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Exhibit 10.12
STOCK AND WARRANT PURCHASE AGREEMENT
STOCK AND WARRANT PURCHASE AGREEMENT ("Agreement") dated as of
November 2, 1999 between SkyMall, Inc., a Nevada corporation (the "Company"),
and each person or entity who executes a counterpart signature page to this
Agreement and is listed as an investor on Schedule I attached to this Agreement
(each individually an "Investor" and collectively the "Investors").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company desires to sell and issue to the Investors
listed on Schedule I, and the Investors listed on Schedule I desire to purchase
from the Company, up to an aggregate of 1,142,885 shares of Common Stock, $.001
par value per share (the "Common Stock"), of the Company on the terms and
conditions set forth herein; and
WHEREAS, each Investor listed on Schedule I will also receive
five-year warrants (the "Warrants"), in the identical form and substance of
Exhibit A attached hereto, to purchase that number of additional shares of
Common Stock equal to the product of 50% multiplied by the number of shares of
Common Stock purchased by such Investor at a per share exercise price equal to
S8.00 per share of Common Stock; and
WHEREAS, the Company has granted the Investors registration rights
with respect to the shares of Common Stock purchased hereunder and the shares of
Common Stock issuable upon exercise of the Warrants (the "Warrant Shares")
pursuant to the terms hereof,
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
"Closing" and "Closing Date" shall have the meanings ascribed to
such terms in Section 1.3 herein.
"Commission" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Holder" and "Holders" shall include an Investor or Investors,
respectively, and any transferee of the shares of Common Stock, the Warrants or
the Warrant Shares or Registrable
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Securities which have not been sold to the public to whom the registration
rights conferred by this Agreement have been transferred in compliance with this
Agreement.
"Registrable Securities" shall mean: (i) the shares of Common Stock
and the Warrant Shares issued or issuable to each Holder or the respective
permitted transferee or designee; (ii) any securities issued (or upon the
conversion or exercise of any warrant, right or other security which is issued)
to each Holder as a result of any stock split, stock dividend, recapitalization
or similar event or upon the exchange of the shares of Common Stock, Warrants,
or Warrant Shares; or (iii) any other security of the Company issued as a
dividend or other distribution with respect to, in exchange of or in replacement
of Registrable Securities.
The terms "register", "registered" and "registration" shall refer to
a registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, including without limitation, Rule 415 under the Securities Act or
any successor rule providing for offering securities on a continuous or delayed
basis, and the declaration or ordering of the effectiveness of such registration
statement by the Commission.
"Registration Expenses" shall mean all expenses to be incurred by
the Company in connection with each Holder's registration rights under this
Agreement, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel for the Company, blue sky
fees and expenses, reasonable fees and disbursements of Xxxxxx, Xxxxxxxxxx &
Xxxxxxxxx LLP or other counsel for Holders (using a single counsel selected by a
majority in the interest of the Holders) for a "due diligence" examination of
the Company and review of the Registration Statement and related documents, and
the expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the
Company, which shall be paid in any event by the Company).
"Registration Statement" shall have the meaning set forth in Section
4.1 (a) herein.
"Regulation D" shall mean Regulation D as promulgated pursuant to
the Securities Act, and as subsequently amended.
"Securities" shall mean the shares of Common Stock, the Warrants and
the Warrant Shares, collectively.
"Securities Act" or "Act" shall mean the Securities Act of 1933, as
amended.
"Selling, Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities, if any,
and all fees and disbursements of counsel for Holders not included within
"Registration Expenses".
ARTICLE I
Purchase and Sale of the Stock and Warrants
Section 1.1 Purchase and Sale. Upon the following terms and
conditions, the Company shall issue and sell to each Investor listed on Schedule
I severally, and each Investor listed on Schedule I severally shall purchase
from the Company, the number of shares of Common Stock and the number of
Warrants indicated next to such Investor's name on Schedule I attached hereto.
Section 1.2 Purchase Price. The per share purchase price for the
shares of Common Stock shall be equal to S7.00 per share of Common Stock (the
"Common Stock Purchase Price"). Each Investor listed on Schedule I will also
receive Warrants to purchase such number of shares of
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Common Stock equal to the product of 50% multiplied by the number of shares of
Common Stock purchased at an exercise price equal to S8.00 per share of Common
Stock.
Section 1.3 The Closing. (a) The closing of the purchase and sale of
the Common Stock and Warrants (the "Closing"), shall take place at the offices
of Squire, Xxxxxxx Xxxxxxx L.L.P, at 10:00 a.m., local time following acceptance
by the Company of subscriptions representing an aggregate of $8,000,200 of
shares of Common Stock, which acceptance shall not occur until the conditions
set forth in Article V hereof shall be fulfilled or waived in accordance
herewith. The date on which the Closing occurs is referred to herein as the
"Closing Date."
(b) On the Closing Date, the Company shall deliver to each Investor
certificates (with the number of and denomination of such certificates
reasonably requested by such Investor) representing the Warrants and the Common
Stock purchased hereunder by such Investor registered in the name of such
Investor or its nominee or deposit such Warrants and Common Stock into accounts
designated by such Investor, and such Investor shall deliver to the Company the
purchase price for the Warrants and Common Stock purchased by such Investor
hereunder by wire transfer in immediately available funds to an account
designated in writing by the Company. In addition, each party shall deliver all
documents, instruments and writings required to be delivered by such party
pursuant to this Agreement at or prior to the Closing Date.
ARTICLE II
Representations and Warranties
Section 2.1 Representations and Warranties of the Company. The Company
hereby makes the following representations and warranties to each of the
Investors from and as of the date hereof through the Closing Date:
(a) Organization and Qualification; Material Adverse Effect. The
Company owns 100% of the outstanding capital stock of each of Durham & Company,
a Utah corporation, Disk Publishing Inc., a Utah corporation, and xxxxxxx.xxx,
Inc. a Nevada corporation (collectively, the "Subsidiaries"). The Company does
not have any other direct or indirect subsidiaries. Each of the Company and its
Subsidiaries is a corporation duly incorporated and validly existing and in good
standing under the laws of its respective jurisdiction of incorporation and the
Company and the Subsidiaries each have the requisite corporate power to own its
properties and to carry on its business as now being conducted. Each of the
Company and each Subsidiary is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which the nature of
the business conducted or property owned by it makes Such qualification
necessary other than those in which the failure so to qualify would not have a
Material Adverse Effect. "Material Adverse Effect" means any adverse effect on
the business, operations, properties, prospects, or financial condition of the
entity with respect to which such term is used and which is material to Such
entity and other entities controlling or controlled by such entity, taken as a
whole, and any material adverse effect on the transactions contemplated under
the Agreement or any other agreement or document contemplated hereby.
(b) Authorization; Enforcement. (i) The Company has the requisite
corporate power and authority to enter into and perform this Agreement and to
issue the Securities in accordance with the terms hereof and the terms of the
Warrants, (ii) the execution and delivery of this Agreement by the Company and
the consummation by it of the transactions contemplated hereby, including the
issuance of the Common Stock and the Warrants in accordance with the terms of
this Agreement and the Warrant Shares in accordance with the terms of the
Warrants have been duly authorized by all necessary corporate action, and no
further consent or authorization of the Company or its Board of Directors or
stockholders is required, (iii) this Agreement has been duly
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executed and delivered by the Company, and (iv) this Agreement constitutes the
valid and binding obligations of the Company enforceable against the Company in
accordance with its terms.
(c) Capitalization. The authorized capital stock of the Company
consists of 50,000,000 shares of Common Stock and 10,000,000 shares of preferred
stock; without giving effect to this offerings, there are 9,279,958 shares of
Common Stock and no shares of preferred stock issued and outstanding,
respectively. All of the outstanding shares of the Common Stock have been
validly issued and are fully paid and non-assessable. No shares of Common Stock
or preferred stock are entitled to preemptive rights; Without giving effect to
this offering, 370,555 shares of Common Stock (including any shares of Common
Stock issuable upon the exercise of any outstanding options, warrants or rights
or upon the exchange or conversion of any exchangeable or convertible securities
of the Company) are entitled to registration rights (which registration rights
do not adversely impact the registration rights granted to the Investors); and
without giving effect to this offering, there are outstanding options for
1,672,149 shares of Common Stock and outstanding warrants for 104,700 shares of
Common Stock. Except for warrants issuable to Xxxx, Beek & Co. Inc. ("Xxxx
Xxxx") and warrants issuable to Shoreline Pacific Institutional Finance
("Shoreline") in connection with this offering and except as disclosed in the
prior sentence and as contemplated by this Agreement or disclosed in the SEC
Documents (as defined below), there are no other scrip, rights to subscribe for,
calls or commitments of any character whatsoever relating to, or securities or
rights exchangeable or convertible into, any shares of capital stock of the
Company, or contracts, commitments, understandings or arrangements by which the
Company is or may become bound to issue additional shares of capital stock of
the Company or options, warrants, scrip, rights to subscribe for, or commitments
to purchase or acquire, any shares, or securities or rights convertible into
shares, of capital stock of the Company. The Company represents and warrants
that it has no current plan or intention to sell or otherwise issue any shares
of Common Stock or securities convertible into or exercisable for shares of
Common Stock other than (i) up to 1,142,885 shares of Common Stock and up to
571,1444 Warrants to purchase shares of Common Stock being sold by the Company
to the Investors and (ii) up to an aggregate of 140,002 warrants (the "Placement
Warrants") to purchase Common Stock being issued to Xxxx Xxxx and Shoreline in
connection with this offering (collectively such number of shares of Common
Stock, Warrants and Placement Warrants are referred to as the "Maximum Shares");
(d) Issuance of Warrant Shares. The Warrant Shares are duly
authorized and will be, as of the Closing Date, reserved for issuance and, upon
exercise in accordance with terms of the Warrants, such Warrant Shares will be
validly issued, fully paid and non-assessable, free and clear of any and all
liens, claims and encumbrances, and the holders of such Warrant Shares shall be
entitled to all rights and preferences accorded to a holder of Common Stock. The
outstanding shares of Common Stock are currently listed on the Nasdaq National
Market ("Nasdaq").
(e) No Conflicts. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby do not and will not (i) result in a violation of the charter
or By-Laws of the Company or any Subsidiary or (ii) conflict with, or constitute
a default (or an event which with notice or lapse of time or both would become a
default) tinder, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture, patent, patent
license or instrument to which the Company or any Subsidiary is a party, or
result in a violation of any Federal, state, local or foreign law, rule,
regulation, order, judgment or decree (including Federal and state securities
laws and regulations) applicable to the Company or any Subsidiary or by which
any property or asset of the Company or any Subsidiary is bound or affected
(except for such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the aggregate,
have a Material Adverse Effect); provided that, for purposes of such
representation as to Federal, state, local or foreign law, rule or regulation,
no representation is made herein with respect to any of the same applicable
solely to the Investors and not to the Company or any Subsidiary. Neither the
business of the Company nor of any Subsidiary is being conducted in
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violation of any law, ordinance or regulation of any governmental entity, except
for violations which either singly or in the aggregate do not and will not have
a Material Adverse Effect. The Company is not required under Federal, state,
local or foreign law, rule or regulation to obtain any consent, authorization or
order of, or to make any filing or registration with, any court or governmental
agency in order for it to execute, deliver or perform any of its obligations
under this Agreement or the Warrants or issue and sell the Common Stock or the
Warrants in accordance with the terms hereof or issue the Warrant Shares upon
exercise of the Warrants, except for the registration provisions provided for
herein, that, for Purposes of the representation made in this sentence, the
Company s assuming and relying upon the accuracy of the relevant representations
and agreements of the Investors herein.
(f) SEC Documents: Financial Statements. The Common Stock of the
Company is registered pursuant to Section 12(a) of the Exchange Act and the
Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the Commission pursuant to the
reporting requirements of the Exchange Act, including material Filed pursuant to
Section 13(a) or 15(d), in addition to one or more registration statements and
amendments thereto heretofore filed by the Company with the Commission (all of
the foregoing including filings incorporated by reference therein being referred
to herein as the "SEC Documents"). The Company has delivered or made available
to the Investors true and complete copies of all SEC Documents (including,
without limitation, proxy information and solicitation materials and
registration statements) filed with the Commission since September 30, 1998. As
of their respective dates, the SEC Documents (as amended by any amendments filed
prior to the date of this Agreement or any Closing Date and provided to each
Investor) complied or will comply in all material respects with the requirements
of the Exchange Act and the rules and regulations of the Commission promulgated
thereunder and other Federal, state and local laws, rules and regulations
applicable to such SEC Documents, and none of the SEC Documents contained or
will contain any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Company included in the SEC
Documents comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the Commission or other
applicable rules and regulations with respect thereto. Such financial statements
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto or (ii) in
the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of operations and cash flows for the periods then ended
(Subject, in the case of unaudited statements, to normal year-end audit
adjustments).
(g) Principal Exchange/Market. The principal market on which the
Common Stock is currently traded is Nasdaq.
