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EXHIBIT 10.1
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INVESTMENT AGREEMENT
DATED AS OF
OCTOBER 30, 1998
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INVESTMENT AGREEMENT
This Investment Agreement (this "Agreement") dated as of October
30, 1998 is made by and between iMall, Inc., a Nevada corporation (the
"Corporation"), and First Data Merchant Services Corporation, a Florida
corporation ("Investor").
RECITALS
WHEREAS, the Corporation is in the business of developing
Internet commerce concepts;
WHEREAS, in order to finance the Corporation's continued
growth, the Corporation desires to issue and sell to Investor, and Investor
desires to purchase from the Corporation, an aggregate of two million
(2,000,000) shares of the authorized and unissued shares of common stock of the
Corporation, par value $.008 per share (the "Common Stock"); and
WHEREAS, in order to provide additional incentive for the
future cooperation of the Corporation and Investor, the Corporation desires to
commit to the issuance to Investor and Investor desires to receive from the
Corporation a warrant (the "Warrant") in the form set forth in Exhibit A to
purchase an additional five million (5,000,000) shares of Common Stock subject
to the satisfaction of certain performance objectives.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I
Sale of Common Shares
1.1. Sale of Common Shares. Subject to the terms and
conditions herein set forth and in reliance upon the representations and
warranties of the Corporation set forth herein or in certificates delivered
pursuant hereto, the Corporation agrees to issue, sell and deliver to Investor,
free and clear of any liens, claims, charges and encumbrances whatsoever, except
as set forth in the Stockholders Agreement (as defined below), and Investor
agrees to purchase from the Corporation, the Common Shares (as defined below)
for $7.00 per share in cash.
1.2. Closing. (a) The closing of the sale and purchase (the
"First Closing") of 1,540,000 shares of Common Stock (the "First Common Shares")
shall be held at the offices of Sidley & Austin, One First National Plaza,
Chicago, Illinois, at 3:30 p.m. local time, on October 30, 1998 or such other
time, date and place as may be agreed to in writing by the Corporation and
Investor (such time and date are herein called the "First Closing Date").
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(b) The closing of the sale and purchase (the "Second
Closing") of 460,000 shares of Common Stock (the "Second Common Shares" and,
together with the First Common Shares, the "Common Shares") shall be held at the
offices of Sidley & Austin, One First National Plaza, Chicago, Illinois, at
10:00 a.m., local time, on the second business day following the day on which
the last of the conditions set forth in Sections 4.3 and 4.4 shall have been
fulfilled or waived (if permissible) or such other time, date and place as may
be agreed to in writing by the Corporation and Investor (such time and date are
herein called the "Second Closing Date").
1.3. Delivery. (a) At the First Closing, the Corporation will
issue and deliver to Investor, against the payment by such Investor of the
aggregate purchase price of $10,780,000 by wire transfer of immediately
available funds to an account which has been designated in writing by the
Corporation, the First Common Shares, duly executed by the Corporation and
registered in the name of Investor.
(b) At the Second Closing, the Corporation will issue and
deliver to Investor, against the payment by such Investor of the aggregate
purchase price of $3,220,000 by wire transfer of immediately available funds to
an account which has been designated in writing by the Corporation, the Second
Common Shares, duly executed by the Corporation and registered in the name of
Investor.
(c) Unless otherwise specified by Investor, all of the First
Common Shares shall be represented by a single certificate and all the Second
Common Shares shall be represented by a single certificate.
ARTICLE II
Representations and Warranties of the Corporation
The Corporation hereby represents and warrants to Investor as
follows:
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Section 2.1. Organization, Qualifications and Corporate Power.
The Corporation is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Nevada, and is duly licensed or
qualified to transact business as a foreign corporation and is in good standing
in each jurisdiction in which the nature of the business transacted by it or the
character of the properties owned or leased by it requires such licensing or
qualification, except where the failure to be so licensed or qualified or in
good standing would not in the aggregate have a Material Adverse Effect (as
defined herein). The Corporation has the power and authority to own and hold its
properties and to carry on its business as now conducted and as proposed to be
conducted. The Corporation has the corporate power and authority to execute,
deliver and perform this Agreement, the Registration Rights Agreement between
the Corporation and Investor in the form of Exhibit B attached hereto (the
"Registration Rights Agreement"), the Stockholders Agreement in the form of
Exhibit C attached hereto (the "Stockholders Agreement"), and the Marketing
Agreement in the form of Exhibit D attached hereto (the "Marketing Agreement"),
and to issue, sell and deliver the First Common Shares and, subject to the
approval of the stockholders contemplated by Section 8.3, to issue, sell and
deliver the Second Common Shares and to issue, sell, perform and deliver the
Warrant and the Warrant Shares (as defined in the Warrant). The Corporation is
in compliance in all material respects with all of the terms and provisions of
the Corporation's Articles of Incorporation, as amended (the "Charter"), and the
Corporation's By-laws (the "By-laws").
Section 2.2. Authorization of Agreements, Etc. (a) The
execution, delivery and performance by the Corporation of this Agreement, the
Registration Rights Agreement, the Stockholders Agreement and the Marketing
Agreement, and the issuance, sale, delivery and performance of the First Common
Shares and, assuming the approval of the stockholders contemplated by Section
8.3, the Second Common Shares, the Warrant and the Warrant Shares, (i) have been
duly authorized by all requisite corporate action, (ii) will not violate (v) any
provision of law, (w) the rules of the Nasdaq Stock Market, (x) any order of any
court or other agency of government, (y) the Charter or the By-laws, or (z) any
provision of any indenture, agreement or other instrument to which the
Corporation or any of its respective properties or assets is bound, (iii) will
not conflict with, result in a breach of or constitute (with due notice or lapse
of time or both) a default under any such order, indenture, agreement or other
instrument, and (iv) will not result in the creation or imposition of any lien,
charge, restriction, claim or encumbrance of any nature whatsoever upon any of
the properties or assets of the Corporation except for such exceptions to
clauses (ii)(z), (iii) and (iv) which, individually and in the aggregate, could
not reasonably be expected to have a material adverse effect on the condition
(financial or otherwise), results of operations or business, prospects or
property of the Corporation and its subsidiaries, taken as a whole (a "Material
Adverse Effect"), and which, individually and in the aggregate, could not
reasonably be expected to have any adverse effect on the rights of Investor
under this Agreement, the Stockholders Agreement, the Registration Rights
Agreement, the Marketing Agreement and the Warrant.
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(b) The First Common Shares and, assuming the approval of the
stockholders contemplated by Section 8.3, the Second Common Shares, the Warrant
and the Warrant Shares, have been duly authorized and the Common Shares and the
Warrant Shares, when issued in accordance with this Agreement or the Warrant, as
applicable, will be validly issued, fully paid and nonassessable with no
personal liability attaching to the ownership thereof and will be free and clear
of all liens, charges, restrictions, claims and encumbrances, except as set
forth in the Stockholders Agreement. The issuance, sale and delivery of the
Common Shares, the Warrant and the Warrant Shares are not subject to any
preemptive right of stockholders of the Corporation or to any right of first
refusal or other right in favor of any Person.
Section 2.3. Validity. This Agreement has been duly executed
and delivered by the Corporation and, assuming the due authorization, execution
and delivery thereof by Investor, constitutes its legal, valid and binding
obligation, enforceable in accordance with its terms, except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and (ii) rights of acceleration and the
availability of equitable remedies may be limited by equitable principles of
general applicability. Each of the Registration Rights Agreement, the
Stockholders Agreement, the Marketing Agreement and the Warrant, when executed
and delivered in accordance with this Agreement and assuming the due
authorization, execution and delivery thereof by the other parties thereto, will
constitute a legal, valid and binding obligation of the Corporation, enforceable
in accordance with their respective terms, except as (i) the enforceability
thereof may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and (ii) rights of acceleration and the availability
of equitable remedies may be limited by equitable principles of general
applicability.
