-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JRJRPVQhDbPH0SK9QSqsaXbNQvUIvDzMNIgXc1QkjrQGFZkzC8o8E1VXTHCYHxgU Xy15GTl074ncaJZLDuzolw== 0000899140-01-500191.txt : 20010810 0000899140-01-500191.hdr.sgml : 20010810 ACCESSION NUMBER: 0000899140-01-500191 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 20010809 GROUP MEMBERS: LANDMARK VENTURES VII, LLC FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: LANDMARK COMMUNICATIONS INC CENTRAL INDEX KEY: 0000057606 STANDARD INDUSTRIAL CLASSIFICATION: TEXTILE MILL PRODUCTS [2200] FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 150 BRAMBLETON AVE CITY: NORFOLK STATE: VA ZIP: 23510-2075 MAIL ADDRESS: STREET 1: WILLKIE FARR & GALLAGHER STREET 2: 153 EAST 53RD ST CITY: NEW YORK STATE: NY ZIP: 10022 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: COOLSAVINGS COM INC CENTRAL INDEX KEY: 0001087875 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 383216102 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-61045 FILM NUMBER: 1702756 BUSINESS ADDRESS: STREET 1: 8755 WEST HIGGINS ROAD STREET 2: SUITE 100 CITY: CHICAGO STATE: IL ZIP: 60631 BUSINESS PHONE: 7736931300 MAIL ADDRESS: STREET 1: 360 N MICIGAN AVE CITY: CHICAGO STATE: IL ZIP: 60601 SC 13D 1 lc934027b.txt INITIAL FILING ON SCHEDULE 13D SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 coolsavings.com inc. - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock, Without Par Value - -------------------------------------------------------------------------------- (Title of Class of Securities) 216485 10 2 - -------------------------------------------------------------------------------- (CUSIP Number of Class of Securities) Guy R. Friddell, III Executive Vice President and General Counsel Landmark Communications, Inc. 150 W. Brambleton Ave. Norfolk, VA 23510-2075 (757) 446-2035 ------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) Copies to: William J. Grant, Jr., Esq. Willkie Farr & Gallagher 787 Seventh Avenue New York, NY 10019-6099 (212) 728-8000 July 30, 2001 - -------------------------------------------------------------------------------- (Date of Event which Requires Filing of this Schedule) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of ss.ss. 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box: [ ] NOTE: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 240.13d-7 for other parties to whom copies are to be sent. SCHEDULE 13D - --------------------- ------------------ CUSIP No. 216485 10 2 Page 2 of 13 Pages - --------------------- ------------------ - ----------- -------------------------------------------------------------------- 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Landmark Communications, Inc. - ----------- -------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X] (b) [ ] - ----------- -------------------------------------------------------------------- 3 SEC USE ONLY - ----------- -------------------------------------------------------------------- 4 SOURCE OF FUNDS* WC - ----------- -------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - ----------- -------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Virginia - --------------------- --------- ------------------------------------------------ 7 SOLE VOTING POWER 7,818,731 --------- ------------------------------------------------ NUMBER OF 8 SHARED VOTING POWER SHARES BENEFICIALLY 0** OWNED BY --------- ------------------------------------------------ EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON WITH 7,818,731 --------- ------------------------------------------------ 10 SHARED DISPOSITIVE POWER 0** - ----------- -------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON 7,818,731 - ----------- -------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - ----------- -------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 19.99%** - ----------- -------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO - ----------- -------------------------------------------------------------------- **See Items 4 through 6. SCHEDULE 13D - --------------------- ------------------ CUSIP No. 216485 10 2 Page 3 of 13 Pages - --------------------- ------------------ - ----------- -------------------------------------------------------------------- 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Landmark Ventures VII, LLC - ----------- -------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X] (b) [ ] - ----------- -------------------------------------------------------------------- 3 SEC USE ONLY - ----------- -------------------------------------------------------------------- 4 SOURCE OF FUNDS* N/A - ----------- -------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - ----------- -------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - --------------------- --------- ------------------------------------------------ 7 SOLE VOTING POWER 0 --------- ------------------------------------------------ NUMBER OF 8 SHARED VOTING POWER SHARES BENEFICIALLY 0** OWNED BY --------- ------------------------------------------------ EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON WITH 0 --------- ------------------------------------------------ 10 SHARED DISPOSITIVE POWER 0** - ----------- -------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON 0** - ----------- -------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - ----------- -------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 0%** - ----------- -------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* OO - ----------- -------------------------------------------------------------------- **See Items 4 through 6. Item 1. Security and Issuer. This statement on Schedule 13D (the "Statement") relates to shares of Common Stock, with no par value per share (the "Common Stock"), of coolsavings.com inc., a Michigan corporation (the "Issuer"). The principal executive offices of the Issuer are located at 360 N. Michigan Avenue, 19th Floor, Chicago, Illinois 60601. This Statement is being filed by the Reporting Persons (as defined below) to report transactions in the Common Stock as a result of which each of the Reporting Persons may be deemed to be a beneficial owner of in excess of 5% of the total number of outstanding Common Stock. Pursuant to Rule 13d-1(k) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Reporting Persons have entered into an agreement with respect to the joint filing of this Statement, and any amendment or amendments hereto, a copy of which is attached hereto as Exhibit 1. Item 2. Identity and Background. (a) This Statement is being filed on behalf of Landmark Communications, Inc., a Virginia corporation ("Landmark"), and its indirect wholly-owned subsidiary, Landmark Ventures VII, LLC, a Delaware limited liability company ("Ventures" and, together with Landmark, the "Reporting Persons"). Schedule I to this Statement contains the name, residence or business address, and present principal occupation of each of the executive officers and directors of the Reporting Persons. (b) Landmark has its principal office at 150 West Brambleton Avenue, Norfolk, Virginia 23510-2075. Ventures has its principal office at Channel 8 Drive, c/o KLAS, Inc., in Las Vegas, Nevada 89109. (c) Landmark's principal business consists of (i) newspaper publishing and (ii) serving as a holding company for wholly-owned subsidiaries engaged in newspaper publishing, television broadcasting and cable television programming services. Ventures' principal business consists of the acquisition, ownership, disposition and reinvestment of investment assets and related business activities. (d) During the past five years, none of the Reporting Persons has been convicted in a criminal proceeding. (e) During the past five years, none of the Reporting Persons has been a party to any civil proceeding as a result of which it has been subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws, or finding any violation with respect to such laws. Item 3. Source and Amount of Funds or Other Consideration. On July 30, 2001, Landmark loaned to the Issuer $5 million in exchange for a promissory note and a Warrant (both as described below) to purchase up to 19.99% of the Common Stock of the Issuer as initial consideration in a series of transactions described 4 in Item 6. If the transactions described in Item 6 hereto are consummated, the Reporting Persons would provide the Issuer with additional equity financing of up to $10 million. The source of such funds was and will be the working capital of the Reporting Persons. Item 4. Purpose of Transaction. The purpose of Reporting Persons for the transaction is, as part of the planned transactions described below in Item 6, to make a substantial equity investment in the Issuer. Upon consummation of such transactions, the Reporting Persons will purchase additional securities of the Issuer and will have the right to designate and elect a majority of the Issuer's board of directors. Except as set forth in this Statement and in the attached Exhibits, the Reporting Persons do not have any present plans or proposals that relate to or would result in any of the actions required to be described in Item 4 of Schedule 13D. Each of the Reporting Persons may, at any time, review or reconsider its position with respect to the Issuer and formulate plans or proposals with respect to any of such matters, but has no present intention of doing so. Item 5. Interest in Securities of the Issuer. (a) Landmark may be deemed to have beneficial ownership over 7,818,731 shares of Common Stock, which represents 19.99% of the Common Stock that would be outstanding if it exercised its right to acquire such shares pursuant to the Warrant (as defined below). Pursuant to the terms of the Warrant, if the transactions described below in Item 6 are not consummated, the number of shares of Common Stock that Landmark would be entitled to purchase shall be adjusted, as necessary, to equal 19.99% of the then outstanding Common Stock. If such transactions are consummated, the Warrant will entitle Landmark to purchase 10 million (10,000,000) shares of Common Stock at an exercise price of $0.50 per share (which, if not sooner exercised, will increase to $0.75 per share on July 30, 2005). Except as disclosed in this Item 5(a), as of the date hereof, neither of the Reporting Persons nor, to the best of their knowledge, any of their directors or executive officers beneficially owns any shares of Common Stock. (b) Pursuant to the terms of a Voting Agreement, dated as of July 30, 2001, by and among the Reporting Persons and Lend Lease International Pty Limited, Steven M. Golden, Steven M. Golden Revocable Living Trust (dated March 3, 1998), Steven M. Golden L.L.C., Matthew Moog, Moog Investment Partners LP, Robert J. Kamerschen, Hugh R. Lamle, HLBL Family Partners LP, Hugh and Betsy Lamle Foundation, Richard H. Rogel Revocable Living Trust (dated March 21, 1990), Richard Rogel - Charitable Remainder Trust, and Richard Rogel Limited Partnership (collectively the "Significant Shareholders"), a copy of which is attached hereto as Exhibit 2 (the "Voting Agreement"), the Significant Shareholders have agreed to vote their shares of the Issuer's Common Stock (1) in favor of adoption of a Securities Purchase Agreement, dated as of July 30, 2001, by and among the Issuer and the Reporting Persons, a copy of which is attached hereto as Exhibit 3 (the "Purchase Agreement"), and approval of the transactions contemplated thereby and any action necessary or desirable in furtherance thereof, (2) 5 against any proposal for recapitalization, amalgamation, merger, sale of assets or other business combination of or by the Issuer other than transactions contemplated by the Purchase Agreement, or any other action or agreement that would in any such case result in a breach of any covenant, representation or warranty or any other obligation of the Issuer under the Purchase Agreement or that would result in any of the conditions to the obligations of the Issuer under the Purchase Agreement not being fulfilled, (3) to adopt a new option plan (as defined in the Purchase Agreement), and (4) to approve a reincorporation merger and any action necessary or desirable in furtherance thereof. The number of shares held by the Significant Shareholders equals 24,663,079 and constitutes 63.09% of the Common Stock outstanding as of the date of such agreement. Although the Reporting Persons are the beneficiary of such Voting Agreement, the Reporting Persons expressly disclaim any beneficial ownership of the shares that are subject to such Voting Agreement. Landmark owns a warrant, a copy of which is attached hereto as Exhibit 4 (the "Warrant"), which entitles Landmark to purchase 7,818,731 shares of Common Stock from the Issuer or such number of shares that would constitute 19.99% of the then outstanding shares of Common Stock of the Issuer, if the transactions contemplated in Item 6 and reflected in the Purchase Agreement are not consummated. If such warrant is exercised Landmark or its transferees would possess the sole power to vote or dispose of such shares of Common Stock. (c) Except as set forth in this Statement, during the last sixty days there have been no transactions in the Common Stock effected by the Reporting Persons, nor, to the best of their knowledge, any of their directors, executive officers, general partners or members. (d) None. (e) Not applicable. Item 6. Contracts, Arrangements, Understandings or Relationships With Respect to Securities of the Issuer. On June 4, 2001, Landmark and the Issuer entered into a Loan and Security Agreement, pursuant to which Landmark loaned $1.75 million to the Issuer. On July 30, 2001, Landmark and the Issuer entered into an Amended and Restated Senior Secured Loan and Security Agreement, a copy of which is attached hereto as Exhibit 5 (the "Amended Loan Agreement"). Under the Amended Loan Agreement, Landmark loaned to the Issuer an additional $3.25 million, for an aggregate $5 million in debt financing. In connection with the Amended Loan Agreement, the Issuer issued to Landmark the Warrant, which initially entitles Landmark to purchase 7,818,731 shares of Common Stock at an exercise price of $0.01 per share. Landmark has agreed not to purchase such shares of Common Stock prior to the Primary Funding (as defined below) unless certain events occur. Upon the closing of the Primary Funding, the Warrant will entitle Landmark 6 to purchase 10 million (10,000,000) shares of Common Stock at an exercise price of $0.50 per share (which, if not sooner exercised, will increase to $0.75 per share on July 30, 2005). After the closing of the Primary Funding, the Issuer will issue to Landmark additional warrants to purchase two shares of Common Stock for each dollar of interest that accrues under the Senior Secured Note and the Amended Loan Agreement. Under the terms of the Purchase Agreement, Ventures has agreed to purchase from the Issuer up to 64,360,810 shares of the Issuer's Series B Preferred Stock, subject to the conditions of the Purchase Agreement, for a total aggregate purchase price of $10 million. Such shares of Series B Preferred Stock will be initially convertible into Common Stock equal to 49% of the total, fully diluted Common Stock, and such shares are subject to subsequent adjustments. The Series B Preferred Stock has an 8% quarterly dividend payable in additional shares of Series B Preferred Stock. The purchase of the Series B Preferred Stock by Ventures will be effected in two tranches. Assuming the satisfaction or waiver of the applicable closing conditions (including approval of the transactions contemplated by the Purchase Agreement by the Issuer's shareholders), Ventures will purchase the first tranche of 32,180,405 shares of Series B Preferred Stock (the "Primary Funding"). After the Primary Funding, the Reporting Persons will have the right to designate and elect a majority of the Issuer's board of directors. Until December 31, 2001, Ventures will have the option to purchase the second tranche of 32,180,405 shares of Series B Preferred Stock. If certain conditions have been met (or waived) and Ventures has not previously exercised its option to purchase such shares of Series B Preferred Stock, Ventures will purchase the second tranche on October 25, 2001. Landmark also has an option to purchase additional shares of Series B Preferred Stock at the same price per share upon the occurrence of certain events. As described in Item 5 hereto, the Reporting Persons and the Significant Shareholders have entered into the Voting Agreement, under which the Significant Shareholders have agreed to vote their shares of Common Stock to approve the transactions contemplated by the Purchase Agreement and the re-incorporation of the Issuer as a Delaware corporation. Also on July 30, 2001, the Reporting Persons and the Significant Shareholders entered into a letter agreement, a copy of which is attached hereto as Exhibit 6 (the "Letter Agreement"). Under the Letter Agreement, the Reporting Persons have agreed, until the earlier of (i) two years after the Reporting Persons or any of their affiliates own 51% or more of the Issuer's Common Stock or (ii) until July 30, 2005, not to initiate or propose a transaction or series of transactions that would result in either (x) the Issuer becoming a privately held company or (y) the Reporting Persons acquiring more than 20% of the Common Stock of the Issuer, calculated on a fully diluted basis, except that such restriction shall not apply to the transactions contemplated under the Purchase Agreement or other documents related thereto. 7 Pursuant to Rule 13d-1(k) promulgated under the Exchange Act, the Reporting Persons have entered into an agreement with respect to the joint filing of this Statement, and any amendment or amendments hereto, a copy of which is attached hereto as Exhibit 1. By virtue of the relationships among the Reporting Persons, as described in this Statement, the Reporting Persons may be deemed to be a "group" under the Federal securities laws. Except as otherwise set forth in this Statement, each Reporting Person expressly disclaims beneficial ownership of any of the shares of Common Stock beneficially owned by any other Reporting Person or the Significant Shareholders and the filing of this Statement shall not be construed as an admission, for the purposes of Sections 13(d) and 13(g) or under any provision of the Exchange Act or the rules promulgated thereunder or for any other purpose, that any Reporting Person is a beneficial owner of any such shares. The Reporting Persons specifically disclaim any beneficial ownership of shares that are subject to the Voting Agreement as set forth in Item 5 hereto. Except as set forth in this Statement or the Exhibits hereto, there are no contracts, arrangements, understandings or relationships among the persons named in Item 2 or between such persons and any other person with respect to any securities of the Issuer. Item 7. Material to be Filed as Exhibits. 1. Joint Filing Agreement, dated as of August 9, 2001, by and among the Reporting Persons. 2. Voting Agreement, dated as of July 30, 2001, by and among the Reporting Persons and certain shareholders of the Issuer. 3. Securities Purchase Agreement, dated as of July 30, 2001, by and among the Reporting Persons and the Issuer. 4. Warrant, dated as of July 30, 2001, issued by the Issuer to Landmark. 5. Amended and Restated Senior Secured Loan and Security Agreement, dated as of July 30, 2001, by and between Landmark and the Issuer. 6. Letter Agreement, dated as of July 30, 2001, by and among the Reporting Persons and the Significant Investors. 8 SIGNATURES After reasonable inquiry and to the best of our knowledge and belief, the undersigned certify that the information set forth in this statement is true, complete and correct. Dated: August 9, 2001 LANDMARK COMMUNICATIONS, INC. By: /s/ Guy R. Friddell, III ------------------------------ Name: Guy R. Friddell, III Title: Executive Vice President and General Counsel Dated: August 9, 2001 LANDMARK VENTURES VII, LLC By: /s/ Richard A. Fraim ------------------------------ Name: Richard A. Fraim Title: Vice President, Treasurer SCHEDULE I TO SCHEDULE 13D Information with Respect to Executive Officers and Directors of the Reporting Persons The following sets forth as to each of the executive officers and directors of the Reporting Persons: his or her name; his or her business address; and his or her present principal occupation or employment and the name, principal business and address of any corporation or other organization in which such employment is conducted. Unless otherwise specified, the principal employer of each such individual is Landmark Communications, Inc., the business address of which is 150 W. Brambleton Avenue, Norfolk, Virginia 23510-2075, and each such individual identified below is a citizen of the United States. To the knowledge of the Reporting Persons, during the last five years, no such person has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors), and no such person was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which he or she was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities law or finding any violation with respect to such laws. Landmark Communications, Inc. - -----------------------------
Name Present Business Address Present Principal Occupation - ---- ------------------------ ---------------------------- Directors: S. Decker Anstrom 300 Interstate North Parkway President and Chief Executive Atlanta, Georgia 30339 Officer of The Weather Channel, Inc. Richard F. Barry, III Landmark Communications, Inc. Vice Chairman 150 W. Brambleton Ave. Norfolk, Virginia 23510-2075 Frank Batten, Jr. Landmark Communications, Inc. Chairman 150 W. Brambleton Ave. Norfolk, Virginia 23510-2075 Frank Batten Landmark Communications, Inc. Chairman of the Executive Committee 150 W. Brambleton Ave. Norfolk, Virginia 23510-2075 Frank A. Daniels 1515 Glenwood Avenue Retired President of News & Raleigh, North Carolina 27608 Observer Publishing Company James A. Henderson 301 Washington Street Retired Chairman & CEO, Cummins Columbus, Indiana 47201 Engine Company, Inc. 1 Richard D. Roberts 1109 South Bay Shore Drive Retired President & CEO, Telecable Virginia Beach, Virginia 23451 Dorothy Batten Rolph Tall Oaks, Route 22 N/A Keswick, Virginia 22947 Howard H. Stevenson 68 Fayerweather Street Professor Cambridge, Massachusetts 02138 Harvard Graduate School Cambridge, Massachusetts John O. Wynne Landmark Communications, Inc. President & CEO 150 W. Brambleton Ave. Norfolk, Virginia 23510-2075 Executive Officers Not Otherwise Listed Above: Guy R. Friddell, III Landmark Communications, Inc. Executive Vice President & General 150 W. Brambleton Ave. Counsel Norfolk, Virginia 23510-2075 Donald H. Patterson, Jr. Landmark Communications, Inc. Executive Vice President 150 W. Brambleton Ave. Norfolk, Virginia 23510-2075 Lemuel E. Lewis Landmark Communications, Inc. Executive Vice President 150 W. Brambleton Ave. Norfolk, Virginia 23510-2075 Landmark Ventures VII, LLC - -------------------------- Name Present Business Address Present Principal Occupation - ---- ------------------------ ---------------------------- Directors: J. William Diedrich 3228 Channel 8 Drive President Las Vegas, Nevada 89109 Richard A. Fraim 3228 Channel 8 Drive Vice President, Treasurer & Las Vegas, Nevada 89109 Secretary Guy R. Friddell, III See above See above Officers*: * This entity acts solely as a holding company and as such is not under the operation of executive officers.
2 EX-1 4 lc934027c.txt EX-1 JOINT FILING AGREEMENT EXHIBIT 1 Joint Filing Agreement The undersigned hereby agree that the Statement on Schedule 13D with respect to the common stock of coolsavings.com inc. is, and any amendment thereto signed by each of the undersigned shall be, filed on behalf of each undersigned pursuant to and in accordance with the provisions of 13d-1(k) under the Securities Exchange Act of 1934, as amended. Dated: August 9, 2001 LANDMARK COMMUNICATIONS, INC. By: /s/ Guy R. Friddell, III ------------------------------ Name: Guy R. Friddell, III Title: Executive Vice President and General Counsel Dated: August 9, 2001 LANDMARK VENTURES VII, LLC By: /s/ Richard A. Fraim ------------------------------ Name: Richard A. Fraim Title: Vice President, Treasurer EX-2 5 lc892409.txt EX-2 VOTING AGREEMENT EXHIBIT 2 EXECUTION COPY VOTING AGREEMENT VOTING AGREEMENT, dated as of July 30, 2001 (this "Agreement"), among those shareholders of coolsavings.com inc. listed on Exhibit A hereto (each, a "Shareholder" and, collectively, the "Shareholders"), Landmark Communications, Inc., a Virginia corporation, and Landmark Ventures VII, LLC, a Delaware limited liability company (with Landmark Communications, Inc., collectively, "Landmark"). WHEREAS, each Shareholder beneficially owns the Common Shares, no par value per share ("Company Common Shares"), of coolsavings.com inc., a Michigan corporation (the "Company"), set forth opposite such Shareholder's name on Exhibit A hereto (all such Company Common Shares, together with any other shares of the Company which any Shareholder hereinafter acquires (including without limitation any shares of Series C Preferred Stock, no par value per share), are referred to as the "Subject Shares"); WHEREAS, Landmark and the Company are, simultaneously with the execution hereof, entering into a Securities Purchase Agreement, dated as of the date hereof (the "Purchase Agreement"); WHEREAS, the Board of Directors of the Company has adopted the Purchase Agreement, approved the transactions contemplated thereby, and recommended to the shareholders of the Company the merger of the Company with and into its subsidiary, coolsavings, inc., a Delaware corporation, pursuant to an Agreement and Plan of Merger substantially in the form attached as Exhibit B hereto (the "Merger"); WHEREAS, the Shareholders and Landmark desire to enter into this Agreement to provide for, among other things, (1) the obligation of the Shareholders to vote their respective Subject Shares to adopt the Purchase Agreement and approve the transactions contemplated thereby and (2) the obligation of the Shareholders to vote their respective Subject Shares to approve the Merger; WHEREAS, each Shareholder acknowledges that Landmark is entering into the Purchase Agreement in reliance on the representations, warranties, covenants and other agreements of the Shareholders set forth in this Agreement; and NOW, THEREFORE, in consideration of the foregoing and mutual covenants and agreements contained herein, and intending to be legally bound hereby, the parties hereto hereby agree as follows: SECTION 1. Covenants of the Shareholders. ----------------------------- (a) Voting of the Company Stock. Until the termination of this Agreement, each Shareholder shall do the following: 1 (1) be present, in person or represented by proxy, at each meeting (whether annual or special, and whether or not an adjourned or postponed meeting) of the shareholders of the Company, or any class thereof, however called, or in connection with any written consent of the shareholders of the Company, so that all the Subject Shares then entitled to vote may be counted for the purposes of determining the presence of a quorum at such meetings or in connection with such consent; (2) at each such meeting held and with respect to each such written consent, vote (or cause to be voted), or deliver a written consent (or cause a consent to be delivered) covering, all the Subject Shares held by such Shareholder (i) to adopt the Purchase Agreement and to approve the transactions contemplated thereby, and any action necessary or desirable in furtherance thereof, (ii) against any proposal for any recapitalization, amalgamation, merger, sale of assets or other business combination of or by the Company other than the transactions contemplated by the Purchase Agreement, or any other action or agreement that would in any such case result in a breach of any covenant, representation or warranty or any other obligation or agreement of the Company under the Purchase Agreement or that would result in any of the conditions to the obligations of the Company under the Purchase Agreement not being fulfilled, (iii) to adopt the Approved Plan (as defined in the Purchase Agreement), and (iv) to approve the Merger, and any action necessary or desirable in the furtherance thereof; and (3) use its best efforts (within its respective power) to cause a majority in number representing 66 2/3% in value of the holders of the outstanding Common Shares of the Company voting in person or by proxy at the Company Shareholders Meeting to adopt the Purchase Agreement and to approve the transactions contemplated thereby. Nothing contained in this Agreement shall in any way preclude or in any manner restrict a Shareholder's designee who is serving on the Company's Board of Directors from discharging that designee's fiduciary duties as a director of the Company in accordance with the terms of the Purchase Agreement. Each shareholder is executing this Agreement solely in his or her capacity as the record or beneficial owner of the Subject Shares held by such Shareholder. (b) No Inconsistent Agreements. Until the termination of this Agreement, each Shareholder shall not enter into any voting agreement or grant a proxy or power of attorney with respect to the Subject Shares which is inconsistent with this Agreement. (c) Review of Purchase Agreement. Each Shareholder acknowledges receipt and review of a copy of the Purchase Agreement. (d) Transfer. -------- (1) During the term of this Agreement, each Shareholder shall not transfer record ownership or beneficial ownership, or both, of any Subject Shares without the prior written consent of Landmark. Notwithstanding anything to the 2 contrary, each Shareholder shall be free to transfer record ownership or beneficial ownership, or both, of any Subject Shares to an entity controlling, controlled by, or under common control with, such Shareholder, provided that such transferee agrees in writing to be bound by this Agreement with respect to such transferred Subject Shares. For elimination of doubt, any transfer or proposed transfer pursuant to the preceding sentence shall not be deemed an "Acquisition Proposal" for purposes of this Agreement. (2) The certificates evidencing the Subject Shares shall bear the following legend reflecting the restrictions on the transfer of such securities contained in this Agreement: "The securities evidenced hereby are subject to the terms of that certain Voting Agreement, dated as of July 30, 2001, by and among Landmark Communications, Inc., Landmark Ventures VII, LLC, and certain investors identified therein, which includes certain voting agreements and restrictions on transfer. A copy of this Agreement has been filed with the Secretary of the Company and is available upon request." As promptly as practicable after the date hereof, the Shareholders shall deliver all certificates representing any Subject Shares to the Company to enable the Company to place the foregoing legend on such certificates. (3) For the purposes of this Agreement, the term "transfer" means a sale, an assignment, a grant, a transfer, a pledge, the creation of a lien or other disposition (including a Hedging Transaction) of any Subject Shares or any interest of any nature in any Subject Shares, including, without limitations, the "beneficial ownership" of such Subject Shares (as determined pursuant to Rule 13d-3 under the Exchange Act). For purposes of this Agreement, a "Hedging -------- Transaction" means any short sale (whether or not against the box) or any purchase, sale or grant of any right ----------- (including, without limitation, any put or call option) with respect to any security (other than a broad-based market basket or index) that includes, relates to or derives any significant part of its value from the Subject Shares. (e) No Revocation. The voting agreements contained herein are coupled with an interest and may not be revoked, except by an amendment, modification or termination effected in accordance with the terms of this Agreement. SECTION 2. Additional Covenants of the Shareholders. ---------------------------------------- (a) Acquisition Proposal. Each Shareholder shall not, and shall cause its affiliates (other than the Company), the officers and directors of it and such affiliates, and its and such affiliate's employees, agents and representatives (including any investment banker, attorney or accountant retained by it or any of such Affiliates) not to, directly or indirectly, (i) initiate, solicit, encourage or knowingly facilitate (including by way of furnishing information) any 3 inquiries or the making of any proposal or offer with respect to a merger, amalgamation, reorganization, share exchange, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving the Company, or any purchase or sale of 20% or more of the consolidated assets of the Company, taken as a whole, or any purchase or sale of, or tender or exchange offer for, the equity securities of the Company that, if consummated, would result in any Person (or the stockholders of such Person) beneficially owning securities representing 20% or more of the total voting power of the Company (or of the surviving or continuing parent entity in such transaction) (any such proposal, offer or transaction (other than a proposal or offer made by Landmark) being hereinafter referred to as an "Acquisition Proposal") or (ii) have any discussion with or provide any information or data to any Person relating to an Acquisition Proposal, or engage in any negotiations concerning an Acquisition Proposal, or knowingly facilitate any effort or attempt to make or implement an Acquisition Proposal. For the purposes hereof, a "Person" shall mean an individual, partnership, joint-stock company, corporation, limited liability company, trust or unincorporated organization, and a government or agency or political subdivision thereof. SECTION 3. Representations and Warranties of the Shareholders. Each Shareholder severally represents and warrants to Landmark as follows: (a) Authority. If such Shareholder is an individual, such Shareholder has full legal capacity and authority to enter into this Agreement and all instruments, documents and agreements contemplated hereby to be executed by or on behalf of such Shareholder and to carry out such Shareholder's obligations hereunder. This Agreement and all instruments, documents and agreements contemplated hereby to be executed by or on behalf of such Shareholder have been or will be at the Closing duly executed and delivered by such Shareholder and constitute, or will constitute, the legal, valid and binding obligation of such Shareholder, enforceable against such Shareholder, except to the extent enforceability is limited by applicable bankruptcy, reorganization, insolvency and similar laws from time to time in effect and subject to general principles of equity and judicial discretion. (b) Existence and Power. If such Shareholder is not an individual, that such Shareholder is a validly existing company, duly organized and in good standing under the laws of its jurisdiction of organization. It has all requisite company power and authority to execute and deliver this Agreement. (c) No Conflicts; Approvals. Neither the execution, delivery and performance by such Shareholder of this Agreement, nor the consummation by such Shareholder of the transactions contemplated hereby, will (a) violate, conflict with or result in a breach of any agreement, contract or other instrument to which such Shareholder is a party, (b) violate or conflict with any order, decree, law, rule or regulation applicable to such Shareholder or by which any property or asset of such Shareholder is bound, or (c) require any consent, approval, authorization or other order of, action by, filing with, or notification to, any federal, state, municipal, foreign or other court or governmental body or agency, or any other regulatory body or Person by such Shareholder. (d) Authorization; Contravention. If such Shareholder is not an individual, that the execution and delivery by it of this Agreement and the performance by it of its 4 obligations hereunder have (1) been duly authorized by all necessary corporate action and (2) do not and will not conflict with or result in a violation of, (A) any provision of its certificate of incorporation or bylaws, or similar organizational document, or (B) any loan or credit agreement, note, mortgage, bond, indenture, lease, benefit plan or other agreement, obligation, instrument, permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to it, the Subject Shares or any of its other properties or assets. (e) Binding Effect. If such Shareholder is not an individual, this Agreement constitutes, or when executed and delivered by it will constitute, a valid and binding obligation of it, enforceable against it in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and similar laws relating to or affecting creditors' rights generally, by general equity principles, (regardless of whether such enforceability is considered in a proceeding in equity or at law) or by an implied covenant of good faith and fair dealing. (f) Ownership. Such Shareholder is the record owner or beneficial owner of the Subject Shares listed beside its name in Exhibit A, free and clear of all liens, security interests, claims, pledges, options, rights of first refusal, limitations on voting rights, charges and other encumbrances of any nature whatsoever except as contemplated by the Purchase Agreement or any Transaction Documents set forth therein. As of the date of this Agreement, it does not own beneficially or of record any equity securities of the Company other than the Subject Shares set forth beside its name on Exhibit A. It has not appointed or granted any proxy which is still effective with respect to the Subject Shares. It has sole voting power or power to direct the vote of the Subject Shares set forth beside its name on Exhibit A and on the record date and the date of the Company Shareholders Meeting at which the Purchase Agreement, the transactions contemplated thereby, and the Merger shall be presented for approval (or the date of any written consent in lieu thereof), it will have sole voting power or power to direct the vote of all its Subject Shares. (g) Litigation. There is no action, suit, investigation, complaint or other proceeding pending against such Shareholder or, to its knowledge, threatened against it or any other Person that restricts in any material respect or prohibits (or, if successful, would restrict or prohibit) the exercise by such Shareholder or its beneficiary of such Shareholder's rights hereunder or the performance by such Shareholder of its obligations hereunder. SECTION 4. Miscellaneous Provisions. ------------------------ (a) Notices. All notices and other communications hereunder shall be in writing and shall be deemed duly given (1) on the date of delivery if delivered personally, or by telecopy or telefacsimile, upon confirmation of receipt, (2) on the first business day following the date of dispatch if delivered by a recognized next-day courier service, or (3) on the seventh business day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. All notices hereunder shall be given to Landmark at its address stated in the Purchase Agreement and all notices to each of the Shareholders shall be given at its address in the register of shareholders of the Company, or, in each case, at any other address as the party may specify for this purpose by notice to the other parties. 5 (b) No Waivers; Remedies; Specific Performance. ------------------------------------------ (1) No failure or delay by Landmark in exercising any right, power or privilege under this Agreement shall operate as a waiver of the right, power or privilege. A single or partial exercise of any right, power or privilege shall not preclude any other or further exercise of the right, power or privilege or the exercise of any other right, power or privilege. The rights and remedies provided in this Agreement shall be cumulative and not exclusive of any rights or remedies provided by law. (2) In view of the uniqueness of the agreements contained in this Agreement and the transactions contemplated hereby and thereby and the fact that Landmark would not have an adequate remedy at law for money damages in the event that any obligation under this Agreement is not performed in accordance with its terms, each of the Shareholders therefore agrees that Landmark shall be entitled to specific enforcement of the terms of this Agreement (without the showing of special, imminent or irreparable damages and without any obligation to post bond or other security or surety) in addition to any other remedy to which Landmark may be entitled, at law or in equity, and if Landmark shall institute any action or proceeding to enforce the provisions hereof, the Shareholders hereby waive the claim or defense that Landmark has an adequate remedy at law. (c) Amendment, Etc. No amendment, modification, termination, or waiver of any provision of any this Agreement, and no consent to any departure by any party hereto or Landmark from any provision of this Agreement, shall be effective unless it shall be in writing and signed and delivered by all the Shareholders and Landmark and, solely with respect to Section 2, this Section 4(c) and Section 4(d), Landmark, and then it shall be effective only in the specific instance and for the specific purpose for which it is given. (d) Successors and Assigns; Third Party Beneficiaries. ------------------------------------------------- (1) No party shall assign any of its rights or delegate any of its obligations under this Agreement. Any assignment or delegation in contravention of this Section 4(d) shall be void ab initio and shall not relieve the assigning or delegating party of any obligation under this Agreement. (2) The provisions of this Agreement shall be binding upon and inure solely to the benefit of the parties hereto and their respective permitted heirs, executors, legal representatives, successors and assigns, and no other person, except that the Company shall be a third party beneficiary under this Agreement with respect to Section 2, Section 4(c) and this Section 4(d) and shall be entitled to enforce its rights hereunder directly. (e) Scope. References in this Agreement to the Purchase Agreement shall not be deemed to include any amendments to the Purchase Agreement, unless the parties hereto have agreed in writing to such inclusion. 6 (f) Governing Law. This Agreement and all rights, remedies, liabilities, powers and duties of the parties hereto, shall be governed in accordance with the laws of the State of New York without regard to principles of conflicts of laws. (g) Severability of Provisions. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible. (h) Headings and References. Article and section headings herein are included for the convenience of reference only and do not constitute a part of this Agreement for any other purpose. References to parties, express beneficiaries, articles and sections in this Agreement are references to parties to or the express beneficiaries and sections of this Agreement, unless the context shall require otherwise. Any of the terms defined in this Agreement may, unless the context otherwise requires, be used in the singular or the plural, depending on the reference. The use in this Agreement of the word "include" or "including," when following any general statement, term or matter, shall not be construed to limit such statement, term, or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not nonlimiting language (such as "without limitation" or "but not limited to" or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that fall within the broadest possible scope of such general statement, term or matter. (i) Entire Agreement. This Agreement embodies the entire agreement and understanding of the Shareholders and Landmark, and supersedes all prior agreements or understandings, with respect to the subject matters of this Agreement. (j) Survival. Except as otherwise specifically provided in this Agreement, each representation, warranty and covenant of a party contained herein shall remain in full force and effect, notwithstanding any investigation or notice to the contrary or any waiver by any other party or beneficiary of a related condition precedent to the performance by the other party or beneficiary of an obligation under this Agreement. No representation, warranty or covenant shall survive termination of this Agreement pursuant to Section 4(l) below; provided, however, if any party has made a written claim for breach prior to the expiration of any applicable survival period, then in such case the breaching party shall remain liable for any losses resulting from, arising out of or related to the asserted breach. (k) Submission to Jurisdiction; Waivers. Each Shareholder and Landmark irrevocably agree that any legal action or proceeding with respect to this Agreement or for recognition and enforcement of any judgment in respect hereto brought by another party hereto or its successors or assigns may be brought and determined in the courts of the State of New York, and each Shareholder and Landmark hereby irrevocably submit with regard to any such 7 action or proceeding for itself and in respect to its property, generally and unconditionally, to the non-exclusive jurisdiction of the aforesaid courts. Each Shareholder and Landmark hereby irrevocably waive, and agree not to assert, by way of motion, as a defense, counterclaim or otherwise, in any action or proceeding with respect to this Agreement, (a) any claim that it is not personally subject to the jurisdiction of the above-named courts for any reason other than the failure to serve process in accordance with the rules of such courts, (b) that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise), and (c) to the fullest extent permitted by applicable law, that (i) the suit, action or proceeding in any such court is brought in an inconvenient forum, (ii) the venue of such suit, action or proceeding is improper and (iii) this Agreement, or the subject matter hereof, may not be enforced in or by such courts. (l) Termination. Unless terminated earlier by mutual agreement of the parties, this Agreement shall terminate upon the first to occur of (i) consummation of the transactions contemplated under the Purchase Agreement or (ii) the termination of the Purchase Agreement pursuant to its terms or (iii) January 31, 2002. (m) Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if all signatures were on the same instrument. [Remainder of this page intentionally left blank.] 