(h) No Material Adverse Change. Since June 30, 1999, the date
through which the most recent quarterly report of the Company on Form 10-Q has
been prepared and filed with the Commission, a copy of which is included in the
SEC Documents, no event which had or is likely to have a Material Adverse Effect
has occurred or exists with respect to the Company or any Subsidiary, except as
otherwise disclosed or reflected in press releases or other SEC Documents
prepared through or as of a date Subsequent to June 30, 1999 and provided to the
Investors.
(i) No Undisclosed Liabilities. Neither the Company nor any
Subsidiary has any liabilities or obligations not disclosed in the SEC
Documents, other than those liabilities incurred in the ordinary course of its
respective business since June 30, 1999 or liabilities or obligations,
individually or in the aggregate, which do not or would not have a Material
Adverse Effect on the Company or the Subsidiaries, taken as a whole.
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(j) No Undisclosed Events or Circumstances. No event or circumstance
has occurred or exists with respect to the Company, any Subsidiary or their
respective business, properties, prospects, operations or financial condition,
which, under applicable law, rule or regulation requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed.
(k) No General Solicitation. None of the Company, the Subsidiaries
or, to the Company's knowledge, any of their respective affiliates or any person
acting on its or their behalf has engaged in any form of general solicitation or
general advertising (within the meaning of Regulation D) in connection with the
offer or sale of the Securities.
(l) No Integrated Offering. None of the Company, the Subsidiaries,
or, to the Company's knowledge, any of their respective affiliates, or any
person acting on its or their behalf has, directly or indirectly, made any
offers or sales of any security or solicited any offers to buy any security,
under circumstances that would require registration of any of the Securities.
(m) Intellectual Property. Each of the Company and the Subsidiaries
owns or has licenses to use certain copyrights and trademarks ("intellectual
property") associated with its respective business. Each of the Company and the
Subsidiaries has all intellectual property rights which are needed to conduct
its respective business as it is now being conducted or as proposed to be
conducted as disclosed in the SEC Documents. The Company has no reason to
believe that the intellectual property rights owned by the Company or any of its
Subsidiaries are invalid or unenforceable or that the use of such intellectual
property by the Company or the Subsidiaries infringes upon or conflicts with any
right of any third party, and neither the Company nor any Subsidiary has
received notice of any such infringement or conflict. The Company has no
knowledge of any infringement of the Company's or any Subsidiary's intellectual
property by any third party.
(n) No Litigation. Except as set forth in the SEC Documents
delivered to the Investors, no litigation or claim (including those for unpaid
taxes) against the Company or any Subsidiary is pending or, to the Company's
knowledge, threatened, and no other event has occurred, which if determined
adversely would have a Material Adverse Effect on the Company or any Subsidiary,
taken as a whole, or would materially adversely effect the transactions
contemplated hereby. The legal proceedings described in the SEC Documents will
not have an effect on the transactions contemplated hereby, and will not have a
Material Adverse Effect on the Company or the Subsidiaries, taken as a whole.
(o) Brokers. The Company has taken no action which would give rise
to any claim by any person, other than Xxxx, Xxxx and Shoreline, for brokerage
commissions, finder's fees or similar payments by the Company relating to this
Agreement or the transactions contemplated hereby. The Company has taken no
action which Would give rise to any claim by any person for brokerage
commissions, finder's fees or similar payments by any Investor relating to this
Agreement or the transactions contemplated hereby.
(p) Forms S-3. The Company is eligible to file a Registration
Statement on Form S-3 under the Act and the rules promulgated thereunder, and
Form S-3 is permitted to be used for the transactions contemplated hereby under
the Act and the rules promulgated thereunder.
(q) Year 2000 Compliance. Each system which includes software,
hardware, databases or embedded control systems (microcompressor controlled,
robotic or other device) (collectively, a "System"), that constitutes any part
of, or is used in connection with the use, operation or enjoyment of, any asset,
property or leased premises of the Company or any Subsidiary (i) is designed (or
has been modified) to be used prior to and after January 1, 2000, (ii) to the
Company's knowledge, will operate without error arising from the creation,
recognition, acceptance,
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calculation, display, storage, retrieval, accessing, comparison, sorting,
manipulation, processing or other use of dates or date-based, date-dependent or
date-related data, including but not limited to century recognition,
day-of-the-week recognition, leap years, date values and interfaces of date
functionalities, and (iii) to the Company's knowledge, will not be adversely
affected by the advent of the year 2000, the advent of the twenty-first century
or the transition from the twentieth century through the year 2000 and into the
twenty-first century (collectively, items (i) through (iii) are referred to
herein as "Year 2000 Compliant"). No System that is material to the business,
finances or operations of the business of the Company or any Subsidiary receives
data from or communicates with any component or system external to itself
(whether or not such external component or system is the Company's, or any
Subsidiary's or any third party's) that is not itself Year 2000 Compliant. All
licenses for the use of any system-related software, hardware, databases or
embedded control system permit the Company or the Subsidiaries to make all
modifications, bypasses, debugging, work-arounds, repairs, replacements,
conversions or corrections necessary to permit the System to operate compatibly,
in conformance with their respective specifications, and to be Year 2000
Compliant. None of the Company nor any of the Subsidiaries has incurred, and
none of the Company nor any of the Subsidiaries has any reason to believe that
it may in the future incur, any expenses arising from or related to the failure
of any of its Systems as a result of not being Year 2000 Compliant.
Section 2.2 Representations and Warranties of the Investors. Each of
the Investors, severally and not jointly, hereby makes the following
representations and warranties to the Company as of the date hereof and on the
Closing Date:
(a) Authorization, Enforcement. (i) Such Investor has the requisite
power and authority, or the legal capacity, as the case may be, to enter and
perform this Agreement and to purchase the Securities being sold to such
Investor hereunder, (ii) the execution and delivery of this Agreement by such
Investor and the consummation by it of the transactions contemplated hereby have
been duly authorized by all necessary corporate or partnership action, as
required, and (iii) this Agreement constitutes the valid and binding obligation
of such Investor enforceable against such Investor in accordance its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally the enforcement of creditors' rights and remedies or by
other equitable principles of general application.
(b) No Conflicts. The execution, delivery and performance of this
Agreement and the consummation by such Investor of the transactions contemplated
hereby do riot and will not (i) result in a violation of such Investor's
organizational documents, or (ii) conflict with any agreement, indenture, or
instrument to which such Investor is a party, or (iii) result in a violation of
any law, rule, or regulation or any order, judgment or decree of any court or
Governmental agency applicable to such Investor. Such Investor is not required
to obtain any consent or authorization of any governmental agency in order for
it to perform its obligations under this Agreement.
(c) Investment Representation. Such Investor is purchasing the
securities purchased hereunder for its own account and not with a view to
distribution in violation of any securities laws. Such Investor has no present
intention to sell the securities purchased hereunder and such Investor has no
present arrangement (whether or not legally binding) to sell the Securities
purchased hereunder to or through any person or entity; provided, however, that
by the representations herein, such Investor does not agree to hold any of the
Securities for any minimum or other specific term and reserves the right to
dispose of any of the Securities at any time in accordance with Federal and
state securities laws applicable to such disposition.
(d) Accredited Investor. Such Investor is an "accredited investor"
as defined in Rule 501 promulgated under the Act. The Investor has such
knowledge and experience in financial and business matters in general and
investments In particular, so that such Investor is able to evaluate
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the merits and risks of an investment in the securities purchased hereunder and
to protect its own interests in connection with such investment. In addition
(but without limiting the effect of the Company's representations and warranties
contained herein), such Investor has received such information as it considers
necessary or appropriate for deciding whether to purchase the Securities
purchased hereunder.
(e) Rule 144. Such Investor understands that there is no public
trading market for the Warrants, that none is expected to develop, and that the
Warrants must be held indefinitely unless exercised or unless such securities
are registered under the Act or an exemption from registration is available.
Such Investor understands that the Common Stock and the Warrant Shares must be
held indefinitely unless such securities are registered under the Act or an
exemption from registration is available. Such Investor has been advised or is
aware of the provisions of Rule 144 promulgated under the Act.
(f) Brokers. Such Investor has taken no action which would give rise
to any claim by any person for brokerage commissions, finder's fees or similar
payments by the Company relating to this Agreement or the transactions
contemplated hereby.
(g) Reliance by the Company. Such Investor understands that the
Common Stock and Warrants are being offered and sold in reliance on a
transactional exemption from the registration requirements of Federal and state
securities laws and that the Company is relying upon the truth and accuracy of
the representations, warranties, agreements, acknowledgments and understandings
of such Investor set forth herein in order to determine the applicability of
such exemptions and the suitability of such Investor to acquire the Securities.
ARTICLE III
Covenants
Section 3.1 Registration and Listing. Until the later of (i) such
time as no Warrants are outstanding or (ii) the expiration of the Effectiveness
Period (as hereinafter defined in Section 4.3), the Company will cause the
Common Stock to continue to be registered under Section 12(g) of the Exchange
Act, will comply in all respects, with its reporting and filing obligations
under the Exchange Act, and will not take any action or file any document
(whether or not permitted by the Exchange Act or the rules thereunder) to
terminate or suspend such reporting and filing obligations. Until the later of
(i) such time as no Warrants are outstanding or (ii) the expiration of the
Effectiveness Period, the Company shall use its best efforts to continue the
listing or trading of the Common Stock on Nasdaq or a principal exchange (which
consists exclusively of the NYSE or AMEX) and comply in all respects with the
Company's reporting filing and other obligations under the bylaws or rules of
Nasdaq or such principal exchange, as the case may be.
Section 3.2 Certificates on Exercise. Upon the exercise of any
Warrants in accordance with the terms of the Warrants, the Company shall issue
and deliver to such Investor (or the then holder) within two (2) business days
of the exercise date, (x) a Certificate or Certificates for the Warrant Shares
issuable upon such exercise and (y) a new certificate or certificates for the
Warrants of such Investor (or holder) which have not yet been exercised but
which are evidenced in part by the certificate(s) submitted to the Company in
connection with such exercise (with the number of and denomination of such new
certificate(s) designated by such Investor or holder).
Section 3.3 Replacement Certificates. The certificate(s)
representing the shares of Common Stock, Warrant Shares or the Warrants held by
any Investor (or then holder) may be exchanged by such Investor (or such holder)
at any time and from time to time for certificates with different denominations
representing an equal number of shares of Common Stock, Warrant Shares
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or Warrants, as the case may be, as reasonably requested by Such investor (or
such holder) upon surrendering the same. No service charge will be made for such
registration, transfer or exchange.
Section 3.4 Securities Compliance. The Company shall notify the
Commission and Nasdaq, in accordance with their requirements, of the
transactions contemplated by this Agreement and the Warrants and shall take all
other necessary action and proceedings as may be required and permitted by
applicable law, rule and regulation, for the legal and valid issuance of the
Securities. The Company covenants and agrees that it will not sell or otherwise
issue any shares of Common Stock or securities convertible into or exercisable
for shares of Common Stock which would violate NASD Rule 4460 (i)(1), and, In
particular, but not in limitation to the foregoing, the Company will not, during
the six (6) month period following the Closing of the sale of shares of Common
Stock and Warrants to the Investors, sell or otherwise issue any shares of
Common Stock or securities convertible into or exercisable for shares of Common
Stock in excess of the Maximum Shares without either (i) approval of such sale
or issuance by the stockholders of the Company, or (ii) a written advisory
opinion of the Nasdaq Stock Market that such approval is not necessary under
NASD Rule 4460 (i)(1) or any other applicable Nasdaq Stock Market or NASD rule
or a written waiver of any such requirement by the Nasdaq Stock Market, or (iii)
a written opinion of counsel to the Company that such stockholder approval is
not required.
Section 3.5 Notices. The Company agrees to provide all holders of
Warrants with copies of all notices and information, including, without
limitation, notices and proxy statements in connection with any meetings, that
are provided to the holders of shares of Common Stock, contemporaneously with
the delivery of such notices or information to such Common Stock holders.
Section 3.6 Reservation of Stock Issuable Upon Exercise. The Company
shall at all times reserve and keep available out of its authorized but unissued
Common Stock, solely for the purpose of affecting the exercise of the Warrants,
such number of shares of Common Stock as shall from time to time be sufficient
to effect the exercise of all outstanding Warrants.
ARTICLE IV
Registration
Section 4.1 Registration Requirements. The Company shall use its
best efforts to effect the registration of the Registrable Securities
(Including, without limitation, the execution of an undertaken, to file
post-effective amendments, appropriate qualification under applicable blue sky
or other state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act) as would permit or facilitate the
public sale or distribution of all the Registrable Securities in the manner
including manner of sale) and in all states reasonably requested by the Holders.
Such best efforts by the Company shall include the following:
(a) The filing by the Company no later than fifteen (15) days after
the Closing of a registration statement or registration statements (as
necessary) with the Commission pursuant to Rule 415 under the Securities Act on
Form S-3) (or such other appropriate registration form if the Company is
ineligible to use Form S-3) covering tile resale of the Registrable Securities
acquired (or underlying the Securities so acquired) at the Closing
("Registration Statement(s)").
