PUT AGREEMENT
THIS PUT AGREEMENT (this "Agreement") is dated as of
November 1, 1999, and is by and between Nordstrom, Inc., a Washington
corporation ("Nordstrom"), and the holders of the Series C Preferred
Stock of Nordstrom.com, Inc., a Delaware corporation (the "Company"), set
forth on Exhibit A hereto (the "Investors").
WHEREAS, concurrently with the execution and delivery of this
Agreement, Nordstrom and the Investors are purchasing shares of the
Company's Preferred Stock and a wholly owned subsidiary of Nordstrom and
the Company are entering into that certain Limited Liability Company
Agreement in connection with the formation of Nordstrom.com, LLC (the
"LLC"); and
WHEREAS, Nordstrom and the Investors each desire to enter into
this Agreement for the purpose of providing a potential financing vehicle
for the Company and absent such financing for Nordstrom to purchase from
the Investors the Company's Series C Preferred Stock (the "Series C
Preferred Stock") and the Company's Common Stock (the "Common Stock")
issued upon conversion thereof (collectively, the "Investor Stock") as
provided below.
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1 PUT RIGHT
1.1 Put Right of Investors. If by July 1, 2002, Nordstrom
has not provided the Company with financing on the terms described in
Exhibit B hereto and an Initial Public Offering (as hereafter defined) is
not consummated by September 1, 2002, at any time during the thirty (30)
day period beginning September 1, 2002, upon the receipt by Nordstrom of a
written request from the holders of a majority of the Common Stock issuable
and issued upon conversion of the Company's Series C Preferred Stock (the
"Conversion Shares"), Nordstrom shall purchase all, but not less than
all, of the Investor Stock, at an aggregate price (the "Put Price") equal
to the greater of (i) the Fair Market Value (as hereafter defined) of the
Investor Stock and (ii) the product of (A) the number of shares of
Conversion Shares and (B) $16.65 (as adjusted for subsequent stock splits,
stock dividends, combinations, reclassifications and the like) per share of
Common Stock.
1.2 Fair Market Value; Put Procedures.
(a) Determination of Fair Market Value. If
requested by the holders of a majority of the Conversion Shares, the Fair
Market Value will be appraised by an independent appraiser appearing on the
attached Schedule A selected by mutual agreement of Nordstrom and the
holders of a majority of the Investor Stock (the "First Appraiser"). The
First Appraiser will render an appraisal of the Fair Market Value to
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Nordstrom and the Investors. Nordstrom and the Investors will cause the
fees and expenses of the First Appraiser to be paid by the LLC. Each of
Nordstrom and the Investors will be entitled within thirty (30) days after
receipt of the appraisal of the First Appraiser to dispute such appraisal.
In such event, the disputing party will select a second independent
appraiser appearing on the attached Schedule A (the "Second Appraiser")
who shall render an appraisal of the Fair Market Value. Nordstrom and the
Investors will cause the fees and expenses of the Second Appraiser to be
paid by the LLC. The First Appraiser and Second Appraiser shall meet to
resolve their differences, if any, as to the Fair Market Value. If such
two appraisers are able to resolve their differences as to Fair Market
Value, the joint decision of such appraisers will be the Fair Market Value.
If the First Appraiser and the Second Appraiser are unable to resolve their
differences as to Fair Market Value within 30 days after receipt of the
second appraisal, the First Appraiser and the Second Appraiser shall in
turn select a third appraiser from the list on the attached Schedule A (the
"Third Appraiser") to appraise the Fair Market Value. Nordstrom and the
Investors will cause the fees and expenses of the Third Appraiser to be
paid by the LLC. The average of the three appraisals shall be the Fair
Market Value. The Fair Market Value shall equal the fair market value of
the company multiplied by a fraction (i) the numerator of which is the
number of Conversion Shares, and (ii) the denominator of which is the
number of outstanding shares of Common Stock outstanding after giving
effect to (A) the conversion of all outstanding convertible securities of
the Company, (B) the exercise of all outstanding vested in-the-money
securities of the Company, and (C) consummation of the merger contemplated
pursuant to Section 5.8 of the Joint Venture Agreement between the Company
and Nordstrom. (For purposes of the preceding sentence, the number of
outstanding shares shall be determined as of September 1, 2002). Each
appraiser shall appraise the fair market value of the Company taken as a
whole, taking into account valuation parameters deemed appropriate by such
appraiser (including, without limitation, the Company's value as a going
concern as a privately or publicly held company, the Company's value if
sold to a willing buyer in an arms'-length transaction and the Company's
value upon liquidation), without giving effect to any adjustment for the
fact that the Investor Stock indirectly represents a minority interest in
the LLC.
