
"Violation" means, with respect to any purchase of securities of the
Company, any event or circumstance pursuant to which the purchase of such
securities (together with any other purchases of such securities pursuant to
this Agreement) would (x) conflict with or result in a violation of, any law,
statute, rule, regulation, order, writ, injunction, decree or judgment
promulgated or entered by any federal, state, local or foreign court or
governmental authority applicable to either the Company, CUC or any of their
respective subsidiaries or any of their respective assets, or (y) result in a
Default, or constitute a Default, under any agreement to which either the
Company, CUC or any of their respective subsidiaries is a party or by which any
of their respective assets may be bound.
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ARTICLE II
SHARE SUBSCRIPTION BY CUC;
REPRESENTATIONS AND WARRANTIES
2.1 Subscription for Shares of Common Stock. CUC hereby agrees to
purchase from the Company, and the Company hereby agrees to issue and sell to
CUC, the Convertible Debenture in the form attached hereto as Exhibit A (the
"Convertible Debenture"), for an aggregate purchase price of U.S.$5,000,000.00.
The Company acknowledges and agrees that such Convertible Debenture shall give
CUC the right to convert such Convertible Debenture at any time at CUC's option
into 42,458 duly authorized, validly issued, fully paid and nonassessable
shares (such shares, the "Shares") of Common Stock (subject to adjustment
pursuant to the provisions of such Convertible Debenture), that such number of
Shares constitutes (assuming that such Convertible Debenture were converted as
of the date hereof) a twenty-five percent (25%) Share Ownership Interest, and
that such Shares shall, when issued, be validly issued, fully paid and
non-assessable and shall be free and clear of any and all Encumbrances (as
defined below). Accordingly, CUC shall, no later than two (2) Business Days
after the date hereof, pay U.S.$5,000,000.00 to the Company via wire transfer
to such U.S. bank account as may be designated by the Company, and promptly
following receipt of such amount by such bank, the Company shall deliver to CUC
a certificate representing such Convertible Debenture. For purposes of this
Agreement, the term "Encumbrance" shall mean and include any mortgage, pledge,
claim, charge, lien, encumbrance, interest, option, restriction, condition,
violation, security interest or assessment of any nature affecting in any way
the assets or property involved.
2.2 Representations, Warranties and Covenants of Each Party. Each
party hereby represents, warrants and covenants, with respect to itself, as of
the date of this Agreement (or, as the case may be, as of the date of the
supplementary agreement entered into pursuant to Section 6.5 hereof) to the
other parties hereto:
(a) Valid Existence. If such party is a corporation,
partnership or other similar entity, it is duly organized and validly existing
under the laws of the jurisdiction of its organization or incorporation and, if
relevant under such laws, it is in good standing.
(b) Power and Authority. It has all requisite power and
authority to execute and deliver, and to perform all of its obligations under,
this Agreement and, if required, it has taken all necessary action to authorize
such execution, delivery and performance.
(c) No Violation or Conflict. The execution and delivery of,
and the performance of its obligations under, this Agreement by such party do
not and will not (A) violate any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award presently in effect applicable to
such party, (B) with or without the giving of notice or the passage of time or
both, result in a breach or
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constitute a Default under any agreement or instrument to which it is a party
or by which it is bound, or (C) require any authorizations, consents,
approvals, licenses, exemption or filings with any third party or governmental
authority (except with respect to any governmental filings or authorizations
required in connection with any of the transactions contemplated pursuant to
either Article V or Article VII of this Agreement).
(d) Enforceability of Obligations. This Agreement constitutes
the legal, valid and binding obligation of such party, enforceable against it
in accordance with its terms, except as such may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and except as may be
limited by general principles of equity.
(e) Absence of Litigation. There is not pending or, to its
knowledge, threatened against it any action, suit or proceeding at law or in
equity or before any court, tribunal, governmental body, agency or official or
any arbitrator that is likely to affect the legality, validity or
enforceability against it of this Agreement or its ability to perform its
obligations under this Agreement.
2.3 Representations, Warranties and Covenants of the Company. In
addition to the representations and warranties set forth in Section 2.2 above,
the Company hereby represents, warrants and covenants to CUC that:
(a) Capital Structure. Attached hereto as Schedule 2.3(a)(i)
is a true and complete copy of the Charter Documents of the Company, as in
effect on the date hereof. Except as set forth in Schedule 2.3(a)(ii), (i) the
authorized capital stock of the Company consists solely of one million
(1,000,000) shares of Common Stock, and (ii) there are issued and outstanding
one hundred and fourteen thousand and forty (114,040) shares of Common Stock
and no other shares of Common Stock are issued and outstanding; no Shares are
held by the Company in its treasury. All outstanding shares of Common Stock are
validly issued, fully paid and non-assessable and are not subject to any
preemptive or other similar rights. Except as set forth in Schedule 2.3(a)(ii),
there are not as of the date hereof, and there will not be at the Closing, (x)
any outstanding or authorized options, warrants, calls, rights (including
preemptive rights), commitments or any other agreements of any character which
the Company or, to the Company's knowledge, any Stockholder, is a party to, or
may be bound by, requiring it to issue, transfer, dispose of, sell, purchase,
redeem or otherwise acquire (or to refrain from doing any of the foregoing) any
shares of Common Stock or any shares of Capital Stock, and (y) any
stockholders' agreements, voting trusts or other agreements or understandings
to which the Company or, to the Company's knowledge, any Stockholder, is a
party or by which it is bound relating to the voting of, or placing any
restrictions on, any shares of the capital stock of the Company.
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(b) Shares to be Issued to CUC; No Changes in Capital
Structure. Immediately after giving effect to the conversion of the Convertible
Debenture and assuming such conversion was effective as of the date hereof, the
Shares to be issued to CUC upon such conversion shall give CUC a Share
Ownership Interest equal to twenty-five percent (25%), as calculated on a
Fully-Diluted Basis. Such Shares will not, when issued, be subject to any
preemptive or other similar rights. Attached hereto as Schedule 2.3(b) is a
true and complete list of all of the holders of record, and to the best
knowledge of the Company, all beneficial holders, of Common Stock and of any
other Capital Stock as of the date hereof. On and prior to the date hereof,
except as set forth on such Schedule 2.3(a)(ii) and except as expressly
provided for in this Agreement, the Company has not (i) declared, authorized,
set aside, paid or distributed any dividend or other distribution, or any
option, warrant, call or right (including preemptive rights), (ii) issued,
transferred, disposed, sold, purchased, redeemed or otherwise acquired any
shares of Capital Stock, or (iii) entered into any agreement of any character
requiring the Company to take any of the actions referred to in clauses (i) and
(ii) above.
(c) Compliance with Laws. Except as set forth in Schedule
2.3(c) and except for those matters which in the aggregate would not result in
a Company Material Adverse Effect (as defined below), (x) the Company is, and
at all times has been, in material compliance with all Laws applicable to the
Company or to the conduct of the business or operations of the Company or the
use of its properties (including any leased properties) and assets, and (y) the
Company has not received, and does not know of the issuance or threatened
issuance by any Governmental Entity, of any notices of violation or alleged
violation of any Law applicable to the Company. Except as set forth in Schedule
2.3(c), to the best knowledge of the Company, there is no proposed legislation
or Law which, if enacted, is reasonably likely to result in a Company Material
Adverse Effect (other than any proposed legislation or Law which could affect
generally companies located within the United States or companies operating in
the same general industry as the Company). For purposes of this Agreement, the
term "Company Material Adverse Effect" means any material adverse change in, or
material adverse effect on, the business, prospects or value of the Company, or
any event or circumstance which would likely prevent, hinder or materially
delay the consummation of any of the transactions contemplated by this
Agreement.
(d) Litigation. Except as set forth in Schedule 2.3(d)(i),
there is no action, suit, claim, investigation or proceeding, whether at law or
in equity (each, a "Legal Proceeding"), pending or, to the best knowledge of
the Company, threatened that questions the validity of this Agreement or the
Marketing Agreement or any action taken or to be taken by the Company or, to
the best knowledge of the Company, any Stockholder in connection with any of
the transactions contemplated hereby or thereby. Schedule 2.3(d)(i) sets forth
an accurate and complete list, and a brief description (setting forth the names
of the parties involved, the court or other governmental or mediating entity
involved, the relief sought and the substantive allegations and the status
thereof), of (a) each material Legal Proceeding pending or,
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to the best knowledge of the Company, threatened against or affecting the
Company or any of its assets, (b) each pending Legal Proceeding against or
affecting the Company or any of its assets which is brought in the form of a
class action or a purported class action, and (c) each group of two or more
Legal Proceedings which (x) arise out of a common set of facts, events or
circumstances, have substantially similar allegations or seek substantially
similar relief and (y) when taken together as such a group, is reasonably
likely to result in a Company Material Adverse Effect. Except as set forth in
Schedule 2.3(d)(ii), none of the matters listed on such Schedule 2.3(d)(i)
should, if adversely determined, either individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect. Except as set
forth in Schedule 2.3(d)(iii), to the best knowledge of the Company, no event
has occurred and no circumstance, matter or set of facts exist which would
constitute a valid basis for the assertion by any third party of any claim or
Legal Proceeding, other than those listed on Schedule 2.3(d)(i), which could
reasonably be expected to result in a Company Material Adverse Effect. Except
as set forth in Schedule 2.3(d)(iii), there is no outstanding or, to the best
knowledge of the Company, threatened judgment, injunction, judgment, order or
consent or similar decree or agreement of any Governmental Entity against,
affecting or naming the Company or affecting any of its properties or assets.
(e) Taxes. Except as set forth in Schedule 2.3(e) and except
for those matters which in the aggregate would not result in a Company Material
Adverse Effect, (i) all Taxes with respect to any periods ending on or before
the date hereof which are due and payable (whether or not shown on any Tax
Return) by the Company have been paid in full and no such Taxes remain
outstanding, (ii) the Company has established, and prior to the Closing Date
will have established, current accruals that are adequate for the payment of
all Taxes payable by it which are not yet due and payable with respect to its
results of operations for all periods ending on or before the Closing Date,
(iii) the Company has filed all Tax Returns required to have been filed by it
prior to the date hereof and no extension of time for filing a Tax Return is
presently in effect, (iv) the Tax Returns that have been filed have been
accurately prepared, duly and timely filed and are correct and complete in all
material respects, (v) the Company has withheld and paid all Taxes required to
have been withheld and paid by it in connection with amounts paid to or owing
to any employee, independent contractor, creditor or any other third party, and
(vi) to the best knowledge of the Company, there has been no examination by any
Tax authority of any return of the Company or of any other person, firm or
corporation for which the Company is liable, and there are no audits, actions,
suits, proceedings, investigations or claims now pending or, to the best
knowledge of the Company, threatened against the Company in respect of any
Taxes. For purposes of this Section 2.3(e), any reference to the Company shall
include any corporation which merged with or into or was liquidated into the
Company or a subsidiary of the Company or otherwise is a predecessor of the
Company or such subsidiary.
(f) Pension and Benefit Plans. All employees of the Company
are set forth on Schedule 2.3(f), and all Contracts and other agreements with
such
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employees are set forth on Schedule 2.3(n). Except as set forth on Schedule
2.3(n), there are no employee benefit, pension, profit sharing, deferred
compensation, welfare or similar plans of the Company with respect to its
employees.
(g) Financial Advisors. No person or entity has acted
directly or indirectly as a broker, finder or financial advisor for or to the
Company or, to the best knowledge of the Company, the Stockholders in
connection with the negotiations relating to or the transactions contemplated
by this Agreement or the Marketing Agreement. No person or entity is entitled
to any fee or commission or like payment, or expense reimbursement, in respect
of this Agreement or the Marketing Agreement or any of the transactions
contemplated hereby or thereby, based in any way on agreements, arrangements or
understandings made by or on behalf of the Company or, to the best knowledge of
the Company, the Stockholders.
(h) Financial Statements. Attached hereto as Schedule 2.3(h)
are true, correct and complete copies of (x) the balance sheet of the Company
and its consolidated subsidiaries (if any such subsidiaries exist) as at
December 31, 1996 and the related statements of earnings, shareholders' equity
and cash flows of the Company for the period then ended (including the related
notes and schedules thereto, the "1996 Financial Statements"), and (y) the
balance sheet (the "Balance Sheet") of the Company and its consolidated
subsidiaries (if any such subsidiaries exist) as at September 30, 1997 (the
"Balance Sheet Date") and the related statements of earnings, shareholders'
equity and cash flows of the Company for the nine-month period then ended (the
"Interim Financial Statements", and together with the 1996 Financial
Statements, the "Financial Statements"). The Financial Statements were prepared
in accordance with the books and records of the Company, are complete and
correct in all material respects, have each been prepared in accordance with
GAAP and present fairly the consolidated financial position, results of
operations and changes in financial position or cash flows, whichever is
applicable, of the Company as at the dates and for the periods indicated
(subject, in the case of the Interim Financial Statements, to normal year-end
audit adjustments).
(i) No Undisclosed Liabilities. Except as set forth in
Schedule 2.3(i), both as of September 30, 1997 and since such time, the Company
has not had, and it has not incurred, any indebtedness, obligations or
liabilities of any kind (whether accrued, absolute, contingent or otherwise,
and whether due or to become due or asserted or unasserted), other than in the
ordinary course of the Company's business, and, to the best knowledge of the
Company, there was no basis for the assertion of any claim or liability of any
nature against the Company that would be required to be disclosed on a balance
sheet prepared as of September 30, 1997 or since such time in conformity with
GAAP, except for (x) those which were fully reflected in, reserved against or
otherwise described in the Balance Sheet, or (y) those matters which in the
aggregate would not result in a Company Material Adverse Effect.