(b) Thereafter the Company shall use its best efforts to cause such
Registration Statement(s) to be declared effective by the Commission within
ninety (90) days following the Closing Date. In the event that such Registration
Statement is not declared effective within 90 days following the Closing Date,
then the Company shall until the Registration Statement is declared effective,
(in addition to any other remedies available to a Holder at law or in equity)
pay in cash to each Holder an amount equal to 2% of the respective purchase
price paid by such Holder (the "Damages") for each 30 day period beginning on
the 91" day following the Closing Date at which
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the Registrable Securities were acquired (the "Default Period") that the
Registration Statement has not been declared effective; provided, however, that
the Default Period shall terminate and Damages shall cease to accrue on the date
upon which such Registrable Securities may be sold under Rule 144(k) in the
reasonable opinion ID of counsel to the Company (provided that the Company's
transfer agent has accepted an instruction from the Company to such effect). If
any applicable Default Period is less than 30 days such cash payment shall be on
a pro rata basis. The amount of such cash payment shall be calculated by the
Company on the earlier of (i) the effective date Of Such Registration Statement
or (ii) the last day of each Default Period, and a certified or bank check in
lawful money of the United States of America shall be sent within three (3)
business days of such calculation to the address of each Holder as listed in the
stock transfer ledger maintained by the Company or its transfer agent.
Notwithstanding the foregoing, if the Default Period commences from the failure
of the Company to cause to become effective the Registration Statement solely by
reason of the failure of any Holder to provide such information as (i) the
Company may reasonably request from such Holder to be included in the
Registration Statement or (ii) the Commission or Nasdaq may request in
connection with such Registration Statement (which request was provided to the
Holder in writing) (the "Late Holder"), the Company shall not be required to pay
such Damages to any of the Holders; provided, that the Company shall file the
Registration Statement excluding the Late Holder or take such other action as
necessary to cause the Registration Statement to be declared effective, within
two (2) business days after the initial day of the original Default C, Period,
provided that a new Default Period will commence three (3) business days after
the initial day of the original Default Period if the Registration Statement is
not effective. The Company agrees to promptly file an amendment to such
Registration Statement including the Late Holder once the requested information
has been provided.
(c) Prepare and File with the Commission such amendments (including
Post- effective amendments) and supplements to such Registration Statement and
the prospectus used in connection with such Registration Statement as may be
necessary to keep Such Registration Statement effective at all times during the
Effectiveness Period (as defined below) and comply with the provisions of the
Act with respect to the disposition of all securities covered by such
Registration Statement and notify the Holders of the filing and effectiveness of
such Registration Statement and any amendments or supplements. In the case of
amendments and supplements to a Registration Statement which are required to be
filed pursuant to this An the Company filing a report on Form 10-K, Form 10-Q or
Form 8-K or any analogous report under the Exchange Act, the Company shall have
incorporated such report by reference into the Registration Statement, if
applicable, or shall file such amendments or Supplements with the Commission on
the same day on which the Exchange Act report is filed which created the
requirement for the Company to amend or supplement the Registration Statement.
(d) Furnish to each Holder such numbers of copies of a current
prospectus conforming with the requirements of the Act, copies of the
Registration Statement, any amendment or supplement thereto and any documents
incorporated by reference therein and such other documents as such Holder may
reasonably require in order to facilitate the disposition of Registrable
Securities owned by such Holder.
(e) Use its best efforts to register and qualify the securities
covered by such Registration Statement under such other securities or "Blue Sky"
laws of such jurisdictions as Ca, shall be reasonably requested by each Holder;
provided that the Company shall not be required in connection therewith or as a
condition thereto to (i) qualify to do business where it: would not otherwise be
required to quality,, (ii) file a general consent to service of process in any
such states or jurisdictions, (iii) make any change in the Company's charter or
By-Laws, or (iv) subject itself to general taxation in any such Jurisdiction.
(f) Notify each Holder immediately of the happening of any event as
a result of which the prospectus (Including any supplement thereto or thereof)
included in such Registration
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Statement, as then in effect, includes an untrue statement of material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing, and use its best efforts to promptly update and/or correct such
prospectus.
(g) Notify each Holder immediately of the issuance by the Commission
or any state securities commission or agency of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any proceeding
for that purpose. The Company shall n use its reasonable best efforts to prevent
the issuance of any stop order and, if any stop order is issued, to obtain the
lifting thereof at the earliest possible time.
(h) Permit a smile firm of counsel, designated as Holders' Counsel
by the Holders of a majority of the Registrable Securities included in the
Registration Statement, to review the Registration Statement and all amendments
and supplements thereto within a reasonable period of time prior to each Filing,
and shall not File any document in a form to which such counsel reasonably
objects, provided such counsel shall provide Such Counsel's comments or
objection within five (5) business days after receipt of any document.
(i) As of the date the Registration Statement is declared effective
by the Commission, the Company shall have caused the Registrable Securities
covered by such Registration Statement to be listed with all securities
exchange(s) and/or markets on which the Common Stock is then listed, and
prepared and filed any required filings with the National Association of
Securities Dealers, Inc. or any exchange or market where the Common Stock is
traded.
(j) The Company shall make available for inspection by the Holders,
representatives of all the Holders together, any underwriter participating in
any disposition pursuant to a Registration Statement, and any attorney or
accountant retained by any Holder or underwriter, all financial and other
records customary for purposes of the Holders' due diligence examination of the
Company and all SEC Documents filed subsequent to the Closing Date, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors and employees to supply all information reasonably requested
by any such representative, underwriter, attorney or accountant in connection
with such Registration Statement, provided that such parties agree to enter into
a Confidentiality Agreement in the form and substance annexed hereto as Exhibit
B.
(k) The term "best efforts" as used in this Agreement shall include,
without limitation, that the Company shall submit to the Commission, within five
(5) business days after the Company learns that no review of a particular
Registration Statement will be made by the staff of the Commission or that the
staff has no further comments on the Registration Statement, as the case may be,
a request for acceleration of effectiveness of such Registration Statement to a
time and date not later than 72 hours after the submission of such request.
Section 4.2 Expenses of Registration. All Registration Expenses
incurred in connection with any registration, qualification or compliance with
registration pursuant to this Section 4 shall be borne by the Company, and all
Selling Expenses of a Holder shall be borne by such Holder.
Section 4.3 Registration Period. In the case of the registration
effected by the Company pursuant to this Section 4, the Company will use its
best efforts to keep such registration effective (the "Effectiveness Period")
until the earlier to occur of (a) two years from the Closing Date, provided,
however, that the period of time which such Registration Statement Registration
is required to be effective shall be increased by the number of days that the
Registration Statement's effectiveness was suspended, if any, during the two
year period from the Closing Date, (b) the date on which all the Holders have
completed the sales or distributions of the Registrable Securities
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included in the Registration Statement or, (c) the date on which such
Registrable Securities of all Holders may be sold without restriction under Rule
144(k) promulgated under the Securities Act (or any successor thereto) in the
reasonable opinion of counsel to the Company (provided that the Company's
transfer a(Tent has accepted an instruction from the Company to such effect and
will issue certificates representing such Registrable Securities without any
legend endorsed thereon).
Section 4.4 Obligation of Holder. It shall be a condition precedent
to the obligations of the Company to complete the registration pursuant to this
Agreement with respect to Registrable Securities of the Holder that:
(a) the Holder by such Holder's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of any Registration
Statement hereunder, unless the Holder has notified the Company in writing of
the Holder's election to exclude all of the Holder's Registrable Securities from
such Registration Statement.
(b) the Holder shall furnish to the Company such information
regarding the Holder, the Registrable Securities held by the Holder and the
intended method of disposition of the Registrable Securities held by the Holder
as shall be reasonably required to effect the registration of such Registrable
Securities and the Holder shall execute such documents as are customary in
connection with such registration as the Company may reasonably request.
Section 4.5 Indemnification.
(a) Company Indemnity. The Company will indemnify each Holder, each
of its officers, directors and partners, and each person controlling each
Holder, within the meaning of Section 15 of the Securities Act and the rules and
regulations thereunder with respect to which registration, qualification or
compliance has been effected pursuant to this Agreement, and each underwriter,
if any, and each person who controls, within the meaning of Section 15 of the
Securities Act and the rules and regulations thereunder, any underwriter,
against all Claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus, offering circular or
other document (including any related registration statement, notification or
the like) incident to any such registration, qualification or compliance, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or any violation by the Company of the Securities Act or any state
securities law or in either case, any rule or regulation thereunder applicable
to the Company and relating to action or inaction required of the Company in
connection with any such registration, qualification or compliance, and will
reimburse each Holder, each of its officers, directors and partners, and each
person controlling such Holder, each such underwriter and each person who
controls any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating and defending any such claim, loss,
damage, liability or action, provided that the Company will not be liable in any
such case to a Holder to the extent that any such claim, loss, damage, liability
or expense arises out of or is based on any untrue statement or omission based
upon written information furnished to the Company by such Holder or the
underwriter (if any) therefor and stated to be specifically for use therein. The
indemnity agreement contained in this Section 4.5(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected Without the consent of the Company (which consent will
not be unreasonably withheld).
(b) Holder Indemnity. Each Holder will, severally and not Jointly,
if Registrable Securities held by it are included in the securities as to Which
Such registration, qualification or compliance is being effected, indemnify the
Company, each of its directors, officers, partners, and each underwriter, if
any, of the Company's securities covered by such registration statement, each
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person who controls the Company or Such underwriter within the meanings of
Section 15 of the Securities Act and the rules and regulations thereunder, each
other Holder (if any), and each of their directors, officers and partners, and
each person controlling such other Holder(s) against all claims, losses, damages
and liabilities (or actions in respect thereof arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statement therein not
misleading, in each case only insofar as such untrue statement or alleged untrue
statement or omission relates to such Holder, and will reimburse the Company and
such other Holder(s) and their directors, officers and partners, underwriters or
control persons for any legal or any other expenses reasonably incurred in
connection with investigating and defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by such Holder and stated to be specifically for use
therein, and provided that the maximum amount for which such Holder shall be
liable under this indemnity shall not exceed the net proceeds received by such
Holder from the sale of the Registrable Securities. The indemnity agreement
contained in this Section 4.5(b) shall not apply to amounts settlement of any
such claims, losses, damages or liabilities if such settlement is effected
without the consent of such Holder (which consent will not be unreasonably
withheld).
(c) Procedure. Each party entitled to indemnification tinder this
Article (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim in any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not be unreasonably withheld), and the Indemnified Party
may participate in such defense at such party's expense, and provided further
that the failure of any Indemnified Party to give notice as herein shall not
relieve the Indemnifying Party of its obligations under this Article except to
the extent that the Indemnifying Party is materially and adversely affected by
such failure to provide notice. No Indemnifying Party, in the defense of any
such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving, by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation. Each Indemnified Party shall furnish such
information regarding itself or the claim in question as an Indemnifying Party
may reasonably request in writing and as shall be reasonably required in
connection with the defense of such claim and litigation resulting therefrom.
4.6 Contribution. If the indemnification provided for in Section 4
herein is unavailable to the Indemnified Parties in respect of any losses,
claims, damages or liabilities referred to herein (other than by reason of the
exceptions provided therein), then each such Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages or
liabilities as between the Company on the one hand and any Holder on the other,
in such proportion as is appropriate to reflect the relative fault of the
Company and of such Holder in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative fault of the Company on the one
hand and of any Holder on the other shall be determined by reference to. among
other things, whether the untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Company or by such Holder.
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In no event shall the obligation of any Indemnifying Party to contribute tinder
this Section 4.6 ID exceed the amount that such Indemnifying Party would have
been obligated to pay by way of indemnification if the indemnification provided
for under Section 4.5(a) or 4.5(b) hereof had been available under the
circumstances.
The Company and the Holders agree that it would not be just and equitable if
contribution pursuant to this Section 4.6 were determined by pro rata allocation
(even if the Holders or the underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraphs.
The amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraphs shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such Indemnified Party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this section, no Holder or underwriter shall
be required to contribute any amount in excess of the an amount which equals (i)
in the case of any Holder, the net proceeds received by such Holder from the
sale of Registrable Securities or (ii) in the case of an underwriter, the
underwriting discount applicable to the securities purchased by the underwriter.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
ARTICLE V
Conditions
Section 5.1 Conditions Precedent to the Obligation of the Company to
Issue and Sell the Stock arid Warrants. The obligation hereunder of the Company
to issue and sell the Common Stock and Warrants to the Investors is subject to
the satisfaction, at or before the Closing Date, of each of the conditions set
forth below. These conditions are for the Company's sole benefit and may be
waived by the Company at any time in its sole discretion.
(a) Accuracy of the Investors' Representations and Warranties. The
representations and warranties of each Investor shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made at that time (except for representations arid warranties that speak as of a
particular date).
