UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED APRIL 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO
___________
Commission file number: 000-29518
SHOPPING.COM
(Exact name of Registrant as specified in its charter)
CALIFORNIA 33-0733679
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2101 EAST COAST HIGHWAY, CORONA DEL MAR, CALIFORNIA 92625
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (949) 640-4393
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes ..X.. No .....
As of May 28, 1998, there were 4,062,354 shares of the Registrant's no par value
common shares outstanding.
Exhibit Index on page 43
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FORM 10-QSB
For the Quarterly Period Ended April 30, 1998
Item Page
- ---- ----
PART I. FINANCIAL INFORMATION
1. FINANCIAL STATEMENTS 3
Balance Sheet at April 30, 1998 3
Statements of Operations for the three months
ended April 30, 1997 and 1998 4
Statements of Cash Flows for the three months
ended April 30, 1997 and 1998 5
Notes to Financial Statements 6
2. MANAGEMENT DISCUSSION AND ANALYSIS 10
Forward Looking Statements 10
Overview 11
Results of Operation 12
Liquidity and Capital Resources 14
Employees 16
Factors That May Affect Future Performance 16
PART II. OTHER INFORMATION
1. Legal Proceedings 29
2. Changes in Securities 31
3. Defaults Upon Senior Securities 36
4. Submission of Matters to a Vote of Security Holders 37
5. Other Information 37
6. Exhibits and Reports on Form 8-K 38
Signature 42
Exhibit Index 43
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SHOPPING.COM
BALANCE SHEET
As of April 30, 1998 (unaudited)
April 30, 1998
(Unaudited)
ASSETS -----------
Current assets
Cash and cash equivalents $ 1,476,109
Accounts receivable, net 87,877
Other receivables 25,384
Prepaid expenses and other current assets 308,041
------------
Total Current assets 1,897,411
Furniture and equipment, net 3,131,509
Deposits 509,510
Other assets 30,555
------------
Total assets $ 5,568,985
============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of capital lease obligations $ 251,459
Accounts payable 1,459,162
Accrued legal and related costs 323,535
Other accrued liabilities 213,998
------------
Total current liabilities 2,248,154
Capital lease obligation, net of current portion 355,484
------------
Total liabilities 2,603,638
------------
Commitments
Shareholders' equity
Common stock, no par value, 20,000,000 shares
authorized, 4,049,059 shares issued and
outstanding 13,394,651
Accumulated deficit (10,429,304)
------------
Total shareholders' equity 2,965,347
------------
Total liabilities and shareholders' equity $ 5,568,985
============
The accompanying notes are an integral part of these financial statements.
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SHOPPING.COM
STATEMENTS OF OPERATIONS
Three Months Ended
April 30,
(Unaudited)
1998 1997
----------- -----------
(unaudited) (unaudited)
Net sales $ 917,836 $ --
Cost of sales 864,889 --
----------- -----------
Gross profit 52,947 --
Operating expenses:
Advertising and marketing 1,837,990 --
Product development 634,594 33,308
General and administrative 2,320,907 312,669
----------- -----------
Total operating expenses 4,793,491 345,977
----------- -----------
Loss from operations (4,740,544) (345,977)
Other income (expense):
Interest Income 36,418 --
Interest Expense (1,452) (1,000)
----------- -----------
Total other income 34,966 (1,000)
----------- -----------
Net Loss $(4,705,578) $ (346,977)
=========== ===========
Basic Loss Per Share $ (1.17) $ (0.30)
=========== ===========
Diluted Loss Per Share $ (1.17) $ (0.30)
=========== ===========
Weighted Average Shares Outstanding 4,039,013 1,152,500
=========== ===========
The accompanying notes are an integral part of these financial statements.
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SHOPPING.COM
STATEMENTS OF CASH FLOWS
For the Three Months Ended April 30,
(unaudited)
1998 1997
---- ----
Cash flows from operating activities
Net loss $(4,705,578) $ (346,977)
Adjustments to reconcile net loss to net
cash used in operating activities
Depreciation of furniture and equipment 162,724 (1,276)
Common stock issued for advertising 1,000,000 --
Expense recognized from issuing stock
options 90,689 --
Decrease (Increase) in prepaid expenses 357,980 (7,866)
(Increase) in other assets (340,324) (55,092)
Decrease (Increase) in accounts/advances
receivable 9,507 (17,700)
(Increase) in other receivables (7,827) --
Decrease (Increase) in accounts payable 609,448 (461)
Decrease (Increase) in other accrued
liabilities (37,531) (31,845)
----------- -----------
Net cash used in operating activities (2,860,912) (461,217)
----------- -----------
Cash flows from investing activities
Purchase of furniture and equipment (418,386) (71,533)
----------- -----------
Net cash used in investing activities (418,386) (71,533)
=========== ===========
Cash flows from financing activities
Collection on stock subscription receivable -- 23,000
Payments on note payable -- (50,000)
Payments on capital lease obligations (73,773) --
Proceeds from the issuance of preferred
stock, Series A -- 300,000
Proceeds from the issuance of preferred
stock, Series B -- 499,900
Payment of offering costs -- (21,050)
Net cash provided by financing activities (73,773) 751,850
----------- -----------
Net increase (decrease) in cash (3,353,071) 219,100
Cash, beginning of period 4,829,180 63
----------- -----------
Cash, end of period $ 1,476,109 $ 219,163
=========== ===========
The accompanying notes are an integral part of these financial statements.
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SHOPPING.COM
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
The accompanying condensed financial statements have been prepared in conformity
with generally accepted accounting principles for interim financial information
as contemplated by the SEC under Item 310(b) of Regulation S-B. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all normal, recurring adjustments considered necessary for a fair
presentation have been included. The interim financial statements should be read
in conjunction with the Company's January 31, 1998 annual report on Form 10-KSB.
The results of operations for the three months ended April 30, 1998 are not
necessarily indicative of the operating results that may be expected for the
fiscal year ending January 31, 1999.
NOTE 2: FURNITURE AND EQUIPMENT
Furniture and equipment consist of the following:
April 30, 1998
--------------
Computer hardware $1,863,082
Computer software 1,262,511
Furniture & equipment 286,309
Leasehold improvements 89,200
----------
3,501,102
Less: Accumulated depreciation 369,593
----------
$3,131,509
==========
NOTE 3: ADVANCES - RELATED PARTIES
During the first quarter of 1998, an officer was advanced a total of $3,344 from
the Company. In addition, the Company advanced one of its employees $7,500
bringing the employees total advances to $18,500 of which $1,000 was repaid
during the first quarter of 1998. Total advances to related parties at April 30,
1998 were $22,041 which was included in "0ther receivables" in the balance
sheet.
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NOTE 4: CONSULTING FEES - RELATED PARTY
For the three months ended April 30, 1998, the Company retained the services of
certain consultants, which were also shareholders. Consulting expenses amounted
to approximately $50,900 of which $28,390 was unpaid as of April 30, 1998.
NOTE 5: SHAREHOLDER'S EQUITY
In February, 1998 the Company issued 47,059 shares of Common Stock for
$1,000,000 of radio advertising based on the then fair market value of the
Common Stock. The advertisements were aired during the three months ended April
30, 1998 and accordingly, $1,000,000 was expensed during this period. Up to
52,941 additional shares of Common Stock may be issuable under the radio
advertising agreement on February 19, 1999 if on such date the average closing
price of the Company's Common Stock for the previous ten days is less than
$21.25 per share.
NOTE 6: PROMISSORY NOTES
On May 15, 1998 the Company issued $1,225,000 of Promissory Notes, which have a
due date of six months from the date of issuance. The Promissory Notes are
unsecured, subordinated and carry an interest rate of 10% per annum. The
Promissory Notes include issuances to certain existing shareholders of the
Company.
In connection with the issuance of these Promissory Notes, 122,500 warrants to
purchase shares of Common Stock were issued which warrants are exercisable until
May 15, 2001 at an exercise price of $14.00 per share of Common Stock. These
below market warrants will result in additional interest charges of
approximately $735,000 over the term of the Promissory Notes.
NOTE 7: 8% CONVERTIBLE DEBENTURES
The Company entered into an agreement in June 1998 whereby the Company issued 8%
Convertible Debentures due May 31, 2000 in the principal amount of $1,000,000.
The 8% Convertible Debentures are convertible into shares of Common Stock at a
conversion price not to exceed $16.00 per share (the "Base Rate"). The holder of
the 8% Convertible Debenture will receive one warrant to purchase a share of
Common Stock for each two shares of Common Stock issued in connection with the
corresponding conversion of the Debentures (the "Warrants"). The Warrants
attributable to each conversion shall have an exercise price equal to the lesser
of (a) 120% of the lowest market price for any three trading days prior to
conversion or (b) 125% of the Base Rate. The Warrants expire on June 5, 2003.
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NOTE 8: STOCK OPTIONS
In February 1998, each of the Company's directors were granted options to
purchase 25,000 shares of the Company's Common Stock at an exercise price of
$14.25 per share, for a total amount of 125,000 stock options granted. Certain
of these options were granted to Kipling Isle, Ltd., a corporation controlled by
Mr. Paul J. Hill, a director.
In April 1998, Mr. Frank Denny joined the Board of Directors as Chairman of the
Board to replace Bill Gross. In May, 1998, Mr. Denny was granted options to
purchase 100,000 shares of the Company's Common Stock at an exercise price of
$16.00 and 50,000 shares of Common Stock at an exercise price of the closing
price of the Company's Common Stock on the effective date of grant ($21.00).
In May 1998, Mr. Douglas Hay, a director and Executive Vice President of the
Company, was granted options to purchase 50,000 shares of the Company's Common
Stock at $16.00 per share and 50,000 shares of Common Stock at an exercise price
of the closing price of the Company's Common Stock on the effective date of
grant ($21.00). The effective date of grant was June 1, 1998.
In May 1998, Mr. Edward Bradley, a director of the Company, was granted options
to purchase 50,000 shares of the Company's Common Stock at an exercise price of
$16.00. The effective date of grant was June 1, 1998.
In May 1998, Kipling Isle, Ltd., a corporation controlled by Paul J. Hill, a
director, was granted options to purchase 50,000 shares of the Company's Common
Stock at an exercise price of $16.00. The effective date of grant was June 1,
1998.
In June 1998, Mr. John Markley became a director and was named the Company's
President and CEO following Mr. Robert McNulty's departure on June 1, 1998. Mr.
Markley was granted options to purchase 150,000 shares of the Company's Common
Stock at an exercise price of $16.00 and 100,000 shares of Common Stock at an
exercise price of the closing price of the Company's Common Stock on the
effective date of grant ($21.00). The effective date of grant was June 1, 1998.
As a result of the issuance of the below-market stock options including those
described above and issued during the fiscal year ended January 31, 1998, the
Company recorded a compensation charge of $90,689 during the three months ended
April 30, 1998 and will record a compensation charge of approximately $2,800,000
during the three months ending July 31, 1998. Refer to Note 9 for a description
of additional similar charges to be recorded.
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NOTE 9: COMMITMENTS AND CONTINGENCIES
CONSULTING AGREEMENTS
On March 26, 1998 the Company entered into a one-year Consulting Agreement (the
Double 12 Agreement") with Double 12, Ltd., a California corporation
("Consultant"), for matters concerning strategic partnerships, public relations,
communications or other business development activities. The Double 12 Agreement
includes quarterly fee payments of $40,000 and an option to extend the service
period for an additional six months.
On April 1, 1998 the Company entered into a two-year consulting agreement (the
"Agreement") with Stilden Co., Inc., a Texas Corporation ("Stilden") to provide
general consulting services relating to operation, promotion and financing of
the Company. Pursuant to the Agreement, Stilden will receive $7,000 per month,
reimbursement for business expenses and a housing allowance of $1,600 per month
for a period of twelve months. Mr. Denny, a director of the Company, is the
president, principal shareholder and a director of Stilden.
On June 1, 1998, the Company entered into a three-year Consulting Agreement with
Cyber Depot (the "Cyber Depot Agreement"). Pursuant to the Cyber Depot
Agreement, Cyber Depot will receive $21,500 per month and options to purchase
100,000 shares of the Company's Common Stock at an exercise price equal to the
closing market price of the Company's Common Stock on June 1, 1998 ($21.00). Mr.
McNulty, a former officer and director of the Company, is the principal
shareholder of Cyber Depot.
EMPLOYMENT AGREEMENTS
As of June 1, 1998, the Company entered into an agreement with Mr. Douglas Hay
to serve as Executive Vice President. The term of the agreement is for two years
and is automatically renewed for one-year terms unless terminated by either
party with written notice given by January 31 of any year beginning January 31,
2001. The agreement provides for a bi-weekly base salary of $8,465. The
agreement also provides that Mr. Hay will participate in a formula based program
to be approved annually by the Board of Directors and providing for the
opportunity to receive up to an amount equal to his base compensation for
exceeding the Company's annual business plan net profit.
Also as of June 1, 1998, the Company entered into an agreement with Mr. John
Markley to serve as President and Chief Executive Officer. The term of the
agreement is for three years and is automatically renewed for one-year terms
unless terminated by either party with written notice given by January 31 of any
year beginning January 31, 2001. The agreement provides for a bi-weekly base
salary of $6,735 for the first year, $9,615 for the second year and $11,540 for
the third year. The agreement also provides that Mr. Markley will participate in
a formula based bonus program to be approved annually by the Board of Directors
and providing for the opportunity to receive up to an amount equal to his base
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compensation for exceeding the Company's annual business plan net profit. In
addition, Mr. Markley will receive a twelve month housing allowance of $1,500
per month.
LEGAL PROCEEDINGS
As more fully described in Part II of this Form 10-QSB, the Company is subject
to various litigations and SEC investigations. As the outcome of these issues is
uncertain and the Company believes its insurance coverage is adequate to cover
any resulting liability, the Company does not maintain any reserves at April 30,
1998.
TERMINATION AND BUY-OUT AGREEMENT
On June 1, 1998 Mr. McNulty resigned as President, CEO and director of
Shopping.com. Pursuant to a Termination and Buy-Out Agreement dated as of June
1, 1998 between the Company and Mr. McNulty, Mr. McNulty will receive $500,000,
with $100,000 payable on or before July 31, 1998 and the balance due in $50,000
increments on or before each succeeding fiscal quarter end beginning October 31,
1998 until fully paid. Amounts payable under this agreement are payable on
demand in one lump-sum payment at the option of Mr. McNulty upon thirty days
written notice to the Company in the event a majority of the current members of
the Board of Directors are replaced by new members. In addition, Mr. McNulty
received options to purchase 150,000 shares of the Company's Common Stock at an
exercise price of $16.00 per share.