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(j) Absence of Certain Material Developments. Except as set
forth in Schedule 2.3(j), since December 31, 1996, (a) there has been no event,
condition or state of facts of any character that has had or is reasonably
likely to have a Company Material Adverse Effect (other than those matters
which affect generally companies located within the United States or companies
operating in the same general industry as the Company), and (b) the Company has
not entered into any transaction or contract or conducted its business, other
than in the ordinary course of the Company's business (except for those matters
which in the aggregate would not result in a Company Material Adverse Effect).
(k) Intellectual Property.
(i) List of Intellectual Property; Sufficiency. Schedule
2.3(k)(i) sets forth a list of all Intellectual Property which is either owned
by the Company, licensed by the Company or otherwise used in its business
(other than commonly-used computer software which is generally available to the
public and the use rights to which were legally acquired by the Company either
for free or through established retail facilities) and indicates, with respect
to each item of Intellectual Property listed thereon, the owner thereof and, if
applicable, the name of the licensor and licensee thereof and the terms of such
license or other contract relating thereto. The Company owns or has the lawful
right to use all Intellectual Property necessary for the conduct of its
business as now conducted, except where any such failure to so own or to so
have the lawful right to use would not, either individually or in the
aggregate, result in a Company Material Adverse Effect.
(ii) Title; Validity; Pending Applications;
Infringements, Etc. Except as set forth in Schedule 2.3(k)(ii) and except for
those matters which in the aggregate would not result in a Company Material
Adverse Effect, (A) the Company has full legal and beneficial ownership (free
and clear of any and all Encumbrances) of, or a valid right to use (free of any
material restriction not entered into in the ordinary course of the Company's
business), all Intellectual Property listed on Schedule Schedule 2.3(k)(i), and
neither the Company nor any of its Affiliates has received any notice or claim
(whether written, oral or otherwise) challenging the Company's ownership or
rights in such Intellectual Property or suggesting that any other entity has
any claim of legal or beneficial ownership with respect thereto, (B) all
Intellectual Property listed on Schedule 2.3(k)(i) is legally valid and
enforceable without any material qualification, limitation or restriction on
its use, and neither the Company nor any of its Affiliates has received any
notice or claim (whether written, oral or otherwise) challenging the validity
or enforceability of any such Intellectual Property, (C) with respect to any
Intellectual Property listed on Schedule 2.3(k)(i) for which registration with
any private or governmental entity is permitted, but which has not yet been
registered, all applications with respect thereto have been made and are
pending and in good standing and are without challenge of any kind, (D) neither
the use of any of the Intellectual Property listed on Schedule 2.3(k)(i) nor
any other Intellectual Property used by the Company will conflict with,
infringe upon, violate or interfere with or constitute an appropriation
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of any right, title or interest held by any other person or entity, and there
have been no claims made with respect thereto, (E) to the knowledge of the
Company, no other person or entity is infringing in any material respect on any
part of the Intellectual Property listed on Schedule 2.3(k)(i), and (F) the
Company has not conducted its business, and has not used or enforced (or failed
to use or enforce) such Intellectual Property, in a manner that would result in
the abandonment, cancellation or unenforceability of any item of the
Intellectual Property, and the Company has not taken or failed to take any
action that would result in the forfeiture or relinquishment of any such
Intellectual Property used in the conduct of its business as now conducted. The
Company has a valid registration and full rights (free of any material
restriction) with respect to all Internet domain names which are currently used
by the Company in its business.
(iii) Protection and Maintenance of Intellectual
Property. Except as set forth in Schedule 2.3(k)(iii) and except for those
matters which in the aggregate would not result in a Company Material Adverse
Effect, (A) the Company has taken all reasonable steps to (x) protect the
Company's rights to the Intellectual Property listed on Schedule 2.3(k)(i) and
(y) to prevent the unauthorized use thereof by any other person or entity, in
each case in accordance with standard industry practice, and (B) the Company
shall use all reasonable efforts to maintain, or cause to be maintained, the
Intellectual Property listed on Schedule 2.3(k)(i) in full force and effect.
Except as set forth in Schedule 2.3(k)(iii), neither the Company nor any
Stockholder nor any of their respective affiliates has granted to any other
person or entity any rights or permissions to use any of the Intellectual
Property listed on Schedule 2.3(k)(i), except in the ordinary course of the
Company's business.
(l) Real Property. Schedule 2.3(l)(i) sets forth an accurate
and complete list of all real property in which the Company has a leasehold
interest. Except as set forth in Schedule 2.3(l)(ii), (A) the Company does not
own or have the right to acquire, pursuant to any agreement, arrangement or
understanding, any real property, and (B) the Company has a good and valid
leasehold interest in each parcel of real property leased by it, free and clear
of all Encumbrances, except those Encumbrances which do not materially
interfere with the Company's use and enjoyment of such real property or
materially detract from or diminish the value thereof.
(m) Insurance. The Company currently maintains, and will
maintain, valid insurance policies, which policies provide coverage, both in
terms of scope and amount of coverage, for the Company and the operations
conducted by the Business, comparable to the coverage typically maintained by
other companies which are similarly situated (i.e., as to size of operations
and line of business) to the Company. Except as set forth in Schedule 2.3(m),
(A) there are no pending material claims against such insurance by the Company
or its Affiliates as to which the applicable insurers have denied coverage, (B)
to the best knowledge of the Company, there exist no material claims under such
insurance that have not been properly
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filed by the Company or its affiliates, and (C) the Company has not been
refused any insurance coverage by any insurer from which the Company has sought
coverage.
(n) Material Contracts.
(i) List of Certain Types of Contracts. Except as set
forth in Schedule 2.3(n)(i), the Company is not a party to, nor are any of its
properties or assets bound by, any (1) contract not made in the ordinary course
of the Company's business or the performance of which will extend over a period
greater than thirty (30) days and which is not cancelable by the Company
without penalty; (2) employment, consulting, independent contractor,
non-competition, severance, golden parachute or indemnification contract; (3)
advertising, public relations, franchise, distributorship or sales agency
contract; (4) contract involving the commitment or payment in excess of $50,000
for the future purchase of services, properties, materials or equipment; (5)
contract among stockholders or granting a right of first refusal or for a
partnership or for a joint venture or for the acquisition, sale or lease of any
properties or assets of the Company; (6) mortgage, pledge, conditional sales
contract, security agreement, factoring agreement or other similar contract
with respect to any property of the Company; (7) loan agreement, credit
agreement, promissory note, guarantee, subordination agreement, letter of
credit or any other similar type of contract; (8) retainer contract with
investment bankers, attorneys, accountants, actuaries, appraisers or other
professional advisers; (9) lease, sublease or other agreement under which the
Company uses or occupies or has the right to use or occupy, now or in the
future, any real property, (10) contract or agreement with any Governmental
Entity; (11) contract which would be reasonably likely to limit or restrain the
Company, or any owner or affiliate of the Company, from engaging in any line of
business, competing with any person, firm, corporation or other entity, or
conducting business in any particular geographic area, (12) contract relating
to the marketing, co-marketing, promotion or co-promotion of the NetGrocer
Service or any part thereof, (13) contract the performance or nonperformance of
which by the Company is reasonably likely to cause a Company Material Adverse
Effect, or (14) commitment or agreement to enter into any of the foregoing (the
contracts, agreements and other arrangements referred to in clauses (1) through
(14) above, collectively referred to as the "Contracts"). The Company has
delivered or otherwise made available to Purchaser and CUC true, correct and
complete copies of the Contracts listed in Schedule 2.3(n)(i), together with
all amendments, modifications and supplements thereto and side letters to which
the Company is a party affecting the obligations of any party thereunder. No
person or entity holds a power of attorney to act on behalf of the Company.
(ii) Enforceability; Defaults; Consents; Impending
Terminations; Etc. Except as set forth in Schedule 2.3(n)(ii) and except for
those matters which in the aggregate would not result in a Company Material
Adverse Effect: (A) to the best knowledge of the Company, each of the Contracts
listed, or required to be listed, on Schedule 2.3(n)(i), is valid and
enforceable in accordance
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with its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally
and subject, as to enforceability, to general principles of equity (regardless
of whether enforcement is sought in a proceeding at law or in equity) and to
general public policy limitations (e.g., certain public policy limitations
regarding the indemnification of violations of the federal securities laws, or
the scope, duration or geographic coverage of certain non-competition
provisions, etc.), (B) no Default exists under any Contract listed in Schedule
2.3(n)(i) either by the Company or, to the best knowledge of the Company, by
any other party thereto; (C) to the best knowledge of the Company, no third
party has asserted any claim of Default or breach under any of the Contracts
listed in Schedule 2.3(n)(i); (D) with respect to those Contracts listed in
Schedule 2.3(n)(i) that were assigned or subleased to the Company by a third
party, to the best knowledge of the Company, all necessary consents to such
assignments or subleases have been obtained, and (E) to the best knowledge of
the Company, there is no present intention on the part of any significant
supplier, customer or other business partner of the Company to either (x)
terminate or significantly change its existing business relationship with the
Company, either now or in the foreseeable future, or (y) fail to renew or
extend its existing business relationship with the Company at the end of the
term of any existing contractual arrangement such supplier or customer may have
with the Company.
(o) Related Party Transactions. Except as set forth in
Schedule 2.3(o) hereto, no Affiliate, and, to the best knowledge of the
Company, no Stockholder and no Permitted Transferee of any Stockholder, either
(i) has lent or borrowed any monies to or from or has outstanding any
indebtedness or other similar obligations to the Company, (ii) owns any direct
or indirect interest of any kind (except with respect to the ownership of not
more than five percent (5%) of any class of equity security in a publicly-held
company) in, or is a director, officer, employee, partner, affiliate or
associate of, or consultant or lender to, or borrower from, or has the right to
participate in the management, operations or profits of, any person or entity
which is (A) a competitor, supplier or distributor of the Company, (B) engaged
in a business related to the business of the Company or (C) participating in,
or has participated in, any material transaction to which the Company is a
party, (iii) is otherwise a party to, or has been a party to, any contract,
arrangement or understanding with the Company or (iv) owns or has any rights in
any assets (including, without limitation, Intellectual Property), properties,
licenses or rights which are used or leased (or were used or leased) by the
Company in the conduct of its business.
(p) No Misrepresentation. Neither this Agreement (including
the schedules hereto), nor the Marketing Agreement nor any information supplied
by or on behalf of the Company or any of its Affiliates to CUC, in connection
with this Agreement, the Marketing Agreement or the transactions contemplated
hereby or thereby, contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary to make the
statements contained herein
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or therein, in light of the circumstances under which they were made, not
misleading. To the best knowledge of the Company, there exist no facts or
circumstances which are reasonably likely to cause a Company Material Adverse
Effect after the date hereof (including after giving effect to the consummation
of the transactions contemplated pursuant to this Agreement), which have not
been set forth in the Financial Statements or disclosed with specificity in a
schedule attached to this Agreement; provided that the provisions of this
sentence shall not be deemed to be a representation or warranty as to any
events or circumstances which affect generally companies which operate in the
same general industry as the Company or affect generally companies located
within the United States.
ARTICLE III
CORPORATE GOVERNANCE
3.1 Voting Matters Related to Charter Documents. From and after the
date hereof, each Stockholder shall vote its shares of Capital Stock (to the
extent entitled to vote), at each regular or special meeting of stockholders of
the Company or in any written consent executed in lieu of such a meeting of
stockholders, and shall take all actions reasonably necessary, to ensure that
the Charter Documents do not, at any time, conflict with the provisions of this
Agreement.
3.2 Designation of CUC Directors. From and after the Closing Date,
each of the Stockholders shall vote its shares of Capital Stock (to the extent
entitled to vote), at each regular or special meeting of the stockholders of
the Company called for the purpose of filling positions on the Board, or in any
written consent executed in lieu of such a meeting of stockholders, and shall
take all actions reasonably necessary, to ensure the election to the Board of
two (2) individuals (the "CUC Nominees") selected by CUC (or by CUC and the
Permitted Transferees of CUC, if any, as CUC and such Permitted Transferees may
agree between or among themselves by the affirmative vote of the holders of a
majority of the shares of Capital Stock owned by such persons).
3.3 Replacement of CUC Nominees. If, prior to his election to the
Board pursuant to Section 3.2 hereof, any CUC Nominee shall be unable or
unwilling to serve as a director of the Company, CUC shall be entitled to
nominate a replacement who shall then be a CUC Nominee for purposes of Section
3.2 above. If, following election to the Board pursuant to Section 3.2 hereof,
any CUC Nominee shall resign, die or be removed or be unable to serve for any
reason prior to the expiration of his term as a director of the Company, CUC
shall within 30 days of such event, notify the Board in writing of a
replacement CUC Nominee, and all Stockholders shall vote their shares of
Capital Stock (to the extent entitled to vote), at any regular or special
meeting called for the purpose of filling positions on the Board, or in any
written consent executed in lieu of such a meeting of stockholders, and shall
take all actions necessary, to ensure the election to the Board of such
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replacement CUC Nominee to fill the unexpired term of the CUC Nominee whom such
new CUC Nominee is replacing.