(b) Performance by the Investors. Each Investor shall have performed
all agreements and satisfied all conditions required hereby to be performed or
satisfied by such Investor at or prior to the Closing Date.
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or Governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
Section 5.2 Conditions Precedent to the Obligation of the Investors
to Purchase the Stock and the Warrants. The obligation hereunder of each
Investor to acquire and pay for the Common Stock and Warrants is subject to the
satisfaction, at or before the Closing Date, of each of the conditions set forth
below. These conditions are for each Investor's sole benefit and may be waived
by each Investor at any time in its sole discretion.
(a) Accuracy of the Company's Representations and Warranties. The
representation and warranties of the Company shall be true and correct in all
material respects as of
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the date where made and as of the Closing Date as though made at that time
(except for representations and warranties that speak as of a particular date).
(b) Performance by the Company. The Company shall have performed all
agreements and satisfied all conditions required to be performed or satisfied by
the Company at or prior to the Closing Date.
(c) Nasdaq. From the date hereof to the Closing Date, trading in the
Company's Common Stock shall not have been suspended by the Commission or Nasdaq
and trading in securities generally as reported by Nasdaq, shall not have been
suspended or limited, and the Common Stock shall not have been delisted from any
exchange or market where they are currently listed.
(d) No Injunction. No statute, rule, regulation, executive order,
decree, ruling, or injunction shall have been enacted, entered, promulgated or
endorsed by any Court or Governmental authority or competent Jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(e) Opinion of Counsel. At the Closing Date the Investors shall have
received an opinion of counsel to the Company in substantially the form attached
hereto as Exhibit C and such other opinions, certificates and documents as the
Investors or their counsel shall reasonably require incident to the Closing.
(f) Minimum Subscription. An aggregate of $8,000,200 of shares of
Common Stock shall have been purchased by the Investors pursuant to this
Agreement.
(g) Secretary's Certificate. The Company shall have delivered to the
Investors a certificate in form and substance reasonably satisfactory to the
Investors, executed by the Secretary of the Company on behalf of the Company,
certifying as to the satisfaction of all Closing conditions, incumbency of
signing officers, charter, By-Laws, good standing and authorizing resolutions of
the Company.
ARTICLE VI
Legend and Stock
Each certificate representing the Common Stock, the Warrants and the
Warrant Shares shall be stamped or otherwise imprinted with a legend
substantially in the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THEY MAY NOT BE OFFERED, SOLD,
PLEDGED, HYPOTHECATED, ASSIGNED OR TRANSFERRED EXCEPT (I) PURSUANT TO A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT WHICH HAS BECOME EFFECTIVE AND
IS CURRENT WITH RESPECT TO THESE SECURITIES OR (II) PURSUANT TO A SPECIFIC
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, BUT ONLY UPON A HOLDER
HEREOF FIRST HAVING OBTAINED THE WRITTEN OPINION OF COUNSEL OF THE ISSUER, OR
OTHER COUNSEL REASONABLY ACCEPTABLE TO THE ISSUER, THAT THE PROPOSED DISPOSITION
IS CONSISTENT WITH ALL APPLICABLE PROVISIONS OF THE SECURITIES ACT AS WELL AS
ANY APPLICABLE "BLUE SKY" OR SIMILAR SECURITIES LAW.
ARTICLE VII
Termination
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Section 7.1 Termination by Mutual Consent. This Agreement may be
terminated at any time prior to the Closing Date by the mutual written consent
of the Company and the Investors.
Section 7.2 Other Termination. This Agreement may be terminated by
action of the Board of Directors of the Company or by any of the Investors at
any time if the Closing Date shall not have been consummated by the fifth
business day following the date of this Agreement.
ARTICLE VIII
Miscellaneous
Section 8.1 Stamp Taxes; Agent Fees. The Company shall pay all stamp
and other taxes and duties levied in connection with the issuance of the Common
Stock and the Warrants pursuant hereto and the Warrant Shares issued upon
exercise of the Warrants.
Section 8.2 Specific Enforcement: Consent to Jurisdiction.
(a) The Company and the Investors acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Agreement and to enforce specifically the terms and provisions hereof, this
being in addition to any other remedy to which any of them may be entitled by
law or equity.
(b) The Company and each of the Investors (i) hereby irrevocably
submits to the exclusive Jurisdiction of the United States District Court, the
New York State courts and other courts of the United States sitting in New York
County, New York for the purposes of any suit, action or proceeding arising out
of or relating to this Agreement and (ii) hereby waives, and agrees not to
assert in any such suit, action or proceeding, any claim that it is not
personally subject to the Jurisdiction of such court, that the suit, action or
proceeding is brought in an inconvenient forum or that the venue of the suit,
action or proceeding is improper. The Company and each of the Investors consents
to process being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing in this paragraph shall affect or
limit any right to serve process in any other manner permitted by law.
Section 8.3 Entire Agreement, Amendment. This Agreement together
with the agreements and documents executed in connection herewith, contains the
entire understanding of the parties with respect to the matters covered hereby
and, except as specifically set forth herein, neither the Company nor any
Investor makes any representation,, warranty, covenant or undertaking with
respect to such matters. No provision of this Agreement may be waived or amended
other than by a written instrument signed by the party against whom enforcement
of any such amendment or waiver is sought.
Section 8.4 Notices. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement Must be in writing and will be deemed to have been delivered: (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile
(provided confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party); or (iii) one business day
after deposit with a nationally recognized overnight delivery service, in each
case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
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to the Company: SkyMall, Inc.
0000 Xxxx Xxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attn: Xxxxxx X. Xxxxxxx
Chief Executive Officer
with copies to: Squire, Xxxxxxx & Xxxxxxx L.L.P.
Two Renaissance Square
00 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000-0000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attn: Xxxxxxx X. Xxxx, Esq.
to the Investors: To each Investor and its representative at
the addresses set forth on
Schedule I of this Agreement.
with copies to: Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000)
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attn: Xxxx Xxxxxxxxxxx, Esq.
Any party hereto may from time to time change its address for notices by giving
at least 5 days written notice of such changed address to the other parties
hereto. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or
electronically Generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) by a nationally recognized overnight delivery service shall
be rebuttable evidence of personal service, receipt by facsimile or receipt from
a nationally recognized overnight delivery service in accordance with clause
(i), (ii) or (iii) above.
Section 8.5 Indemnity. Each party shall indemnify each other party
against any loss, cost or damages (including reasonable attorney's fees but
excluding consequential damages) incurred as a result of such parties' breach of
any representation, warranty, covenant or agreement in this Agreement.
Section 8.6 Waivers. No waiver by any party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such night accruing to it thereafter.
Section 8.7 Headings. The headings herein are for convenience only,
do not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
Section 8.8 Successors and Assigns. Except as otherwise provided
herein, this Agreement shall be binding upon and inure to the benefit of the
parties and their successors and permitted assigns. The parties hereto may amend
this Agreement without notice to or the consent of any third party. The Company
may not assign this Agreement or any nights or obligations
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hereunder without the prior written consent of all Investors (which consent may
be withheld for any reason in their sole discretion), except that the Company
may assign this Agreement in connection with a merger, consolidation, business
combination or the sale of all or substantially all of its assets provided that
the Company is not released from any of its obligations hereunder, such
successor in interest or assignee assumes all obligations of the Company
hereunder, and appropriate adjustment of the provisions contained in this
Agreement is made, in form and substance satisfactory to the Investors, to place
the Investors in substantially the same position as they would have been but for
such assignment. Any Investor may assign this Agreement (in whole or in part) or
any nights or obligations hereunder without the consent of the Company in
connection with any sale or transfer of all or any portion of the Securities
held by such Investor, provided that no Investor may assign this Agreement prior
to the Closing Date without the Company's prior consent except to an affiliate
or affiliates of such Investor.
Section 8.9 No Third Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
Section 8.10 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York without regard to such state's principles of conflict of laws.
Section 8.11 Survival. The representations and warranties and the
agreements and covenants of the Company and each Investor contained herein shall
survive tile Closing
Section 8.12 Execution. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement,
it being understood that all parties need not sign the same counterpart.
Section 8.13 Publicity. The Company agrees that it will not
disclose, and will not include in any public announcement, the name of any
Investor without its consent, unless and until such disclosure is required by
law or applicable regulation, and then only to the extent of such requirement.
Section 8.14 Severability. The parties acknowledge and agree that
the Investors are not agents, affiliates or partners of each other, that all
representations, warranties, covenants and agreements of the Investors hereunder
are several and not Joint, that no Investor shall have any responsibility or
liability for the representations, warrants, agreements, acts or omissions of
any other Investor, and that any rights granted to "Investors" hereunder shall
be enforceable by each Investor hereunder.
Section 8.15 Like Treatment of Holders. Neither the Company nor any
of its affiliates shall, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee, payment for the redemption or
exchange of Securities, or otherwise, to an holder of Securities, for or as an
inducement to, or in connection with the solicitation of, any consent, waiver or
amendment of any terms or provisions of the Securities or this Agreement, unless
such consideration is required to be paid to all holders of Securities bound by
such consent, waiver or amendment whether or not such holders so consent, waive
or agree to amend and whether or not such holders tender their Securities for
redemption or exchange. The Company shall not, directly or indirectly, redeem
any Securities unless such offer of redemption is made pro rata to all holders
of Securities on identical terms.
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19
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
SKYMALL, INC
By: /s/ Xxxxxxxx Xxxxx
-----------------------------
Name:
Title:
XXXXXXX COMMUNICATIONS, INC.
By: /s/ Xxxxxx Xxxxxxxx
-----------------------------
Name:
Title:
Exact Name in Which Securities Should
be registered:
------------------------
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20
SCHEDULE I
----------------------------------------------------------------------------------------------------------------------
No. of
Shares of
Name and Address of Common No. of
Name and Address of Investor Representative Purchase Price Stock Warrants
----------------------------------------------------------------------------------------------------------------------
American High Growth Equities None $1,000,000 142,857 71,429
Retirement Trust
Xxxxx Tower--24th Floor
000 0xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
----------------------------------------------------------------------------------------------------------------------
Special Situations Private Equity Fund L.P. Xxxxx Greenhouse $1,199,800 171,400 85,700
----------------------------------------------------------------------------------------------------------------------
Special Situations Fund L.P. III Xxxxx Greenhouse $1,350,300 192,900 96,450
000 X. 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
----------------------------------------------------------------------------------------------------------------------
Special Situations Cayman L.P. Xxxxx Greenhouse $450,100 64,300 32,150
000 X. 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
----------------------------------------------------------------------------------------------------------------------
Xxxxxxx Communications, Inc. Xxxxxxxx Xxxx $3,000,000 428,571 214,286
One Blue Hill Plaza c/x Xxxxx, et al.
Xxxxx Xxxxx, Xxx Xxxx, 00000 000 Xxxxxxxxx Xxx.
Xxx Xxxx, XX 00000
----------------------------------------------------------------------------------------------------------------------
Xxxxxx Xxxxxxx Worsley and Christi Xxxxx n/a $1,000,000 142,857 71,429
Worsley, as trustees of the Xxxxxx Xxxxxxx
Xxxxxxx and Xxxxxxx Xxxxx Xxxxxxx Family
Revocable Trust dated July 28, 1998
c/o SkyMall, Inc.
0000 X. Xxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
----------------------------------------------------------------------------------------------------------------------
20
21
EXHIBITS AND SCHEDULES
Exhibit A Form of Warrant
Exhibit B Form of Confidentiality Agreement
Exhibit C Form of Opinion
22
EXHIBIT A
FORM OF WARRANT
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL EN A FORM REASONABLY
SATISFACTORY TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID
ACT. NOTWITHSTANDING THE FOREGOING, THIS WARRANT MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT.
SKYMALL, INC.
WARRANT TO PURCHASE COMMON STOCK
Warrant No.: Number of Shares:
Date of Issuance: November 2, 1999
SkyMall, Inc., a Nevada corporation (the "Company"), hereby certifies that, for
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Xxxxxxx Communications, Inc., the registered holder hereof or its
permitted assigns (a "holder"), is entitled, subject to the terms set forth
below, to purchase from the Company upon surrender of this Warrant, at any time
or times on or after the date hereof, but not after 11:59 P.M. Eastern Time on
the Expiration Date (as defined herein) fully paid nonassessable shares of
Common Stock (as defined herein) of the Company (the "Warrant Shares") at the
purchase price per share provided in Section 2(a) below.
1. Definitions.
(a) Stock and Warrant Purchase Agreement. This Warrant is one of the
Warrants (the "Warrants") issued pursuant to the Stock and Warrant Purchase
Agreement dated as of November 2, 1999, among the Company and the Investors (as
such term in defined therein) (the "Agreement").
(b) Definitions. The following words and terms as used in this Warrant
shall have the following meanings:
(i) "Business Day" means any day other than Saturday, Sunday or
other day on which commercial banks in the City of New York are authorized or
required by law to remain closed.