8 IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first written above. LANDMARK COMMUNICATIONS, INC. By: /s/ Guy R. Friddell, III ----------------------------------------- Name: Guy R. Friddell, III Title: Executive Vice President LANDMARK VENTURES VII, LLC By: /s/ Richard A. Fraim ----------------------------------------- Name: Richard A. Fraim Title: Vice President and Treasurer LEND LEASE INTERNATIONAL PTY. LIMITED [ACN# 000489109] By: /s/ Mark Skinner, under Power of Attorney ----------------------------------------- Name: Mark Skinner, under Power of Attorney STEVEN M. GOLDEN /s/ Steven M. Golden --------------------------------------------- STEVEN M. GOLDEN REVOCABLE LIVING TRUST DATED 3/3/98 By: /s/ Steven M. Golden ----------------------------------------- Name: Steven M. Golden Title: Trustee STEVEN M. GOLDEN L.L.C. By: /s/ Steven M. Golden ----------------------------------------- Name: Steven M. Golden Title: Member MATTHEW MOOG /s/ Matthew Moog --------------------------------------------- MOOG INVESTMENT PARTNERS LP By: /s/ Matthew Moog ----------------------------------------- Name: Matthew Moog Title: General Partner ROBERT J. KAMERSCHEN /s/ Robert J. Kamerschen --------------------------------------------- HUGH R. LAMLE /s/ Hugh R. Lamle --------------------------------------------- HLBL FAMILY PARTNERS LP By: /s/ Hugh R. Lamle ----------------------------------------- Name: Hugh R. Lamle Title: Managing General Partner HUGH AND BETSY LAMLE FOUNDATION By: /s/ Hugh R. Lamle ----------------------------------------- Name: Hugh R. Lamle Title: President RICHARD H. ROGEL REVOCABLE LIVING TRUST DATED 3/21/90 By: /s/ Richard H. Rogel ----------------------------------------- Name: Richard H. Rogel Title: Trustee RICHARD ROGEL -- CHARITABLE REMAINDER TRUST By: /s/ Richard H. Rogel ----------------------------------------- Name: Richard H. Rogel Title: Trustee RICHARD ROGEL LIMITED PARTNERSHIP By: /s/ Richard H. Rogel ----------------------------------------- Name: Richard H. Rogel Title: General Partner COOLSAVINGS.COM INC., as third party beneficiary By: /s/ Matthew Moog ----------------------------------------- Name: Matthew Moog Title: President EXHIBIT A --------- - ------------------------------------------ ------------------------------------ Lend Lease International Pty. Limited 10,889,636 [ACN# 000489109] - ------------------------------------------ ------------------------------------ Steven M. Golden* 334,000 - ------------------------------------------ ------------------------------------ Steven M. Golden Revocable Living Trust 4,382,315 dated 3/3/98; Steven M. Golden as Trustee - ------------------------------------------ ------------------------------------ Steven M. Golden L.L.C. 172,500 - ------------------------------------------ ------------------------------------ Matthew Moog* 64,500 - ------------------------------------------ ------------------------------------ Moog Investment Partners LP 238,268 - ------------------------------------------ ------------------------------------ Robert J. Kamerschen* 147,724 - ------------------------------------------ ------------------------------------ Hugh R. Lamle* 57,500 - ------------------------------------------ ------------------------------------ HLBL Family Partners LP 1,004,023 - ------------------------------------------ ------------------------------------ Hugh and Betsy Lamle Foundation 1,500 - ------------------------------------------ ------------------------------------ Richard Rogel Limited Partnership 139,700 - ------------------------------------------ ------------------------------------ Richard H. Rogel Revocable Living Trust 7,156,413 dated 3/21/90 - ------------------------------------------ ------------------------------------ Richard Rogel - Charitable Remainder 75,000 Trust - ------------------------------------------ ------------------------------------ - ------------------------------------------ ------------------------------------ TOTAL 24,663,079 - ------------------------------------------ ------------------------------------ Percent of outstanding 63.14% - ------------------------------------------ ------------------------------------ * Shares may be held in street name. EX-3 6 lc890862.txt EX-3 SECURITIES PURCHASE AGREEMENT EXHIBIT 3 EXECUTION COPY - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES PURCHASE AGREEMENT between LANDMARK COMMUNICATIONS, INC., LANDMARK VENTURES VII, LLC COOLSAVINGS, INC. and COOLSAVINGS.COM INC. July 30, 2001 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- EXECUTION COPY COOLSAVINGS.COM INC. SECURITIES PURCHASE AGREEMENT THIS SECURITIES PURCHASE AGREEMENT dated as of July 30, 2001 (the "Agreement") between and among COOLSAVINGS.COM INC., a Michigan corporation (the "Company"), COOLSAVINGS, INC., a Delaware corporation ("Newco"), LANDMARK COMMUNICATIONS, INC., a Virginia corporation ("LCI"), and LANDMARK VENTURES VII, LLC, a Delaware limited liability company ("LV") (LCI and LV are each a "Landmark Party" and collectively the "Landmark Parties"). WHEREAS, the Company and LCI entered into a non-binding Term Sheet dated June 5, 2001 (the "Term Sheet") which stated the general terms and conditions upon which LCI or certain of its affiliates would lend to and invest in the Company up to Fifteen Million Dollars ($15,000,000) in exchange for a Senior Secured Note, certain Warrants and shares of Series B Preferred Stock (each as defined below); and WHEREAS, in anticipation of this Agreement, the Company and LCI entered into a Loan and Security Agreement dated June 14, 2001, as amended on June 27, 2001 and July 26, 2001 (the "Bridge Loan Agreement"), pursuant to which LCI has advanced to the Company One Million Seven Hundred Fifty Thousand Dollars ($1,750,000) (the "Bridge Loan Amount") which was borrowed pursuant to a Master Note for such amount (the "Bridge Note"); and WHEREAS, the Company and LCI are contemporaneously herewith amending and restating the Bridge Loan Agreement with the Amended and Restated Loan Agreement attached hereto as Exhibit A (the "Amended Loan Agreement") pursuant to which the amount advanced to the Company is being increased to an aggregate total of Five Million Dollars ($5,000,000) (the "Senior Secured Loan"); and WHEREAS, contemporaneously herewith, LCI is delivering to the Company the Bridge Note and Three Million Two Hundred Fifty Thousand Dollars ($3,250,000) in cash (less all interest that has accrued under the Bridge Note) in consideration for the execution, delivery and issuance by the Company of a 12% Senior Secured Note (together with any amendments thereto, the "Senior Secured Note"), which shall evidence the Senior Secured Loan and amend and restate the Bridge Note in its entirety; and WHEREAS, the Senior Secured Note shall initially be due six months from the date hereof and have the rights and privileges set forth in the form of Exhibit B attached hereto; and WHEREAS, under the Amended Loan Agreement, the Company has also made a Grid Note (the "Grid Note") attached hereto as Exhibit C pursuant to which LCI may at its option record additional advances requested by and made to the Company or obligations incurred by the Company pursuant to the Amended Loan Agreement; and WHEREAS, from and after the consummation of the First Tranche Closing (defined below) contemplated hereby, the terms of the Senior Secured Note provide that the maturity date shall be adjusted to June 30, 2006, and the interest rate shall be adjusted to 8% per annum (all subject to the express terms of the Senior Secured Note); and WHEREAS, in connection with the issuance of the Senior Secured Note, the Company has agreed to issue to LCI warrants substantially in the form attached as Exhibit D hereto (the "Warrants"), which are exercisable through July 30, 2009, for shares of common stock of the Company ("Common Stock"); and WHEREAS, from issuance through the First Tranche Closing, the Warrants shall (subject to the terms of the Warrants) be exercisable at $0.01 per share into that number of shares of Common Stock (the "Warrant Shares") equal to 19.9% of all shares of Common Stock outstanding (calculated as provided under the Warrants) and, from and after the First Tranche Closing, the terms of the Warrants provide that the exercise price shall be adjusted to $0.50 per share and the number of Warrant Shares shall be adjusted to 10,000,000 shares, subject to adjustments required to be made pursuant to the terms of the Warrants, including without limitation, (i) a re-set in the price to $0.75 per share after the fourth anniversary of the issuance of the Warrants, (ii) adjustments in connection with the antidilution provisions of the Warrants, and (iii) increases in the number of Warrant Shares required to reflect the issuance of additional Warrants (the "PIK Warrants") issued in connection with the payment in kind of interest accrued after the First Tranche Closing under the Senior Secured Note (the shares of Common Stock issuable upon exercise of the PIK Warrants are "PIK Warrant Shares" and also "Warrant Shares"); and WHEREAS, the Company desires to sell and issue to LV and LV wishes to purchase from the Company up to Ten Million Dollars ($10,000,000.00) of the Company's shares of Preferred Stock, designated as "Series B Convertible Preferred Stock" (the "Series B Preferred Stock"); and WHEREAS, based on the business judgment of the Board of Directors of the Company and in furtherance of the transactions contemplated hereby, the Board of Directors has authorized and approved, and is recommending to the shareholders of the Company for their approval, the merger of the Company pursuant to the Agreement and Plan of Merger substantially in the form attached hereto as Exhibit E ("Agreement and Plan of Merger") with Newco, a newly-formed, wholly-owned subsidiary of the Company organized in the State of Delaware, prior to LV's purchase of the Series B Preferred Stock (the "Merger"); and WHEREAS, in connection with and prior to such Merger, the Company shall cause Newco to be duly organized through the filing of the Certificate of Incorporation attached hereto as Exhibit F (the "Restated Charter") with the State of Delaware and the adoption of the organizational actions (including, without limitation, the adoption of Newco's bylaws) attached hereto as Exhibit G; and WHEREAS, pursuant to the Agreement and Plan of Merger, Newco shall assume all of the rights, liabilities and obligations of the Company including, without limitation, all obligations of the Company under this Agreement and the Transaction Documents; and 2 WHEREAS, if the requisite number of shareholders of the Company fail to approve the Merger, the Board of Directors of the Company has authorized and approved the Series B Preferred Stock pursuant to the Certificate of Designation attached hereto as Exhibit H (the "Series B Certificate of Designation") which has been filed with the Department of Commerce and Industry Services of the State of Michigan (the "DCIS"); and WHEREAS, the shares of Series B Preferred Stock to be purchased hereunder, whether from the Company or Newco as its successor (in each case and including the Option Shares, defined below, hereinafter the "Series B Preferred Stock") shall accrue dividends on a quarterly basis payable solely in kind (the "PIK Shares") and shall be (together with accrued and cumulated dividends thereon) convertible, pursuant to the terms of the Company's articles of incorporation or Newco's certificate of incorporation, as applicable, into shares (the "Converted Shares") of Common Stock of the Company or Newco, as applicable; and WHEREAS, the Landmark Parties will have registration rights with respect to the Converted Shares and the Warrant Shares, pursuant to the terms of that certain Registration Rights Agreement to be entered into between the Company and the Landmark Parties, substantially in the form attached as Exhibit I hereto ("Registration Rights Agreement"); and WHEREAS, the Landmark Parties wish to purchase the Senior Secured Note, the Warrants and the Series B Preferred Stock (collectively with the Warrant Shares and the PIK Shares, the "Securities") on all of the other terms and subject to the conditions set forth in this Agreement; and WHEREAS, capitalized terms used herein but not defined shall have the respective meanings given to such terms under Section 10.1 below. NOW THEREFORE, in consideration of the foregoing premises and the covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company hereby agrees with the Landmark Parties as follows: SECTION 1. AUTHORIZATION OF SERIES B PREFERRED STOCK ----------------------------------------- The Company has authorized and designated shares of Series B Preferred Stock. The terms, powers, preferences, qualifications, limitations and relative rights of the Series B Preferred Stock are set forth in the Series B Certificate of Designation. Upon and subject to shareholder approval of the Merger, the Company shall cause the Merger to be consummated pursuant to the Agreement and Plan of Merger, whereupon Newco will assume all of the Company's obligations hereunder and all representations, warranties and covenants shall be made and performed by Newco. The terms, powers, preferences, qualifications, limitations and relative rights of the Series B Preferred Stock to be sold by Newco hereunder are set forth in the Restated Charter. 3 SECTION 2. PURCHASE AND SALE OF SECURITIES ------------------------------- 2.1. Issuance of Senior Secured Note ------------------------------- Subject to the terms and conditions set forth in this Agreement and in reliance upon the representations and warranties set forth below (and upon the satisfactory completion of the conditions listed on Schedule 2.1 hereto), as of the date hereof the Company shall sell to LCI, and LCI shall purchase from the Company, the Senior Secured Note and the Warrants for an aggregate purchase price of Five Million Dollars ($5,000,000.00) (the "Note Purchase Price"). Such sale and purchase shall be effected on the date hereof by the Company executing and delivering to LCI the duly executed Amended Loan Agreement, Senior Secured Note and Warrants, against delivery by LCI to the Company of (a) the Note Purchase Price (less the outstanding balance under the Bridge Note and any accrued and unpaid interest thereon) by wire transfer of immediately available funds to such account as the Company shall designate prior to the date hereof and (b) the Bridge Note. 2.2. Issuance of First Tranche of Series B Preferred Stock ----------------------------------------------------- (a) Subject to the terms and conditions set forth in this Agreement and in reliance upon the representations and warranties set forth below, on the First Tranche Closing Date (defined below) the Company shall sell to LV, and LV shall purchase from the Company 32,180,405 shares of Series B Preferred Stock (the "First Tranche of Purchased Preferred Stock"), for a cash purchase price of Five Million Dollars ($5,000,000.00) (the "First Tranche Purchase Price"). Such sale and purchase shall be 4 effected on the First Tranche Closing Date by the Company executing and delivering to LV, duly registered in its name, a duly executed stock certificate evidencing the Series B Preferred Stock being purchased by it, against delivery by LV to the Company of the First Tranche Purchase Price (less any debt under the Grid Note that LCI requests be applied to the Purchase Price) by wire transfer of immediately available funds to such account as the Company shall designate prior to the First Tranche Closing Date. (b) The closing of such sale and purchase (the "First Tranche Closing") shall take place at 10:00 A.M., New York City time, on the second business day after the satisfaction or waiver of the conditions set forth in Sections 6 and 8 hereof at the offices of Willkie Farr & Gallagher, 787 Seventh Avenue, New York, NY 10019 (the "Willkie Offices"), or at such other place and time as may be mutually agreed to by the parties hereto (the "First Tranche Closing Date"). 2.3. Issuance of Second Tranche of Series B Preferred Stock ------------------------------------------------------ (a) At any time after the First Tranche Closing Date but not later than December 31, 2001 (such date to be October 25, 2001, in the event all of the conditions to closing under Section 2.3(c) below have been satisfied or waived by such date), LV, in its sole discretion (and in reliance upon the representations and warranties set forth below), shall have the option to purchase from the Company (the "Second Tranche Purchase Option"), and the Company shall be obligated to sell to LV, 32,180,405 shares of Series B Preferred Stock (the "Second Tranche of Purchased Preferred Stock"), for a cash purchase price of Five Million Dollars ($5,000,000.00) (the "Second Tranche Purchase Price"). Such sale and purchase shall be 4 effected on the Second Tranche Closing Date by the Company executing and delivering to LV, duly registered in its name, a duly executed stock certificate evidencing the Series B Preferred Stock being purchased by it (together with the certificates and opinion contemplated under Sections 7.3 and 7.5 below, respectively), against delivery by LV to the Company of the Second Tranche Purchase Price (less any debt under the Grid Note that LCI requests be applied to the Purchase Price) by wire transfer of immediately available funds to such account as the Company shall designate prior to the Second Tranche Closing Date. None of the Landmark Parties shall have any obligation hereunder to exercise the Second Tranche Purchase Option. (b) Except as otherwise provided in Section 2.3(c) below, the closing of such sale and purchase (the "Second Tranche Closing", and together with the First Tranche Closing, the "Closings") shall take place at 10:00 A.M., New York City time, on the fifth business day after LV provides the Company with written notice that LV has elected to exercise the Purchase Option, at the Willkie Offices, or at such other place and time as may be mutually agreed to by the parties hereto (the "Second Tranche Closing Date", and together with the First Tranche Closing Date, the "Closing Dates"). (c) If after the First Tranche Closing the Second Tranche Purchase Option has not been exercised, and the conditions set forth in Sections 7 and 8 below have been satisfied or waived, then the Second Tranche Closing shall take place at 10:00 A.M., New York City time, on October 25, 2001 (in such event, such date shall be the "Second Tranche Closing Date"). On the Second Tranche Closing Date, in reliance upon the representations and warranties set forth below, the Company shall sell to LV, and LV shall purchase from the Company the Second Tranche of Purchased Preferred Stock for the Second Tranche Purchase Price (less any debt under the Grid Note that LCI requests be applied to the Purchase Price). Such sale and purchase shall be effected in the same manner described in the penultimate sentence of Section 2.3(a) above. 2.4. Issuance of Additional Tranches of Series B Preferred Stock ----------------------------------------------------------- (a) At any time and from time to time after the Second Tranche Closing Date but not later than December 31, 2002 (the "Additional Option Period"), if a Shortfall Event (defined below) occurs, LV, in its sole discretion (and in reliance upon the Special Officer's Certificate, defined below), shall have the option to purchase from the Company (each option related to a Shortfall Event, a "Shortfall Purchase Option"), and the Company shall be obligated to sell to LV, for a cash purchase price of $0.1554 per share (the "Share Price") up to that number of shares of Series B Preferred Stock (the "Available Option Shares") determined by dividing the Shortfall Amount (defined below) by the Share Price. (b) If a Shortfall Event occurs and LV elects to exercise the corresponding Shortfall Purchase Option, LV shall provide the Company with written notice of election specifying the number of Available Option Shares that LV will purchase and, on the third day after the Company's receipt of such notice (or at such other time as may be mutually agreed to by the parties hereto), the closing of such sale and purchase shall be effected at 10:00 a.m., New York City time at the Willkie Offices (or at such other place as may be mutually agreed to by the parties hereto). Each such closing (an "Additional Option Closing") shall be effected by the Company executing and delivering to LV, duly registered in its name, a duly executed stock 5 certificate evidencing the Series B Preferred Stock being purchased by it (together with the Special Officer's Certificate and the Special Opinion, defined below), against delivery by LV to the Company of the aggregate Share Price by wire transfer of immediately available funds to such account as the Company shall designate prior to the applicable closing. (c) As used in this Section 2.4: (i) "Shortfall Event" means any of: (A) The occurrence of an event which with or without notice or the passage of time or both would constitute a Forbearance Termination Event (as defined under the applicable Forbearance Agreement) under any of the Forbearance Agreements (defined below) that is curable by the payment of cash to the applicable forbearing party or through the infusion of cash into the Company; (B) the occurrence of an event which with or without notice or the passage of time or both would constitute a breach or event of default under (1) any of the Key Agreements and Instruments (defined below) (including, without limitation, the Amended Loan Agreement) or any of the Material Contracts (defined below), (2) any material agreement by which the Company has received a license with respect to Intellectual Property, or (3) any real property lease, provided, such breach or event of default is curable by the payment of cash to the other party under the applicable agreement, license or lease; (C) the failure by the Company to pay any account payable which is due and owing within ninety (90) days of its applicable due date, except as to any account payable being disputed by the Company in good faith and as to which the Company's chief financial officer or principal accounting officer has delivered to LV a certificate certifying to the dispute and the facts giving rise to the dispute; (D) any litigation against the Company exists in which the adverse party may attach a lien against a material part of the Company's assets or is seeking to enjoin the Company from using any material asset, excluding any litigation listed on Schedule 3.13 or in which the Company has received an opinion from its counsel that a judgment in favor of the Company is more likely than not; (E) the failure by the Company during the Additional Option Period to maintain an excess of Current Assets over Current Liabilities at or above the amount shown (or derived(1)) for the corresponding week or quarter, as applicable, on the "coolsaving.com BASE CASE Cash Source & Use Forecast 2001 (Jun 18 to Dec 31) 7/27/01 12:00 AM" - ---------- (1) With respect to the calculation of "Current Liabilities" and "Total Liabilities", it is understood and agreed that to the extent balances are not explicitly set forth on the Base Forecast, the Base Forecast assumes that each capital lease and bank obligation and liability of the Company is being paid when due in accordance with the terms agreed upon at the closing of the Senior Secured Loan, including the terms of all applicable forbearance agreements, and that no additional obligation or liability to any lessor or lender has been incurred. 6 delivered by the Company to the Landmark Parties by e-mail dated July 27, 2001 (the "Base Forecast")(2); (F) the failure by the Company during the Additional Option Period to maintain an excess of Current Assets over Total Liabilities at or above the amount shown (or derived1) for the corresponding week or quarter, as applicable, on the Base Forecast; or (G) the reduction by the Company during the Additional Option Period of its expenditures in any expense category shown on the Base Forecast by more than 10% or in all expense categories by more than 2% in the aggregate. (ii) "Shortfall Amount" means the cash amount required to cure an applicable Shortfall Event. (iii) "Special Officer's Certificate" means a duly executed officer's certificate which shall be delivered to LV at each Additional Option Closing and which shall be substantially similar in form to the certificate described in Section 6.3 below and certify the same matters required under Section 6.3, provided the certifications (and the representations and warranties that reference a "Closing Date") shall be made as of the actual date of the Additional Option Closing and may be qualified by an updated disclosure schedule attached to the certificate. (iv) "Special Opinion" means a duly executed opinion of counsel which shall be delivered to LV at each Additional Option Closing and which shall be substantially similar in form to the opinion described in Section 6.6 below, conformed to delete those opinions unrelated to the issuance of shares and to reflect changes resulting from the passage of time. (d) The aggregate Purchase Price paid by LV in connection with the exercise of each Shortfall Purchase Option shall be used exclusively by the Company to cure the applicable Shortfall Event and, in connection therewith, LV may require that such Purchase Price be placed in escrow pending such application or otherwise transferred and applied in a manner satisfactory to LV. (e) None of the Landmark Parties shall have any obligation hereunder to exercise any Shortfall Purchase Option or any implied duty in connection therewith; each such option being exercisable at LV's option and in its sole and absolute discretion. No waiver by LV of its right to exercise a Shortfall Purchase Option upon the occurrence of any Shortfall Event shall be deemed to preclude the occurrence of any subsequent Shortfall Event or a further or continuing waiver of any Shortfall Purchase Option related to any subsequent Shortfall Event. (f) With respect to all shares of Series B Preferred Stock purchased after the First Tranche Closing, LV shall be entitled to all anti-dilution protections applicable to the shares - ---------- (2) For purposes of identification, the Base Forecast indicates Projected Cash (Requirement) of $1,565,494.43 at 31-Dec-01 and $102,921.99 at 4th quarter 2002. 7 of Series B Preferred Stock under the Articles of Incorporation or Restated Charter, as applicable, on the same basis as if LV had been issued such shares at the First Tranche Closing and would consequently be entitled to protection for below market issuances on and after that date. 2.5. Equitable Adjustment. -------------------- The number of shares of Series B Preferred Stock to be purchased pursuant to this Section 2 assumes the filing of the Restated Charter with the Secretary of State of Delaware and the consummation of the Merger. If such Merger is consummated, Newco shall succeed to all obligations under this Purchase Agreement including without limitation the obligation to issue and deliver the Securities under the same terms and conditions as set forth in this Section 2. In the event that prior to the First Tranche Closing the Restated Charter is not filed with the Secretary of State of Delaware and the Merger is not consummated, and LV, in its sole discretion, elects to proceed with the First Tranche Closing, then the Series B Preferred Stock purchased at the First Tranche Closing shall be issued pursuant to the Series B Certificate of Designation and the number of shares of Series B Preferred Stock issued at such closing shall be 3,218,040.50. SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY --------------------------------------------- The Company represents and warrants to the Landmark Parties that, except as set forth on the correspondingly numbered section of the Disclosure Schedule attached hereto and delivered to the Landmark Parties in connection herewith, the statements contained in this Section 3 are true, complete and correct and will be true, complete and correct as of each Closing Date: 3.1. Corporate Organization and Authority ------------------------------------ (a) The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Michigan. Attached hereto as Exhibits J and K, respectively, are true and complete copies of the articles of incorporation (the "Articles of Incorporation") and the bylaws (the "Bylaws") of the Company, each as amended through July 30, 2001 (collectively, the "Michigan Organizational Documents"). (b) Upon the filing of the Restated Charter and the consummation of the Merger, Newco will be a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Attached hereto at Exhibits F and G, respectively, are true and complete copies of the Restated Charter and the bylaws of Newco, each as amended through the date of the Merger (collectively, the "Delaware Organizational Documents" and together with the Michigan Organizational Documents, the "Organizational Documents"). (c) The Company has all requisite power and authority and has all necessary approvals, licenses, permits and authorization to own its properties and to carry on its business as now conducted except where the failure to so qualify would not, individually or in the aggregate, have a material adverse effect on the business, properties, assets, liabilities, prospects, profits, results of operations or condition (financial or otherwise) of the Company or the ability of the Company to consummate the transactions contemplated hereby (a "Material Adverse Effect"). 8 The Company has all requisite power and authority to execute and deliver the Transaction Documents and to perform its obligations hereunder and thereunder. (d) The Company has filed all necessary documents to qualify to do business as a foreign corporation in, and the Company is in good standing under the laws of, each jurisdiction in which the conduct of the Company's business or the nature of the property owned, operated or leased requires such qualification, except where the failure to so qualify would not, individually or in the aggregate, have a Material Adverse Effect. 3.2. Subsidiaries ------------ Other than Newco, the Company has no subsidiaries and no interests or investments in any partnership, trust or other entity or organization. 3.3. Capitalization -------------- (a) As of July 30, 2001, the authorized capital stock of the Company consists of (i) 100,000,000 shares of its Common Stock, and (ii) 10,000,000 shares of preferred stock, of which (A) 8,695,000 shares are designated as Series B Preferred Stock and (B) 1,300,000 shares are designated Series C Preferred Stock. Upon filing of the Restated Charter with the Secretary of State of Delaware prior to the First Tranche Closing, the authorized capital stock of Newco will consist of a total of six hundred fifty (650,000,000) million shares of capital stock which shall consist of: (i) three hundred seventy nine (379,000,000) million shares of its Common Stock, $0.001 par value per share, and (ii) two hundred seventy one (271,000,000) million shares of preferred stock, $0.001 par value per share, of which (A) two hundred fifty eight (258,000,000) million shares will be designated as Series B Preferred Stock, and (B) thirteen (13,000,000) million shares will be designated as "Series C Convertible Preferred Stock" (the "Series C Preferred Stock"). The Company's Board of Directors has adopted a resolution dated July 12, 2001, authorizing and directing the organization of Newco and the filing of the Restated Charter in connection therewith and recommending to the shareholders that the Merger be approved. As of July 30, 2001, the issued and outstanding shares of capital stock of the Company consist of 39,093,660 shares of Common Stock, and at each Closing the issued and outstanding shares of capital stock of the Company will be the same, except to the extent that additional shares of Common Stock are issued upon valid exercise of warrants, options and convertible securities that are issued and outstanding as of July 30, 2001 as reflected on Schedule 3.3(a), to the extent that shares of Series B Preferred Stock are issued pursuant to this Agreement and to the extent that shares of Series C Preferred Stock are issued pursuant to Section 6.15 below. There are no shares of preferred stock designated as "Series A Preferred Stock" other than shares already issued, converted and retired none of which is held in treasury or otherwise available for re-issuance. (b) All the outstanding shares of capital stock of the Company have been duly and validly issued and are fully paid and non-assessable, and were issued in accordance with the registration or qualification requirements of the Securities Act and any relevant state securities laws or pursuant to valid exemptions therefrom. Upon issuance, sale and delivery as contemplated by this Agreement, the Series B Preferred Stock will be duly authorized, validly issued, fully paid and non-assessable shares of the Company, free of all preemptive or similar 9 rights, and entitled to the rights therein described. Upon their issuance in accordance with the terms of the Series B Preferred Stock and Warrants, and in the case of the Warrants, upon and against payment therefor, the PIK Shares and the shares of Common Stock issuable upon conversion of the Series B Preferred Stock or upon exercise of the Warrants, as applicable, will be duly authorized, validly issued, fully paid and non-assessable shares of Common Stock of the Company, free of all preemptive or similar rights except as contemplated by the Transaction Documents. (c) Except for the exercise and conversion rights which attach to the warrants, options and convertible securities which are listed on Schedule 3.3(a) hereto and to the Series B Preferred Stock, Series C Preferred Stock and the Warrants, on the Closing Dates there will be no shares of Common Stock or any other equity security of the Company issuable upon conversion or exchange of any security of the Company nor will there be any rights, options or warrants outstanding or other agreements to acquire shares of Common Stock nor will the Company be contractually obligated to purchase, redeem or otherwise acquire any of its outstanding shares. No shareholder of the Company is entitled to any preemptive or similar rights to subscribe for shares of capital stock of the Company. The Company's Series C Preferred Stock is, and will be, in all respects junior to the Series B Preferred Stock with the designations set forth in the Certificate of Designation with respect to the Series C Preferred Stock attached hereto as Exhibit L (the "Series C Certificate of Designation" and, collectively with the Series B Certificate of Designation, the "Certificates of Designation") or the Restated Charter, as applicable. Except as set forth on Schedule 3.3(a), there are no other scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights exchangeable for or convertible into, any shares of capital stock of the Company, or contracts, commitments, understandings, or arrangements by which the Company is or may become bound to issue additional shares of capital stock of the Company or options, warrants, scrip, rights to subscribe to, or commitments to purchase or acquire, any shares, or securities or rights convertible or exchangeable into shares, of capital stock of the Company. There are no outstanding or authorized stock appreciation, phantom stock or similar rights with respect to the Company. (d) Except as set forth in Schedule 3.3(d), there are no outstanding securities issued by the Company that are entitled to registration rights under the Securities Act. Except as set forth in Schedule 3.3(d), there are no outstanding securities issued by the Company that are directly or indirectly convertible into, exercisable into, or exchangeable for, shares of Common Stock of the Company, or that have anti-dilution or similar rights that would be affected by the issuance of the Securities, the Converted Shares or the Warrant Shares. (e) As of each Closing Date, the designations, powers, preferences, rights, qualifications, limitations and restrictions in respect of each class and series of authorized capital stock of the Company and Newco will be set forth in the Articles of Incorporation (as amended by the Certificates of Designation) or the Restated Charter, as applicable, and all such designations, powers, preferences, rights, qualifications, limitations and restrictions will upon filing be valid, binding and enforceable and in accordance with all applicable laws. (f) Upon consummation of the Merger, all outstanding shares of capital stock of Newco shall have been duly and validly issued and fully paid and non-assessable, and shall 10 have been issued in accordance with the registration or qualification requirements of the Securities Act and any relevant state securities laws or pursuant to valid exemptions therefrom. Upon consummation of the Merger, all securities of the Company shall become securities of Newco in accordance with the terms of the Agreement and Plan of Merger. 3.4. Issuance of Common Stock ------------------------ The Converted Shares and the Warrant Shares are duly authorized and reserved for issuance and, upon issuance, the Converted Shares and the Warrant Shares will be validly issued, fully paid and non-assessable, free and clear of any and all liens, claims and encumbrances, and, if the Common Stock is then listed and traded on the Nasdaq National Market, the Converted Shares and Warrant Shares will be entitled to be traded on the Nasdaq National Market (or on any market that the outstanding stock is traded on, the "Approved Markets"), and the holders of such Converted Shares and Warrant Shares shall be entitled to all rights and preferences accorded to a holder of Common Stock. 3.5. Corporate Proceedings, etc. --------------------------- The Company has authorized the execution, delivery, and performance of the Transaction Documents to be executed by it and each of the transactions and agreements contemplated hereby and thereby. No other corporate action is necessary to authorize such execution, delivery of the Transaction Documents and no other corporate action is necessary to authorize the performance of the Transaction Documents (excluding shareholder approval for the Merger). Upon such execution and delivery, each of the Transaction Documents shall constitute the valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except that such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights and general principles of equity. The Company has authorized the issuance and delivery of the Securities in accordance with this Agreement and, subject to the issuance of the Series B Preferred Stock and Warrants, the Company will have a sufficient number of shares of Common Stock reserved for initial issuance upon conversion of the Series B Preferred Stock (including PIK Shares) and the exercise of the Warrants (including the PIK Warrants). 3.6. Consents and Approvals ---------------------- Except as set forth on Schedule 3.6 and except for the shareholder approval for the Merger, the execution and delivery by the Company of the Transaction Documents, the performance by the Company of its obligations hereunder and thereunder and the consummation by the Company of the transactions contemplated hereby and thereby do not require the Company to obtain any consent, approval or action of, or make any filing with or give any notice to, any corporation, person or firm or any public, governmental or judicial authority. 3.7. Absence of Defaults, Conflicts, etc. ------------------------------------ Except as set forth on Schedule 3.7, the execution and delivery of the Transaction Documents and the approval of the Board of Directors of the Company and the submission to the shareholders of the Company for approval of the Merger do not, and the fulfillment of the terms hereof and thereof by the Company, and the issuance of the Series B Preferred Stock, PIK 11 Shares, the Warrants and the PIK Warrants (and the Common Stock issuable upon conversion or exercise thereof) and the execution of the Senior Secured Note will not, result in a breach of any of the terms, conditions or provisions of, or constitute a default under, or permit the acceleration of rights under or termination of, any indenture, mortgage, deed of trust, credit agreement, note or other evidence of indebtedness, or other material agreement of the Company (collectively the "Key Agreements and Instruments"), or the Organizational Documents (except to the extent the Merger will require shareholder approval), or any rule or regulation of any court or federal, state or foreign regulatory board or body, or administrative agency having jurisdiction over the Company or over its properties or businesses. Except as set forth on Schedule 3.7, no event has occurred and no condition exists which, upon notice or the passage of time (or both), would constitute a default under any such Key Agreements and Instruments or under any license, permit or authorization to which the Company is a party or by which it may be bound. There is not a pending Takeover Proposal and the Company is in compliance with the terms of that certain exclusivity letter with LCI dated June 5, 2001. 3.8. Absence of Certain Developments ------------------------------- Except as disclosed in the Public Filings and except as set forth on Schedule 3.8, since May 15, 2001 there has been no (i) material adverse change in the condition, financial or otherwise, of the Company or in its assets, liabilities, properties, or business or prospects, (ii) declaration, setting aside or payment of, or any agreement by the Company to declare, set aside or pay, any dividend or other distribution with respect to the capital stock of the Company (or repurchase or redemption of any capital stock), (iii) issuance of, or any agreement by the Company to issue, capital stock (other than pursuant to the exercise of options, warrants, or convertible securities outstanding at such date) or options, warrants or rights to acquire capital stock (other than the rights granted to the Landmark Parties hereunder), (iv) material loss, destruction or damage to any property of the Company, whether or not insured, (v) acceleration or prepayment of any indebtedness for borrowed money or the refunding of any such indebtedness, (vi) labor trouble involving the Company or any material change in its personnel or the terms and conditions of employment, (vii) waiver of any valuable right, (viii) increase in, or any agreement by the Company to increase, salary and benefits of any officer or employee or loan or extension of credit to any officer or employee of the Company except in the ordinary course of business consistent with past practice, or (ix) acquisition or disposition of any material assets (or any contract or arrangement therefor), or any other material transaction by the Company otherwise than for fair value in the ordinary course of business. 3.9. Securities Law Issues --------------------- (a) SEC Documents; No Non-Public Information; Financial Statements. The Common Stock of the Company is registered pursuant to Section 12(g) of the Exchange Act and the Company has filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Exchange Act, including material filed pursuant to Section 13(a) or 15(d), in addition to one or more registration statements and amendments thereto heretofore filed by the Company with the SEC (all of the foregoing including filings incorporated by reference therein being referred to herein as the "SEC Documents"). The Company has delivered or made available to the Landmark Parties true and complete copies of all SEC Documents (including, without limitation, proxy information and 12 solicitation materials and registration statements) filed with the SEC since May 15, 2000. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC promulgated thereunder and other federal, state and local laws, rules and regulations applicable to such SEC Documents, and none of the SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. No event or circumstance has occurred which would require the Company to disclose such event or circumstance in order to make the statements in the SEC Documents not misleading on the date hereof or on the Closing Dates but which has not been so disclosed. The financial statements of the Company included in the SEC Documents, the Company's unaudited financial statements attached hereto as Schedule 3.9(a) and the Company's unaudited financial statements for the period ending March 31, 2001 (the "Filed Financial Statements") comply as to form and substance in all material respects with applicable accounting requirements and the published rules and regulations of the SEC or other applicable rules and regulations with respect thereto. The Filed Financial Statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto or (ii) in the case of unaudited interim statements, to the extent they may not include footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments which will not, individually or in the aggregate, be material). (b) Receivables. All receivables of the Company (including accounts receivable, loans receivable and advances) which are reflected in the Balance Sheet, and all such receivables which will have arisen from the date thereof (as stated from time to time in the financial information delivered pursuant to Section 5.8 below), shall have arisen only from bona fide transactions in the ordinary course of the Company's business and shall be (or have been) fully collected when due, or in the case of each account receivable within 90 days after it arose, without resort to litigation and without offset or counterclaim, in the aggregated face amounts thereof, except to the extent of the doubtful accounts reserve reflected on the Balance Sheet or the delivered financial information, as applicable. (c) Principal Exchange/Market. The principal market on which the Common Stock is currently traded is the Nasdaq National Market. The Company has received notice from Nasdaq notifying the Company that its Common Stock may be subject to delisting from the National Market due to recent failure of the Company to meet the continued listing standards required by Nasdaq. (d) No General Solicitation. Neither the Company, nor any of its Affiliates, or, to the Company's knowledge, any person acting on its or their behalf has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with the offer or sale of the Securities, the Converted Shares or the Warrant Shares. 13 (e) No Integrated Offering. Neither the Company, nor any of its Affiliates, nor to its knowledge any person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would require registration of the Securities (or the underlying Common Stock convertible or exercisable pursuant to the Series B Preferred Stock or the Warrants) under the Securities Act. The issuance of the Securities (or the underlying common stock convertible or exercisable pursuant to the Series B Preferred Stock or the Warrants) to the Landmark Parties and the Series C Preferred Stock to the Subordinated Debt Holders will not be integrated with any other issuance of the Company's securities (past, current or future) which will require any shareholder approval under the rules of the Nasdaq National Market other than the shareholder approval to be obtained in connection herewith. (f) Shareholder Rights Plan. Neither the acquisition of the Securities (or the underlying Common Stock convertible or exercisable pursuant to the Series B Preferred Stock or the Warrants) nor the deemed beneficial ownership of shares of Common Stock prior to, or the acquisition of such shares pursuant to, the conversion of the Series B Preferred Stock, PIK Shares or the exercise of the Warrants or PIK Warrants will in any event under any circumstance trigger the poison pill provisions of any shareholders' rights or similar agreements, or a substantially similar occurrence under any successor or similar plan. (g) Michigan Law Issues. The Company has complied with any and all procedures required under Chapter 7A or Chapter 7B of the Michigan Business Corporation Act, and all such required procedures are by law effective as of the date hereof and irrevocable, to prevent the application of the provisions of such Chapters to, and such provisions shall not be applied to, this Agreement or the Transaction Documents, or any of the transactions contemplated hereby and thereby. 3.10. Acknowledgement of Dilution --------------------------- In accordance with the terms of the Series B Preferred Stock and the Warrants, the number of shares of Common Stock constituting Converted Shares or Warrant Shares may increase substantially in certain circumstances. The Company acknowledges that its obligation to issue the Converted Shares, upon conversion of the Series B Preferred Stock and PIK Shares (and the accrued and cumulated dividends thereon), and the Warrant Shares, upon exercise of the Warrants and PIK Warrants, is absolute and unconditional, regardless of the dilution that such issuance may have on other shareholders of the Company. 3.11. No Bankruptcy ------------- The Company is not subject to any bankruptcy, insolvency or similar proceeding. Based on the financial condition of the Company as of the Closing Dates, the Company's assets do not constitute unreasonably small capital to carry out its business as now conducted and as proposed to be conducted including the Company's capital needs taking into account the particular capital requirements of the business conducted by the Company, and projected capital requirements and capital availability thereof. 14 3.12. Compliance with Law ------------------- (a) The Company is in compliance with all laws, ordinances, governmental rules or regulations to which it is subject, including without limitation laws or regulations relating to the environment or to occupational health and safety, except where the failure to be in compliance would not have a Material Adverse Effect, and no material expenditures are or will be required in order to cause its current operations or properties to comply with any such law, ordinances, governmental rules or regulations. (b) The Company has all licenses, permits, franchises or other governmental authorizations necessary to the ownership of its property or to the conduct of its business, except where the failure to possess such licenses, permits, franchises or authorizations would not have a Material Adverse Effect. The Company has not finally been denied any application for any such licenses, permits, franchises or other governmental authorizations necessary to its business. 3.13. Litigation ---------- Except as set forth in Schedule 3.13, there is no legal action, suit, arbitration or other legal, administrative or other governmental investigation, inquiry or proceeding (whether federal, state, local or foreign) pending or, to the best of the Company's knowledge, threatened against or affecting the Company, the Company's properties, assets or business or the transactions contemplated by the Transaction Documents. After reasonable inquiry of its management employees, the Company is not aware of any fact which might result in or form a reasonable basis for any such action, suit, arbitration, investigation, inquiry or other proceeding. Except as set forth in Schedule 3.13, the Company is not subject to any order, writ, judgment, injunction, decree, determination or award of any court or of any governmental agency or instrumentality (whether federal, state, local or foreign). 3.14. Absence of Undisclosed Liabilities ---------------------------------- Except (a) as set forth or reserved against in the most recent balance sheet included in the Filed Financial Statements ("Balance Sheet"), (b) for obligations incurred in the ordinary course of business since the date of the Balance Sheet, which are, except as set forth on Schedule 3.14, not individually or in the aggregate material in amount, or (c) as set forth on Schedule 3.14, the Company does not have any debt, obligation or liability (whether accrued, absolute, contingent, liquidated or otherwise, whether due or to become due, whether or not known to the Company) arising out of any transaction entered into, or any state of facts existing at or prior to the date hereof, including taxes with respect to or based upon the transactions or events occurring at or prior to the date hereof, and including, without limitation, unfunded past service liabilities under any pension, profit sharing or similar plan. 3.15. Tax Matters ----------- There are no foreign, federal, state, county or local taxes due and payable by the Company which have not been paid. Any liability of the Company for taxes not yet due and payable, or which are being contested in good faith, has been provided for on the Balance Sheet in accordance with GAAP. The Company has duly filed all federal, state, county and local tax returns required to have been filed by the Company and there are in effect no waivers of 15 applicable statutes of limitations with respect to taxes for any year. Except for a sales and use tax audit in 2001, all amounts owing as a result of which have been paid as of the date hereof, the Company has not been subject to a federal or state tax audit of any kind. Since January 1, 1998, no claim has been made by any tax authority in a jurisdiction where the Company does not currently file a tax return that the Company is or may be subject to tax by such jurisdiction. There is no action, suit, proceeding, investigation, audit or claim now pending against, or with respect to, the Company in respect of any tax or assessment, nor is any claim for additional tax or assessment asserted by any tax authority. The Company has withheld and paid all material taxes required to be withheld in connection with any amounts paid or owing to any employee, creditor, independent contractor or other third party. Any amount that could be received (whether in cash or property or the vesting of property) as a result of any of the transactions contemplated by this Agreement by any employee, officer or director of the Company who is a "disqualified individual" (as such term is defined in proposed Treasury Regulation Section 1.280G-1) under any employment, severance or termination agreement, other compensation arrangement or benefit plan currently in effect would not be characterized as an "excess parachute payment" (as such term is defined in Section 280G(b)(1) of the Code). The Company has delivered in writing pursuant to Landmark's due diligence request list a report that accurately sets forth the regular and alternative minimum tax net operating loss and other carryovers available to the Company. As of the Closing Dates, and except for giving effect to the transactions contemplated hereby, the ability of the Company or any subsidiary to use such carryovers will not have been affected by Sections 382, 383 or 384 of the Code or by the SRLY limitations of the consolidated return regulations under Section 1502 of the Code. The Company has not made any election under Section 341(f) of the Code. 3.16. Intellectual Property --------------------- (a) Except as set forth on Schedule 3.16(a), the Company owns all right, title and interest in and to, or has a valid and enforceable license to use all the Intellectual Property used by it in connection with the Company's business, which represents, subject to Section 3.17 below, all intellectual property rights necessary to the conduct of the Company's business as now conducted. Except as set forth on Schedule 3.16(a), the Company has performed all obligations required to be performed by the Company to date under, and is not in default or delinquent in performance, status or any other respect (claimed or actual) in connection with, any license or other agreement pursuant to which the Company has the right to use any Intellectual Property. Except as set forth on Schedule 3.16(a), to the best of the Company's knowledge the other party to such license or agreement has no current basis to terminate such license or agreement and no event has occurred which would constitute such a default of such license or agreement. Except as set forth on Schedule 3.16(a), the conduct of the Company's business as currently conducted does not conflict with or infringe any Intellectual Property or other proprietary right of any third party. Except as set forth on Schedule 3.16(a), there is no claim, suit, action or proceeding pending or, to the knowledge of the Company, threatened against the Company: (i) alleging any such conflict or infringement with any third party's Intellectual Property or other proprietary rights; or (ii) challenging the Company's ownership or use of, or the validity or enforceability of any Intellectual Property. Except as disclosed on Schedule 3.16 and to the best of the Company's knowledge, there are no conflicts with or infringements of any Intellectual Property owned by the Company by any third party, except infringements which, individually and in the aggregate, would not have a Material Adverse Effect. 