Cash-strapped online grocer

Peapod.com

(PPOD)

is exploring ways to reclaim a $2.5 million loan made to the company's former CEO William Malloy in an effort to scrape together enough money to stay afloat,

The Wall Street Journal

reported Wednesday.

According to the paper, Peapod granted Malloy a $2.5 million loan to buy Peapod's common stock. Under the terms of the loan, the money would have become a gift after five years, but Malloy, 47, resigned in mid-March after less than a year with the company due to health problems.

The terms of the agreement, however, also stipulated that the loan could be forgiven if Malloy left the company for a good reason.

The company must now try to determine whether Malloy's reasons were indeed good. Malloy, who joined Peapod from

AT&T Wireless

, left the company due to mental and physical exhaustion.

After Malloy left, four companies canceled a $120 million investment, triggering doubts about Peapod's long-term viability.

Since then, the Skokie, Ill.-based company, which has never posted a profit, said it was in talks with an unnamed party regarding an equity investment in the company. Peapod also said it had obtained a commitment from the party for an immediate bridge loan.

Peapod's shares closed down 1/4, or 8%, at 3 on Wednesday.

A company spokesperson was not immediately available for comment.