Section 2.4. Authorized Capital Stock. (a) The authorized
capital stock of the Corporation consists of 37,500,000 shares of Common Stock
and 10,000,000 shares of Preferred Stock, par value $.001 per share, of which
5,250,000 shares have been designated Series A 9% Convertible Preferred Stock
(the "Series A Preferred Stock"). On October 30, 1998, 7,756,006 shares of
Common Stock and 5,000,000 shares of Series A Preferred Stock will be validly
issued and outstanding, fully paid and nonassessable with no personal liability
attaching to the ownership thereof. The Series A Preferred Stock is the only
series of Preferred Stock of the Corporation issued and outstanding. The
designations, powers, preferences, rights, qualifications, limitations and
restrictions in respect of each class and series of authorized capital stock of
the Corporation are as set forth in the Charter and the Certificate of
Designation of the Series A Preferred Stock and amendments thereto (the
"Certificate of Designation"), and all such designations, powers, preferences,
rights, qualifications, limitations and restrictions are valid, binding and
enforceable and in accordance with all applicable laws. Except as set forth in
the Charter, Certificate of Designation or SEC Documents (as defined herein),
(i) no subscription, warrant, option, convertible security, or other right
(contingent or otherwise) to purchase or otherwise acquire equity securities of
the Corporation from the Corporation or any of its subsidiaries is authorized or
outstanding and (ii) there is no commitment by the Corporation to
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issue shares, subscriptions, warrants, options, convertible securities, or
other such rights or to distribute to holders of any of its equity securities
any evidence of indebtedness or asset. Except as provided for in the Charter or
the Certificate of Designation or as set forth in the SEC Documents, the
Corporation has no obligation (contingent or otherwise) to purchase, redeem or
otherwise acquire any of its equity securities or any interest therein or to pay
any dividend or make any other distribution in respect thereof. The Corporation
does not know of any voting trusts or agreements, stockholders agreements,
pledge agreements, buy-sell agreements, rights of first refusal, preemptive
rights or proxies relating to any securities of the Corporation or any of its
subsidiaries (whether or not any of them is a party thereto), except for this
Agreement and the Stockholders Agreement. All of the outstanding securities of
the Corporation have been issued in compliance in all material respects with all
applicable Federal and state securities laws. Except for the Registration Rights
Agreement, or as set forth in the SEC Documents or as set forth in Schedule 2.4
hereof, there are no agreements or understandings granting to any Person any
right to cause the Corporation to effect the registration under the Securities
Act of 1933, as amended (the "Securities Act"), of any shares of its capital
stock.
(b) The Corporation has reserved, and at all times from and
after the date hereof will keep reserved, free from preemptive rights, out of
its authorized but unissued shares of Common Stock, solely for the purpose of
effecting the exercise of the Warrant, sufficient shares of Common Stock to
provide for the full exercise of the Warrant. The foregoing reservation of
shares of Common Stock shall at all times assume that the Warrant will be
exercisable into the maximum number of shares of Common Stock issuable upon such
exercise.
Section 2.5. SEC Documents. Except as set forth in Schedule
2.5(a) hereof, the Corporation has filed all documents required to be filed by
it with the Securities and Exchange Commission (the "SEC") since January 1,
1996. As of their respective dates, all documents filed by the Corporation with
the SEC since January 1, 1996 (the "SEC Documents") complied in all material
respects with the requirements of the Securities Act or the Exchange Act, as the
case may be, and none of the SEC Documents included an untrue statement of a
material fact or omitted to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The consolidated financial statements of the Corporation
included in the SEC Documents complied as to form in all material respects with
the applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles (except, in the case of the unaudited statements,
as permitted by Form 10-QSB of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated therein or in the notes thereto)
and fairly present the consolidated financial position of the Corporation and
its consolidated subsidiaries as of the respective dates thereof and the
consolidated results of their operations and their consolidated cash flows for
the respective periods then ended (subject, in the case of the unaudited
statements, to normal year-end audit adjustments and to any other adjustments
described therein). Except as set forth in the SEC
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Documents and Schedule 2.5(b) hereof, since January 1, 1998, (i) there has been
no change in the assets, liabilities or financial condition of the Corporation,
except for changes in the ordinary course of business which individually or in
the aggregate have not been materially adverse, and (ii) the condition
(financial or otherwise), results of operations or business, prospects or
property of the Corporation has not been materially adversely affected by any
occurrence, state of facts or development, individually or in the aggregate,
whether or not insured against.
Section 2.6. Events Subsequent to January 1, 1998. Except as
set forth in the SEC Documents and in Schedule 2.6, since January 1, 1998, the
Corporation has not (i) issued any stock, bond or other security (except shares
issued in connection with the exercise of employee stock options), (ii) borrowed
any amount or incurred or become subject to any liability (absolute, accrued or
contingent), except current liabilities incurred in the ordinary course of
business and liabilities under contracts entered into in the ordinary course of
business, (iii) declared or made any payment or distribution to equity holders
or purchased or redeemed any share of its capital stock or other security, (iv)
mortgaged, pledged or subjected to lien any of its assets, tangible or
intangible, other than liens for current taxes not yet due and payable, except
for mortgages, pledges or liens that do not exceed $50,000 in the aggregate, (v)
sold, assigned or transferred any of its assets except in the ordinary course of
business, or canceled any debt or claim, (vi) suffered any material loss of
property or waived any right of substantial value whether or not in the ordinary
course of business, (vii) made any material change to the Corporation's employee
benefit plans, (viii) made any change in the Corporation's accounting principles
and practices, (ix) made any material change in the manner of business or
operations, (x) entered into any material transaction except in the ordinary
course of business or as otherwise contemplated hereby or (xi) entered into any
commitment (contingent or otherwise) to do any of the foregoing.
Section 2.7. Litigation; Compliance with Law. Except as set
forth in the SEC Documents and in Schedule 2.7, there is no (i) action, suit,
claim, proceeding or investigation pending or, to the knowledge of the
Corporation, threatened against the Corporation or its assets, at law or in
equity, or before or by any Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, (ii) arbitration proceeding relating to the Corporation or (iii)
governmental inquiry pending or, to the knowledge of the Corporation, threatened
against or affecting the Corporation (including, without limitation, any inquiry
as to the qualification of the Corporation to hold or receive any license or
permit), and there is no basis for any of the foregoing which, in each case,
could reasonably be expected to have a Material Adverse Effect. The Corporation
is not in default with respect to any order, writ, injunction or decree known to
or served upon the Corporation of any court or of any Federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign. There is no action or suit by the
Corporation pending or threatened against others. The Corporation has complied
with all laws, rules, regulations and orders applicable to its business,
operations, properties, assets, products and services, except for such failures
to comply which, individually and in the aggregate, would
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not have a Material Adverse Effect, and the Corporation has all necessary
permits, licenses and other authorizations required to conduct its business in
all material respects as conducted. To the knowledge of the Corporation, there
is no existing rule, regulation or order, whether Federal or state, which would
prohibit or restrict the Corporation from, or otherwise materially adversely
affect the Corporation in, conducting its business in any jurisdiction in which
it is now conducting business or in which it proposes to conduct business.
Section 2.8. Proprietary Information of Third Parties;
Intellectual Property. (a) No third party has claimed in writing or, to the
knowledge of the Corporation, has a valid basis to claim that any Person
employed by or affiliated with the Corporation has (i) violated or is violating
any of the terms or conditions of such Person's employment, non-competition or
nondisclosure agreement with such third party, (ii) disclosed or is disclosing
or utilized or is utilizing any trade secret or proprietary information or
documentation of such third party or (iii) interfered or is interfering in the
employment relationship between such third party and any of its present or
former employees. No third party has requested in writing information from the
Corporation which could reasonably be interpreted to suggest that such a claim
might be contemplated. To the knowledge of the Corporation, no Person employed
by or affiliated with the Corporation has employed or proposes to employ, any
trade secret or any information or documentation in violation of the proprietary
rights of any former employer, and, to the knowledge of the Corporation, no
Person employed by or affiliated with the Corporation has violated any
confidential relationship which such Person may have had with any third party,
in connection with the development, manufacture or sale of any product or
proposed product or the development or sale of any service or proposed service
of the Corporation and there is no reason to believe there will be any such
employment or violation. To the knowledge of the Corporation, none of the
execution, delivery or performance of this Agreement, or the carrying on of the
business of the Corporation as officers, employees or agents by any officer,
director or key employee of the Corporation or the conduct or proposed conduct
of the business of the Corporation will conflict with or result in a breach of
the terms, conditions or provisions of or constitute a default under any
contract, covenant or instrument under which any such Person is obligated.