16 (b) Schedule 3.16(b) sets forth a complete and current list of registrations (including registrations for intention to use a trademark)/patents pertaining to the Intellectual Property owned by the Company ("Listed Intellectual Property"), all pending applications for registrations/patents and the owner of record, date of application or issuance and relevant jurisdiction as to each. All Listed Intellectual Property is owned by the Company, free and clear of security interests, liens, encumbrances or claims of any nature other than Permitted Liens or as otherwise set forth in Schedule 3.16(b). Except as set forth in Schedule 3.16(b), all Listed Intellectual Property is valid, subsisting, unexpired, in proper form and enforceable and all renewal fees and other maintenance fees that have fallen due on or prior to the effective date of this Agreement have been paid. Except as set forth in Schedule 3.16 (b), no Listed Intellectual Property is the subject of any proceeding before any governmental, registration or other authority in any jurisdiction, including any office action or other form of preliminary or final refusal of registration. (c) Schedule 3.16(c) sets forth a complete list of licenses and all agreements relating to the Intellectual Property (excluding any Software) or to the right of the Company to use of the proprietary rights of any third party, excluding intellectual property or other proprietary rights owned by customers, vendors, advertisers and other third parties that are licensed to the Company on an incidental basis in the ordinary course of the Company's business with such parties (and none of which is necessary for the Company operations generally). Except as set forth in Schedule 3.16(c), the Company is not under any obligation to pay royalties or other payments in connection with any agreement pursuant to which it licenses the rights to use any Intellectual Property (excluding royalties or other payments that are not material in amount and are payable with respect to any Software), nor restricted from assigning its rights respecting Intellectual Property owned by the Company (other than as contemplated by the Permitted Liens) nor will the Company otherwise be, as a result of the execution and delivery of this Agreement or the performance of its obligations under this Agreement or the Transaction Documents, in breach of any agreement relating to the Intellectual Property or required to pay any fee or royalty. (d) No present or former employee, officer or director of the Company, or agent or outside contractor of the Company, holds any right, title or interest, directly or indirectly, in whole or in part, in or to any Intellectual Property. (e) To the Company's knowledge: (i) none of the Intellectual Property has been used, disclosed or appropriated to the detriment of the Company for the benefit of any Person other than the Company; and (ii) no employee, independent contractor or agent of the Company has misappropriated any trade secrets or other confidential information of any other Person in the course of the performance of his or her duties as an employee, independent contractor or agent of the Company. (f) Except as set forth on Schedule 3.16(f), to the Company's knowledge, the Company's transmission, reproduction, use, display or modification of any content relating to the Company and its operations, software, graphical user interfaces, embedded code or other materials contained in or accessed via any of the Company's Web sites (including framing and linking Web site content) or other practices in connection therewith does not infringe or violate 17 any proprietary or other right of any other Person and no claim relating to such infringement or violation is pending or, to the Company's knowledge, threatened. (g) Each employee of the Company who has created any copyrightable or protectable programs, modifications, enhancements or other inventions, improvements, discoveries, methods or works of authorship ("Works") or any employee of the Company who in the regular course of his employment may create Works and all consultants have signed an assignment or similar agreement with the Company confirming the Company's ownership or, in the alternate, transferring and assigning to the Company all right, title and interest in and to such programs, modifications, enhancements or other inventions including copyright and other intellectual property rights therein. 3.17. Software -------- (a) The operating and applications computer software programs and databases owned or used by the Company (collectively, the "Software") that are material to the conduct of the Company's business as now conducted are listed on Schedule 3.17 hereto; excluding generally available application software used by the Company in connection with the ordinary course of its internal business operations, including, without limitation, word processing software, spreadsheet software, e-mail and internal network tool sets, presentation and graphic arts software, basic PC and network operating systems, database and contact management software and other software not used in connection with operation of the Company's web sites. The Company owns or has valid licenses to use all copies of the Software, and the Company has not sold, licensed, leased or otherwise transferred or granted any interest or rights in or to any portion thereof other than the Permitted Liens or as otherwise set forth in Schedule 3.17. Except as set forth on Schedule 3.17, none of the Software owned by the Company (the "Proprietary Software"), and to the Company's knowledge none of the Software owned by third parties and used by the Company, nor any use thereof, conflicts with, infringes upon or violates any intellectual property or other proprietary right of any other Person and, to the knowledge of the Company, no claim, suit, action or other proceeding with respect to any such infringement or violation is threatened or pending. The Company has taken the, and will continue to take, all steps reasonably necessary to protect its right, title and interest in and to the Software in accordance with standard industry practice. The Company has not committed, and will not commit, any acts, and has not omitted, and will not omit, to take any actions, which would cause a forfeiture of abandonment of any rights in the Proprietary Software or would cause the Proprietary Software to enter into the public domain. (b) The Company possesses or has access to the original and all copies of all documentation and all source code or password protected code, as applicable for all the Proprietary Software. Except for the Permitted Liens or as set forth in Schedule 3.17, upon consummation of the transactions contemplated by this Agreement, the Company will continue to own all the Proprietary Software, free and clear of all claims, liens, encumbrances, and liabilities and, with respect to all agreements for the lease or license of Software which require consents or other actions as a result of the consummation of the transactions contemplated by this Agreement in order for the Company to continue to use and operate such Software after the Closing Dates, the Company will use best efforts to obtain such consents or taken such other actions so required. 18 3.18. Material Contracts ------------------ Schedule 3.18 sets forth a true and complete list of each contract, agreement, instrument, commitment and other arrangement to which the Company is a party or otherwise relating to or affecting any of its assets, including without limitation, any employment, severance or consulting agreements; loan, credit or security agreements; joint venture agreements or distribution agreements which cannot be terminated on ninety (90) days' notice without penalty or premium and either (a) has a duration of over 1 year or (b) which involves the expenditure or receipt of revenues by the Company of over $75,000 (each, a "Material Contract"). Except for the breaches disclosed on Schedule 3.18, each Material Contract is valid, binding and enforceable against the parties thereto in accordance with its terms, and in full force and effect. Except as disclosed on Schedule 3.18, the Company has performed all obligations required to be performed by the Company to date under, and is not in default or delinquent in performance, status or any other respect (claimed or actual) in connection with, any Material Contract such that the other party to such Material Contract may obtain damages or terminate such Material Contract, and no event has occurred which, with due notice or lapse of time or both, would constitute such a default. Except as disclosed on Schedule 3.18, to the knowledge of the Company, no other party to any Material Contract is in default in respect thereof, and no event has occurred which, with due notice or lapse of time or both, would constitute such a default. The Company has made available and shall have delivered, as of the Closing Dates, to the Buyer or its representatives true and complete originals or copies of all the Material Contracts. Except as set forth on Schedule 3.18A, within the past 60 days, none of the contracts, agreements, instruments, commitments and other arrangements to which the Company is a party and through which the Company has derived more than $25,000 in annual revenue in the past twelve months (a "Material Revenue Contract") has been terminated prior to its expiration (and no notice has been given or event has occurred which, with due notice or lapse of time or both, would result in such termination), and each such Material Revenue Contract (including Material Revenue Contracts that have expired within the past 60 days) is valid, binding and enforceable against the parties thereto in accordance with its terms, and in full force and effect. Except as set forth on Schedule 3.18, to the knowledge of the Company, no party to a Material Revenue Contract is unwilling to use the Company's services. 3.19. Employees --------- The Company is in full compliance with all laws regarding employment, wages, hours, equal opportunity, collective bargaining and payment of social security and other taxes except such noncompliance as would not, in the aggregate, have a Material Adverse Effect. The Company is not engaged in any unfair labor practice or discriminatory employment practice and no complaint of any such practice against the Company is filed or, to the best of the Company's knowledge, threatened to be filed with or by the National Labor Relations Board, the Equal Employment Opportunity Commission or any other administrative agency, federal or state, that regulates labor or employment practices, nor is any grievance filed or, to the best of the Company's knowledge, threatened to be filed, against the Company by any employee pursuant to any collective bargaining or other employment agreement to which the Company is a party or is bound. The Company is in compliance with all applicable foreign, federal, state and local laws and regulations regarding occupational safety and health standards except to the extent that noncompliance will not have a Material Adverse Effect, and has received no complaints from 19 any foreign, federal, state or local agency or regulatory body alleging violations of any such laws and regulations. Except as set forth on Schedule 3.19, each of the employees of the Company has executed without modification the Company's Terms of Employment attached hereto as Schedule 6.16. 3.20. Employee Benefit Plans ---------------------- (a) Schedule 3.20(a) sets forth a complete and correct list of: (i) all "employee benefit plans", as defined in Section 3(3) of ERISA, maintained by the Company to which Company has any obligation or liability, contingent or otherwise; and (ii) all employment or consulting agreements, and all bonus or other incentive compensation, deferred compensation, salary continuation, disability, stock award, stock option, stock purchase, collective bargaining agreement or other employee benefit policies or arrangements which the Company maintains or to which the Company has any obligation or liability, contingent or otherwise (collectively referred to as the "Company Plans"). (b) The Company has no material obligation or liability, contingent or otherwise, under Title IV of ERISA or Section 412 of the Code. No Company Plan is a "multiemployer plan," as defined in Section 3(37) of ERISA (a "Multiemployer Plan"), or a plan that has two or more contributing sponsors at least two of whom are not under common control, within the meaning of Section 4063 of ERISA (a "Multiple Employer Plan"), nor has the Company, any of its Subsidiaries or any of its ERISA Affiliates at any time contributed to or been obligated to contribute to any Multiemployer Plan or Multiple Employer Plan. (c) The Company Plans intended to qualify under Section 401(a) are qualified under such sections, and each trust maintained pursuant thereto, has been determined to be exempt from federal income taxation under Section 501 of the Code by the IRS, and nothing has occurred with respect to the operation of any such Company Plans that would reasonably be expected to cause the loss of such qualification or exemption or the imposition of any material liability, penalty or tax under ERISA or the Code. (d) All contributions (including all employer contributions and employee salary reduction contributions) required to have been made under any of the Company Plans to any funds or trusts established thereunder or in connection therewith have been made by the due date thereof and all contributions for any period ending on or before the Closing Date which are not yet due will have been paid or accrued prior to the Closing Date. (e) True, correct and complete copies of the following documents, with respect to each of the Company Plans, have been delivered to the Landmark Parties by the Company, if applicable: (i) all plan and related trust documents, and amendments thereto; (ii) the most recent Form 5500 (iii) summary plan description; and (iv) and any written agreements, policies or practices. 20 (f) Except as set forth on Schedule 3.20, the Company Plans have been maintained, in all material respects, in accordance with their express terms and with all provisions of ERISA and the Code (including rules and regulations thereunder) and other applicable federal and state laws and regulations, and the Company has not engaged in, or has knowledge that a "party in interest" or a "disqualified person" has engaged in, a "prohibited transaction", as defined in Section 4975 of the Code or Section 406 of ERISA, or taken any actions, or failed to take any actions, which could reasonably be expected to result in any material liability under ERISA or the Code. (g) For any "group health plan", as defined in Section 4980B of the Code, the Company has complied in all material respects with the notice and coverage continuation requirements of Section 4980B of the Code and Section 601 of ERISA, and the regulations thereunder ("COBRA"). None of the Company Plans provide retiree health or life insurance benefits except as may be required by COBRA or applicable state continuation coverage law or at the expense of the participant or the participant's beneficiary. (h) Except as set forth in Schedule 3.20(h), neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will: (a) result in any payment becoming due to any current employee or former employee of the Company, (b) increase any benefits otherwise payable under any of the Company Plans (c) result in any payment that will not be deductible under Section 280G of the Code or (d) result in the acceleration of the time of payment or vesting of any benefits provided under any of the Company Plans. 3.21. Title to Tangible Assets ------------------------ Except as set forth on Schedule 3.21, the Company has good title to its properties and assets and a valid leasehold interest in all its leasehold estates, in each case subject to no mortgage, pledge, lien, lease, encumbrance or charge, other than or resulting from taxes which have not yet become delinquent and minor liens and encumbrances which do not in any case materially detract from the value of the property subject thereto or materially impair the operations of the Company and which have not arisen otherwise than in the ordinary course of business. The Company does not own any real property. 3.22. Condition of Properties ----------------------- All facilities, machinery, equipment, fixtures, vehicles and other properties owned, leased or used by the Company are suitable for their intended use and in reasonably good operating condition and repair, normal wear and tear excepted. 3.23. Insurance --------- The Company and its properties are insured in such amounts, against such losses and with such insurers as the Company has determined to be prudent based upon the nature of the properties and businesses of the Company. Schedule 3.23 sets forth a true and complete listing of the insurance policies of the Company (other than insurance policies under any Company Plan) as in effect on the date hereof, including in each case the applicable coverage limits, deductibles and the policy expiration dates. No notice of any termination or threatened 21 termination of any of such policies has been received by the Company and such policies are in full force and effect. 3.24. Membership Base; Demographic Activity ------------------------------------- (a) The Company has at least 14 million unique members, representing at least 12 million individual households. (b) The average of the indicated ages of the Company's members is approximately 34. Of the Company's 14 million plus members, all have fully registered and at least 6.5 million have agreed to accept electronic mail messages from the Company. (c) Within the past 30 days, at least 1.4 million of the Company's members have accessed the Company's website. (d) The Company's databases are the exclusive property of the Company, and such databases are adequately protected against, and have not suffered any, loss due to system damage or destruction, data erosion, unwanted or unauthorized access, and theft. (e) Below is a correct and complete chart which, for each of the calendar quarters in 2000 and 2001, accurately indicates the number of the Company's newly registered households ("New H.H.") in each applicable quarter and the number of total meaningful revenue producing actions ("Total actions") taken by the Company's members in each applicable quarter ("M" means million): - ------------------ --------- --------- -------- --------- --------- -------- Q1 `00 Q2 `00 Q3 `00 Q4 `00 Q1 `01 Q2 `01 - ------------------ --------- --------- -------- --------- --------- -------- New H.H. 1.6 M 1.6 M 1.8 M 1.9 M 1.8 M .9 M - ------------------ --------- --------- -------- --------- --------- -------- Total actions 4.4 M 4.5 M 7.5 M 10.2 M 7.8 M 7.3 M - ------------------ --------- --------- -------- --------- --------- -------- 3.25. Voting Agreements ----------------- Each of the Chief Executive Officer, the President/Chief Operating Officer, the Chief Financial Officer, the Chief Technology Officer and the Senior Vice President--Product Management and (the "Management Investors") and the parties listed on Schedule 3.25 (together with the Management Investors, the "Principal Investors") has executed and delivered voting agreements, in the form attached hereto as Exhibit M (the "Voting Agreements"), with respect to the voting of all capital stock owned by such Principal Investors (which in the aggregate represents the necessary percentage of voting power of the Company to effect the shareholder approval to the extent the Company's Board's approval is not withdrawn) in favor of the transactions contemplated hereby, the certain actions specified in the Voting Agreements, and the increase of capital stock of the Company, from time to time, to permit the authorization and issuance of shares underlying the Series B Preferred Stock and the Warrants. Such Voting Agreements are in full force and effect and have not been rescinded, abrogated or canceled in any manner. 22 3.26. Certain Interests ----------------- Except as set forth in Schedule 3.26 and as disclosed in the Public Filings, neither the Company nor any of its officers or, to the best of its knowledge, directors, has any interest, either by way of contract or by way of investment (other than as holder of not more than 2% of the outstanding capital stock of a publicly traded Person) or otherwise, directly or indirectly, in any Person other than the Company that (i) provides any services or designs, produces or sells any product or product lines or engages in any activity similar to or competitive with any activity currently proposed to be conducted by the Company or any of its subsidiaries, (ii) has any direct or indirect interest in any asset or property, real or personal, tangible or intangible, owned or used by the Company or (iii) any suppliers, vendors or customers of the Company. 3.27. Registration Rights ------------------- Except as provided by the Registration Rights Agreement and under the agreements listed on Schedule 3.27, the Company will not, as of the Closing Dates, be under any obligation to register any of its securities under the Securities Act. 3.28. Private Offering ---------------- Based upon the representations of the Landmark Parties set forth in Section 4 and assuming the accuracy thereof as of the date hereof and as of the date of the issuance of the Series B Preferred Stock and Warrants and the issuance of the Converted Shares and the Warrant Shares, the offer, issuance and sale of the Securities and the shares of Common Stock issuable upon conversion of the Series B Preferred Stock and exercise of the Warrants are and will be exempt from the registration and prospectus delivery requirements of the Securities Act, and have been registered or qualified (or are exempt from registration and qualification) under the registration, permit or qualification requirements of all applicable state securities laws. 3.29. Brokerage --------- There are no claims for brokerage commissions or finder's fees or similar compensation in connection with the transactions contemplated by this Agreement based on any arrangement made by or on behalf of the Company other than those disclosed on Schedule 3.29 which shall be the Company's sole obligation and liability and paid pursuant to Section 6.21. The Company agrees to indemnify and hold the Landmark Parties harmless against any costs or damages incurred as a result of any claim directly against the Landmark Parties arising out of or relating to such brokerage commissions or finder's fees. 3.30. Minute Books ------------ The minute books of the Company have been made available to the Landmark Parties and contain a complete summary of all meetings of directors and shareholders since the time of the Company's incorporation. 23 3.31. Change of Control ----------------- Since May 15, 2001, there has been no event that has resulted or will result in a Change of Control of the Company, excluding the transactions contemplated under this Agreement. 3.32. Material Facts -------------- This Agreement, the Disclosure Schedules, and the other agreements, documents, certificates or written statements furnished or to be furnished to the Landmark Parties through the Closing Dates by or on behalf of the Company in connection with the transactions contemplated hereby taken as a whole, do not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein or herein, in light of the circumstances in which they were made, not misleading. There is no fact which is known to the Company and which has not been disclosed herein or otherwise by the Company to the Landmark Parties which may materially adversely affect the business, properties, assets, liabilities, prospects, profits, results of operations or condition, financial or otherwise, of the Company. SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE LANDMARK PARTIES ------------------------------------------------------ The Landmark Parties represent and warrant to the Company as follows: 4.1. Corporate Proceedings, etc. --------------------------- LCI is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Virginia. LV is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware. Each Landmark Party has authorized the execution, delivery, and performance of the Transaction Documents required to be executed by it and each of the transactions and agreements contemplated hereby and thereby. No other corporate action is necessary to authorize such execution, delivery and performance of the Transaction Documents, and upon such execution and delivery each of the Transaction Documents shall constitute the valid and binding obligation of each applicable Landmark Party, enforceable against the applicable Landmark Party in accordance with its terms, except that such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights and general principles of equity. Each of the Landmark Parties has all requisite power and authority to execute and deliver the Transaction Documents to which it is a party and to perform its obligations hereunder and thereunder. 4.2. Consents and Approvals. ----------------------- The execution and delivery by each Landmark Party of the Transaction Documents, the performance by each Landmark Party of its obligations hereunder and thereunder, and the consummation by each Landmark Party of the transactions contemplated hereby and thereby do not require either Landmark Party to obtain any consent, approval or action of, or make any filing with or give any notice to, any corporation, person or firm or any public, governmental or judicial authority. 24 4.3. Investment Representation. -------------------------- (a) Each Landmark Party is purchasing the applicable Securities for its own account and not with a view to distribution in violation of any securities laws. Neither Landmark Party has any present intention to sell the Securities, Converted Shares or Warrant Shares in violation of federal or state securities laws and neither Landmark Party has any present arrangement (whether or not legally binding) to sell the Securities, Converted Shares or Warrant Shares to or through any person or entity; provided, however, that by making the representations herein, neither Landmark Party agrees to hold the Securities, Converted Shares or Warrant Shares for any minimum or other specific term and each Landmark Party reserves the right to dispose of the Securities, Common Shares or Warrant Shares at any time in accordance with and not in violation of federal and state securities laws applicable to such disposition and Section 5.5 hereof. (b) Each Landmark Party is an "accredited" investor as defined in Rule 501(a) promulgated under the Securities Act, and (i) is able to bear the economic risk of its investment in the Series B Preferred Stock and the Warrants, (ii) is able to hold the Series B Preferred Stock and the Warrants for an indefinite period of time, (iii) can afford a complete loss of its investment in the Series B Preferred Stock and the Warrants and (iv) has adequate means of providing for its current needs. 4.4. Access to Other Information. ---------------------------- Each Landmark Party acknowledges that the Company has made available to it the opportunity to examine such additional documents from the Company and to ask questions of, and receive full answers from, the Company concerning, among other things, the Company, its financial condition, its management, its prior activities and any other information which such Landmark Party considers relevant or appropriate in connection with entering into this Agreement. 4.5. Risks of Investment. -------------------- Each Landmark Party acknowledges that the Securities have not been registered under the Securities Act. Each Landmark Party is familiar with the provisions of Rule 144 and understands that in the event all of the applicable requirements of Rule 144 are not satisfied, registration under the Securities Act or some other exemption from the registration requirements of the Securities Act will be required in order to dispose of the Securities, and that such Landmark Party may be required to hold its Securities received under this Agreement for a significant period of time prior to reselling them. Each Landmark Party is capable of assessing the risks of an investment in the Securities and is fully aware of the economic risks thereof. SECTION 5. COVENANTS OF THE PARTIES ------------------------ 5.1. Securities Compliance --------------------- The Company shall notify the Nasdaq National Market, in accordance with its requirements, of the transactions contemplated by the Transaction Documents, and shall take all other necessary action and proceedings as may be required and permitted by applicable law, rule 25 and regulation, for the legal and valid issuance of the Series B Preferred Stock, Warrants, Converted Shares and Warrant Shares hereunder, including, without limitation, the preparation and filing with the SEC of a proxy statement for the purposes of soliciting shareholder approval for the transactions contemplated under the Transaction Documents. 5.2. Reservation of Stock Issuable Upon Conversion or Exercise of the Securities ---------------------------------------------------------------- The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the Series B Preferred Stock (including the PIK Shares) and the exercise of the Warrants (including the PIK Warrants), such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Series B Preferred Stock and the exercise of all outstanding Warrants. If at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion and/or exercise of all the then outstanding Series B Preferred Stock and Warrants, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose, including without limitation effecting a combination/reverse split of shares or engaging in best efforts to obtain the requisite shareholder approval for a Charter amendment. Without in any way limiting the foregoing, the Company agrees to reserve and at all times keep available solely for purposes of conversion and/or exercise of the Series B Preferred Stock and Warrants such number of authorized but unissued shares of Common Stock that is at least equal to 150% of the aggregate shares issuable upon conversion and/or exercise of the Series B Preferred Stock and Warrants, which number may be reduced by the number of Converted Shares or Warrant Shares actually delivered pursuant to conversion of the Series B Preferred Stock or exercise of the Warrants and shall be appropriately adjusted for any stock split, reverse split, stock dividend or reclassification of the Common Stock. 5.3. Form D; Blue Sky Laws --------------------- The Company agrees to file a Form D with respect to the Securities and the Converted Shares, in accordance with the provisions of Regulation D, and to provide a copy thereof to the Landmark Parties promptly after such filing. The Company shall, on or before the each applicable Closing Date (including the date of each Additional Option Closing), take such action as the Company shall have reasonably determined is necessary to qualify the Securities, the Converted Shares and the Warrant Shares for sale to the Landmark Parties at the respective closings pursuant to this Agreement under applicable securities or "blue sky" laws of the states of the United States (or to obtain an exemption from such qualification), and shall provide evidence of any such action so taken to the Landmark Parties on or prior to the each applicable closing date. 5.4. Best Efforts ------------ The Company will use its best efforts to obtain promptly shareholder approval for the actions contemplated hereby, including shareholder approval to authorize and approve the consummation of the Merger. Without limiting the foregoing, the Chairman of the Board, the 26 Chief Executive Officer, or the President of the Company shall duly call, pursuant to the Organizational Documents, a meeting of the holders of the Company's outstanding voting securities (the "Shareholders' Meeting") and, as soon as permitted under applicable law, the Company shall use its best efforts to obtain additional Voting Agreements from that number of shareholders as may be necessary to ensure that the number of votes to be voted in favor of the transactions contemplated hereby (including the consummation of the Merger) shall not be less than sixty-six and two-thirds percent (66-2/3%) of the outstanding shares of Common Stock entitled to vote at the Shareholders' Meeting. 5.5. Resale of Securities -------------------- (a) Each Landmark Party covenants that it will not sell or otherwise transfer the Securities (or any Converted Shares or Warrant Shares) except pursuant to an effective registration under the Securities Act or in a transaction which, in the opinion of counsel, which opinion and which counsel shall be reasonably satisfactory to the Company, qualifies as an exempt transaction under the Securities Act and the rules and regulations promulgated thereunder and any applicable state blue sky laws. (b) The certificates evidencing the shares of Series B Preferred Stock, the Converted Shares issuable upon conversion of the Securities, and the Warrant Shares issuable upon exercise of the Warrants will bear the following legend reflecting the foregoing restrictions on the transfer of such securities: "The securities evidenced hereby have not been registered under the Securities Act of 1933, as amended (the "Act") OR ANY APPLICABLE STATE SECURITIES LAWS, and may not be transferred except pursuant to an effective registration under the Act or in a transaction which, in the opinion of counsel, WHICH OPINION AND WHICH COUNSEL SHALL BE reasonably satisfactory to the Company, qualifies as an exempt transaction under the Act and the rules and regulations promulgated thereunder." 5.6. Covenants Pending the Closings ------------------------------ From the date hereof through the Second Tranche Closing Date, the Company will not, without LCI's prior written consent, take any action or fail or omit to take any action which would result in any of the representations or warranties contained in this Agreement not being true at and as of the time immediately after such action, or in any of the covenants contained in this Agreement becoming incapable of performance. The Company will promptly advise LCI of any action or event of which it becomes aware which has the effect of making incorrect any of such representations or warranties or which has the effect of rendering any of such covenants incapable of performance. The compliance by the Company with this covenant shall not be deemed or construed to cure or otherwise excuse in any respect the breach of the applicable representation, warranty or covenant. 27 5.7. Further Assurance; Securities Law Assurances -------------------------------------------- (a) Each of the parties shall execute such documents and other papers and take such further actions as may be required or desirable to carry out the provisions hereof and the transactions contemplated hereby. Each such party shall use its reasonable best efforts to fulfill or obtain the fulfillment of the conditions to each of the Closings as promptly as practicable. (b) Until the earlier to occur of the repurchase by the Company of all of the Series B Preferred Stock pursuant to the Restated Charter or July 30, 2003, so long as any Series B Preferred Stock or Warrants remain outstanding, each Landmark Party agrees that it shall not (i) engage in any market manipulation of the Common Stock, (ii) sell short the Common Stock, or (iii) make public negative disclosures about the Company other than in connection with or relating to permitted disclosures regarding a public company pursuant to a proxy statement. Nothing in this Agreement shall prevent the Landmark Party from exercising its rights under the Transaction Documents. Furthermore, nothing contained herein shall restrict the ability of a Landmark Party to sell or purchase Common Stock in the market or otherwise, in compliance with and not in violation of the federal and state securities laws, including, but not limited to, Rule 10b-5 promulgated under the Exchange Act. 5.8. Financial and Business Information ---------------------------------- From and after the date hereof and for as long as the Landmark Parties, together with all of their Affiliates, shall own at least 25% of the outstanding Common Stock, the Company shall deliver to the Landmark Parties or any subsequent holder of the Securities: (a) Monthly and Quarterly Statements - as soon as practicable, and in any event within 15 business days after the close of each month in the case of monthly statements and 40 days after the close of each of the first three fiscal quarters of each fiscal year of the Company in the case of quarterly statements, a consolidated balance sheet, statement of income and statement of cash flows of the Company and any subsidiaries as at the close of such month or quarter and covering operations for such month or quarter, as the case may be, and the portion of the Company's fiscal year ending on the last day of such month or quarter, all in reasonable detail and prepared in accordance with GAAP, subject to audit and year-end adjustments, setting forth in each case in comparative form the figures for the comparable period of the previous fiscal year together with a detailed aging report with respect to receivables and payables. The Company shall also provide comparisons of each pertinent item to the budget referred to in subsection (c) below. (b) Annual Statements - as soon as practicable after the end of each fiscal year of the Company, and in any event within 90 days thereafter, duplicate copies of: (i) consolidated and consolidating balance sheets of the Company and any subsidiaries at the end of such year; and (ii) consolidated and consolidating statements of income, shareholders' equity and cash flows of the Company and any subsidiaries for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and 28 accompanied by an opinion thereon of independent certified public accountants of recognized national standing selected by the Company, which opinion shall state that such financial statements fairly present the financial position of the Company and any subsidiaries on a consolidated basis and have been prepared in accordance with GAAP (except for changes in application in which such accountants concur) and that the examination of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as were considered necessary in the circumstances, and the Company shall also provide comparisons of each pertinent item to the budget referred to in subsection (c) below. (c) Business Plan; Projections - no later than 30 days prior to the commencement of each fiscal quarter of the Company, an updated Business Plan of the Company and projections of operating results, prepared on a monthly basis, and a three year business plan of the Company and projections of operating results. Within 45 days of the close of each fiscal quarter of the Company, the Company shall provide the Landmark Parties with an update of such monthly projections. Such business plans, projections and updates shall contain such substance and detail and shall be in such form as will be reasonably acceptable to the Landmark Parties. By email dated July 6, 2001, the Company has delivered to the Landmark Parties a business plan amended with interlineations that reflect the current status of the business and the projected course for the balance of the year (the "Business Plan"). (d) Audit Reports - promptly upon receipt thereof, one copy of each other financial report and internal control letter submitted to the Company by independent accountants in connection with any annual, interim or special audit made by them of the books of the Company. (e) Other Reports - simultaneously with mailing to shareholders or public issuance, one copy of each financial statement, report, notice or proxy statement sent by the Company to shareholders generally, of each financial statement, report, notice or proxy statement sent by the Company or any of its subsidiaries to the SEC or any successor agency, if applicable, of each regular or periodic report and any registration statement, prospectus or written communication (other than transmittal letters) in respect thereof filed by the Company or any subsidiary with, or received by such Person in connection therewith from, any domestic or foreign securities exchange, the SEC or any successor agency or any foreign regulatory authority performing functions similar to the SEC, of any press release issued by the Company or any subsidiary, and of any material of any nature whatsoever prepared by the SEC or any successor agency thereto or any state blue sky or securities law commission which relates to or affects in any way the Company or any subsidiary. (f) Progress Reports - when distributed, all reports provided to senior management and all reports listed on Schedule 5.8(f), prior to each regularly scheduled meeting of the Board of Directors of the Company, a narrative report describing the Company's activities since the date of the last such report, including a description of business development, operating results and marketing efforts, and weekly, not later than the third day of such week, a sales pipeline report and member activity report for the preceding week. 29 (g) Requested Information - with reasonable promptness, such other data and information as from time to time may be reasonably requested by the Landmark Parties. 5.9. Inspection ---------- The Company shall permit LCI (or any subsequent holder of the Securities, as applicable), its nominee, assignee, and its representative to visit and inspect any of the properties of the Company, to examine all its books of account, records, reports and other papers not contractually required of the Company to be confidential or secret, to make copies and extracts therefrom, and to discuss its affairs, finances and accounts with its officers, directors, key employees and independent public accountants or any of them (and by this provision the Company authorizes said accountants to discuss with LCI, its nominees, assignees and representatives the finances and affairs of the Company and any subsidiaries), all at such reasonable times and as often as may be reasonably requested. 5.10. Confidentiality --------------- Other than as set forth on Schedule 5.10, as to so much of the information and other material furnished under or in connection with this Agreement (whether furnished before, on or after the date hereof, including without limitation information furnished pursuant to Sections 5.8 and 5.9 hereof) as constitutes or contains confidential business, financial or other information of the Company or any subsidiary, each Landmark Party (or as applicable in this Section 5.10, any holder of the Securities) covenants for itself and its directors, officers and partners that it will use due care to prevent its officers, directors, partners, employees, counsel, accountants and other representatives from disclosing such information to Persons other than their respective authorized employees, counsel, accountants, shareholders, partners, limited partners and other authorized representatives; provided, however, that a Landmark Party may disclose or deliver any information or other material disclosed to or received by it should each Landmark Party be advised by its counsel that such disclosure or delivery is required by law, regulation or judicial or administrative order. In the event of any termination of this Agreement prior to the First Tranche Closing, the Landmark Parties shall return to the Company or destroy or otherwise purge from their records all confidential material previously furnished to them or their officers, directors, partners, employees, counsel, accountants and other representatives in connection with this transaction. For purposes of this Section 5.10, "due care" means the same level of care that a Landmark Party would use to protect the confidentiality of its own sensitive or proprietary information, and this obligation shall survive termination of this Agreement. 5.11. Conduct of Business ------------------- (a) The Company will continue to engage in business of the same general type as now conducted by it, and preserve, renew and keep in full force and effect its corporate existence and take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business. The Company has entered into with its current employees and shall require all of its employees hired or consultants engaged after the date hereof to enter into appropriate confidentiality agreements to protect confidential information relating to the Company and its business, including trade secrets. 30 (b) The Company acknowledges that excessive e-mail transmissions, while promoting short-term revenue increases, could have detrimental effects on the long term financial prospects of the Company. The Company agrees to monitor the member opt-out rate and to not transmit excessive member e-mails that could cause such opt-out rate to exceed 3.5%. (c) The Company will comply in all material respects with all applicable laws, rules, regulations and orders except where the failure to comply would not have a Material Adverse Effect. (d) The Company will maintain insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies of similar size and credit standing engaged in similar business and owning similar properties, provided that such insurance is and remains available to the Company at commercially reasonable rates. (e) The Company will keep proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Company in accordance with GAAP. 5.12. Lost, etc. Certificates Evidencing Shares (or Shares of Common Stock); Exchange -------------------------------------------------------------- Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of any certificate evidencing any shares of Series B Preferred Stock or Common Stock owned by a Landmark Party, and (in the case of loss, theft or destruction) of an indemnity or bond satisfactory to it, and upon reimbursement to the Company of all reasonable expenses incidental thereto, and upon surrender and cancellation of such certificate, if mutilated, the Company will make and deliver in lieu of such certificate a new certificate of like tenor and for the number of shares evidenced by such certificate which remain outstanding. LCI's agreement of indemnity shall constitute indemnity satisfactory to the Company for purposes of this Section 5.12. Upon surrender of any certificate representing any shares of Series B Preferred Stock or Common Stock for exchange at the office of the Company, the Company at its expense will cause to be issued in exchange therefor new certificates in such denomination or denominations as may be requested for the same aggregate number of shares of Series B Preferred Stock or Common Stock, as the case may be, represented by the certificate so surrendered and registered as such holder may request. The Company will also pay the cost of all deliveries of certificates for such shares to the office of LCI (including the cost of insurance against loss or theft in an amount satisfactory to the holders) upon any exchange provided for in this Section 5.12. 5.13. Termination ----------- The provisions of Sections 5.7 through 5.13 (other than Section 5.10 which shall survive indefinitely) shall survive the Closings and remain in effect until the Landmark Parties or their successors and assigns shall own less than 25% of the Company's Common Stock, measured on an as-exercised and as-converted basis. 31 5.14. Option Plan; Option Repricing ----------------------------- (a) At the Shareholders' Meeting (and in the proxy mailed to shareholders), the Company shall request shareholder approval of the Approved Plan (defined below). During the period between the execution hereof and until the termination of this Agreement, the Company shall not (i) issue additional options or make awards under its 1997 Stock Option Plan other than (A) options to purchase Common Stock granted to Matt Moog under the terms of his Employment Agreement, (B) options to purchase Common Stock issued in connection with the re-pricing of the options granted to Steven Golden (as contemplated by the terms of Golden's Severance Agreement and General Release), and (C) options to purchase Common Stock granted to new employees in the ordinary course of business (provided, the Company does not grant options to purchase more than 75,000 shares of Common Stock to any single employee or options to purchase more than 300,000 shares of Common Stock, in the aggregate, to all employees), or (ii) issue additional options or make awards under its 1999 Non-Employee Director Stock Option Plan. After the First Tranche Closing, grants and awards shall be made under the Approved Plan. (b) The Company shall promptly (after it is legally permitted to do so) take such action as may be required to offer each of the persons listed on Schedule 5.14 (to the extent such persons are employees on the date of the offer) the opportunity to re-price their options that have an exercise price at or above $2.00 with an exercise price of the greater of (x) the closing sales price of the Common Stock on the date the exchange occurs and (y) $0.50; provided, however, as a condition to such repricing, each employee accepting the Company's offer must agree, through execution and delivery of a Stock Option Agreement in the form attached as Exhibit N, that such re-priced options shall be subject to vesting in three equal installments on each of the first three annual anniversaries of the re-pricing date; provided, further, that each employee that has not executed and delivered the Company's standard terms of employment agreement shall execute and deliver such agreement as a condition precedent for receiving any repriced options. 5.15. Payment Defaults ---------------- The Company shall promptly cure any and all of the breaches, defaults and failures to comply that are disclosed with respect to the agreements set forth on Schedule 3.7, Schedule 3.8, Schedule 3.12, Schedule 3.16(c), Schedule 3.16(f) and Schedule 3.18, to the extent such breach, default or failure to comply, as applicable, relates to the Company's failure to pay an amount owed and the chief executive officer or Board of Directors has not determined that the Company has a bona fide defense with respect to such non-payment; provided, the foregoing notwithstanding, and solely with respect to the breaches, default and failures that relate to unpaid accounts payable to trade creditors (as disclosed on Schedule 3.8 and Schedule 3.18), the Company shall not be in breach of the foregoing covenant so long as it uses its best efforts to cause the maximum aging of such payables to be less than ninety (90) days excluding such account payable that is being disputed by the Company in good faith and as to which the Company's chief financial officer or principal accounting officer has delivered to LV a certificate certifying to the dispute and the facts giving rise to the dispute. 32 SECTION 6. LANDMARK CONDITIONS FOR FIRST TRANCHE CLOSING --------------------------------------------- The obligation of LV to purchase and pay for the First Tranche of Purchased Preferred Stock on the First Tranche Closing Date, as provided in Section 2.2 hereof, and LCI's related obligations hereunder, shall be subject to the performance by the Company of its agreements theretofore to be performed hereunder and to the satisfaction, prior thereto or concurrently therewith, of the following further conditions: 6.1. Representations and Warranties ------------------------------ The representations and warranties of the Company contained in this Agreement shall be true in all material respects on and as of the First Tranche Closing Date as though such representations and warranties were made at and as of such date, except for representations and warranties qualified by reference to materiality which shall be true in all respects on and as of the First Tranche Closing Date as though such representations and warranties were made at and as of such date. 6.2. Compliance with Agreement ------------------------- The Company shall have performed and complied in all material respects with all agreements, covenants and conditions contained in this Agreement which are required to be performed or complied with by the Company prior to or on the First Tranche Closing Date. 6.3. Officer's Certificate --------------------- The Landmark Parties shall have received a certificate, dated the First Tranche Closing Date, signed by each of the President and the Chief Financial Officer of the Company, certifying that the conditions specified in the foregoing Sections 6.1 and 6.2 hereof have been fulfilled. 