(ii) "Closing Bid Price" means, for any security as of any date, the
last closing bid price for such security on the Principal Market (as defined
below) as reported by Bloomberg Financial Markets ("Bloomberg"), or, if the
Principal Market is not the principal trading market for such security, the last
closing bid price of such security on the principal securities exchange or
trading market where such security listed or traded as reported by Bloomberg, or
if the foregoing do not apply, the last closing bid price of such security in
the over-the-counter market on the electronic
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23
bulletin board for such security as reported by Bloomberg, or, if no closing bid
price is reported for such security by Bloomberg, the last closing trade price
for such security as reported by Bloomberg, or, if no last closing trade price
is reported for such security by Bloomberg, the average of the bid prices of any
market makers for such security as reported in the "pink sheets" by the National
Quotation Bureau, Inc. If the Closing Bid Price cannot be calculated for such
security on such date on any of the foregoing bases, the Closing Bid Price of
such security on such date shall be the fair market value as mutually determined
by the Company and the holder of this Warrant. All such determinations to be
appropriately adjusted for any stock dividend, stock split or other similar
transaction during such period.
(iii) "Closing Sale Price" means, for any security as of any date,
the last closing trade price for such security on the Principal Market (as
defined below) as reported by Bloomberg, or, if the Principal Market is not the
principal securities exchange or trading market for such security, the last
closing trade price of such security on the principal securities exchange or
trading market where such security is listed or traded as reported by Bloomberg,
or if the foregoing do not apply, the last closing trade price of such security
in the over-the-counter market on the electronic bulletin board for such
security as reported by Bloomberg, or, if no last closing trade price is
reported for such security by Bloomberg, the last closing ask price of such
security as reported by Bloomberg, or, if no last closing ask price is reported
for such security by Bloomberg, the average of the lowest ask price and lowest
bid price of any market makers for such security as reported in the "pink
sheets" by the National Quotation Bureau, Inc. If the Closing Sale Price cannot
be calculated for such security on such date on any of the foregoing bases, the
Closing Sale Price of such security on such date shall be the fair market value
as mutually determined by the Company and the holder of this Warrant. If the
Company and the holder of this Warrant are unable to agree upon the fair market
value of the Common Stock, then such dispute shall be resolved by the term
"Market Price" being substituted for the term "Closing Sale Price." All such
determinations to be appropriately adjusted for any stock dividend, stock split
or other similar transaction during such period.
(iv) "Common Stock" means (i) the Company's common stock, par value
5.001 per share, and (ii) any capital stock into which such Common Stock shall
have been changed or any capital stock resulting from a reclassification of such
Common Stock.
(v) "Expiration Date" means the date five (5) years from the date of
this Warrant or, if such date falls on a Saturday, Sunday or other day on which
banks are required or authorized to be closed in the City of New York or the
State of New York or on which trading does not take place on the principal
exchange or automated quotation system on which the Common Stock is traded (a
"Holiday"), the next date that is not a Holiday.
(vi) "Issuance Date" means, with respect to each Warrant, the date
of issuance of the applicable Warrant.
(vii) "Market Price" means, with respect to any security for any
date of determination, that price which shall be computed as the arithmetic
average of the Closing Bid Prices for such security on each of the five (5)
consecutive trading days immediately preceding such date of determination (all
such determinations to be appropriately adjusted for any stock dividend, stock
split or similar transaction during the pricing period).
(viii) "Person" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof.
(ix) "Principal Market" means the Nasdaq National Market.
(x) "Securities Act" means the Securities Act of 1933, as amended.
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24
(xi) "Warrant" means this Warrant and all warrants issued in
exchange, transfer or replacement thereof.
(xii) "Warrant Exercise Price" shall be equal to S8.00 per share.
(xiv) Other Definitional Provisions. Except as otherwise specified
herein, all references herein (A) to the Company shall be deemed to include the
Company's successors and (B) to any applicable law defined or referred to
herein, shall be deemed references to such applicable law as the same may have
been or may be amended or supplemented from time to time. When used in this
Warrant, the words "herein," "hereof," and "hereunder," and words of similar
import, shall refer to this Warrant, as a whole and not to any provision of this
Warrant, and the words "Section," "Schedule," and "Exhibit" shall refer to
Sections of. and Schedules and Exhibits to, this Warrant unless otherwise
specified. Whenever the context so requires, the neuter gender includes the
masculine or feminine, and the singular number includes the plural, and vice
versa.
2. Exercise of Warrant.
(a) Subject to the terms and conditions hereof, this Warrant may be
exercised by the holder hereof then registered on the books of the Company, in
whole or in part, at any time on any Business Day on or after the opening of
business on the date hereof and prior to 11:59 P.M. Eastern Time on the
Expiration Date by (i) delivery of a written in the form of the subscription
notice attached as Exhibit A hereto (the "Exercise Notice), of such holder's
election to exercise this Warrant, which notice shall specify the number of
Warrant Shares to be purchased; (ii) (A) payment to the Company of an amount
equal to the Warrant Exercise Price multiplied by the number of Warrant Shares
as to which this Warrant is being exercised (the "Aggregate Exercise Price") in
cash, certified or bank funds or wire transfer of immediately available funds or
(B) notifying the Company that this Warrant is being exercised pursuant to a
Cashless Exercise (as defined in Section 2(e)); and (iii) the surrender of this
Warrant (or a Lost Warrant Affidavit in substantially the form annexed hereto as
Exhibit C with respect to this Warrant in the case of its loss, theft or
destruction) to a common carrier for overnight delivery to the Company;
provided, that if such Warrant Shares are to be issued in any name other than
that of the registered holder of this Warrant, such issuance shall be deemed a
transfer and the provisions of Section 8 shall be applicable. In the event of
any exercise of the nights represented by this Warrant in compliance with this
Section 2(a), the Company shall on the second Business Day following the date of
receipt of the Exercise Notice, the Aggregate Exercise Price (or notice of a
Cashless Exercise) and this Warrant (or a Lost Warrant Affidavit in
substantially the form annexed hereto as Exhibit C with respect to this Warrant
in the case of its loss, theft or destruction) (the "Exercise Delivery
Documents"), credit such aggregate number of shares of Common Stock to which the
holder (or its designee) shall be entitled to the holder's (or its designee's)
balance account with The Depository Trust Company; provided, however, if the
holder who submitted the Exercise Notice requested physical delivery of any or
all of the Warrant Shares, then the Company shall, on or before the second
Business Day following receipt of the Exercise Delivery Documents issue and
surrender to a common carrier for overnight delivery to the address specified in
the Exercise Notice, a certificate, registered in the name of the holder (or its
designee), for the number of shares of Common Stock to which the holder (or its
designee) shall be entitled. Upon delivery of the Exercise Notice and Aggregate
Exercise Price referred to above or notification to the Company of a Cashless
Exercise referred to in Section 2(e), the holder of this Warrant (or its
designee) shall be deemed for all corporate purposes to have become the holder
of record of the Warrant Shares with respect to which this Warrant has been
exercised, irrespective of the date of delivery of this Warrant as required by
clause (iii) above or the certificates evidencing such Warrant Shares. In the
case of a dispute as to the determination of the Warrant Exercise Price or the
Market Price of a security or the arithmetic calculation of the Warrant Shares,
the Company shall promptly Issue to the holder (or its designee) the number of
shares of Common Stock that is not disputed and shall submit the disputed
determinations or arithmetic calculations to the holder via facsimile within one
Business Day of receipt of the holder's Exercise Notice. If the holder and the
Company are
3
25
unable to agree upon the determination of the Warrant Exercise Price or the
Market Price or arithmetic calculation of the Warrant Shares within one day of
such disputed determination or arithmetic calculation being submitted to the
holder, then the Company shall immediately submit via facsimile (i) the disputed
determination of the Warrant Exercise Price or the Market Price to an
independent, reputable investment banking firm of nationally recognized
standing, mutually acceptable to both the Company and the holder or (ii) the
disputed arithmetic calculation of the Warrant Shares to an independent, outside
accountant, mutually acceptable to both the Company and the holder. The outside
Company shall cause the investment banking firm or the accountant, as the case
may be, to perform the determinations or calculations and notify the Company and
the holder of the results no later than forty-eight (48) hours from the time it
receives the disputed determinations or calculations. Such investment banking
firm's or accountant's determination or calculation, as the case may be, shall
be deemed conclusive absent manifest error.
(b) Unless the rights represented by this Warrant shall have expired or
shall have been fully exercised, the Company shall, as soon as practicable and
in no event later than two (2) Business Days after delivery of the Exercise
Delivery Documents and at its own expense, issue a new Warrant identical in all
respects to this Warrant exercised except it shall represent rights to purchase
the number of Warrant Shares purchasable immediately prior to such exercise
under this Warrant exercised, less the number of Warrant Shares with respect to
which such Warrant is exercised.
(c) No fractional shares of Common Stock are to be issued upon the
exercise of this Warrant, but rather the number of shares of Common Stock issued
upon exercise of this Warrant shall be rounded up to the nearest whole number.
(d) If the Company shall fall for any reason or for no reason to issue to
the holder within two (2) Business Days of receipt of the Exercise Delivery
Documents, a certificate for the number of shares of Common Stock to which the
holder (or its designee) is entitled or to credit the holder's (or designee's)
balance account with The Depository Trust Company for such number of shares of
Common Stock to which the holder (or its designee is entitled upon the holder's
exercise of thi Warrant for the number of shares of Common Stock to which such
holder is entitled pursuant to Section 2(b) hereof, the Company shall, in
addition to any other remedies under this Warrant or the Agreement or otherwise
available to such holder, including any indemnification under the Agreement, pay
as additional damages in cash to such holder on each day the issuance of such
Common Stock certificate or new Warrant, as the case may be, is not timely
effected, an amount equal to 0.5% of the product of (A) the sum of the number of
shares of Common Stock not issued to the holder (or its designee) on a timely
basis and to which the holder (or its designee) is entitled and/or, the number
of shares represented by the portion of this Warrant which is not being
converted, as the case may be, and (B) the average of the Closing Sale Price of
the Common Stock for the Five (5) consecutive trading days immediately preceding
the last possible date which the Company could have issued such Common Stock or
Warrant, as the case may be, to the holder without violating this Section 2.
(e) If, despite the Company's obligations under the Agreement, the Warrant
Shares to be issued are not registered and available for resale pursuant to a
registration statement in accordance with the Agreement, then notwithstanding
anything contained herein to the contrary, the holder of this Warrant may, at
its election exercised in its sole discretion, exercise this Warrant in whole or
in part and, in lieu of making the cash payment otherwise contemplated to be
made to the Company upon such exercise in payment of the Aggregate Exercise
Price, elect instead to receive upon such exercise the "Net Number" of shares of
Common Stock determined according to the following formula (a "Cashless
Exercise"):
Net Number = (A x B) - (A x C)
-----------------
B
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26
For purposes of the foregoing formula:
A = the total number of shares with respect to which this
Warrant is then being exercised.
B = the Market Price as of the date of the Exercise Notice.
C = the Warrant Exercise Price then in effect for the
applicable Warrant Shares at the time is Warrant or a new of
such exercise.
3. (a) Adjustment for Dividends in Other Stock and Property, Reclassifications.
In case at any time or from time to time the holders of the Common Stock (or any
shares of stock or other securities at the time receivable upon the exercise of
this Warrant) shall have received, or, on or after the record date fixed for the
determination of eligible shareholders, shall have become entitled to receive,
without payment therefor,
(1) other or additional stock or other securities or property
(other than cash) by way of dividend,
(2) any cash or other property paid or payable out of any
source other than retained earnings (determined in accordance with
generally accepted accounting principles), or
(3) other or additional stock or other securities or property
(including cash) by way of stock-split, spin-off, reclassification,
combination of shares or similar corporate rearrangement,
(other than (x) shares of Common Stock or any other stock or securities into
which such Common Stock shall have been exchanged or (y) any other stock or
securities convertible into or exchangeable for such Common Stock or such other
stock or securities), then and in each such case a holder, upon the exercise
hereof as provided in Section 2, shall be entitled to receive the amount of
stock and other securities and property (including cash in the cases referred to
in clauses (2) and (3) above) which such holder would hold on the date of such
exercise if on the Issuance Date such holder had been the holder of record of
the number of shares of Common Stock called for on the face of this Warrant, and
had thereafter, during the period from the Issuance Date to and including the
date of such exercise, retained such shares and/or all other or additional stock
and other securities and property (including cash in the cases referred to in
clause (2) and (3) above) receivable by it as aforesaid during such period,
giving effect to all adjustments called for during such period by Sections 3(a)
and 3)(b).