(b) The Corporation owns or possesses all licenses or other
rights to use all patents, patent applications, trademarks, trademark
applications, service marks, service xxxx applications, Internet domain names,
trade names, software, copyrights, manufacturing processes, formulae, trade
secrets and know how (collectively, "Intellectual Property") necessary to the
conduct of its business as conducted and, to the knowledge of the Corporation,
as proposed to be conducted, and no claim is pending or, to the knowledge of the
Corporation, threatened to the effect that the operations of the Corporation
infringe upon, misappropriate, violate or conflict with the asserted rights of
any other Person under any Intellectual Property. To the knowledge of the
Corporation there is no valid basis for any such claim (whether or not pending
or threatened). No claim is pending or, to the knowledge of the Corporation,
threatened to the effect that any
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such Intellectual Property owned or licensed by the Corporation, or which the
Corporation otherwise has the right to use, is invalid or unenforceable by the
Corporation, and, to the knowledge of the Corporation, there is no basis for any
such claim (whether or not pending or threatened). Except as set forth in
Schedule 2.8 hereof, the Corporation has not granted or assigned to any other
Person or entity any right to license or sell the software of the Corporation.
Section 2.9. Title to Properties. The Corporation has good
title to its properties and assets reflected on the balance sheet included in
the Corporation's 10-QSB for the quarter ended June 30, 1998 (the "Balance
Sheet") or acquired since the date of the Balance Sheet (other than properties
and assets disposed of in the ordinary course of business since the date of the
Balance Sheet), and all such properties and assets of the Corporation are, and
at each of the First Closing and Second Closing will be, free and clear of
mortgages, pledges, security interests, liens, charges, claims, restrictions and
other encumbrances, except for liens for or current taxes not yet due and
payable and minor imperfections of title, if any, not material in nature or
amount and not materially detracting from the value or impairing the use of the
property subject thereto or impairing the operations or proposed operations of
the Corporation.
Section 2.10. Taxes. (i) The Corporation has timely filed all
Federal, state, county, local and foreign tax returns required to be filed by it
except where failures to file such tax returns would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Corporation; (ii) all such tax returns are complete and accurate except where
failures of such tax returns to be complete and accurate would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect on
the Corporation; (iii) the Corporation has paid all taxes shown to be due by
such returns as well as all other taxes, assessments and governmental charges
that have become due or payable except where failures to pay such taxes would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Corporation; (iv) the Corporation has withheld and
collected all amounts required to be withheld from amounts owing to employees,
creditors and third parties except where failures to withhold and collect such
taxes would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on the Corporation; (v) adequate reserves have
been established for all taxes accrued but not yet payable except where failures
to establish such reserves would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Corporation;
(vi) no deficiency or adjustment of the Corporation's Federal, state, county,
local or foreign taxes has been asserted or proposed, or is pending or
threatened except where such deficiencies or adjustments did not or would not
reasonably be expected to, individually or in the aggregate, have a Material
Adverse Effect on the Corporation; (vii) there are no tax liens outstanding
against the assets, properties or business of the Corporation other than liens
for current taxes not yet due and payable except where such liens would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Corporation; and (viii) the Corporation has never been a
member of any "affiliated
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group" for federal income tax purposes, or any similar group for tax purposes,
other than the group of which it is currently a member.
Section 2.11. Status of Contracts. The Corporation and, to the
knowledge of the Corporation, each other party thereto have in all material
respects performed all the obligations required to be performed by them to date,
have received no notice of default and are not in default (with due notice or
lapse of time or both) under any lease, agreement or contract now in effect to
which the Corporation is a party or by which it or its property may be bound nor
is there or is there alleged to be any basis for termination thereof, other than
for such exceptions to the foregoing, which, individually and in the aggregate,
would not have a Material Adverse Effect.
Section 2.12. Governmental Approvals. Subject to the accuracy
of the representations and warranties of Investor set forth in Section 3.3, no
registration or filing with, or consent or approval of or other action by, any
Federal, state or other governmental agency or instrumentality is or will be
necessary for the valid execution, delivery and performance by the Corporation
of this Agreement, the Registration Rights Agreement, the Stockholders
Agreement, the Marketing Agreement or the issuance, sale and delivery of the
Common Shares, the Warrant and the Warrant Shares, other than filings to be made
with the SEC in connection with the stockholders meeting contemplated by Section
8.3 and with respect to the Registration Rights Agreement, the registration of
the shares covered thereby with the SEC and filings pursuant to state securities
laws provided therein and those filings that may be required under any
applicable state securities laws which filings shall be made in a timely
fashion.
Section 2.13. Disclosure. This Agreement does not contain any
untrue statement of a material fact. The statements, documents, certificates or
other items prepared and supplied by the Corporation with respect to the
transactions contemplated hereby, taken together with the SEC Documents, do not
contain any untrue statement of a material fact or omit any material fact
necessary to make the statements contained therein not misleading.
Section 2.14. Brokers. Except as set forth in Schedule 2.14,
the Corporation has no contract, arrangement or understanding with any broker,
finder or similar agent with respect to the transactions contemplated by this
Agreement for which the Corporation shall have any liability or responsibility.
Section 2.15. Transactions With Affiliates. Except as
disclosed in the SEC Documents and Schedule 2.15, no director, officer, employee
or stockholder owning more than 5% of the outstanding capital stock of the
Corporation, or member of the family of any such Person, or any corporation,
partnership, trust or other entity in which any such Person, or any member of
the family of any such Person, has a substantial interest or is an officer,
director, trustee, partner or holder of more than 5% of the outstanding capital
stock thereof, is a party to any transaction with the Corporation, including any
contract, agreement or other arrangement
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providing for the employment of, furnishing of services by, rental of real or
personal property from or otherwise requiring payments to any such Person, if in
each case such transaction was required to be disclosed in such SEC Documents.
The Corporation has terminated its relationship with Sierra Advertising and has
no obligation to make any further payments in excess of $10,000 in the aggregate
to, or obtain services from, Sierra Advertising.
Section 2.16. Employees. To the knowledge of the Corporation,
other than in connection with the closing of the seminar division, no officer or
key employee of the Corporation has advised the Corporation, orally or in
writing, that he or she intends to terminate employment with the Corporation
during the 24 months succeeding the date hereof. The Corporation has complied in
all material respects with all applicable laws relating to the employment of
labor, including provisions relating to wages, hours, equal opportunity and
collective bargaining, and with the Employee Retirement Income Security Act of
1974, as amended, except for such failures to comply which, individually and in
the aggregate, would not have a Material Adverse Effect.
Section 2.17. Significant Customers and Suppliers. No customer
or supplier which was significant to the Corporation during the last 12 months
or is significant to its projected future results for the next 12 months, has
terminated, materially reduced or threatened to terminate or materially reduce
its purchases from or provision of products or services to it.
ARTICLE III
Representations and Warranties of Investor
Investor represents and warrants to the Corporation as
follows:
Section 3.1. Organization, Qualifications and Corporate Power.
Investor is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Florida. The Corporation has the
corporate power and authority to execute, deliver and perform this Agreement,
the Registration Rights Agreement, the Stockholders Agreement, and the Marketing
Agreement, and to purchase and receive the Common Shares and the Warrant.