The issuance of these below-market stock options will result in a charge to
operations of approximately $750,000 during the three months ending July 31,
1998.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the Company's financial
statements and the related notes thereto appearing elsewhere herein.
FORWARD LOOKING STATEMENTS
The following statements contained in this "Management's Discussion and Analysis
of Financial Condition and Results of Operations" include "forward looking"
information within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities and Exchange Act of 1934, as amended,
and are subject to the safe harbor created by those sections. The forward
looking statements are based on current expectations, estimates and projections
about the Company's industry, management's beliefs and certain assumptions made
by management. All statements, trends, analyses and other information contained
in this report relative to the actual future results of the Company could differ
materially from those projected in the forward looking information. For a
discussion of certain factors that could cause actual results to differ
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materially from those projected by the forward looking information, see "Factors
That May Affect Future Performance" herein. Except as required by law, the
Company undertakes no obligation to update any forward-looking statement,
whether as a result of new information, future events or otherwise. Readers,
however, should carefully review the factors set forth in other reports or
documents that the Company files from time to time with the SEC.
OVERVIEW
Shopping.com (the "Company") began operations in February, 1996, was
incorporated on November 22, 1996 and commenced selling on the Internet on July
11, 1997. The Company is an innovative Internet-based electronic retailer
("E-tailer") specializing in retail marketing a broad range of products and
services at wholesale prices to both consumer and trade customers. Utilizing
proprietary technology, the Company has designed a fully-scalable systems
architecture for the Internet shopping marketplace.
The Company's management team combines the experiences of:
o Executives with extensive background in both retail and
warehouse/discount store formats.
o Executives who have experience in computer and information systems
design and development.
o Directors with entrepreneurial skills who currently oversee and
manage their own existing companies.
The Company has only recently begun generating sales, thus making an evaluation
of the Company and its prospects difficult to calculate. The Company anticipates
that sales from the Company's Web site will constitute substantially all of the
Company's sales. Over the next twelve months, the Company intends to increase
its revenues by pursuing an aggressive advertising and marketing campaign aimed
at attracting customers to shop on its Web Site and to co-brand with other
commercial partners which will help increase the Company's brand name
recognition as well as increase traffic on the Company's Web Site. The Company
must seek additional financing in order to sustain operations or achieve planned
expansion.
While the company believes that it will be able to fund the additional capital
resources to sustain operations, there can be no assurance that such additional
funds will be available or that, if available, such additional funds will be on
terms acceptable to the Company.
The Company anticipates that its operations will incur significant operating
losses for the foreseeable future. The Company believes that its success will
depend upon its ability to increase obtain sales on its Web site significantly
over the next twelve months, which cannot be assured. The Company's ability to
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generate sales is subject to substantial uncertainty. The Company's prospects
must be considered in light of the risks, expenses and difficulties frequently
encountered by companies in their early stage of development, particularly
companies in new and rapidly evolving markets such as online commerce. Such
risks for the Company include, but are not limited to, an evolving and
unpredictable business model and the management of growth. To address these
risks, the Company must, among other things, obtain a customer base, implement
and successfully execute its business and marketing strategy, continue to
develop and upgrade its technology and transaction-processing systems, improve
its Web site, provide superior customer service and order fulfillment, respond
to competitive developments, and attract, retain and motivate qualified
personnel. There can be no assurance that the Company will be successful in
addressing such risks; and the failure to do so could have a material adverse
effect on the Company's business, prospects, financial condition and results of
operations. Additionally, the Company's lack of an operating history makes
predictions of future operating results difficult to ascertain. Accordingly,
there can be no assurance that the Company will be able to generate sales, or
that the Company will be able to achieve or maintain profitability. Since
inception, the Company has incurred significant losses and, as of April 30,
1998, had an accumulated deficit of approximately $10.4 million. The Company
substantially increased its operating expenses over the past quarter in order
to, among other things, fund increased advertising and marketing efforts, expand
and improve its Internet operations and user support capabilities, and develop
new Internet content and applications. The Company expects to continue to incur
significant operating expenses on a quarterly and annual basis for the
foreseeable future. To the extent such increases in operating expenses are not
offset by revenues, the Company will continue to incur significant losses.
The Company's quarterly operating results may fluctuate significantly as a
result of a variety of factors, many of which are outside of the Company's
control. See "Factors That May Affect Future Performance - Unpredictability Of
Future Revenues; Potential Fluctuations In Quarterly Operating Results;
Seasonality."
In seeking to effectively implement its business plan, the Company may elect,
from time to time, to make certain marketing or acquisition decisions that could
have a material adverse effect on the Company's business, prospects, financial
condition and results of operations. Due to all of the foregoing factors, it is
likely that in some future quarters, the Company's results of operations may be
below the expectations of securities analysts and shareholders. In such event,
the price of the Company's Common Stock could be materially adversely affected.
RESULTS OF OPERATIONS
The following is a discussion of the results of operations for the three months
ended April 30, 1998. The Company is not providing any comparisons of its
results of operations with the prior year because the Company was in an early
stage of development at that time, and such comparisons would not be meaningful.
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Net Sales
Although the Company commenced operations in February 1996, it did not begin
selling products and services on its Web site until July 11, 1997 prior to which
time it was still in the process of evaluating the technical features of its Web
site. For the three months ended April 30, 1998, the Company generated net sales
of $917,836. The sole source of funds for the Company from the date of inception
through April 30, 1998, other than the sale of equity and debt securities, has
been from sales of products. For the three months ended April 30, 1998, sales of
$84,162, or approximately 9%, were sales to Waldron & Co., Inc. ("Waldron"), the
Company's underwriter and market maker. Such sales consisted primarily of
computer equipment and office supplies which allowed the Company to generate
higher gross margins. Sales of $108,707 were made to CCI, a computer and
computer supply resaler. The sales to CCI constituted approximately 12% of net
sales. In addition, the Company had sales of $9,402 to Aubry Hanson, a
partnership in which one of the partners is a shareholder of the Company. The
sales to Aubry Hanson approximate 1% of net sales of the Company for three
months ended April 30, 1998. The Company believes that it is not dependent upon
Waldron or any other customer and that the loss of Waldron as a customer would
not have a material adverse impact on the Company. The Company expects the sales
to Waldron to continue to decline as a percentage of total sales. The Company's
business model is based on a low profit margin coupled with a large volume of
sales to a broad customer base. The Company records sales at the time products
are shipped to customers, which includes the retail sales price of the product
and any shipping and handling charges billed to its customers. As of January 31,
1998, the Company created a reserve for sales returns of $10,000 and has an
accumulated balance of $55,600 for the three month ended April 30, 1998.
Cost of Sales
Cost of sales include the actual cost the Company pays its vendors for the
products and the actual shipping and handling charges incurred by the Company to
ship products to its customers. The cost of sales for the three months ending
April 30, 1998 was $864,889, or approximately 94.2% of net sales. The Company's
gross profit margin was approximately 5.8% for the three months ended April 30,
1998. The failure to generate sales with sufficient margins to cover its
operating expenses will result in losses and could have a material adverse
effect on the Company's business, prospects, financial condition and results of
operations.
Advertising and Marketing Expenses
Advertising and marketing expenses consist primarily of media costs related to
advertising, promotion and marketing literature. Advertising and marketing
expenses incurred by the Company for the three months ending April 30, 1998 were
$1,837,990, or approximately 200% of net sales. The Company intends to
significantly increase its advertising and marketing expenses in future periods.
While the Company is hopeful that its net sales will also increase in future
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periods so that its sales and marketing expense will represent a decreasing
percentage of net sales, the Company is not able to predict whether its net
sales will increase by a sufficient amount for this to occur. No assurance can
be given that the Company will achieve increased net sales or that marketing
expense will decrease as a percentage of sales.
Product Development Expenses
Product development expenses consist primarily of costs incurred by the Company
to develop and enhance its Web site. Product development expenses include
compensation and related expenses, depreciation and amortization of computer
hardware and software, and the cost of acquiring, designing, developing and
editing Web site content. Product development expenses incurred by the Company
for the three months ended April 30, 1998 were approximately $634,594 or
approximately 69.1% of net sales. The Company believes that significant
investments in enhancing its Web site will be necessary to become and remain
competitive. As a result, the Company may continue to incur, or increase the
level of, product development expenses.
General and Administrative Expenses
General and administrative expenses not otherwise attributable to product
development and advertising and marketing expenses consist primarily of
compensation, rent expense, fees for professional services and other general
corporate purposes. General and administrative expenses incurred by the Company
for the three months ended April 30, 1998 were $2,320,907, or approximately
252.9% of net sales. The Company expects general and administrative expenses to
significantly increase in future periods as a result of, among other things,
increased hiring and expansion of facilities.
Interest Income and Expense
Interest income on cash and cash equivalents was $36,418 or approximately 4% of
net sales. Interest income was due to the Company having certain
interest-bearing cash and cash equivalents accounts.
Interest expense for the three months ended April 30, 1998 was $1,452 or less
than 1% of net sales and is primarily attributable to interest on accounts
payable.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of liquidity were cash and cash equivalents
derived from public and private sales of the Company's equity and debt
securities. The sole source of funds for the Company from the date of inception
through April 30, 1998, other than the sale of equity and debt securities, has
been from sales of product.
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Capital expenditures from February 1, 1998 through April 30, 1998 were $418,386.
The Company has current and long-term capital lease obligations for certain
office equipment, the aggregate amount of which, as of April 30, 1998 was
$690,109. The Company anticipates a substantial increase in its capital
expenditures in 1998 consistent with its anticipated growth.
The Company experienced a net loss of $4,705,578 and generated net sales of
$917,836 for the three month period ended April 30, 1998. THE COMPANY'S ABILITY
TO SURVIVE AND GROW FOR THE IMMEDIATE FUTURE WILL DEPEND ON THE COMPANY'S
ABILITY TO RAISE ADDITIONAL CAPITAL FROM PUBLIC OR PRIVATE EQUITY OR DEBT
SOURCES. IN ADDITION, THE COMPANY BELIEVES THAT IT WILL NEED TO RAISE ADDITIONAL
FUNDS IN ORDER TO AVAIL ITSELF OF ANY UNANTICIPATED OPPORTUNITIES (SUCH AS MORE
RAPID EXPANSION, ACQUISITIONS OF COMPLEMENTARY BUSINESSES OR THE DEVELOPMENT OF
NEW PRODUCTS OR SERVICES), TO REACT TO UNFORESEEN DIFFICULTIES (SUCH AS THE LOSS
OF KEY PERSONNEL OR THE REJECTION BY INTERNET USERS OF THE COMPANY'S WEB SITE
CONTENT) OR TO OTHERWISE RESPOND TO UNANTICIPATED COMPETITIVE PRESSURES. THE
COMPANY HAS USED RATHER THAN PROVIDED CASH FROM ITS OPERATIONS. THESE FACTORS
RAISE A SUBSTANTIAL DOUBT ABOUT THE COMPANY'S ABILITY TO CONTINUE AS A GOING
CONCERN. IN VIEW OF THE MATTERS DESCRIBED ABOVE, RECOVERABILITY OF A MAJOR
PORTION OF THE COMPANY'S RECORDED ASSET AMOUNTS IS DEPENDENT UPON THE COMPANY'S
ABILITY TO RAISE SUFFICIENT CAPITAL TO FUND ITS WORKING CAPITAL REQUIREMENTS
UNTIL THE COMPANY CAN GENERATE SUFFICIENT SALES VOLUME TO COVER ITS OPERATING
EXPENSES.
MANAGEMENT OF THE COMPANY BELIEVES THAT ITS CURRENT CASH ON HAND PLUS THE
EXISTING WORKING CAPITAL WILL NOT BE SUFFICIENT TO SUSTAIN CURRENT OPERATIONS
FOR THE BALANCE OF THE FISCAL YEAR ENDING JANUARY 31, 1998. THE COMPANY IS
CURRENTLY NEGOTIATING WITH SEVERAL INVESTORS ABOUT RAISING ADDITIONAL CAPITAL
THROUGH PRIVATE PLACEMENT OFFERINGS. HOWEVER, THERE CAN BE NO ASSURANCE THAT
SUCH CAPITAL RESOURCES WILL BE AVAILABLE TO THE COMPANY OR THAT IF AVAILABLE,
SUCH FUNDS WILL BE ON TERMS ACCEPTABLE TO THE COMPANY. IN ADDITION, THE
INVESTIGATION BY THE SEC, THE INTERRUPTION OF THE TRADING OF THE COMPANY'S STOCK
ON THE ELECTRONIC BULLETIN BOARDS, THE PENDENCY OF LAWSUITS AND THE ATTENDANT
ADVERSE PUBLICITY MAY NOT ONLY REDUCE SIGNIFICANTLY THE LIQUIDITY OF THE
COMPANY'S STOCK BUT ALSO MAKE IT DIFFICULT FOR THE COMPANY TO RAISE ADDITIONAL
CAPITAL TO CONTINUE ITS DEVELOPMENT AND EXPANSION. SEE "LEGAL PROCEEDINGS."
If additional funds are raised through the issuance of equity securities, the
percentage ownership of the Company's then existing shareholders will be
reduced. Moreover, shareholders may experience additional and significant
dilution, and such equity securities may have rights, preferences or privileges
senior to those of the Company's Common Stock. These factors raise a substantial
doubt about the Company's ability to continue as a going concern. In view of the
matters described above, recoverability of a major portion of the Company's
recorded asset amounts is dependent upon the Company's ability to raise
sufficient capital to fund its working capital requirements until the Company
can generate sufficient sales volume to cover its operating expenses.
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EMPLOYEES
As of April 30, 1998, the Company employed 70 full time and 11 part time
employees. This is an increase from January 31, 1998 when the number of
employees was 67 full time and 9 part time employees. The Company believes that
its future success will depend in part on its ability to attract, hire and
maintain qualified personnel. However, the Company believes there will not be a
significant increase in employees over the next twelve months. Competition for
such personnel in the on-line industry is intense. None of the Company's
employees is represented by a labor union, and the Company has never experienced
a work stoppage. The Company believes its relationship with its employees to be
good.