6.4. Default Under Senior Secured Note, this Agreement or Forbearance Agreements ---------------------------------------------------------------- No event shall have occurred and continue to exist which with or without notice or the passage of time or both would constitute a default or has been declared a default under the Amended Loan Agreement, Senior Secured Note or this Agreement which has not been unconditionally waived in writing by the Landmark Parties. There shall have been no default (or event which with or without the notice or the passage of time or both would constitute a default) or Forbearance Termination Event (as such term is defined in the applicable Forbearance Agreement) that has occurred under any of the Forbearance Agreements which has not been cured by the Company itself or unconditionally waived by the forbearing party. 6.5. Pending or Threatened Litigation -------------------------------- There shall be no effective injunction, writ, preliminary restraining order or any order of any nature issued by a court of competent jurisdiction not initiated by the Landmark Parties or an Affiliate thereof directing that the transactions provided for herein or any of them not be consummated as herein provided. There shall be no claims, actions, suits, proceedings, 33 labor disputes or investigations pending or, to the knowledge of the Company, threatened, before any federal, state or local court or governmental or regulatory authority, domestic or foreign, or before any arbitrator of any nature, brought by any third party not Affiliated with the Landmark Parties against the Company or either Landmark Party, or any of the Company or the Landmark Parties' officers, directors, employees, agents or Affiliates involving, affecting or relating to the transactions contemplated by the Transaction Documents, nor is any basis known to the Company or any of its directors or officers for any such action, suit, proceeding or investigation. 6.6. Counsel's Opinion ----------------- LV shall have received from the Company's counsel, Jaffe, Raitt, Heuer and Weiss, Professional Corporation, an opinion, dated the First Tranche Closing Date, substantially in the form of Exhibit O-1 hereto and from the Company's special counsel Young, Conaway, an opinion, dated the First Tranche Closing Date, substantially in the form of Exhibit O-2 hereto. The Company shall have received an opinion from such counsel that the Merger is a tax free-reorganization in form and substance reasonably satisfactory to Landmark. If the Merger is not consummated and the First Tranche Closing proceeds pursuant to Sections 2.2 and 2.5, then the opinion given by Jaffe, Raitt, Heuer and Weiss shall be conformed to cover the opinions regarding the Company and the issuances to the same extent given at the closing of the Senior Secured Loan and contemplated by the Young, Conaway opinion. 6.7. Forbearance Agreement --------------------- The Landmark Parties shall have received from the Company executed copies of forbearance agreements between the Company and each of American National Bank, Midwest Guaranty Bank, and 360 North Michigan Trust (MB Beitler Management Corp. as agent) (collectively, the "Forbearance Agreements"). The Landmark Parties shall have received evidence from the Company that each of the Forbearance Agreements is in full force and effect, has not been amended without LCI's consent and no event has occurred which with or without notice or the passage of time or both would constitute a Forbearance Termination Event (as such term is defined in the applicable Forbearance Agreement). 6.8. Adverse Development ------------------- Since June 1, 2001, there shall have been no developments in the business, operations, assets, properties, condition (financial or otherwise) or prospects of the Company, including without limitation the occurrence of any legal actions, suits, arbitrations or other legal, administrative or other governmental investigations, inquiries or proceedings brought or threatened against the Company, which in the opinion of the Landmark Parties would have a Material Adverse Effect. 6.9. Shareholders Agreement ---------------------- The Company and each of the other parties thereto shall have executed the Shareholders Agreement, the form of which is attached as Exhibit P hereto (the "Shareholders Agreement"). 34 6.10. Registration Rights Agreement ----------------------------- The Company shall have executed the Registration Rights Agreement, the form of which is attached as Exhibit I hereto. 6.11. Shareholder Approval and Adoption of Restated Charter ----------------------------------------------------- (a) The Shareholders' Meeting shall have duly called pursuant to the Organizational Documents. (b) At such Shareholders' Meeting, the Company shall have obtained shareholder approval of the Merger and the transactions contemplated herein and in the Transaction Documents (to the extent required)(including the amendment and restatement of the existing option plan with the amended and restated option plan attached hereto as Exhibit Q (the "Approved Plan"). 6.12. Filing of Charter Terms; Merger ------------------------------- The Restated Charter shall have been filed with the Secretary of State of Delaware and the Merger shall have been consummated in accordance with the terms of the Agreement and Plan of Merger; provided, however, if shareholder approval is not obtained prior to the First Tranche Closing, then the Landmark Parties, in their sole and absolute discretion, may make a limited waiver with respect to the filing of the Restated Charter prior to the First Tranche Closing and request that the shares to be issued in connection with the First Tranche Closing be issued pursuant to the Series B Certificate of Designation until such time as the Restated Charter (conformed to reflect the proper conversion rates applicable to the Series B Preferred Stock and the Series C Preferred Stock) may be authorized, approved and filed and the Merger is consummated. 6.13. Voting Agreements ----------------- None of the Principal Investors shall have rescinded any Voting Agreements and, pursuant to such Voting Agreements, each shall have voted in favor of the transactions contemplated hereby. 6.14. State Law Concerns ------------------ The Company shall have obtained evidence reasonably satisfactory to the Landmark Parties (including an opinion of counsel if requested) that (a) the transactions contemplated hereby do not violate any state anti-takeover laws or state securities laws, (b) that the Company is not and will not be liable for any Michigan State Business Tax ("MSBT") or other state or local taxes in excess of an aggregate amount of $50,000 and (c) that any state law requirements necessary to complete the transactions contemplated hereby or requiring regulatory approval under the Transaction Documents have been satisfied and/or waived. ). 35 6.15. Conversion of Debt to Employees ------------------------------- The Landmark Parties shall have received evidence, in a form satisfactory to the Landmark Parties, that indicates that all debt of the Company to the holders (the "Subordinated Debt Holders") of those certain promissory notes listed on Schedule 6.15 and the warrants issued in connection therewith have been, or simultaneously is being, exchanged for an aggregate of 13 million shares of the Company's Series C Preferred Stock pursuant to the agreements with such holders which are listed on Schedule 6.15; provided, however, if the Merger is not consummated and LV, in its sole discretion, elects to proceed with the First Tranche Closing, then 1.3 million shares of the Series C Preferred Stock as designated by the Series C Certificate of Designation shall be issued to such Subordinated Debt Holders. 6.16. Employment Agreements --------------------- Each of the employees of the Company shall have executed, without modification, the Company's standard Terms of Employment attached at Schedule 6.16. 6.17. Insurance --------- The Company shall have obtained, on such terms and conditions and in such amounts as are reasonably acceptable to the Landmark Parties, errors and omissions and directors' and officers' insurance coverage. 6.18. Key Man Life Insurance ---------------------- The Company shall have obtained, on such terms and conditions and in such amounts as are reasonably acceptable to the Landmark Parties, key man life insurance policies payable to the Company on the lives of such senior executives as the Landmark Parties may reasonably request. 6.19. Election of Directors --------------------- The persons designated by LV pursuant to the Shareholders Agreement for nomination and election as "Series B Directors" (as defined in the Shareholders Agreement) shall have been elected or appointed to the Board of Directors of the Company, effective upon the First Tranche Closing. 6.20. Member Metrics -------------- None of the figures that the Company has represented and warranted as true and correct in Section 3.24 shall have decreased; provided, with respect to the figures in Sections 3.24(a) through (e), decreases of less than 5% from the date of execution until each respective Closing Date, as applicable, shall be permitted for purposes of determining whether this condition has been satisfied. 36 6.21. Expenses -------- Aggregate expenses incurred by or otherwise obligated to be paid by the Company related to the consummation of the transactions contemplated by the Transaction Documents shall not exceed $2,000,000 (exclusive of Landmark Fees and Expenses) and each applicable payee shall have agreed to the terms (and the manner and timing of payment) that corresponds to such payee on Schedule 6.21. 6.22. NASDAQ Listing -------------- The Company shall have used its reasonable best efforts to remain listed on the NASDAQ National Market and shall have promptly responded to any regulatory authority regarding any listing requirements or requests. 6.23. Consents -------- The Company shall have procured all of the third party consents identified on Schedule 3.6. and on Schedule 3.17. 6.24. Payment Defaults ---------------- The Company shall have cured any and all breaches, defaults and failures to comply that are required to be cured under Section 5.15. 6.25. Warrant Re-Issuance. -------------------- Newco shall have issued to LCI a replacement warrant certificate with identical terms to the Warrant. 6.26. Approval of Proceedings ----------------------- All proceedings to be taken in connection with the transactions contemplated by this Agreement, and all documents incident thereto, shall be reasonably satisfactory in form and substance to the Landmark Parties, and their special counsels, Willcox & Savage and Willkie Farr & Gallagher; and the Landmark Parties shall have received copies of all documents or other evidence which it may reasonably request in connection with such transactions and of all records of corporate proceedings in connection therewith in form and substance reasonably satisfactory to the Landmark Parties. SECTION 7. LANDMARK CONDITIONS FOR SECOND TRANCHE CLOSING ---------------------------------------------- The obligation of LV to purchase and pay for the Second Tranche of Purchased Preferred Stock on the Second Tranche Closing Date, as provided in Section 2.3 hereof, and LCI's related obligations hereunder, shall be subject to the performance by the Company of its agreements theretofore to be performed hereunder and to the satisfaction, prior thereto or concurrently therewith, of the following further conditions: 37 7.1. Representations and Warranties ------------------------------ The representations and warranties of the Company contained in this Agreement shall be true in all material respects on and as of the Second Tranche Closing Date as though such representations and warranties were made at and as of such date, except for representations and warranties qualified by reference to materiality which shall be true in all respects on and as of the Second Tranche Closing Date as though such warranties and representations were made at and as of such date, except to the extent that such representations and warranties must be adjusted to give effect to the Securities issued hereunder. 7.2. Compliance with Agreement ------------------------- The Company shall have performed and complied in all material respects with all agreements, covenants and conditions contained in this Agreement which are required to be performed or complied with by the Company prior to or on the Second Tranche Closing Date. 7.3. Officer's Certificate --------------------- The Landmark Parties shall have received a certificate, dated the Second Tranche Closing Date, signed by each of the President and the Chief Financial Officer of the Company, certifying that the conditions specified in the foregoing Sections 7.1 and 7.2 hereof have been fulfilled. 7.4. Default Under Senior Secured Note, this Agreement or Forbearance Agreements ---------------------------------------------------------------- No event shall have occurred and continue to exist which with or without notice or the passage of time or both would constitute a default or has been declared a default under the Amended Loan Agreement, the Senior Secured Note or this Agreement which has not been unconditionally waived in writing by the Landmark Parties. There shall have been no default (or event which with or without notice or the passage of time or both would constitute a default) and no Forbearance Termination Event (as such term is defined in the applicable Forbearance Agreement) that has occurred under any of the Forbearance Agreements which has not been cured by the Company itself or unconditionally waived by the forbearing party. The Landmark Parties shall have received certification from the Company that each of the Forbearance Agreements is in full force and effect, has not been amended without LCI's consent and no event has occurred which with or without notice or the passage of time or both would constitute a Forbearance Termination Event which has not been unconditionally waived by the forbearing party. 7.5. Counsel's Opinion ----------------- The Landmark Parties shall have received from the Company's counsel, Jaffe, Raitt, Heuer and Weiss, Professional Corporation, an updated opinion, dated the Second Tranche Closing Date, substantially in the form of Exhibit O-1 hereto and from the Company's special counsel Young, Conaway, an opinion, dated the Second Tranche Closing Date, substantially in the form of Exhibit O-2 hereto 38 7.6. Adverse Development ------------------- There shall have been no developments in the business, operations, assets, properties, or condition (financial or otherwise) of the Company, including without limitation the occurrence of any legal actions, suits, arbitrations or other legal, administrative or other governmental investigations, inquiries or proceedings brought or threatened against the Company, which in the opinion of the Landmark Parties would have a Material Adverse Effect. 7.7. Voting Agreements; Merger; Filing of Restated Charter ----------------------------------------------------- None of the Principal Investors shall have rescinded any Voting Agreements and, pursuant to such Voting Agreements, each shall have voted in favor of the transactions contemplated hereby. The Restated Charter shall have been filed with the Secretary of State of Delaware and the Merger shall have been consummated in accordance with the terms of the Agreement and Plan of Merger. 7.8. Approval of Proceedings ----------------------- All proceedings to be taken in connection with the transactions contemplated by this Agreement, and all documents incident thereto, shall be reasonably satisfactory in form and substance to the Landmark Parties, and their special counsels, Willcox & Savage and Willkie Farr & Gallagher; and the Landmark Parties shall have received copies of all documents or other evidence which it may reasonably request in connection with such transactions and of all records of corporate proceedings in connection therewith in form and substance satisfactory to the Landmark Parties. 7.9. Option Repricing and Reissuance ------------------------------- The Company shall have effected the option repricing contemplated by Section 5.14. 7.10. Continued Conditions -------------------- To the extent that any of the conditions in Sections 6.15 through 6.24 were not satisfied on or before the First Tranche Closing, such conditions shall have been satisfied on or before the Second Tranche Closing, except to the extent in proceeding with the First Tranche Closing LV unconditionally waived in writing such conditions for all purposes. SECTION 8. COMPANY CLOSING CONDITIONS -------------------------- The obligation of the Company to issue, execute and deliver the Series B Preferred Stock on each of the Closing Dates, as provided in Section 2 hereof, shall be subject to the performance by the Landmark Parties of their agreements theretofore to be performed hereunder and to the satisfaction, prior thereto or concurrently therewith, of the following further conditions: 39 8.1. Representations and Warranties ------------------------------ The representations and warranties of the Landmark Parties contained in this Agreement shall be true in all material respects on and as of the First Tranche Closing Date as though such representations and warranties were made at and as of such date, except for representations and warranties qualified by reference to materiality which shall be true in all respects on and as of each of the applicable Closing Dates as though such warranties and representations were made at and as of such dates, except as otherwise affected by the transactions contemplated hereby. 8.2. Compliance with Agreement ------------------------- The Landmark Parties shall have performed and complied in all material respects with all agreements, covenants and conditions contained in this Agreement which are required to be performed or complied with by it prior to or on each of the applicable Closing Dates. 8.3. Landmark's Certificates ----------------------- The Company shall have received a certificate from LV for each of the Closings, dated the respective Closing Date, signed by a duly authorized representative of LV, certifying that the conditions specified in the foregoing Sections 8.1 and 8.2 hereof have been fulfilled. 8.4. Injunction ---------- There shall be no effective injunction, writ, preliminary restraining order or any order of any nature issued by a court of competent jurisdiction directing that the transactions provided for herein or any of them not be consummated as herein provided. 8.5. Shareholders Agreement ---------------------- The Landmark Parties shall have executed the Shareholders Agreement, the form of which is attached as Exhibit P hereto. 8.6. Registration Rights Agreement ----------------------------- The Landmark Parties shall have executed the Registration Rights Agreement, the form of which is attached as Exhibit I hereto. SECTION 9. EXCLUSIVITY AND TERMINATION --------------------------- 9.1. Takeover Proposal. ------------------ (a) From the date of this Agreement until the earlier of the First Tranche Closing or the termination of this Agreement pursuant to Section 9.2, the Company and its subsidiaries will not, directly or indirectly through their officers, directors, employees, agents or otherwise, (i) solicit, initiate or encourage any Takeover Proposal or (ii) engage in negotiations with, or disclose any nonpublic information relating to the Company or any of its subsidiaries to, or afford access to the properties, books or records of the Company or any of its subsidiaries to, 40 any person that has indicated to the Company that it may be considering making, or that has made, a Takeover Proposal or whose efforts to formulate a Takeover Proposal would knowingly or could reasonably be expected to be assisted thereby; provided, nothing herein shall prohibit the Company's Board of Directors from taking and disclosing to the Company's shareholders a position with respect to an unsolicited tender or exchange offer pursuant to Rules 14d-9 and 14e-2 promulgated under the Exchange Act. Notwithstanding the immediately preceding sentence, if an unsolicited Takeover Proposal, or an unsolicited written expression of interest that the Company reasonably expects to lead to a Takeover Proposal, shall be received by the Board of Directors of the Company, then, to the extent the Board of Directors of the Company believes in good faith (after consultation with its financial advisor) (i) that such Takeover Proposal would, if consummated, result in a transaction more favorable to the Company's shareholders from a financial point of view than the transaction contemplated by this Agreement and (ii) after reasonable inquiry by the Company, that the third party making such Takeover Proposal is financially capable of consummating such Takeover Proposal (any Takeover Proposal meeting such conditions being referred to in this Agreement as a "Superior Proposal") and the Board of Directors of the Company determines in good faith after consultation with outside legal counsel that it is necessary for the Board of Directors of the Company to comply with its fiduciary duties to shareholders under applicable law, the Company and its officers, directors, employees, investment bankers, financial advisors, attorneys, accountants and other representatives retained by it may furnish in connection therewith information and take such other actions as are consistent with the fiduciary obligations of the Company's Board of Directors, and such actions shall not be considered a breach of this Section 9.1 or any other provisions of this Agreement, provided that (A) upon each such determination the Company notifies the Landmark Parties of such determination by the Company's Board of Directors and provides the Landmark Parties with a true and complete copy of the Superior Proposal received from such third party, if the Superior Proposal is in writing, or a written summary of all material terms and conditions thereof (including the identity of the person initiating the Superior Proposal), if it is not in writing, (B) the Company provides the Landmark Parties (simultaneously with the time that such documents are provided to such third party) with all documents containing or referring to non-public information of the Company that are supplied to such third party, to the extent not previously supplied by the Company to the Landmark Parties and (C) the Company provides such non-public information to any such third party pursuant to a non-disclosure agreement at least as restrictive as to confidential information as the Confidentiality Agreement between the Company and Landmark dated as of March 6, 2001. (b) The Company shall not, and shall not permit any of its officers, directors, employees (acting on behalf of the Company) or other representatives to agree to or endorse any Takeover Proposal unless the Company shall have terminated this Agreement pursuant to Section 9.2 and paid the Landmark Parties all amounts payable to the Landmark Parties pursuant to Section 9.4. Notwithstanding anything in this Agreement to the contrary, the Company shall not accept or recommend to its shareholders, or enter into any agreement concerning, a Superior Proposal for a period of not less than 48 hours after the Landmark Parties' receipt of a true and complete copy of such Superior Proposal, if the Superior Proposal is in writing, or a written summary of all material terms and conditions thereof, if it is not in writing. The Company will immediately notify the Landmark Parties after receipt of any Takeover Proposal or any notice that any person is considering making a Takeover Proposal or any request for non-public information relating to the Company or any of its subsidiaries or for access to the properties, 41 books or records of the Company or any of its subsidiaries by (i) any person that has indicated to the Company that it may be considering making, or that has made, a Takeover Proposal, or (ii) any person whose efforts to formulate a Takeover Proposal would knowingly or could reasonably be expected to be assisted thereby and who could reasonably be expected to make a Takeover Proposal (such notice to include the identity of such person or persons) and will keep the Landmark Parties fully informed of the status and material details of any such Takeover Proposal notice, request or any correspondence or communications related thereto and shall provide the Landmark Parties with a true and complete copy of such Takeover Proposal notice or request or correspondence or communications related thereto, if it is in writing, or a complete written summary thereof, if it is not in writing. The Company shall immediately cease and cause to be terminated any existing discussions or negotiations with any parties (other than the Landmark Parties) conducted heretofore with respect to any Takeover Proposal. The Company shall ensure that the officers, directors and employees of the Company and its subsidiaries and any investment banker or other advisor or representative retained by the Company are aware of the restrictions described in this Section 9.1 and shall be responsible for any breach of this Section 9.1 by such officers, directors, employees, bankers, advisors and representatives. For purposes of this Agreement, "Takeover Proposal" means any offer or proposal for, or any indication of interest in, a merger or other business combination involving the Company or the acquisition of 20% or more of the outstanding shares of capital stock of the Company, or the sale or transfer of any significant portion of the assets of the Company, other than the transactions contemplated by this Agreement. 9.2. Termination. ------------ This Agreement may be terminated at any time prior to the First Tranche Closing Date, notwithstanding approval by the shareholders of the Company of the Merger and the transactions contemplated herein: (a) by mutual written consent duly authorized by the Boards of Directors of the Company and the Landmark Parties; or (b) by either the Company or the Landmark Parties if the First Tranche Closing shall not have occurred on or before November 30, 2001 (the "End Date") (provided, that a later date may be agreed upon in writing by the parties hereto and provided, further, that the right to terminate this Agreement under this Section 9.2(b) shall not be available to any party whose willful breach of this Agreement or failure to perform in all material respects its obligations under this Agreement to be performed or complied with prior to the First Tranche Closing has been the cause of or resulted in the failure of the First Tranche Closing to occur on or before such date); or (c) by either the Company or the Landmark Parties if a court of competent jurisdiction or governmental, regulatory or administrative agency or commission shall have issued a non-appealable final order, decree or ruling or taken any other action, in each case having the effect of permanently restraining, enjoining or otherwise prohibiting the transactions contemplated hereby; or 42 (d) by the Landmark Parties if at the Shareholders' Meeting the approvals required under Section 6.11 are not obtained; or (e) by the Landmark Parties, (i) upon a material breach of any representation, warranty, covenant or agreement on the part of the Company (except for representations and warranties qualified by reference to materiality in which case any breach would give cause) set forth in this Agreement which is not cured within twenty (20) days after the Landmark Parties give notice of breach, or if any representation or warranty of Company shall have become untrue in any material respect (except for representations and warranties qualified by reference to materiality in which case if they become untrue in any respect cause would exist) such that the conditions set forth in Section 6 or Section 7 would not be satisfied within twenty (20) days after the Landmark Parties give notice of breach, (ii) if the Board of Directors of the Company shall have withheld, withdrawn, or modified its recommendation of shareholder approval of the Merger and the transactions contemplated herein or shall have resolved to do any of the foregoing, (iii) upon the occurrence of any default under any Forbearance Agreement (including without limitation under Section 4 of the Forbearance Agreement between the Company and American National Bank) or any Forbearance Termination Event (as such term is defined in any applicable Forbearance Agreement) has occurred, or (iv) for any reason the Company fails to call and hold the Shareholders' Meeting by the End Date; provided, however, that the right to terminate this Agreement by the Landmark Parties under this Section 9.2(e) shall not be available to the Landmark Parties where the Landmark Parties are at that time in willful breach of this Agreement; or (f) by either the Landmark Parties or the Company, if the Company shall have accepted a Superior Proposal or if the Board of Directors of the Company recommends a Superior Proposal to the shareholders of the Company. 9.3. Notice of Termination --------------------- (a) Subject to Section 9.3(b), any termination of this Agreement under Section 9.2 above will be effective immediately upon the delivery of written notice of the terminating party to the other parties hereto. In the event of the termination of this Agreement pursuant to Section 9.2, this Agreement shall forthwith become void and there shall be no liability or obligation on the part of any party hereto or any of its respective Affiliates, directors, officers or shareholders except nothing herein shall relieve any party from liability for any willful breach hereof. No termination of this Agreement shall affect the obligations of the parties contained in the Confidentiality Agreement, and in Sections 5.2 and 5.5 (as applicable to the Warrants), Section 5.10 (Confidentiality), Sections 9.2, 9.3 and 9.4 and Article XI, all of which obligations shall remain in full force and effect and survive termination of this Agreement in accordance with its terms. (b) Any termination of this Agreement by the Company pursuant to Section 9.2(f) hereof shall be of no force or effect unless at or prior to such termination the Company shall have paid to the Landmark Parties any amounts payable pursuant to Section 9.4. 43 9.4. Fees and Expenses ----------------- (a) If the proposed transactions are consummated, all fees and expenses incurred in connection with this Agreement and the transactions contemplated hereby (including, without limitation, the fees and expenses of their advisers, accountants and legal counsel) by the Landmark Parties shall be paid by the Company, including, without limitation, any and all fees and expenses incurred in relation to the printing and filing of any required proxy solicitation (including any preliminary materials related thereto) and any amendments or supplements thereto (collectively the "Landmark Fees and Expenses"); provided, that the Landmark Fees and Expenses shall be paid after all of the Company's fees and expenses listed on Schedule 6.21 have been paid (collectively the "Company Fees and Expenses"); and provided further that interest shall accrue at the rate of 8% on the Landmark Fees and Expenses from and after the date on which all Company Fees and Expenses have been paid, and that such Landmark Fees and Expenses and any accrued interest thereon to the extent when combined with the Company Fees and Expenses causes such aggregate fees and expenses to exceed $2 million (the "Excess Landmark Fees and Expenses") shall be deemed an advance which the Company shall not have to repay until the earlier of (i) the termination of that certain Intercreditor Agreement, dated as of June 15, 2001, by and between American National Bank and LCI, or (ii) the receipt by the Company of a written consent by American National Bank to the payment of such excess Landmark Fees and Expenses and accrued interest. In furtherance of that certain letter agreement dated July 27, 2001, between the Company and American National Bank, LCI hereby acknowledges that the Excess Landmark Fees and Expenses shall be "Landmark Indebtedness" as such term is defined in the Subordination Agreement between LCI and American National Bank. (b) Except as set forth in Section 9.4(c), if the proposed transactions are not consummated, all fees and expenses incurred in connection with this Agreement and the transactions contemplated hereby (including, without limitation, the fees and expenses of its advisers, accountants and legal counsel) shall be paid by the party incurring such expenses. (c) The Company shall pay the Landmark Parties a fee of $1,000,000 plus any Landmark Fees and Expenses incurred in connection with the transactions contemplated hereby upon the earliest to occur of the following events: (i) the termination of this Agreement by the Landmark Parties pursuant to Section 9.2(e)(ii) or Section 9.2(e)(iv) or, in the case of a willful breach by the Company, Section 9.2(e)(i); or (ii) the termination of this Agreement by the Company or the Landmark Parties pursuant to Section 9.2(f); or (iii) the termination of this Agreement by the Landmark Parties pursuant to Section 9.2(d) as a result of the failure to receive the approvals required under Section 6.11 at the Shareholders' Meeting. (d) The fee payable pursuant to Section 9.4(c) shall be paid within five (5) business days after the first to occur of the events described in Sections 9.4(c)(i), (ii) and (iii). 44 (e) Upon termination of this Agreement, the Senior Secured Note and any and all letters of credit, loans, advances, guaranties or other indebtedness borrowed by the Company from the Landmark Parties (the "Outstanding Indebtedness") shall become immediately due and payable and, if such termination is pursuant to Section 9.2(f), the Company shall within five (5) business days pay in full (in cash) the Outstanding Indebtedness and shall deliver to the Landmark Parties (in trust for the benefit of ANB) a cash amount sufficient to pay all indebtedness and obligations of the Company to ANB or a waiver from ANB that permits LCI to accept cash payment in satisfaction of the amounts payable hereunder and the Outstanding Indebtedness. SECTION 10. INTERPRETATION OF THIS AGREEMENT -------------------------------- 10.1. Terms Defined ------------- As used in this Agreement, the following terms have the respective meanings set forth below or set forth in the Section hereof following such term: Additional Option Closing: shall have the meaning set forth in Section 2.4(b). Additional Option Period: shall have the meaning set forth in Section 2.4(a). Affiliate: shall mean any Person or entity, directly or indirectly controlling, controlled by or under common control with such Person or entity. Agreement: shall have the meaning set forth in the Preamble. Agreement and Plan of Merger: shall have the meaning set forth in the eleventh Recital. Amended Loan Agreement: shall have the meaning set forth in the third Recital. Approved Markets: shall have the meaning set forth in Section 3.4. Approved Plan: shall have the meaning set forth in Section 6.11(b). Articles of Incorporation: shall have the meaning set forth in Section 3.1(a). Available Option Shares: shall have the meaning set forth in Section 2.4(a). Balance Sheet: shall have the meaning set forth in Section 3.14. Basket: shall have the meaning set forth in Section 11.5(a). Bridge Loan Agreement: shall have the meaning set forth in the second Recital. Bridge Loan Amount: shall have the meaning set forth in the second Recital. Bridge Note: shall have the meaning set forth in the second Recital 45 Business Day: shall mean a day other than a Saturday, Sunday or other day on which banks in the State of New York are required or authorized to close. Business Plan: shall have the meaning set forth in Section 5.8(c). Bylaws: shall have the meaning set forth in Section 3.1(a). Cap: shall have the meaning set forth in Section 11.5(a). Certificates of Designation: shall have the meaning set forth in Section 3.3(c). Change of Control: shall mean (i) the sale, lease or transfer of all or substantially all of the assets of the Company to any "Person" or "group" (within the meaning of Sections 13(d)(3) and 14(d)(2) of the Exchange Act, or any successor provision to either of the foregoing, including any group acting for the purpose of acquiring, holding or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act), (ii) the approval by the requisite shareholders of the Company of a plan of liquidation or dissolution of the Company, (iii) any "Person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act, or any successor provision to either of the foregoing, including any group acting for the purpose of acquiring, holding or disposing of securities within the meaning of Rule 13d- 5(b)(1) under the Exchange Act) becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of more than 50% of the total voting power of all classes of the voting stock of the Company and/or warrants or options to acquire such voting stock, calculated on a fully diluted basis, unless, as a result of such transaction, the ultimate direct or indirect ownership of the Company is substantially the same immediately after such transaction as it was immediately prior to such transaction, or (iv) any consolidation or merger of the Company pursuant to which the Company Common Stock would be converted into cash, securities or other property, in each case other than a consolidation or merger of the Company in which the holders of Company Common Stock and other capital stock of the Company entitled to vote in the election of directors of the Company, immediately prior to the consolidation or merger have, directly or indirectly, at least a majority of the total voting power in the aggregate of capital stock entitled to vote in the election of directors of the continuing or surviving corporation immediately after the consolidation or merger. Notwithstanding the foregoing, the transactions contemplated in this Agreement shall not constitute a Change of Control. Closing Dates: shall have the meaning set forth in Section 2.3(b). Closings: shall have the meaning set forth in Section 2.3(b). COBRA: shall have the meaning set forth in Section 3.20(g). Code: shall mean the Internal Revenue Code of 1986, as amended. Common Stock: shall have the meaning set forth in the eighth Recital. Company: shall have the meaning set forth in the Preamble. Company Fees and Expenses: shall have the meaning set forth in Section 9.4(a). 46 Company Plans: shall have the meaning set forth in Section 3.20(a). Contingent Liability: shall mean, as applied to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to (i) any indebtedness, lease, dividend, letter of credit or other obligation of another, including, without limitation, any such obligation directly or indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by that Person, or in respect of which that Person is otherwise directly or indirectly liable; (ii) any obligations with respect to undrawn letters of credit issued for the account of that Person; and (iii) all obligations arising under any interest rate, currency or commodity swap agreement, interest rate cap agreement, interest rate collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; provided, however, that the term "Contingent Obligation" shall not include endorsements for collection or deposit in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determined amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such Person in good faith; provided, however, that such amount shall not in any event exceed the maximum amount of the obligations under the guarantee or other support arrangement. Converted Shares: shall have the meaning set forth in the fifteenth Recital. Current Assets: shall mean, as of any applicable date, all amounts that should, in accordance with GAAP, be included as current assets on the consolidated balance sheet of the Company and its subsidiaries as at such date less all inventory and non-recurring items including without limitation tax credits Current Liabilities: shall mean, as of any applicable date, all amounts that should, in accordance with GAAP, be included as current liabilities on the consolidated balance sheet of the Company and its subsidiaries, as at such date, plus, to the extent not already included therein, all Advances (as defined in the Amended Loan Agreement) made under the Amended Loan Agreement or by the Landmark Parties for the Company's benefit under the Forbearance Agreements, including all Indebtedness (as defined in the Amended Loan Agreement) that is payable upon demand or within one year from the date of determination thereof unless such Indebtedness is renewable or extendable at the option of the Company or any subsidiary to a date more than one year from the date of determination, including all current maturities of long term debt. DCIS: shall have the meaning set forth in the fourteenth Recital. Delaware Organizational Documents: shall have the meaning set forth in Section 3.1(b). Encumbrance: shall mean each of the following: (a) security interest, mortgage, pledge, hypothecation, lien, attachment, or charge of any kind (including any agreement to give any of the foregoing); conditional sale or other title retention agreement; sale of accounts receivable or chattel paper; or other arrangement 47 pursuant to which any Person is entitled to any preference or priority with respect to the property or assets of another Person or the income or profits of such other Person or which constitutes an interest in property to secure an obligation; each of the foregoing whether consensual or non-consensual and whether arising by way of agreement, operation of law, legal process or otherwise; and (b) The filing of any financing statement under the Uniform Commercial Code, as adopted and in effect in the State of Michigan or the State of Delaware, as applicable, as each may be amended from time to time, or the comparable law of any jurisdiction. End Date: shall have the meaning set forth in Section 9.2(b). ERISA: shall mean the Employee Retirement Income Security Act of 1974, as amended. Exchange Act: shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. Filed Financial Statements: shall have the meaning set forth in Section 3.9(a). First Tranche Closing: shall have the meaning set forth in Section 2.2(b). First Tranche Closing Date: shall have the meaning set forth in Section 2.2(b). First Tranche of Purchased Preferred Stock: shall have the meaning set forth in Section 2.2(a). First Tranche Purchase Price: shall have the meaning set forth in Section 2.2(a). Forbearance Agreements: shall have the meaning set forth in Section 6.7. Forecast: shall have the meaning set forth in Section 2.4(c). Fully Diluted Basis: shall mean the outstanding capital stock of the Company on a fully diluted basis assuming as outstanding (a) any shares reserved for issuance under any option plans of the Company, whether or not options in respect of such shares have been issued, (b) shares underlying any warrants (but excluding the Warrants), (c) all securities (including the Series B Preferred Stock) convertible into or exercisable for capital stock of the Company regardless of the exercise price, or (d) any capital stock issued or issuable under any agreement of the Company. GAAP: shall mean U.S. generally accepted accounting principles. Grid Note: shall have the meaning set forth in the sixth Recital. Intellectual Property: shall mean all of the following, owned or used in the current or contemplated business of the Company: (i) trademarks and service marks, trade dress, product configurations, trade names and other indications of origin, applications or registrations 48 in any jurisdiction pertaining to the foregoing and all goodwill associated therewith; (ii) patentable inventions, discoveries, improvements, ideas, know-how, formula methodology, processes, technology, software (including password unprotected interpretive code or source code, object code, development documentation, programming tools, drawings, specifications and data) and applications and patents in any jurisdiction pertaining to the foregoing, including re-issues, continuations, divisions, continuations-in-part, renewals or extensions; (iii) trade secrets, including confidential information and the right in any jurisdiction to limit the use or disclosure thereof; (iv) copyrights in writings, designs software, mask works or other works, applications or registrations in any jurisdiction for the foregoing and all moral rights related thereto; (v) database rights; (vi) Internet Web sites, domain names and applications and registrations pertaining thereto and all intellectual property used in connection with or contained in all versions of the Company's Web sites; (vii) rights under all agreements relating to the foregoing; (viii) books and records pertaining to the foregoing; and (ix) claims or causes of action arising out of or related to past, present or future infringement or misappropriation of the foregoing. Key Agreements and Instruments: shall have the meaning set forth in Section 3.7. Landmark Fees and Expenses: shall have the meaning set forth in Section 9.4(a). Landmark Parties: shall have the meaning set forth in the Preamble. LCI: shall have the meaning set forth in the Preamble. Listed Intellectual Property: shall have the meaning set forth in Section 3.16(b). Loss: shall have the meaning set forth in Section 11.5(a). LV: shall have the meaning set forth in the Preamble. Management Investors: shall have the meaning set forth in Section 3.25. Material Adverse Effect: shall have the meaning set forth in Section 3.1(c). Material Contract: shall have the meaning set forth in Section 3.18. Material Revenue Contract: shall have the meaning set forth in Section 3.18. Merger: shall have the meaning set forth in the eleventh Recital. Michigan Organizational Documents: shall have the meaning set forth in Section 3.1(a). MSBT: shall have the meaning set forth in Section 6.14. Multiemployer Plan: shall have the meaning set forth in Section 3.20(b). Multiple Employer Plan: shall have the meaning set forth in Section 3.20(b). New H.H.: shall have the meaning set forth in Section 3.24(e). 49 Newco: shall have the meaning set forth in the eleventh Recital. Note Purchase Price: shall have the meaning set forth in Section 2.1. Organizational Documents: shall have the meaning set forth in Section 3.1(b). Outstanding Indebtedness: shall have the meaning set forth in Section 9.4(e). Person: shall mean an individual, partnership, joint-stock company, corporation, limited liability company, trust or unincorporated organization, and a government or agency or political subdivision thereof. Permitted Liens: shall mean the liens granted by the Company in favor of American National Bank and Trust Company of Chicago. PIK Shares: shall have the meaning set forth in the fifteenth Recital. PIK Warrant Shares: shall have the meaning set forth in the ninth Recital. PIK Warrants: shall have the meaning set forth in the ninth Recital. Principal Creditors: shall mean American National Bank and Trust Company of Chicago, Midwest Guaranty Bank, and 360 N. Michigan Trust. Principal Investors: shall have the meaning set forth in Section 3.25. Proprietary Software: shall have the meaning set forth in Section 3.17(a). Public Filings: shall mean the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000, as amended by Form 10-K/A filed with the SEC on April 27, 2001, and Quarterly Report on Form 10-Q for the quarter ended March 31, 2001. Purchase Option: shall have the meaning set forth in Section 2.3(a). Registration Rights Agreement: shall have the meaning set forth in the sixteenth Recital. Restated Charter: shall have the meaning set forth in the twelfth Recital. SEC: shall mean the Securities and Exchange Commission, or any successor commission or agency having similar powers. SEC Documents: shall have the meaning set forth in Section 3.9(a). Second Tranche Closing: shall have the meaning set forth in Section 2.3(b). Second Tranche Closing Date: shall have the meaning set forth in Section 2.3(b). 50 Second Tranche of Purchased Preferred Stock: shall have the meaning set forth in Section 2.3(a). Second Tranche Purchase Option: shall have the meaning set forth in Section 2.3(a). Second Tranche Purchase Price: shall have the meaning set forth in Section 2.3(a). Securities: shall have the meaning set forth in the seventeenth Recital. Securities Act: shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. Senior Secured Loan: shall have the meaning set forth in the third Recital. Senior Secured Note: shall have the meaning in the fourth Recital. Series B Certificate of Designation: shall have the meaning set forth in the fourteenth Recital. Series B Directors: shall have the meaning set forth in Section 6.19. Series B Preferred Stock: shall have the meaning set forth in the fifteenth Recital. Series C Certificate of Designation: shall have the meaning set forth in Section 3.3(c). Series C Preferred Stock: shall have the meaning set forth in Section 3.3(a). Share Price: shall have the meaning set forth in Section 2.4(a). Shareholders' Agreement: shall have the meaning set forth in Section 6.9. Shareholders' Meeting: shall have the meaning set forth in Section 5.4. Shortfall Amount: shall have the meaning set forth in Section 2.4(c). Shortfall Event: shall have the meaning set forth in Section 2.4(c). Shortfall Purchase Option: shall have the meaning set forth in Section 2.4(a). Software: shall have the meaning set forth in Section 3.17(a). Special Officer's Certificate: shall have the meaning set forth in Section 2.4(c). Special Opinion: shall have the meaning set forth in Section 2.4(c). 