Section 3.2. Authorization of Agreements, Etc. Investor has
taken all corporate action necessary to authorize its execution and delivery of
this Agreement, the Registration Rights Agreement, the Stockholders Agreement
and the Marketing Agreement, its performance of the obligations thereunder, and
its consummation of the transactions contemplated thereby. This Agreement has
been executed and delivered by an authorized representative of Investor in
accordance with such authorization. Assuming the due authorization, execution
and delivery hereof by the Corporation, this Agreement constitutes the legal,
valid and binding obligation of Investor, enforceable in accordance with its
terms. Each of the Registration Rights Agreement,
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the Stockholders Agreement and the Marketing Agreement, when executed and
delivered in accordance with this Agreement and assuming the due authorization,
execution and delivery thereof by the other parties thereto, will constitute a
legal, valid and binding obligation of Investor, enforceable in accordance with
their respective terms, except as (i) the enforceability thereof may be limited
by bankruptcy, insolvency or similar laws affecting creditors' rights generally
and (ii) rights of acceleration and the availability of equitable remedies may
be limited by equitable principles of general applicability.
Section 3.3. Investment Representation. Investor is acquiring
the Common Shares and will acquire the Warrant and Warrant Shares for Investor's
own account and not with a view to reselling or distributing such securities in
any transaction which would constitute a "distribution" within the meaning of
the Securities Act. Investor has such knowledge and experience in financial and
business matters that Investor is capable of evaluating the merits and risks of
the investment in the Common Shares and the Warrant. Investor understands that
the Common Shares and, when issued, the Warrant and the Warrant Shares have not
been registered under the Securities Act or any applicable state securities laws
(collectively, the "Acts") and that the Corporation is relying upon exemptions
from registration under the Acts based in part on Investor's representations
under this Agreement, and that the Common Shares and, when issued, the Warrant
and the Warrant Shares may not be resold without registration under the Acts or
an exemption therefrom. Investor has had the opportunity to ask questions of,
and receive answers from, the Corporation concerning the terms and conditions of
the offering of the Common Shares and the Warrant and the Warrant Shares and to
obtain additional information (including, without limitation, documents) about
the Corporation and it has obtained such information. Investor is not an entity
formed solely to make this investment. Investor is an "accredited investor" as
defined in Rule 501 promulgated under the Securities Act.
Section 3.4. Brokers and Finders. No Person or entity acting
on behalf or under the authority of Investor is or will be entitled to any
broker's, finder's or similar fee or commission in connection with the
transaction contemplated hereby.
ARTICLE IV
Conditions to First Closing and Second Closing
Section 4.1. Conditions to First Closing by Investor. The
obligation of Investor to purchase the First Common Shares at the First Closing
is subject to the fulfillment to the reasonable satisfaction of Investor at or
prior to the First Closing of each of the following conditions:
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(a) Accuracy of Representations and Warranties. The
representations and warranties of the Corporation contained in this Agreement or
any agreement, instrument or certificate delivered pursuant hereto which are
qualified as to materiality shall be true, correct and complete, and those
representation and warranties which are not so qualified shall be true, correct
and complete in all material respects, in each case, on and as of the First
Closing Date, and the Corporation, with respect to the representations and
warranties of the Corporation, shall have delivered to Investor a certificate of
the President and Chief Financial Officer of the Corporation, dated the First
Closing Date, to that effect.
(b) Performance. All covenants, agreements and conditions
contained in this Agreement to be performed or complied with by the Corporation
on or prior to the First Closing Date shall have been performed or complied with
in all material respects and the Corporation shall have delivered to Investor a
certificate of the President and Chief Financial Officer of the Corporation,
dated the First Closing Date, to that effect.
(c) Qualifications. On or prior to the First Closing Date, all
authorizations, approvals or permits of, or filings with, any governmental
authority that are required prior to the First Closing in connection with the
issuance of the First Common Shares and the consummation of the transactions
contemplated by this Agreement shall have been duly obtained and shall be
effective on and as of the First Closing Date.
(d) Secretary's Certificate. At the First Closing, the
Corporation shall have delivered to Investor copies of the Charter, certified by
the Secretary of State of the State of Nevada, and copies of each of the
following, in each case certified as of the First Closing Date by the Secretary
of the Corporation:
(i) the By-laws;
(ii) resolutions of the Board of Directors of the
Corporation, authorizing and approving, as appropriate, this
Agreement and the transactions contemplated hereby, the
execution, issuance, sale and delivery of the Common Shares
and execution, issuance, sale, delivery and performance of the
Warrant, and the execution, delivery and performance of the
Registration Rights Agreement, the Stockholders Agreement, the
Marketing Agreement and the transactions contemplated hereby
and thereby; and
(iii) the signatures and incumbency of the officers
of the Corporation authorized to execute and deliver the
documents to which the Corporation is a party.
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(e) Good Standing Certificates. At the First Closing, the
Corporation shall have delivered to Investor a good standing certificate dated
not more than five business days prior to the First Closing Date relating to the
Corporation from the State of Nevada.
(f) Consents. At the First Closing, the Corporation shall have
delivered to Investor copies of all consents and approvals of third parties
required under any licenses or agreements or otherwise in connection with the
execution, delivery or performance by the Corporation of this Agreement or any
of the other agreements or documents contemplated hereby.
(g) Registration Rights Agreement. At the First Closing, the
Corporation shall have executed and delivered to Investor the Registration
Rights Agreement.
(h) Stockholders Agreement. At the First Closing, the
Corporation and the other parties thereto (other than Investor) shall have
executed and delivered to Investor the Stockholders Agreement.
(i) Marketing Agreement. At the First Closing, the Corporation
shall have executed and delivered to Investor the Marketing Agreement.
(j) Legal Opinion. At the First Closing, Xxxxxx & Xxxxxxx
shall have delivered to Investor an opinion, dated the First Closing Date,
addressed to the Investor and in the form attached hereto as Exhibit E.
(k) Additional Documents. Investor shall have received such
other documents, instruments, approvals or opinions as Investor may reasonably
request.
Section 4.2. Conditions to First Closing by the Corporation.
The obligation of the Corporation to issue the First Common Shares at the First
Closing is subject to the fulfillment to the reasonable satisfaction of
Corporation at or prior to the First Closing of each of the following
conditions:
(a) Stockholders Agreement. At the First Closing, the Investor
shall have executed and delivered to the Corporation the Stockholders Agreement.
(b) Marketing Agreement. At the First Closing, the Investor
shall have executed and delivered to the Corporation the Marketing Agreement.
Section 4.3. Conditions to Second Closing by Investor. The
obligation of Investor to purchase the Second Common Shares at the Second
Closing is subject to the
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fulfillment to the reasonable satisfaction of Investor at or prior to the Second
Closing of each of the following conditions:
(a) Accuracy of Representations and Warranties. The
representations and warranties of the Corporation contained in this Agreement or
any agreement, instrument or certificate delivered pursuant hereto which are
qualified as to materiality shall be true, correct and complete, and those
representation and warranties which are not so qualified shall be true, correct
and complete in all material respects, in each case, on and as of the Second
Closing Date, and the Corporation, with respect to the representations and
warranties of the Corporation, shall have delivered to Investor a certificate of
the President and Chief Financial Officer of the Corporation, dated the Second
Closing Date, to that effect.
(b) Stockholder Approval. The issuance of the Second Common
Shares, the Warrant and the Warrant Shares shall have been approved by the
requisite vote of stockholders of the Corporation in accordance with the
applicable Nasdaq Marketplace Rules.
(c) Performance. All covenants, agreements and conditions
contained in this Agreement to be performed or complied with by the Corporation
on or prior to the Second Closing Date shall have been performed or complied
with in all material respects and the Corporation shall have delivered to
Investor a certificate of the President and Chief Financial Officer of the
Corporation, dated the Second Closing Date, to that effect.