FACTORS THAT MAY AFFECT FUTURE PERFORMANCE
The Company's business, financial condition and results of operations may be
impacted by a number of factors including, without limitation, the factors
discussed below.
The Need For Additional Capital
The Company must seek additional financing in order to sustain operations or
achieve planned expansion. While the Company believes that it will be able to
find the additional capital resources necessary to sustain operations, there can
be no assurance that such additional funds will be available or that if
available, such additional funds will be on terms acceptable to the Company.
Limited Operating History; Accumulated Deficit; Anticipated Losses; ability To
Continue As A Going Concern
The Company commenced operations in February 1996, was incorporated on November
22, 1996 and began selling products on its Web site on July 11, 1997.
Accordingly, the Company has a limited operating history on which to base an
evaluation of its business and prospects. The Company's prospects must be
considered in light of the risks, expenses and difficulties frequently
encountered by companies in their early stage of development, particularly
companies in new and rapidly expanding markets such as online commerce. Such
risks for the Company include, but are not limited to, an evolving and
unpredictable business model and the management of growth. To address these
risks, the Company must, among other things, obtain a customer base, implement
and successfully execute its business and marketing strategy, continue to
develop and upgrade its technology and transaction-processing systems, improve
its Web site, provide superior customer service and order fulfillment, respond
to competitive developments, and attract, retain and motivate qualified
personnel. There can be no assurance that the Company will be successful in
addressing such risks, and the failure to do so could have a material adverse
effect on the Company's business, prospects, financial condition and results of
operations.
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Since inception, the Company has incurred significant losses, and as of April
30, 1998 had an accumulated deficit of approximately $10.5 million. The Company
believes that its success will depend in large part on its ability to (i) obtain
a wide-spread name recognition, (ii) provide its customers with an outstanding
value and a superior shopping experience, (iii) achieve sufficient sales volume
to realize economies of scale, and (iv) successfully coordinate the fulfillment
of customer orders without the need to maintain expensive warehousing facilities
and personnel. Accordingly, the Company intends to invest heavily in marketing
and promotion, site development and technology and operating infrastructure
development. The Company also intends to offer attractive pricing programs,
which will reduce its gross margins. Because the Company has relatively low
gross margins, achieving profitability depends upon the Company's ability to
generate and sustain substantially increased sales levels. As a result, the
Company believes that it will incur substantial operating losses for the
foreseeable future, and that the rate at which such losses will be incurred will
increase significantly from current levels.
The Company incurred a net loss of $5,522,029 and had negative cash flows from
operations during the year ended January 31, 1998, and had a shareholders
deficit of $6,580,236 as of January 31, 1998. As of April 30, 1998 the Company
had net losses totaling $10,541,804 and had negative cash flows from operations.
Management raised capital during 1997 through private placement offerings of
equity and debt securities and completed an initial public offering in the
latter part on 1997, which provided funding to continue present operations,
marketing and development activities.
The Company has used a portion of the net proceeds of its initial public
offering to fund its operating losses. As of April 30, 1998, the Company had
approximately $1.4 million remaining of the net proceeds. Such net proceeds,
together with cash generated by operations, will, in the Company's view, be
insufficient to fund the Company's anticipated operating losses until its sales
increase to a sufficient level to cover operating expenses. In order to continue
to fund operating losses while it seeks to implement its business plan, until
its sales increase to a sufficient level to cover operating expenses, the
Company must raise additional funds. There can be no assurance that such
financing will be available, if at all, in amounts or on terms acceptable to the
Company. In addition, the investigation by the SEC, the interruption of the
trading of the Company's stock on the electronic bulletin boards and the
attendant adverse publicity may also make it difficult for the Company to raise
additional capital to continue its development. See "Legal Proceedings."
Unpredictability Of Future Revenues; Potential Fluctuations In Quarterly
Operating Results; Seasonality
As a result of the Company's limited operating history and the emerging nature
of the markets in which it competes, the Company is unable to accurately
forecast its revenues. The Company's current and future expense levels are based
largely on its investment plans and estimates of future revenues. Sales and
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operating results generally depend on the volume of, timing of, and ability to
fulfill orders received, which are difficult to forecast. The Company will not
be able to adjust spending in a timely manner to compensate for any unexpected
revenue shortfall until revenues grow substantially. Accordingly, any
significant shortfall in revenues in relation to the Company's planned
expenditures could have an immediate adverse effect on the Company's business,
prospects, financial condition and results of operations. Further, as a
strategic response to changes in the competitive environment, the Company may
from time to time make certain pricing, service or marketing decisions that
could have a material adverse effect on its business, prospects, financial
condition and results of operations.
The Company expects to experience significant fluctuations in its future
quarterly operating results due to a variety of factors, many of which are
outside the Company's control. Factors that may adversely affect the Company's
quarterly operating results include: (i) the Company's ability to obtain and
retain customers, attract new customers at a steady rate, maintain customer
satisfaction and establish consumer confidence in conducting transactions on the
Internet environment; (ii) the Company's ability to manage fulfillment
operations electronically and without warehouse facilities and to establish
competitive gross margins; (iii) the announcement or introduction of new Web
sites, services and products by the Company and its competitors; (iv) price
competition or higher vendor prices; (v) the level of use and consumer
acceptance of the Internet and other online services for the purchase of
consumer products such as those offered by the Company; (vi) the Company's
ability to upgrade and develop its systems and infrastructure and attract new
personnel in a timely and effective manner; (vii) the level of traffic on the
Company's Web site; (viii) technical difficulties, systems downtime or Internet
brownouts; (ix) the amount and timing of operating costs and capital
expenditures relating to expansion of the Company's business, operations and
infrastructure; (x) delays in revenue recognition at the end of a fiscal period
as a result of shipping or logistical problems; (xi) the level of merchandise
returns experienced by the Company; (xii) governmental regulation and taxation,
(xiii) economic conditions specific to the Internet and online commerce; (xiv)
the risk associated with the year 2000 in connection with computer programs with
which the Company may interact that read only the last two digits of an annual
date; (xv) the risk of credit card fraud and other types of fraud and theft
which may be perpetrated by computer hackers and on-line thieves; and (xvi)
general economic conditions.
The Company expects that it will experience seasonality in its business,
reflecting a combination of seasonal fluctuations in Internet usage and
traditional retail seasonality patterns. Internet usage and the rate of Internet
growth may be expected to decline during the summer. Further, sales in the
traditional retail industry are significantly higher in the quarter of each year
ending January 31 than in the preceding three quarters.
Due to the foregoing factors, in one or more future quarters, the Company's
operating results may fall below the expectations of securities analysts and
investors. In such event, the trading price of the Common Stock would likely be
materially adversely affected.
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Risk Of Capacity Constraints; Reliance On Internally Developed Systems; System
Development Risks
A key element of the Company's strategy is to generate a high volume of traffic
on, and use of, its Web site. Accordingly, the satisfactory performance,
reliability and availability of the Company's Web site, transaction-processing
systems and network infrastructure are critical to the Company's reputation and
its ability to attract and retain customers, as well as maintain adequate
customer service levels. The Company's revenues depend on the number of visitors
who shop on its Web site and the volume of orders it fulfills. Any system
interruptions that result in the unavailability of the Company's Web site or
reduced order fulfillment performance would reduce the volume of goods sold and
the attractiveness of the Company's product and service offerings. The Company
may experience periodic system interruptions from time to time. Any substantial
increase in the volume of traffic on the Company's Web site or the number of
orders placed by customers will require the Company to expand and upgrade
further its technology, transaction-processing systems and network
infrastructure. There can be no assurance that the Company will be able to
accurately project the rate or timing of increases, if any, in the use of its
Web site or timely expand and upgrade its systems and infrastructure to
accommodate such increases.
The Company uses an internally developed system for its Web site, search engine
and substantially all aspects of transaction processing, including order
management, cash and credit card processing, purchasing, shipping, accounting
and financial systems. Any substantial disruptions or delays in any of its
systems would have a material adverse effect on the Company's business,
prospects, financial condition and results of operations.
Risk Of System Failure; Single Site And Order Interface
The Company's success, in particular its ability to successfully receive and
fulfill orders and provide high-quality customer service, largely depends on the
efficient and uninterrupted operation of its computer and communications
hardware systems. Substantially all of the Company's computer and communications
hardware is located at a single leased facility in Corona del Mar, California.
Although the Company has redundant and back-up systems onsite and a disaster
recovery plan, the Company's systems and operations may be vulnerable to damage
or interruption from fire, flood, power loss, telecommunications failure,
break-ins, earthquake and similar events. The Company does not carry business
interruption insurance sufficient to compensate fully for any or all losses from
any or all such occasions. Despite the implementation of network security
measures by the Company, including a proprietary firewall, its servers may be
vulnerable to computer viruses, physical or electronic break-ins and similar
disruptions, which could lead to interruptions, delays, loss of data or the
inability to accept and fulfill customer orders. The occurrence of any of the
foregoing risks could have a material adverse effect on the Company's business,
prospects, financial condition and results of operations.
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Management Of Potential Growth; New Management Team; Limited Senior Management
Resources
The Company has rapidly and significantly expanded its operations, and
anticipates that further significant expansion will be required to address
potential growth in its customer base and market opportunities. This expansion
has placed, and is expected to continue to place, a significant strain on the
Company's management, operations and financial resources. From October 31, 1997
to April 30, 1998, the Company expanded from 50 to approximately 75 employees,
respectively and has since grown to approximately 85 employees. The majority of
the Company's senior management, including its President and CEO, John H.
Markley, joined the Company within the last several months, and some officers
have no prior senior management experience at public companies. The Company's
new employees include a number of key managerial, technical and operations
personnel who have not yet been fully integrated into the Company's operations.
To manage the increase in personnel and expected growth of its operations, the
Company will be required to improve existing, and implement new,
transaction-processing, operational and financial systems, procedures and
controls, and to train and manage its already expanded employee base. Although
the Company believes that there will not be a significant increase in the number
of employees over the next twelve months, the Company may be required to
increase its finance, administrative and operations staff. Further, the
Company's management will be required to maintain and expand its relationships
with various manufacturers, distributors, freight companies, other Web sites,
other Internet Service Providers and other third parties necessary to the
Company's operations. There can be no assurance that the Company's current and
planned personnel, systems, procedures and controls will be adequate to support
the Company's future operations, that management will be able to hire, train,
retain, motivate and manage required personnel or that the Company's management
will be able to successfully identify, manage and exploit existing and potential
market opportunities. If the Company is unable to manage growth effectively, its
business, prospects, financial condition and results and operations would be
materially adversely affected.
Dependence On Continued Growth Of Online Commerce
The Company's future revenues and any future profits are substantially dependent
upon the widespread acceptance and use of the Internet and other online services
as an effective medium of commerce by consumers. Rapid growth in the use of and
interest in the Web, the Internet and other online services is a recent
phenomenon, and there can be no assurance that acceptance and use will continue
to develop or that a sufficiently broad base of consumers will adopt, and
continue to use, the Internet and other online services as a medium of commerce.
Demand and market acceptance for recently introduced products and services over
the Internet are subject to a high level of uncertainty and there exist few
proven services and products. The Company relies, and will continue to rely, on
consumers who have historically used traditional means of commerce to purchase
merchandise. For the Company to be successful, these consumers must accept and
utilize novel ways of conducting business and exchanging information.
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In addition, the Internet and other online services may not be accepted as a
viable commercial marketplace for a number of reasons, including potentially
inadequate development of the necessary network infrastructure or delayed
development of enabling technologies and performance improvements. To the extent
that the Internet and other online services continue to experience significant
growth in the number of users, their frequency of use or an increase in their
bandwidth requirements, there can be no assurance that the infrastructure for
the Internet and other online services will be able to support the demands
placed upon them. In addition, the Internet or other online services could lose
their viability due to delays in the development or adoption of new standards
and protocols required to handle increased levels of Internet or other online
service activity, or due to increased governmental regulation. Changes in or
insufficient availability of telecommunications services to support the Internet
or other online services also could result in slower response times and
adversely affect usage of the Internet and other online services generally and
Shopping.com in particular. If use of the Internet and other online services
does not continue to grow or grows more slowly than expected, if the
infrastructure for the Internet and other online services does not effectively
support growth that may occur, or if the Internet and other online services do
not become a viable commercial marketplace, the Company's business, prospects,
financial condition and results of operations would be materially adversely
affected.
Rapid Technological Change
To remain competitive, the Company must continue to enhance and improve the
responsiveness, functionality and features of the Shopping.com online store. The
online commerce industry is characterized by rapid technological change, changes
in user and customer requirements and preferences, frequent new product and
service introductions embodying new technologies and the emergence of new
industry standards and practices that could render the Company's existing Web
site and proprietary technology and systems obsolete. The Company's future
success will depend, in part, on its ability to license leading technologies
useful in its business, enhance its existing services, develop new services and
technologies that address the increasingly sophisticated and varied needs of its
prospective customers, and respond to technological advances and emerging
industry standards and practices on a cost-effective and timely basis. The
development of a Web site and other proprietary technology entails significant
technical and business risks. There can be no assurance that the Company will
successfully use new technologies effectively or adapt its Web site, proprietary
technology and transaction-processing systems to customer requirements or
emerging industry standards. If the Company is unable, for technical, legal,
financial or other reasons, to adapt in a timely manner in response to changing
market conditions or customer requirements, its business, prospects, financial
condition and results of operations would be materially adversely affected.
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Year 2000
The Company may be interacting with certain computer programs in connection with
credit card transactions and programs used by the Company's vendors and
suppliers. These programs may refer to annual dates only by the last two digits,
e.g.,"97 for "1997." Problems are anticipated to arise for many of these
programs in the year 2000 ("Year 2000 Problems"). The Company has taken this
problem into account with respect to its own internal programs and believes that
its own internal software is not susceptible to Year 2000 Problems. However, the
Company has not made a formal assessment of programs used by service providers
or other third parties, including the financial institutions processing credit
card transactions, with which the Company may have to interact, nor the
Company's vulnerability which may result from any such party's failure to
remediate their own year 2000 issues. There can be no guarantee that the systems
of other companies on which the Company relies will be converted timely and will
not have an adverse effect on the Company's systems and the Company's business,
prospects, financial condition and results of operations.