(b) Adjustment for Reorganization, Consolidation and Merger. In case of
any reorganization of the Company (or any other corporation the stock or other
securities of which are at the time receivable on the exercise of this Warrant)
or reclassification of its securities after the Issuance Date, or the Company
(or any such other corporation) shall consolidate with or merge into another
corporation or entity or convey or exchange all or substantially all its assets
to another corporation or entity, then and in each such case the holder of this
Warrant, upon the exercise hereof as provided in Section 2 at any time after the
consummation of such reorganization reclassification, consolidation, merger,
conveyance or exchange, shall be entitled to receive, in lieu of the stock or
other securities and property receivable upon the exercise of this Warrant prior
to such consummation, the stock or other securities or property to which Such
holder would have been entitled upon such consummation if such holder had
exercised this Warrant immediately prior thereto, all subject to further
adjustment as provided in Sections 3(a), (b), (c) and (d); in each such case,
the terms of this Warrant shall be applicable to the shares of stock or other
securities or property receivable upon the exercise of this Warrant after such
consummation.
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27
(c) Adjustment for Certain Dividends and Distributions. If the Company at
any time or from time to time makes, or fixes a record date for the
determination of holders of Common Stock (or any shares of stock or other
securities at the time receivable upon the exercise of this Warrant) entitled to
receive, a dividend or other distribution payable in additional shares of (x)
Common Stock or any other stock or securities into which such Common Stock shall
have been exchanged, or (y) any other stock or securities convertible into or
exchangeable for such Common Stock or such other stock or securities, then and
in each such event
(1) the Warrant Exercise Price then in effect shall be
decreased as of the time of the issuance of such additional shares
or, in the event such record date is fixed, as of the close of
business on such record date, by multiplying the Warrant Exercise
Price then in effect by a fraction (A) the numerator of which is the
total number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the close of
business on such record date, and (B) the denominator of which shall
be the total number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the close of
business on such record date as the case may be, plus the number of
shares of Common Stock issuable in payment of such dividend or
distribution; provided, however, that if such record date is fixed
and such dividend is not fully paid or if such distribution is not
fully made on the date fixed therefor, the Warrant Exercise Price
shall be recomputed accordingly as of the close of business on such
record date, and thereafter the Warrant Exercise Price shall be
adjusted pursuant to this Section 3)(c) as of the time of actual
payment of such dividends or distributions; and
(2) the number of shares of Common Stock theretofore
receivable upon the exercise of this Warrant shall be increased, as
of the time of such issuance or, in the event such record date is
fixed, as of the close of business on such record date, in inverse
proportion to the decrease in the Warrant Exercise Price.
(d) Stock Split and Reverse Stock Split. If the Company at any time or
from time to time effects a stock split or subdivision of the outstanding Common
Stock, the Warrant Exercise Price then in effect immediately before that stock
split or subdivision shall be proportionately decreased and the number of shares
of Common Stock theretofore receivable upon the exercise of this Warrant shall
be proportionately increased. ff the Company at any time or from time to time
effects a reverse stock split or combines the outstanding shares of Common Stock
into a smaller number of shares, the Warrant Exercise Price then in effect
immediately before that reverse stock split or combination shall be
proportionately increased and the number of shares of Common Stock theretofore
receivable upon the exercise of this Warrant shall be proportionately decreased.
Each adjustment tinder this Section 3)(d) shall become effective at the close of
business on the date the stock split, subdivision, reverse stock split or
combination becomes effective.
4. Redemption at the Company's Election. The Company, upon thirty (30) days'
prior written notice to the holder, may elect to redeem all or part of this
Warrant at a price equal to $0.01 per Warrant Share Issuable upon the exercise
hereof, if, but only if: (i) the Closing Bid Price shall have exceeded $12.00
per share (as equitably adjusted to reflect any merger, consolidation or
reorganization of the Company or any stock split, subdivision, reverse stock
split or combination effected by the Company) on each of the twenty (20)
consecutive trading days ending not more than one Business Day prior to the date
on which the notice of redemption shall be delivered to the holder, (ii) the
registration statement required to be filed under Section 4.1 of the Agreement,
dated as of the date hereof, by and among the Company and the other parties
signatory thereto, shall be effective and permit the sale of all Warrant Shares,
and (iii) the Common Stock shall be listed and trading on the Nasdaq National
Market, AMEX or the NYSE. Any such redemption shall be effective on the
thirtieth day following the delivery of such notice, provided, however, that the
holder may elect at any time prior to the effective date of redemption to
exercise all or any portion
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28
of this Warrant in accordance with the terms hereof, and provided further, that
the Company's right to redeem this Warrant shall be suspended if, after the
notice has been delivered, the Warrant Shares may not be sold pursuant to an
effective registration statement for any reason whatsoever or the Common Stock
shall cease to be listed and trading on the Nasdaq National Market, AMEX or the
NYSE. The notice period shall then be extended for a period of time equal to the
number of days during the notice period during which the registration statement
shall not have permitted the sale of such Warrant Shares or the Common Stock
shall not have been so listed and trading, as the case may be; provided,
however, that the notice period shall not begin to run until such time as the
holder receives notice from the Company that the registration statement permits
the sale of the Warrant Shares and/or the Common Stock shall have been so listed
and trading, as the case may be. The redemption price shall be payable in full,
in cash, on the effective date of any redemption pursuant to this paragraph (4).
A redemption notice delivered by the Company pursuant to this paragraph (4)
shall be irrevocable. Notwithstanding the foregoing, the Company's right to
redeem all or part of this Warrant may not be exercised if on the date on which
the Company delivers notice of such exercise the Market Price shall be less than
S12.00 per share (as equitably adjusted to reflect any merger, consolidation or
reorganization of the Company or any stock split, subdivision, reverse stock
split or combination effected by the Company).
5. Covenants as to Common Stock. The Company hereby covenants and agrees
as follows:
(a) This Warrant is, and any Warrants issued in Substitution for or
replacement of thi Warrant will upon issuance be, duly authorized and validly
issued.
(b) All Warrant Shares which may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be validly issued, fully paid
and nonassessable and free from all taxes, liens and char(Yes with respect to
the issuance thereof.
(c) During the period within which the rights represented by this Warrant
may be exercised, the Company will at all times have authorized and reserved at
least 100% of the number of shares of Common Stock needed to provide for the
exercise of the rights then n represented by this Warrant and the par value of
said shares will at all times be less than or equal to the applicable Warrant
Exercise Price.
(d) The Company shall secure the listing of the shares of Common Stock
issuable upon exercise of this Warrant upon each national securities exchange or
automated quotation any, upon which shares of Common Stock are then listed
within the time required by system, such exchange or quotation system's rules
and regulations and shall maintain, so long as any other shares of Common Stock
shall be so listed, such listing of all shares of Common Stock from time to time
issuable upon the exercise of this Warrant; and the Company shall so list on
each national securities exchange or automated quotation system within the time
required by such exchange or quotation system's rules and regulations, as the
case may be, and shall maintain such listing of, any other shares of capital
stock of the Company issuable upon the exercise of this Warrant if and so long
as any shares of the same class shall be listed on such national securities
exchange or automated quotation system.
(e) The Company will not, by amendment of its Certificate of Incorporation
or through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities, or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the holder of this
Warrant in order to protect the exercise privilege of the holder of this Warrant
against dilution or other impairment, consistent with the tenor and purpose of
this Warrant. Without limiting the generality of the foregoing, the Company (i)
will not increase the par value of any shares of Common Stock receivable upon
the exercise of this Warrant
7
29
above the Warrant Exercise Price then in effect, and (ii) will take all such
actions as may be necessary or appropriate in order that the Company may validly
and legally issue fully pal and nonassessable shares of Common Stock upon the
exercise of this Warrant.
f) This Warrant will be binding upon any entity succeeding to the Company
by merger, consolidation or acquisition of all or substantially all of the
Company's assets and any such successive mergers, consolidations or
acquisitions.
6. Taxes. The Company shall pay any and all taxes which may be payable with
respect to the issuance and delivery of Warrant Shares upon exercise of this
Warrant; provided, however, that the Company shall not be required to pay any
tax that may be payable in respect of any transfer involved in the issue or
delivery of Common Stock or other securities or property in a name other than
that of the registered holders of this Warrant to be converted and such holder
shall pay such amount, if any, to cover any applicable transfer or similar tax.
7. Warrant Holder Not Deemed a Stockholder. Except as otherwise specifically
provided herein, no holder of this Warrant, solely by virtue of such holding,
shall be entitled to vote or receive dividends or be deemed the holder of shares
of the Company for any purpose, nor shall anything contained in this Warrant be
construed to confer upon the holder hereof, as such, any of the rights of a
stockholder of the Company or any right to vote, give or withhold consent to any
corporate action (whether a reorganization, issue of stock, reclassification of
stock, consolidation, merger, conveyance or otherwise), receive notice of
meetings, receive dividends or subscription rights, or otherwise, prior to the
issuance to the holder of this Warrant of the Warrant Shares which he or she is
then entitled to receive upon the due exercise of this Warrant. In addition,
nothing contained in this Warrant shall be construed as imposing any liabilities
on such holder to purchase any securities (upon exercise of this Warrant or
otherwise) or as a stockholder of the Company, whether such liabilities are
asserted by the Company or by creditors of the Company. Notwithstanding this
Section 6, the Company will provide the holder of this Warrant with copies of
the same notices and other information given to the stockholders of the Company
Generally, contemporaneously with the giving thereof to the stockholders.
8. Representations of Holder. The holder of this Warrant, by the acceptance
hereof, represents that it is acquiring this Warrant and the Warrant Shares for
its own account for investment only and not with a view towards, or for resale
in connection with, the public sale or distribution of this Warrant or the
Warrant Shares, except pursuant to sales registered or exempted under the
Securities Act; provided, however, that by making the representations herein,
the holder does not agree to hold this Warrant or any of the Warrant Shares for
any minimum or other specific term and reserves the right to dispose of this
Warrant and the Warrant Shares at any time in accordance with or pursuant to a
registration statement or an exemption under the Securities Act. The holder of
this Warrant further represents, by acceptance hereof, that, as of this date,
such holder is an "accredited investor" as such term is defined in Rule
501(a)(1) of Regulation D promulgated by the Securities and Exchange Commission
under the Securities Act (an "Accredited Investor").
9. Ownership and Transfer.
(a) The Company shall maintain at its principal executive offices (or such
other office or agency of the Company as it may designate by notice to the
holder hereof), a register for this Warrant, in which the Company shall record
the name and address of the person in whose name this Warrant has been issued,
as well as the name and address of each transferee. The Company may treat the
person in whose name any Warrant is registered on the register as the owner and
holder thereof for all purposes, but in all events recognizing any transfers
made in accordance with the terms of this Warrant.
8
30
(b) This Warrant and the rights granted hereunder shall be assignable by
the holder hereof without the consent of the Company.
(c) The Company is obligated to register the Warrant Shares for resale
under the Securities Act pursuant to the Agreement and any holder of this
Warrant (and the assignees thereof) is entitled to the registration rights in
respect of the Warrant Shares as set forth in the Agreement.
10. Lost, Stolen, Mutilated or Destroyed Warrant. If this Warrant is lost,
stolen, mutilated or destroyed, the Company shall, on receipt of an executed
Lost Warrant Affidavit in substantially the form annexed hereto as Exhibit C
(or, in the case of a Mutilated Warrant, the Warrant), issue a new Warrant of
like denomination and tenor as this Warrant so lost, stolen, mutilated or
destroyed.
11. Notice. Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Warrant must be in writing and
will be deemed to have been delivered: (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending party); or (iii) one Business Day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company:
SkyMall, Inc.
0000 Xxxx Xxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxxxx X. Xxxxxxx, President and Chief Executive Officer
With copy to:
Squire, Xxxxxxx & Xxxxxxx L.L.P.
Two Renaissance Square
00 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Facsimile: 000-000-0000
Attention: Xxxxxxx X. Xxxx, Esq.
If to a holder of this Warrant, to it at the address and facsimile number set
forth on the Schedule of Investors to the Agreement, with copies to such
holder's representatives as set forth on such Schedule of Investors, or at such
other address and facsimile as shall be delivered to the Company by the holder
at any time. Each party shall provide five days' prior written notice to the
other party of any change in address or facsimile number. Written confirmation
of receipt (A) given by the recipient of such notice, consent, waiver or other
communication, (B) mechanically or electronically generated by the sender's
facsimile machine containing the time, date, recipient facsimile number and an
image of the first page of such transmission or (C) by a nationally recognized
overnight delivery service shall be rebuttable evidence of prove personal
service, receipt by facsimile or receipt from a nationally recognized overnight
delivery service in accordance with clause (i), (ii) or (iii) above,
respectively.
12. Date. The date of this Warrant is November 2, 1999. This Warrant, in all
events, shall be wholly void and of no effect after the close of business on the
Expiration Date, except that notwithstanding any other provisions hereof, the
provisions of Section 8 shall continue in full force
9
31
and effect after such date as to any Warrant Shares or other securities issued
upon the exercise of this Warrant.