51 Special Representations and Warranties: shall have the meaning set forth in Section 11.4. subsidiary: shall mean a corporation of which a Person owns, directly or indirectly, more than 50% of the Voting Stock. Subordinated Debt Holders: shall mean those holders of the notes that shall be converted into Series C Preferred Stock pursuant to Section 6.15. Superior Proposal: shall have the meaning set forth in Section 9.1(a). Surfari: shall have the meaning set forth in Section 11.5(a). Surfari Agreement: shall have the meaning set forth in Section 11.5(a). Takeover Proposal: shall have the meaning set forth in Section 9.1(b). Total actions: shall have the meaning set forth in Section 3.24(e). Total Liabilities: shall mean all indebtedness and obligations (including without limitation any Contingent Obligations) of or assumed by any Person including, without limitation, any indebtedness or obligation: (i) in respect of money borrowed (including any indebtedness which is non-recourse to the credit of such Person but which is secured by an Encumbrance on any asset of such Person) or evidenced by a promissory note, bond, debenture or other written obligation to pay money; (ii) for the payment, deferred or other written obligation to pay money; (ii) for the payment, deferred for more than thirty (30) days, of the purchase price of goods or services (other than current trade liabilities of such Person incurred in the ordinary course of business and payable in accordance with customary practices); (iii) in connection with any letters of credit or acceptance transaction (including, without limitation, the face amount of all letters of credit and acceptances issued for the account of such Person or reimbursement on account of which such Person would be obligated); (iv) in connection with the sale or discount of accounts receivable or chattel paper of Borrower; (v) on account of deposits or advances; and (vi) as lessee under Capital Leases. "Indebtedness" of any Person shall also include: (x) Indebtedness of others secured by an Encumbrance on any asset of such Person; (y) Any guaranty, endorsement, suretyship or other undertaking pursuant to which that Person may be liable on account of any obligation of any third party; and (z) the Indebtedness of a partnership or joint venture in which such Person is a general partner or joint venturer. Term Sheet: shall have the meaning set forth in the first Recital. Transaction Documents: shall mean this Agreement, the Amended Loan Agreement, the Note, the Articles of Incorporation, the Restated Charter, Agreement and Plan of Merger, the Warrants, the Shareholders Agreement, the Registration Rights Agreement, the Forbearance Agreement, the Voting Agreements and any other documents necessary to consummate the transactions contemplated hereby. Voting Agreements: shall have the meaning set forth in Section 3.25. 52 Voting Stock: shall mean securities of any class or classes of a corporation the holders of which are ordinarily, in the absence of contingencies, entitled to elect a majority of the corporate directors (or Persons performing similar functions). Warrant Shares: shall have the meaning set forth in the ninth Recital. Warrants: shall have the meaning set forth in the eighth Recital. Willkie Offices: shall have the meaning set forth in Section 2.2(b). Works: shall have the meaning set forth in Section 3.16(g). 10.2. Accounting Principles --------------------- Where the character or amount of any asset or amount of any asset or liability or item of income or expense is required to be determined or any consolidation or other accounting computation is required to be made for the purposes of this Agreement, this shall be done in accordance with GAAP at the time in effect, to the extent applicable, except where such principles are inconsistent with the requirements of this Agreement. 10.3. Directly or Indirectly ---------------------- Where any provision in this Agreement refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person. 10.4. Governing Law ------------- This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within such State. 10.5. Paragraph and Section Headings ------------------------------ The headings of the sections and subsections of this Agreement are inserted for convenience only and shall not be deemed to constitute a part thereof. SECTION 11. MISCELLANEOUS ------------- 11.1. Notices ------- (a) All communications under this Agreement shall be in writing and shall be delivered by hand or facsimile or mailed by overnight courier or by registered mail or certified mail, postage prepaid: (i) if to the Landmark Parties, at Landmark Communications, Inc., 150 W. Brambleton Avenue, Norfolk, VA 23510 (facsimile: (757) 664-2164), Attention: Guy R. Friddell, III, Executive Vice President and General Counsel or at such other address or facsimile number as Landmark may 53 have furnished the Company in writing, with a copies to: (i) Willcox & Savage, P.C., 1800 Bank of America Center, Norfolk, VA 23510 (facsimile: (757) 628-5566), Attention: Thomas C. Inglima; and (ii) Willkie Farr & Gallagher, 787 Seventh Avenue, New York, NY 10019 (facsimile: (212) 728-8111), Attention: William J. Grant, Jr. (ii) if to the Company, at 360 N. Michigan Avenue, 19th Floor, Chicago, IL 60601 (facsimile: (312) 853-0456), Attention: Robert Gorman, or at such other address or facsimile number as it may have furnished Landmark in writing, with a copy to Jaffe, Raitt, Heuer & Weiss, P.C., One Woodward Avenue, Suite 2400, Detroit, MI 48226 (facsimile: (313) 961-8358), Attention: Peter Sugar. (b) Any notice so addressed shall be deemed to be given: if delivered by hand or facsimile, on the date of such delivery; if mailed by courier, on the first business day following the date of such mailing; and if mailed by registered or certified mail, on the third business day after the date of such mailing. 11.2. Expenses and Taxes ------------------ The Company will pay, and save and hold the Landmark Parties harmless from any and all liabilities (including interest and penalties) with respect to, or resulting from any delay or failure in paying, stamp and other taxes (other than income taxes), if any, which may be payable or determined to be payable on the execution and delivery or acquisition of the Securities or the shares of Common Stock issuable upon conversion of the Series B Preferred Stock or the exercise of the Warrants. 11.3. Reproduction of Documents ------------------------- This Agreement and all documents relating thereto, including, without limitation, (a) consents, waivers and modifications which may hereafter be executed, (b) documents received by the Landmark Parties on the Closing Dates (except for the certificates evidencing the Series B Preferred Stock, the Converted Shares or the Warrant Shares themselves), and (c) financial statements, certificates and other information previously or hereafter furnished to the Landmark Parties, may be reproduced by the Landmark Parties by any photographic, photostatic, microfilm, micro-card, miniature photographic or other similar process and the Landmark Parties may destroy any original document so reproduced. All parties hereto agree and stipulate that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by the Landmark Parties in the regular course of business) and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. 11.4. Survival -------- All warranties, representations, and covenants made by the Landmark Parties and the Company herein or in any certificate or other instrument delivered by the Landmark Parties or the Company under this Agreement shall be considered to have been relied upon by the 54 Company or the Landmark Parties, as the case may be, and shall survive all deliveries to the Landmark Parties of the Securities, or payment to the Company for such Securities, regardless of any investigation made by the Company or the Landmark Parties, as the case may be, or on the Company's or the Landmark Parties' behalf for a period of one (1) year after each applicable Closing Date, except (i) the representations and warranties set forth in Sections 3.1, 3.3, 3.4 and 3.5 (the "Special Representations and Warranties") and all covenants and agreements set forth in this Agreement shall survive each applicable Closing and continue in full force and effect except to the extent limited by a period set forth herein and (ii) if any party entitled to indemnification has made a written claim for indemnification to the party required to provide indemnification prior to the expiration of the applicable survival period, then in such case the indemnifying party shall remain liable for any Losses (defined below) resulting from, arising out of or related to the breach asserted in the notice of claim. All statements in any such certificate or other instrument shall constitute warranties and representations by the Company hereunder. 11.5. Indemnity --------- (a) (i) The Company shall indemnify the Landmark Parties against any loss, cost or damages (including reasonable attorneys' fees but excluding consequential damages) (each, a "Loss" and, collectively, "Losses") incurred by any Landmark Party as a result of the breach by the Company of any representation, warranty, covenant or agreement in this Agreement or any certificate delivered in connection herewith. (ii) The Company shall also indemnify the Landmark Parties against any lawsuits, claims, actions, suits, proceedings, or investigations relating to the transactions contemplated by the Transaction Documents by any person other than the Company, including, without limitation, any shareholder suits brought by or on behalf of the Company's shareholders. (iii) The Company's indemnity obligation under Section 11.5(a)(i) shall be limited as follows: (A) under such provision, the Company shall not be obligated to indemnify either Landmark Party until the Losses sustained, incurred, paid or required to be paid by the Landmark Parties exceed, in aggregate, a Three Hundred Thousand Dollars ($300,000) threshold (the "Basket"), at which point the Company shall be obligated to indemnify the applicable Landmark Party(ies) from and against all Losses relating back to the first dollar and (B) there will be an $11,500,000 aggregate ceiling (the "Cap") on the obligation of the Company to indemnify the Landmark Parties under such provision; provided, the foregoing notwithstanding, the Basket and Cap shall not apply to Losses arising out of, resulting from, or related to (x) the breach of any Special Representation and Warranty or (y) the breach of any covenant or agreement (including, without limitation this Section 11.5). (iv) Notwithstanding the foregoing, the Company shall also indemnify the Landmark Parties for any Losses arising out of or relating to any items listed on Schedule 3.20 including without limitation any liabilities related to employee contributions under the Company's 401(k) plan, Cafeteria Plan (whether imposed by any party) and any penalties associated therewith. (v) In addition to the foregoing, in the event that the Company shall issue any shares of Common Stock or equity or debt securities convertible, exchangeable or 55 exercisable into Common Stock to Surfari, Inc. a Tennessee corporation ("Surfari") pursuant to the terms of that certain Asset Purchase Agreement, dated as of November 30, 2000, by and between the Company and Surfari, as amended (the "Surfari Agreement") or otherwise issue any such shares to Surfari, the Company shall issue to LV a number of shares of Series B Preferred Stock equal on an as-converted basis to the number of shares of Common Stock issued to Surfari. Notwithstanding the foregoing calculation of the number of shares on an as-converted basis, LV shall be entitled to all anti-dilution protections applicable to the shares of Series B Preferred Stock under the Articles of Incorporation or Restated Charter, as applicable, on the same basis as if LV had been issued such shares at the First Tranche Closing and would consequently be entitled to protection for below market issuances on and after that date (other than as issued pursuant to this Section 11.5(a)(v)). (b) The Landmark Parties shall indemnify the Company against any Loss incurred by the Company as a result of the breach by the Landmark Parties of any representation, warranty, covenant or agreement in this Agreement. (c) Subject to the consummation of the First Tranche Closing, the Company agrees (i) that money damages would not be sufficient remedy for the Landmark Parties for any breach of this Agreement by the Company, (ii) that in addition to all other remedies, the Landmark Parties shall be entitled to specific performance and injunctive and other equitable relief as a remedy for any such breach, and (iii) to waive any requirement for the securing or posting of any bond in connection with such remedy. 11.6. Successors and Assigns; Assignability ------------------------------------- This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties. The Landmark Parties may freely assign this Agreement to their Affiliates provided such Affiliates agree in writing to be bound by the terms hereof including without limitation the confidentiality provisions set forth in Section 5.10. 11.7. Entire Agreement; Amendment and Waiver -------------------------------------- This Agreement and the agreements attached as Exhibits hereto constitute the entire understandings of the parties hereto and supersede all prior agreements or understandings with respect to the subject matter hereof among such parties (including without limitation the Confidentiality Letter dated March 6, 2001 between LCI and the Company and the Term Sheet). This Agreement may be amended with (and only with) the written consent of the Company and the Landmark Parties. This Agreement shall not become effective and the terms and provisions herein shall be of no force and effect unless and until both parties hereto have executed and delivered the Agreement. Any party hereto may, by written notice to the other parties, waive any provision of this Agreement. The failure or delay of any party hereto to enforce at any time any of the provisions of this Agreement shall in no way be construed to be a waiver of any such provision, nor in any way to affect the validity of this Agreement or any part thereof or the right of any party thereafter to enforce each and every such provision. 56 11.8. Severability ------------ In the event that any part or parts of this Agreement shall be held illegal or unenforceable by any court or administrative body of competent jurisdiction, such determination shall not affect the remaining provisions of this Agreement which shall remain in full force and effect. 11.9. Counterparts ------------ This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall be considered one and the same agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK - SIGNATURE PAGE FOLLOWS] 57 EXECUTION COPY IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date first above written. COOLSAVINGS.COM INC. By: /s/ Matthew Moog ----------------------------------------- Name: Matthew Moog Title: President COOLSAVINGS, INC. By: /s/ Matthew Moog ----------------------------------------- Name: Matthew Moog Title: President LANDMARK COMMUNICATIONS, INC. By: /s/ Guy R. Friddell, III ----------------------------------------- Name: Guy R. Friddell, III Title: Executive Vice President LANDMARK VENTURES VII, LLC By: /s/ Richard A. Fraim ----------------------------------------- Name: Richard A. Fraim Title: Vice President and Treasurer
TABLE OF CONTENTS ----------------- SECTION 1. AUTHORIZATION OF SERIES B PREFERRED STOCK.......................................................3 SECTION 2. PURCHASE AND SALE OF SECURITIES.................................................................4 2.1. Issuance of Senior Secured Note.................................................................4 2.2. Issuance of First Tranche of Series B Preferred Stock...........................................4 2.3. Issuance of Second Tranche of Series B Preferred Stock..........................................4 2.4. Issuance of Additional Tranches of Series B Preferred Stock.....................................5 2.5. Equitable Adjustment............................................................................8 SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................................................8 3.1. Corporate Organization and Authority............................................................8 3.2. Subsidiaries....................................................................................9 3.3. Capitalization..................................................................................9 3.4. Issuance of Common Stock.......................................................................11 3.5. Corporate Proceedings, etc.....................................................................11 3.6. Consents and Approvals.........................................................................11 3.7. Absence of Defaults, Conflicts, etc............................................................11 3.8. Absence of Certain Developments................................................................12 3.9. Securities Law Issues..........................................................................12 3.10. Acknowledgement of Dilution....................................................................14 3.11. No Bankruptcy..................................................................................14 3.12. Compliance with Law............................................................................15 3.13. Litigation.....................................................................................15 3.14. Absence of Undisclosed Liabilities.............................................................15 3.15. Tax Matters....................................................................................15 3.16. Intellectual Property..........................................................................16 3.17. Software.......................................................................................18 3.18. Material Contracts.............................................................................19 3.19. Employees......................................................................................19 3.20. Employee Benefit Plans.........................................................................20 3.21. Title to Tangible Assets.......................................................................21 3.22. Condition of Properties........................................................................21 3.23. Insurance......................................................................................21 3.24. Membership Base; Demographic Activity..........................................................22 3.25. Voting Agreements..............................................................................22 3.26. Certain Interests..............................................................................23 3.27. Registration Rights............................................................................23 3.28. Private Offering...............................................................................23 3.29. Brokerage......................................................................................23 3.30. Minute Books...................................................................................23 3.31. Change of Control..............................................................................24 i 3.32. Material Facts.................................................................................24 SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE LANDMARK PARTIES........................................................................................24 4.1. Corporate Proceedings, etc.....................................................................24 4.2. Consents and Approvals.........................................................................24 4.3. Investment Representation......................................................................25 4.4. Access to Other Information....................................................................25 4.5. Risks of Investment............................................................................25 SECTION 5. COVENANTS OF THE PARTIES.......................................................................25 5.1. Securities Compliance..........................................................................25 5.2. Reservation of Stock Issuable Upon Conversion or Exercise of the Securities....................26 5.3. Form D; Blue Sky Laws..........................................................................26 5.4. Best Efforts...................................................................................26 5.5. Resale of Securities...........................................................................27 5.6. Covenants Pending the Closings.................................................................27 5.7. Further Assurance; Securities Law Assurances...................................................28 5.8. Financial and Business Information.............................................................28 5.9. Inspection.....................................................................................30 5.10. Confidentiality................................................................................30 5.11. Conduct of Business............................................................................30 5.12. Lost, etc. Certificates Evidencing Shares (or Shares of Common Stock); Exchange................31 5.13. Termination....................................................................................31 5.14. Option Repricing...............................................................................32 5.15. Payment Defaults...............................................................................32 SECTION 6. LANDMARK CONDITIONS FOR FIRST TRANCHE CLOSING..................................................33 6.1. Representations and Warranties.................................................................33 6.2. Compliance with Agreement......................................................................33 6.3. Officer's Certificate..........................................................................33 6.4. Default Under Senior Secured Note, this Agreement or Forbearance Agreements....................33 6.5. Pending or Threatened Litigation...............................................................33 6.6. Counsel's Opinion..............................................................................34 6.7. Forbearance Agreement..........................................................................34 6.8. Adverse Development............................................................................34 6.9. Shareholders Agreement.........................................................................34 6.10. Registration Rights Agreement..................................................................35 6.11. Shareholder Approval and Adoption of Restated Charter..........................................35 6.12. Filing of Charter Terms; Merger................................................................35 6.13. Voting Agreements..............................................................................35 -ii- 6.14. State Law Concerns.............................................................................35 6.15. Conversion of Debt to Employees................................................................36 6.16. Employment Agreements..........................................................................36 6.17. Insurance......................................................................................36 6.18. Key Man Life Insurance.........................................................................36 6.19. Election of Directors..........................................................................36 6.20. Member Metrics.................................................................................36 6.21. Expenses.......................................................................................37 6.22. NASDAQ Listing.................................................................................37 6.23. Consents.......................................................................................37 6.24. Payment Defaults...............................................................................37 6.25. Approval of Proceedings........................................................................37 SECTION 7. LANDMARK CONDITIONS FOR SECOND TRANCHE CLOSING.................................................37 7.1. Representations and Warranties.................................................................38 7.2. Compliance with Agreement......................................................................38 7.3. Officer's Certificate..........................................................................38 7.4. Default Under Senior Secured Note, this Agreement or Forbearance Agreements....................38 7.5. Counsel's Opinion..............................................................................38 7.6. Adverse Development............................................................................39 7.7. Voting Agreements; Merger; Filing of Restated Charter..........................................39 7.8. Approval of Proceedings........................................................................39 7.9. Option Repricing and Reissuance................................................................39 7.10. Continued Conditions...........................................................................39 SECTION 8. COMPANY CLOSING CONDITIONS.....................................................................39 8.1. Representations and Warranties.................................................................40 8.2. Compliance with Agreement......................................................................40 8.3. Landmark's Certificates........................................................................40 8.4. Injunction.....................................................................................40 8.5. Shareholders Agreement.........................................................................40 8.6. Registration Rights Agreement..................................................................40 SECTION 9. EXCLUSIVITY AND TERMINATION....................................................................40 9.1. Takeover Proposal..............................................................................40 9.2. Termination....................................................................................42 9.3. Notice of Termination..........................................................................43 9.4. Fees and Expenses..............................................................................44 SECTION 10. INTERPRETATION OF THIS AGREEMENT...............................................................45 10.1. Terms Defined..................................................................................45 10.2. Accounting Principles..........................................................................53 10.3. Directly or Indirectly.........................................................................53 iii 10.4. Governing Law..................................................................................53 10.5. Paragraph and Section Headings.................................................................53 SECTION 11. MISCELLANEOUS..................................................................................53 11.1. Notices........................................................................................53 11.2. Expenses and Taxes.............................................................................54 11.3. Reproduction of Documents......................................................................54 11.4. Survival.......................................................................................54 11.5. Indemnity......................................................................................55 11.6. Successors and Assigns; Assignability..........................................................56 11.7. Entire Agreement; Amendment and Waiver.........................................................56 11.8. Severability...................................................................................57 11.9. Counterparts...................................................................................57
EXHIBIT A Amended Loan Agreement EXHIBIT B Senior Secured Note EXHIBIT C Grid Note EXHIBIT D Warrants EXHIBIT E Agreement and Plan of Merger EXHIBIT F Restated Charter EXHIBIT G Newco's Organizational Minutes with Bylaws EXHIBIT H Series B Certificate of Designation EXHIBIT I Registration Rights Agreement EXHIBIT J Articles of Incorporation (Michigan entity) EXHIBIT K Bylaws (Michigan entity) EXHIBIT L Series C Certificate of Designation EXHIBIT M Voting Agreements EXHIBIT N Amended Incentive Stock Option Agreement EXHIBIT O Jaffe, Raitt, Heuer & Weiss opinion EXHIBIT P Shareholders Agreement EXHIBIT Q Approved Plan -iv- EX-4 7 lc892446.txt EX-4 WARRANT EXHIBIT 4 WARRANT THIS WARRANT AND THE SECURITIES ISSUABLE UPON ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW, AND MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE ACT OR IN A TRANSACTION WHICH, IN THE OPINION OF COUNSEL, WHICH OPINION AND WHICH COUNSEL SHALL BE REASONABLY SATISFACTORY TO COOLSAVINGS.COM INC., QUALIFIES AS AN EXEMPT TRANSACTION UNDER THE ACT AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER. COOLSAVINGS.COM INC. Common Stock Purchase Warrant coolsavings.com inc., a Michigan corporation (the "Company"), hereby certifies that, for value received, Landmark Communications, Inc. or its assigns (the "Holder"), is entitled, subject to the terms set forth below, to purchase from the Company, at any time and from time to time during the period beginning on July 30, 2001 and ending on July 30, 2009 (the "Expiration Date"), in whole or in part, the Warrant Shares (defined in Section 1.1 below) of fully paid and non-assessable shares of the Common Stock of the Company at the Purchase Price (defined in Section 1.1 below). The Purchase Price and the number and character of such Warrant Shares are subject to the adjustments provided below, and the term "Common Stock" shall mean, unless the context otherwise requires, the stock or other securities or property at the time deliverable upon the exercise of this Warrant. This Warrant is herein called the "Warrant." 1. EXERCISE OF WARRANT. 1.1 The Holder of this Warrant is entitled to purchase at a purchase price of $0.01 per share ("Purchase Price") 7,818,731 shares (the "Warrant Shares") of Common Stock; provided, however, that, upon consummation of the First Tranche Closing (as defined in that certain Securities Purchase Agreement, dated as of July 30, 2001, by and among the Holder, Landmark Ventures VI, LLC, and the Company, such agreement, the "Securities Purchase Agreement"), the Warrant Shares that the Holder is entitled to purchase under this Warrant shall be adjusted to equal 10,000,000 shares of Common Stock (the "Base Shares") plus the PIK Shares (defined below) and the Purchase Price of such Warrant Shares and PIK Shares shall be increased to $0.50 (and further to $0.75 from and after July 30, 2005); provided, further, that in the event of a termination of the Securities Purchase Agreement, the terms of Section 1.6 shall apply. 1.2 After the First Tranche Closing, in addition to the Base Shares, the Holder of this Warrant shall be entitled to purchase, at a Purchase Price per share of $0.50 ($0.75 from and after July 30, 2005), two (2) additional shares of Common Stock (adjusted for dividends, splits, combinations and the like) (the "PIK Shares") for every dollar of interest accrued, compounded and added after the date of the First Tranche Closing to the Original Principal Amount (defined below) of the Initial Loan (defined below) on a quarterly basis. The "Initial Loan" is the "Initial Loan" defined in and described under that certain Amended and Restated Loan and Security Agreement dated July 30, 2001 between the Holder and the Company (the "Loan Agreement"), which is further evidenced by the Senior Secured Note (as defined in and attached to the Loan Agreement). The "Original Principal Amount" is the Original Principal Amount of $5,000,000 as defined in the Loan Agreement. Such PIK Shares are part of the Company's obligation to pay the interest accruing under the Initial Loan "in kind"; specifically, the Company is obligated to pay the interest by delivering additional notes and warrants and, in lieu of delivering separately certificated warrants, the Company has agreed to add the PIK Shares (as the warrant portion of the "in kind" payment) to the Base Shares that may be purchased hereunder. The Base Shares and all PIK Shares are collectively the Warrant Shares hereunder. Within ten (10) days of each Quarterly Payment Date (as defined in the Loan Agreement) through the Expiration Date, or as reasonably requested by the Holder, the Company shall issue to the Holder a certificate executed by the Company's chief financial officer or other executive officer setting forth the number of PIK Shares as of such date and the amount of the interest accrued, compounded and added to the Initial Loan. 1.3 For the purposes hereof, the term "Fully Diluted Basis" shall mean the outstanding capital stock of the Company on a fully diluted basis assuming as outstanding (a) any shares reserved for issuance under any option plans of the Company, provided that such options in respect of such shares have been issued, (b) shares underlying any warrants including warrants issued in connection with the issuance of the Series C Convertible Preferred Stock, no par value per share (but excluding this Warrant), (c) all securities (excluding shares of the Company's Series B Convertible Preferred Stock (the "Series B Preferred Stock")) convertible into or exercisable for capital stock of the Company regardless of the conversion or exercise price, or (d) any capital stock issued or issuable under any agreement of the Company. 1.4 Other than in the event of a termination of the Securities Purchase Agreement (as set forth in Section 1.6 hereto), in the event that the Warrants issued hereunder at any time prior to the First Tranche Closing equal or exceed 20% of the Common Stock (or any securities convertible into or exercisable for Common Stock) or 20% or more of the outstanding voting power of the Company prior to the date hereof as such terms are defined and referenced in NASD Rule 4350(i)(1)(D), the number of Warrants issued hereunder shall be adjusted to be just less than such 20% (for example 19.999%) of such Common Stock or outstanding voting power of the Company prior to the date hereof. Furthermore, in the event that the Warrants issued hereunder at any time prior to the First Tranche Closing or the SPA Termination Date are less than 19.99% of the Common Stock (or any securities convertible into or exercisable for Common Stock) or less than 19.99% of the outstanding voting power of the Company prior to the date hereof as such terms are defined and referenced in NASD Rule 4350(i)(1)(D), the number of Warrants issued hereunder shall be adjusted to equal at least 19.99% of such Common Stock or outstanding voting power of the Company at such First Tranche Closing or SPA Termination Date. -2- 1.5 The Holder hereof agrees that it shall not exercise the Warrant prior to the First Tranche Closing unless (i) the Securities Purchase Agreement is terminated in any manner whatsoever, (ii) there has been an Event of Default (as such term is defined under the Loan and Security Agreement dated as of the date hereof between the parties hereto) under the Loan and Security Agreement or failure to pay interest in kind (including any Warrant Shares) under the Senior Secured Note, or (iii) the Board of Directors of the Company fails to call a meeting of shareholders of the Company or fails to recommend the proposed transactions as contemplated in the Transaction Documents. In the event the Holder is entitled to exercise the Warrant pursuant to this Section 1.5, then Section 1.4 hereto shall be of no further force and effect upon such exercise and Section 1.6 shall apply. 1.6 Notwithstanding the foregoing, if the Securities Purchase Agreement is terminated at any time and in any manner whatsoever, then the Warrant Shares that the Holder is entitled to purchase under this Warrant shall be adjusted to equal 19.9% of the outstanding capital stock of the Company, as calculated on a Fully Diluted Basis (defined above) regardless of NASD Rule 4350(i)(1)(D) as of the date of such termination (the "SPA Termination Date") and the Purchase Price shall remain $0.01 per share. 1.7 Until such time as this Warrant is exercised in full or expires, the Warrant Shares issuable upon exercise and the Purchase Price shall be subject to the further adjustments set forth below. 1.8 The purchase rights evidenced by this Warrant shall be exercised by the Holder surrendering this Warrant, with the form of subscription at the end hereof duly executed by the Holder, to the Company at its office at 360 N. Michigan Avenue, 19th Floor, Chicago, IL 60601, accompanied by payment, of an amount (the "Exercise Payment") equal to the Purchase Price multiplied by the number of shares being purchased pursuant to such exercise, payable as follows: (a) by payment to the Company in cash, by certified or official bank check, or by wire transfer of the Exercise Payment, (b) by offset, at the Holder's request, of that portion of any promissory note, indebtedness or cash obligation of the Company to the Holder equal to the Exercise Payment, (c) by surrender to the Company for cancellation of securities of the Company having a Market Price (defined below) on the date of exercise equal to the Exercise Payment; or (d) by a combination of the methods described in clauses (a), (b) and (c) above. For purposes hereof, the term "Market Price" shall mean, with respect to any day, the average closing price of a share of Common Stock for the 15 consecutive trading days preceding such day on the principal national securities exchange on which the shares of Common Stock or securities are listed or admitted to trading or, if not listed or admitted to trading on any national securities exchange, the average of the reported bid and asked prices during such 15 trading day period in the over-the-counter market as furnished by the National Quotation Bureau, Inc., or, if such firm is not then engaged in the business of reporting such prices, as furnished by any member of the National Association of Securities Dealers, Inc. selected by the Company or, if the shares of Common Stock or securities are not publicly traded, the Market Price for such day shall be the fair market value thereof determined jointly by the Company and the holder of this Warrant; provided, however, that if such parties are unable to reach agreement within a reasonable period of time, the Market Price shall be determined in good faith by the independent investment banking firm selected jointly by the Company and the holder of this Warrant or, if -3- that selection cannot be made within 15 days, by an independent investment banking firm selected by the American Arbitration Association in accordance with its rules. In no event may this Warrant be exercised at any time after the Expiration Date. Notwithstanding any provision herein to the contrary, if the Market Price of one share of Common Stock is greater than the Purchase Price (at the date of calculation as set forth below), the Holder may elect to receive, without the payment by the Holder of any additional consideration, shares of Common Stock equal to the value (as determined below) of this Warrant or any portion hereof by the surrender of this Warrant or such portion to the Company, with the net issue election notice annexed hereto duly executed, at the office of the Company. Thereupon, the Company shall issue to the Holder such number of fully paid and nonassessable shares of Common Stock as is computed using the following formula: X = Y (A-B) ----------- A where X = the number of shares of Common Stock to be issued to the Holder. Y = the number of shares of Common Stock covered by this Warrant in respect of which the net issue election is made pursuant to this Section 1.2. A = the Market Price of one share of Common Stock, as determined in accordance with the provisions of this Section 1.2. B = the Purchase Price in effect under this Warrant at the time the net issue election is made pursuant to this Section 1.2. 1.9 Partial Exercise. This Warrant may be exercised for less than the full number of shares of Common Stock, in which case the number of shares receivable upon the exercise of this Warrant as a whole, and the sum payable upon the exercise of this Warrant as a whole, shall be proportionately reduced. Upon any such partial exercise, the Company at its expense will forthwith issue to the Holder a new Warrant or Warrants of like tenor calling for the number of shares of Common Stock as to which rights have not been exercised, such Warrant or Warrants to be issued in the name of the Holder hereof or his or its nominee (upon payment by the Holder of any applicable transfer taxes). 2. DELIVERY OF STOCK CERTIFICATES ON EXERCISE. As soon as practicable after the exercise of this Warrant and payment of the Purchase Price, and in any event within ten (10) days thereafter, the Company, at its expense, will cause to be issued in the name of and delivered to the Holder a certificate or certificates for the number of fully paid and non-assessable shares or other securities or property to which the Holder shall be entitled upon such exercise, plus, in lieu of any fractional share to which the Holder would otherwise be entitled, cash in an amount determined in accordance with Paragraph 3.9 hereof. The Company agrees that the shares so purchased shall be deemed to be issued to the Holder as the record owner of such shares as of the close of business on the date on which this Warrant shall have been surrendered and payment made for such shares as aforesaid. -4- 3. ANTI-DILUTION PROVISIONS AND OTHER ADJUSTMENTS. In order to prevent dilution of the rights granted hereunder, the Purchase Price shall be subject to adjustment from time to time in accordance with this Paragraph 3. Upon each adjustment of the Purchase Price pursuant to this Paragraph 3, the registered Holder of this Warrant shall thereafter be entitled to acquire upon exercise, at the Purchase Price resulting from such adjustment, the number of shares of Common Stock obtainable by multiplying the Purchase Price in effect immediately prior to such adjustment by the number of shares of Common Stock acquirable immediately prior to such adjustment and dividing the product thereof by the Purchase Price resulting from such adjustment. 3.1 Adjustment for Issue or Sale of Common Stock at Less than Purchase Price. Except as provided in Paragraph 3.2 or 3.5 below, if and whenever on or after the date hereof (the "Initial Issuance Date"), the Company shall issue or sell or shall be deemed to have issued or sold any shares of its Common Stock (or in case the Company at any time shall in any manner grant (whether directly or by assumption in a merger or otherwise) any rights to subscribe for or to purchase, or any options for the purchase of, Common Stock or any stock or other securities convertible into or exchangeable for Common Stock (such rights or options being herein called "Options" and such convertible or exchangeable stock or securities being herein called "Convertible Securities")) for a consideration per share less than the Purchase Price in effect immediately prior to the time of such issue or sale, then forthwith upon such issue or sale (the "Triggering Transaction"), the Purchase Price shall be reduced to the price at which the Common Stock, Options or Convertible Securities were issued or deemed to have been issued in such Triggering Transaction. For purposes of determining the adjusted Purchase Price under this Paragraph 3.1, the following subsections (1) to (9), inclusive, shall be applicable: (1) In case the Company at any time shall in any manner grant (whether directly or by assumption in a merger or otherwise) any rights to subscribe for or to purchase, or any options for the purchase of, Common Stock or any stock or other securities convertible into or exchangeable for Common Stock (such rights or options being herein called "Options" and such convertible or exchangeable stock or securities being herein called "Convertible Securities"), whether or not such Options or the right to convert or exchange any such Convertible Securities are immediately exercisable and the price per share for which the Common Stock is issuable upon exercise, conversion or exchange (determined by dividing (x) the total amount, if any, received or receivable by the Company as consideration for the granting of such Options, plus the minimum aggregate amount of additional consideration payable to the Company upon the exercise of all such Options, plus, in the case of such Options which relate to Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable upon the issue or sale of such Convertible Securities and upon the conversion or exchange thereof, by (y) the total maximum number of shares of Common Stock issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities) shall be less than the Purchase Price in effect immediately prior to the time of the granting of such -5- Option, then the total maximum amount of Common Stock issuable upon the exercise of such Options, or, in the case of Options for Convertible Securities, upon the conversion or exchange of such Convertible Securities, shall (as of the date of granting of such Options) be deemed to be outstanding and to have been issued and sold by the Company for such price per share. No adjustment of the Purchase Price shall be made upon the actual issue of such shares of Common Stock or such Convertible Securities upon the exercise of such Options, except as otherwise provided in subparagraph (3) below. (2) In case the Company at any time shall in any manner issue (whether directly or by assumption in a merger or otherwise) or sell any Convertible Securities, whether or not the rights to exchange or convert thereunder are immediately exercisable, and the price per share for which Common Stock is issuable upon such conversion or exchange (determined by dividing (x) the total amount received or receivable by the Company as consideration for the issue or sale of such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange thereof, by (y) the total maximum number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities) shall be less than the Purchase Price in effect immediately prior to the time of such issue or sale, then the total maximum number of shares of Common Stock issuable upon conversion or exchange of all such Convertible Securities shall (as of the date of the issue or sale of such Convertible Securities) be deemed to be outstanding and to have been issued and sold by the Company for such price per share. No adjustment of the Purchase Price shall be made upon the actual issue of such Common Stock upon exercise of the rights to exchange or convert under such Convertible Securities, except as otherwise provided in subparagraph (3) below. (3) If the purchase price provided for in any Option referred to in subparagraph (1) or the rate at which any Convertible Securities referred to in subparagraphs (1) or (2) are convertible into or exchangeable for Common Stock, shall be reduced at any time under or by reason of provisions with respect thereto designed to protect against dilution, then in case of the delivery of Common Stock upon the exercise of any such Option or upon conversion or exchange of any such Convertible Security, the Purchase Price then in effect hereunder shall forthwith be adjusted to such respective amount as would have been obtained had such Option or Convertible Security never been issued as to such Common Stock and had adjustments been made upon the issuance of the shares of Common Stock delivered as aforesaid, but only if as a result of such adjustment the Purchase Price then in effect hereunder is hereby reduced. (4) On the expiration or earlier termination of any Option or the termination of any right to convert or exchange any Convertible Securities, the Purchase Price then in effect hereunder shall forthwith be increased to the Purchase Price which would have been in effect at the time of such expiration or -6- termination had such Option or Convertible Securities, to the extent outstanding immediately prior to such expiration or termination, never been issued. (5) In case any Options shall be issued in connection with the issue or sale of other securities of the Company, together comprising one integral transaction in which no specific consideration is allocated to such Options by the parties thereto, such Options shall be deemed to have been issued without consideration unless otherwise recorded on the Company's financial statements in accordance with generally accepted accounting principles. (6) In case any shares of Common Stock, Options or Convertible Securities shall be issued or sold or deemed to have been issued or sold for cash, the consideration received therefor shall be deemed to be the amount received by the Company therefor. In case any shares of Common Stock, Options or Convertible Securities shall be issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Company shall be the fair value of such consideration as determined in good faith by the Board of Directors of the Company. In case any shares of Common Stock, Options or Convertible Securities shall be issued in connection with any merger in which the Company is the surviving corporation, the amount of consideration therefor shall be deemed to be the fair value of such portion of the net assets and business of the non-surviving corporation as shall be attributed by the Board of Directors of the Company in good faith to such Common Stock, Options or Convertible Securities, as the case may be. (7) The number of shares of Common Stock outstanding at any given time shall not include shares owned, held by or for the account of the Company or cancelled, and the disposition of any shares so owned or held shall be considered an issue or sale of Common Stock for the purpose of this Paragraph 3.1. (8) In case the Company shall declare a dividend or make any other distribution upon the stock of the Company payable in Options or Convertible Securities, then in such case any Options or Convertible Securities, as the case may be, issuable in payment of such dividend or distribution shall be deemed to have been issued or sold without consideration. (9) For purposes of this Paragraph 3.1, in case the Company shall take a record of the holders of its Common Stock for the purpose of entitling them (x) to receive a dividend or other distribution payable in Common Stock, Options or in Convertible Securities, or (y) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right or subscription or purchase, as the case may be. -7- 3.2 Dividends Not Paid Out of Earnings or Earned Surplus. In the event the Company shall declare a dividend upon the Common Stock (other than a dividend payable in Common Stock) payable otherwise than out of earnings or earned surplus, determined in accordance with generally accepted accounting principles, including the making of appropriate deductions for minority interests, if any, in subsidiaries (herein referred to as "Liquidating Dividends"), then, as soon as possible after the exercise of this Warrant, the Company shall pay to the person exercising such Warrant an amount equal to the aggregate value at the time of such exercise of all Liquidating Dividends (including but not limited to the Common Stock which would have been issued at the time of such earlier exercise and all other securities which would have been issued with respect to such Common Stock by reason of stock splits, stock dividends, mergers or reorganizations, or for any other reason). For the purposes of this Paragraph 3.2, a dividend other than in cash shall be considered payable out of earnings or earned surplus only to the extent that such earnings or earned surplus are charged an amount equal to the fair value of such dividend as determined in good faith by the Board of Directors of the Company. 3.3 Subdivisions and Combinations. In case the Company shall at any time (i) subdivide the outstanding Common Stock or (ii) issue a stock dividend on its outstanding Common Stock, the Purchase Price in effect immediately prior to such subdivision or dividend shall be proportionately reduced by the same ratio as the subdivision or dividend. In case the Company shall at any time combine its outstanding Common Stock, the Purchase Price in effect immediately prior to such combination shall be proportionately increased by the same ratio as the combination. 