Dependence On Key Personnel; Need For Additional Personnel
The Company's performance is substantially dependent on the continued services
and on the performance of its senior management and other key personnel,
particularly Mark S. Winkler, its Chief Information and Technology Officer. The
Company's performance also depends on the Company's ability to retain and
motivate its other officers and key employees. The loss of the services of any
of its executive officers or other key employees could have a material adverse
effect on the Company's business, prospects, financial condition and results of
operations. The Company had a written employment agreement with Mr. McNulty
which was subsequently terminated pursuant to a Termination and Buy-Out
Agreement entered into June 1, 1998 between the Company and Mr. McNulty. In
addition, the Company has a written employment agreement with Mr. Winkler for a
period ending May 20, 1998 which continues thereafter without a specified term.
The Company recently entered into written employment agreements with Mr. Markley
for a period of three years and Mr. Hay for a period of two years. The Company's
future success depends on its ability to identify, attract, hire, train, retain
and motivate other highly skilled technical, managerial, editorial,
merchandising, marketing and customer service personnel. Competition for such
personnel is intense, and there can be no assurance that the Company will be
able to successfully attract, assimilate and retain sufficiently qualified
personnel. In particular, the Company may encounter difficulties in attracting
and retaining a sufficient number of qualified software developers for its Web
site and transaction-processing systems, and there can be no assurance that the
Company will be able to retain and attract such developers. The failure to
retain and attract the necessary technical, managerial, editorial,
merchandising, marketing and customer service personnel could have a material
adverse effect on the Company's business, prospects, financial condition and
results of operations.
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Online Commerce Security Risks
A significant barrier to online commerce and communications is the need for
secure transmission of confidential information over public networks. The
Company relies on encryption and authentication technology licensed from third
parties to provide the security and authentication necessary to effect secure
transmission of confidential information, such as customer credit card numbers.
There can be no assurance that advances in computer capabilities, new
discoveries in the field of cryptography, or other events or developments will
not result in a compromise or breach of the algorithms used by the Company to
protect customer transaction data. A party who is able to circumvent the
Company's security measures could misappropriate confidential information or
cause interruptions in the Company's operations. The Company may be required to
expend significant capital and other resources to protect against such security
breaches or to alleviate problems caused by such breaches. If any such
compromise of the Company's security were to occur, it could have a material
adverse effect on the Company's business, prospects, financial condition and
results of operations.
Concerns over the security of transactions conducted on the Internet and other
online services as well as user's desires for privacy may also inhibit the
growth of the Internet and other online services generally, and the Web in
particular, especially as a means of conducting commercial transactions. The
activities of the Company and third-party contractors involve the storage and
transmission of proprietary information, such as credit card numbers and other
confidential information. Any such security breaches could damage the Company's
reputation and expose the Company to a risk of loss, litigation and/or possible
liability. There can be no assurance that the Company's security measures will
prevent security breaches or that failure to prevent such security breaches will
not have a material adverse effect on the Company's business, prospects,
financial condition and results of operations.
Merchants on the Internet are subject to the risk of credit card fraud and other
types of theft and fraud perpetrated by hackers and on-line thieves. Credit card
companies may hold merchants fully responsible for any fraudulent purchases made
when the signature cannot be verified. Although credit card companies and others
are in the process of developing anti-theft and anti-fraud protections, and
while the Company itself is continually monitoring this problem and developing
internal controls, at the present time the risk from such activities could have
a material adverse effect on the Company's business, prospects, financial
condition and results of operation.
Competition
The online commerce industry, particularly on the Internet, is new, rapidly
evolving and intensely competitive. The Company expects such competition to
intensify in the future. Barriers to entry are minimal, allowing current and new
competitors to launch new Web sites at a relatively low cost. The Company
currently or potentially competes with a variety of other companies. These
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competitors include: (i) various online vendors of other consumer and trade
products and services such as CUC International, Amazon.com., ONSALE, Peapod,
NetGrocer, iMALL, Internet Shopping Network, Micro Warehouse, CD Now, QVC and
Home Shopping Network; (ii) a number of indirect competitors that specialize in
online commerce or derive a substantial portion of their revenues from online
commerce, including America Online, Microsoft Network, Prodigy and Compuserve;
(iii) mail order catalogue operators such as Speigel, Lands End, and Sharper
Image; (iv) retail and warehouse/discount store operators such as Wal-Mart, Home
Depot, Target and Price/Costco; and (v) other international retail or catalogue
companies which may enter the online commerce industry. Both Wal-Mart and Home
Depot have announced their intention to devote substantial resources to online
commerce at discount prices, which if successful, could have a material adverse
effect on the Company's business, prospects, financial condition and results of
operations. However, the Company believes that retail and warehouse/discount
operators will be somewhat restricted in their ability to lower prices by the
need to protect their own pricing strategy to avoid cannibalizing their store
margins.
The Company believes that the principal competitive factors in its market are
price, speed of fulfillment, name recognition, wide selection, personalized
services, ease of use, 24-hour accessibility, customer service, convenience,
reliability, quality of search engine tools, and quality of editorial and other
site content. Many of the Company's current and potential competitors have
longer operating histories, larger customer bases, greater brand name
recognition and significantly greater financial, marketing and other resources
than the Company. In addition, online retailers may be acquired by, receive
investments from or enter into other commercial relationships with larger,
well-established and well-financed companies as use of the Internet and other
online services increases. Certain of the Company's competitors may be able to
secure merchandise from vendors on more favorable terms, devote greater
resources to marketing and promotional campaigns, adopt more aggressive pricing
or inventory availability policies and devote substantially more resources to
Web site and systems development than the Company. Increased competition may
result in reduced operating margins, loss of market share and a diminished
franchise value. There can be no assurance that the Company will be able to
compete successfully against current and future competitors, and competitive
pressures faced by the Company may have a material adverse effect on the
Company's business, prospects, financial condition and results of operations.
Further, as a strategic response to changes in the competitive environment, the
Company may, from time to time, make certain pricing, service or marketing
decisions or acquisitions that could have a material adverse effect on its
business, prospects, financial condition and results of operations. New
technologies and the expansion of existing technologies may increase the
competitive pressures on the Company. In addition, companies that control access
to transactions through network access or Web browsers could promote the
Company's competitors or charge the Company a substantial fee for inclusion.
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Reliance On Certain Suppliers And Shippers
Unlike retail and warehouse/discount store operators and certain online commerce
providers, the Company, as an E-tailer, carries no inventory, has no warehouse
employees or facilities, and relies on rapid fulfillment from its vendors. The
Company has no long-term contracts or arrangements with any of its vendors or
shippers that guarantee the availability of merchandise, the continuation of
particular payment terms, the extension of credit limits or shipping schedules.
There can be no assurance that the Company's current vendors will continue to
sell merchandise to, or that shippers will be able to provide delivery service
for, the Company on current terms or that the Company will be able to establish
new, or extend current, vendor and shipper relationships to insure acquisition
and delivery of merchandise in a timely and efficient manner and on acceptable
commercial terms. If the Company were unable to develop and maintain
relationships with vendors and shippers that would allow it to obtain sufficient
quantities of merchandise on acceptable commercial terms, or in the event of
labor disputes or natural catastrophes, its business, prospects, financial
condition and results of operations would be materially adversely affected.
Availability Of Merchandise; Vendor Credit For The Company
Although the Company's merchandising division maintains past relationships with
vendors which it believes will offer competitive sources of supply, and believes
that other sources are available for most of the merchandise it will sell or may
sell in the future, there can be no assurance that Shopping.com will be able to
obtain the quantity or brand quality of items that management believes are
optimum. The unavailability of certain product lines could adversely impact the
Company's operating results. Given its lack of operating history, certain
vendors of products sold by the Company may not be prepared to advance normal
levels of credit to the Company. An unwillingness to extend credit may increase
the amounts of capital required to finance the Company's operations and reduce
returns, if any, on invested capital. The investigation by the SEC, the
interruption of the trading of the Company's stock on the electronic bulletin
boards and the attendant adverse publicity may also make vendors reluctant to
extend credit to the Company.
Risks Associated With Entry Into New Business Areas
The Company may choose to expand its operations by developing new Web sites,
promoting new or complementary products or sales formats, expanding the breadth
and depth of products and services offered or expanding its market presence
through relationships with third parties. There can be no assurance that the
Company would be able to expand its efforts and operations in a cost-effective
or timely manner or that any such efforts would increase overall market
acceptance. Furthermore, any new business or Web site launched by the Company
that is not favorably received by consumer or trade customers could damage the
Company's reputation or the Shopping.com brand name. Expansion of the Company's
operations in this manner would also require significant additional expenses and
development, operations and editorial resources and would strain the Company's
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management, financial and operational resources. The lack of market acceptance
of such efforts or the Company's inability to generate satisfactory revenues
from such expanded services or products could have a material adverse effect on
the Company's business, prospects, financial condition and results of
operations.
Limited Protection Of Intellectual Property And Proprietary Rights
The Company regards its Shopping.com brand name and related technology as
proprietary and relies primarily on a combination of copyright, trademark, trade
secret and confidential information laws as well as employee and third-party
non-disclosure agreements and other methods to protect its proprietary rights.
There can be no assurance that these protections will be adequate to protect
against technologies that are substantially equivalent or superior to the
Company's technologies. The Company does not currently hold any patents or have
any patent applications pending for itself or its products and has not obtained
Federal registration for any of its trademarks. The Company enters into
non-disclosure and invention assignment agreements with certain of its employees
and also enters into non-disclosure agreements with certain of its consultants
and subcontractors. However, there can be no assurance that such measures will
protect the Company's proprietary technology, or that its competitors will not
develop software with features based upon, or otherwise similar to, the
Company's software or that the Company will be able to prevent competitors from
developing similar software.
The Company believes that its products, trademarks and other proprietary rights
do not infringe on the proprietary rights of third parties. The Company has been
displaying its Web site on the Internet without receiving claims from third
parties that its products or names infringe on any proprietary rights of other
parties. However, the Company is a recent entrant in the sale of merchandise on
the Internet, and there can be no assurance that third parties will not assert
infringement claims against the Company in the future with respect to current or
future products, trademarks or other Company works. Such assertion may require
the Company to enter into royalty arrangements or result in costly litigation.
The Company is also dependent upon obtaining additional technology related to
its operations. To the extent new technological developments are unavailable to
the Company on terms acceptable to it, or at all, the Company may be unable to
continue to implement its business and any such inability would have a material
adverse effect on the Company's business, prospects, financial condition and
results of operations.
Governmental Regulation And Legal Uncertainties
The Company is not currently subject to direct regulation by any domestic or
foreign governmental agency, other than regulations applicable to businesses
generally, and laws or regulations directly applicable to access to online
commerce. However, due to the increasing popularity and use of the Internet and
other online services, it is possible that a number of laws and regulations may
be adopted with respect to the Internet or other online services covering issues
such as user privacy, pricing, content, copyrights, distribution and
characteristics and quality of products and services. Furthermore, the
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growth and development of the market for online commerce may prompt calls for
more stringent consumer protection laws that may impose additional burdens on
those companies conducting business online. The adoption of any additional laws
or regulations may decrease the growth of the Internet or other online services,
which could, in turn, decrease the demand for the Company's products and
services and increase the Company's cost of doing business, or otherwise have a
material adverse effect on the Company's business, prospects, financial
condition and results of operations. Moreover, the applicability to the Internet
and other online services of existing laws in various jurisdictions governing
issues such as property ownership, sales and other taxes, libel and personal
privacy is uncertain and may take years to resolve. Any such new legislation or
regulation, the application of laws and regulations from jurisdictions whose
laws do not currently apply to the Company's business, or the application of
existing laws and regulations to the Internet and other online services could
have a material adverse effect on the Company's business, prospects, financial
condition and results of operations.
Permits or licenses may be required from federal, state or local government
authorities to operate or to sell certain products on the Internet. No
assurances can be made that such permits or licenses will be obtainable. The
Company may be required to comply with future national and/or international
legislation and statutes regarding conducting commerce on the Internet in all or
specific countries throughout the world. No assurances can be made that the
Company will be able to comply with such legislation or statutes.
Sales And Other Taxes
The Company does not currently collect sales or other similar taxes with respect
to shipments of goods to consumers into states other than California. However,
one or more states may seek to impose sales tax collection obligations on
out-of-state companies such as the Company which engage in online commerce. In
addition, any new operation in states outside California could subject shipments
into such states to state sales taxes under current or future laws. A successful
assertion by one or more states or any foreign country that the Company should
collect sales or other taxes on the sale of merchandise could have a material
adverse effect on the Company's business, prospects, financial condition and
results of operations.
Risks Associated With Domain Names
The Company currently holds various Web domain names relating to its brand,
including the "Shopping.com" domain name. The acquisition and maintenance of
domain names generally is regulated by governmental agencies and their
designees. For example, in the United States, the National Science Foundation
has appointed Network Solutions, Inc. as the exclusive registrar for the "com",
".net", and ".org" generic top-level domains. The regulation of domain names in
the United States and in foreign countries is subject to change. Governing
bodies may establish additional top-level domains, appoint additional
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domain name registrars or modify the requirements for holding domain names. As a
result, there can be no assurance that the Company will be able to acquire or
maintain relevant domain names in all countries in which it conducts business.
Furthermore, the relationship between regulations governing domain names and
laws protecting trademarks and similar proprietary rights is unclear. The
Company, therefore, may be unable to prevent third parties from acquiring domain
names that are similar to, infringe upon or otherwise decrease the value of its
trademarks and other proprietary rights. Any such inability could have a
material adverse effect on the Company's business, prospects, financial
condition and results of operations.
Risks Of Business Combinations And Strategic Alliances
The Company may choose to expand its operations or market presence by entering
into business combinations, investments, joint ventures or other strategic
alliances with third parties. Any such transactions would be accompanied by the
risks commonly encountered in such transactions. These include, among others,
the difficulty of assimilating operations, technology and personnel of the
combined companies, the potential disruption of the Company's ongoing business,
the inability to retain key technical and managerial personnel, the inability of
management to maximize the financial and strategic position of the Company
through the successful integration of acquired businesses, additional expenses
associated with amortization of acquired intangible assets, the maintenance of
uniform standards, controls and policies and the impairment of relationships
with existing employees and customers. There can be no assurance that the
Company would be successful in overcoming these risks or any other problems
encountered in connection with such business combinations, investments, joint
ventures or other strategic alliances, or that such transactions will not have a
material adverse effect on the Company's business, prospects, financial
condition and results of operations.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On July 8, 1997, Brian Leneck, a former officer of the Company, resigned.