(d) Qualifications. On or prior to the Second Closing Date,
all authorizations, approvals or permits of, or filings with, any governmental
authority that are required prior to the Second Closing in connection with the
issuance of the Second Common Shares and the consummation of the transactions
contemplated by this Agreement shall have been duly obtained and shall be
effective on and as of the Second Closing Date.
(e) Secretary's Certificate. At the Second Closing, the
Corporation shall have delivered to Investor copies of the Charter, certified by
the Secretary of State of the State of Nevada, and copies of each of the
following, in each case certified as of the Second Closing Date by the Secretary
of the Corporation:
(i) the By-laws;
(ii) resolutions of the Board of Directors of the
Corporation, authorizing and approving, as appropriate, this
Agreement and the transactions contemplated hereby and the
execution, issuance, sale and delivery of the Second Common
Shares; and
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(iii) the signatures and incumbency of the officers
of the Corporation authorized to execute and deliver the
documents to which the Corporation is a party.
(f) Good Standing Certificates. At the Second Closing, the
Corporation shall have delivered to Investor a good standing certificate dated
not more than five business days prior to the Second Closing Date relating to
the Corporation from the State of Nevada.
(g) Consents. At the Second Closing, the Corporation shall
have delivered to Investor copies of all consents and approvals of third parties
required under any licenses or agreements or otherwise in connection with the
execution, delivery or performance by the Corporation of this Agreement or any
of the other agreements or documents contemplated hereby.
(h) Legal Opinion. At the Second Closing, Xxxxxx & Xxxxxxx
shall have delivered to Investor an opinion, dated the Second Closing Date,
addressed to the Investor and in the form attached hereto as Exhibit E.
(i) Additional Documents. Investor shall have received such
other documents, instruments, approvals or opinions as Investor may reasonably
request.
Section 4.4. Conditions to Second Closing by the Corporation.
The obligation of the Corporation to issue the Second Common Shares at the
Second Closing is subject to the fulfillment to the reasonable satisfaction of
Corporation at or prior to the Second Closing of the following condition:
(a) Stockholder Approval. The issuance of the Second Common
Shares, the Warrant and the Warrant Shares shall have been approved by the
requisite vote of stockholders of the Corporation in accordance with the
applicable Nasdaq Marketplace Rules. .
ARTICLE V
Reporting and Inspection
The Corporation hereby covenants and agrees:
5.1. Confidential Information. Each party hereto agrees that
it will keep (and will cause each of its affiliates and its and their respective
directors, officers, employees, representatives, agents, advisors, consultants,
counsel, external or internal auditors and independent contractors to whom
disclosure may be made in connection with the negotiation and
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performance of this Agreement or any agreement entered into in connection with
this Agreement to keep) in confidence all documents, materials and other
information which it shall have obtained or will obtain regarding the other
parties during the course of the negotiations leading to the execution of this
Agreement (whether obtained before or after the date of this Agreement) or at
any time at which Investor or any of its affiliates own Common Stock. Such
documents, information and materials shall not be communicated to any third
person (other than counsel, accountants or financial advisors of Investor, the
Corporation, employees of Investor and the Corporation and their affiliates who
have a need to know and any Alliance that has agreed to bound by the provision
of this Section 5.1). Investor shall not use such documents, materials and other
information in any manner competitive with the Corporation. The obligation of
each party to treat such documents, materials and other information in
confidence shall not apply to any information which (i) is or becomes available
to such party from a source other than another party, which source was not
itself known to such party after due inquiry to be bound by a confidentiality
agreement and was not known by such party after due inquiry to have received
such information, directly or indirectly, from a person or entity so bound, (ii)
is or becomes available to the public other than as a result of disclosure by
such party or its agents, (iii) is required to be disclosed under applicable
requirements of law or judicial or administrative process, but only to the
extent it must be disclosed or (iv) such party reasonably deems necessary to
disclose in connection with any judicial or arbitral proceeding to enforce any
rights of such party under this Agreement or any agreement entered into in
connection herewith or otherwise relating to the transactions contemplated
hereby or thereby, but subject to cooperation with the other party to maintain
the confidentiality of such disclosed information.
Section 5.2. Certain Information. The Corporation will provide
to Investor by telephone communication to a representative of Investor
designated for this purpose (or, at the election of the Corporation, in
writing):
(a) promptly upon the occurrence thereof, notice of any
material disputes with any significant customer or supplier or the
occurrence of any other event which has had, or could reasonably be
expected to have, a Material Adverse Effect;
(b) promptly upon the Corporation's receipt of written notice
thereof, written notice of (i) any material pending litigation
affecting the Corporation or any of its subsidiaries, whether or not
the claim is considered by the Corporation to be covered by insurance,
and (ii) any material pending administrative or arbitration proceeding
or investigation, or the receipt by the Corporation or any of its
subsidiaries of any material notice or order from any regulatory body
or agency having jurisdiction over the Corporation or any of its
subsidiaries;
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(c) promptly upon the Corporation obtaining knowledge thereof,
notice of (i) any change in the business or affairs of the Corporation
or any of its subsidiaries which has had, or could have, a Material
Adverse Effect; (ii) any breach of any of its covenants,
representations or warranties set forth in this Agreement; and (iii) a
default by the Corporation or any of its subsidiaries under any note,
indenture, loan agreement, mortgage, lease, deed or other material
agreement to which the Corporation or such subsidiary is a party or by
which the Corporation or any such subsidiary is bound, which default
constitutes a payment default or a default that entitles, or with
notice or lapse of time or both would entitle, the holder of such note,
indenture, loan agreement, mortgage, lease, deed or other agreement to
accelerate the payment or other obligations of the Corporation or such
subsidiary thereunder provided such acceleration would constitute a
Material Adverse Effect; and
(d) with reasonable promptness, such other data, reports and
information as from time to time Investor may reasonably request and
such data, press releases, reports and information as the Corporation
or any of its subsidiaries may from time to time furnish to holders of
its securities.
ARTICLE VI
Additional Covenants
Section 6.1. Directors' Expenses. The Corporation shall
reimburse each of its directors for the reasonable out-of-pocket expenses
incurred by such director in attending meetings of the Board of Directors or any
committee thereof and for otherwise fulfilling his fiduciary obligations as a
director of the Corporation.
Section 6.2. Directors' Meetings. The Corporation shall use
its reasonable best efforts to cause meetings of its Board of Directors
periodically but not less often than quarterly.
Section 6.3. Indemnification. (a) The Corporation shall
indemnify, defend and hold Investor and its directors, officers, employees,
affiliates and agents (collectively, the "Indemnified Persons") harmless from
and against and in respect of any and all claims, demands, losses, costs,
expenses, obligations, liabilities, damages, recoveries and deficiencies,
including, without limitation, interest, penalties, court costs and attorneys'
fees (collectively, "Losses"), that any Indemnified Person shall incur or
suffer, which arise, result from, or relate to (i) any breach or alleged breach
of, or failure or alleged failure by the Corporation to perform, any of its
representations, warranties, covenants or agreements in this Agreement the
Warrant, the Registration Rights Agreement, the Stockholders Agreement, or in
any other agreement or any
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schedule, certificate, exhibit or instrument furnished or to be furnished by the
Corporation hereunder or thereunder (other than the Marketing Agreement), or
(ii) any claim, litigation, investigation or proceeding (whether or not such
Indemnified Person is a party thereto) relating to the performance of this
Agreement or any instrument, document or agreement executed or delivered in
connection herewith (other than the Marketing Agreement); provided, however,
that the indemnity under clause (ii) of this Section 6.3(a) shall not apply to
any such Losses finally determined by a court of competent jurisdiction to have
arisen from the recklessness or willful misconduct of such Indemnified Person.
If the Corporation breaches any representation and warranty contained in Section
2.8 based upon the Corporation's infringement upon, misappropriation, violation
or conflict with a third party's Intellectual Property, which Intellectual
Property is used in the performance of the Corporation's obligations under the
Marketing Agreement, the Indemnified Person shall have the right to require the
Corporation to either (i) promptly license the right to use such Intellectual
Property or (ii) promptly create Intellectual Property with substantially the
same functionality.