3.4 Calling Special Meetings for the Removal of CUC Nominees. Each
Stockholder hereby agrees to use such Stockholder's reasonable efforts to call,
or cause the appropriate officers and directors of the Company to call, a
special meeting of stockholders of the Company and to vote all of the shares of
Capital Stock owned or held of record by such Stockholder (to the extent
entitled to vote) for, or to take all actions by written consent in lieu of any
such meeting necessary to cause, the removal (with or without cause) of any CUC
Nominee from the Board if CUC requests in writing his or her removal for any
reason.
3.5 Calling Special Meetings for the Enforcement of this Agreement. In
order to effectuate the provisions of this Agreement, each Stockholder hereby
agrees that when any action or vote is required to be taken by such Stockholder
pursuant to this Agreement, such Stockholder shall use its reasonable efforts
to call, or cause the appropriate officers and directors of the Company to
call, a special or annual meeting of stockholders of the Company, as the case
may be, or execute or cause to be executed a consent in writing in lieu of any
such meetings to effectuate such stockholder action.
3.6 Removal for Cause. Each Stockholder hereby agrees that, subject to
the requirements of applicable law and the Charter Documents, no CUC Nominee
shall be removed without Cause (except as provided in Section 3.4 hereof). For
the purposes of this Section 3.6, "Cause" means the commission of an act of
fraud or embezzlement against the Company or any of its subsidiaries, any
willful misconduct in the course of the person's duties which causes
significant injury to the Company and its subsidiaries, taken as a whole, or
any conviction or guilty plea for a felony (or a plea of nolo contendere
thereto).
3.7 CUC Approval Rights. The written approval of all of the CUC
Nominees shall be required in order for the Company to (a) effect any amendment
of the Charter Documents which adversely affects, either directly or
indirectly, any of the rights of CUC or any of its Affiliates in any material
respect, (b) change the size of the Board, (c) effect any amendment of this
Agreement or effect any transaction in violation of this Agreement, (d) pay any
dividends or make any other distributions with respect to the Capital Stock or
otherwise, (e) effect any repurchase or redemption of Capital Stock, (f) effect
any material change in the nature of the Company's business, (g) effect any
transaction involving the acquisition or disposition by the Company of any
equity interests, assets or any business in which the fair market value thereof
exceeds thirty percent (30%) of the Company's total net worth (as determined in
accordance with GAAP), or (h) effect any liquidation, dissolution or winding-up
of the Company or effect any voluntary filing, or consent to any involuntary
filing, for bankruptcy; provided that the written approval of the CUC Nominees
shall not be required in order to effect any change restricted by the
provisions of Sections 3.8(a), 3.8(b) and 3.8(g) to the extent that
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such change is reasonably required in order to effect an IPO; provided further
that the written approval of the CUC Nominees shall not be required in order to
amend the Company's Certificate of Incorporation to increase the authorized
capital stock of the Company, to increase the size of the Board or for the
Company to issue capital stock, so long as in each case such change or issuance
is reasonably required in order for the Company to issue and sell its capital
stock in connection with meeting its bona fide capital raising needs. Absent
the written approval referred to in the previous sentence, neither the Company
shall engage in, nor shall any Stockholder take any action to facilitate, any
of the activities restricted by the provisions of the preceding sentence. In
order to give full effect to the provisions of this Section 3.8, the Company's
Certificate of Incorporation shall be amended on or promptly (but in any event
within three business days) following the date hereof (and each of the
Stockholders agrees to use its respective best efforts to effect such
amendment) to include therein the provisions attached hereto as Exhibit B.
ARTICLE IV
CUC RIGHT TO ACQUIRE THE COMPANY
4.1 CUC Right to Acquire Additional Capital Interest.
(a) Additional Capital Right in General. On or prior to April
1, 1998, CUC shall have the right (the "Additional Capital Right"), at its sole
option, to cause the Company to issue and sell to CUC, for an aggregate
purchase price of U.S.$5,000,000.00, an additional convertible debenture in the
same form as the Convertible Debenture referred to in Section 2.1 above, except
that such additional convertible debenture ("Additional Convertible Debenture")
shall (x) be in an aggregate principal amount of U.S.$5,000,000.00, and (y)
give CUC the right to convert such Additional Convertible Debenture at any time
at CUC's option into that number of shares of Common Stock as is equal to eight
and three-tenths percent (8.3%) of the Common Stock, calculated on a
Fully-Diluted Basis on the date of the exercise of the Additional Capital
Right. In the event that CUC exercises such Additional Capital Right, the
Company shall have the right, at its sole option, to require CUC to instead
purchase from the Company one of the following two types of Additional
Convertible Debentures which are different from the Additional Convertible
Debenture described above in the purchase price amount thereof, in the
principal amount thereof and in the amount of Common Stock that it is
convertible into, as follows: either (i) an Additional Convertible Debenture to
be purchased by CUC for an additional purchase price of U.S.$1,000,000.00 (for
an aggregate purchase price of U.S.$6,000,000.00), which shall be in an
aggregate principal amount of U.S.$6,000,000.00, and shall give CUC the right
to convert such convertible debenture at any time at CUC's option into that
number of shares of Common Stock as is equal to an additional one and one-half
percent (1.5%) of the Common Stock, for an aggregate of nine and eight-tenths
percent (9.8%) of the Common Stock, in each case calculated on a Fully-Diluted
Basis on the date of the exercise of the Additional Capital Right, or (ii) an
Additional Convertible Debenture
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to be purchased by CUC for an additional purchase price of U.S.$2,000,000.00
(for an aggregate purchase price of U.S.$7,000,000.00), which shall be in an
aggregate principal amount of U.S.$7,000,000.00, and shall give CUC the right
to convert such convertible debenture at any time at CUC's option into that
number of shares of Common Stock as is equal to an additional three percent
(3%) of the Common Stock, for an aggregate of eleven and three-tenths percent
(11.3%) of the Common Stock, in each case calculated on a Fully-Diluted Basis
on the date of the exercise of the Additional Capital Right. The Company must
notify CUC in writing, within 10 days following the delivery to the Company of
CUC's notice of CUC's exercise of its right hereunder, if the Company desires
to require that CUC acquire any additional shares of Common Stock in accordance
with the provisions of the preceding sentence.
(b) Transfer Mechanics. Upon any exercise by CUC of its
rights under this Section 4.1, the closing of such purchase shall occur on the
15th business day following the date on which CUC initially notifies the
Company of CUC's exercise of its rights hereunder (or on such other day as the
parties may mutually agree upon). At such closing, CUC shall deliver to the
Company the appropriate consideration required to be transferred to the Company
in accordance with the provisions of this Section 4.1, by wire transfer to a
bank account designated by the Company in a written notice to CUC, in exchange
for the delivery to CUC by the Company of the certificates representing the
Additional Convertible Debenture in question. All shares of Common Stock to be
issued and sold to CUC, upon the conversion by CUC of any such Additional
Convertible Debenture (if CUC so opts to do so), shall be validly issued, fully
paid and non-assessable and shall be free and clear of any and all
Encumbrances. Upon consummation of any transaction contemplated pursuant to
this Section 4.1, the Company shall be deemed to have made with respect to such
transaction each of the representations and warranties set forth in Sections
2.2 and 2.3 above as if such representations and warranties were made as of
such date; provided that the Company (x) shall update Schedules 2.3(a) and
2.3(h) to disclose information relating to such schedules which is current as
of that time and (y) shall also be entitled to update any of the other
schedules attached to this Agreement in order to make such representations and
warranties factually correct (but only to the extent and in the manner a
reasonable party would customarily disclose such factual matters), in each case
by delivering a letter to CUC at least 10 days prior to the closing date
setting forth in reasonable detail such factual matters and with reasonable
specificity as to the particular representations and warranties covered
thereby; provided further that CUC may, within ten (10) days of its receipt of
the letter referred to in the previous proviso, determine not to exercise its
Additional Capital Right by notifying the Company in writing of its
determination to no longer exercise its Additional Capital Right.
4.2 CUC Right to Acquire the Entire Company.
(a) Company Purchase Right in General. Subject to the
provisions of Section 4.2(b) below, on or prior to September 1, 1998, CUC shall
have the right
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(the "Company Purchase Right"), at its sole option, to cause the sale of all or
substantially all of the Company to CUC or any designated affiliate of CUC,
whether pursuant to a sale of Capital Stock, merger, consolidation, sale of
assets or similar transaction, at a total purchase price which shall be based
on an aggregate valuation of the Company of U.S.$165,000,000.00 (which
aggregate valuation includes the value of CUC's share ownership in the
Company). For instance, by way of example, if, at the time CUC exercises such
Company Purchase Right, CUC owns a thirty-three and one-third percent Share
Ownership Interest, then the stockholders of the Company, other than CUC, shall
be entitled to receive in the aggregate two-thirds of such $165 million amount,
which is equal to $110 million in the aggregate (less any tax amounts which are
incurred as a result of such transaction, and less any transaction costs in
excess of $25,000 in the aggregate which are incurred by the Company as a
result of such transaction, in each case subject to the provisions of Section
4.2(e) below). If CUC proposes to exercise its Company Purchase Right, CUC
shall send written notice of the exercise of its Company Purchase Right to each
of the remaining Stockholders, setting forth the material terms and conditions
of such transaction.
(b) Limitations on CUC's Purchase Right. Notwithstanding the
foregoing, (i) in the event that either (A) CUC fails to notify the Company,
prior to April 2, 1998, that it intends to exercise its rights under Section
4.1 above, or (B) the additional equity investment contemplated by Section 4.1
above is not actually consummated, then CUC's rights set forth in this Section
4.2 shall thereafter automatically terminate, and (ii) in the event that the
Board determines in good faith that it will take all appropriate action to
promptly commence an IPO, then the Company shall notify CUC in writing promptly
of such determination and CUC shall have 30 days after the date of such written
notification by the Company to exercise its rights under this Section 4.2, and
if CUC fails to do so within such time period, then CUC's rights set forth in
this Section 4.2 shall thereafter automatically terminate (unless such IPO is
not actually consummated within 120 days after the date on which CUC's sends
its written response to such written notification from the Company, in which
event CUC's rights under this Section 4.2 shall be automatically reinstated).
(c) Sale of Company Pursuant to Sale of Capital Stock. In the
event that CUC determines to exercise its Company Purchase Right pursuant to a
sale of Capital Stock to CUC or any designated affiliate of CUC, then CUC may,
at its option, require the remaining Stockholders and their respective
Permitted Transferees to sell all shares of Capital Stock held by them to CUC
or any designated affiliate of CUC, at a purchase price equal to the product of
(x) U.S.$165,000,000.00 (less any legal, accounting and other transaction costs
in excess of $25,000 in the aggregate which are incurred by the Company as a
result of such transaction), multiplied by (y) the Share Ownership Interest
held by the particular Stockholder or Permitted Transferee in question. Within
10 days following the date of CUC's notice of its exercise of its Company
Purchase Right, each of the Stockholders and their respective Permitted
Transferees shall deliver to a
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representative of CUC designated in CUC's notice, certificates or other
instruments representing all of the Capital Stock held by such person, Duly
Endorsed, together with all other documents reasonably required to be executed
in order to effectuate such transaction. In the event that any such person
should fail to deliver such certificates or other instruments to CUC, the
Company shall cause the books and records of the Company to show that such
Capital Stock of such person is bound by the provisions of this Section 4.2 and
that such Capital Stock may be transferred only to CUC or the particular
affiliate designated by CUC.
(d) Sale of Company Other than Pursuant to Sale of Capital
Stock. In the event that CUC determines to exercise its Company Purchase Right
pursuant to a merger, consolidation, sale of assets or similar transaction in
which CUC or any designated affiliate of CUC acquires all or substantially all
of the Company in connection with such transaction, then CUC may, at its
option, require the Stockholders and their respective Permitted Transferees to
vote in favor of such transaction. In particular, in the event of any such
proposed transaction, upon any request by CUC, each of the Stockholders shall
use its respective best efforts (i) to call, or cause the appropriate officers
and directors of the Company to call, a special meeting of stockholders of the
Company to consider approval of such proposed transaction, and (ii) vote in
favor of such proposed transaction all of the shares of Capital Stock owned or
held of record by such Stockholder (to the extent entitled to vote), at each
regular or special meeting of the stockholders of the Company called for the
purpose of voting on such matter, or in any written consent executed in lieu of
such a meeting of stockholders, and shall take all actions reasonably
necessary, to ensure that all necessary stockholder approvals for such
transaction are obtained. Upon the consummation of such transaction, CUC shall,
subject to and in accordance with the provisions of Section 4.2(e) below, be
obligated to pay (i) in the event of a sale of all or substantially all of the
assets or other similar transaction, an amount to the Company equal to
U.S.$165,000,000.00, and (ii) in the event of a merger or consolidation, an
amount to the remaining Stockholders and their respective Permitted Transferees
equal to the product of (x) U.S.$165,000,000.00 (less any legal, accounting and
other transaction costs in excess of $25,000 in the aggregate which are
incurred by the Company as a result of such transaction), multiplied by (y) the
Share Ownership Interest held by the particular Stockholder or Permitted
Transferee in question.