By letter dated July 10, 1997, Robert McNulty tendered payment to Leneck to buy
back 140,000 shares of Common Stock of the Company pursuant to a shareholder
agreement. Leneck rejected the tender, claiming that the amount was not the fair
market value of the shares. On March 17, 1998, Leneck filed a lawsuit in Orange
County Superior Court of California against the Company, Robert McNulty and
three members of the Board of Directors at the time, Bill Gross, Edward Bradley
and Paul Hill. Leneck's lawsuit seeks damages for breach of contract,
conversion, and breach of fiduciary duty with respect to 70,000 shares. The
Company believes that it has meritorious defenses, as well as affirmative
claims, against Leneck and intends to vigorously protect its rights in this
matter. On March 27, 1998, the Company filed a lawsuit in Orange County Superior
Court against Leneck asserting, inter alia, breach of contract, breach of
implied covenant of good faith and fair dealing, fraud and deceit, declaratory
relief and specific performance.
In March of 1998, the Company became aware that the Securities and
Exchange Commission (the "SEC") had initiated a private investigation to
determine whether the Company, Waldron & Co., Inc. ("Waldron"), the principal
market maker in the Company's stock, or any of their officers, directors,
employees, affiliates or others had engaged in activities in connection with
transactions in the Company's stock in violation of the federal securities laws.
The SEC suspended trading in the Company's stock from 9:30 a.m. EST, March 24,
1998 through 11:59 p.m. EDT on April 6, 1998 pursuant to Section 12(k) of the
Securities Exchange Act of 1934. On April 30, 1998, the National Association of
Securities Dealers ("NASD") permitted the Company's Common Stock to resume
trading on the electronic bulletin boards beginning on April 30, 1998. Because
the SEC has not alleged any violations, it is difficult to predict the outcome
of their investigation. The Company continues, however, to fully cooperate with
the SEC inquiry. Nevertheless, the investigation by the SEC, the interruption of
the trading of the Company's stock on the electronic bulletin boards and the
attendant adverse publicity may not only reduce significantly the liquidity of
that stock but also make it difficult for the Company to raise additional
capital to continue its development and expansion. The inability of the Company
to raise additional capital would have material adverse effect on the Company's
business, prospects, financial condition and results of operations and may
prevent the Company from carrying out its business plan.
On April 16, 1998, Michael A. Martucci on behalf of all persons who
purchased shares of the Company's stock between November 25, 1997 and March 26,
1998, filed suit in the California Superior Court for the County of Orange
alleging violations of the California securities laws by the Company, Robert
McNulty, Douglas Hay, Waldron and one other broker-dealer and two of those
firm's executives. The complaint charges that the defendants "participated in a
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scheme and wrongful course of business to manipulate the price of [the
Company's] stock, which included: (i) defendant Waldron's refusal to execute
sell orders; (ii) the use of illegal stock parking; (iii) the use of illegal
above-market buy-ins to intimidate and dissuade potential short sellers from
selling [Company] stock short; (iv) the sale of [Company] shares to
discretionary accounts without regard to suitability; and (v) the dissemination
of materially false and misleading statements about [the Company's] operating
performance and its future prospects." The complaint further alleges that the
Company "secretly arranged to sell $250,000 of product to Waldron as part of
defendants' effort to have [the Company] post revenue growth prior to the
[Company's] planned [initial public offering]," that such sales constituted
almost 25% of the Company's revenues between its inception and March 26, 1998
and that the Company did not disclose such sales or their significance in the
Prospectus used in the Company's initial public offering. The plaintiff seeks
compensatory damages in an unspecified amount, attorneys' fees and costs,
injunctive relief, disgorgement or restitution of the proceeds of the Company's
IPO and the defendants' profits from trading in the Company's stock, and the
imposition of a constructive trust over the Company's revenues and profits.
On May 6, 1998 Steven T. Moore on behalf of all persons who purchased
shares of the Company's stock between November 25, 1997 and March 26, 1998 filed
suit in United States District Court for the Central District of California
alleging violations of the federal securities laws by the Company, Robert
McNulty, Douglas Hay, Waldron and one other broker-dealer and two of those
firm's executives. The complaint charges that the defendants "participated in a
scheme and wrongful course of business to manipulate the price of [the
Company's] stock, which included: (i) defendant Waldron's refusal to execute
sell orders; (ii) the use of illegal stock parking; (iii) the use of illegal
above-market buy-ins to intimidate and dissuade potential short sellers from
selling [Company] stock short; (iv) the sale of [Company] shares to
discretionary accounts without regard to suitability; and (v) the dissemination
of materially false and misleading statements about [the Company's] operating
performance and its future prospects." The complaint further alleges that the
Company "secretly arranged to sell $250,000 of product to Waldron as part of
defendants' effort to have [the Company] post revenue growth prior to the
[Company's] planned [initial public offering]," that such sales constituted
almost 25% of the Company's revenues between its inception and March 26, 1998
and that the Company did not disclose such sales or their significance in the
Prospectus used in the Company's initial public offering. The plaintiff seeks
compensatory damages in an unspecified amount, attorneys' fees and costs,
injunctive relief, disgorgement or restitution of the proceeds of the Company's
IPO and the defendants' profits from trading in the Company' s stock, and the
imposition of a constructive trust over the Company's revenues and profits.
On April 28, 1998, Abraham Garfinkel on behalf of all persons who purchased
shares of the Company's stock between November 25, 1997 and March 26, 1998,
filed suit in the United States District Court for the Central District of
California alleging violation of the federal securities laws by the Company,
Robert McNulty, Douglas Hay, Waldron and Cery Perle. The complaint alleges that
defendants acted in concert with each other to manipulate the price of the
Company's stock by, INTER ALIA, "work[ing] closely with defendant McNulty on a
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weekly basis whereby defendant McNulty would pass the supposedly confidential
information of those who had 'hit' or contacted Shopping's website." The
complaint alleges that the defendants also manipulated the market by engaging in
conduct similar to that alleged in the Martucci and Moore actions. The complaint
also alleges that the Company's prospectus was misleading by the failure to
disclose sales to Waldron as discussed above. The plaintiffs seek damages
similar to that sought by Martucci and Moore.
The Company denies that it engaged in any of the acts alleged in any of
the above complaints and intends to defend against these actions vigorously.
Nonetheless, and despite the Company's insurance coverage for such actions,
these class action suits may be very harmful to the Company. Diversion of
management time and effort from the Company's operations and the implementation
of the Company's business plan at this crucial time in the Company's development
may adversely and significantly affect the Company and its business. The
continued pendency of this litigation may make it difficult for the Company to
raise additional capital to continue its development and expansion. The
inability of the Company to raise additional capital would have material adverse
effect on the Company's business, prospects, financial condition and results of
operations and may prevent the Company from carrying out its business plan.
The Company is involved in two other labor related disputes. Although it
is not possible to predict the outcome of these disputes, or any future claims
against the Company related hereto, the Company believes that such disputes will
not, either individually or in the aggregate, have a material adverse effect on
its financial condition or results of operations.
Item 2. Changes in Securities and Use of Proceeds
The following are all securities sold by Registrant within the past
three (3) years without registering the securities under the Securities Act 1/:
DATE TITLE AMOUNT
(1) (a) March 1997-June 1997 Common Stock 1,282,500 Shares
- --------
1/ All share amounts and related information reflect a one-for-two reverse
stock split effective upon the effective date of the Company's initial
offering. The warrants to purchase 122,000 shares of the Company's Common
Stock issued to Waldron & Co., Inc. as the Underwriters' Representative are
not included because such warrants were registered in connection with the
Company's initial public offering. As of June 11, 1998, the Company had
issued 1,192,000 options, largely to employees, officers and directors. In
addition, the Company granted 300,000 warrants to purchase Common Stock to
Ladenburg Thalman & Co., Inc. See "Item 5. Other Information."
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(b) There were no underwriters used in connection with this offering.
1,150,000 shares of Common Stock were offered and sold to Robert J. McNulty, CEO
of the Registrant. Subsequently, Mr. McNulty gifted an aggregate of 325,000 of
such shares to various employees of the Company for no consideration. In
addition, the Company offered and sold shares of Common Stock to idealab!, a
company controlled by Bill Gross, a former director of Registrant (100,000
shares); Alvin S. Morrow, (2,500 shares); and 30,000 shares to an independent
consultant who provided the Registrant's web site address; all of whom were
accredited investors and residents of the State of California.
(c) The securities were sold for two cents ($.02) per share except for the
30,000 shares issued to an independent consultant which were valued at $.20 per
share for an aggregate consideration of $30,650.
(d) The issuer relied on Section 4(2) and 3(a)(11) of the Securities Act
of 1933, as amended.
(e) Not Applicable.
DATE TITLE AMOUNT
(2)(a) March 1997-April 1997 Series A Preferred Stock 750,000 Shares
Warrants for 375,000 Warrants
Common Stock
(b) There were no underwriters used in connection with this offering. The
securities were offered and sold only to two accredited investors, Cyber Depot,
Inc., a corporation controlled by Robert J. McNulty, President and CEO of the
issuer, and idealab! a corporation controlled by Bill Gross, a director of
Registrant. One Warrant was issued for each two shares.
(c) The securities were sold for forty cents ($.40) per share of Series A
Stock.
(d) The issuer relied on Rule 506 under Regulation D based on the fact
that all offerees were accredited investors under Rule 501.
(e) The Warrants are convertible into one share of the Company's Common
Stock at an exercise price of $3.00 per share. The Warrants expire five years
from the date of issuance.
DATE TITLE AMOUNT
(3)(a) April 1997 Series B Preferred Stock 536,500 Shares
-September 1997 Warrants for Common Stock 268,250 Warrants
(b) There were no underwriters used in connection with 536,500 shares of
this offering. Waldron & Co., Inc. acted as placement agents for 200,000 shares
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of this offering and received fees of $78,000. The securities were offered and
sold only to accredited investors. One Warrant was issued for each two shares of
Series B Stock.
(c) The securities were sold for Three Dollars ($3.00) per share for an
aggregate consideration of $1,609,500. The Warrants are exercisable for five
years for the purchase of one share of Common Stock at a strike price of $3.00.
(d) The issuer relied on Rule 506 under Regulation D based on the fact
that all offerees were accredited investors under Rule 501.
(e) Not applicable.
DATE TITLE AMOUNT
(4)(a)June 1997-September 1997 Promissory Notes $1,150,000
Warrants for Common Stock 382,950 Warrants
(b) No underwriters were used in connection with $50,000 principal amount
of such Notes. Waldron & Co., Inc., acted as placement agents in connection with
the placement of the $1,100,000 principal amount of such Notes, and received
fees of $143,000. The securities were offered and sold only to qualified and
accredited investors. 333 Warrants were issued for each $1,000 in principal
amount of such Notes.
(c) The Notes were sold for an aggregate consideration of $1,150,000. The
accompanying Warrants are exercisable for five years for the purchase of one
share of Common Stock at an exercise price of $6.00 per share.
(d) The issuer relied on Rule 506 under Regulation D based on the fact
that all offerees were accredited investors under Rule 501.
(e) The Warrants are exercisable for five years for the purchase of one
share of Common Stock at an exercise price of $6.00 per share. In May 1998,
16,650 Warrants were exercised in a "cashless" exercise and 13,295 shares of the
Company's Common Stock were issued.
DATE TITLE AMOUNT
(5)(a)April 1997 Common Stock 8,000 Shares
(b) There were no underwriters used in connection with this private
placement. The securities were offered and sold to Typhoon Capital Consultants,
LLC in exchange for consulting services.
(c) The securities were valued at $6.00 per share and were exchanged for
business consulting services, for an aggregate consideration valued at $48,000.
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(d) The issuer relied on Section 4(2) of the Securities Act of 1933, as
amended.
(e) Not applicable.
DATE TITLE AMOUNT
(6)(a)September 1997 Common Stock 125,000 Shares
Promissory Note $600,000
Warrants for Common Stock 199,800 Shares
(b) Waldron & Co., Inc. acted as placement agent in connection with this
private placement and was paid $78,000 in fees therefor. The securities were
issued to En Pointe Technologies, Inc., an accredited investor.
(c) The Common Stock was valued at $6.00 per share and was issued as
consideration for a 5 year license to the Company to use En Pointe's EPIC
software. The Notes were issued at face value for a $600,000 loan to the
Company. 333 Warrants were issued for each $1,000 principal amount of the Note.
The Warrants are exercisable for five years for the purchase of one share of
stock at a strike price of $4.50 per share.
(d) The issuer relied on Rule 506 under Regulation D based on the fact
that En Pointe is an accredited investor.
(e) The Warrants are exercisable for five years for the purchase of one
share of stock at a strike price of $4.50 per share.
DATE TITLE AMOUNT
7(a) February 1998 Common Stock 47,059 Shares
(b) There were no underwriters used in connection with this offering. The
shares were offered pursuant to a Subscription Agreement between the Company and
Premiere Radio Network, Inc., a Delaware corporation ("PRN"), dated February 19,
1998.
(c) PRN agreed to purchase the shares in consideration of radio
advertising valued at $1,000,000.
(d) The Company relied on Section 4(2) of the Securities Act of 1933, as
amended, and Regulation D promulgated under the Securities Act of 1933, as
amended.
(e) In the event that the average closing price of the Company's Common
Stock for the ten days prior to February 19, 1999 is less than $21.25 per share,
the Company will issue to PRN up to 52,941 additional shares.
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DATE TITLE AMOUNT
8(a) May 1998 Warrants for Common Stock 122,500 Shares
Promissory Notes $1,225,000
(b) Waldron & Co., Inc. acted as placement agent in connection with this
private placement and was paid 7% of the total amount raised plus an expense
allowance of 3%.
(c) The shares were offered pursuant to Subscription Agreements,
Promissory Notes and Warrant Agreements between the Company and individual
investors, each dated May 15, 1998. Pursuant to the Subscription Agreements,
each investor purchased units consisting of a promissory Note in the principal
amount of $25,000 bearing interest at an annual rate of 10% interest and
principal payable November 15, 1998 and warrants to purchase 2,500 shares of the
Company's Common Stock at an exercise price of $14.00 per share. The units were
sold to Ray Fisk (two units), Mike Weikamp (four units), Jon Aubry (twenty
units), William Schweitzer (two units), Zahra Khiaban (three units), Carlos
Beharie (sixteen units), and Tony Nikolich (two units). A total consideration of
$1,225,000 was paid in this offering.