(b) If any indemnifiable claim by a third party is made
against any Indemnified Person, such Indemnified Person shall promptly provide
written notice to the Corporation of such claim; provided that the failure to
give such notice shall not affect any rights of such Indemnified Person
hereunder except to the extent the Corporation is materially prejudiced by such
failure to give notice. By delivering written notice to such Indemnified Person
within 15 days after receipt of such Indemnified Person's notice, the
Corporation may, or upon written request of such Indemnified Person shall,
assume the defense of such claim at its sole expense through counsel reasonably
satisfactory to such Indemnified Person, provided that (i) the Corporation shall
not permit any lien, encumbrance or other adverse charge upon any asset of such
Indemnified Person, (ii) the Corporation shall permit such Indemnified Person to
participate in such settlement or defense through counsel selected by such
Indemnified Person at such Indemnified Person's expense, and (iii) the
Corporation shall agree to promptly reimburse such Indemnified Person for the
full amount of its liability to the third party claimant provided such liability
is indemnifiable under Section 6.3(a). If the Corporation shall not have
employed counsel to defend such claim or if such Indemnified Person shall have
reasonably concluded (with the written advice of counsel) that the position of
such Indemnified Person and the Corporation may be in conflict, the Corporation
shall not have the right to direct the defense of any such claim on behalf of
such Indemnified Person and the reasonable legal and other expenses incurred by
such Indemnified Person shall be borne by the Corporation. Notwithstanding the
foregoing, each Indemnified Person shall have the right to pay or settle any
such claim provided in such event it shall waive its right to indemnity therefor
by the Corporation.
Section 6.4. No Solicitation. From and after the date hereof
and through the date of the stockholders meeting contemplated by Section 8.3,
the Corporation shall not, and shall use its reasonable best efforts to ensure
that any of its directors, officers, employees, attorneys, financial advisors,
agents or other representatives or those of any of its subsidiaries do not,
directly or indirectly, solicit, initiate or encourage any competing offers,
investments or
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transactions similar to the transactions contemplated hereby, which offers,
investments or transactions would reasonably be considered inconsistent with or
would materially delay the consummation of the transactions contemplated hereby,
nor engage in or continue discussions or negotiations relating to any such
offers, investments or transactions; provided, however, that the Corporation may
engage in discussions or negotiations with, or furnish information concerning
the Corporation and its properties, assets and business to (without, in each
case, directly or indirectly soliciting, initiating or encouraging discussions
or negotiations) any Person if the Board of Directors of the Corporation
reasonably concludes in good faith after consultation with its outside counsel
that the failure to take such action would be inconsistent with the fiduciary
obligations of such Board of Directors under applicable law.
Section 6.5. Use of Proceeds. The Corporation shall use the
net proceeds received by the Corporation from the sale of the Common Shares
solely for activities directly related to (i) the Stuff Site and the Mall Site
(as such terms are defined in the Marketing Agreement), (ii) the Corporation's
electronic commerce solutions, designed so as to benefit Investor, and (iii)
such other purposes to which the Corporation and Investor agree in writing.
Section 6.6. Sale of Common Stock. Without limiting the effect
of Section 8.4, Investor shall use reasonable best efforts to ensure that it
shall not transfer any of the Common Shares, the Warrant Shares or the Warrant
to any Person or group which, to the knowledge of Investor, after due inquiry,
owns, or as a result of such transfer would own, more than 5% of the outstanding
Voting Securities or more than 5% of the Total Voting Power (as each is defined
below) of the Corporation; provided that, the foregoing shall not prohibit
Investor from making any transfer to: (i) any Significant Stockholder (as
defined in the Stockholders Agreement) pursuant to the exercise by such
Significant Stockholder of an Option (as defined in the Stockholders Agreement);
(ii) any affiliate of Investor that agrees to be bound by the terms and
provisions of Section 6.6, Article VII and Section 8.4 of this Agreement and the
Stockholders Agreement as though a party to such provisions or agreement,
respectively; (iii) any Alliance that agrees to be bound by the terms and
provisions of Section 6.6, Article VII and Section 8.4 of this Agreement and the
Stockholders Agreement as though a party to such provisions or agreement,
respectively; provided, however, that, subject to Section 3.1(a) of the
Stockholders Agreement, such Alliance shall not be required to bind any of its
affiliates to any of the provisions of this Agreement or the Stockholders
Agreement; (iv) at any time after December 31, 1999, an offeror under any tender
or exchange offer made pursuant to Section 14(d) of the Securities Exchange Act
of 1934, as amended; or (v) at any time on or before December 31, 1999, an
offeror under any tender or exchange offer made pursuant to Section 14(d) of the
Securities Exchange Act of 1934, as amended, whose tender offer or exchange
offer is recommended by the Board of Directors.
Section 6.7. Exchange of Certificates. Upon surrender by any
holder to the Corporation of any certificate or certificates evidencing any
securities (including the Common
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Shares, the Warrant Shares and the Warrant), the Corporation at its expense will
issue in exchange therefor, and deliver to such holder, new certificates, as the
case may be, in such denomination or denominations as may be requested by such
holder. Upon receipt of evidence reasonably satisfactory to the Corporation of
the loss, theft, destruction or mutilation of any security issued by it and in
case of any such loss, theft or destruction, upon delivery of an indemnity
agreement reasonably satisfactory to the Corporation, and in the case of any
such mutilation, upon surrender and cancellation of such security, the
Corporation at its expense will issue and deliver to any such holder a new
security of like tenor, in lieu of such lost, stolen, destroyed or mutilated
certificate.
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ARTICLE VII
Standstill
Section 7.1. Certain Definitions. For purposes of this
Agreement: (i) the term "beneficially own" (or any similar phrase) has the
meaning set forth in Rule 13d-3 under the Securities Exchange Act of 1934, as
amended; (ii) the term "Voting Securities" shall mean any securities entitled to
vote generally in the election of directors of the Corporation or its
successors, securities convertible or exchangeable into or exchangeable for such
securities and any rights or options to acquire any of the foregoing securities;
(iii) the term "Voting Power" shall mean the power to vote generally in the
election of directors (or Persons serving similar functions) of the Corporation
or its successors; (iv) the term "Total Voting Power" shall mean the total
combined Voting Power of all Voting Securities then outstanding plus the
prospective Voting Power of all Voting Securities issuable upon exercise of any
options or warrants beneficially owned by the Investor or any of its
Subsidiaries; (v) the term "Subsidiary", with respect to any Person, shall mean
any corporation or other entity (a) of which a majority of the securities or
other ownership interests generally having Voting Power to elect a majority of
the board of directors or other individuals performing similar functions are at
the time directly or indirectly owned by such Person or (b) as to which such
Person directly or indirectly has the power to elect or designate such majority
of the board of directors or such other individuals; provided, however, such
term shall not include the Alliances (as defined in the Stockholders Agreement);
(vi) the term "Person" shall mean an individual, a corporation, a limited
liability company, a partnership, an association, a trust or any other entity or
organization; and (vii) "Acquisition Proposal" means any proposed acquisition of
Voting Securities representing more than 20% of the Total Voting Power, whether
by business combination, tender or exchange offer, or otherwise, or the proposed
acquisition of all or substantially all the assets of the Corporation and its
Subsidiaries, taken as a whole. A Person shall not be deemed to beneficially own
securities held in a pension fund controlled by the Person. For the purpose of
calculating the Total Voting Power during the Warrant Term (as defined below),
the Investor shall be deemed to beneficially own the Warrant. For purposes of
this Article VII, the term "Affiliate" shall mean First Data Corporation and its
Subsidiaries.