(e) Consummation of Company Purchase. (i) Upon consummation
of any sale transaction contemplated pursuant to this Section 4.2, each of the
Stockholders and their respective Permitted Transferees in existence
immediately prior to giving effect to such transaction shall be deemed to have
made with respect to such transaction each of the representations and
warranties set forth in Section 2.2 above (on a several and not joint basis) as
well as in Section 2.3 above (on a joint and not several basis), in each case
as if such representations and warranties were made as of such date. In
addition, upon consummation of any sale transaction contemplated pursuant to
this Section 4.2, the Company shall be deemed to have made with respect to such
transaction each of the representations and warranties
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set forth in Sections 2.2 and 2.3 above as if such representations and
warranties were made as of such date; provided that the Company (x) shall
update Schedules 2.3(a) and 2.3(h) to disclose information relating to such
schedules which is current as of that time and (y) shall also be entitled to
update any of the other schedules attached to this Agreement in order to make
such representations and warranties factually correct (but only to the extent
and in the manner a reasonable party would customarily disclose such factual
matters), in each case by delivering a letter to CUC at least 10 days prior to
the closing date setting forth in reasonable detail such factual matters and
with reasonable specificity as to the particular representations and warranties
covered thereby; provided further that, upon the receipt by CUC of the letter
referred to in the previous proviso, CUC may thereafter determine not to
exercise its Company Purchase Right.
(ii) Promptly (but in no event later than two
business days) after the consummation of any sale transaction contemplated
pursuant to this Section 4.2, CUC shall give notice thereof to the
Stockholders, shall remit to each of the remaining Stockholders and their
respective Permitted Transferees the total transaction proceeds to which such
Stockholders or the Company (as the case may be) are entitled pursuant thereto
(except, in the case of Section 4.2(c) above, that such amounts shall not be
paid until the Stockholder in question has made the requisite deliveries to
CUC, following which CUC shall make the payment in question promptly to such
Stockholder), and shall furnish such other evidence of the completion and time
of completion of such sale or other disposition and the terms and conditions
thereof as may be reasonably requested by such Stockholders. Notwithstanding
anything to the contrary contained herein, CUC shall be entitled to withhold,
pursuant to the Escrow Agreement attached hereto as Exhibit C, for a period of
up to eighteen months following the consummation of the transaction in
question, fifteen percent (15%) of the proceeds which would otherwise be
payable to such Stockholders and shall further be entitled to use such withheld
amount to irrevocably offset against any Losses resulting from, arising out of,
relating to, imposed upon or incurred by CUC or its Affilates by reason of any
inaccuracy in or breach of any of the representations or warranties deemed to
be given pursuant to this Section 4.2(e); CUC shall remit to the Stockholders,
following the eighteen-month anniversary of the consummation of the transaction
in question, such withheld amount less any amounts which have been offset
against pursuant to this sentence. Such withheld amount shall constitute a
non-exclusive indemnity pool to serve as partial security with respect to the
representations, warranties and other obligations of the Stockholders in
connection with any sale transaction contemplated pursuant to this Section 4.2.
In addition to the representations and warranties deemed to be given pursuant
to this Section 4.2(e), the Company shall also enter into such covenants and
agreements as are typically entered into by a similarly-situated selling party.
Except with respect to any inaccuracy in or breach of any of the
representations or warranties deemed to be given by a Stockholder pursuant to
this Section 4.2(e) and except with respect to any breach of any of the
Company's covenants referred to in the previous sentence, the Stockholders
shall not owe any other liabilities or obligations to CUC as a result of the
consummation of any of the
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transactions contemplated pursuant to this Section 4.2 and shall not have any
liability with respect to any of the liabilities of the Company. All amounts
payable by CUC to the Company or the Stockholders pursuant to this Section 4.2
shall be paid by wire transfer of immediately available funds to such U.S. bank
account(s) as may be designated in writing prior to consummation of the
transaction in question, or if such information is not provided, then such
amounts will be paid by bank, cashier's or certified check.
(iii) Each of the Stockholders and the Company shall
cooperate with CUC, to the extent reasonably requested by CUC, in structuring
any sale transaction contemplated pursuant to this Section 4.2 in a manner
which is most tax-efficient to CUC, and shall not take any position in their
respective tax returns or otherwise which is inconsistent with such tax
structure chosen by CUC and shall execute and deliver all documents necessary
to effect such tax structure election; provided that in the event that CUC
seeks to structure any sale transaction contemplated pursuant to this Section
4.2 in a manner which imposes an additional amount of taxation on the
Stockholders and the Company in excess of the Base Amount (as defined below),
CUC must reimburse (or, at the request of the party in question, advance such
amounts within five days prior to the date on which such amounts are owed) the
Stockholders and the Company (subject to the receipt by CUC of documentation
reasonably evidencing the incurrence of such costs and any other documentation
reasonably requested by CUC) for one-half of the sum of (i) the amount of the
federal, state and local tax costs which are actually incurred by the
Stockholders and the Company as a result of the consummation of the transaction
pursuant to CUC's tax structure (without taking into account any tax costs
which arise as a result of any payments contemplated pursuant to this
sentence), less (ii) the Base Amount. For purposes of this Section 4.2, the
term "Base Amount" means the amount of the federal, state and local tax costs
which would be normally incurred by the Stockholders and the Company in a
transaction in which CUC or its designee acquired all of the Capital Stock
directly from the Stockholders for cash (assuming that there was no
availability of making an election pursuant to the provisions of Section
338(h)(10) of the Code).
ARTICLE V
PROVISIONS RELATING TO TRANSFERS OF STOCK
5.1 Preemptive Rights.
(a) Preemptive Rights in General. The Company hereby grants
to CUC a right to purchase any and all Capital Stock which may be issued or
transferred from time to time during the one-year period following the date
hereof by the Company or any of its subsidiaries. In particular, during the
one-year period following the date hereof, neither the Company shall, nor shall
it permit any of its subsidiaries to, issue or Transfer, individually or
collectively, in any one transaction or any series of similar transactions, any
shares of Capital Stock to any person (each
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such person, a "Preemptive Offeree"), unless (i) the Company gives CUC a
written notice (the "Preemptive Rights Notice") setting forth the Purchase
Price and all of the other material terms and conditions of such proposed
issuance or Transfer, and (ii) such Preemptive Rights Notice contains an offer
to CUC to sell or otherwise transfer such Capital Stock to CUC at the same
Purchase Price, and on substantially the same terms and conditions as the other
terms and conditions, which the Company plans to offer to the Preemptive
Offeree(s). At any time within 30 days after its receipt of the Preemptive
Rights Notice in question, CUC may irrevocably accept the Company's offer set
forth in such Preemptive Rights Notice for up to such number of shares or other
amount of Capital Stock as is being offered to the Preemptive Offerees by
furnishing written notice of such acceptance to the Company. Promptly following
such acceptance by CUC, CUC shall deliver to the Company the appropriate
Purchase Price to be transferred to the Company as reflected in such Preemptive
Rights Notice, in exchange for the delivery to CUC by the Company or one of its
subsidiaries of the certificates or instruments representing the issued or
transferred Capital Stock in question. If within 30 business days after the
receipt of the Preemptive Rights Notice in question, CUC has not accepted the
offer contained in such Preemptive Rights Notice, the Company shall have 60
days in which to sell or otherwise dispose of the same amount of Capital Stock
described in the Preemptive Rights Notice, at a Purchase Price which is no more
favorable, and on such other terms and conditions which are generally no more
favorable, to the Preemptive Offeree(s) than the Purchase Price and other terms
and conditions set forth in such Preemptive Rights Notice. If, at the end of
such 60-day period the Company has not completed the sale or other disposition
of such Capital Stock described in such Preemptive Rights Notice in compliance
with the provisions of the preceding sentence, all the restrictions on Transfer
contained in this Agreement (including, without limitation, this Section 5.1)
with respect to such Capital Stock shall again be in effect. Notwithstanding
the foregoing, the Company may request that the amount of Capital Stock to be
issued to CUC pursuant to this Section 5.1 be limited to the amount of Capital
Stock which is necessary for CUC to maintain its then-current Share Ownership
Interest (which Share Ownership Interest amount shall be calculated assuming
the full conversion of the Convertible Debenture and, so long as CUC has not
failed to exercise the Additional Capital Right prior to its expiration,
assuming the full exercise of the Additional Capital Right); provided that the
Company shall not be entitled to limit the amount of Capital Stock which CUC
may purchase pursuant to this sentence in the event that the Preemptive
Offeree(s) and their respective Affiliates would in the aggregate acquire, in a
single transaction or in a group of related transactions, more than either (x)
in the event of any Preemptive Offeree(s) which are neither Stockholders nor
Affiliates or Associates of any Stockholder, a thirty-five percent (35%) Share
Ownership Interest (assuming that they acquired all of the Capital Stock
referred to in the Preemptive Rights Notice, other than any portion
attributable to CUC and its Affiliates), or (y) in the event of any Preemptive
Offeree(s) which are either Stockholders or Affiliates or Associates of any
Stockholder, an additional fifteen percent (15%) Share Ownership Interest
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(assuming that they acquired all of the Capital Stock referred to in the
Preemptive Rights Notice, other than any portion attributable to CUC and its
Affiliates).
(b) Exceptions to Preemptive Rights. Notwithstanding anything
to the contrary contained herein, no right of first refusal pursuant to Section
5.1(a) above would apply in the event of (i) the issuance of options to
purchase shares of Common Stock granted to any of the Company's full-time
officers and employees (provided that (A) such grants are both in the ordinary
course of the Company's business consistent with past practice and do not, when
taken together with all other grants of options and other equity rights given
after the date hereof to the Company's officers and employees, exceed a five
percent (5%) Share Ownership Interest with respect to all such officers and
employees, taken as a whole, and (B) the exercise price of such options is not
below the fair market value of the shares of Common Stock as of the date of
grant, as determined by the Board in good faith), (ii) the exercise of any
employee options referred to in clause (i) above or the exercise of any
employee stock options in existence as of the date hereof, (iii) an issuance of
securities by the Company in connection with an IPO and (iv) the distribution
by the Company of its securities to all of its stockholders on a pro rata
basis.
5.2 Tag-Along Rights.
(a) Tag-Along Rights Generally. No Stockholder or
Stockholders shall, individually or collectively, in any one transaction or any
series of similar transactions, Transfer any Capital Stock to any Third Party
unless the terms and conditions of such Transfer to such Third Party contains
an offer to CUC to include, at the option of CUC, in the sale or other
disposition to such Third Party a number or amount of Capital Stock then owned
or held by CUC equal to the product of (x) the total number or amount of
Capital Stock to be acquired by the Third Party, times (y) CUC's Share
Ownership Interest (the shares of Capital Stock of CUC subject to such right,
the "Tag-Along Stock"). In particular, if any Stockholder or Stockholders
receive a bona fide offer or offers to purchase or otherwise acquire shares of
its or their Capital Stock from a Third Party, each such Stockholder (a
"Transferor") shall use its reasonable efforts to cause the Third Party's offer
to be reduced to writing and shall provide a written notice of such Third
Party's offer (the "Notice") to CUC in the manner set forth in Section 9.6
hereof; provided that in the event that any Transferor fails to either cause
the Third Party's offer to be reduced to writing or to provide the Notice to
CUC in the prescribed manner, such Transferor shall not be permitted to effect
any such Transfer of Capital Stock to such Third Party. The Notice shall also
contain an offer to purchase or otherwise acquire shares of Tag-Along Stock
from CUC according to the terms and conditions of this Section 5.2 and upon
substantially the same terms and conditions as the terms and conditions
contained in the Third Party's offer and shall be accompanied by a true and
correct copy of the Third Party's offer. At any time within 30 days after its
receipt of the Notice, CUC may irrevocably accept the Third Party offer
included in the Notice for up to such number of shares of Tag-Along Stock as is
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determined in accordance with the provisions of this Section 5.2 by furnishing
written notice of such acceptance to the Transferor in question. Promptly
following such acceptance by CUC, CUC shall deliver to the Transferor in
question the certificate or certificates representing the Tag-Along Stock to be
sold or otherwise disposed of pursuant to such offer by CUC, together with a
limited power-of-attorney authorizing the Transferor to sell or otherwise
dispose of such shares of stock pursuant to the terms and conditions of such
Third Party's offer.
(b) Transfer Mechanics. The purchase from CUC pursuant to
this Section 5.2 shall be on the same terms and conditions, including the same
proportionate Purchase Price (which shall be paid by bank, cashier's or
certified check or by wire transfer of immediately available funds, unless
otherwise specified in the Notice provided to CUC by the Company) and date of
sale or other disposition, as are received by the Transferor and stated in the
Notice in question provided to CUC. As promptly as practicable (but in no event
later than 5 days) after the consummation of the sale or other disposition of
Capital Stock of the Transferor and Tag-Along Stock of CUC to the Third Party
pursuant to the Third Party's offer, the Transferor shall notify CUC thereof,
shall remit to CUC the total sales price of the Tag-Along Stock of CUC sold or
otherwise disposed of pursuant thereto, and shall furnish such other evidence
of the completion and time of completion of such sale or other disposition and
the terms and conditions thereof as may be reasonably requested by CUC.
(c) Transfers to Third Parties if CUC Declines Tag-Along
Rights. If within 30 business days after the receipt of the Notice, CUC has not
accepted the offer contained in the Notice, the Transferor shall have 30 days
in which to sell or otherwise dispose of not more than the amount of Capital
Stock described in the Third Party's offer, on terms and conditions not more
favorable to the Transferor than were set forth in the Notice. If, at the end
of such 30-day period, the Transferor has not completed the sale or other
disposition of Capital Stock of the Transferor in accordance with the terms and
conditions of the Third Party's offer as set forth in the Notice, the
Transferor shall return to CUC, if applicable, all certificates representing
shares of Tag-Along Stock which CUC delivered for sale or other disposition
pursuant to this Section 6.2, and all the restrictions on Transfer contained in
this Agreement with respect to Capital Stock owned by the Transferor
(including, without limitation, this Section 5.2) shall again be in effect.