(d) The Company relied on Section 4(2) and Regulation D Rule 505
promulgated by the Securities and Exchange Commission as the exemption from
registration. The investors were all accredited investors.
DATE TITLE AMOUNT
9(a) June 1998 8% Convertible Debentures $1,000,000
Due May 31, 2000
Warrants for Common Stock 1 share for
every 2 shares
issued upon
conversion
of the
Debenture
(b) Trautman, Kramer & Company, Incorporated and Waldron & Co., Inc. acted
as placement agents in connection with this private placement, receiving 9% and
1%, respectively, of the net proceeds. The Debentures in the amount of $250,000
were sold to each of Malso Fund, Ltd., Wayne Invest & Trade, Inc., Chesterfield
Capital Resources, Ltd. and Star High Yield Investment Management Corporation.
Subject to certain restrictions on the ability of the holders of the Debentures
to convert, the Debentures are convertible into shares of the Company's Common
Stock at a conversion price for each share of Common Stock equal to the lower of
(i) the lowest market price for any three trading days selected by the Debenture
holder from the thirty trading days prior to the conversion, or (ii) $16.00.
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(c) The total consideration was $1,000,000.
(d) The issuer relied on Section 4(2) and Regulation D Rule 506
promulgated by the securities and Exchange Commission as the exemption from
registration. Each investor was an accredited investor.
e. USE OF PROCEEDS.
The Company's registration statement, Registration No. 333-36215, under
the Securities Act of 1933, as amended, for its initial public offering (the
"Registration Statement") became effective on November 25, 1997, and the initial
public offering commenced on November 25, 1997. The offering terminated after
the sale of all securities that were registered under the Registration
Statement. Waldron & Co., Inc. was the managing underwriter of the offering. The
Company registered and sold 1,300,000 shares of Common Stock with an aggregate
price of $11.7 million. The Company incurred a total of approximately $2.3
million of expenses in connection with the registration and distribution of
Common Stock in the offering, of which approximately $1.1 million was paid in
underwriting discounts and commissions, approximately $400,000 was paid to the
underwriters, Waldron & Co., Inc., for expense reimbursement and approximately
$400,000 was paid to third parties for other expenses. Offering proceeds, net of
aggregate expenses of approximately $2.3 million, was $9.4 million. As of April
30, 1998 the Company has used approximately $1.6 million of the net offering
proceeds for advertising and marketing, approximately $1.7 million for repayment
of promissory notes, and approximately $300,000 for repayment of interim loans,
approximately $2.9 million for general administrative and working capital
expenses paid directly or indirectly to third parties, approximately $1.3
million for capital expenditures and systems architecture development,
approximately $50,000 for personnel, and approximately $60,000 for facilities.
The Company has not used any of the net offering proceeds for construction of
plant, building or facilities; purchases of real estate; or acquisition of other
businesses. Except in the form of wages to employees and ordinary business
expense reimbursement, none of the net offering proceeds and none of the
expenses paid in connection with the registration and distribution of the Common
Stock in the offering were paid directly or indirectly to directors, officers,
or general partners of the Company or their associates, persons owning 10% or
more of any class of the Company's securities, or affiliates of the Company.
With the exception of capital expenditures and systems architecture development
along with additional costs associated with the initial public offering, the use
of proceeds did not materially change from the use of proceeds described in the
prospectus.
Item 3. Defaults Upon Senior Securities
None.
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Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
On May 15, 1998, the Company issued Promissory Notes and warrants in
connection with the loan of an aggregate of $1,225,000 from a total of seven
individual investors. Each investor purchased units with each unit consisting of
a Promissory Note in the principal amount of $25,000 bearing interest at an
annual rate of 10%, interest and principal payable November 15, 1998, and
warrants to purchase 2,500 shares of the Company's Common Stock at an exercise
price of $14.00 per share. Each warrant may be exercised for a term of three
years. The holders of the warrants were granted "piggyback" registration rights
with regard to the shares issuable upon conversion of the warrants.
Pursuant to the Securities Purchase Agreements (the "Securities Purchase
Agreements") dated June 5, 1998 between the Company and each of four investors
(the "Investors"), the Company issued 8% Convertible Debentures Due May 31, 2000
(the "Debentures") in the aggregate amount of $1,000,000. Subject to certain
restrictions on the ability of the holders of the Debentures to convert, the
Debentures will be convertible into shares of the Company's Common Stock, no par
value at a conversion price for each share of Common Stock equal to the lower of
(i) the lowest market price for any three trading days selected by the Debenture
holder from the thirty trading days prior to the conversion (the "Conversion
Price"), or (ii) $16.00 (the "Base Rate"). The holder of the Debenture will
receive one warrant to purchase a share of the Company's Common Stock for every
two shares issued upon conversion of the Debenture (the "Warrants"). The
Warrants will have an exercise price equal to the lessor of (i) 120% of the
relevant Conversion Price, or (ii) 125% of the Base Rate. The Warrants expire of
June 5, 2003.
Pursuant to a Registration Rights Agreement entered into between the
Company and each of the investors (the "Investors"), the Company agrees to file
within 60 days a registration statement to register the shares issuable upon
conversion of the Debentures and exercise of the Warrants issued upon such
conversion. In the event that such registration statement is not filed, the
Company agrees to make payments to the investors. Pursuant to the Securities
Purchase Agreements, the Company agreed not to enter into a subsequent or
further offer or sale of its Common Stock without the prior written consent of
the purchasers of the Debentures for 180 days following the later of (i) the
effective date of such registration statement or (ii) the latest of any
additional issuance of Debentures to the above Investors.
On June 15, 1998 the Company entered into an agreement with Ladenburg
Thalman & Co., Inc. ("Ladenburg") wherein the Company agreed to retain Ladenburg
as its investment banker and financial advisor. In connection therewith, the
Company will issue to Ladenburg warrants to purchase 300,000 shares of the
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Company's Common Stock at the average market closing price for the thirty days
prior to the date of the agreement. Concurrent with this agreement, the company
agreed that Waldron & Co., Inc. will no longer represent Shopping.com as its
investment banker.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
4.1 Subscription Agreement dated May 15, 1998 between the Company
and Carlos Beharie.
4.2 Unsecured Promissory Note made by the Company payable to
Carlos Beharie.
4.3 Warrant Agreement dated May 15, 1998 between the Company and
Carlos Beharie.
4.4 Subscription Agreement dated May 15, 1998 between the Company
and Ray Fisk.
4.5 Unsecured Promissory Note made by the Company payable to Ray
Fisk.
4.6 Warrant Agreement dated May 15, 1998 between the Company and
Ray Fisk.
4.7 Subscription Agreement dated May 15, 1998 between the Company
and Zahra Khiaban.
4.8 Unsecured Promissory Note made by the Company payable to Zahra
Khiaban.
4.9 Warrant Agreement dated May 15, 1998 between the Company and
Zahra Khiaban.
4.10 Subscription Agreement dated May 15, 1998 between the Company
and William Schweitzer.
4.11 Unsecured Promissory Note made by the Company payable to
William Schweitzer.
4.12 Warrant Agreement dated May 15, 1998 between the Company and
William Schweitzer.
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4.13 Subscription Agreement dated May 15, 1998 among the Company
and Michael and Mary Kathleen Wiekamp.
4.14 Unsecured Promissory Note made by the Company payable to
Michael and Mary Kathleen Wiekamp.
4.15 Warrant Agreement dated May 15, 1998 among the Company and
Michael and Mary Kathleen Wiekamp.
4.16 Subscription Agreement dated May 15, 1998 between the Company
and Jon Aubry.
4.17 Unsecured Promissory Note made by the Company payable to Jon
Aubry.
4.18 Warrant Agreement dated May 15, 1998 between the Company and
Jon Aubry.
4.19 Subscription Agreement dated May 15, 1998 between the Company
and Tony Nikolich.
4.20 Unsecured Promissory Note made by the Company payable to Tony
Nikolich.
4.21 Warrant Agreement dated May 15, 1998 between the Company and
Tony Nikolich.
4.22 Securities Purchase Agreement dated as of June 5, 1998 between
the Company and each of Burstein & Lindsay Securities Corp.,
Malso Fund, Ltd., Wayne Invest & Trade, Inc., Chesterfield
Capital Resources, Ltd. and Star High Yield Investment
Management Corporation.
4.23 Registration Rights Agreement between the Company and each of
Burstein & Lindsay Securities Corp., Malso Fund, Ltd., Wayne
Invest & Trade, Inc., Chesterfield Capital Resources, Ltd. and
Star High Yield Investment Management Corporation.
4.24 8% Convertible Debenture Due May 31, 2000 made by the Company
payable to Burstein & Lindsay Securities Corp.
4.25 8% Convertible Debenture Due May 31, 2000 made by the Company
payable to Malso Fund, Ltd.
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4.26 8% Convertible Debenture Due May 31, 2000 made by the Company
payable to Wayne Invest & Trade, Inc.
4.27 8% Convertible Debenture Due May 31, 2000 made by the Company
payable to Chesterfield Capital Resources, Ltd.
4.28 8% Convertible Debenture Due May 31, 2000 made by the
Registrant payable to Star High Yield Investment Management
Corporation.
9.1 Irrevocable Proxy dated June 1, 1998 from Cyber Depot, Inc. to
Frank W. Denny incorporated herein by reference from Exhibit
7.1 to Registrant's Current Report on Form 8-K dated June 1,
1998. (Filed with the SEC on June 9, 1998, File No.
000-29518.)
9.2 Irrevocable Proxy dated June 1, 1998 from Robert J. McNulty to
Douglas Hay incorporated herein by reference from Exhibit 7.2
to Registrant's Current Report on Form 8-K dated June 1, 1998.
(Filed with the SEC on June 9, 1998, File No. 000-29518.)
9.3 Irrevocable Proxy dated June 1, 1998 from Robert J. McNulty to
Paul J. Hill incorporated herein by reference from Exhibit 7.3
to Registrant's Current Report on Form 8-K dated June 1, 1998.
(Filed with the SEC on June 9, 1998, File No. 000-29518.)
9.4 Irrevocable Proxy dated June 1, 1998 from Robert J. McNulty to
Edward F. Bradley incorporated herein by reference from
Exhibit 7.4 to Registrant's Current Report on Form 8-K dated
June 1, 1998. (Filed with the SEC on June 9, 1998, File No.
000-29518.)
9.5 Irrevocable Proxy dated June 1, 1998 from Robert J. McNulty to
John Markley incorporated herein by reference from Exhibit 7.5
to Registrant's Current Report on Form 8-K dated June 1, 1998.
(Filed with the SEC on June 9, 1998, File No. 000-29518.)
10.1 Employment Agreement between the Company and John H. Markley
dated June 1, 1998 incorporated herein by reference from
Exhibit 10.20 to Registrant's Current Report on Form 8-K dated
June 1, 1998. (Filed with the SEC on June 9, 1998, File No.
000-29518.)
10.2 Termination and Buy-Out Agreement between the Company and
Robert J. McNulty dated June 1, 1998 incorporated herein by
reference from Exhibit 10.21 to Registrant's Current Report on
Form 8-K dated June 1, 1998. (Filed with the SEC on June 9,
1998, File No. 000-29518.)
Page 40 of 290
<PAGE>
10.3 Consulting Agreement between the Company and Cyber Depot, Inc.
dated June 1, 1998 incorporated herein by reference from
Exhibit 10.22 to Registrant's Current Report on Form 8-K dated
June 1, 1998. (Filed with the SEC on June 9, 1998, File No.
000-29518.)
10.4 Agreement between the Company and Stilden Co., Inc. dated
April 1, 1998. This exhibit corrects the exhibit previously
filed as Exhibit 10.23 to Registrant's Current Report on Form
8-K dated June 1, 1998.
27.1 Financial Data Schedule2/
(b) Reports on Form 8-K
On June 9, 1998, the Company filed with the SEC a current Report on
Form 8-K dated June 1, 1998 to report the resignation of Robert J. McNulty from
his positions as President and Chief Executive Officer and as a member of the
Company's Board of Directors and the appointment of John Markley as President
and Chief Executive Officer and as a member of the Board of Directors.
- --------
2/ This exhibit is being filed electronically in the electronic format
specified by EDGAR.
Page 41 of 290
<PAGE>
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Shopping.com
Date: June 22, 1998 By /s/ Kristine E. Webster
---------------------------------
Kristine E. Webster
Sr. Vice President, Chief Financial
Officer and Treasurer
Page 42 of 290
<PAGE>
EXHIBIT INDEX
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
4.1 Subscription Agreement dated May 15, 1998 between the Company 47
and Carlos Beharie.
4.2 Unsecured Promissory Note made by the Company payable to Carlos 51
Beharie.
4.3 Warrant Agreement dated May 15, 1998 between the Company and 58
Carlos Beharie.
4.4 Subscription Agreement dated May 15, 1998 between the Company 67
and Ray Fisk.
4.5 Unsecured Promissory Note made by the Company payable to Ray 71
Fisk.
4.6 Warrant Agreement dated May 15, 1998 between the Company and 77
Ray Fisk.
4.7 Subscription Agreement dated May 15, 1998 between the Company 86
and Zahra Khiaban.
4.8 Unsecured Promissory Note made by the Company payable to Zahra 90
Khiaban.
4.9 Warrant Agreement dated May 15, 1998 between the Company and 96
Zahra Khiaban.
4.10 Subscription Agreement dated May 15, 1998 between the Company 105
and William Schweitzer.
4.11 Unsecured Promissory Note made by the Company payable to 109
William Schweitzer.
4.12 Warrant Agreement dated May 15, 1998 between the Company and 115
William Schweitzer.
4.13 Subscription Agreement dated May 15, 1998 among the Company and 124
Michael and Mary Kathleen Wiekamp.
Page 43 of 290
<PAGE>
4.14 Unsecured Promissory Note made by the Company payable to 128
Michael and Mary Kathleen Wiekamp.
4.15 Warrant Agreement dated May 15, 1998 among the Company and 134
Michael and Mary Kathleen Wiekamp.
4.16 Subscription Agreement dated May 15, 1998 between the Company 143
and Jon Aubry.