(b) Procedure. The closing of any sale of
Investor Stock under Section 1.1 shall take place at the offices of Lane
Powell Spears Lubersky LLP, 1420 Fifth avenue, Suite 4100, Seattle,
Washington (or such other place as may be agreed by Nordstrom and the
holders of a majority of the Common Stock issuable or issued upon
conversion of the Company's Series C Preferred Stock) on the Put Closing
Date (as hereafter defined).
(i) The Put Closing Date shall be on the
date that is the later of (A) October 15, 2002, if no appraisal is obtained
pursuant to Section 1.2(a), (B) forty (40) days after the receipt of the
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appraisal rendered by the First Appraiser (unless either party disputes
such appraisal within thirty (30) days after it is received), (C) if
applicable, forty (40) days after receipt of the joint decision of the
appraisers selected by Nordstrom, on the one hand, and the Investors, on
the other, resolving any differences they have as to the Fair Market Value
(D) if applicable, ten (10) days after receipt of the appraisal rendered by
the Third Appraiser, or (E) such other date as may be mutually acceptable
to the parties to the transaction.
(ii) On the Put Closing Date, Nordstrom
shall deliver to the holders of Investor Stock the Put Price in cash, and
the holders of Investor Stock shall deliver to Nordstrom certificates
representing the Investor Stock, free of any liens or encumbrances,
together with such powers and other documentation necessary for the
transfer of such stock. The parties hereto shall do all things and execute
and deliver all papers as may be necessary to consummate any purchase under
this Agreement.
For purposes of this Agreement, "Initial Public Offering"
means an initial public offering of the Common Stock of the Company or
Nordstrom.com, Holdings, Inc. or the common shares of the LLC pursuant to a
registration statement declared effective under the Securities Act of 1933,
as amended, resulting in gross proceeds of at least $20.0 million and
underwritten by a nationally recognized investment bank.
1.3 Other Purchases of Investor Stock. At any time,
Nordstrom may purchase all of the Investor Stock on terms and conditions
approved by Nordstrom and holders of a majority of the Investor Stock.
SECTION 2 MISCELLANEOUS.
2.1 Headings. The headings in this Agreement are for
convenience of reference only and shall not control or affect the meaning
or construction of any provisions hereof.
2.2 Entire Agreement. This Agreement constitutes the
entire agreement and understanding of the parties hereto in respect of the
subject matter hereof, and there are no restrictions, promises,
representations, warranties, covenants, or undertakings with respect to the
subject matter hereof, other than those expressly set forth or referred to
herein.
2.3 Notices. Unless otherwise provided, any notice
required or permitted under this Agreement shall be given in writing and
shall be deemed effectively given upon personal delivery to the party to be
notified or upon delivery by confirmed facsimile transmission, nationally
recognized overnight courier service, or upon deposit with the United
States Post Office, by registered or certified mail, postage prepaid and
addressed to the party to be notified at the address indicated for such
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party on the signature page hereof, or at such other address as such party
may designate by ten (10) days' advance written notice to the other
parties.
2.4 Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective heirs, successors and permitted assigns.
Notwithstanding the foregoing, neither this Agreement nor any right,
remedy, obligation or liability arising hereunder or by reason hereof shall
(except as expressly provided in this Agreement) be assignable by Nordstrom
without the prior written consent of the other parties hereto.