Section 7.2. Acquisitions. Subject to Section 7.3, from the
First Closing until the earlier of (i) the fifth anniversary of the First
Closing or (ii) the third anniversary of the first date as of which the Investor
and its Subsidiaries beneficially own Voting Securities representing less than
5% of the Total Voting Power, without the prior approval of a majority of the
members of the Board of Directors of the Corporation who are not employees or
officers of the Corporation or the Investor or any of their Subsidiaries or
otherwise designated by Investor pursuant to the Stockholders Agreement, the
Investor will not, and will cause each of its Subsidiaries and Affiliates (other
than Alliances) not to, acquire any Voting Securities such that, after giving
effect to such acquisition, the sum of (i) the Voting Securities beneficially
owned by Investor, its
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Subsidiaries and its Affiliates (other than Alliances) and (ii) the Voting
Securities owned by any Alliance which have been transferred to such Alliance by
Investor or any of its Affiliates in compliance with Section 3.1(a) of the
Stockholders Agreement represents more than 39.9% of Total Voting Power;
provided, however, that the provisions of this Section 7.2 shall not require the
Investor, any of its Subsidiaries or Affiliates or any Alliance to sell or
otherwise dispose of Voting Securities representing more than 39.9% of Total
Voting Power (such Voting Securities representing Voting Power in excess of
39.9% of Total Voting Power, "Excess Voting Securities") to the extent that such
Voting Securities constitute Excess Voting Securities as a result of a
repurchase or other retirement of Voting Securities by the Corporation or any of
its Subsidiaries or as a result of purchases made by the Investor, its
Subsidiaries and Affiliates or any Alliance during any period in which the
restrictions contained in this Section 7.2 were suspended pursuant to Section
7.3(b) (irrespective of any subsequent reinstatement thereunder).
Section 7.3. Suspension; Termination. (a) In the event that
the Corporation enters into a written agreement pursuant to which an Acquisition
Proposal is to be effected, then the restrictions set forth in Section 7.2 shall
thereupon terminate.
(b) In the event that any Person (other than the Investor or
any of its Subsidiaries or Affiliates or any Person acting on behalf of or in
participation with any of the foregoing) commences a tender or exchange offer
that, if fully consummated, would result in such Person, together with such
Person's Subsidiaries, or any other Person acting on behalf of or in
participation with such Person or its Subsidiaries, becoming the beneficial
owner of Voting Securities representing more than 20% of the Total Voting Power,
then the restrictions set forth in Section 7.2 shall thereupon be suspended (and
during such period of suspension be of no force and effect). If, upon the
expiration of such tender or exchange offer, the Person making such tender or
exchange offer does not acquire an amount of Voting Securities sufficient to
make the provisions of paragraph (c) of this Section 7.3 applicable, then such
restrictions shall thereupon be reinstated, subject to further suspension or
reinstatement in the event of the occurrence of further events described in the
preceding sentence or this sentence, respectively.
(c) In the event that it is publicly announced or the Investor
or the Corporation shall become aware (in which case it shall promptly notify
the other) that any Person (other than the Investor or any of its Subsidiaries
or Affiliates or any Person acting on behalf of or in participation with any of
the foregoing), together with such Person's Subsidiaries, or any other Person
acting on behalf of or in participation with such Person or its Subsidiaries,
has become the beneficial owner of Voting Securities representing more than 20%
of the Total Voting Power, then the restrictions set forth in Section 7.2 shall
thereupon terminate.
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ARTICLE VIII
Warrant
Section 8.1. Issuance of Warrant. As additional consideration
for entering into this Agreement, subject to Section 8.3, the Corporation shall
issue the Warrant to Investor on the terms and subject to the conditions
provided herein.
(a) Certain Definitions. For purposes of this Agreement: (i)
"Beta Test" shall mean the successful testing of the systems and technologies
provided by the Corporation to logistically support the Mall (as defined in the
Marketing Agreement) as reasonably determined by Investor; (ii) "Electronic
Commerce Tools" shall have the meaning set forth in the Marketing Agreement;
(iii) "Mall Tenant" shall have the meaning set forth in the Marketing Agreement;
(iv) "Subscribers" shall mean all Mall Tenants that Investor and any of its
affiliates or Alliances participated in soliciting; and (iv) "Warrant Term"
shall mean the term beginning on the Closing Date and ending on the earlier of
(A) the second anniversary of the date of completion of the Beta Test and (B)
the date of issuance of the Warrant.
(b) If, at any time during the Warrant Term, the Corporation
has either (i) 25,000 Subscribers using Electronic Commerce Tools or (ii) 50,000
Subscribers for any product, then the Investor shall be entitled to issuance of
the Warrant. Within five business days after the number Subscribers shall have
been determined and such determination shall have become final and binding
pursuant to Section 8.2, if the Investor is entitled to issuance of the Warrant
pursuant to the preceding sentence, the Corporation shall deliver the Warrant to
Investor duly executed by the Corporation and registered in the name of
Investor.
(c) At the time of issuance, the Warrant shall entitle the
holder thereof to purchase 5,000,000 shares of Common Stock at an exercise price
of $17.00 per share; provided, however, that if the Warrant had been issued on
the First Closing Date with such terms and prior to the time at which it is
actually issued pursuant to Section 8.1(b) the number of shares of Common Stock
covered by the Warrant, the exercise price per share or the type of securities
deliverable upon exercise of the Warrant would have been adjusted or changed
pursuant to the terms of the Warrant, then the Warrant shall be issued with such
adjusted or changed terms.
Section 8.2. Determination of Subscribers. (a) Not later than
45 days following the end of each calendar quarter during the Warrant Term and
at the end of the Warrant Term, the Corporation shall deliver to Investor a
certificate (each such certificate being referred to as a "Preliminary Report")
setting forth the Corporation's determination, with respect to such quarter (or,
as applicable, as of the final date of the Warrant Term), the number of
Subscribers using the Electronic Commerce Tools and the number of Subscribers
for any product. Such certificate
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shall be accompanied by a system generated report, if available, and such other
documentation reasonably available and necessary to establish the basis for the
calculation thereof.
(b) Following receipt of the Preliminary Report, Investor may
review the same and, within 30 business days after the date of such receipt, may
deliver to the Corporation a certificate setting forth any objections to the
determinations set forth in the Preliminary Report, together with a summary of
the reasons therefor and calculations which, in its view, are necessary to
eliminate such objections. If Investor does not object within such 30 business
day period, the determinations set forth in the Preliminary Report shall be
final and binding on the Corporation and Investor.
(c) If Investor timely objects within such 30-day period, the
Corporation and Investor shall use their respective reasonable best efforts to
resolve within 60 days after such timely objection by written agreement (the
"Agreed Changes") any differences as to the determinations set forth in the
Preliminary Report. If Investor and the Corporation so resolve any such
differences, the determinations set forth in the Preliminary Report, as adjusted
by the Agreed Changes, shall be final and binding on the Corporation and
Investor.
(d) If any objections timely raised by Investor are not
resolved by the Agreed Changes within the 60-day period contemplated in Section
2.7(c), then the Corporation and Investor shall submit the objections that are
then unresolved to Ernst & Young LLP or any independent accountants of
nationally recognized standing in the United States reasonably satisfactory to
Investor and the Corporation (the "Accounting Firm"). The Accounting Firm shall
be directed by the Corporation and Investor to seek to resolve the unresolved
objections as promptly as reasonably practicable and to deliver written notice
to each of the Corporation and Investor setting forth its resolution of the
disputed matters, and the determinations set forth in the Preliminary Report as
adjusted by the Agreed Changes and such party's resolution of such objections
shall be final and binding on the Corporation and Investor.
(e) The parties hereto shall make available to the Corporation
and Investor, and, if applicable, the Accounting Firm, as the case may be, such
books, records and other information (including work papers) as any of the
foregoing may reasonably request to prepare or review any Preliminary Report or
any matters submitted to the Accounting Firm or system auditor, as the case may
be.
(f) The reasonable fees and expenses of the Accounting Firm
shall be shall be divided equally between the Corporation and Investor.