4.17 Unsecured Promissory Note made by the Company payable to Jon 147
Aubry.
4.18 Warrant Agreement dated May 15, 1998 between the Company and 153
Jon Aubry.
4.19 Subscription Agreement dated May 15, 1998 between the Company 162
and Tony Nikolich.
4.20 Unsecured Promissory Note made by the Company payable to Tony 166
Nikolich.
4.21 Warrant Agreement dated May 15, 1998 between the Company and 173
Tony Nikolich.
4.22 Securities Purchase Agreement dated as of June 5, 1998 between 182
the Company and each of Burstein & Lindsay Securities Corp.,
Malso Fund, Ltd., Wayne Invest & Trade, Inc., Chesterfield
Capital Resources, Ltd. and Star High Yield Investment
Management Corporation.
4.23 Registration Rights Agreement between the Company and each of 219
Burstein & Lindsay Securities Corp., Malso Fund, Ltd., Wayne
Invest & Trade, Inc., Chesterfield Capital Resources, Ltd. and
Star High Yield Investment Management Corporation.
4.24 8% Convertible Debenture Due May 31, 2000 made by the Company 233
payable to Burstein & Lindsay Securities Corp.
4.25 8% Convertible Debenture Due May 31, 2000 made by the Company 243
payable to Malso Fund, Ltd.
4.26 8% Convertible Debenture Due May 31, 2000 made by the Company 253
payable to Wayne Invest & Trade, Inc.
Page 44 of 290
<PAGE>
4.27 8% Convertible Debenture Due May 31, 2000 made by the Company 263
payable to Chesterfield Capital Resources, Ltd.
4.28 8% Convertible Debenture Due May 31, 2000 made by the 273
Registrant payable to Star High Yield Investment Management
Corporation.
9.1 Irrevocable Proxy dated June 1, 1998 from Cyber Depot, Inc. to
Frank W. Denny incorporated herein by reference from Exhibit
7.1 to Registrant's Current Report on Form 8-K dated June 1,
1998. (Filed with the SEC on June 9, 1998, File No. 000-29518.)
9.2 Irrevocable Proxy dated June 1, 1998 from Robert J. McNulty to
Douglas Hay incorporated herein by reference from Exhibit 7.2
to Registrant's Current Report on Form 8-K dated June 1, 1998.
(Filed with the SEC on June 9, 1998, File No. 000-29518.)
9.3 Irrevocable Proxy dated June 1, 1998 from Robert J. McNulty to
Paul J. Hill incorporated herein by reference from Exhibit 7.3
to Registrant's Current Report on Form 8-K dated June 1, 1998.
(Filed with the SEC on June 9, 1998, File No. 000-29518.)
9.4 Irrevocable Proxy dated June 1, 1998 from Robert J. McNulty to
Edward F. Bradley incorporated herein by reference from Exhibit
7.4 to Registrant's Current Report on Form 8-K dated June 1,
1998. (Filed with the SEC on June 9, 1998, File No. 000-29518.)
9.5 Irrevocable Proxy dated June 1, 1998 from Robert J. McNulty to
John Markley incorporated herein by reference from Exhibit 7.5
to Registrant's Current Report on Form 8-K dated June 1, 1998.
(Filed with the SEC on June 9, 1998, File No. 000-29518.)
10.1 Employment Agreement between the Company and John H. Markley
dated June 1, 1998 incorporated herein by reference from
Exhibit 10.20 to Registrant's Current Report on Form 8-K dated
June 1, 1998. (Filed with the SEC on June 9, 1998, File No.
000-29518.)
10.2 Termination and Buy-Out Agreement between the Company and
Robert J. McNulty dated June 1, 1998 incorporated herein by
Page 45 of 290
<PAGE>
reference from Exhibit 10.21 to Registrant's Current Report on
Form 8-K dated June 1, 1998. (Filed with the SEC on June 9,
1998, File No. 000-29518.)
10.3 Consulting Agreement between the Company and Cyber Depot, Inc.
dated June 1, 1998 incorporated herein by reference from
Exhibit 10.22 to Registrant's Current Report on Form 8-K dated
June 1, 1998. (Filed with the SEC on June 9, 1998, File No.
000-29518.)
10.4 Agreement between the Company and Stilden Co., Inc. dated April 283
1, 1998. This exhibit corrects the exhibit previously filed as
Exhibit 10.23 to Registrant's Current Report on Form 8-K dated
June 1, 1998.
27.1 Financial Data Schedule 1/ 290
- --------
1/ This exhibit is being filed electronically in the electronic format
specified by EDGAR.
Page 46 of 290
<PAGE>
EXHIBIT 4.1
-----------
THIS SUBSCRIPTION AGREEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES REFERRED TO HEREIN.
SUBSCRIPTION AGREEMENT
Shopping.com
2101 East Coast Highway
Garden level
Corona Del Mar, CA 92625
Attn: Robert McNulty
Re: Prospective Purchase of Notes and Warrants
Shopping.com, a California corporation
Gentlemen:
The undersigned, by signing the Signature Page attached hereto, hereby
irrevocably tenders this subscription and applies to purchase 16 units (the
"Units") of Shopping.com, a California corporation (the "Company"), at a
purchase price of $25,000 per Unit. Each Unit consists of a Promissory Note in
the principal amount of $25,000 and warrants to purchase 2,500 shares of the
Company's Common Stock, no par value (the "Common Stock"), at an exercise price
of $14.00 per share.
Enclosed, in cash or good funds (in the case of a check, the check should
be payable to the order of "Shopping.com") as tender of the purchase price for
the Units, is the aggregate amount of $400,000.00 ($25,000 minimum).
The undersigned hereby acknowledges receipt of a copy of the Company's
Annual Report on form 10-KSB for the period ending January 31, 1998 (the
"Report"), relating to and describing the terms and conditions of the offer and
sale of the Units.
The undersigned hereby represents and warrants to, and covenants with, the
Company as follows, recognizing that the Company will rely to a material degree
upon such representations, warranties and covenants, each of which shall survive
any acceptance of this subscription in whole or in part by the Company and the
issuance and sale of any Units to the undersigned:
1. All statements made in the Prospective Investor Questionnaire which has
been or is concurrently being furnished to the Company by the undersigned
continue to be and are true, accurate and complete as of the date hereof.
2. The undersigned has been informed and is aware that an investment in
the Units involves a degree of risk and speculation, and has carefully read and
considered the Report in its entirety.
-1-
Page 47 of 290
<PAGE>
3. The undersigned confirms that he has been advised that he should rely
on, and that he has consulted and relied upon, his own accounting, legal and
financial advisors with respect to this investment in the Units. The undersigned
and his professional advisor(s) (as defined in Section 260.102.12(g) of the
Rules of the California Corporations Commissioner), if any, have been afforded
an opportunity to meet with the officers and directors of the Company and to ask
and receive answers to any questions about this offering and the proposed
business and affairs of the Company, and to obtain any additional information
which the Company possesses or can acquire without unreasonable effort or
expense that is necessary to verify the accuracy of information provided in the
Report, and have therefore obtained, in the judgement of the undersigned and/or
his or her professional advisor(s), sufficient information to evaluate the
merits and risks of investment in the Units. The undersigned acknowledges and
agrees that he/she has had an opportunity to meet and speak with officers or
representatives and to ask questions and get answers with respect to the Company
and this offering.
4. The undersigned understands and acknowledges that no federal or state
agency has made any finding or determination as to the fairness or suitability
for investment in, nor any recommendation or endorsement of, the Company or the
Units.
5. On the basis of the review of the materials and information described
above, and relying solely thereon and upon the knowledge and experience of the
undersigned and/or his or her professional advisor(s), if any, in business and
financial matters, the undersigned has evaluated the merits and risks of
investment in the Units and has determined that he or she is both willing and
able to undertake the economic risk of this investment.
6. The Units are being acquired by the undersigned for the personal
account of the undersigned for investment and not with a view to, or for resale
in connection with, any distribution thereof or of any interest therein, and no
one else has any beneficial ownership or interest in the Units being acquired by
the undersigned, nor are they to be subject to any lien or pledge. The
undersigned has no present obligation, indebtedness or commitment pending, nor
is any circumstance in existence which will compel the undersigned to secure
funds by the sale, transfer or other distribution of any of the Units or any
interest therein or any Stock that may be distributed in respect thereof.
7. The undersigned understands and agrees that the Units cannot be
transferred or assigned that there is and will be no public market therefor,
and, accordingly, that it may not be possible for the undersigned readily, if at
all, to liquidate this investment in the Units in case of an emergency or
otherwise. The undersigned has the net worth, past income and estimated future
income set forth in the Prospective Investor Questionnaire, can afford to bear
the risks of an investment in the Units, including the risk of losing the entire
investment, for an indefinite period of time, and has adequate means of
providing for his or her current needs and personal contingencies and has no
need for liquidity in this investment.
8. The undersigned understands and acknowledges that the Units are being
offered and sold pursuant to one or more exemptions from the registration and
qualification requirements of the Securities Act of 1933 and the California
-2-
Page 48 of 290
<PAGE>
Corporate Securities Act of 1968, the availability of which depend upon the
truth and completeness of the information provided to the Company in the
Prospective Investor Questionnaire and the bona fide nature of the foregoing
representations and warranties. With such realization, the undersigned hereby
authorizes the Company to act as it may see fit in reliance on such information,
representations and warranties, including the placement of the following legend
on the stock certificate(s) issued to the undersigned in addition to any other
legends that may be imposed thereon which, in the reasonable opinion of
Company's counsel, may be required by applicable securities laws:
"THE UNITS REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSIONS UNDER THE SECURITIES ACT OF
1933 OR WITH THE CALIFORNIA DEPARTMENT OF CORPORATIONS UNDER THE
CORPORATE SECURITIES LAW OF 1968, AS AMENDED. THE UNITS MAY NOT
BE PLEDGED, SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACTS COVERING THE UNITS OR AN
OPINION OR QUALIFIED COUNSEL OR OTHER EVIDENCE SATISFACTORY TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
9. The undersigned hereby indemnifies and holds harmless the Company, and
its respective officers, directors, shareholders, employees and agents, as the
case may be, from and against any and all damages suffered and liabilities
incurred by any of them (including costs of investigation and defense and
attorneys' fees) arising out of any inaccuracy in the agreements,
representations, covenants and warranties made by the undersigned herein.
10. If the undersigned is purchasing the Units subscribed for hereby in a
fiduciary capacity, the above representations and warranties shall be deemed to
have been made on behalf of the person or persons for whom the undersigned is so
purchasing.
11. The undersigned hereby acknowledges and agrees that the undersigned is
not entitled to cancel, terminate or revoke this subscription or any agreements
of the undersigned hereunder and that such subscription and agreements shall
survive the death or disability of the undersigned.
12. The undersigned understands and acknowledges that this subscription
may be accepted or rejected by the Company in its sole discretion, together with
a completed and executed Prospective Investor Questionnaire and all information
required by the provisions hereof and payment of the full amount of the
subscription price for the Units subscribed for. Any amounts tendered in excess
of the total payable as the purchase price for Units as to which this
subscription has been accepted will thereafter be delivered to the undersigned
as soon as is practicable, all as described in the Confidential Private
Placement Memorandum. The Company shall signify its rejection by returning to
the undersigned this Subscription Agreement and all funds (without interest or
deduction) submitted by the undersigned.
NEITHER THE COMPANY, NOR ANY OFFICER, DIRECTOR, SHAREHOLDER, EMPLOYEE OR
AGENT OF ANY OF THEM SHALL BE LIABLE TO ANY PERSON FOR THE REJECTION, IN WHOLE
OR IN PART, OF ANY OFFER TO SUBSCRIBE TO PURCHASE UNITS, NOTWITHSTANDING THAT
THE UNDERSIGNED MAY OTHERWISE BE QUALIFIED AS A PROSPECTIVE INVESTOR.
-3-
Page 49 of 290
<PAGE>
13. If, prior to the sale of any Units to the undersigned, there is a
material change in die undersigned's investment intention as expressed herein,
or if there occurs any change which would make either the representations or
warranties made by the undersigned herein or the information provided by the
undersigned in the Prospective Investor Questionnaire materially untrue or
misleading, the undersigned agrees to immediately so notify the Company, and any
prior acceptance of the subscription of the undersigned shall be voidable at the
option of the Company.
IN WITNESS WHEREOF, the undersigned executes and agrees to be bound by
this Subscription Agreement by executing the Signature Page attached hereto on
the date therein indicated.
SIGNATURE PAGE
(All information must be completed)
Date: May 15, 1998
/s/ Carlos Beharie $400,000 40,000 $400,000
- ----------------------- -------- ------ ---------
Signature of Purchaser Purchase Price # of Warrants Total $ Investment
/s/ Joan Beharie Carlos Beharie and Joan Beharie
- ----------------------------------- --------------------------------
Signature of Joint Owner (if any) Name(s) of Purchaser (Print)
If Joint Ownership, check one:
Residence Address:
X Joint Tenants, with -----------------
----- Right of Survivorship 583 Cherry Hill Road
Princeton, New Jersey 08540-7612
_____ Tenants in Common
###-##-####
_____ Community Property ---------------------------------------
Social Security No. or Taxpayer I.D. No.
ACCEPTED AND AGREED:
SHOPPING.COM
By /s/ Robert J. McNulty
------------------------------
Robert J. McNulty, Chief Executive Officer
Date: May __, 1998
-4-
Page 50 of 290
<PAGE>
EXHIBIT 4.2
-----------
UNSECURED PROMISSORY NOTE
$400,000.00 CORONA DEL MAR, CALIFORNIA MAY 15, 1998
1. PRINCIPAL.
FOR VALUE RECEIVED, the undersigned, SHOPPING.COM ("Maker"),
promises to pay to Dr. Carlos Beharie ("Payee"), or order, at 2101 East Coast
Highway, Corona Del Mar, CA 92625 or such other place as the holder of this Note
shall specify, in lawful money of the United States of America, the principal
amount of FOUR HUNDRED THOUSAND DOLLARS ($400,000.00), together with interest at
the rate of ten percent (10%) per annum, payable as hereinafter provided.
2. PAYMENT OF PRINCIPAL AND INTEREST.
All principal of and interest accruing on this Note shall be due and
payable six months from the date of this Note.