(d) Exceptions to Tag-Along Rights. The provisions of this
Section 5.2 shall not be applicable to any transfer of Capital Stock (i) from
any Stockholder to any Permitted Transferee, provided that such Permitted
Transferee (other than the Company or CUC) agrees in writing to be bound by the
terms and conditions of this Agreement pursuant to the provisions of Section
6.5 hereof, or (ii) made pursuant to a public offering of Capital Stock in
connection with any IPO.
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5.3 Right of First Refusal.
(a) Right of First Refusal Generally. If, at any time during
the term of this Agreement, any Stockholder (the "Offering Stockholder")
receives a bona fide offer which such Stockholder wishes to accept (a "Transfer
Offer") from any Third Party (the "Offeror") to purchase shares of Capital
Stock (the "Transfer Stock") then owned by such Stockholder, the Offering
Stockholder shall use its reasonable efforts to cause the Transfer Offer to be
reduced to writing and shall provide a written notice (the "Transfer Notice")
of such Transfer Offer to CUC in the manner set forth in Section 9.6 hereof;
provided that in the event that any Offering Stockholder fails to either cause
the Offeror's offer to be reduced to writing or to provide the Transfer Notice
to CUC in the prescribed manner, such Offering Stockholder shall not be
permitted to effect any Transfer of Capital Stock to such Offeror. The Transfer
Notice shall also contain an irrevocable offer to sell the Transfer Stock to
CUC (in the manner set forth below) at the same Purchase Price and upon
substantially the same terms and conditions contained in the Transfer Offer and
shall be accompanied by a true and correct copy of the Transfer Offer (which
shall identify the Offeror, the Offering Stockholder, the Transfer Stock in
question, the price contained in the Transfer Offer and all the other material
terms and conditions of the Transfer Offer). CUC shall have the right and
option, within 15 days after the date the Transfer Notice is received by CUC,
to accept irrevocably such offer, in the aggregate, as to all, but not less
than all, shares of Transfer Stock. If CUC desires to exercise such option, CUC
shall provide the Offering Stockholder with written notice within such 15 day
period. Notwithstanding the provisions of this Section 5.3, in the event that
the Company grants after the date hereof to any then-existing Stockholder (a
"Similar Holder") a right of first refusal which is either substantially
similar to, or no more favorable to such Stockholder than, the provisions of
this Section 5.3 (provided that such grant is otherwise in compliance with the
provisions of this Agreement) (such other right of first refusal, the "Similar
Right of First Refusal"), CUC's right to purchase the Transfer Stock referred
to in the Transfer Notice shall be limited to the greater of (i) the amount of
Transfer Stock which is necessary for CUC to maintain its then-current Share
Ownership Interest (which Share Ownership Interest amount shall be calculated
assuming the full conversion of the Convertible Debenture and, so long as CUC
has not failed to exercise the Additional Capital Right prior to its
expiration, assuming the full exercise of the Additional Capital Right), or
(ii) the sum of (A) the amount referred to in clause (x) above, plus (B) in the
event that any Similar Holder, who or which was offered such Transfer Stock
pursuant to a Similar Right of First Refusal in connection with any such
transaction, determines not to acquire such Transfer Stock (such Transfer
Stock, the "Additional Transfer Stock"), the lesser of (x) the total amount of
Additional Transfer Stock or (y) in the event that there exists one or more
other Similar Holder(s) who or which agree to acquire all of its allotted
Transfer Stock and all of its proportional share of the Additional Transfer
Stock, the amount of such Additional Transfer Stock which is proportionate to
CUC's Share Ownership Interest in comparison to the Share Ownership Interests
of such other Similar Holder(s).
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(b) Transfer Mechanics. The closing of the purchase of the
Transfer Stock by CUC pursuant to Section 5.3(a) above shall take place at the
principal executive offices of the Company on the 15th business day after the
acceptance by CUC of such Transfer Offer. At such closing, CUC shall deliver to
the Offering Stockholder an amount equal to the appropriate Purchase Price
amount, against delivery of certificates representing the Transfer Stock so
purchased Duly Endorsed; such amount to be paid by CUC shall be paid by wire
transfer of immediately available funds to such U.S. bank account(s) as may be
designated in writing prior to consummation of the transaction in question, or
if such information is not so provided, then such amounts shall be paid by
bank, cashier's or certified check to the Offering Stockholder.
(c) Transfers to Third Parties after CUC Declines Right of
First Refusal. If at the end of the 15-day period following the giving of the
Transfer Notice, CUC shall not have accepted the offer contained in such notice
as to all the Transfer Stock covered thereby, the Offering Stockholder shall
have 30 days in which to sell the Transfer Stock to the Offeror, at a price not
less than that contained in the Transfer Notice and on such other terms and
conditions which are generally no more favorable to the Offeror than were
contained in the Transfer Notice. No sale may be made to any Offeror unless
such Offeror agrees in writing to be bound by the terms and conditions of this
Agreement pursuant to the provisions of Section 6.5 hereof. Promptly after any
sale pursuant to this Section 5.3, the Offering Stockholder shall notify CUC
and the Company of the consummation thereof and shall furnish such evidence of
the completion (including time of completion) of such sale and of the terms and
conditions thereof as the Company or CUC may reasonably request. If, at the end
of such 30-day period, the Offering Stockholder has not completed the sale of
the Transfer Stock, such Offering Stockholder shall no longer be permitted to
sell such shares pursuant to this Section 5.3 without again fully complying
with the provisions of this Section 5.3 and all the restrictions on Transfer
contained in this Agreement shall again be in effect with respect to all such
person's shares of Capital Stock, including the Transfer Stock.
(d) Exceptions to Rights of First Refusal. The provisions of
this Section 5.3 shall not be applicable to any Transfer of Capital Stock (i)
from any Stockholder to any Permitted Transferee, provided that such Permitted
Transferee (other than the Company) agrees in writing to be bound by the terms
and conditions of this Agreement pursuant to the provisions of Section 6.5
hereof, (ii) made pursuant to a public offering of Capital Stock which is
registered by the Company under any Registration Statement (as defined in
Article VII below), or (iii) effected in compliance with the provisions of Rule
144 promulgated under the Securities Act (as defined in Article VII below). In
addition, the provisions of this Section 5.3 shall not be applicable to any
Transfer of Capital Stock following the successful consummation of an IPO,
unless such Transfer, or any group of related Transfers, would result in more
than a fifteen percent (15%) Share Ownership Interest being Transferred to any
person. Further, the provisions of this Section 5.3 shall not be
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applicable to any Transfer of Capital Stock in the event that CUC fails to
exercise its Additional Capital Right prior to the expiration of such
Additional Capital Right.
ARTICLE VI
MISCELLANEOUS COVENANTS
6.1 Affiliated Arrangements. Notwithstanding anything to the contrary
contained in this Agreement, the Company agrees that it will not, nor will it
permit any of its subsidiaries to, (x) enter into any contractual or other
arrangement with any of the Stockholders or any of their respective Affiliates
or Associates or with any of the Company's Affiliates, or (y) effect any
transaction (including, without limitation, the payment of any amounts or the
delivery of any goods or services) with any of the Stockholders or any of their
respective Affiliates or Associates or with any of the Company's Affiliates;
provided that the foregoing restrictions shall not apply to (a) the Escrow
Agreement or any arrangement entered into pursuant to the express provisions of
the Marketing Agreement, (b) those arrangements which are specifically approved
in writing in advance by CUC or by all of the CUC Nominees (provided such
approval covers both the specific type of arrangement or transaction in
question and the specific amounts involved in such arrangement or transaction),
(c) any transaction or series of related transactions which are both (i)
immaterial in nature (i.e., involves a total amount which, or goods or services
having a total fair market value which, when taken together with all other
similar or related amounts, items and transactions, does not exceed $25,000 in
the aggregate) and (ii) either entered into on an arm's length basis or in the
ordinary course of the Company's business, (d) any transaction or arrangement
which is (i) entered into with any Affiliate or Associate which at such time
has outstanding securities which were issued by such entity and which are both
(A) registered under the Securities Act and (B) listed for trading on a
national securities exchange or on the NASDAQ Stock Market or NASDAQ National
Market, (ii) either entered into on an arm's length basis or in the ordinary
course of the Company's business, and (iii) immaterial in nature (i.e.,
involves a total amount which, or goods or services having a total fair market
value which, when taken together with all other similar or related amounts,
items and transactions, does not exceed $35,000 in the aggregate during any
calendar year), (e) the payment of up to $6,000 per month to Millstone Brands
in connection with the provision by Millstone Brands to the Company of the
consulting services of Yoram Evan and Uri Evan, to the extent that such
consulting services are actually rendered to the Company on a regular basis,
(f) the sharing of any office lease costs and other related office costs with
American Value Brands, Inc. ("AVB"), but only to the extent such costs are
reasonably allocated between AVB and the Company in a manner consistent with
the express provisions of the letter agreement between the Company and AVB (a
copy of which is attached to Schedule 2.3(o) of this Agreement), and (g) the
sharing of any costs with AVB reasonably related to the Oracle Application
System, telephone service, kitchen and office supplies, insurance coverage,
network support and other programming and personnel, but only to the extent
such costs are reasonably allocated between AVB
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and the Company in a manner consistent with the express provisions of the
letter agreement between the Company and AVB (a copy of which is also attached
to Schedule 2.3(o) of this Agreement).
6.2 Financial Reports. The Company shall prepare and distribute to
CUC, following the end of each fiscal quarter of the Company, an unaudited,
consolidated balance sheet of the Company and its consolidated subsidiaries as
at the end of the fiscal quarter in question and the related unaudited,
consolidated statements of earnings, shareholders' equity and cash flows of the
Company and its consolidated subsidiaries for the three-month period then ended
(each such set of financial statements, the "Periodic Financial Statements").
The Periodic Financial Statements relating to each set of fiscal year-end
financial statements shall be accompanied by an audit report of a
nationally-recognized, independent accounting firm. Each set of Periodic
Financial Statements shall be delivered to CUC as soon as reasonably
practicable after the end of the applicable financial period (but in any event
no later than 35 days after the end of the fiscal quarter in question, or, with
respect to any fiscal year-end financial statements, 80 days after the end of
the fiscal year in question). All Periodic Financial Statements shall be
prepared in accordance with the books and records of the Company, shall be
complete and correct in all material respects, shall have each been prepared in
accordance with GAAP and shall present fairly the consolidated financial
position, results of operations and changes in financial position or cash
flows, whichever is applicable, of the Company and its consolidated
subsidiaries as at the dates and for the periods indicated (subject, in the
case of any interim, unaudited Periodic Financial Statements, to normal
year-end audit adjustments).
6.3 Access to Information. The Company shall provide to CUC access to
such books and records of the Company and its subsidiaries as may be reasonably
requested by CUC, during the regular business hours of the Company and such
subsidiaries, on not less than two (2) days prior written notice from CUC to
the Company requesting such access; provided that any information received by
CUC and its representatives pursuant to the provisions of this Section 6.3
shall be deemed to be Confidential Information (as such term is defined in the
Marketing Agreement) and shall be treated in a similar manner to the
confidentiality provisions set forth in Section 10(a) of the Marketing
Agreement, notwithstanding any termination of the Marketing Agreement.
6.4 Stock Certificate Legend. A copy of this Agreement shall be filed
with the corporate secretary of the Company and kept with the records of the
Company. Each of the Stockholders agrees that the following legend (or a
substantially similar legend) shall be placed on the certificates representing
any shares of Capital Stock owned by them:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
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AMENDED, OR ANY STATE SECURITIES LAW, AND MAY NOT BE TRANSFERRED, SOLD
OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM. IN ADDITION, SUCH SHARES MAY BE TRANSFERRED ONLY
IN COMPLIANCE WITH THE CONDITIONS SPECIFIED IN THE INVESTMENT AND
STOCKHOLDERS AGREEMENT DATED AS OF NOVEMBER 17, 1997 AMONG THE ISSUER
AND THE OTHER PARTIES THERETO, A COMPLETE AND CORRECT COPY OF WHICH IS
AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE ISSUER AND
WILL BE FURNISHED TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND
WITHOUT CHARGE. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS
CERTIFICATE, AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF SUCH
AGREEMENT."
All Stockholders shall be bound by the requirements of such legend to
the extent that such legend is applicable. Upon any registration of any Capital
Stock under the Securities Act pursuant to an IPO, the certificate representing
such shares shall, if appropriate, be replaced, at the expense of the Company,
with certificates which do not bear the legend referred to above.