3.4 Reorganization, Reclassification, Consolidation, Merger or Sale of Assets. If any capital reorganization or reclassification of the capital stock of the Company, or consolidation or merger of the Company with or into another corporation, or the sale of all or substantially all of its assets to another corporation shall be effected in such a way that holders of Common Stock shall be entitled to receive stock, securities, cash or other property with respect to or in exchange for Common Stock, then, as a condition of such reorganization, reclassification, consolidation, merger or sale, lawful and adequate provision shall be made whereby the Holder shall have the right to acquire and receive, upon exercise of this Warrant, such shares of stock, securities, cash or other property issuable or payable (as part of the reorganization, reclassification, consolidation, merger or sale) with respect to or in exchange for such number of outstanding shares of the Common Stock as would have been received upon exercise of this Warrant at the Purchase Price then in effect. The Company will not effect any such consolidation, merger or sale, unless prior to the consummation thereof the successor corporation (if other than the Company) resulting from such consolidation or merger or the corporation purchasing such assets shall assume by written instrument mailed or delivered to the Holder at the last address of the Holder appearing on the books of the Company, the obligation to deliver to the Holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, the Holder may be entitled to purchase. If a purchase, tender or exchange offer is made to and accepted by the holders of more than 50% of the outstanding shares of Common Stock of the Company, the Company shall not effect any consolidation, merger or sale with the person having made such offer or with any Affiliate of such person, unless prior to the consummation of such consolidation, merger or sale the Holder shall have been given a reasonable opportunity to then elect to receive upon the exercise of this Warrant either the stock, -8- securities or assets then issuable with respect to the Common Stock or the stock, securities or assets, or the equivalent, issued to previous holders of the Common Stock in accordance with such offer. For purposes hereof the term "Affiliate" with respect to any given person shall mean any person controlling, controlled by or under common control with the given person. 3.5 No Adjustment for Exercise of Certain Options, Warrants, Etc. The provisions of this Section 3 shall not apply to any Common Stock issued, issuable or deemed outstanding under subparagraphs 3.1(1) to (8) inclusive in respect of: (i) options issued under any Approved Plan as such term is defined in the Company's Articles of Incorporation (as amended) or Certificate of Incorporation, as applicable, or if not so defined therein as defined in the Securities Purchase Agreement (provided that when determining whether there are any options remaining for issuance under an Approved Plan, all shares issued and outstanding under such Approved Plan regardless of exercise price must be considered in such calculation), (ii) Options, Convertible Securities and conversion rights in existence on the date hereof, (iii) conversion of the Series B Preferred Stock, the Series C Preferred Stock or this Warrant, (iv) any issuance of additional shares of Series B Preferred Stock as a dividend, and (v) any issuance of additional shares of Series B Preferred Stock in accordance with Section 2.4 of the Securities Purchase Agreement. 3.6 Notices of Record Date, Etc. In the event that: (1) the Company shall declare any cash dividend upon its Common Stock, or (2) the Company shall declare any dividend upon its Common Stock payable in stock or make any special dividend or other distribution to the holders of its Common Stock, or (3) the Company shall offer for subscription pro rata to the holders of its Common Stock any additional shares of stock of any class or other rights, or (4) there shall be any capital reorganization or reclassification of the capital stock of the Company, including any subdivision or combination of its outstanding shares of Common Stock, or consolidation or merger of the Company with, or sale of all or substantially all of its assets to, another corporation, or (5) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company; then, in connection with such event, the Company shall give to the Holder: (ii) at least twenty (20) days' prior written notice of the date on which the books of the Company shall close or a record shall be taken for such dividend, distribution or subscription rights or for determining rights to vote in respect of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up; and -9- (iii) in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up, at least twenty (20) days' prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause (i) shall also specify, in the case of any such dividend, distribution or subscription rights, the date on which the holders of Common Stock shall be entitled thereto, and such notice in accordance with the foregoing clause (ii) shall also specify the date on which the holders of Common Stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reorganization, reclassification consolidation, merger, sale, dissolution, liquidation or winding up, as the case may be. Each such written notice shall be given by first class mail, postage prepaid, addressed to the Holder at the address of the Holder as shown on the books of the Company. 3.7 Grant, Issue or Sale of Options, Convertible Securities, or Rights. If at any time or from time to time on or after the date of issuance hereof, the Company shall grant, issue or sell any Options, Convertible Securities or rights to purchase property (the "Purchase Rights") pro rata to the record holders of any class of Common Stock and such grants, issuances or sales do not result in an adjustment of the Purchase Price under Paragraph 3.1 hereof, then the Holder shall be entitled to acquire (within thirty (30) days after the receipt by such holder of the notice concerning Purchase Rights to which such holder shall be entitled under Paragraph 3.6) and upon the terms applicable to such Purchase Rights either: (i) the aggregate Purchase Rights which the Holder could have acquired if it had held the number of shares of Common Stock acquirable upon exercise of this Warrant immediately before the grant, issuance or sale of such Purchase Rights; provided that if any Purchase Rights were distributed to holders of Common Stock without the payment of additional consideration by such holders, corresponding Purchase Rights shall be distributed to the exercising Holder as soon as possible after such exercise and it shall not be necessary for the Holder specifically to request delivery of such rights; or (ii) in the event that any such Purchase Rights shall have expired or shall expire prior to the end of said thirty (30) day period, the number of shares of Common Stock or the amount of property which the Holder could have acquired upon such exercise at the time or times at which the Company granted, issued or sold such expired Purchase Rights. 3.8 Adjustment by Board of Directors. If any event occurs as to which, in the opinion of the Board of Directors of the Company, the provisions of this Section 3 are not strictly applicable or if strictly applicable would not fairly protect the rights of the Holder in accordance with the essential intent and principles of such provisions, then the Board of Directors in good faith shall make an adjustment in the application of such provisions, in accordance with such essential intent and principles, so as to protect such rights as aforesaid, but in no event shall any adjustment have the effect of increasing the Purchase Price as otherwise determined pursuant to any of the provisions of this Section 3 except in the case of a -10- combination of shares of a type contemplated in Paragraph 3.3 and then in no event to an amount larger than the Purchase Price as adjusted pursuant to Paragraph 3.3. 3.9 Fractional Shares. The Company shall not issue fractions of shares of Common Stock upon exercise of this Warrant or scrip in lieu thereof. If any fraction of a share of Common Stock would, except for the provisions of this Section 3.9, be issuable upon exercise of this Warrant, the Company shall in lieu thereof pay to the person entitled thereto an amount in cash equal to such fraction, calculated to the nearest one-hundredth (1/100) of a share, multiplied by the Market Price for the Common Stock, determined as of the date of exercise; provided, however, that if the Market Price is to be determined by the Company and the Holder and the parties are unable to reach agreement after a reasonable period of time, the Market Price shall be determined by the Company's Board of Directors in good faith rather than by an independent investment banking firm. 3.10 Officers' Statement as to Adjustments. Whenever the Purchase Price shall be adjusted as provided in Section 3 hereof, the Company shall forthwith file at each office designated for the exercise of this Warrant, a statement, signed by the Chairman of the Board, the President, any Vice President or Treasurer of the Company, showing in reasonable detail the facts requiring such adjustment and the Purchase Price that will be effective after such adjustment. The Company shall also cause a notice setting forth any such adjustments to be sent by mail, first class, postage prepaid, to the record Holder at his or its address appearing on the stock register. If such notice relates to an adjustment resulting from an event referred to in Paragraph 3.6, such notice shall be included as part of the notice required to be mailed and published under the provisions of Paragraph 3.6 hereof. 4. NO DILUTION OR IMPAIRMENT. The Company will not, by amendment of its articles of incorporation or through reorganization, consolidation, merger, dissolution, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder against dilution or other impairment. Without limiting the generality of the foregoing, the Company will not increase the par value of any shares of stock receivable upon the exercise of this Warrant above the amount payable therefor upon such exercise, and at all times will take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable stock upon the exercise of this Warrant. 5. RESERVATION OF STOCK, ETC., ISSUABLE ON EXERCISE OF WARRANTS. The Company shall at all times reserve and keep available out of its authorized but unissued stock, solely for the issuance and delivery upon the exercise of this Warrant and other similar Warrants, such number of its duly authorized shares of Common Stock as from time to time shall be issuable upon the exercise of this Warrant and all other similar Warrants at the time outstanding. 6. REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this -11- Warrant and (in the case of loss, theft or destruction) upon delivery of an indemnity agreement (with surety if reasonably required) in an amount reasonably satisfactory to it, or (in the case of mutilation) upon surrender and cancellation thereof, the Company will issue, in lieu thereof, a new Warrant of like tenor. 7. REMEDIES. The Company stipulates that the remedies at law of the Holder in the event of any default by the Company in the performance of or compliance with any of the terms of this Warrant are not and will not be adequate, and that the same may be specifically enforced. 8. NEGOTIABILITY, ETC. This Warrant is issued upon the following terms, to all of which each taker or owner hereof consents and agrees: (a) Subject to the legend appearing on the first page hereof and applicable federal securities laws, title to this Warrant may be transferred by endorsement (by the Holder executing the form of assignment at the end hereof including guaranty of signature) and delivery in the same manner as in the case of a negotiable instrument transferable by endorsement and delivery. (b) Any person in possession of this Warrant properly endorsed is authorized to represent himself as absolute owner hereof and is granted power to transfer absolute title hereto by endorsement and delivery hereof to a bona fide purchaser hereof for value; each prior taker or owner waives and renounces all of his equities or rights in this Warrant in favor of every such bona fide purchaser, and every such bona fide purchaser shall acquire title hereto and to all rights represented hereby. (c) Until this Warrant is transferred on the books of the Company, the Company may treat the registered Holder as the absolute owner hereof for all purposes without being affected by any notice to the contrary. (d) Prior to the exercise of this Warrant, the Holder shall not be entitled to any rights of a shareholder of the Company with respect to shares for which this Warrant shall be exercisable, including, without limitation, the right to vote, to receive dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein. (e) The Company shall not be required to pay any Federal or state transfer tax or charge that may be payable in respect of any transfer involved in the transfer or delivery of this Warrant or the issuance or conversion or delivery of certificates for Common Stock in a name other than that of the registered Holder or to issue or deliver any certificates for Common Stock upon the exercise of this Warrant until any and all such taxes and charges -12- shall have been paid by the Holder or until it has been established to the Company's satisfaction that no such tax or charge is due. 9. SUBDIVISION OF RIGHTS. This Warrant (as well as any new warrants issued pursuant to the provisions of this paragraph) is exchangeable, upon the surrender hereof by the Holder, at the principal office of the Company for any number of new warrants of like tenor and date representing in the aggregate the right to subscribe for and purchase the number of shares of Common Stock which may be subscribed for and purchased hereunder. 10. MAILING OF NOTICES, ETC. All notices and other communications from the Company to the Holder shall be mailed by first-class certified mail, postage prepaid, to the address furnished to the Company in writing by the last holder of this Warrant who shall have furnished an address to the Company in writing. 11. HEADINGS, ETC. The headings in this Warrant are for purposes of reference only, and shall not limit or otherwise affect the meaning hereof. 12. CHANGE, WAIVER, ETC. Neither this Warrant nor any term hereof may be changed, waived, discharged or terminated orally but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought which, in the case of holders of the Warrant, shall be evidenced by the approval of a majority of the total Warrant Shares issued or issuable under this Warrant. 13. GOVERNING LAW. THIS WARRANT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. COOLSAVINGS.COM INC. By /s/ Matthew Moog ------------------------------------- Name: Matthew Moog Title: President Dated: July 30, 2001 Attest: - ------------------------------------- -13- [To be signed only upon exercise of Warrant] EXERCISE NOTICE --------------- coolsavings.com inc. 360 N. Michigan Avenue, 19th Floor Chicago, IL 60601 Attention: Chief Financial Officer The undersigned hereby elects to purchase, pursuant to the provisions of the Common Stock Purchase Warrant to purchase shares of common stock, no par value per share, issued by coolsavings.com inc. (the "Company") and held by the undersigned, the original of which is attached hereto, and (check the applicable box): [ ] Tenders herewith payment of the Exercise Payment (as defined in the Warrant) in full in the form of cash, certified check, official bank check or wire transfer or check in the amount of $__________________ for _______________ such securities. [ ] Confirms that payment of the Exercise Payment (as defined in the Warrant) in full by means of a wire transfer in the amount of $__________________ for _______________ such securities has been made to the Company. [ ] Elects to surrender to the Company for cancellation securities of the Company having Market Price (as defined in the Warrant) on the date hereof equal to the Exercise Payment. -14- The undersigned hereby represents and warrants that the undersigned is acquiring such shares for its own account for investment purposes only, and not for resale or with a view to distribution of such shares or any part thereof. The undersigned requests that the certificates for such shares be issued in the name of, and be delivered to, ___________________________,whose address is ______________________________. Dated: - ------------------------------------- ------------------------------------- (Signature must conform in all respects to name of Holder as specified on the face of the Warrant) ------------------------------------- Address -15- [To be signed only upon transfer of Warrant] FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto ____________________________ (the "Transferee") the right represented by the within Warrant to purchase __________________ shares of Common Stock of coolsavings.com inc. to which the within Warrant relates, and appoints ____________________ attorney to transfer said right on the books of coolsavings.com inc., with full power of substitution in the premises. Dated: - ------------------------------------- ------------------------------------- (Signature must conform in all respects to name of Holder as specified on the face of the Warrant) ------------------------------------- Address In the presence of: - ------------------------------------- Transferee hereby represents and warrants to coolsavings.com inc. that Transferee is an "accredited investor" as defined in Rule 501(a) of the Rules and Regulations promulgated under the Securities Act of 1933, as amended. ------------------------------------- Transferee ------------------------------------- Dated -16- [To be signed only on net issue exercise of the Warrant] NET ISSUE ELECTION ------------------ coolsavings.com inc. 360 N. Michigan Avenue, 19th Floor Chicago, IL 60601 Attention: Chief Financial Officer The undersigned, the holder of the within Warrant, hereby irrevocably elects to exercise this Warrant with respect to ________________________ shares of Common Stock of coolsavings.com inc. pursuant to the net issuance provisions set forth in Section 2.1 of this Warrant and requests that the certificates for the number of shares of Common Stock issuance pursuant to said Section 2.1 after application of the net issuance formula to such __________ shares to be issued in the name of, and delivered to ______________________________________________, federal taxpayer identification number _______________________, whose address is _______________________________________________________________________________. Dated: ------------------------------ ------------------------------------- (Signature must conform to the name of holder as specified on the face of the Warrant) ------------------------------------- ------------------------------------- (Address) -17- EX-5 8 lc913375.txt EX-5 SENIOR SECURED LOAN AND SECURITY AGREEMENT EXHIBIT 5 EXECUTION COPY AMENDED AND RESTATED -------------------- SENIOR SECURED LOAN AND SECURITY AGREEMENT ------------------------------------------ Date: July 30, 2001 THIS AMENDED AND RESTATED SECURED LOAN AND SECURITY AGREEMENT (hereinafter, the "Agreement") is made between Landmark Communications, Inc. (hereinafter, "Lender"), a corporation organized and existing under the laws of the State of Virginia having an office at 150 W. Brambleton Avenue, Norfolk, VA 23510, and coolsavings.com inc. (hereinafter, "Borrower"), a Michigan corporation with its principal executive offices at 360 N. Michigan Ave., 19th Floor, Chicago, IL 60601, in consideration of the mutual covenants contained herein and benefits to be derived herefrom. This Agreement supersedes that certain Loan and Security Agreement, dated as of June 14, 2001, by and between the Lender and the Borrower (the "Original Agreement"). The Master Note that was made by the Borrower in favor of the Lender pursuant to the Original Agreement shall be amended and restated in its entirety by the Borrower and the Lender on the terms and conditions of the Senior Secured Note attached hereto as Exhibit A (the "Note"). All capitalized terms shall have the respective meanings ascribed to them in Exhibit B hereto. W I T N E S S E T H: -------------------- ARTICLE 1. THE LOAN 1.1. Initial Loan and Advances. -------------------------- (a) For value received Borrower unconditionally promises to pay to the order of Lender on the Maturity Date (as defined below), without offset, the original principal sum of Five Million Dollars ($5,000,000.00) (the "Original Principal Amount") with interest on the outstanding principal amount which shall accrue and compound thereon at the interest rates set forth below (the "Initial Loan") and as set forth in the Note. (b) For value received Borrower unconditionally promises to pay to the order of Lender ON DEMAND, without offset, the unpaid principal amount of any and all sums advanced to the Borrower at the Lender's sole discretion, from time to time (an "Advance") and outstanding under that certain Commercial Demand Grid Note attached hereto as Exhibit C (the "Grid Note") together with interest on each and all such Advances from the date of any such Advance which shall accrue and compound thereon at the interest rates set forth below (the Initial Loan together with any and all Advances, the "Loan"). Notwithstanding the foregoing, the aggregate amount of any Advances under the Grid Note shall at no time exceed Five Million Dollars ($5,000,000). Lender shall not be obligated to make any Advance to Borrower at any time and should Lender, in its sole discretion, make an Advance, the decision to evidence Borrower's repayment obligation with respect thereto under the Grid Note shall also be at Lender's sole discretion. The Grid Note shall be a demand obligation which shall be payable by the Borrower at Lender's demand at any time and from time to time. For purposes of this Agreement, "Advance" shall be deemed to include any reimbursement obligation of Borrower to Lender that Lender records as an advance under the Grid Note. (c) As additional consideration for the Initial Loan, the Borrower shall issue to the Lender a warrant to purchase common stock of the Borrower in the form attached hereto as Exhibit D (the "Initial Warrant"). 1.2. Interest on the Initial Loan and Repayment. ------------------------------------------- (a) The outstanding principal amount on the Initial Loan shall bear interest at the rate of twelve percent (12%) per annum; provided, however, that if the First Tranche Closing as such term is defined in that certain Securities Purchase Agreement, dated as of July 30, 2001, by and among the Borrower, the Lender and Landmark Ventures VII, LLC (the "Purchase Agreement") is consummated, then from and after the date of such Closing the Initial Loan (including the outstanding principal and interest that has then accrued) shall bear interest at the rate of eight percent (8%) per annum. Interest shall be computed on the actual number of days elapsed on the basis of a year consisting of 360 days. All interest shall accrue and compound quarterly on: October 31, January 31, April 30 and July 31 of each year (each such date, a "Quarterly Payment Date"). Such accrued and compounded interest shall be added to the principal amount of the Note. (b) Notwithstanding the foregoing, any amount outstanding under the Initial Loan shall bear interest from and after the Maturity Date at the rate of sixteen (16%) per annum (the "Default Interest Rate"), increasing monthly by an annual rate which is one (1) percentage point above the then current Default Interest Rate for each month that the Note remains overdue. Any interest on the Initial Loan accruing after the Maturity Date shall accrue and be compounded monthly (the date of such compounding, the "Monthly Compounding Date" and collectively with the Quarterly Payment Date, the "Compounding Date") until the obligation of Borrower, with respect to the payment of such interest, has been discharged (whether before or after judgment). Such accrued and compounded interest shall be added to the principal amount of the Note. (c) Notwithstanding the foregoing, the effective annual rate under the Initial Loan (including the Default Interest Rate) shall not exceed a maximum annual rate of twenty-four (24%) percent or the maximum annual rate permitted by law, whichever is less. (d) The Initial Loan shall be paid in full on the Maturity Date. Until the Initial Loan is paid in full, on each Compounding Date, in lieu of a cash payment of the interest due, Borrower shall pay such interest "in-kind". In lieu of delivering separately documented and certificated promissory notes (the "Note PIK Payment") and warrants (the "Warrant PIK Payment") for such "in- kind" payments, the Note PIK Payment shall be effected by adding the accrued interest to the principal amount of the Note (as described by the compounding in Sections 1.2(a) and 1.2(b) above) and the Warrant PIK Payment shall be effected through the provision in the Initial Warrant which provides that for every dollar of interest accrued, compounded and added to the principal amount of the Initial Loan, the aggregate number of shares of Borrower's common stock that may be purchased under the Initial Warrant shall be increased by two (2) (as such number may be adjusted for dividends, splits, combinations and the -2- like). The foregoing notwithstanding, no Warrant PIK Payment shall be required until after the First Tranche Closing and then only in respect of interest payments accruing thereafter under the Initial Loan. Lender acknowledges that the amount of the Note PIK Payment shall be deemed an additional loan borrowed from the Lender (it being further acknowledged by the Borrower that it shall not receive additional funds in connection with any such loan). (e) Borrower may not prepay the Initial Loan except as follows: On or after the third anniversary of the date hereof, the Borrower may prepay the Note if and only if (i) the Borrower has had earnings and positive cash flow during the most recent four fiscal quarters prior to such payment, (ii) Borrower has no Indebtedness outstanding other than the Initial Loan, the Senior Secured Note and trade payables incurred in the ordinary course of business (none of which shall be more than ninety (90) days past due), (iii) the Quick Ratio set forth in 4.12 below, immediately after giving effect to the prepayment, will be 2 to 1 and the Working Capital, also immediately after giving effect to the prepayment, will be a net positive of $3 million, and (iv) Borrower's chief financial officer has certified to Lender in writing (including supporting computations) that each of the foregoing conditions is satisfied. 1.3. Interest on any Advances. ------------------------- (a) The outstanding principal amount on any Advances hereunder shall bear interest at the rate of eight percent (8%) per annum. Interest shall be computed on the actual number of days elapsed on the basis of a year consisting of 360 days. (b) Any amounts outstanding under any Advances hereunder that shall have been demanded by the Lender hereto and not paid shall bear interest from and after the date of such applicable demand at the rate of sixteen (16%) per annum (the "Demand Interest Rate"), increasing monthly by an annual rate which is one (1) percentage point above the then current Demand Interest Rate for each month that the Grid Note remains overdue. Any interest on the Advances shall accrue and be compounded monthly until the obligation of Borrower, with respect to the payment of such interest, has been discharged (whether before or after judgment). (c) Notwithstanding the foregoing, the effective annual rate under the Advances (including the Demand Interest Rate) shall not exceed a maximum annual rate of twenty-four (24%) percent or the maximum annual rate permitted by law, whichever is less. (d) Borrower may prepay the Grid Note at any time and from time to time. 1.4. Priority of Payment. -------------------- (a) All payments under the Loan shall be made to Lender at its address specific above, or at such other address as Lender may specify in writing to Borrower. All payments received from Borrower hereunder shall be applied, at the option of Lender, first in payment of any costs or expenses of Lender due to Lender pursuant to the terms of this Agreement, second in payment of interest accrued and unpaid on the Grid Note, third in payment of the outstanding principal balance of the Grid Note, and, when prepayment is permitted, fourth to the payment of interest accrued and unpaid on the Note, and fifth, to reduce the principal balance of the Note. -3- (b) At Lender's sole discretion, Lender may forgive any portion of any principal or interest amounts due under the Grid Note and unpaid as effective payment of any portion of the exercise price of any warrants to purchase common stock of Borrower that Lender then holds and wishes to exercise. Any payments of expenses, principal or interest shall be made in lawful money of the United States of America. 1.5. Maturity Date of the Initial Loan. Borrower shall pay all outstanding principal and unpaid accrued interest on the Note in full on January 26, 2002 (the "Maturity Date"); provided, however, that, if the transactions contemplated under the Purchase Agreement are consummated, the Maturity Date of the Note shall be June 30, 2006. Notwithstanding the foregoing if any amount under the Initial Loan or any Advances are not paid in full when due or demanded, whether at maturity, by acceleration or otherwise (the "Default Date"), the Maturity Date shall be the Default Date. 1.6. Change of Control. If at any time after the date of this Agreement and prior to the Maturity Date, Borrower shall undergo a Change of Control, then the holder hereof shall have the option to accelerate the Maturity Date to the date of the consummation of such Change of Control and demand payment of all outstanding principal and unpaid accrued interest on the Note and the Grid Note in full in lawful money of the United States of America payable at the principal office of Lender, or at such other place as Lender may specify in writing to Borrower. 1.7. Use of Proceeds. The proceeds of the Loan shall be used solely for general working capital purposes. ARTICLE 2. GRANT OF SECURITY INTEREST 2.1. Grant of Security Interest. To secure Borrower's prompt, punctual, and faithful performance of all and each of Borrower's Liabilities, Borrower hereby grants to Lender a continuing security interest in and to, and assigns to Lender, the following, and each item thereof, whether now owned or now due, or in which Borrower has an interest, or hereafter acquired, arising, or to become due, or in which Borrower obtains an interest, and all products, proceeds, substitutions, and accessions of or to any of the following (all of which, together with any other property in which Lender may in the future be granted a security interest, is referred to herein as the "Collateral"): (a) All Accounts and Accounts Receivable (including health-care- insurance receivables); (b) All Inventory; (c) All Contract Rights (or other rights to the payment of money); (d) All General Intangibles (including without limitation all intellectual property, payment intangibles, patents, patent applications, trademarks, trademark applications, trade names, copyrights, copyright applications, engineering drawings, service marks, and all licenses, permits, agreements of any kind or nature pursuant to which Borrower possesses, uses -4- or has authority to possess or use property (whether tangible or intangible) of others or others possess, use or have authority to possess or use property (whether tangible or intangible) of Borrower); (e) All Investment Property; (f) All Equipment (and any accessions thereto); (g) All Goods; (h) All Fixtures; (i) All Chattel Paper (whether tangible or electronic); (j) All books, records, and information relating to the Collateral and/or to the operation of Borrower's business, and all rights of access to such books, records, and information, and all property in which such books, records, and information are stored, recorded and maintained; (k) All software, computer programs, customer lists, tax refunds, goodwill, trade secrets, and other recorded data, including without limitation writings, plans, specifications and schematics, and all rights relating to the foregoing; (l) All Instruments (including promissory notes), Documents of Title, Documents, policies and certificates of insurance, Securities and all other investment property, supporting obligations, deposits, deposit accounts, letter-of-credit rights (whether or not the letter of credit is evidenced by a writing), commercial tort claims, general tort claims, impressed accounts, compensating balances, money, cash, or other property; (m) All insurance claims and proceeds, refunds and premium rebates, including, without limitation, proceeds of fire and credit insurance, whether any of such proceeds, refunds, and premium rebates arise out of any of the foregoing ((a) - (1)) or otherwise; and (n) All liens, guaranties, rights, remedies, and privileges pertaining to any of the foregoing including the right of stoppage in transit. (o) Any and all Bank Collateral and Additional Bank Collateral as such terms are defined in Section 2(h) of the Forbearance and Reaffirmation Agreement dated as of June 15, 2001, as amended July 27, 2001, by and between American National Bank and Trust Company ("ANB") and the Borrower (the "ANB Forbearance Agreement"). 2.2. Extent and Duration of Security Interest. This grant of a security interest is in addition to, and supplemental of, any security interest previously granted by Borrower to Lender, is applicable to all Liabilities, and shall continue in full force and effect until all Liabilities have been paid and/or satisfied in full and the security interest granted herein is specifically terminated in writing by a duly authorized officer of Lender. -5- ARTICLE 3. GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS To induce Lender to establish the loan arrangement contemplated herein and to make loans and advances and to provide financial accommodations hereunder, each of which loans shall be deemed to have been made in reliance thereupon, Borrower, in addition to all other representations, warranties, and covenants made by Borrower in any other Loan Document, makes the following representations, warranties, and covenants. 3.1. Due Organization. Borrower presently is and shall hereafter remain in good standing as a corporation in its state of formation and is and shall hereafter remain duly qualified and in good standing in every other State in which, by reason of the nature or location of Borrower's assets or operation of Borrower's business, such qualification may be necessary and the failure to be so qualified would have a Material Adverse Effect on the Borrower or its businesses. 3.2. Corporate Authorization. Borrower has all requisite corporate power and authority to execute and deliver to Lender all and each of the Loan Documents to which Borrower is a party, and has and will hereafter retain all requisite corporate power to perform all and singular of the Liabilities. 3.3. Enforceability. The Loan Documents have been duly executed and delivered by Borrower and are the legal, valid and binding obligations of Borrower, enforceable against Borrower in accordance with their respective terms. 3.4. Consents and Approvals; No Violations. The execution and delivery of the Loan Documents and the consummation of the transactions contemplated hereby and thereby will not: (a) violate or conflict with any provision of the Charter or bylaws of Borrower; or (b) breach, violate or constitute a material event of default (or an event which with the lapse of time or the giving of notice or both would constitute a material event of default) under, give rise to any right of termination, cancellation, modification or acceleration under, or require any consent or the giving of any notice under, any note, bond, indenture, mortgage, security agreement, lease, license, franchise, permit, agreement or other instrument or obligation to which Borrower is a party, or by which Borrower or any of its properties or assets may be bound, or result in the creation of any material lien, claim or encumbrance or other right of any third party of any kind whatsoever upon the properties or assets of Borrower pursuant to the terms of any such instrument or obligation (other than any breach, violation or default that has been expressly waived in connection herewith) and other than any liens granted pursuant to the Loan Documents. All of the representations and warranties under the Original Agreement were and are, respectively, true and correct in all respects at and as of the date of the Original Agreement and on and as of the date hereof (as though made on and as of the date hereof). 3.5. Title to Properties; Security Interest. Borrower has good and valid title to all personal property, tangible or intangible, which Borrower purports to own and which is pledged hereunder, including the properties reflected on the Balance Sheet or acquired after the date thereof (other than properties and assets sold or otherwise disposed of in the ordinary course of -6- business and consistent with past practice since the Statement Date), free and clear of any claims, liens, pledges, security interests or encumbrances of any kind whatsoever, except those in favor of Lender, subject only to the prior security interests granted to ANB and Midwest Guaranty Bank (solely with respect to equipment leases). The security interests granted to Lender in the Collateral constitute valid and perfected security interests in the Collateral. 3.6. Name; Location of Chief Executive Office; Location of Collateral. Except as disclosed on Schedule 3.6, Borrower has not done business and will not, without at least thirty (30) days prior written notice to Lender, do business under any name other than that specified in the preamble above. The chief executive office of Borrower is located at the address indicated in the preamble above. Schedule 3.6 is a complete and accurate list of every location at which any of the Collateral is located. Borrower shall not effect the Merger contemplated under the Purchase Agreement unless and until (a) the surviving corporation assumes all of Borrower's obligations hereunder and (b) Borrower takes all steps required to preserve and maintain Lender's perfected security interests in the Collateral, subject only to the prior security interests granted to ANB and Midwest Guaranty Bank (solely with respect to equipment leases). 3.7. Representations, Warranties, and Covenants Contained in Purchase Agreement. Borrower represents, warrants and covenants that all of the representations, warranties, and covenants made by Borrower under the Purchase Agreement are true and complete as of the date hereof, and agrees that such representations, warrants and covenants are incorporated and made part of this Agreement by reference and shall continue in full force and effect regardless of any termination of such Purchase Agreement or any survival limitation therein. 3.8. Disclosure. No representation or warranty by Borrower contained in this Agreement or the Purchase Agreement and no statement contained in any schedule, certificate or other document or instrument delivered or to be delivered pursuant to the Loan Documents by Borrower or its representatives contains or will contain any untrue statement of a material fact or omits or will omit to state any material fact necessary to make the statements contained therein not misleading when made. ARTICLE 4. AFFIRMATIVE COVENANTS Borrower covenants and agrees that, until payment in full of the outstanding Liabilities or for so long as Lender may have any commitment to make any loans or advances, Borrower will continue to do all of the following: 4.1. Payment of Obligations. Punctually pay the principal of and interest on the Liabilities, at the times and places, in the manner and in accordance with the terms of this Agreement, the Note, the Grid Note, and the other Loan Documents. 4.2. Conduct of Business and Maintenance of Existence. Continue to engage in business of the same general type as now being conducted by the Borrower, and do and cause to be done all things necessary to maintain and keep in full force and effect its corporate existence in good standing in each jurisdiction in which it conducts business. -7- 4.3. Compliance with Laws, Etc. Comply in all material respects with all laws, statutes, ordinances, orders, rules or regulations applicable to the Borrower or to the Collateral (or any part thereof) or to any other property owned, leased, operated or used by the Borrower, including, without limitation, environmental laws, the violation of which would have a material adverse effect on the business, operations, properties or financial condition of the Borrower; provided, Lender acknowledges that Borrower is currently not in compliance to the extent described in Schedule 3.12 of the Purchase Agreement; and, provided, further that notwithstanding such acknowledgement Borrower shall use its best efforts to promptly cure such non- compliance and nothing herein shall be deemed or construed to excuse or otherwise modify Borrower's indemnification obligations under the Purchase Agreement with respect to such matters. 4.4. Payment of Liabilities and Taxes. Pay, when due, all of its Indebtedness and liabilities, and pay and discharge promptly all taxes, assessments and governmental charges and levies (including, without limitation, F.I.C.A. payments and withholding taxes) upon the Borrower or upon the Borrower's income, profits or property (including, without limitation, the Collateral), except to the extent the amount or validity thereof is contested in good faith by appropriate proceedings so long as adequate reserves have been set aside therefor. It is acknowledged that existing payment defaults have been disclosed under Schedule 3.8 of the Purchase Agreement and that such defaults shall be cured in the manner described in Section 5.15 of the Purchase Agreement. 4.5. Contractual Obligations. Comply with any agreement or undertaking to which the Borrower is a party and maintain in full force and effect all contracts and leases to which the Borrower is or becomes a party unless the failure to do so would not have a material adverse effect on the business, operation, properties or financial condition of the Borrower. 4.6. Maintenance of Properties. Do all things necessary to maintain, preserve, protect and keep its properties in good repair, working order and condition, and make all necessary and proper repairs, renewals and replacements so that the Borrower's business may be properly conducted at all times, unless the failure to do so would not have a material adverse effect on the business, operation or financial condition of the Borrower. The Borrower shall promptly notify the Lender of any event causing deterioration, loss or depreciation in value of any substantial portion of the Collateral and the amount of such loss or depreciation. The Borrower shall perform, observe, and comply with all of the terms and provisions to be performed, observed or complied with by it under each contract, agreement or obligation relating to the Collateral. The Lender shall have no duty to, and the Borrower hereby releases the Lender from all claims for loss or damage caused by the failure of the Lender to, collect, protect, preserve or enforce any of the Collateral or preserve rights against account debtors and prior parties to the Collateral. 4.7. Insurance. ---------- (a) Borrower, at its expense, shall keep the Collateral insured against loss or damage by fire, theft, explosion, sprinklers, and all other hazards and risks, and in such amounts, as ordinarily insured against by other owners in similar businesses conducted in the locations where Borrower's business is conducted. Borrower shall also maintain insurance relating to Borrower's ownership and use of the Collateral in amounts and of a type that are customary to -8- businesses similar to Borrower's. Borrower shall also maintain liability insurance and worker's compensation insurance. (b) All such policies of insurance shall be in such form, with such companies, and in such amounts as are reasonably satisfactory to Lender. All such policies of property insurance shall contain a lender's loss payable endorsement, in a form satisfactory to Lender, showing Lender as an additional loss payee thereof and all liability insurance policies shall show the Lender as an additional insured, and shall specify that the insurer must give at least twenty (20) days notice to Lender before canceling its policy for any reason. At Lender's request, Borrower shall deliver to Lender certified copies of such policies of insurance and evidence of the payments of all premiums therefor. All proceeds payable under any such policy shall, at the option of Lender, be payable to Lender. 4.8. Inspection. Permit the Lender, by its representatives and agents, to inspect any of the properties, books and financial records of the Borrower, to examine and make copies of the books of accounts and other financial records of the Borrower, and to discuss the affairs, finances and accounts of the Borrower with, and to be advised as to the same by, the Borrower (or its representatives) at such reasonable times and intervals as the Lender may designate. In connection with the foregoing, the Lender and its representatives and agents, at the expense of the Borrower, shall have the right to (a) enter any business premises of the Borrower or any other premises where the Collateral and the records relating thereto may be located and to audit, appraise, examine and inspect the Collateral and all records related thereto and to make extracts therefrom and copies thereof, and (b) verify under reasonable procedures the validity, amount, quality, quantity, value and condition of, and any other matter relating to, the Collateral, including contacting account debtors or any person possessing any of the Collateral. 4.9. Collection of Receivables Collateral. Collect its Receivables Collateral only in the ordinary course of business consistent with Borrower's past practices, and shall not, without the Lender's prior written consent unless done so in the ordinary course of business consistent with past practices made known to the Lender in writing, compromise or adjust the amount of any Receivable Collateral or extend the time for payment of any Receivable Collateral. 4.10. Further Assurances. Defend the title of the Borrower to the Collateral and the security interest and lien thereon of the Lender against all persons and against all security interests and liens on the Collateral adverse to those of the Lender. The Borrower will, from time to time, at the expense of the Borrower, execute, deliver, acknowledge and cause to be duly filed, recorded or registered any statement, assignment, instrument, paper, agreement or other document and take any other action that from time to time may be necessary or desirable, or that the Lender may reasonably request, in order to create, preserve, continue, perfect, confirm or validate the security interest and lien of the Lender on the Collateral or to enable the Lender to obtain the full benefits of this Agreement or to exercise and enforce any of its rights, powers and remedies hereunder or under applicable laws. The Borrower shall pay all costs of, and incidental to, the filing, recording or registration of any such document as well as any recordation, transfer or other tax required to be paid in connection with any such filing, recordation or registration. The Borrower hereby covenants to save harmless and indemnify the Lender from and against any liability resulting from the failure to pay any required documentary stamps, recordation and transfer taxes and recording costs incurred by the Lender in connection with this Agreement or -9- the Collateral which covenant shall survive the termination of this Agreement and the payment of all other Liabilities. The Borrower agrees that a carbon, photographic, photostatic or other reproduction of this Agreement or of a financing statement signed by the Borrower in connection with this Agreement shall be sufficient as a financing statement. If any Receivable Collateral arises out of a contract with the United States of America or any state, county, municipality or any department, agency or instrumentality thereof, the Borrower shall immediately notify the Lender thereof and, if required by the Lender, execute and deliver any agreements, notices and/or assignments and do such other things as may be satisfactory to the Lender in order that all sums due or to become due to the Borrower under such contract shall be duly assigned to the Lender in accordance with the Federal Assignment of Claims Act and/or any other applicable federal, state and local laws or regulations relating to the assignment of governmental obligations. If, in the reasonable opinion of the Lender, any Equipment is or may become a part of any real estate owned or leased by the Borrower, the Borrower will, upon the request of the Lender, use its best efforts to furnish to the Lender in form and content satisfactory to the Lender, a landlord's waiver by the record owner of such real estate and a mortgagee's waiver by any person who has a security interest or lien on such real estate which is or may be superior to the security interest and lien of the Lender on such Equipment. 4.11. Notice. Promptly give written notice to the Lender of (a) the occurrence of any Default or any event, development or circumstance which might materially adversely effect the business, operations, properties or financial condition of the Borrower, (b) any litigation instituted or threatened against the Borrower or any judgment against the Borrower where claims against the Borrower exceed $50,000 and are not covered in full by insurance, and (c) any notice of a claim against, or investigation of, the Borrower, the Collateral or any other property owned, leased, operated or used by the Borrower. Borrower shall also promptly provide Lender with copies of all notices received from, or required to be provided to, ANB or Midwest Guaranty Bank under the Forbearance Agreements, or to any landlord from which the Borrower leases any real property under any lease agreement. 4.12. Financial Covenants. -------------------- (a) Performance Against Forecast. By e-mail dated July 27, 2001, Borrower delivered to Lender a "coolsaving.com (Conservative Case) Cash Source & Use Forecast 2001 (Jun 18 to Dec 31)" (the "Conservative Forecast") 7/27/01 12:00 AM.