Section 8.3. Stockholder Meeting; Termination Fee. (a) The
Corporation shall call a meeting of its the stockholders for the purpose of
voting upon approval of the issuance of the Second Common Shares, the Warrant
and the Warrant Shares (the "Share Issuance") to
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Investor pursuant to the terms of this Agreement in accordance with the Nasdaq
Marketplace Rules. Such stockholders meeting shall be held no later than the
later of (a) January 31, 1999 or (b) 45 days after the Corporation has cleared
all comments made by the SEC on the proxy statement (the "Proxy Statement")
filed by the Corporation with the SEC in connection with the vote contemplated
by this Section 8.3 (the "Termination Date"). The Corporation shall, through its
Board of Directors, recommend to the stockholders of the Corporation approval of
issuance of the Warrant and shall not withdraw such recommendation.
(b) The Corporation shall promptly prepare and file with the
SEC the Proxy Statement; provided, however, the Corporation agrees to file a
preliminary copy of the Proxy Statement with the SEC no later than December 11,
1998. The Corporation shall use its reasonable best efforts to have the Proxy
Statement cleared by the SEC as promptly as practicable after such filing. As
promptly as practicable after all of the SEC's comments on the Proxy Statement
have been cleared, the Corporation shall mail the Proxy Statement to its
stockholders.
(c) If the stockholders of the Corporation fail to approve the
Share Issuance prior to the Termination Date, then the Corporation shall pay to
Investor, within five business days after written demand by Investor, the sum of
(i) $1,000,000 and (ii) the Spread Amount (as defined below) by wire transfer of
immediately available funds. "Spread Amount" shall mean the product of (i)
460,000 and (ii) the difference, if positive, between (A) the Closing Price (as
defined in the Warrant) on the last trading day prior to the Termination Date
and (B) $7.00. The Spread Amount shall be equitably adjusted in the event of any
reclassification, stock split or stock dividend with respect to the Common
Stock, any change or conversion of the Common Stock into other securities of the
Corporation or any other dividend or distribution with respect to the Common
Stock prior to the Termination Date. Nothing contained in this Section 8.3(c)
shall be deemed to limit any remedies available to Investor for any breach of
this Agreement by the Corporation which such remedies shall be in addition to
any amounts received by Investor pursuant to this Section 8.3(c); provided,
however, Investor's damages for failure of the stockholders to approve the Share
Issuance shall be limited to the amount provided for in the first sentence of
this Section 8.3(c).
Section 8.4. Non-Transferable Right. During the Warrant Term,
Investor shall not transfer its rights pursuant to this Article VIII other than
to an affiliate of Investor or to an Alliance.
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ARTICLE IX
Miscellaneous
Section 9.1 Confidentiality. Neither the Corporation nor
Investor shall make, nor allow their respective financial consultants,
accountants or lawyers to make, without the prior written consent of the other,
any release to the press or any other public disclosure concerning this
Agreement, the Registration Rights Agreement, the Stockholders Agreement, the
Marketing Agreement or the transactions contemplated hereby or thereby, except
for disclosures made by the Corporation or Investor to their financial
consultants, accountants or lawyers or such public disclosure as may be required
under any applicable law, regulation or government order.
Section 9.2. Amendments. Except as otherwise expressly
provided herein, the provisions of this Agreement may be amended only by a
waiver of any rights of any such holders.
Section 9.3. Survival of Representations and Warranties. All
representations and warranties contained herein or made in writing by any party
in connection herewith will survive the execution and delivery of this
Agreement, the consummation of any closing, and any investigation made at any
time by or on behalf of Investor.
Section 9.4. Successors and Assigns. Except as otherwise
expressly provided herein, all covenants and agreements contained in this
Agreement by or on behalf of any of the parties hereto will bind and inure to
the benefit of the respective successors and assigns of the parties hereto,
whether so expressed or not. In addition, and whether or not any express
assignment has been made, the provisions of this Agreement which are for the
benefit of Investor or holders of the Common Shares or the Warrant are also for
the benefit of, and enforceable by, any subsequent holders.
Section 9.5. Severability. Whenever possible, each provision
of this Agreement will be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
Section 9.6. Descriptive Headings. The descriptive headings of
this Agreement are inserted for convenience of reference only and do not
constitute a part of this Agreement.
Section 9.7. Notices. Any notices required, desired or
permitted to be given hereunder, shall be delivered personally, sent by
overnight courier or mailed, registered or certified mail, return receipt
requested, to the following addresses (or to such other address as each party
may specify in a notice given hereunder) or transmitted by facsimile
transmission
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(with such transmission promptly confirmed by writing delivered
personally, by overnight courier or mailed as provided in this Section 9.7) and
shall be deemed to have been received on the day of personal delivery, one
business day after delivery to the overnight courier service, three business
days after such mailing or, in the case of facsimile transmission, when
received:
If to Investor:
First Data Merchant Services Corporation
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: President
Facsimile: (000) 000-0000
-and-
First Data Merchant Services Corporation
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: General Counsel
Facsimile: (000) 000-0000
with a copy in the case of a notice to Investor to:
Sidley & Austin
Xxx Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxxxxx X. Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
If to the Corporation:
iMall, Inc.
000 Xxxxxxxx Xxxxxxxxx
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxxx
Facsimile: (000) 000-0000
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with a copy in the case of a notice to the Corporation to:
Xxxxxx & Xxxxxxx
000 Xxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxxxx, Esq.
Facsimile: (000) 000-0000
SECTION 9.8. GOVERNING LAW. THE VALIDITY, MEANING AND EFFECT
OF THIS AGREEMENT SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THAT STATE.
Section 9.9. Final Agreement. This Agreement, together with
those documents which are exhibits hereto, constitute the final agreement of the
parties concerning the matters referred to herein and therein, and supersedes
all prior and contemporaneous agreements and understandings.
Section 9.10. Delays or Omissions. No delay or omission to
exercise any right, power or remedy accruing to any holder of Common Shares or
the Warrant upon any breach or default of the Corporation under this Agreement,
the Common Shares, the Warrant, the Registration Rights Agreement, the
Stockholders Agreement, the Marketing Agreement, the Charter or the By-laws, or
any other agreement contemplated hereby or thereby shall impair any such right,
power or remedy of any such holder nor shall it be construed to be a waiver of
any such breach or default, or an acquiescence therein, or of or in any similar
breach or default thereafter occurring; nor shall any waiver of any single
breach or default be deemed a waiver of any other breach or default theretofore
or thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any such holder of any provisions or conditions of this
Agreement, the Common Shares, the Warrant, the Registration Rights Agreement,
the Stockholders Agreement, the Marketing Agreement, the Charter, or the By-laws
must be made in writing and shall be effective only to the extent specifically
set forth in such writing. All remedies, under either this Agreement, the Common
Shares, the Warrant, the Registration Rights Agreement, the Stockholders
Agreement, the Marketing Agreement, the Charter or the By-laws or otherwise
afforded to any holder of Common Shares or Warrant shall be cumulative and not
alternative.
Section 9.11. Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which when so executed and
delivered shall be deemed an original and such counterparts together shall
constitute one instrument.
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Section 9.12. Attorneys' Fees. In the event of any action or
suit based upon or arising out of any actual or alleged breach by any party of
any representation, warranty or agreement in this Agreement, the prevailing
party shall be entitled to recover its reasonable attorneys' fees and expenses
of such action or suit from the other party, in addition to any other relief
ordered by the court.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the 30th day of October, 1998.
iMall, Inc.
----------------------------------------
By: Xxxxxxx X. Xxxxxxxxxx
Title: Chairman and Chief Executive
Officer
First Data Merchant Services Corporation
----------------------------------------
By: Xxxxxxx X. Xxxxxx
Title: Senior Vice President
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EXHIBITS
A Form of Warrant
B Form of Registration Rights Agreement
C Form of Stockholders Agreement
D Form of Marketing Agreement
E Form of Opinion of Counsel
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