2.5 Specific Performance. Each of the parties hereto
acknowledges and agrees that in the event of any breach of this Agreement,
the non-breaching party or parties would be irreparably harmed and could
not be made whole by monetary damages. It is accordingly agreed that the
parties hereto shall and do hereby waive the defense in any action for
specific performance that a remedy at law would be adequate and that the
parties hereto, in addition to any other remedy to which they may be
entitled at law or in equity, shall be entitled to compel specific
performance of this Agreement.
2.6 Amendments. This Agreement may not be amended,
modified or supplemented without the prior written consent of Nordstrom and
the holders of a majority of the Common Stock issuable or issued upon
conversion of the Company's Series C Preferred Stock.
2.7 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of
which shall constitute one and the same Agreement.
2.8 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of
California applicable to contracts made and to be performed therein.
2.9 Expenses. Except as expressly provided herein, the
parties to this Agreement shall bear their respective expenses incurred in
connection with the preparation, execution and performance of this
Agreement and the transactions contemplated hereby, including, without
limitation, all fees and expenses of agents, representatives, counsel and
accountants.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
NORDSTROM, INC.
Name: Michael A. Stein
Title: Executive Vice President and
Chief Financial Officer
Address: Nordstrom, Inc.
1617 Sixth Avenue, Suite 500
Seattle, WA 98101
INVESTORS:
BENCHMARK CAPITAL PARTNERS III, L.P.
as nominee for
Benchmark Capital Partners III, L.P.
Benchmark Founders Fund III, L.P.
Benchmark Founders Fund III-A, L.P
Benchmark Members Fund III, L.P.
By: Benchmark Capital Management Co. III, L.L.C.
its general partner
By:
--------------------------
Managing Member
Address: 2480 Sand Hill Road, Suite 200
Menlo Park, CA 94025
MADRONA RETAIL PARTNERS I, L.L.C.
By:
--------------------------
By:
--------------------------
Its.:
--------------------------
Address: 1000 Second Ave., Suite 3700
Seattle, WA 98104
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Exhibit A
------------
Series C Preferred Stock Holders
----------------------------------------
Number of Series of Total Purchase
Name and Address Shares Purchased Preferred Stock Price of Shares
- ----------------- ------------------- ----------------- ----------------
Benchmark Capital 3,217,503.15 C $10,714,285.50
Partners III, L.P.
2480 Sand Hill Road,
Suite 200
Menlo Park, CA 94025
Benchmark Founders' 938,223.87 C $3.124.285.50
Fund III, L.P.
2480 Sand Hill Road,
Suite 200
Menlo Park, CA 94025
Benchmark Founders' 254,128.83 C $846,249.00
Fund III-A, L.P.
2480 Sand Hill Road,
Suite 200
Menlo Park, CA 94025
Benchmark Members' 94,594.59 C $315,000.00
Fund III, L.P.
2480 Sand Hill Road,
Suite 200
Menlo Park, CA 94025
Madrona Retail Partners 300,300.30 C $1,000,000
I, L.L.C.
1000 Second Ave.,
Suite 3700
Seattle, WA 98104
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SCHEDULE A
INDEPENDENT APPRAISERS
-----------------------------
To be Agreed Upon
First Appraiser: American Appraisal
Second Appraiser: Houlihan Lokey Howard & Zukin
Third Appraiser: Arthur Andersen
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Exhibit B
Nordstrom.com, Inc.
Summary of New Series D Preferred Stock Terms
Company Nordstrom.com, Inc. ("Company")
Securities Series D Convertible Preferred Stock ("Series D")
Investment Amount $100 million
Investor Nordstrom, Inc.
Valuation Pre-money valuation of $300 million on a fully diluted
basis (including shares reserved for or issued in
connection with option plans or other similar plans or
arrangements) for the combined entity.
Dividend Provisions The Series D holder would not be entitled to receive any
dividend unless declared by Company's Board of
Directors ("Board").
Liquidation Preference In the event of any liquidation or winding up of
Company, the Series D holder is entitled to receive, parri
passu with holders of Common Stock and after any
preference to Series A, Series B and Series C Preferred
Stock (which preference shall be doubled at the time of
the Series D financing), an amount equal to the Series D
Purchase Price plus any accrued but unpaid dividends.