(1) During each calendar month in 2001 and each calendar quarter in 2002, Borrower shall comply with each of the following: (i) Borrower's Earned Cash Billings (defined below) shall not be less than the "Invoicing (Est.) cash" amount for the applicable month or the "[number] quarter 2002 cash" amount for the applicable quarter as set forth in Section II of the Conservative Forecast (e.g., $1,998,000 for September 2001); - ---------- (1) For purposes of identification, the Conservative Forecast indicates Projected Cash (Requirement) of $1,316,357.69 at 31- Dec-01 and ($5,075,595.70) at 4th Quarter 2002. -10- (ii) Borrower's actual Costs of Services and actual Marketing expenses shall not exceed the "Cost of Services" and "Marketing" amounts, respectively (each, a "Cost Threshold"), for the applicable month or quarter as set forth in Sections VI and VII of the Conservative Forecast (e.g., $235,224.10 in Costs of Services and $478,696 in Marketing for September 2001) unless the amount by which the applicable Cost Threshold is exceeded in the applicable month or quarter is offset on a dollar-for-dollar basis by the amount by which the Earned Cash Billings exceed the "Invoicing (Est.) cash" amount in the applicable month or quarter; (iii) Borrower's actual capital expenditures shall be in an amount at least equal to the "Capital Expenditure Budget" amount for the applicable month or quarter as set forth in Section VII of the Conservative Forecast; (iv) Borrower's actual accounts payable balance shall not exceed the "Period Ending A/P balance" amount for the applicable month or quarter as set forth in Section V of the Conservative Forecast by an amount more than the lesser of (A) $100,000, or (B) 2% of the applicable "Period Ending A/P balance" on the Conservative Forecast; (v) Borrower's actual cash on hand shall not be less than 98% of the "Projected Cash Requirement" amount for the applicable month or quarter as set forth in Section IX of the Conservative Forecast; and (vi) Borrower's bad debt experience with respect to the billings rendered in a month or quarter, as applicable, shall not be more than 3% of the Earned Cash Billings for such month or quarter. Each item used or included for purposes of calculating an entry on the Conservative Forecast (such as "Cost of Services") shall be consistently used and included for purposes of calculating the "actual" amount of such entry in the applicable test set forth above; provided, Earned Cash Billings shall be calculated as provided below. (b) Minimum Working Capital and Ratio. Borrower shall maintain on a consolidated basis, as of the last day of each calendar month, Working Capital (defined below) and a Quick Ratio (defined below) of at least the following amounts at the following times: Minimum Working Quick Capital Ratio Period ------- ----- ------ ($4,500,000; deficit .3 to 1.0 through First Tranche Closing increasing by $1,500,000 for each month after 9/30/01 that First Tranche Closing is delayed) $200,000 .4 to 1.0 First Tranche Closing through Second Tranche Closing $600,000 .5 to 1.0 Second Tranche Closing through June 30, 2002 $750,000 1.0 to July 1, 2002 through 1.0 December 31, 2002 $2,000,000 1.3 to 1.0 At all times thereafter -11- (c) Total Indebtedness to Tangible Net Worth. Borrower shall maintain on a consolidated basis, as of the last day of each calendar month, a ratio of Total Indebtedness (defined below) to Tangible Net Worth (defined below) of at least the following amounts at the following times: Indebtedness/Net ---------------- Worth Ratio: Period: ------------ ------- [N/A] through First Tranche Closing 8.0 to 1.0 First Tranche Closing through Second Tranche Closing 2.0 to 1.0 Second Tranche Closing through first four full fiscal quarters thereafter 1.0 to 1.0 At all times thereafter (d) Total Indebtedness to EBITDA. Borrower shall maintain on a consolidated basis, as of the last day of each calendar month, a ratio of Total Indebtedness to EBITDA (defined below) of at least the following amounts at the following times: Indebtedness EBITDA Ratio: Period: ------------- ------- 3.0 to 1.0 From and after December 31, 2002 (e) Compliance Certificate. Within fifteen (15) business days after the end of each calendar month and twenty (20) days after the end of each quarter, as applicable,, Borrower shall deliver to Lender a compliance certificate, executed by Borrower's president and its chief financial officer (and in a form reasonably satisfactory to Lender) which certifies Borrower's compliance with the financial covenants in this Section 4.12 for the immediately preceding month and quarter, as applicable. 4.13. Commercial Tort Claims. If Borrower shall at any time hold or acquire a commercial tort claim, Borrower shall immediately notify Lender in a writing signed by Borrower of the brief details thereof and grant to Lender in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance satisfactory to Lender. 4.14. Newly Created Intellectual Property. Borrower will promptly notify Lender of all new trademark, patent and copyright registrations and applications for registration now or hereafter filed by Borrower. ARTICLE 5. NEGATIVE COVENANTS Borrower covenants and agrees that, until payment in full of the outstanding Liabilities, Borrower will not do any of the following: -12- 5.1. Dispositions. Convey, sell, lease, transfer or otherwise dispose of (collectively, a "Transfer"), all or any part of its business or property, other than Transfers: (i) of inventory in the ordinary course of business, (ii) of non-exclusive licenses and similar arrangements for the use of the property of Borrower in the ordinary course of business; (iii) that constitute payment of normal and usual operating expenses in the ordinary course of business; or (iv) of worn-out or obsolete equipment. 5.2. Changes in Business. Engage in any business, other than the businesses currently engaged in by Borrower and any business substantially similar or related thereto (or incidental thereto). The Company acknowledges that excessive e-mail transmissions, while promoting short-term revenue increases, could have detrimental effects on the long term financial prospects of the Company. The Company agrees to monitor the member opt-out rate and to not transmit excessive member e-mails that could cause such opt-out rate to exceed 3.5%. 5.3. Dividends or Investments. Borrower shall not, without the prior written consent of Lender: (a) Pay any cash dividend or make any other distribution in respect of any class of Borrower's capital stock (other than dividends paid in kind with respect to Borrower's Series B Preferred Stock); (b) Own, redeem, retire, purchase, or acquire any of Borrower's capital stock; (c) Invest in or purchase any stock or securities or rights to purchase any such stock or securities, of any corporation or other entity; (d) Merge or consolidate or be merged or consolidated with or into any other corporation or other entity or acquire all or substantially all of the assets of any corporation or other entity; (e) Consolidate any of Borrower's operations with those of any other corporation or other entity; (f) Organize or create any Related Entity; or (g) Subordinate any debts or obligations owed to Borrower by any third party to any other debts owed by such third party to any other Person. 5.4. Restrictions on Indebtedness; Expenditures and Material Obligations. -------------------------------------------------------------------- (a) Borrower shall not make any loans or advances to, nor acquire, guarantee or otherwise become responsible for the Indebtedness of, any Person, other than advance payments made to Borrower's suppliers in the ordinary course or to Borrower's employees for travel and related expenses. (b) Borrower shall not create, incur, assume or be or remain liable with respect to Indebtedness, except for (i) Permitted Indebtedness and (ii) trade indebtedness incurred in the ordinary course of business. -13- (c) Borrower shall not make any payment in respect of any Indebtedness, except payments made in respect of (i) Permitted Indebtedness, to the extent such payments are made in compliance with the terms of such Permitted Indebtedness (and do not constitute prepayments, other than the prepayments required under the terms of the Forbearance Agreements) and (ii) trade indebtedness incurred in the ordinary course of business. Without limiting the payments prescribed in the preceding sentence, Borrower shall not (A) make any payment out of the ordinary course of business, (B) make any payment to any shareholder or shareholder Affiliate (excluding payments made to Borrower and/or its Affiliates) or any director, officer or employee (excluding employee salaries, board fees and expense reimbursements in accordance with Borrower's policies and procedures) or (C) make any payment that could cause Borrower to breach the financial covenants made under this Agreement or prevent Borrower from paying, when due, accrued dividends on its Series B Preferred Stock. (d) Borrower shall not amend any provision contained in any documentation relating to any Indebtedness (including Permitted Indebtedness) without Lender's prior written consent. (e) Borrower shall not make any material increases in annual salaries of its employees outside of the ordinary course and consistent with past practice. (f) Borrower shall not enter into any material agreements, joint venture agreements, license agreements, revenue sharing agreements, or other arrangements which allocate revenues to a third party or obligate Borrower to pay any kind of fees which, individually, would exceed $250,000 per year, or $750,000 over the term such arrangement, or which when combined with all similar arrangements would involve fees in excess of $2,000,000. (g) Borrower shall not enter into any material agreements, joint venture agreements, license agreements, revenue sharing agreements, alliances or other arrangements which allocate revenues to a third party or obligate Borrower to perform any services which on an arms length basis calculated at fair market value, individually would exceed $250,000 per year, or $750,000 over the term of such arrangement, or which when combined with all similar arrangements would involve in kind services on an arms length basis calculated at fair market value in excess of $2,000,000. 5.5. Transactions with Affiliates. Directly or indirectly enter into any material transaction with any Affiliate of Borrower or permit to exist any such material transaction other than as set forth on Schedule 5.5 (which shall only list transactions existing through the date hereof) except for transactions that are in the ordinary course of Borrower's business, upon fair and reasonable terms that are no less favorable to Borrower than would be obtained in an arm's length transaction with a nonaffiliated Person. 5.6. Executive Management. Borrower shall not change its Chief Executive Officer, Chief Financial Officer, Chief Technology Officer, or Executive Vice President, Business Development from those individuals occupying such positions at the execution of this Agreement without the written consent of Lender. -14- 5.7. Amendment to Forbearance Agreements; Additional Borrowings. Without the prior written consent of the Lender, the Borrower shall not (i) amend, alter or terminate the ANB Forbearance Agreement or that certain Forbearance Agreement between Midwest Guaranty Bank and the Borrower dated July 27, 2001, or that certain Letter Agreement between 360 Michigan Trust and the Borrower dated June 14, 2001 (collectively, the "Forbearance Agreements") or (ii) incur any additional indebtedness from ANB or Midwest Guaranty Bank at any time, whether under existing loan documents or otherwise. 5.8. Change in Control. Borrower shall not, without the prior written consent of Lender, change the ownership of the capital stock of Borrower such that a Change of Control would result. 5.9. Changes in Business Locations or Incorporation. Borrower will not, without at least thirty (30) days prior written notification to Lender, relocate its chief executive office or add any new offices or business locations or create any Subsidiary or reincorporate in any other jurisdiction (excluding the reincorporation contemplated by the Merger). 5.10. Encumbrances. Create, incur, assume or suffer to exist any Lien with respect to any of its property, or assign or otherwise convey any right to receive income, including the sale of any Accounts, except for permitted Encumbrances hereunder. ARTICLE 6. EVENTS OF DEFAULT The occurrence of any event described in this Article 6 shall constitute an "Event of Default" herein. Upon the occurrence of any Event of Default any and all Liabilities shall become due and payable, without any further act on the part of Lender. Upon the occurrence of any Event of Default, or the entry of any order for relief with respect to Borrower under the Bankruptcy Code, any and all Liabilities of Borrower to Lender shall become immediately due and payable, at the option of Lender and without notice or demand. The occurrence of any Event of Default shall also constitute, without notice or demand, a default under all other agreements between Lender and Borrower and instruments and papers given Lender by Borrower, whether such agreements, instruments, or papers now exist or hereafter arise. 6.1. Failure to Pay the Loan. The failure by Borrower to pay, when due, any amount under the Loan or any other Liability provided that such failure to pay is not cured within five (5) business days. 6.2. Failure to Perform Covenant or Liability. Except for payment defaults as set forth in Section 6.1, the failure by Borrower to promptly, punctually, faithfully and timely to perform or discharge, or to comply with, any covenant to or with Lender or any Liability, provided, however, that such failure or breach is not cured within twenty (20) days from date of notice given by Lender in the manner provided in Section 9.15; provided, further, that (a) no further notice shall be required from Lender if Borrower has delivered to Lender a certificate in which the breach or default is disclosed or is otherwise aware of the breach or default as a result of written notices sent or received by Borrower, and (b) the cure period under this Section 6.2 shall -15- be interpreted to run concurrently and not consecutively with Section 9.2(e) of the Purchase Agreement. 6.3. Misrepresentation. The determination by Lender that any representation or warranty at any time made by Borrower to Lender, including without limitation any representation and warranty made under the Original Agreement, this Agreement or the Purchase Agreement, was not true or complete in all material respects (in all respects to the extent the representation or warranty is qualified by a materiality standard) when given or has otherwise been breached; provided, however, to the extent the breach relates to a breach of a representation and warranty under the Purchase Agreement (which would otherwise trigger an Event of Default under this Agreement by virtue of being incorporated by reference), then an Event of Default hereunder shall not be deemed to exist unless under the terms of the Purchase Agreement, Borrower or its Affiliate is entitled to be indemnified for any Losses (as defined in the Purchase Agreement) (any such breach as excepted hereunder is hereafter a "Representation and Warranty Exception"). 6.4. Acceleration of Other Debt. The occurrence of any event such that any Indebtedness of Borrower to any creditor other than Lender has been accelerated and has not been cured within five (5) business days. 6.5. Default Under Other Agreements. The occurrence of any breach or default under any agreement between Lender and Borrower (subject to Representation and Warranty Exception) or under any of the Forbearance Agreements (including for such purposes an event which, with or without notice or the passage of time or both, would constitute a breach or default) including without limitation any breach of a covenant, representation or warrant made under this Agreement, the Forbearance Agreements, the Purchase Agreement, or any instrument or paper given to Lender by Borrower, whether such agreement, instrument, or paper now exists or hereafter arises (notwithstanding that Lender may not have exercised its rights upon default under any such other agreement, instrument or paper). 6.6. Termination of Purchase Agreement. The termination of the Purchase Agreement prior to the First Tranche Closing, by any party thereto, pursuant to Section 9.2 of the Purchase Agreement. 6.7. Failure to Pay Dividends; Redemption of Series B Preferred Stock. The failure of the Borrower to declare or pay dividends on the Borrower's Series B Preferred Stock or to redeem any shares of the Series B Preferred Stock pursuant to the Borrower's Charter. 6.8. Casualty Loss; Non-Ordinary Course Sales. The occurrence of any (a) uninsured loss, theft, damage, or destruction of or to any material portion of Borrower's assets, or (b) sale (other than sales in the ordinary course of business) of the assets of Borrower. 6.9. Judgment; Restraint of Business. -------------------------------- (a) The service of process upon Lender seeking to attach, by trustee, mense, or other process, any of Borrower's funds on deposit with, or assets of Borrower in the possession of, Lender. -16- (b) The entry of any judgment against Borrower, which judgment is not satisfied (if a money judgment) or appealed from (with execution or similar process stayed) within fifteen (15) days of its entry. (c) The entry of any order or the imposition of any other process having the force of law, the effect of which is to restrain in any material way the conduct by Borrower of its business in the ordinary course. 6.10. Business Failure. Any act by, against, or relating to Borrower, or its property or assets, which act constitutes the application for, consent to, or sufferance of the appointment of a receiver, trustee, or other person, pursuant to court action or otherwise, over all, or any part of Borrower's property; the granting of any trust mortgage or execution of an assignment for the benefit of the creditors of Borrower, or the occurrence of any other voluntary or involuntary liquidation or extension of debt agreement for Borrower; or the offering by or entering into by Borrower of any composition, extension, or any other arrangement seeking relief from or extension of the debts of Borrower, or the initiation of any other judicial or non-judicial proceeding or agreement by, against, or including Borrower which seeks or intends to accomplish a reorganization or arrangement with creditors (however, it shall not be an Event of Default hereunder until the earlier of (x) the entry of an order for relief against Borrower, or (y) the expiration of thirty (30) days without dismissal of such complaint, application, or petition if such complaint, application or petition filed against Borrower was not filed by or at the direction of Borrower or any Related Entity, and is being diligently contested). 6.11. Bankruptcy. The failure by Borrower to generally pay the debts of Borrower as they mature; adjudication of bankruptcy or insolvency relative to Borrower; the entry of an order for relief or similar order with respect to Borrower in any proceeding pursuant to the Bankruptcy Code or any other federal bankruptcy law; the filing of any complaint, application, or petition by or against Borrower initiating any matter in which Borrower is or may be granted any relief from the debts of Borrower pursuant to Bankruptcy Code or any other insolvency statute or procedure (however, it shall not be an Event of Default hereunder until the earlier of (x) the entry of an order for relief against Borrower, or (y) the expiration of thirty (30) days without dismissal of such complaint, application, or petition of such complaint, application or petition filed against Borrower was not filed by or at the direction of Borrower or any Related Entity, and is being diligently contested). 6.12. Michigan Law. The opt-in or adoption by Borrower of any provisions whether in the Borrower's Charter, Bylaws or otherwise contained in Sections 7A or 7B of the Michigan Business Corporation Act. ARTICLE 7. RIGHTS AND REMEDIES UPON DEFAULT In addition to all of the rights, remedies, powers, privileges, and discretions which Lender is provided prior to the occurrence of an Event of Default, Lender shall, at its election, without notice of its election and without demand, have the following rights and remedies upon the occurrence of any Event of Default and at any time thereafter. -17- 7.1. Rights of Enforcement. Lender shall have all of the rights and remedies of a secured party upon default under the UCC, in addition to which Lender shall have all and each of the following rights and remedies, upon seven (7) days notice to the Borrower: (a) To collect the Receivables Collateral with or without the taking of possession of any of the Collateral; (b) To apply the Receivables Collateral or the proceeds of the Collateral towards (but not necessarily in complete satisfaction of) the Liabilities; (c) To take possession of all or any portion of the Collateral; (d) To sell, lease, or otherwise dispose of any or all of the Collateral, in its then condition or following such preparation or processing as Lender deems advisable and with or without the taking of possession of any of the Collateral; and (e) To exercise all or any of the rights, remedies, powers, privileges, and discretions under all or any of the Loan Documents. 7.2. Sale of Collateral. ------------------- (a) Any sale or other disposition of the Collateral may be at public or private sale upon such terms and in such manner as Lender deems advisable, having due regard to compliance with any statute or regulation which might affect, limit, or apply to Lender's disposition of the Collateral. (b) Unless the Collateral is perishable or threatens to decline speedily in value, or is of a type customarily sold on a recognized market (in which event Lender shall provide Borrower with such notice as may be practicable under the circumstances), Lender shall give Borrower at least seven (7) days prior written notice of the date, time, and place of any proposed public sale, and of the date after which any private sale or other disposition of the Collateral may be made. Borrower agrees that such written notice shall satisfy all requirements for notice to Borrower which are imposed under the UCC or other applicable law with respect to Lender's exercise of Lender's rights and remedies upon default. (c) Lender may purchase the Collateral, or any portion of it at any sale held under this Article. (d) Lender shall apply the proceeds of any exercise of Lender's Rights and Remedies under this Article 7 towards the Liabilities in such manner, and with such frequency, as Lender determines. 7.3. Collection of Accounts. Upon the occurrence and during the continuance of an Event of Default, Lender may notify any Person owing funds to Borrower of Lender's security interest in such funds and verify the amount of such funds. Borrower shall collect all amounts owing to Borrower for Lender, receive in trust all payments as Lender's trustee, and if requested or required by Lender immediately deliver such payments to Lender in their original form as received from the account debtor, with proper endorsements for deposit. -18- 7.4. Occupation of Business Location. In connection with Lender's exercise of Lender's rights under this Article, Lender may enter upon, occupy, and use any premises owned or occupied by Borrower, and may exclude Borrower from such premises or portion thereof as may have been so entered upon, occupied, or used by Lender. Lender shall not be required to remove any of the Collateral from any such premises upon Lender's taking possession thereof, and may render any Collateral unusable to Borrower. In no event shall Lender be liable to Borrower for use or occupancy by Lender of any premises pursuant to this Article, nor for any charge (such as wages for Borrower's employees and utilities) incurred in connection with Lender's exercise of Lender's Rights and Remedies. 7.5. Grant of Nonexclusive License. Borrower hereby grants to Lender a royalty-free, nonexclusive, irrevocable license to use, apply, and affix any trademark, trade name, logo, or the like in which Borrower now or hereafter has rights, such license being with respect to Lender's exercise of the rights hereunder including, without limitation, in connection with any completion of the manufacture of Inventory or sale or other disposition of Inventory. 7.6. Assembly of Collateral. Lender may require Borrower to assemble the Collateral and make it available to Lender at Borrower's sole risk and expense at a place or places which are reasonably convenient to both Lender and Borrower. 7.7. Rights and Remedies. The rights, remedies, powers, privileges, and discretions of Lender hereunder (herein, the "Lender's Rights and Remedies") shall be cumulative and not exclusive of any rights or remedies which it would otherwise have. No delay or omission by Lender in exercising or enforcing any of Lender's Rights and Remedies shall operate as, or constitute, a waiver thereof. No waiver by Lender of any Event of Default or of any default under any other agreement shall operate as a waiver of any other default hereunder or under any other agreement. No single or partial exercise of any of Lender's Rights or Remedies, and no express or implied agreement or transaction of whatever nature entered into between Lender and any person, at any time, shall preclude the other or further exercise of Lender's Rights and Remedies. No waiver by Lender of any of Lender's Rights and Remedies on any one occasion shall be deemed a waiver on any subsequent occasion, nor shall it be deemed a continuing waiver. All of Lender's Rights and Remedies and all of Lender's rights, remedies, powers, privileges, and discretions under any other agreement or transaction are cumulative, and not alternative or exclusive, and may be exercised by Lender at such time or times and in such order of preference as Lender in its sole discretion may determine. Lender's Rights and Remedies may be exercised without resort or regard to any other source of satisfaction of the Liabilities. ARTICLE 8. TERM OF AGREEMENT 8.1. Termination of Loan. The Loan shall terminate upon the earlier of (i) the Maturity Date of the Initial Loan, (ii) after the occurrence of an Event of Default or (iii) after a demand under the Grid Note that is not immediately paid by the Lender. Upon such termination, all Liabilities under the Loan (and the Note and Grid Note) shall be immediately due and payable in full. -19- ARTICLE 9. GENERAL 9.1. Delivery of Additional Documentation Required. Borrower shall from time to time execute and deliver to Lender, at the request of Lender, all Collateral, and all financing statements and other documents that Lender may request, in form satisfactory to Lender, to perfect and continue to perfect Lender's security interests in the Collateral (and ensure the priority thereof) and in order to fully consummate all of the transactions contemplated under the Loan Documents. 9.2. Successors and Assigns. ----------------------- (a) This Agreement shall be binding upon Borrower and Borrower's representatives, successors, and assigns and shall inure to the benefit of Lender and Lender's successors and assigns, provided, however, no trustee or other fiduciary appointed with respect to Borrower shall have any rights hereunder. (b) Lender shall have the unrestricted right at any time or from time to time, and without Borrower's or any guarantor's consent, to assign all or any portion of its rights and obligations hereunder to any of its affiliates (each, an "Assignee"), and Borrower and each guarantor agrees that it shall execute, or cause to be executed, such documents, including without limitation, amendments to this Agreement and to any other documents, instruments and agreements executed in connection herewith as Lender shall deem necessary to effect the foregoing. In addition, at the request of Lender and any such Assignee, Borrower shall issue one or more new promissory notes, as applicable, to any such Assignee and, if Lender has retained any of its rights and obligations hereunder following such assignment, to Lender, which new promissory notes shall be issued in replacement of, but not in discharge of, the liability evidenced by the promissory note or notes held by Lender prior to such assignment and shall reflect the amount of the respective commitments and loans held by such Assignee and Lender after giving effect to such assignment. Upon the execution and delivery of appropriate assignment documentation, amendments and any other documentation required by Lender in connection with such assignment, and the payment by Assignee of the purchase price agreed to by Lender and such Assignee, such Assignee shall be a party to this Agreement and shall have all of the rights and obligations of Lender hereunder (and under any and all other guaranties, documents, instruments and agreements executed in connection herewith) to the extent that such rights and obligations have been assigned by Lender pursuant to the assignment documentation between Lender and such Assignee, and Lender shall be released from its obligations hereunder and thereunder to a corresponding extent. (c) Lender may transfer any investment securities held by Lender as Collateral into Lender's name or that of its nominee and may receive the income and any distributions thereon and hold the same as Collateral for the Liabilities, or apply the same to any Liability, whether or not a default or an Event of Default has occurred. 9.3. Severability. Any determination that any provision of this Agreement or any application thereof is invalid, illegal, or unenforceable in any respect in any instance shall not -20- affect the validity, legality, or enforceability of such provision in any other instance, or the validity, legality, or enforceability of any other provision of this Agreement. 9.4. Amendments; Course of Dealing. This Agreement and the other Loan Documents incorporate all discussions and negotiations between Borrower and Lender, either express or implied, concerning the matters included herein and in such other instruments, any custom, usage, or course of dealings to the contrary notwithstanding. No such discussions, negotiations, custom, usage, or course of dealings shall limit, modify, or otherwise affect the provisions thereof. No failure by Lender to give noticed to Borrower of Borrower's having failed to observe and comply with any warranty or covenant included in any Loan Document shall constitute a waiver of such warranty or covenant or the amendment of the subject Loan Document. This Agreement may be amended only with the written consent of all parties hereto. 9.5. Power of Attorney. In connection with all powers of attorney included in this Agreement, Borrower hereby grants unto Lender full power to do any and all things necessary or appropriate in connection with the exercise of such powers as fully and effectually as Borrower might or could do, hereby ratifying all that said attorney shall do or cause to be done by virtue of this Agreement. No power of attorney set forth in this Agreement shall be affected by any disability or incapacity suffered by Borrower and each shall survive the same. All powers conferred upon Lender by this Agreement, being coupled with an interest, shall be irrevocable until this Agreement is terminated. 9.6. Lender's Costs and Expenses. Borrower shall pay on demand all Costs of Collection and all reasonable expenses of Lender in connection with the preparation, execution, and delivery of this Agreement, and any and all documents, instruments and agreements delivered to Lender in connection herewith, whether evidencing the Liabilities, or granting Lender certain rights with respect to Borrower, or its shares of stock, and of any Loan Documents, whether now existing or hereafter arising, and all other reasonable expenses which may be incurred by Lender in preparing or amending this Agreement and all other agreements, instruments, and documents related thereto, or otherwise incurred with respect to the Liabilities. Borrower specifically authorizes Lender to pay all such fees and expenses. 9.7. Copies and Facsimiles. This Agreement and all documents which relate thereto, which have been or may be hereinafter furnished Lender may be reproduced by Lender by any photographic, microfilm, xerographic, digital imaging, or other process, and Lender may destroy any document so reproduced. Any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made in the regular course of business). 9.8. Governing Law. This Agreement and all rights and obligations hereunder, including matters of construction, validity, and performance, shall be governed by the laws of the State of Illinois. 9.9. Consent to Jurisdiction. Borrower agrees that any legal action, proceeding, case, or controversy against Borrower with respect to any Loan Document may be brought in the City of Norfolk in the Commonwealth of Virginia, as Lender may elect in Lender's sole discretion. By execution and delivery of this Agreement, Borrower, for itself and in respect of its property, -21- accepts, submits, and consents generally and unconditionally, to the jurisdiction of the aforesaid courts. 9.10. Indemnification. Borrower shall indemnify, defend, and hold Lender and any employee, officer, or agent of Lender (each, an "Indemnified Person") harmless of and from any claim brought or threatened against any Indemnified Person by Borrower, any guarantor or endorser of the Liabilities, or any other Person (as well as from attorneys' reasonable fees and expenses in connection therewith) on account of Lender's relationship with Borrower or any other guarantor or endorser of the Liabilities (each of which may be defended, compromised, settled, or pursued by the Indemnified Person with counsel of Lender's selection, but at the expense of Borrower) other than any claim as to which a final determination is made in a judicial proceeding (in which Lender and any other Indemnified Person has had an opportunity to be heard), which determination includes a specific finding that the Indemnified Person seeking indemnification had acted in a grossly negligent manner or in actual bad faith. The within indemnification shall survive payment of the Liabilities and/or any termination, release, or discharge executed by Lender in favor of Borrower. 9.11. Agreement Controlling. The Loan Documents shall be construed and interpreted in a harmonious manner, provided, however, that in the event of any inconsistency between the provisions of this Agreement and any other Loan Document, the provisions of this Agreement shall govern and control. 9.12. Right of Set-Off. Borrower and any guarantor hereby grant to Lender a lien, security interest and right of setoff as security for all Liabilities and obligations to Lender, whether now existing or hereafter arising upon and against all deposits, credits, collateral and property, now or hereafter in the possession, custody, safekeeping or control of Lender or any entity under the control of Lender, or in transit to any of them. At any time without demand or notice, Lender or any entity under control of Lender may set off the same or any part thereof and apply the same to any liability or obligation of Borrower and any guarantor even though unmatured and regardless of the adequacy of any other collateral securing the loan. ANY AND ALL RIGHTS TO REQUIRE LENDER TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE LOAN, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER OR ANY GUARANTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED. 9.13. Waivers. -------- (a) Borrower (and all guarantors, endorsers, and sureties of the Liabilities) make each of the waivers included in Section 9.13(b), below, knowingly, voluntarily, and intentionally, and understands that Lender, in entering into the financial arrangements contemplated hereby and in providing loans and other financial accommodations to or for the account of Borrower as provided herein, whether now or in the future, is relying on such waivers. -22- (b) BORROWER, AND EACH SUCH GUARANTOR, ENDORSER, AND SURETY RESPECTIVELY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE FOLLOWING: (i) Except as otherwise specifically required hereby, notice of non-payment, demand, presentment, protest and all forms of demand and notice, both with respect to the Liabilities; (ii)Except as otherwise specifically required hereby, the right to notice and/or hearing prior to Lender's exercising of Lender's rights upon default; and (iii) THE RIGHT TO A JURY IN ANY TRIAL OF ANY CASE OR CONTROVERSY IN WHICH LENDER IS OR BECOMES A PARTY (WHETHER SUCH CASE OR CONTROVERSY IS INITIATED BY OR AGAINST LENDER OR IN WHICH LENDER IS JOINED AS A PARTY LITIGANT), WHICH CASE OR CONTROVERSY ARISES OUT OF OR IS IN RESPECT OF, ANY RELATIONSHIP AMONGST OR BETWEEN BORROWER OR ANY OTHER PERSON AND LENDER (AND LENDER LIKEWISE WAIVES THE RIGHT TO A JURY IN ANY TRIAL OR ANY SUCH CASE OR CONTROVERSY). THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR LENDER TO ACCEPT THIS AGREEMENT AND MAKE THE LOANS AND ADVANCES HEREUNDER. 9.14. Usury Laws. All agreements between Borrower and any guarantor and Lender are hereby expressly limited so that in no contingency or event whatsoever, whether by reason of acceleration of maturity of the indebtedness evidenced hereby or otherwise, shall the amount paid or agreed to be paid to Lender for the use or the forbearance of the indebtedness evidenced hereby exceed the maximum permissible under applicable law. As used herein, the term "applicable law" shall mean the law in effect as of the date hereof provided, however, that in the event there is a change in the law which results in a higher permissible rate of interest, then this Agreement shall be governed by such new law as of its effective date. In this regard, it is expressly agreed that it is the intent of Borrower and Lender in the execution, delivery and acceptance of this Agreement to contract in strict compliance with the laws of the State of Illinois from time to time in effect. If, under or from any circumstances whatsoever, fulfillment of any provision hereof or of any of the Loan Documents at the time of performance of such provision shall be due, shall involve transcending the limit of such validity prescribed by applicable law, then the obligation to be fulfilled shall automatically be reduced to the limits of such validity, and if under or from circumstances whatsoever Lender should ever receive as interest an amount which would exceed the highest lawful rate, such amount which would be excessive interest shall be applied to the reduction of the principal balance evidenced hereby and not to the payment of interest. This provision shall control every other provision of all agreements between Borrower and any guarantor and Lender. 9.15. Notices. All communications under this Agreement shall be in writing and shall be delivered by hand or facsimile or mailed by overnight courier or by registered mail or certified mail, postage prepaid: -23- (a) if to Landmark, at Landmark Communications, Inc., 150 W. Brambleton Avenue, Norfolk, VA 23510 (facsimile: (757) 664- 2164), Attention: Guy R. Friddell, III, Executive Vice President and General Counsel, or at such other address or facsimile number as Landmark may have furnished the Company in writing, with a copies to: (i) Willcox & Savage, P.C., 1800 Bank of America Center, Norfolk, VA 23510 (facsimile: (757) 628-5566), Attention: Thomas C. Inglima; and (ii) Willkie Farr & Gallagher, 787 Seventh Avenue, New York, NY 10019 (facsimile: (212) 728-8111), Attention: William J. Grant, Jr.; and (b) if to the Company, at 360 N. Michigan Avenue, 19th Floor, Chicago, IL 60601 (facsimile: (312) 853-0456), Attention: Robert Gorman, or at such other address or facsimile number as it may have furnished Landmark in writing, with a copy to Jaiffe, Raitt, Heuer & Weiss, P.C., One Woodward Avenue, Suite 2400, Detroit, MI 48226 (facsimile: (313) 961-8358), Attention: Peter Sugar. (c) Any notice so addressed shall be deemed to be given: if delivered by hand or facsimile, on the date of such delivery; if mailed by courier, on the first business day following the date of such mailing; and if mailed by registered or certified mail, on the third business day after the date of such mailing. 9.16. Definitions. All capitalized terms herein shall have the meaning attributed thereto in EXHIBIT B attached hereto. 9.17. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall be considered one and the same agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK - SIGNATURE PAGE FOLLOWS] -24- IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date first above written. Borrower: coolsavings.com inc. By: /s/ Matthew Moog ---------------- Print Name: Matthew Moog Title: President Lender: Landmark Communications, Inc. By: /s/ Guy R. Friddell, III ------------------------ Print Name: Guy R. Friddell, III Title: Executive Vice President EXHIBITS The following Exhibits to this Loan and Security Agreement are respectively described in the Section indicated below. Those schedules for which no information has been inserted or provided shall be deemed to read "None." EXHIBIT A --------- SENIOR SECURED NOTE ------------------- Original Aggregate Principal Amount: $5,000,000 Chicago, Illinois July 30, 2001 FOR VALUE RECEIVED, the undersigned, coolsavings.com inc., a Michigan corporation with its principal offices at 360 N. Michigan Avenue, 19th Floor, Chicago, IL 60601 (the "Borrower"), promises to pay to the order of Landmark Communications, Inc., a Delaware corporation with an office at 150 W. Brambleton Avenue, Norfolk, VA 23510 (hereinafter, with any subsequent holder, the "Lender") at an office of Lender, on the Maturity Date (defined below), without offset, the principal sum of Five Million and no/100 Dollars ($5,000,000), adjusted as provided below, together with interest as provided below. This note (the "Note") evidences the Initial Loan made by Lender to Borrower pursuant to the Amended and Restated Senior Secured Loan and Security Agreement of even date (as such may be amended hereafter) (the "Loan Agreement"). As additional consideration for the Initial Loan, Borrower is issuing to Lender a warrant to purchase common stock as described in and attached to the Loan Agreement (the "Initial Warrant"). The payment of this Note is secured by the Loan Agreement and the collateral described therein. All capitalized terms not defined herein shall have the meaning ascribed to them in the Loan Agreement. All obligations under this Note shall be pari passu with the Grid Note, consistent with the Loan Agreement. The outstanding principal amount on this Note shall bear interest at the rate of twelve percent (12%) per annum and shall commence from the date hereof and shall continue on the outstanding principal; provided, however, that if the First Tranche Closing, as such term is defined in the Purchase Agreement, is consummated, then from and after the date of such closing this Note (including the outstanding principal and interest that has then accrued) shall bear interest at the rate of eight percent (8%) per annum. Interest shall be computed on the actual number of days elapsed on the basis of a year consisting of 360 days. All interest shall accrue and compound quarterly on: October 31, January 31, April 30 and July 31 each year (each such date, a "Quarterly Payment Date"). Such accrued and compounded interest shall be added to the principal amount of the Note. Notwithstanding the foregoing, any amount outstanding under this Note shall bear interest from and after the Maturity Date at the rate of sixteen (16%) per annum (the "Default Interest Rate"), increasing monthly by an annual rate which is one (1) percentage point above the then current Default Interest Rate for each month that the Note remains overdue. Any interest on this Note accruing after the Maturity Date shall accrue and be compounded monthly (the date of such compounding, the "Monthly Compounding Date" and collectively with the Quarterly Payment Date, the "Compounding Date") until the obligation of Borrower, with respect to the payment of such interest, has been discharged (whether before or after judgment). Notwithstanding the foregoing, the effective annual rate under the Loan (including the Default Interest Rate) shall not exceed a maximum annual rate of twenty-four (24%) percent or the maximum annual rate permitted by law, whichever is less. 1 This Note shall be paid in full on the Maturity Date. Until this Note is paid in full, on each Compounding Date, in lieu of a cash payment of the interest due, Borrower shall pay such interest "in-kind". In lieu of delivering separately documented and certificated promissory notes (the "Note PIK Payment") and warrants (the "Warrant PIK Payment") for such "in- kind" payments, the Note PIK Payment shall be effected by adding the accrued interest to the principal amount of this Note (as described by the compounding set forth above) and the Warrant PIK Payment shall be effected through the provision in the Initial Warrant which provides that for every dollar of interest accrued, compounded and added to the principal amount of this Note, the aggregate number of shares of Borrower's common stock that may be purchased under the Initial Warrant shall be increased by two (2) (as such number may be adjusted for dividends, splits, combinations and the like). The foregoing notwithstanding, no Warrant PIK Payment shall be required until after the First Tranche Closing and then only in respect of interest payments accruing thereafter under this Note. Lender acknowledges that the amount of the Note PIK Payment shall be deemed an additional loan borrowed from the Lender (it being further acknowledged by the Borrower that it shall not receive additional funds in connection with any such loan). Borrower may not prepay this Note except as follows: On or after the third anniversary of the date hereof, the Borrower may prepay the Note if and only if (a) the Borrower has had earnings and positive cash flow for at least 365 consecutive days in the one year period prior to such payment, (b) the Borrower has no Indebtedness outstanding other than the Initial Loan, the Grid Note and trade payables in the ordinary course of business, and (c) the Quick Ratio set forth in Section 4.12 of the Loan Agreement is 2 to 1 and the Working Capital is a net positive of $3 million. All payments shall be made to Lender at its address specified above, or at such other address as Lender may specify in writing to Borrower. All payments received from Borrower hereunder shall be applied first, to the payment of any expenses due to Lender pursuant to the terms of the Loan Agreement, second, to the payment of interest accrued and unpaid on the Note, and third, to reduce the principal balance hereunder. Any payments of expenses, principal or interest shall be made in lawful money of the United States of America. The Borrower shall pay all outstanding principal and unpaid accrued interest on the Note in full on January 26, 2002 (the "Maturity Date"); provided, however, that, if the transactions contemplated under the Purchase Agreement are consummated, the Maturity Date shall be June 30, 2006. Notwithstanding the foregoing if any amount under the Note is not paid in full when due, whether at maturity, by acceleration or otherwise (the "Default Date"), the Maturity Date shall be the Default Date. Within ten (10) days of each Compounding Date, or as reasonably requested by the Holder, the Company shall issue to the Holder a certificate executed by the Company's chief financial officer or other executive officer setting forth the aggregate outstanding principal amount of the Note as of such date and the amount of the interest accrued, compounded and added to the Initial Loan. This Note is secured by the Collateral defined and described in the Loan Agreement. In addition, any and all deposits or other sums at any time credited by or due to Borrower from 2 Lender or any of its banking or lending affiliates or any bank acting as a participant under any loan arrangement between Lender of Borrower, and any cash, securities, instruments, or other property of Borrower in the possession of Lender, or any of its banking or lending affiliates, and any bank acting as a participant under any loan arrangement between Lender and Borrower, whether for safekeeping, or otherwise, or in transit to or from Lender or any of its banking or lending affiliates or any such participant, or in the possession of any third party acting on Lender's behalf (regardless of the reason Lender had received same or whether Lender has conditionally released the same) shall at all times constitute security for any and all Liabilities, and may be applied or set off against such Liabilities at any time, whether or not the Liabilities are then due or whether or not other collateral is available to Lender. Any Event of Default under the Loan Agreement shall constitute an event of default under this Note. Upon an event of default, the entire principal amount then outstanding, and all accrued and unpaid interest, and all other sums required under this Note and the Loan Agreement shall, notwithstanding the stated maturity in this Note, become immediately due and payable, without notice or demand to Borrower. Upon default, Lender shall have the right, immediately and without notice to Borrower or the taking of any other action, to set-off against this Note, all liabilities of Lender to Borrower and all obligations for money or money's worth owed by Lender to Borrower, whether or not due, without notice to Borrower (such liabilities and obligations including, without limitation, all money, stocks, bonds or other security or property of any kind or nature held by or in the possession of Lender to or for the credit of Borrower); and Lender shall be deemed to have made a charge against any such liabilities or obligations immediately upon the occurrence of any event of default under this Note even though such charge is subsequently made or entered on the behalf of Lender. The remedies provided in this Note upon default and in other agreement between Lender and Borrower are cumulative and not exclusive of any other remedies provided under the Loan Agreement or at law or in equity. No delay or omission by Lender in exercising or enforcing any of Lender's powers, rights, privileges, remedies, or discretions hereunder shall operate as a waiver thereof on that occasion nor on any other occasion. No waiver of any default hereunder shall operate as a waiver of any other default hereunder, nor as a continuing waiver. Borrower, and each endorser and guarantor, if any, of this Note, shall indemnify, defend, and hold Lender harmless against any claim brought or threatened against Lender by Borrower (other than a claim which is finally judicially determined against Lender), by any endorser or guarantor, or by any other person (as well as from attorneys' reasonable fees and expenses in connection therewith) on account of Lender's relationship with Borrower or any endorser or guarantor hereof (each of which may be defended, compromised, settled or pursued by Lender with counsel of Lender's selection, but at the expense of Borrower and any endorser and/or guarantor). Borrower will pay on demand all attorneys' reasonable fees and out-of-pocket expenses incurred by Lender in the administration of all Liabilities and obligations of Borrower to Lender, including, without limitation, costs and expenses associated with travel on behalf of Lender. Borrower will also pay on demand, without limitation, all attorneys' reasonable fees, out-of-pocket expenses incurred by Lender's attorneys and all costs incurred by Lender, including, without limitation, costs and expenses associated with travel on behalf of Lender, which costs 3 and expenses are directly or indirectly related to the protection or enforcement of any of Lender's rights against Borrower or any such endorser or guarantor and against any collateral given Lender to secure this Note or any other Liabilities of Borrower or such endorser and guarantor to Lender (whether or not suit is instituted by or against Lender). Borrower, and each endorser and guarantor of this Note, respectively waives presentment, demand, notice, and protest, and also waives any delay on the part of the holder hereof. Each assents to any extension or other indulgence (including, without limitation, the release or substitution of collateral) permitted Borrower or any endorser or guarantor by Lender with respect to this Note and/or any collateral given to secure this note or any extension or other indulgence, as described