6.5 Additional Stockholders.
(a) Transferees of Stockholders. No Transfers of shares of
Capital Stock may be made (and no such Transfer shall be effective) pursuant to
this Agreement to either a Permitted Transferee or to any Third Party, unless
in each case prior to such Transfer any such transferee agrees in writing to be
bound (to the same extent and in the same manner as previously applied with
respect to the Stockholder (or the Permitted Transferee(s) thereof)
transferring such shares of Capital Stock) by the terms and conditions of this
Agreement pursuant to a supplementary agreement reasonably satisfactory in form
and substance to the Company and CUC (except that neither the Company nor CUC
need enter into any such separate written agreement); provided that any Third
Party (other than any existing Stockholder or a Permitted Transferee of any
existing Stockholder) shall not, in entering into such supplementary agreement,
be obligated or bound by the provisions of Sections 5.2 and 5.3 of this
Agreement. Upon entering into any such agreement, such transferee shall be
deemed to be a Stockholder for all purposes of this Agreement (except as
otherwise expressly provided in the previous sentence). No Stockholder may do
indirectly, through the sale of capital stock of its subsidiary or otherwise,
that which is not permitted by this Agreement. No transfer of Capital Stock in
violation of this Agreement shall be made or recorded on the books of the
Company and any such transfer shall be void and of no effect.
(b) Issuance to Management Stockholders. The Company shall
not issue Capital Stock to any member of management or other employee unless
the person to whom the Capital Stock is to be issued or transferred agrees in
writing to be bound by the terms and conditions of this Agreement pursuant to a
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supplementary agreement reasonably satisfactory in form and substance to the
Company; upon entering into such agreement, such member of management or other
employee shall be deemed to be a Stockholder for all purposes of this
Agreement.
(c) Supplemental Agreements. Each supplementary agreement
referred to in Sections 6.5(a) and 6.5(b) above shall become effective upon its
execution by the Company and the new holder of Capital Stock, and it shall not
require the signatures or the consent of the other Stockholders (or their
respective Permitted Transferees). The supplementary agreement between the
Company and any new holder of Capital Stock may modify some of the terms and
conditions of this Agreement as they affect the rights and obligations of the
new holder of Capital Stock, provided that the modified terms and conditions
shall be no less favorable to CUC or the Stockholders (or their respective
Permitted Transferees) than the terms and conditions set forth in this
Agreement (except as otherwise expressly set forth in the proviso to Section
6.5(a) above).
6.6 Use of Funds Provided to the Company by CUC. The amounts received
or to be received by the Company from CUC or its affiliates pursuant to the
provisions of Sections 2.1 and 4.1(a) above may only be used to fund the
Company's normal working capital needs and to fund any capital expenditures and
purchases of inventory by the Company, and may not be used for any other
purpose.
6.7 Non-Competition Agreement. The parties hereto acknowledge that
concurrently with the execution of this Agreement, CUC and the Company are also
entering into a Non-Competition Agreement with Uri Evan, ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and
American Value Brands, Inc. in the form attached hereto as Exhibit D (the "Non-
Competition Agreement"), and that CUC's obligations hereunder are conditioned
upon the execution and delivery to CUC on the date hereof of the
Non-Competition Agreement by the parties thereto (other than CUC).
ARTICLE VII
REGISTRATION RIGHTS
7.1 Demand Registration Rights.
(a) Demand Registration Rights in General. Upon the terms and
subject to the conditions of this Agreement, (x) as soon as reasonably
practicable following the receipt by the Company of any written demand by CUC,
the Company shall prepare and file on a reasonably prompt basis (but in any
event within forty-five (45) days following written demand) with the Securities
and Exchange Commission (the "SEC") a registration statement (the "Registration
Statement") under the Securities Act of 1933, as amended (such act, the
"Securities Act") relating to the resale of Registrable Securities, (y) the
Company shall use its commercially reasonable efforts to cause the Registration
Statement to be declared effective by the SEC as soon as reasonably practicable
after the filing of such
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Registration Statement, and (z) the Company shall use its commercially
reasonable efforts to maintain the effectiveness of such Registration Statement
(and maintain the current status of the prospectus or prospectuses contained
therein) for the duration of the Registration Period (as defined below). The
Company shall not be prohibited from adding other shares of Common Stock to the
Registration Statement so long as the addition of such shares does not
significantly delay the preparation, filing or effectiveness of the
Registration Statement and the Company obtains the prior written consent of the
Holder(s) in question (which consent may not be unreasonably withheld);
provided that if the Holder consents to the inclusion of offers and sales of
any other securities in a Registration Statement pursuant to this Section 7.1
and the Holder later determines that such offering would be materially and
adversely affected by the inclusion of such securities, the Holder may in its
sole discretion exclude all or, in such manner as the Holder in its sole
discretion deems appropriate, some of such securities from such offering. In
connection with any registration requested pursuant to this Section 7.1 which
is an underwritten offering, the Holders shall have the right to designate the
managing underwriter(s); provided that such managing underwriter(s) must be
reasonably acceptable to the Company.
(b) Number of Demands; Limitations on Demands. The Holders
will have the right to request registration pursuant to this Section 7.1 an
aggregate of two (2) times; provided that any registration requested by a
Holder pursuant to this Section 7.1 shall not be deemed to have been effected
(and, therefore, not requested for purposes of this Section 7.1(b)), (i) unless
it has become effective, (ii) if after it has become effective such
registration is interfered with by any stop order, injunction or other order or
requirement of the SEC or other governmental agency or court for any reason
other than a misrepresentation or an omission by the Holders and, as a result
thereof, the Registrable Securities requested to registered cannot be
completely distributed in accordance with the plan of distribution set forth in
the related registration statement, or (iii) if the conditions to closing
specified in the purchase agreement or underwriting agreement entered into in
connection with such registration are not satisfied or waived other than by
reason or some act of omission by the Holders. Notwithstanding anything to the
contrary contained in this Section 7.1, without the prior written consent of
the Company (which may be withheld by the Company in its sole discretion), the
Holders shall not be permitted to exercise any of the demand registration
rights referred to in this Section 7.1 until 120 days following the date of the
successful consummation of an IPO.
(c) Defined Terms. The term "Holder" shall mean and include
CUC and any of the Permitted Transferees of CUC; provided that, whenever any
action is required under this Agreement by or on behalf of the Holders, the
actions or decisions of those Holders who hold a majority of the Registrable
Securities covered by the Registration Statement shall be binding on all
Holders. The term "Registrable Securities" shall mean any Capital Stock owned
or held by the Holders, whether pursuant to this Agreement or otherwise;
provided that in the event that
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the Holders request at any specific time pursuant to this Section 7.1 the
registration under the Securities Act of any amount of Capital Stock which
represents a Share Ownership Interest of less than five percent (5%), then the
term "Registrable Securities" shall exclude any amount of such Capital Stock in
question which the Holders are then permitted to resell pursuant to the
provisions of Rule 144 promulgated under the Securities Act. The term
"Registration Period" shall mean the period which shall run from the date on
which the Registration Statement has been declared effective by the SEC and
shall expire on the earlier of (x) the first date on which the Holders are
permitted to resell all such Registrable Securities pursuant to the provisions
of Rule 144 promulgated under the Securities Act, (y) the date upon which there
shall cease to be any Registrable Securities, or (z) 180 days after the date on
which the Registration Statement has been declared effective by the SEC.
7.2 Piggyback Registration Rights. If at any time following any
registration by the Company of Capital Stock under the Securities Act, the
Company proposes to effect another registration of Capital Stock under the
Securities Act, whether or not for sale for its own account and (subject to the
provisions of Section 7.1 above) whether or not pursuant to the exercise of any
of the demand registration rights referred to in Section 7.1 hereof, in a
manner which would permit registration of Registrable Securities for sale to
the public under the Securities Act, it will each such time, subject to the
provisions of Sections 7.1 above and this Section 7.2, give prompt written
notice to all Holders of its intention to do so and of each Holder's rights
under this Article VII, at least 25 days prior to the anticipated filing date
of the registration statement relating to such Registration. Such notice shall
offer to the Holders the opportunity to include in such registration statement
such number of Registrable Securities as the Holders may request. Upon the
written request of any Holder made within 15 days after the receipt of the
Company's notice (which request shall specify the number of Registrable
Securities intended to be disposed of by such Holder and the intended method of
disposition thereof), the Company will use its commercially reasonable efforts
to effect the registration under the Securities Act and the qualification under
any applicable state securities or blue sky laws (subject to the provisions of
Section 7.4(d) below) of all Registrable Securities which the Company has been
so requested to register by the Holders thereof, to the extent required to
permit the disposition (in accordance with such intended methods thereof) of
the Registrable Securities so requested to be registered; provided that:
(a) if such registration involves an underwritten public
offering, all Holders requesting to be included in the Company's registration
must, upon request by the underwriter(s), sell their Registrable Securities to
such underwriter(s) selected by the Company on the same terms and conditions as
apply to the Company or any selling securityholder;
(b) if, at any time after giving written notice of its
intention to register any securities pursuant to this Section 7.2 and prior to
the effective date of the registration statement filed in connection with such
registration, the Company
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shall determine for any reason not to register such securities, the Company
shall give written notice to all Holders and, thereupon, shall be relieved of
its obligation to register any Registrable Securities in connection with such
registration (without prejudice, however, to the rights of the Holders
immediately to request that such registration be effected as a registration
under Section 7.1);
(c) any Holder requesting to be included in such registration
may elect, in writing at least 10 days prior to the effective date of the
registration statement filed in connection with such registration, not to
register such securities in connection with such registration;
(d) the Company shall not be required to effect any
registration of Registrable Securities under this Section 7.2 incidental to the
registration of any of its securities in connection with mergers, acquisitions,
exchange offers, subscription offers, dividend reinvestment plans or stock
option or other executive or employee benefit or compensation plans; and
(e) no registration of Common Stock effected under this
Section 7.2 shall relieve the Company of its obligation to effect a
registration of Registrable Securities pursuant to Section 7.1.
7.3 Priority in Piggyback Registrations. If a registration referred to
in the first sentence of Section 7.2 is to be an underwritten offering and the
managing underwriter(s) advise the Company in writing that, in its or their
opinion, the number of shares of equity securities of the Company (including
all shares of Registrable Securities) which the Company, the Holders and any
other persons intend to include in such registration exceeds the largest number
of securities which can be sold without having an adverse effect on such
offering, including the price at which such securities can be sold, the Company
shall include in such registration: (i) first, all securities the Company
proposes to sell for its own account (the "Company Securities"), (ii) second,
to the extent that the number or dollar amount of the Company Securities is
less than the number of shares of securities which the Company has been advised
can be sold in such offering without having the adverse effect referred to
above, the number of Registrable Securities requested to be sold by any Holder
pursuant to Section 7.2 hereof (the "Piggyback Securities") (provided that if
the number of the Company Securities and Piggyback Securities exceeds the
number of shares or securities which the Company has been advised can be sold
in such offering without having the adverse effect referred to above, the
number of Piggyback Securities to be included in such offering shall be
allocated pro rata among all holders of Piggyback Securities on the basis of
the relative number or amount of Piggyback Securities each such holder has
requested to be included in such registration), and (iii) third, to the extent
that the number of Company Securities and Piggyback Securities is less than the
number of shares of securities which the Company has been advised can be sold
in such offering without having the adverse effect referred to above, the
equity securities requested to be sold for the account of any other persons
(allocated among the persons holding such other
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securities in such proportions as such persons and the Company may agree).
Notwithstanding the provisions of this Section 7.3, in the event that the
Company grants after the date hereof to any then-existing Stockholder (a
"Similar Piggyback Holder") any piggyback registration rights which are either
substantially similar to, or no more favorable to such Stockholder than, the
provisions of this Article VII (provided that such grant is otherwise in
compliance with the provisions of this Agreement) (such other piggyback
registration rights, the "Similar Piggyback Rights"), the Holders' priority
rights under clause (ii) above shall be shared pro rata with any such Similar
Piggyback Holder, pro rated in accordance with the amount of Capital Stock
which such Holders propose to register pursuant to Section 7.2 in comparison to
the amount of Capital Stock which any such Similar Piggyback Holder proposes to
register pursuant to such Similar Piggyback Rights.