13. Amendment and Waiver. Except as otherwise provided herein, the provisions of
the Warrants issued pursuant to the Agreement may be amended and the Company may
take any action herein prohibited, or omit to perform any act herein required to
be performed by it, only if the Company has obtained the written consent of the
holders of Warrants representing 66.7% of the shares of Common Stock obtainable
upon exercise of the Warrants then outstanding that no such action may increase
the Warrant Exercise Price of the Warrants, decrease the number of shares or
class of stock obtainable upon exercise of any Warrants, or otherwise materially
adversely effect the rights of the holder of this Warrant without the written
consent of such holder.
14. Descriptive Headings; Governing, Law; Jurisdiction. The descriptive headings
of the several Sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. The corporate
laws of the State of New York shall govern. all issues concerning the relative
nights of the Company and its stockholders. All other questions concerning the
construction, validity, enforcement and interpretation of this Warrant shall be
Governed by the internal laws of the State of New York, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
New York, or any other jurisdictions) that would cause the application of the
laws of any Jurisdictions other than the State of New York. Each of the parties
hereto irrevocably consents and submits to the nonexclusive jurisdiction of the
Supreme Court of the State of New York and the United States District Court for
the Southern District of New York in connection with any proceeding arising out
of or relating to this Warrant, waives any objection to venue in the County of
New York, State of New York, or such District, and agrees that service of any
summons, complaint, notice of other process relating to such proceeding may be
effected in the manner provided by Section 10 hereof.
[Signature Page Follows]
10
32
SKYMALL, INC.
By:_________________________
Name:_______________________
Title:______________________
11
33
EXHIBIT A TO WARRANT
SUBSCRIPTION FORM
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT
SKYMALL, INC.
The undersigned holder hereby exercises the right to purchase
___________________ of the shares of Common Stock ("Warrant Shares") of SkyMall,
Inc., a Nevada corporation (the "Company"), evidenced by the attached Warrant
(the "Warrant"). Capitalized terms used herein and not otherwise defined shall
have the respective meanings set forth in the Warrant.
1. Form of Warrant Exercise Price. The Holder intends that payment of the
Warrant Exercise Price shall be made as:
____________ a "Cash Exercise" with respect to _________________
Warrant Shares; and/or
____________ a "Cashless Exercise" with respect to ______________
Warrant Shares (to the extent permitted by the terms
of the Warrant).
2. Payment of Warrant Exercise Price. In the event that the holder has
elected a Cash Exercise with respect to some or all of the Warrant Shares to be
issued pursuant hereto, the holder shall pay the sum of S to the Company in
accordance with the terms of the Warrant.
3. Delivery of Warrant Shares. The Company shall deliver to the holder
Warrant Shares in accordance with the terms of the Warrant.
Date:______________,_______
___________________________
Name of Registered Holder
By: ______________________
Name:
Title:
X-0
00
XXXXXXX X TO WARRANT
FORM OF WARRANT POWER
FOR VALUE RECEIVED, the undersigned does hereby assign and transfer to
_______________, Federal Identification No. ________, a warrant to purchase
shares of the capital stock of SkyMall, Inc., a Nevada corporation, represented
by warrant certificate no. _____, standing in the name of the undersigned on the
books of said corporation. The undersigned does hereby irrevocably constitute
and appoint ______________________, attorney to transfer the warrants of said
corporation, with full power of substitution in the premises.
Dated: _______________,_______
___________________________________
By: __________________________
Its: __________________________
B-1
35
EXHIBIT C TO WARRANT
FORM OF AFFIDAVIT OF LOSS
STATE OF )
)ss:
COUNTY OF )
The undersigned (hereinafter "Deponent"), being duly sworn, deposes and says
that:
1. Deponent is an adult whose mailing address is:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
2. Deponent is the recipient of a Warrant (the "Warrant") from
SkyMall, Inc. (the "Company"), dated ___________________________________ for the
purchase of _________________________________ shares of Common Stock, par value
S.001 per share, of the Company, at an exercise price of
$_______________________ per share.
3. The Warrant has been lost, stolen, destroyed or misplaced, under
the following circumstances:
4. The Warrant was not endorsed.
5. Deponent has made a diligent search for the Warrant, and has been
unable to find or recover same, and Deponent was the unconditional owner of the
Warrant at the time of loss, and is entitled to the full and exclusive
possession thereof, that neither the Warrant nor the rights of Deponent therein
have, in whole or in part, been assigned, transferred, hypothecated, pledged or
otherwise disposed of, in any manner whatsoever, and that no person, firm or
corporation other than the Deponent has any right, title, claim, equity or
interest in, to, or respecting the Warrant.
6. Deponent makes this Affidavit Cor the purpose of requesting and
inducing the Company and its agents to issue a new warrant in substitution for
the Warrant.
7. If the Warrant should ever come into the hands, custody or power
of the Deponent or the Deponent's representatives, agents or assigns, the
Deponent will immediately and without consideration surrender the Warrant to the
Company, its representatives, agents or assigns, its transfer agents or
subscription agents for cancellation.
C-1
36
8. The Deponent hereby indemnities and holds harmless the Company
from any claim or demand for payment or reimbursement of any party arising in
connection with the subject matter of this Affidavit.
Signed, sealed and dated: _________________________
______________________________
Deponent
Sworn to and subscribed before me this
______day of ________________,________
______________________________________
Notary Public
C-2
37
FORM OF CONFIDENTIALITY AGREEMENT
SKYMALL, INC.
THIS AGREEMENT (the "Agreement") is entered into on _____________ ____,
1999 (the "Effective Date"), between SkyMall, Inc., a Nevada corporation
("SkyMall"), and ____________________________________ ("Company"). (SkyMall and
Company are hereinafter sometimes individually referred to as a "Party," and
collectively as the "Parties.")
1. Confidential Information. The parties hereby acknowledge and agree that
they will be disclosing to each other in their discussions and communications
with each other certain confidential information including, without limitation,
certain confidential information relating to their respective businesses,
business strategies, opportunities, operations and related information (the
"Confidential Information"). The term Confidential Information does not include
information which (1) was or becomes generally available to the public through
no fault of a Party, or (2) was or becomes available on a non-confidential basis
from a source other than the other Party, provided that such source was not
bound by a confidentiality agreement in respect thereof. The Parties agree that
the Confidential Information will be kept confidential and only disclosed to
each Party's representatives who have a need to know such information for the
purposes of evaluation any business opportunities and that, in any event, each
Party shall be ible for any breach of this Agreement by any such
representatives. response
2. Non-Disclosure of Confidential Information. In consideration thereof,
it is our mutual understanding and agreement that, except as hereafter
specifically authorized in writing by either Party, the other Party shall not
disclose to any person or entity any such Confidential Information and that each
Party will hold in the highest confidential manner and to maintain in trust at
all times any such Confidential Information received from the other. Each Party
shall not disclose the Confidential Information to any person other than as
permitted hereby and will take all reasonable and appropriate steps to safeguard
the Confidential Information from unauthorized disclosure. Each Party agrees to
promptly notify the other Party if it becomes aware of the unauthorized
disclosure of the other Party's Confidential Information. Each Party further
agrees that it will not use any Confidential Information in competition with the
other Party, nor use the Confidential Information in any manner that competes
with the other Party.
3. Enforcement of Agreement Provisions. The Parties acknowledge and agree
that any breach or threatened breach o this Agreement will entitle the other
Party to injunctive relief to enforce this Agreement including a temporary
restraining order or injunction without bond and without the necessity of
province actual damages. Nothing in this Section 3 shall limit or exclude any
and all other rights to money damages, granted by law or equity. If any court or
of competent jurisdiction shall refuse, in that jurisdiction, to enforce any
part or provision of this Agreement due to a determination of enforceability,
illegality or invalidity, it is gr expressly understood and agreed by the
Parties that neither this Agreement, nor any part thereof, shall be void and
only the particular restriction deemed to be unenforceable, illegal or invalid
shall then be reduced or otherwise modified by such court or tribunal, but only
to the minimum extent necessary to permit its enforcement. The agreements and
promises contained herein shall survive the termination of any relationship
between the parties. This Agreement shall be Governed by the laws of the State
of Arizona. The term "person" as used in this Agreement shall be broadly
interpreted to include, without limitation, any corporation, partnership,
individual, organization or other entity.
4. In the event that a receiving Party or any of its employees or agents
become legally compelled (by deposition, interrogatory, request of documents,
subpoena, civil investigative demand or similar process) to disclose any of the
Confidential Information of the disclosing Party, that receiving Party or person
from whom Such information is being sought shall provide the
1
38
disclosing Party to whom such Confidential Information belongs, with prompt
prior written notice of such requirement so that such disclosing Party may seek
a protective order or other appropriate remedy and/or waive compliance with the
terms of this Agreement. In the event that such protective order or other remedy
is not obtained, or the disclosing Party waives compliance with the provisions
hereof, the receiving Party required to provide such information agrees to
furnish only such portion of the Confidential Information which is legally
required to be furnished.
IN, WITNESS WHEREOF, the parties hereto by their respective duly
authorized officers have caused this Agreement to be executed.
SKYMALL, INC. COMPANY:_________________________
Signature:________________________ Signature:_______________________
Name:_____________________________ Name:____________________________
(Printed) (Printed)
Title:____________________________ Title:___________________________
Date:_____________________________ Date:____________________________
2
39
FORM OF OPINION
November 2, 1999
To The Investors Listed On
Schedule A to This Opinion
And
Xxxx, Xxxx & Co., Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Re: SkyMall, Inc.
Ladies and Gentlemen:
We have acted as counsel to SkyMall, Inc. (the "Company"), a Nevada
corporation, in connection with that certain Stock and Warrant Purchase
Agreement, dated as of November 1, 1999 (the "Purchase Agreement"), and the
transactions contemplated therein. Capitalized terms used herein, but not
otherwise defined, shall have the meanings given them in the Purchase Agreement.
This opinion letter (the "Opinion") is delivered to you pursuant to Section
5.2(e) of the Purchase Agreement.
In connection with the opinions set forth herein, we have examined (i) the
Purchase Agreement; and (ii) the Warrants (collectively, the "Transaction
Documents"). We have also examined originals or copies of (a) the Company's
Articles of Incorporation, as amended to date; (b) the Company's Bylaws, as
amended to date; and (c) the corporate proceedings of the Company relating to
the foregoing. In addition, we have examined originals or copies, certified or
otherwise identified to our satisfaction, of such other corporate records,
agreements, instruments and documents of the Company and the Subsidiaries and
certificates and other statements of public officials and corporate officers,
and have made such other investigations of fact and law, as we have deemed
necessary in connection with the opinions set forth herein. In our examination,
we have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified, facsimile, conformed or photostatic
copies, and the authenticity of the originals of such copies, and the accuracy
and completeness of all corporate records made available to us by the Company
and its representatives.
As to questions of fact material to these opinions, we have relied upon
certificates of officers and other representatives of each of the Company and
its Subsidiaries and upon Our examination of the documents referred to above,
and have assumed the current accuracy and completeness of the information
contained in Such certificates and obtained from public officials and public
records included in the documents referred to above. For purposes of the
opinions expressed in this letter, we have assumed, without independent
investigation, that all representations, warranties and statements with respect
to factual matters in the Transaction Documents and such other documents and
instruments we have examined are true and accurate as of the date of this
opinion letter and have
40
Investors Listed on Schedule A to this Option November 2, 1999
And Page 2
Xxxx, Xxxx & Co., Inc.
relied upon such documents and instruments in rendering such opinions. We have
made no independent investigations or other attempts to certify the accuracy of
any such information or to the existence or nonexistence of any other factual
matters; however, our Primary Lawyers (as defined below) have no Actual
Knowledge (as defined below) concerning the factual matters upon which reliance
is placed which would render such reliance unreasonable. For purposes hereof,
the term "Primary Lawyers" means those attorneys currently in this firm who have
given substantive legal attention to the representation of the Company or any
Subsidiary, and the term "Actual Knowledge" means the conscious awareness of
such Primary Lawyers of facts or other information without any further
investigation.
In rendering the opinions set forth herein, we also have assumed, with
your permission: (i) the due organization, valid corporate existence and good
standing of each party to the Transaction Documents, other than the Company and
its Subsidiaries; (ii) the power and authority of each party to the Transaction
Documents (other than the Company and its Subsidiaries) to execute, deliver and
perform the Transaction Documents to which it is a party; (iii) the due
authorization, execution and delivery by each party to the Transaction Documents
(other than the Company and its Subsidiaries) of the Transaction Documents to
which it is a party; and (iv) that each of the Transaction Documents is a legal,
valid and binding obligation of, and enforceable in accordance with its terms
against, each party thereto (other than the Company and its Subsidiaries).
We express no opinion as to the enforceability of a waiver of rights
granted by any federal or state statute or any decisional law, including any
waiver of notice or any opportunity for a hearing, to the extent that such
waiver is deemed to violate public policy.