above, with respect to any other liability or any collateral given to secure any other liability of Borrower or any endorser or guarantor to Lender. This Note shall be binding upon Borrower and each endorser and guarantor hereof and upon their respective heirs, successors, assigns, and representatives, and shall inure to the benefit of Lender and its successors, endorsees, and assigns. The liabilities of Borrower and any endorser or guarantor of this Note are joint and several; provided, however, that the release by Lender of Borrower or any one or more endorser or guarantor shall not release any other person obligated on account of this Note. Each reference in this Note to Borrower, any endorser, and any guarantor, is to such person individually and also to all such persons jointly. No person obligated on account of this Note may seek contribution from any other person also obligated unless and until all liabilities, obligations and indebtedness to Lender of the person from whom contribution is sought have been satisfied in full. Borrower and each endorser and guarantor hereof each authorizes Lender to complete this Note if delivered incomplete in any respect. This Note is delivered to Lender at its offices at 150 W. Brambleton Avenue, Norfolk, VA 23510, shall be governed by the laws of the State of Illinois, and shall take effect as a sealed instrument. Borrower and each endorser and guarantor of this Note each submits to the jurisdiction of the courts of the State of Illinois for all purposes with respect to this Note, any collateral given to secure their respective liabilities, obligations and indebtedness to Lender, and their respective relationships with Lender. Any determination that any provision of this Note or any application thereof is invalid, illegal, or unenforceable in any respect in any instance shall not affect the validity, legality or enforceability of such provision in any other instance, or the validity, legality or enforceability of any other provision of this Note. The undersigned makes the following waiver knowingly, voluntarily, and intentionally, and understands that Lender, in the establishment and maintenance of Lender's relationship with Borrower contemplated by the within Note, is relying thereon. THE UNDERSIGNED, TO THE EXTENT ENTITLED THERETO, WAIVES ANY PRESENT OR FUTURE RIGHT OF THE UNDERSIGNED, OR OF ANY GUARANTOR OR ENDORSER OF THE UNDERSIGNED OR OF ANY OTHER PERSON LIABLE TO LENDER ON ACCOUNT OF OR IN RESPECT TO THE LIABILITIES, TO A TRIAL BY JURY IN ANY CASE OR CONTROVERSY IN WHICH LENDER IS OR BECOMES A PARTY (WHETHER SUCH CASE OR CONTROVERSY IS INITIATED BY OR AGAINST LENDER OR IN WHICH LENDER IS 4 JOINED AS A PARTY LITIGANT), WHICH CASE OR CONTROVERSY ARISES OUT OF, OR IS IN RESPECT TO, ANY RELATIONSHIP AMONGST OR BETWEEN THE UNDERSIGNED, ANY SUCH PERSON, AND LENDER. Borrower has read all of the terms and conditions of this Note and acknowledges receipt of an exact copy of it. WITNESS coolsavings.com inc. Signed in my Presence - ------------------------------ By: /s/ Matthew Moog ------------------------------ Print Name:------------------- Name: Matthew Moog Title: President 5 EXHIBIT B DEFINITIONS ----------- As herein used, the following terms have the following meanings or are defined in the section of the within Agreement so indicated: "Account Debtor": has the meaning given that term in the UCC (as defined below). "Accounts" and "Accounts Receivable" include, without limitation, "accounts" as defined in the UCC, and also all: accounts, accounts receivable, credit card receivables, notes, drafts, acceptances, and other forms of obligations and receivables and rights to payment for credit extended and for goods sold or leased, or services rendered, whether or not yet earned by performance. "Advance": has the meaning set forth in Section 1.1(a). "Affiliate": means, with respect to any two Persons, a relationship in which (a) one holds, directly or indirectly, not less than Twenty Five Percent (25%) of the capital stock, beneficial interests, partnership interest, or other equity interests of the other; or (b) one has, directly or indirectly, Control of the other; or (c) not less than Twenty Five Percent (25%) of their respective ownership is directly or indirectly held by the same third Person. "Agreement": is defined in the Preamble. "ANB": is defined in Section 2.1(o). "ANB Forbearance Agreement": is defined in Section 2.1(o). "Assignee": is defined in Section 9.2(b). "Balance Sheet": has the meaning given such term under the Purchase Agreement. "Bankruptcy Code": Title 11, U.S.C., as amended from time to time. "Borrower": is defined in the Preamble. "Business Day": any day other than (a) a Saturday, Sunday; or (b) a day which shall be in the State of New York a legal holiday or day on which banking institutions are required or authorized to close. "Capital Lease": any lease which may be capitalized in accordance with GAAP. "Change of Control": shall mean (i) the sale, lease or transfer of all or substantially all of the assets of the Company to any "Person" or "group" (within the meaning of Sections 13(d)(3) and 14(d)(2) of the Exchange Act, or any successor provision to either of the foregoing, including any group acting for the purpose of acquiring, holding or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act), (ii) the approval by the requisite stockholders of the Company of a plan of liquidation or dissolution of the Company, (iii) any "Person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act, or any successor provision to either of the foregoing, including any group acting for the purpose of acquiring, holding or disposing of securities within the meaning 1 of Rule 13d- 5(b)(1) under the Exchange Act) becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of more than 50% of the total voting power of all classes of the voting stock of the Company and/or warrants or options to acquire such voting stock, calculated on a fully diluted basis, unless, as a result of such transaction, the ultimate direct or indirect ownership of the Company is substantially the same immediately after such transaction as it was immediately prior to such transaction, or (iv) any consolidation or merger of the Company pursuant to which the Company Common Stock would be converted into cash, securities or other property, in each case other than a consolidation or merger of the Company in which the holders of Company Common Stock and other capital stock of the Company entitled to vote in the election of directors of the Company, immediately prior to the consolidation or merger have, directly or indirectly, at least a majority of the total voting power in the aggregate of capital stock entitled to vote in the election of directors of the continuing or surviving corporation immediately after the consolidation or merger. Notwithstanding the foregoing, the transactions contemplated by the Purchase Agreement shall not constitute a Change of Control. "Charter": shall mean the Articles of Incorporation of the Borrower, as amended or the Certificate of Incorporation of the Borrower's wholly owned subsidiary, Newco, after the consummation of the Merger (as such term is defined in the Purchase Agreement). "Chattel Paper": has the meaning given that term in the UCC. "Collateral": is defined in Section 2.1. "Compounding Date": is defined in Section 1.2(b). "Conservative Forecast": is defined in Section 4.12(a). "Contingent Obligation": shall mean, as applied to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to (i) any indebtedness, lease, dividend, letter of credit or other obligation of another, including, without limitation, any such obligation directly or indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by that Person, or in respect of which that Person is otherwise directly or indirectly liable; (ii) any obligations with respect to undrawn letters of credit issued for the account of that Person; and (iii) all obligations arising under any interest rate, currency or commodity swap agreement, interest rate cap agreement, interest rate collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; provided, however, that the term "Contingent Obligation" shall not include endorsements for collection or deposit in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determined amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such Person in good faith; provided, however, that such amount shall not in any event 2 exceed the maximum amount of the obligations under the guarantee or other support arrangement. "Contract Rights": includes, without limitation, "contract rights" as now or formerly defined in the UCC and also any right to payment under a contract not yet earned by performance and not evidenced by an instrument or Chattel Paper. "Control": Person(s) shall be deemed to Control another Person if such Person(s) directly or indirectly possess the power to direct or cause the direction of the management and policies of such other Person, whether through ownership of voting securities, by contract, or otherwise. "Cost Threshold": is defined in Section 4.12(a)(ii). "Costs of Collection" includes, without limitation, all attorneys' reasonable fees and reasonable out-of-pocket expenses incurred by Lender's attorneys, and all reasonable costs incurred by Lender in the administration of the Liabilities and/or the Loan Documents, including, without limitation, reasonable costs and expenses associated with travel on behalf of Lender, which costs and expenses are directly or indirectly related to or in respect of Lender's: administration and management of the Liabilities; negotiation, documentation, and amendment of any Loan Document; or efforts to preserve, protect, collect, or enforce the Collateral, the Liabilities, and/or Lender's Rights and Remedies and/or any of Lender's rights and remedies against or in respect of any guarantor or other person liable in respect to the Liabilities (whether or not suit is instituted in connection with such efforts). The Costs of Collection are Liabilities, and at Lender's option may bear interest at the highest post-default rate which Lender may charge Borrower hereunder as if such had been lent, advanced, and credited by Lender to, or for the benefit of, Borrower. "Current Assets": shall mean, as of any applicable date, all amounts that should, in accordance with GAAP, be included as current assets on the consolidated balance sheet of Borrower and its Subsidiaries as at such date less all inventory and non-recurring items including without limitation tax credits. "Current Liabilities": means, as of any applicable date, all amounts that should, in accordance with GAAP, be included as current liabilities on the consolidated balance sheet of Borrower and its Subsidiaries, as at such date, plus, to the extent not already included therein, all Advances made under this Agreement or by Lender for Borrower's benefit under the Forbearance Agreements, including all Indebtedness that is payable upon demand or within one year from the date of determination thereof unless such Indebtedness is renewable or extendable at the option of Borrower or any Subsidiary to a date more than one year from the date of determination, including all current maturities of long term debt. "Default Date": is defined in Section 1.4. "Default Interest Rate": is defined in Section 1.2(b). "Demand Interest Rate": is defined in Section 1.3(b). "Documents": has the meaning given that term in the UCC. 3 "Documents of Title": has the meaning given that term in the UCC. "Earned Cash Billings": means, with respect to an applicable monthly or quarterly measurement pursuant to Section 4.12(a), the sum of: (i) the aggregate amount of all of Borrower's billed and unpaid invoices to Eligible Debtors for services rendered during the month or quarter; minus (ii) the aggregate amount of all credit memos and other negative adjustments with respect to such period; minus (iii) the aggregate amount of all advanced billings (e.g., unearned revenue) included in such invoices; plus (iv) all deferred revenue from prior periods that is earned in the period being measured (to the extent not included in (i) above); plus (v) all royalties earned from Eligible Debtors (to the extent not included in (i) above); minus (vi) all amounts relating to barter; and minus (vii) all positive adjustments and invoices relating to prior periods. "EBITDA": means earnings before income taxes, depreciation and amortization. "Eligible Debtors": means those invoiced customers of Borrower that as of the applicable measurement date are not indebted to Borrower with respect to an account receivable that is more than ninety (90) days past due, are not subject to any pending or threatened bankruptcy or insolvency proceeding, are not subject to any event or circumstance that gives Borrower reason to believe that the collectability of their account may be impaired, and have not asserted a claim against Borrower or disputed any amount that is then due and owing. "Encumbrance": each of the following: (a) security interest, mortgage, pledge, hypothecation, lien, attachment, or charge of any kind (including any agreement to give any of the foregoing); conditional sale or other title retention agreement; sale of accounts receivable or chattel paper; or other arrangement pursuant to which any Person is entitled to any preference or priority with respect to the property or assets of another Person or the income or profits of such other Person or which constitutes an interest in property to secure an obligation; each of the foregoing whether consensual or non-consensual and whether arising by way of agreement, operation of law, legal process or otherwise. 4 (b) The filing of any financing statement under the UCC or comparable law of any jurisdiction. "Equipment" includes, without limitation, "equipment" as defined in the UCC, and also all motor vehicles, rolling stock, machinery, office equipment, plant equipment, tools, dies, molds, store fixtures, furniture, and other goods, property, and assets which are used and/or were purchased for use in the operation or furtherance of Borrower's business, and any and all accessions, additions thereto, and substitutions therefore. "Events of Default": is defined in Article 6. "Exchange Act": is the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. "Fixtures": has the meaning given that term in the UCC. "Forbearance Agreements": is defined in Section 5.8. "GAAP" or "Generally Accepted Accounting Principles": principles which are consistent with those promulgated or adopted by the Financial Accounting Standards Board and its predecessors (or successors) in effect and applicable to that accounting period in respect of which reference to GAAP or Generally Accepted Accounting Principles is being made. "General Intangibles" includes, without limitation, "general intangibles" as defined in the UCC; and also all: rights to payment for credit extended; deposits; amounts due to Borrower; credit memoranda in favor of Borrower; warranty claims; tax refunds and abatements; insurance refunds and premium rebates; all means and vehicles of investment or hedging, including, without limitation, options, warrants, and futures contracts; records; customer lists; telephone numbers; goodwill; causes of action; judgments; payments under any settlement or other agreement; literary rights; rights to performance; royalties; license and/or franchise fees; rights of admission; licenses; franchises; license agreements, including all rights of Borrower to enforce same; permits, certificates of convenience and necessity, and similar rights granted by any governmental authority; patents, patent applications, patents pending, and other intellectual property; developmental ideas and concepts; proprietary processes; blueprints, drawings, designs, diagrams, plans, reports, and charts; catalogs; manuals; technical data; computer software programs (including the source and object codes therefor), computer records, computer software, rights of access to computer record service bureaus, service bureau computer contracts, and computer data; tapes, disks, semi-conductors chips and printouts; trade secrets rights, copyrights, mask work rights and interests, and derivative works and interests; user, technical reference, and other manuals and materials; trade names, trademarks, service marks, and all goodwill relating thereto; applications for registration of the foregoing; and all other general intangible property of Borrower in the nature of intellectual property; proposals; cost estimates, and reproductions on paper, or otherwise, of any and all concepts or ideas, and any matter related to, or connected with, the design, development, manufacture, sale, marketing, 5 leasing, or use of any or all property produced, sold, or leased, by Borrower or credit extended or services performed, by Borrower, whether intended for an individual customer or the general business of Borrower, or used or useful in connection with research by Borrower. "Goods": has the meaning given that term in the UCC. "Grid Note": is defined in Section 1.1(a). "Indebtedness": all indebtedness and obligations (including without limitation any Contingent Obligations) of or assumed by any Person including, without limitation, any indebtedness or obligation: (i) in respect of money borrowed (including any indebtedness which is non-recourse to the credit of such Person but which is secured by an Encumbrance on any asset of such Person) or evidenced by a promissory note, bond, debenture or other written obligation to pay money; (ii) for the payment, deferred or other written obligation to pay money; (ii) for the payment, deferred for more than Thirty (30) days, of the purchase price of goods or services (other than current trade liabilities of such Person incurred in the ordinary course of business and payable in accordance with customary practices); (iii) in connection with any letters of credit or acceptance transaction (including, without limitation, the face amount of all letters of credit and acceptances issued for the account of such Person or reimbursement on account of which such Person would be obligated); (iv) in connection with the sale or discount of accounts receivable or chattel paper of Borrower; (v) on account of deposits or advances; and (vi) as lessee under Capital Leases. "Indebtedness" of any Person shall also include: (x) Indebtedness of others secured by an Encumbrance on any asset of such Person; (y) Any guaranty, endorsement, suretyship or other undertaking pursuant to which that Person may be liable on account of any obligation of any third party; and (z) the Indebtedness of a partnership or joint venture in which such Person is a general partner or joint venturer. "Indemnified Person": is defined in Section 9.10. "Initial Loan": is defined in Section 1.1(a). "Initial Warrants": is defined in Section 1.1(b). "Instruments": has the meaning given that term in the UCC. "Inventory" includes, without limitation, "inventory" as defined in the UCC and also all: packaging, advertising, and shipping materials related to any of the foregoing, and all names or marks affixed or to be affixed thereto for identifying or selling the same; Goods held for sale or lease or furnished or to be furnished under a contract or contracts of sale or service by Borrower, or used or consumed or to be used or consumed in Borrower's business; Goods of said description in transit: returned, repossessed and rejected Goods of said description; and all documents (whether or not negotiable) which represent any of the foregoing. "Investment Property": has the meaning given that term in the UCC. "Lender": is defined in Preamble. "Lender's Rights and Remedies": is defined in Section 7.7. 6 "Liability" or "Liabilities" includes, without limitation, all and each of the following, whether now existing or hereafter arising: (a) Any and all direct and indirect liabilities, debts, and obligations of Borrower to Lender, each of every kind, nature, and description. (b) Each obligation to repay any loan, advance, indebtedness, note, obligation, overdraft, or amount now or hereafter owing by Borrower to Lender (including all future advances whether or not made pursuant to a commitment by Lender), whether or not any of such are liquidated, unliquidated, primary, secondary, secured, unsecured, direct, indirect, absolute, contingent, or of any other type, nature, or description, or by reason of any cause of action which Lender may hold against Borrower. (c) All notes and other obligations of Borrower now or hereafter assigned to or held by Lender, each of every kind, nature, and description including, without limitation, the Note and Grid Note. (d) All interest, fees, and charges and other amounts which may be charged by Lender to Borrower and/or which may be due from Borrower to Lender from time to time. (e) All costs and expenses incurred or paid by Lender in respect of any agreement between Borrower and Lender or instruments furnished by Borrower to Lender (including, without limitation, Costs of Collection, attorneys' reasonable fees, and all court and litigation costs and expenses). (f) Any and all covenants of Borrower to or with Lender and any and all obligations of Borrower to act or to refrain from acting in accordance with any agreement between Borrower and Lender or instruments furnished by Borrower to Lender. "Lien": any Encumbrance as defined herein. "Loan": is defined in Section 1.1(a). "Loan Account": the account maintained on Lender's books in which a record will be kept of all loans and advances hereunder and payments thereon, and all calculations of interest fees or other costs as provided hereunder. "Loan Documents": this Agreement, the Note, the Grid Note, and each instrument and document executed and/or delivered in connection with the arrangements contemplated hereby, as each may be amended from time to time. "Maturity Date": is defined in Section 1.4. "Monthly Compounding Date": is defined in Section 1.2(b). "Note": is defined in the Preamble. "Note PIK Payment": is defined in Section 1.2(d). 7 "Original Agreement": is defined in the Preamble. "Original Principal Amount": is defined in 1.1(a). "Permitted Indebtedness": means: (a) Indebtedness of Borrower in favor of Lender arising under this Agreement or any other Loan Document; (b) Indebtedness to ANB and Midwest Guaranty Bank, provided such Indebtedness is limited to the Indebtedness described in the applicable Forbearance Agreement; (c) Subordinated Debt; and (d) Indebtedness of Borrower under capital leases, provided, the aggregate amount financed under all such capital leases (including capital leases existing on the date hereof) shall not exceed $3 million; and provided, further, Borrower shall not incur a capital lease obligation to the extent immediately after incurring such obligation Borrower would not be legally permitted to declare and pay dividends on its Series B Preferred Stock. "Person": any natural person, and any corporation, trust, partnership, joint venture, or other enterprise or entity. "Proceeds": include, without limitation, "Proceeds" as defined in the UCC, and each type of property described in Section 2.1, above. "Purchase Agreement": is defined in Section 1.2(a). "Qualified Accounts Receivable": shall mean, as of any applicable date, all amounts that should, in accordance with GAAP, be included as an account receivable on the consolidated balance sheet of Borrower and its Subsidiaries as of such date, but shall specifically exclude any receivables that are unbilled (a) more than ninety (90) days past due (b) owed by an officer or director (c) owed to an obligor that has any accounts receivable with Borrower that are more than ninety (90) days past due, or (d) that are disputed or challenged (or for which such obligor has otherwise asserted a defense or right of offset with respect to collection). "Quarterly Payment Dates": is defined in Section 1.2(c). "Quick Assets": shall mean, as of any applicable date, the Borrower's consolidated cash, cash equivalents, investments with maturities of fewer than ninety (90) days determined in accordance with GAAP, and Qualified Accounts Receivable, but shall exclude all restricted and regulated cash. "Quick Ratio": shall mean the excess of Quick Assets over Current Liabilities. "Receivables Collateral": Borrower's Accounts, Accounts Receivable, Contract Rights, General Intangibles, Chattel Paper, Instruments, Documents of Title, Documents, Securities, letters of credit for the benefit of Borrower, and bankers' acceptances held by Borrower, and any rights to payment. "Related Entity": refers to (a) any Affiliate; and (b) any corporation, trust, partnership, joint venture, or other enterprise which: is a parent, brother-sister, Subsidiary, or 8 Affiliate, of Borrower; could have such enterprise's tax returns or financial statements consolidated with Borrower's; could be a member of the same controlled Group of corporation (within the meaning of Section 1563(a)(1), (2) and (3) of the Internal Revenue Code of 1986, as amended from time to time) of which Borrower is a member; Controls or is Controlled by Borrower or any Affiliate of Borrower. "Securities": has the meaning given that term in the UCC. "Securities Act": is the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. "Series B Preferred Stock": has the meaning given such term under the Purchase Agreement. "Statement Date": has the meaning given such term under the Purchase Agreement. "Subordinated Debt": means any debt incurred by Borrower that is subordinated to the debt owing by Borrower to Lender on terms reasonably acceptable to Lender (and identified as being such by Borrower and Lender). "Subsidiary" means with respect to any Person, corporation, partnership, company association, joint venture, or any other business entity of which more than fifty percent (50%) of the voting stock or other equity interests is owned or controlled, directly or indirectly, by such Person or one or more Affiliates of such Person. "Tangible Net Worth": shall mean (a) the aggregate amount of all assets of Borrower as may be properly classified as such, other than (i) all assets of Borrower which are properly classified as intangible assets including, without limitation, franchises, licenses, permits, patents, patent applications, copyrights, trademarks, trade names, goodwill, experimental or organizational expense and other like intangibles, including the excess paid for assets acquired over the respective book values on the books of the corporation from which acquired, and (ii) all investments in and loans to the shareholders, officers, directors, employees, subsidiaries and affiliates, less (b) the aggregate amount of all Indebtedness and Liabilities of Borrower, all determined in accordance with GAAP consistently applied. "Total Indebtedness" means all Indebtedness plus all Contingent Obligations. "Transfer" is defined in Section 5.1. "UCC": is Uniform Commercial Code as adopted and in effect in the State of Illinois, as amended from time to time. "Warrant PIK Payment": is defined in Section 1.2(d). "Working Capital" means the excess of Current Assets over Current Liabilities. 9 EXHIBIT C --------- COMMERCIAL DEMAND GRID NOTE $_____________ July 30, 2001 (Up to $5 million) Chicago, Illinois FOR VALUE RECEIVED, the undersigned (the "Borrower") unconditionally promises to pay ON DEMAND to the order of Landmark Communications, Inc., a Virginia corporation ("Lender"), without offset, at 150 W. Brambleton Avenue, Norfolk, VA 23510, or at such other place as the holder of this Commercial Demand Grid Note ("Note") may designate from time to time in writing, the unpaid principal amount of all sums advanced and outstanding hereunder (the "Principal Amount Outstanding") as set forth on the attached Schedule of Advances and Payments of Principal (the "Schedule"), together with interest on the Principal Amount Outstanding from the date of each advance at the rate, and on the terms and conditions, set forth below. Each "Advance", as defined in that certain Amended and Restated Loan and Security Agreement, dated the date hereof, between Borrower and Lender (the "Loan Agreement"), shall, at Lender's option, be an installment of principal advanced hereunder. Lender shall be under no obligation to make advances hereunder or under the Loan Agreement. Capitalized terms not otherwise defined herein shall have the meaning given such terms under the Loan Agreement. All obligations under this Note shall be pari passu with the Senior Secured Note, consistent with the Loan Agreement. 1. Demand Right; Payment of Note. Lender may demand at any time and from time to time in whole or in part the payment of the Principal Amount Outstanding and all accrued and unpaid interest on the Note. 2. Interest; Default Rate. (a) The Principal Amount Outstanding shall bear interest at the rate of eight percent (8%) per annum. Interest shall be computed on the actual number of days elapsed on the basis of a year consisting of 360 days. (b) Any amounts outstanding under this Note that shall have been demanded by the Lender hereto and not paid shall bear interest from and after the date of such applicable demand at the rate of sixteen (16%) per annum (the "Demand Interest Rate"), increasing monthly by an annual rate which is one (1) percentage point above the then current Demand Interest Rate for each month that any amounts outstanding under this Note remain overdue. Any interest on the Note shall accrue and be compounded monthly until the obligation of Borrower, with respect to the payment of such interest, has been discharged (whether before or after judgment). (c) Notwithstanding the foregoing, the effective annual rate under this Note (including the Demand Interest Rate) shall not exceed a maximum annual rate of twenty-four (24%) percent or the maximum annual rate permitted by law, whichever is less. 1 3. Prepayment. Borrower may prepay the Principal Amount Outstanding and all accrued interest under this Note at any time and from time to time; provided, such prepayment shall not cause a breach or event of default under Maker's agreements with American National Bank and Trust Company of Chicago or be permitted at any time that Borrower has failed to declare and pay all dividends required to be declared and paid under Borrower's articles/certificate of incorporation; and, provided, further, that payment of any outstanding principal or interest (whether a prepayment or in response to a demand) shall not extinguish or terminate this Note as it shall secure Borrower's obligations to pay Advances under the Loan Agreement until the Loan Agreement has been terminated. 4. Application of Payments. All payments made on this Note may be applied, at the option of Lender, first in payment of any costs or expenses of Lender due hereunder, then in payment of any late charges due hereunder, then in payment of any accrued and unpaid interest due hereunder, and any balance shall be applied in payment of the Principal Amount Outstanding under this Note. At Lender's sole discretion, Lender may forgive any portion of any principal or interest amounts due under this Note and unpaid as effective payment of any portion of the exercise price of any warrants to purchase common stock of the Borrower that Lender then holds and wishes to exercise. Each payment tendered to Lender on this Note shall be payable in lawful money of the United States which shall be legal tender for public and private debts at the time of payment. Any check given in payment of any amounts due hereunder will constitute a payment only when collected. In the event Lender shall incur any cost or expense or make any advance or other disbursement under the terms and conditions of any document or instrument relating to the indebtedness of Borrower to Lender evidenced by this Note or any document or instrument providing Lender with any security for the payment of this Note, then, any payment made to Lender under this Note may be applied, at the option of Lender, first to the payment of any such cost, expense, advance or disbursement and all interest due thereon, and the balance, if any, of such payment applied as aforesaid towards the payment of any amounts then due and payable under this Note. 5. Waivers. Borrower waives presentment, demand, protest, notice of dishonor and all other notices of every kind and nature to which Borrower would otherwise be entitled under the applicable law. Borrower agrees that Lender may take any one or more of the following actions, on one or more occasions, whether before or after the maturity of this Note, without any notice to Borrower, without any further consent to such actions, and without releasing or discharging Borrower from liability on the Note: (a) Any extension or extensions of the time of payment of any principal, interest or other amount due and payable under this Note; (b) Any renewal of this Note, in whole or in part; (c) Any full or partial release or discharge from liability under this Note of any other Borrower; (d) Any release, in whole or in part, of any security for the payment of all or any portion of the amounts due under this Note; 2 (e) Any waiver of any default under any Loan Document; (f) Any failure or refusal of Lender to (i) realize on any security which Lender may have for the payment of this Note, (ii) institute any suit or action against Borrower under this Note, (iii) exercise any other right or remedy available to Lender under this Note or applicable law, or any delay by Lender in realizing on any such security, in instituting any such suit or action, or in exercising any other such right or remedy; (g) Any agreement with Borrower changing the rate of interest or any other term or condition of this Note; or (h) Any failure or refusal of Lender to obtain or maintain a valid, perfected and enforceable lien against any real and/or personal property securing the payment of this Note, in whole or in part. To the fullest extent permitted by law, Borrower waives the benefit of all laws and rules of law intended for his protection or advantage as a party liable on this Note or providing for its release or discharge from liability upon the failure or refusal of Lender to perform certain acts, including, but not limited to, the realization by Lender on any security for the payment of this Note and any law and any rule of law requiring Lender to institute any suit or action on this Note, but excluding any statute of limitations applicable to the collection or enforcement of this Note. 6. Security. This Note is secured as provided in the Loan Agreement. 7. Completion of Schedule. It is understood and agreed that any officer or authorized employee of Lender may make entries on the Schedule (and on any supplemental schedules attached hereto) (i) upon receipt of written or telephonic instructions of any one reasonably believed by such officer or authorized employees to be an authorized agent of Borrower or (ii) when an Advance is made pursuant to the Loan Agreement. Borrower shall indemnify and hold Lender harmless from and against any and all claims, damages, losses, costs and expenses (including attorneys' fees) which may arise or be created by the acceptance of instructions for making or paying advances by telephone. The Principal Amount Outstanding shown on the Schedule shall be prima facie evidence of the principal amount owing and unpaid on this Note. The failure to record the date an amount of any advance on the Schedule shall not, however, limit or otherwise affect the obligations of Borrower under this Note to repay the principal amount of the advance together with all interested accruing thereon. 8. Events of Default. Any Event of Default under the Loan Agreement shall constitute an event of default under this Note. 9. Acceleration; Remedies. Upon an event of default, the entire Principal Amount Outstanding, and all accrued and unpaid interest, and all other sums required under this Note and the Loan Agreement shall, notwithstanding the stated maturity in this Note, become immediately due and payable, without notice or demand to Borrower. Upon default, Lender shall have the right, immediately and without notice to Borrower or the taking of any other action, to set-off against this Note, all liabilities of Lender to Borrower and all obligations for money or money's worth owed by Lender to Borrower, whether or not due, without notice to 3 Borrower (such liabilities and obligations including, without limitation, all money, stocks, bonds or other security or property of any kind or nature held by or in the possession of Lender to or for the credit of Borrower); and Lender shall be deemed to have made a charge against any such liabilities or obligations immediately upon the occurrence of any event of default under this Note even though such charge is subsequently made or entered on the behalf of Lender. The remedies provided in this Note upon default and in other agreement between Lender and Borrower are cumulative and not exclusive of any other remedies provided under the Loan Agreement or at law or in equity. 10. Additional Provisions. (a) To the extent permitted by generally accepted accounting principles, Borrower will treat, account and report the Note as debt and not equity for accounting purposes and with respect to any returns filed with federal, state or local tax authorities. (b) No delay or omission by Lender in exercising or enforcing any of Lender's powers, rights, privileges, remedies, or discretions hereunder shall operate as a waiver thereof on that occasion nor on any other occasion. No waiver of any default hereunder shall operate as a waiver of any other default hereunder, nor as a continuing waiver. (c) Borrower, and each endorser and guarantor, if any, of this Note, shall indemnify, defend, and hold Lender harmless against any claim brought or threatened against Lender by Borrower (other than a claim which is finally judicially determined against Lender), by any endorser or guarantor, or by any other person (as well as from attorneys' reasonable fees and expenses in connection therewith) on account of Lender's relationship with Borrower or any endorser or guarantor hereof (each of which may be defended, compromised, settled or pursued by Lender with counsel of Lender's selection, but at the expense of Borrower and any endorser and/or guarantor). (d) Borrower will pay on demand all attorneys' reasonable fees and out-of-pocket expenses incurred by Lender in the administration of all Liabilities and obligations of Borrower to Lender, including, without limitation, costs and expenses associated with travel on behalf of Lender. Borrower will also pay on demand, without limitation, all attorneys' reasonable fees, out-of-pocket expenses incurred by Lender's attorneys and all costs incurred by Lender, including, without limitation, costs and expenses associated with travel on behalf of Lender, which costs and expenses are directly or indirectly related to the protection or enforcement of any of Lender's rights against Borrower or any such endorser or guarantor and against any collateral given Lender to secure this Note or any other Liabilities of Borrower or such endorser and guarantor to Lender (whether or not suit is instituted by or against Lender). (e) Borrower, and each endorser and guarantor of this Note, respectively waives presentment, demand, notice, and protest, and also waives any delay on the part of the holder hereof. Each assents to any extension or other indulgence (including, without limitation, the release or substitution of collateral) permitted Borrower or any endorser or guarantor by Lender with respect to this Note and/or any collateral given to secure this note or any extension or other indulgence, as described above, with respect to any other liability or any collateral given to secure any other liability of Borrower or any endorser or guarantor to Lender. 4 (f) This Note shall be binding upon Borrower and each endorser and guarantor hereof and upon their respective heirs, successors, assigns, and representatives, and shall inure to the benefit of Lender and its successors, endorsees, and assigns. (g) The liabilities of Borrower and any endorser or guarantor of this Note are joint and several; provided, however, that the release by Lender of Borrower or any one or more endorser or guarantor shall not release any other person obligated on account of this Note. Each reference in this Note to Borrower, any endorser, and any guarantor, is to such person individually and also to all such persons jointly. No person obligated on account of this Note may seek contribution from any other person also obligated unless and until all liabilities, obligations and indebtedness to Lender of the person from whom contribution is sought have been satisfied in full. (h) Borrower and each endorser and guarantor hereof each authorizes Lender to complete this Note if delivered incomplete in any respect. (i) This Note is delivered to Lender at its offices at 150 W. Brambleton Avenue, Norfolk, VA 23510, shall be governed by the laws of the State of Illinois, and shall take effect as a sealed instrument. Borrower and each endorser and guarantor of this Note each submits to the jurisdiction of the courts of the State of Illinois for all purposes with respect to this Note, any collateral given to secure their respective liabilities, obligations and indebtedness to Lender, and their respective relationships with Lender. Any determination that any provision of this Note or any application thereof is invalid, illegal or unenforceable in any respect in any instance shall not affect the validity, legality or enforceability of such provision in any other instance, or the validity, legality or enforceability of any other provision of this Note. (j) The undersigned makes the following waiver knowingly, voluntarily, and intentionally, and understands that Lender, in the establishment and maintenance of Lender's relationship with Borrower contemplated by the within Note, is relying thereon. THE UNDERSIGNED, TO THE EXTENT ENTITLED THERETO, WAIVES ANY PRESENT OR FUTURE RIGHT OF THE UNDERSIGNED, OR OF ANY GUARANTOR OR ENDORSER OF THE UNDERSIGNED OR OF ANY OTHER PERSON LIABLE TO LENDER ON ACCOUNT OF OR IN RESPECT TO THE LIABILITIES, TO A TRIAL BY JURY IN ANY CASE OR CONTROVERSY IN WHICH LENDER IS OR BECOMES A PARTY (WHETHER SUCH CASE OR CONTROVERSY IS INITIATED BY OR AGAINST LENDER OR IN WHICH LENDER IS JOINED AS A PARTY LITIGANT), WHICH CASE OR CONTROVERSY ARISES OUT OF, OR IS IN RESPECT TO, ANY RELATIONSHIP AMONGST OR BETWEEN THE UNDERSIGNED, ANY SUCH PERSON, AND LENDER. (k) Borrower has read all of the terms and conditions of this Note and acknowledges receipt of an exact copy of it. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK - SIGNATURE PAGE FOLLOWS] 5 WITNESS the following signature(s) and seal(s): COOLSAVINGS.COM INC. By: /s/ Matthew Moog ------------------------------ Name: Matthew Moog Title: President ATTEST: ________________________________________ Name: __________________________________ Title:__________________________________ 6 SCHEDULE OF ADVANCES AND PAYMENTS OF PRINCIPAL - -------------- ---------------- ----------------- --------------- -------------- Principal Approving Amount Person's Date Advance Payment Outstanding Initials - -------------- ---------------- ----------------- --------------- -------------- - -------------- ---------------- ----------------- --------------- -------------- - -------------- ---------------- ----------------- --------------- -------------- - -------------- ---------------- ----------------- --------------- -------------- - -------------- ---------------- ----------------- --------------- -------------- - -------------- ---------------- ----------------- --------------- -------------- - -------------- ---------------- ----------------- --------------- -------------- - -------------- ---------------- ----------------- --------------- -------------- - -------------- ---------------- ----------------- --------------- -------------- - -------------- ---------------- ----------------- --------------- -------------- - -------------- ---------------- ----------------- --------------- -------------- - -------------- ---------------- ----------------- --------------- -------------- - -------------- ---------------- ----------------- --------------- -------------- - -------------- ---------------- ----------------- --------------- -------------- - -------------- ---------------- ----------------- --------------- -------------- - -------------- ---------------- ----------------- --------------- -------------- - -------------- ---------------- ----------------- --------------- -------------- - -------------- ---------------- ----------------- --------------- -------------- - -------------- ---------------- ----------------- --------------- -------------- - -------------- ---------------- ----------------- --------------- -------------- - -------------- ---------------- ----------------- --------------- -------------- 7 EX-6 9 lc929530.txt EX-6 LETTER AGREEMENT EXHIBIT 6 LANDMARK VENTURES VII, LLC 150 West Brambleton Avenue Norfolk, Virginia 23510 July 30, 2001 To the shareholders of coolsavings.com inc. countersigning below (the "Significant Investors") Re: Investment by Landmark Ventures VII, LLC and Landmark Communications, Inc. (collectively, "Landmark") in coolsavings.com inc. (the "Company") pursuant to that certain Securities Purchase Agreement, dated as of the date hereof as the same may be amended and restated from time to time (the "Purchase Agreement"). (Capitalized terms not defined when used have the meanings given such terms under the Purchase Agreement.) Dear Significant Investors: In furtherance of the transactions contemplated by the Purchase Agreement, Landmark and the Significant Investors have entered into one or more ancillary agreements, including that certain Voting Agreement dated as of the date hereof. In consideration of the mutual covenants contained in such agreements, Landmark agrees as follows: 1. Until the earlier of (a) two years after Landmark and any of its Affiliates own 51% of the Common Stock of the Company (measured on an as-converted basis) or (b) July 30, 2005, Landmark will not initiate or propose a transaction or series of transactions to make the Company a privately held company or to acquire more than 20% of the Common Stock (including securities convertible or exchangeable into such Common Stock), calculated on a Fully Diluted Basis, except in a transaction or series of transactions which has been approved by holders of a majority of the Common Stock, calculated on a Fully Diluted Basis, not then held by Landmark or any Affiliate; provided, however, that the above restriction shall not apply to any transactions contemplated by the Purchase Agreement or the Transaction Documents, including, without limitation, adjustments made in connection with anti-dilution protections, the issuance, conversion or exercise of any of the Securities, the issuance of securities made in respect of anti-dilution protections, and the exercise of any right of first offer or preemptive right. 2. No amendment, modification, termination, or waiver of any provision of this letter agreement, and no consent to any departure by any Significant Investor or Landmark from any provision of this letter agreement, shall be effective unless it shall be in writing and signed and delivered by Landmark and Significant Investors holding a majority of the shares of Common Stock held by all Significant Investors on an as converted basis, and then it shall be effective only in the specific instance and for the specific purpose for which it is given. Significant Investors July 30, 2001 Page 2 3. No party shall assign any of its rights or delegate any of its obligations under this letter agreement. Any assignment or delegation in contravention of this Section 3 shall be void ab initio and shall not relieve the assigning or delegating party of any obligation under this letter agreement; provided, however, that Landmark may freely transfers its shares of Series B Preferred Stock to a third party as long as such third party agrees to be bound by the terms of this letter agreement. The provisions of this letter agreement shall be binding upon and inure solely to the benefit of the parties hereto and their respective permitted heirs, executors, legal representatives, successors and assigns, and no other person shall be entitled to enforce its rights hereunder directly. 4. This letter agreement and all rights, remedies, liabilities, powers and duties of the parties hereto shall be governed in accordance with the laws of the State of New York without regard to principles of conflicts of laws. 5. All notices and other communications hereunder shall be in writing and shall be deemed duly given (a) on the date of delivery if delivered personally, or by telecopy or telefacsimile, upon confirmation of receipt, (b) on the first business day following the date of dispatch if delivered by a recognized next-day courier service, or (c) on the seventh business day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. All notices hereunder shall be given to Landmark at its address stated in the Purchase Agreement and all notices to each of the Significant Investors shall be given at its address in the register of shareholders of the Company, or, in each case, at any other address as the party may specify for this purpose by notice to the other parties. 6. Unless terminated earlier as provided herein, this letter agreement shall terminate upon the first to occur of (a) the termination of the Purchase Agreement pursuant to its terms or (b) the termination of the covenant set forth in Section 1 above in accordance with its terms. 7. This letter agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if all signatures were on the same instrument. If the foregoing reflects our mutual understanding with respect to the subject matter hereof, please countersign this letter to express your agreement with the terms hereof. Very truly yours, LANDMARK VENTURES VII, LLC By: /s/ Richard A. Fraim ------------------------------ Name: Richard A. Fraim Title: Vice President and Treasurer Significant Investors July 30, 2001 Page 3 LANDMARK COMMUNICATIONS, INC. By: /s/ Guy R. Friddell, III ------------------------------ Name: Guy R. Friddell, III Title: Executive Vice President SEEN AND AGREED: LEND LEASE INTERNATIONAL PTY. LIMITED [ACN# 000489109] By: /s/ Mark Skinner, under Power of Attorney ----------------------------------------- Name: Mark Skinner, under Power of Attorney STEVEN M. GOLDEN /s/ Steven M. Golden - ----------------------------- STEVEN M. GOLDEN REVOCABLE LIVING TRUST DATED 3/3/98 By: /s/ Steven M. Golden ------------------------- Name Steven M. Golden Title: Trustee STEVEN M. GOLDEN L.L.C. By: /s/ Steven M. Golden ------------------------- Name Steven M. Golden Title: Member MATTHEW MOOG /s/ Matthew Moog - ----------------------------- Significant Investors July 30, 2001 Page 4 MOOG INVESTMENT PARTNERS LP By: /s/ Matthew Moog ------------------------------ Name Matthew Moog Title: General Partner ROBERT J. KAMERSCHEN /s/ Robert J. Kamerschen - ----------------------------- HUGH R. LAMLE /s/ Hugh R. Lamle - ----------------------------- HLBL FAMILY PARTNERS LP By: /s/ Hugh R. Lamle ------------------------------ Name Hugh R. Lamle Title: Managing General Partner HUGH AND BETSY LAMLE FOUNDATION By: /s/ Hugh R. Lamle ------------------------------ Name Hugh R. Lamle Title: President Significant Investors July 30, 2001 Page 5 RICHARD H. ROGEL REVOCABLE LIVING TRUST DATED 3/21/90 By: /s/ Richard H. Rogel ------------------------------ Name Richard H. Rogel Title: Trustee RICHARD ROGEL - CHARITABLE REMAINDER TRUST By: /s/ Richard H. Rogel ------------------------------ Name Richard H. Rogel Title: Trustee RICHARD ROGEL LIMITED PARTNERSHIP By: /s/ Richard H. Rogel ------------------------------ Name Richard H. Rogel Title: General Partner -----END PRIVACY-ENHANCED MESSAGE-----