7.4 Registration Procedure. Upon the terms and subject to the
conditions of this Article VII, the Company shall, in effecting any
registration of the Registrable Securities pursuant to this Article VII:
(a) Pre-Filing Draft of Registration Statement. Not less than
15 days prior to the initial filing of the Registration Statement with the SEC,
furnish to CUC and to one law firm selected by the Holders copies of all such
documents proposed to be filed, give CUC and such law firm the opportunity to
communicate any comments they may have on such documents and, to the extent
that CUC or such law firm make any reasonable comments on such documents
relating to the plan of distribution section, the selling stockholder section
and any other sections of the Registration Statement which relate to the
Holders, modify the Registration Statement accordingly to reflect appropriately
any such reasonable comments;
(b) Filing of Amendments. Prepare and file with the SEC such
amendments and supplements to the Registration Statement, and the prospectus
used in connection with the Registration Statement, as may be reasonably
necessary to keep the Registration Statement effective for the Registration
Period;
(c) Furnishing Copies of Filings. Furnish to the Holders
copies of the Registration Statement, each amendment and supplement thereto,
the prospectus included in the Registration Statement (including each
preliminary prospectus) and such other documents as the Holders may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by them;
(d) Blue Sky Filings. Register or qualify the Registrable
Securities under such other securities or blue sky laws of such U.S.
jurisdictions as shall be reasonably requested by the Holders and do any and
all other acts and things which may be reasonably necessary or advisable to
enable the Holders to consummate the disposition in such jurisdictions of the
Registrable Securities owned by each such Holders; provided that the Company
shall not be required in connection therewith or as a condition thereto to (i)
qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 1.5(b)(iv),
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(ii) subject itself to taxation in any such jurisdiction, or (iii) file a
general consent to service of process in any such jurisdiction;
(e) Exchange Listing. Use its reasonable efforts to cause the
Registrable Securities to be authorized for listing on a national securities
exchange or on the NASDAQ Stock Market or NASDAQ National Market, subject to
official notice of issuance;
(f) Transfer Agent. Provide a transfer agent and registrar
for all of the Registrable Securities covered by the Registration Statement not
later than the effective date of the Registration Statement;
(g) Changes to Registration Statement, Etc. Notify the
Holders, at any time when a prospectus relating to the Registration Statement
is required to be delivered under the Securities Act, as soon as reasonably
practicable after such time as the Company discovers any facts or circumstances
which cause the prospectus included in the Registration Statement to contain an
untrue statement of a material fact or to omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of circumstances then existing; as soon as reasonably
practicable after the date of such notification to the Holders, the Company
will prepare and furnish to such Holders a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus will not contain an untrue statement of
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in light of
circumstances then existing;
(h) Inspection of Documents. Subject to such confidentiality
requirements as the Company may reasonably impose (which confidentiality
requirements shall not, in any event, be more extensive than the
confidentiality requirements set forth in Section 10(a) of the Marketing
Agreement), make available for inspection by the Holders and any attorney,
accountant or other agent retained by the Holders (collectively, the
"Inspectors"), during the normal business hours of the Company, all financial
and business records of the Company as shall be reasonably necessary to enable
them to exercise their due diligence responsibility, and cause the Company's
officers, directors and employees to supply all information reasonably
requested by any such Inspector in connection with such registration statement;
(i) Stop Orders. Notify the Holders of any stop order issued
or threatened by the SEC and take all reasonable actions required to prevent
the entry of such stop order or to remove it if entered; and
(j) Other Actions. Cooperate with each Holder and its
representatives to the extent reasonably required in connection with any
registration contemplated pursuant to this Article VII, execute and deliver all
such agreements
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and instruments and take such other actions as may be necessary or appropriate
(including without limitation, entering into customary underwriting
arrangements with any Holder or underwriter participating in such registration)
or as may otherwise be reasonably requested by any Holder in connection with
any registration contemplated pursuant to this Article VII, subject in all
cases to the Company's right to discontinue, pursuant to Section 7.2(b) above,
any registration arising in connection with the provisions of Section 7.2 of
this Agreement, and subject to the Company's rights pursuant to the provisions
of Section 7.5(c) below.
7.5 Certain Additional Covenants of the Company and the
Stockholders.
(a) Furnishing Information to the Company. The parties agree
that the Company may require the Holders to furnish to the Company such
information regarding the Holders and the distribution of such Registrable
Securities as the Company may from time to time reasonably request. Each of the
Holders and its respective representatives shall cooperate with the Company and
its representatives to the extent reasonably required in connection with the
performance by the Company of its obligations under this Agreement. Each Holder
shall notify the Company, as soon as reasonably practicable after such time as
such Holder discovers any facts or circumstances which cause the prospectus
included in the Registration Statement to contain an untrue statement of a
material fact or to omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
circumstances then existing; as soon as reasonably practicable after the date
of such notification to the Company, the Company will prepare and furnish to
such Holders a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
prospectus will not contain an untrue statement of material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading in light of circumstances then existing.
(b) Discontinuing Sales Until Prospectus is Corrected. Each
Holder agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 7.5(a) above or upon
the delivery of a similar notice to the Company by Holders pursuant to Section
7.4(g) above, such Holder will forthwith discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until receipt by the Holders of the copies of the supplemented or
amended prospectus contemplated by such Sections 7.4(g) and 7.5(a) above, and,
if so directed by the Company, each Holder will deliver to the Company all
copies, other than permanent file copies then in such Holder's possession, of
the prospectus covering such Registrable Securities current at the time of
receipt of such notice. In the event of the giving of any such notice
contemplated pursuant to Sections 7.4(g) and 7.5(a) above, the Registration
Period shall be extended by the number of days during the period from and
including the date of the giving of such notice, to and including the date when
the Holders shall have received the copies of such supplemented or amended
prospectus.
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(c) Discontinuing Sales Due to Material Disadvantageous
Event. With respect to any Registration Statement filed or to be filed pursuant
to this Agreement, if the Company is at any time currently involved in
negotiations with respect to any material acquisition or disposition
transaction involving the Company or there exists any other similar event or
condition which is material to the Company, which in any such case has not been
publicly disclosed, and as a result thereof it would be materially
disadvantageous to the Company for such Registration Statement to become
effective or for sales of Registrable Securities to continue pursuant to such
registration statement (a "Disadvantageous Condition"), the Company shall,
notwithstanding any other provisions of this Agreement, be entitled, upon the
giving of a written notice (a "Delay Notice") to such effect to the Holders
included or to be included in such registration statement, (x) to cause sales
of Registrable Securities by the Holders pursuant to such registration
statement to cease, or (y) in the event no such registration statement has yet
been filed, to delay filing any such registration statement, until the earlier
of (i) the date on which, in the good faith judgment of the Company, such
Disadvantageous Condition no longer exists (notice of which the Company shall
promptly deliver to the Holders with respect to which any such registration
statement has been filed), or (ii) the date on which the material aspects of
such Disadvantageous Condition are publicly disclosed and as a result thereof
the Registration Statement in question does not contain an untrue statement of
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading. Notwithstanding the
foregoing provisions of this Section 7.5(c)): (1) the Company shall not be
entitled to cause sales of Registrable Securities to cease or to delay any
registration of Registrable Securities required pursuant to this Section 7.5(c)
by reason of any Disadvantageous Condition, for a period of more than
seventy-five (75) days from the giving of its Delay Notice to the Holders with
respect to such Disadvantageous Condition; and (2) in the event the Company
elects to cause Holders to refrain from selling Registrable Securities for any
period during the Registration Period, the Registration Period with respect to
such Holders shall be extended by the number of days during the Registration
Period that such Holders is required to refrain from selling Registrable
Securities.
(d) Cooperation with Underwriters. In the event that any
person retained by any Holder might reasonably be deemed to be an "underwriter"
(as such term is commonly understood for purposes of the Securities Act) with
respect to the resale of any Registrable Securities pursuant to the
Registration Statement, then the Company shall, upon any reasonable request and
without limitation to any of the other provisions of this Article VII, (A)
provide indemnification to such person on terms similar to the provisions of
Section 7.6 below and on such other customary terms and conditions as might be
requested by a similarly-situated underwriter, (B) use its reasonable best
efforts to provide to such person a "cold comfort" letter from the independent
public accountants of the Company with respect to the financial statements and
certain other financial information contained in, or incorporated by reference
in, the Registration Statement, which letter shall cover such matters, and be
in such form and substance, as is customary for such "cold comfort" letters,
(C)
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provide to such person an opinion of counsel, which opinion shall cover such
matters, and be in such form and substance, as may be customarily requested by
a similarly-situated underwriter, and (D) provide to such person and its
representatives reasonable access at all reasonable times to the management and
the books and records of the Company, in connection with any due diligence to
be performed by such person.
(e) Restrictions on Public Sale by Stockholders and Holders.
In connection with any public offering of securities of the Company (including,
without limitation, any offering contemplated by this Article VII), each
Stockholder and each Holder agrees that it will consent to and agree to comply
with any "lock up" or "hold back" restriction (i.e., that such Stockholder or
Holder shall not effect any public sale or distribution, including any sale
pursuant to Rule 144 under the Securities Act, of any Capital Stock) that may
be reasonably requested by the underwriter(s) or placement or other selling
agent(s) of such offering, during the 30 days prior to, and during the
90-day-period (or 120-day-period in the event of an IPO) following, the
effective date of the registration statement in question (except for sales
which are part of such public offering and specifically registered under such
registration statement); provided that the foregoing restriction shall not
apply to any party who or which is neither (x) an officer or director of the
Company nor (y) a holder of Capital Stock who or which, when taken together
with such holder's Affiliates, Associates and Permitted Transferees, holds in
the aggregate less than a five percent (5%) Share Ownership Interest.
(f) Restrictions on Public Sale by the Company. If any
registration of Registrable Securities pursuant to Article VII shall be in
connection with an underwritten public offering, the Company agrees (i) not to
effect any public sale or distribution of any of its Capital Stock (other than
any such sale or distribution of such securities in connection with any merger
or consolidation by the Company or a subsidiary of the Company or in connection
with the purchase of all or substantially all the assets of any other person or
in connection with an employee stock option or other benefit plan) during the
30 days prior to, and during the 90-day-period (or 120-day-period in the event
of an IPO) following, the effective date of such registration statement (except
for sales which are part of such public offering and specifically registered
under such registration statement) and (ii) that any agreement entered into
after the date of this Agreement pursuant to which the Company issues or agrees
to issue any privately placed equity securities shall contain a provision under
which holders of such securities agree not to effect any public sale or
distribution of any such securities during the period referred to in the
foregoing clause (i), including any sale pursuant to Rule 144 under the
Securities Act (except as part of such registration if permitted).
7.6 Indemnification.
(a) Indemnification by the Company. In connection with the
registration of the Registrable Securities under the Securities Act pursuant to
this
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Agreement, the Company will, and it hereby does, indemnify and hold harmless,
to the fullest extent permitted by law, the Holders and each other person who
participates in the offering or sale of the Registrable Securities on behalf of
the Holders (collectively, the "Holder Indemnitees"), against any and all
losses, claims, damages or liabilities, joint or several, and expenses
(including any amounts paid in any settlement effected with the Company's prior
consent (which may not be unreasonably withheld) and reasonable attorneys fees
and disbursements) to which such Holder Indemnitees may become subject under
the Securities Act, common law or otherwise, insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) or
expenses arise out of or are based upon (A) any untrue statement or alleged
untrue statement of any material fact contained in any Registration Statement,
any preliminary, final or summary prospectus contained therein, or any
amendment or supplement thereto, or (B) any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and the Company will reimburse such
Holder Indemnitees for any legal or any other expense reasonably incurred by
them in connection with investigating or defending such loss, claim, liability,
action or proceedings; provided that the Company shall not be liable in any
such case to any Holder Indemnitee or group of Holder Indemnitees to the extent
that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expenses arose out of or was based upon any untrue
statement or alleged untrue statement or omission or alleged omission which was
made or done in such registration statement or amendment or supplement thereto
or in any such preliminary, final or summary prospectus, in reliance upon and
conformity with written information furnished to the Company or its
representatives by or on behalf of any Holder Indemnitee or group of Holder
Indemnitees or by any of their respective representatives; provided further
that the Company will not be liable to any such Holder Indemnitees with respect
to any preliminary prospectus as then amended or supplemented, as the case may
be, to the extent that any such loss, claim, damage or liability of such Holder
Indemnitees results from the fact that such Holder Indemnitees sold Registrable
Securities to a person to whom there was not sent or given, at or prior to the
written confirmation of such sale, a copy of the final prospectus (including
any documents incorporated by reference therein), whichever is most recent, if
the Company has previously furnished copies thereof to such Holder Indemnitees
(or has previously notified such Holder Indemnitees in writing to cease selling
securities pursuant to such prospectus due to certain specified misstatements
or omissions contained therein) and such final prospectus, as then amended and
supplemented, has corrected any such misstatement or omission. Such indemnity
shall remain in full force and effect regardless of any investigation made by
or on behalf of any Holder Indemnitee and shall survive the transfer of the
Registrable Securities by each such Holder.
(b) Indemnification by the Holders. In connection with the
registration of the Registrable Securities under the Securities Act pursuant to
this Agreement, each Holder hereby agrees that he will indemnify and hold
harmless, to the fullest extent permitted by law, the Company or any affiliate
of the Company or
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any other person who participates in the offering or sale of such securities on
the Company's behalf, against any and all losses, claims, damages or
liabilities, joint or several, and expenses (including any amounts paid in any
settlement effected with the Holder's prior consent (which may not be
unreasonably withheld) and reasonable attorneys fees and disbursements) to
which the Company or any affiliate of the Company or any such other person may
become subject under the Securities Act, common law or otherwise, up to the
amount of all gross proceeds received by each such Holder in the sale of his
Registrable Securities, insofar as such losses, claims, damages or liabilities
(or actions or proceedings in respect thereof) or expenses arise out of or are
based upon (A) any untrue statement or alleged untrue statement of any material
fact contained in any Registration Statement, any preliminary, final or summary
prospectus contained therein, or any amendment or supplement thereto, or (B)
any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading
(but only to the extent that such alleged or actual misstatements or omissions
referred to in clauses (A) and (B) above were done or omitted, etc. in reliance
upon and in conformity with written information furnished to the Company or its
representatives by or on behalf of such Holder or by any of his, her or its
representatives). Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Company or any
Holder Indemnitee and shall survive the transfer of the Registrable Securities
by each such Holder.
(c) Notices of Claims, Etc. Promptly after receipt by an
indemnified party hereunder of written notice of the commencement of any action
or proceeding with respect to which a claim for indemnification may be made
pursuant to this Agreement, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party, promptly give written
notice to the latter of the commencement of such action; provided that the
failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under the preceding
subsections of this Agreement, except to the extent that the indemnifying party
is prejudiced by such failure to give notice. In case any action is brought
against an indemnified party, the indemnifying party will be entitled to
participate in and to assume the defense thereof, jointly with any other
indemnifying parties similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party. After notice from
the indemnifying party to such indemnified party of its election so to assume
the defense of any such action, the indemnifying party will not be liable to
such indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof (unless any meaningful
conflict of interest between such indemnified and indemnifying parties arises
in respect of such claim after the assumption of the defense thereof), and the
indemnifying party will not be subject to any liability for any settlement made
without its consent (which consent shall not be unreasonably withheld). No
indemnifying party will consent to entry of judgment or enter into any
settlement which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such
-42-
indemnified party of a release from all liability in respect to such claim or
litigation. An indemnifying party who elects not to assume the defense of a
claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party a
meaningful conflict of interest may exist between such indemnified party and
any other of such indemnified parties with respect to such claim, in which
event the indemnifying party shall be obligated to pay the fees and expenses of
only one additional counsel.