Upon payment of the above-described amounts and any
other preferences, the holders of the Series A, B, C
and D and the Common Stock are entitled to share
ratably (calculated on an as-converted basis) in
Company's remaining assets.
Conversion The Series D holder has the right, at any time, to convert
all or a portion of its Series D shares into Common
Stock. The number of shares of Common Stock into
which each such share initially may be converted will
be determined by dividing the Series D Purchase Price
by the Series D conversion price. The initial Series D
conversion price equals the Series D Purchase Price.
The Series D conversion price will be subject to
adjustment as set forth in the "Antidilution Provisions."
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Automatic Conversion The Series D automatically converts into Common
Stock at the then applicable conversion rate in the event
of: (i) the closing of an underwritten public offering of
shares of Common Stock by Company; or (ii) upon
consent of or conversion by holders of 66 2/3 percent of
the outstanding Series C.
Antidilution Provisions Proportional adjustment in the event of stock splits,
stock dividends, reclassifications and the like; standard
weighted average antidilution protection is provided for
the holders of the Series D in the event of future
issuances of stock or other equity instruments (except as
provided below) at a price per share less than the
Series D Purchase Price, as adjusted. Exceptions to the
foregoing weighted average dilution protection for:
(i) options or warrants to purchase such shares that are
reserved for or issued to employees, directors and
consultants of Company that are approved by the
Board, (ii) Common Stock issuable on conversion of
preferred stock or other convertible securities issued by
Company, and (iii) Common Stock issued as a dividend
or other distribution on outstanding Common Stock or
issued in connection with a subdivision of outstanding
Common Stock into a greater number of shares or a
combination of outstanding Common Stock into a
smaller number of shares (collectively, the "Excepted
Issuances").
Preemptive Rights Series D holders have the contractual right to
participate in the issuances of additional securities by
Company in proportion to their ownership of
outstanding Common Stock (calculated on an as
-converted basis) to the total outstanding Common
Stock shares and Common Stock subject to outstanding
options and warrants immediately prior to the proposed
issuance. The foregoing right does not apply to shares
offered pursuant to a registration statement, securities
issued pursuant to the acquisition of another company
by Company as approved by the Board, securities
issued in connection with the formation of any licensing
or collaborative agreements provided by the Board, and
the Excepted Issuances. The foregoing preemptive
rights expire upon the earlier of: (i) immediately prior
to the closing of a Qualifying IPO; or (ii) on the date on
which the holder or transferee no longer holds any
shares of Series D.
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Voting Rights A Series D holder shall vote on all matters in
proportion to all other holders of Preferred and
Common Stock, and the holders of Series C shall be
given the right to vote Series B shares.
Information Rights So long as Nordstrom, Inc. holds at least one percent of
the issued and outstanding capital stock of the
Company on an as-converted basis, the Company shall
deliver quarterly unaudited financial statements and
monthly unaudited financial reports. The foregoing
information rights shall terminate upon the earlier of:
(i) completion of Company's initial public offering; or
(ii) the date Company registers any securities under the
Securities Exchange Act of 1934.
Piggyback Registration The Series D holders are entitled to "piggyback"
registration rights of their Common Stock issuable upon
conversion of their Series C on all registrations, other
than registrations for employee plans or Rule 145
transactions, subordinate to any other registration rights
to other holders of Preferred Stock.
Rule 144; Transfer of Rights Registration rights do not apply if a holder may sell all
of such holder's shares under Rule 144 in a three-month
period.
Market Standoff Agreement The Series D holder must comply with the request of
Company's underwriters in connection with a public
offering by Company not to sell or otherwise dispose of
any shares of Series D Preferred Stock or Common
Stock issuable upon conversion thereof (except for
those securities being registered, if any, for such
offering).
Expenses The holder of Series D Preferred Stock shall pay the
legal fees, in an amount not to exceed $50,000, and
expenses of Gunderson, Dettmer, Stough Villeneuve
Franklin & Hachigian, LLP in connection with their
review and participation in the issuance of the Series D
Preferred Stock, and all legal expenses of the
Company.
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