Without limiting any other qualifications set forth herein, the opinions
expressed below are subject to the effect of any generally applicable laws that:
(i) limit the enforceability of provisions releasing, exculpating, or exempting
a party from, or requiring indemnification of a party for, liability for its own
action or inaction, to the extent the action or inaction involves gross
negligence, recklessness, willful misconduct or unlawful conduct; (ii) may,
where less than all of a contract may be unenforceable, limit the enforceability
of the balance of the contract to circumstances in which the enforceable portion
is not an essential part of the agreed exchange; (iii) govern and afford
judicial discretion regarding the determination of damages and entitlement to
attorneys' fees and other costs; or (iv) may permit a party who has materially
failed to render or offer performance required by a contract to cure that
failure unless permitting a cure would unreasonably hinder the aggrieved party
from making substitute arrangements for performance or it is important under the
circumstances to the aggrieved party that performance occur by the date stated
in the contract.
In addition to the foregoing, we expressly limit or qualify our opinion as
follows
A. Our opinions expressed in Paragraph 2 below as to the valid existence
and good standing of the Company and its Subsidiaries are based solely on
certificates of public officials. copies of which have been furnished to You,
and our opinions with respect to such matters are rendered as of the dates of
such certificates.
B. Our opinions expressed in Paragraph 2 below are given as to the Company
and each of its Subsidiaries only with respect to those jurisdictions in which
such Company or Subsidiary owns or leases property or conducts business, as set
forth in a certificate of the Company attached hereto as Exhibit A, and we have
made no independent investigation as to the accuracy of the jurisdictions
identified therein.
41
Investors Listed on Schedule A to this Option November 2, 1999
And Page 3
Xxxx, Xxxx & Co., Inc.
C. Our opinions expressed herein are qualified to the extent that the
enforceability of any of the provisions of the agreements, documents or
obligations referred to herein may be subject to or affected by (i) applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or
conveyance or other laws affecting the rights and remedies of creditors
generally, (ii) general equity principles (regardless of whether enforcement is
sought in a proceeding in equity or at law) and the discretion of the court
before which any proceeding may be brought, (iii) duties and standards of good
faith, reasonableness and fair dealing imposed on parties to contracts, (iv) the
limitation in certain circumstances of provisions imposing penalties,
forfeitures, late payment charges or an increase in interest rate upon
delinquency in payment or the occurrence of a default, and (v) a court
determination that any fees payable pursuant to a provision requiring the
payment of attorneys' fees is reasonable. We express no opinion as to the
validity or binding effect of any indemnification or contribution provisions
contained in the Transaction Documents or any other agreements to the extent
such provisions are limited by federal or state securities laws or the policies
underlying such laws.
D. Our opinions expressed herein are limited to the specific issues
addressed and to the laws existing on the date hereof. By rendering our opinion,
we do not undertake to advise you with respect to any other matter or of any
change in such laws or the interpretation thereof which may occur after the date
hereof.
E. In connection with the opinions expressed in Paragraph I hereof, we
note that any provisions of the Transaction Documents that permit the Investors
to take actions or make determinations, or to benefit from indemnities and
similar undertakings, may be subject to a requirement that such actions be taken
or such determinations be made, and that any action or inaction by the Investors
which may give rise to a request for payment under such an indemnity or similar
undertaking be taken or not taken, in a commercially reasonable manner and in
good faith. Based upon the foregoing, and subject to the qualifications set
forth herein, we are of the opinion that:
1. The execution, delivery and performance of the Transaction
Documents have been duly and validly authorized by the Company and the Agreement
is valid and binding upon the Company, enforceable in accordance with its terms.
The Warrants constitute valid and binding obligations of the Company to issue
and sell, upon exercise thereof in accordance with its terms, the number and
type of securities of the Company called for thereby. The securities to be
issued and sold by the Company in connection with the Agreement and the Warrants
(as the case may be) have been duly authorized and, when issued and paid for in
accordance with the Agreement and the Warrants (as the case may be), the
certificates representing each of the securities, will be validly Issued, fully
paid and non-assessable; the holders thereof are not and will not be subject to
personal liability to third parties solely by reason of being such holders, such
securities are not subject to the preemptive nights of any security holder of
the Company; and all corporate action required to be taken for the
authorizations issuance and sale of such securities has been duly and validly
taken by the Company. The Company has duly reserved 1,142,858 shares of Common
Stock for issuance upon exercise of the Warrants. The Common Stock, the Warrants
and the Warrant Shares conform in all material respects to the description
thereof contained in the Agreement. No transfer tax is payable by or on behalf
of the Company in connection with the issuance and sale of any of the Common
Stock, the Warrants and the Warrant Shares or the consummation of the Company's
obligations under the Transaction Documents.
42
Investors Listed on Schedule A to this Option November 2, 1999
And Page 4
Xxxx, Xxxx & Co., Inc.
2. The Company and each Subsidiary has been duly organized and is
validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation; the Company and each Subsidiary is duly qualified
and is in good standing as a foreign corporation to do business in each
jurisdiction in which its ownership or leasing of any properties or the
character of its operations requires such qualification, except where the
failure to so qualify would not have a Material Adverse Effect (as defined in
the Agreement); each of the Company and each Subsidiary has all requisite
corporate power and authority, and to our Actual Knowledge, all authorizations,
approvals, orders, licenses, certificates and permits of and from all state and
Federal governmental regulatory officials and bodies to own or lease its
properties and conduct its business, and, to our Actual Knowledge, each of the
Company and each Subsidiary is doing business in compliance with all such
authorizations, approvals, orders, licenses, certificates and permits and all
state and Federal laws, rules and regulations concerning the business in which
the Company or such Subsidiary is engaged, except where the failure to so comply
would not have a Material Adverse Effect (as defined in the Agreement).
3. All issued and outstanding been duly authorized and validly issued
and, based solely upon our review of the respective stock ledgers, minute books
and certificates of respective officers, are fully paid and non-assessable; the
holders thereof have no rights of rescission or preemptive rights with respect
thereto and are not subject to personal liability solely by reason of being
securityholders; and, none of such securities were issued in violation of any
statutory preemptive rights of any holder of any security of the Company or, to
our Actual Knowledge, any contractual preemptive rights of any party.
4. To our Actual Knowledge, except as set forth in the SEC Documents,
there is no material litigation or state or Federal Governmental proceeding
pending or threatened against, or involving the properties or business of the
Company or any Subsidiary.
5. To our Actual Knowledge, none of the Company nor any Subsidiary is
in breach of, or in default under, any term or provision of any indenture,
mortgage, deed of trust, lease, note, loan or credit agreement or any other
agreement or instrument evidencing an obligation for borrowed money, or any
other agreement or instrument known to us to which it is a party or by which it
or any of its respective properties may be bound or affected, except for where
such breach or default would not have a Material Adverse Effect. To our Actual
Knowledge, none of the Company nor any Subsidiary is in violation of any
provision of its charter or Bylaws or in violation of any franchise, license,
permit, judgment, decree or order, or in violation of any state or Federal
statute, rule or regulation. To our Actual Knowledge, neither the execution and
delivery of the Transaction Documents, nor the issuance and sale or delivery of
the Common Stock, the Warrants and/or the Warrant Shares nor the consummation of
any of the transactions contemplated in the Transaction Documents, nor the
compliance by the Company with the terms and provisions thereof, has conflicted
with or will conflict with, or has resulted in or will result in a breach of,
any of the terms and provisions of, or has constituted or will constitute a
default under, or has resulted in or will result in the creation or imposition
of any lien, charge or encumbrance upon any property or assets of the Company or
any Subsidiary or pursuant to the terms of any indenture, mortgage, deed of
trust, note, loan or credit agreement or any other agreement or instrument
evidencing an obligation for borrowed money, or any other agreement or
instrument known to us to which the Company or any Subsidiary may be bound or to
which any of the property or assets of the Company or any Subsidiary is subject;
nor will such action result in any violation of the provisions of the charter or
the Bylaws of the Company or any Subsidiary, any state or Federal statute or any
state or Federal order, rule or regulation applicable to the Company or any
Subsidiary of any court or other state or Federal regulatory authority having
jurisdiction over the Company or any Subsidiary.
43
Investors Listed on Schedule A to this Option November 2, 1999
And Page 5
Xxxx, Xxxx & Co., Inc.
6. Assuming that each Investor that purchases the Common Stock and the
Warrants is an Accredited Investor, that the representations made by the Company
and the Investors in the Purchase Agreement were true and correct on the date of
such Agreement and at the time of the Closing and that a Form D will be filed in
accordance with the provisions of Section 503) of Regulation D, no registration
under the Securities Act is required in connection with the sale and issuance of
any of the Securities. The offering and sale of the Securities in the manner
contemplated by the Purchase Agreement will not be integrated with any offering
made before the offer and sale of such Securities in a manner that would render
unavailable any exemption from registration under the Securities Act.
7. We have participated in conferences with officers and other
representatives of the Company, at which conferences we have made inquiries of
such officers and representatives, discussed the contents of the SEC Documents
(as defined in the Agreement), the Confidential Private Placement Memorandum
(together with the attachments thereto), dated as of September 27, 1999, as
supplemented (the "Memorandum"), and related matters and, although we are not
passing upon and do not assume responsibility for the accuracy, completeness or
fairness of the statements contained in the SEC Documents or the Memorandum, on
the basis of the foregoing no facts have come to Our attention which lead LIS to
believe that any of the SEC Documents or the Memorandum as of the date of this
opinion contained any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading (it being understood we are not expressing any opinion with
respect to the financial statements and schedules and other financial and
statistical data, including any financial forecasts or projections, included in
the SEC Documents or the Memorandum).
Attorneys involved in the preparation of this opinion are admitted to
practice law in the States of Arizona and we do not express any opinion herein
concerning any law other than the laws of the State of Arizona, the General
Corporation Law of the States of Nevada and Utah and the federal laws of the
United States of America (collectively, "Applicable Law"); however, the term
"Applicable Law" is limited to those laws and regulations that a lawyer
exercising customary professional diligence would reasonably recognize as
applicable in any material respect to the transactions contemplated by the
Transaction Documents, and does not include laws and regulations of county,
municipal, and special political subdivisions, whether state, regional,
municipal, or otherwise, provided the violation of any of the foregoing would
not result in a Material Adverse Effect. No opinion is expressed herein as to
matters governed by any other laws, statutes, rules, or regulations.
This opinion is intended solely for the benefit of the addressee hereof
any may not be relied upon in any manner by any other person without our express
prior written consent.
Respectfully submitted,
Squire, Xxxxxxx & Xxxxxxx L.L.P.
44
EXHIBIT A
Certificate of SkyMall, Inc
[Attached]
45
SKYMALL, INC.
OFFICER'S CERTIFICATE
1, Xxxxxxxxx X. Xxxxxxxx, Executive Vice President, General Counsel and
Secretary of SkyMall, Inc., a Nevada corporation (the "Corporation"), hereby
certify that:
(a) The Corporation does business in the States of Nevada and
Arizona.
(b) xxxxxxxx.xxx, inc. does business in the States of Nevada,
Arizona
(c) Durham & Company does business in the States of Utah and
(d) Disc Publishing, Inc. does business in the State of Utah.
IN WITNESS WHEREOF, I have hereunto signed my name.
Dated: November 2, 1999
SKYMALL, INC.
-------------------------------
Xxxxxxxxx X. Xxxxxxxx
Executive Vice President, General Counsel
and Secretary
46
SCHEDULE A
LIST OF INVESTORS
47
SCHEDULE I
----------------------------------------------------------------------------------------------------------------------
No. of
Shares of
Name and Address of Common No. of
Name and Address of Investor Representative Purchase Price Stock Warrants
----------------------------------------------------------------------------------------------------------------------
American High Growth Equities None $1,000,000 142,857 71,429
Retirement Trust
Xxxxx Tower--24th Floor
000 0xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
----------------------------------------------------------------------------------------------------------------------
Special Situations Private Equity Fund L.P. Xxxxx Greenhouse $1,199,800 171,400 85,700
----------------------------------------------------------------------------------------------------------------------
Special Situations Fund L.P. III Xxxxx Greenhouse $1,350,300 192,900 96,450
000 X. 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
----------------------------------------------------------------------------------------------------------------------
Special Situations Cayman L.P. Xxxxx Greenhouse $450,100 64,300 32,150
000 X. 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
----------------------------------------------------------------------------------------------------------------------
Xxxxxxx Communications, Inc. Xxxxxxxx Xxxx $3,000,000 428,571 214,286
One Blue Hill Plaza c/x Xxxxx, et al.
Xxxxx Xxxxx, Xxx Xxxx, 00000 000 Xxxxxxxxx Xxx.
Xxx Xxxx, XX 00000
----------------------------------------------------------------------------------------------------------------------
Xxxxxx Xxxxxxx Worsley and Christi Xxxxx n/a $1,000,000 142,857 71,429
Worsley, as trustees of the Xxxxxx Xxxxxxx
Xxxxxxx and Xxxxxxx Xxxxx Xxxxxxx Family
Revocable Trust dated July 28, 1998
c/o SkyMall, Inc.
0000 X. Xxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
----------------------------------------------------------------------------------------------------------------------