7.7 Expenses. The Company shall pay all registration, qualification
and filing fees, all fees and expenses of legal counsel, accountants and other
persons retained by the Company, and all other expenses incurred by the Company
in connection with each registration of Registrable Securities requested
pursuant to this Article VII or otherwise incurred in connection with the
Company's performance of or compliance with the provisions of this Article VII;
provided that the Company will not be obligated to pay (x) any underwriting
discounts, selling commissions or transfer taxes, if any, relating to the sale
or disposition of Registrable Securities sold pursuant to any such
registration, or (y) any fees or expenses of any separate legal counsel or
other advisors retained separately by any Holder.
ARTICLE VIII
TERM OF AGREEMENT
8.1 Term. This Agreement shall terminate automatically without any
further action on the part of any parties hereto, upon the earlier of: (a) the
ten (10) year anniversary of the date hereof, (b) an IPO, (c) a sale of all or
substantially all of the assets or equity interests in the Company to a Third
Party (whether by merger, consolidation, sale of assets or securities or
otherwise), (d) the written approval by CUC as well as by those Stockholders
who collectively hold at least a 50% Share Ownership Interest, or (e) CUC and
its Permitted Transferees, taken as a whole, cease to own at least a five
percent (5%) Share Ownership Interest; provided that, in the event of an IPO,
the provisions of Article III, Section 5.3 (except as otherwise provided in
Section 5.3(d)), Section 6.1, Section 6.3, Section 6.4 and Article VII of this
Agreement shall continue in full force and effect until the earliest to occur
of the events set forth in clauses (a), (c), (d) or (e) of this Section 8.1;
provided further that, in any event, the provisions of Articles I, II and IX of
this Agreement shall continue in full force and effect, notwithstanding any
termination or expiration of this Agreement (subject to the provisions of the
next sentence). Further, the parties hereto agree that (i) the representations
and warranties set forth in Article II of this Agreement shall survive for a
period ending on the eighteen-month anniversary of the date on which such
representations and warranties were either made or deemed to have been made (as
the case may be), and (ii) each covenant and agreement set forth in this
Agreement shall survive the execution and delivery of this Agreement and shall
continue until the expiration of
-43-
the applicable statute of limitations period, unless otherwise expressly
provided in this Section 8.1 or otherwise expressly provided elsewhere herein
(all of the time periods set forth above, collectively referred to as the
"Survival Period"); provided that, notwithstanding anything to the contrary
contained herein, in the event that written notice of any claim relating to the
breach of any representation, warranty, covenant or agreement shall have been
given on or prior to the last day of the applicable Survival Period, such
provision shall, with respect to the specific claim made, survive the
applicable Survival Period until such claim is finally resolved and all
obligations with respect thereto (if any) are fully satisfied. Notwithstanding
the foregoing, in the event that CUC and its Permitted Transferees, taken as a
whole, cease to own at least a ten percent (10%) Share Ownership Interest, the
provisions of Articles III, IV and V of this Agreement shall immediately
thereafter terminate.
ARTICLE IX
MISCELLANEOUS
9.1 Arbitration. Any controversies, disputes, actions, causes of
action, or other claims arising out of or in connection with the provisions of
this Agreement which cannot be settled by mutual agreement shall be finally
settled by arbitration in New York, New York in accordance with the Commercial
Arbitration Rules of the American Arbitration Association. The arbitrator may
enter a default decision against any party who fails to participate in the
arbitration proceedings. The decision of the arbitrator on the points in
dispute will be final, unappealable and binding and judgment on the award may
be entered in any court having jurisdiction thereof. So long as this Agreement
has not previously been terminated in accordance with the provisions of Section
8.1 above, the parties shall continue their performance under this Agreement
while the arbitration proceeding is pending. The arbitrator will be authorized
to apportion its fees and expenses and the reasonable attorney's fees and
expenses of the parties hereto as the arbitrator deems appropriate. In the
absence of any such apportionment, the fees and expense of the arbitrator will
be borne equally by each party, and each party will bear the fees and expenses
of its own attorney. The parties agree that this clause has been included to
rapidly and inexpensively resolve any disputes between them with respect to
this Agreement, and that this clause shall be grounds for dismissal of any
court action commenced by either party with respect to this Agreement, other
than post-arbitration actions seeking to enforce an arbitration award and
actions seeking equitable, injunctive or other similar relief.
9.2 Relationship of Parties. It is understood and agreed that the
relationship of the parties created under this Agreement is that of independent
contracting parties, and no partnership, joint venture, agency or other
relationship is intended or created hereby, nor shall either party nor any of
it affiliates, employees or representatives be construed to be an affiliate,
employee, agent or representative of the other party hereto. Except as
otherwise expressly set forth in this Agreement or in the Marketing Agreement,
the parties hereto acknowledge and
-44-
agree that each party hereto shall be free to enter into any contractual,
business or other relationship(s) with any person with respect to any area of
business.
9.3 Specific Performance. Each of the parties hereto (including any
party entering into a supplementary agreement pursuant to Section 6.5 above)
acknowledges and agrees that in the event of any breach of this Agreement, the
non-breaching party or parties would be irreparably harmed, no adequate remedy
at law would exist and damages would be difficult to determine. It is
accordingly agreed that (x) in the event of a breach of any provision of this
Agreement, the aggrieved party shall be entitled to specific performance of
this Agreement (without the necessity of proving actual damages and without
posting bond or other security), in addition to any other remedy to which such
aggrieved party may be entitled at law or in equity, and (y) each of the
parties hereto (including any party entering into a supplementary agreement
pursuant to Section 6.5 above) shall waive the defense in any action for
specific performance or other equitable relief that a remedy at law would be
adequate.
9.4 Attorneys' Fees. In any legal action or proceeding (including,
without limitation, any arbitration proceeding) brought to enforce any
provision of this Agreement, or where any provision hereof is validly asserted
as a defense, or because of an alleged dispute, breach or default in connection
with any of the provisions of this Agreement, the party or parties which are
principally prevailing in such legal action or proceeding shall be entitled to
recover reasonable attorneys' fees and other costs incurred in that action or
proceeding, in addition to any other available remedy or relief to which such
party or parties may be entitled.
9.5 Expenses. Except as otherwise expressly set forth in this
Agreement, all costs and expenses, including all fees and expenses of
attorneys, accountants and other advisers, incurred in connection with this
Agreement or any matters related hereto, shall be paid by the party incurring
such costs and expenses.
9.6 Notices. Any notice or communication required or permitted
hereunder shall be in writing and either delivered personally, telecopied or
sent by overnight courier, or sent by certified or registered mail, postage
prepaid, and shall be deemed to be given, dated and received when so delivered
personally or by courier or telecopied, or, if mailed, five business days after
the date of mailing, to the following address or telecopy number, or to such
other address or addresses as such person may subsequently designate by notice
given hereunder:
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(i) if to CUC, to:
CUC International Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
(ii) if to the Company, to:
NetGrocer, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ Nissan
with a copy to:
Fulbright & ▇▇▇▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
(iii) If to any of the Stockholders entering into this
Agreement on the date hereof, to:
Uri Evan
▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇.▇. ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(iv) if to any other party hereto, to the address
specified by such party in any supplementary
agreement entered into by such party.
9.7 Entire Agreement; Waivers; Amendments. This Agreement, together
with the Marketing Agreement, the Convertible Debenture, the Additional
Convertible Debenture, the Escrow Agreement, the Non-Competition Agreement and
any schedules attached hereto and made a part hereof, constitute the entire
agreement between the parties as to the subject matter hereof, and shall
supersede
-46-
all prior understandings, letters, agreements, contracts and other documents.
No failure or delay by any party to exercise, and no course of dealing with
respect to, any right of any such party regarding an obligation of any other
party to this Agreement, shall operate as a waiver thereof, unless agreed to in
writing by the parties in question. Any single or partial waiver by either
party of any obligation of the other party under this Agreement shall
constitute a waiver of such obligation only as specified in such waiver and
shall not constitute a waiver of any other obligation; in addition, no single
or partial exercise of any power or right shall preclude any party's other or
further exercise or the exercise of any other power or right. This Agreement
may not be amended, modified or supplemented, and no waivers of, consents to or
departures from the provisions hereof may be given, without the prior written
consent of (i) each of the Company and CUC and (ii) the Stockholders owning in
the aggregate at least a 50% Share Ownership Interest.
9.8 Governing Law; Construction; Headings. This Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware,
without giving effect to the principles of conflicts of laws thereof. The
construction and interpretation of this Agreement shall not be strictly
construed against the drafter. The headings in this Agreement are for reference
only, and shall not affect the interpretation of this Agreement.
9.9 Successors; Assigns; Transferees. The provisions of this Agreement
shall be binding upon and accrue to the benefit of the parties hereto and their
respective heirs, permitted successors and assigns and legal representatives.
Neither this Agreement nor any right hereunder may be assigned, whether
voluntarily or by operation of law, by either party hereto without the prior
written consent of the other party hereto (which consent may not be
unreasonably withheld); provided that no such consent shall be necessary for
such an assignment, transfer or delegation by any party hereto to any of its
Affiliates, so long as such assigning party remains liable with respect to its
obligations hereunder and such Affiliate enters into a supplementary agreement
in accordance with the provisions of Section 6.5 above.
9.10 No Third Party Beneficiaries; Defaults. Nothing in this Agreement
is intended to confer any rights or remedies on any person or entity which is
not a party to this Agreement. A default by any party to this Agreement in such
party's compliance with any of the conditions or covenants hereof or
performance of any of the obligations of such party hereunder shall not
constitute a default by any other party.
9.11 Severability. The invalidity or unenforceability of any provision
of this Agreement in any jurisdiction shall not affect the validity, legality
or enforceability of the remainder of this Agreement in such jurisdiction or
the validity, legality or enforceability of this Agreement, including any such
provision, in any other jurisdiction, it being intended that all rights and
obligations of the parties hereunder shall be enforceable to the fullest extent
permitted by law.
-47-
9.12 Further Assurances. Each party hereto or person or entity subject
hereto shall do and perform or cause to be done and performed all such further
acts and things and shall execute and deliver all such other agreements,
certificates, instruments and documents as any other party hereto or person or
entity subject hereto may reasonably request in order to carry out the intent
and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
9.13 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same Agreement.
9.14 Interpretation. The parties hereto agree that, whenever any
matter is stated in this Agreement to be (a) to the "knowledge of the Company"
or to the "best knowledge of the Company", such reference shall be deemed to
include the knowledge of each of the officers and directors of the Company, in
each case after reasonable inquiry by such persons as to such matter, and (b)
"in the ordinary course of the Company's business" or any phrase of similar
meaning, such reference shall be deemed to refer to the ordinary course of the
Company's business, consistent with the normal business practices of companies
in the same industry as the Company and, where applicable, entered into on an
arm's length basis.
9.15 Recapitalization, etc. In the event that any capital stock or
other securities are issued in respect of, in exchange for, or in substitution
of, any shares of Capital Stock by reason of any reorganization, any
recapitalization, reclassification, merger consolidation, spin-off, partial or
complete liquidation, stock dividend, split-up, sale of assets, distribution to
stockholders or combination of the shares of Capital Stock or any other change
in the Company's capital structure, appropriate adjustments shall be made in
the percentages specified in this Agreement so as to preserve as far as
reasonably practicable, the original rights and obligations of the parties
hereto under this Agreement.
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered on behalf of each of the parties hereto as of the date first above
written.
CUC INTERNATIONAL INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: Senior Vice President
-48-
NET GROCER INC.
By: /s/ ▇▇▇▇▇▇ Nissan
--------------------------------
Name: ▇▇▇▇▇▇ Nissan
Title: President & CEO
/s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ Uri Evan
-----------------------------------
Uri Evan
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇
-----------------------------------
▇▇▇▇▇ ▇. Evan
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
-----------------------------------
▇▇▇▇▇▇ ▇. Evan
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇
-----------------------------------
▇▇▇▇▇ ▇. Evan
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ Yoram Evan
-----------------------------------
Yoram Evan
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-49-
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ Nissan
-----------------------------------
▇▇▇▇▇▇ Nissan
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇
LONGVIEW PARTNERS, L.P.
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------
Name:
Title:
▇▇▇▇▇▇▇▇ FAMILY TRUST
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------
Name:
Title:
UME L.L.C.
By: /s/ Uri Evan
--------------------------------
Name:
Title:
BANBURY ASSOCIATED, F.A.
By: /s/ Uri Evan
--------------------------------
Name:
Title:
-50-
▇▇▇▇▇ ▇▇▇▇▇▇▇ CORP.
By: /s/ Uri Evan
--------------------------------
Name:
Title:
ESI PROJECTS LIMITED
By: /s/ Uri Evan
--------------------------------
Name:
Title:
TIVERTON INTERNATIONAL CORP.
By: /s/ Uri Evan
--------------------------------
Name:
Title:
-51-