Interest shall be calculated on the unpaid principal balance of this
Note on the basis of a year of 360 days and the actual number of days elapsed
until payment, unless such calculation would result in a usurious rate, in which
case interest shall be calculated on the basis of a year of 365 or 366 days, as
the case may be. Interest shall accrue and be payable under this Note whether or
not Maker, or Maker's successors or assigns, should avail themselves of the
protection of the United States bankruptcy laws. From and after the occurrence
of an "event of default" as set forth in Section 7 hereof, interest shall
continue to accrue on the unpaid principal balance of this Note at the same
interest rate as set forth in Section 1 of this Note.
3. PREPAYMENT.
A. This Note may be prepaid at any time or from time to time, in
whole or in part, without penalty.
B. Each such prepayment shall include all interest then accrued but
unpaid on this Note.
C. Any partial prepayment of the outstanding principal balance shall
in no way release, discharge or affect the obligation of the Maker to continue
to make any other payments of principal or interest provided for herein until
this Note is paid in full.
-1-
Page 51 of 290
<PAGE>
4. APPLICATION OF PAYMENTS.
Each payment on this Note (whether made when due or otherwise) shall
be credited first, to late charges, fees and other charges due, including
collection costs and attorneys' fees, second against interest then due, and the
remainder of such payment shall be credited against the unpaid principal.
5. WAIVER.
Maker and all endorsers, guarantors and all persons liable, or to
become liable on this Note (each hereinafter referred to in this Section as the
"Applicable Party"), jointly and severally, waive presentment, protest and
demand, notice of protest, demand, dishonor and nonpayment of this Note, notice
of acceleration, notice of intent to accelerate, and any and all other notices
or matters of a like nature, and consent to any and all renewals and extensions
of the fine of payment hereof. Each Applicable Party agrees that at any time and
from time to time, without notice, (i) the terms of payment herein, or (ii) the
terms of any guaranty of this Note, or (iii) the security described in any
documents at any time securing this Note, may be modified, increased, changed or
exchanged, in whole or in part, without in any way affecting the liability of
any Applicable Party.
6. LATE CHARGE.
If any payment of interest and/or principal hereunder is not
received by Payee within ten (10) days after the due date thereof, Maker agrees
to pay Payee a late charge equal to five percent (5%) of the unpaid amount.
Maker acknowledges that it would be extremely difficult to fix Payee's actual
damages for the failure of Maker to timely pay any amount due under this Note.
Accordingly, such late charge shall be deemed to be Payee's damages for any such
late payment, provided that such late charge shall not limit Payee's right to
compel prompt performance by Maker or to exercise other remedies available to
Payee.
7. DEFAULT BY MAKER.
Any one or more of the following shall constitute an "Event of
Default" by Maker under the terms of this Note:
A. If Maker fails to pay any payment, whether at maturity or
otherwise, of principal and/or interest upon the due date thereof.
-2-
Page 52 of 290
<PAGE>
B. If Maker defaults in the performance or observance of any of the
covenants, conditions or agreements set forth in this Note.
C. If Maker institutes proceedings to be adjudicated a voluntary
bankrupt; consents to the filing of a bankruptcy proceeding against Maker; files
or consents to filing of a petition or answer or consent seeking reorganization
under the federal bankruptcy laws or any other similar applicable federal or
state law; consents to the appointment or a receiver of liquidator or trustee or
assignee in bankruptcy or insolvency of the Maker or a substantial part of
Maker's property; an assignment for the benefit of creditors is made by the
Maker; or Maker admits in writing of Maker's inability to pay Maker's debts
generally as they become due.
8. REMEDIES UPON DEFAULT.
If an Event of Default occurs, at the option of Payee, and upon
written demand, the Payee may accelerate the due date of this Note and declare
the entire outstanding principal balance hereof, including all fees and costs
(if any), and accrued but unpaid interest, immediately due and payable in full.
Each of the options, rights and remedies provided herein or
available at law or in equity which may be exercised by Payee may be exercised
separately or concurrently with any one or more other options, rights or
remedies available to Payee. Failure to exercise any option, right or remedy
shall not constitute a waiver of the right of the Payee to exercise such option,
right or remedy in the event of or with respect to any prior, subsequent or
concurrent transaction or occurrence of the same or a different kind or
character.
9. ATTORNEYS' FEES.
Maker agrees to pay all costs of collection or enforcement of this
Note when incurred, including, but not limited to, reasonable attorneys' fees.
If any suit or action is instituted to enforce this Note, Maker promises to pay,
in addition to the costs and disbursements allowed by law, such sum as the court
may adjudge as reasonable attorneys' fees in such suit or action. Maker shall
also pay all reasonable attorneys' fees and costs incurred by Payee in
connection with any modification, amendment or consent related to any
renegotiation or modification of this Note.
10. SEVERABILITY.
Every provision of this Note is intended to be severable. If any
term or provision hereof is declared by a court of competent jurisdiction to be
-3-
Page 53 of 290
<PAGE>
illegal or invalid for any reason whatsoever, such illegality or invalidity
shall not affect the balance of the terms and provisions hereof, which terms and
provisions shall remain binding and enforceable.
11. GOVERNING LAW.
This Note shall be governed by and construed in accordance with the
laws of the State of California.
12. NOTICES.
All notices, statements or demands shall be in writing and shall be
served in person, by telegraph, by express mail, by certified mail or by private
overnight delivery. Service shall be deemed conclusively made (i) at the time of
service, if personally served, (ii) at the time (as confirmed in writing by the
telegraphic agency) of delivery thereof to the addressee, if served
telegraphically, (iii) twenty-four (24) hours (exclusive of weekends and
national holidays) after deposit in the United States mail, properly addressed
and postage prepaid, if served by express mail, (iv) five (5) calendar days
after deposit in the United States mail, properly addressed and postage prepaid,
return receipt requested, if served by certified mail, (v) twenty-four (24)
hours after delivery by the party giving the notice, statement or demand to the
private overnight deliverer, if served by private overnight delivery and (vi) at
the time of electronic transmission, if a copy of such notice is mailed within
twenty-four (24) hours after the transmission.
Any notice or demand to Maker shall be given to:
Robert J. McNulty
Shopping.com
2101 E. Coast Hwy., Garden Level
Corona del Mar, California 92625
Any notice or demand to Payee shall be given to:
Dr. Carlos Beharie
583 Cherry Hill Road
Princeton, New Jersey 08540-7612
-4-
Page 54 of 290
<PAGE>
and with a copy to:
Barry D. Falk, Esq.
JEFFERS, WILSON, SHAFF & FALK, LLP
18881 Von Karman Avenue, Suite 1400
Irvine, California 92612
FAX No.: (949) 660-7799
Any party hereto may change its address for the purpose of receiving
notices, demands or other communications as herein provided by a written notice
given in the manner aforesaid to the other party or parties hereto.
13. SUCCESSOR AND ASSIGNS.
All the terms and provisions of this Note shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
14. ASSIGNABILITY.
Maker's obligation hereunder are nontransferable and nonassignable
without the prior written consent of Payee.
15. AMENDMENT.
Neither this Note nor any term or provision hereof may be modified,
amended or altered except by a written instrument approved by Payee and signed
by Maker.
16. HEADINGS.
Headings at the beginning of each numbered Paragraph of this Note
are intended solely for convenience and are not to be deemed or construed to be
a part of this Note.
17. PURPOSE OF LOAN.
The proceeds of this Note are to be used by Maker exclusively for
business purposes, and not for personal, family or household purposes.
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Page 55 of 290
<PAGE>
18. TIME OF THE ESSENCE.
TIME IS EXPRESSLY DECLARED TO BE THE ESSENCE of each
obligation of the Maker hereunder and in all matters concerning this Note,
including all acts or things to be done or performed in connection herewith, and
specifically of every provision of this Note in which time is an element.
19. COMPLIANCE WITH USURY LAWS.
Maker and Payee intent to comply with all applicable usury laws. In
fulfilling this intention, all agreement between Maker and Payee are expressly
limited so that the amount of interest paid or agreed to be paid to Payee for
the use, forbearance, or detention of money under this Note shall not exceed the
maximum amount permissible under applicable law.
If for any reason payment of any amount required under this Note
shall be prohibited by law, then the obligation shall be reduced to the maximum
allowable bylaw. If for any reason Payee receives as interest an amount that
would exceed the highest lawful rate, then the amount which would constitute
excessive interest shall be applied to the reduction of the principal of this
Note and not to the payment of interest. If any conflict arises between this
provision and any provision of any other agreement between Maker and Payee, then
this provision shall control.
20. LEGAL REPRESENTATION.
Maker agrees and represents that such party has been represented by
such party's own legal counsel with regard to all aspects of this Note, or if
such party is acting without legal counsel, that such party has had adequate
opportunity and has been encouraged to seek the advice of such party's own legal
counsel prior to the execution of this Agreement.
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<PAGE>
21. JURISDICTION.
Any action whatsoever brought upon or relating to this Note shall be
instituted and prosecuted in the state courts of California, County of Orange,
or the federal district court therefore, and each party waives the right to
change the venue. The parties hereto further consent to accept service of
process in any such action or proceeding by certified mail, return receipt
requested.
"MAKER" "PAYEE"
SHOPPING.COM CARLOS BEHARIE
By /s/ Robert J. McNulty By /s/ Carlos Beharie
-------------------------------- --------------------------------
Robert J. McNulty Carlos Beharie 5/15/98
Title: President and Chief Executive
Officer By /s/ Joan H. Beharie
--------------------------------
Joan H. Beharie 5/15/98
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Page 57 of 290
<PAGE>
EXHIBIT 4.3
-----------
SHOPPING.COM
WARRANT AGREEMENT
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THIS WARRANT MAY
NOT BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS
AN EXEMPTION THEREFROM IS AVAILABLE.
This Warrant Agreement (this "Agreement") is entered into as of 15th day
of May, 1998 by and between, SHOPPING.COM, a California corporation (the
"Company"), and Carlos Beharie (the "Holder").
RECITALS
WHEREAS, the Company has agreed to grant to Holder warrants to purchase
40,000 shares of Company Common Stock in exchange and in consideration for good
and valuable goods and services.
NOW, THEREFORE, BE IT RESOLVED, the parties agree hereto as follows:
1. Description, Execution.
(a) The Company agrees to issue to the Holder and the Holder agrees
to accept the Warrant Certificate evidencing the right to purchase shares of the
Company common stock at an initial purchase price of Fourteen Dollars ($14.00)
per Share as to which the Warrant is exercisable. The Warrant Certificate shall
be substantially in the form annexed hereto as Exhibit A.
(b) This Agreement shall be executed on behalf of the Company by its
President Upon delivery of this Warrant to the Holder, this Agreement shall be
binding upon the Company, and the Holder shall be entitled to all the benefits
set forth herein.
2. Term of Warrant. The Warrant shall become exercisable at any time after
the date hereof, and remain exercisable, subject to the conditions set forth in
Section 3 until the close of business on May 15, 2001 (the "Expiration Date").
3. Exercise of Warrant.
(a) Subject to (b) below, at any time until the Expiration Date, the
Holder shall have the right to purchase from the Company (and the Company shall
promptly issue to the Holder) one fully-paid and nonassessable share of Common
Stock at the Exercise Price (as defined below) for each Warrant, by surrendering
the appropriate Warrant Certificate and the Subscription Form attached hereto to
the Company at its executive offices and paying the aggregate Exercise Price for
the sham to be purchased, in cash, by check or by cancellation of indebtedness.
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(b) The Warrant may be exercised in whole and in part but not in
increments of less than 100 shares. In case of a partial exercise, the Warrant
Certificate shall be surrendered and a new Warrant Certificate of the same tenor
and for the purchase of the number of sham not purchased upon such partial
exercise shall be issued by the Company to the Holder hereof. The Warrants shall
be deemed to have been exercised immediately prior to the close of business on
the date of their surrender for exercise as provided above, and the person or
entity entitled to receive the shares of Common Stock issuable upon the exercise
shall be treated for all purposes as the holder of such shares of record as of
the close of business on such date. Prior to any such exercise, neither the
Holder nor any person entitled to receive shares issuable upon exercise shall be
or have any of the rights of a shareholder of the Company. No adjustment shall
be made for dividends or other stockholder rights for which the record date is
prior to the date of exercise. As soon as practicable on or after such date, the
Company shall issue in the name of, and deliver to the person or persons
entitled to receive, a certificate or certificates for the full number of shares
of Common Stock issuable upon such exercise.
4. Exercise Price. The initial Exercise Price for each share of Common
Stock issuable pursuant to the Warrant shall be Fourteen Dollars ($14.00) per
Share, adjusted as provided below. The Exercise Price may be paid, in cash,
cashier's check or by cancellation of indebtedness from the Company to the
Holder.
5. Adjustment of Warrant Price and Number of Shares of Common Stock. The
number and kind of securities purchasable upon the exercise of the Warrants and
the Exercise Price shall be subject to adjustment from time to time upon the
happening of certain events, as follows:
5.1 Adjustments. The Exercise Price of the Warrant shall be subject to
adjustment as follows:
(a) In case the Company shall issue rights, options, warrants or
convertible securities to all or substantially all holders of its Common Stock,
without any charge to such holders, entitling the holder thereof to subscribe
for or purchase Stock at a price per share which is lower at the date of
issuance of such rights, options, warrants or securities than the then Current
Fair Market Value (as defined in Section 7 hereof), the price of shares of Stock
thereafter purchasable upon the exercise of the Warrant shall be reduced to a
price equal to an amount which would entitle the Holder to receive the same
number of shares of Common Stock and other securities that he would have
received had he exercised the Warrants immediately prior to such issuance.
(b) For the purpose of this Section 5, the term "Common Stock" shall
mean (i) the class of stock designated as the Common Stock of the Company at the
date of this Agreement, or (ii) any other claw of stock resulting from
successive changes or reclassifications of such Common Stock consisting solely
of changes in par value, or from par value to no par value, or from no par value
to par value.
5.2 No Adjustment for Dividends. Except as provided in Section 5.1 hereof,
no adjustment in respect of any dividends or distributions out of earnings shall
be made during the term of a Warrant or upon the exercise of a Warrant.
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5.3 No Adjustment in Certain Cases. No adjustments shall be made pursuant
to Section 5 hereof in connection with the grant or exercise of presently
authorized or outstanding options to purchase Common Stock under the Company's
existing stock option plan or the exercise of presently outstanding warrants to
purchase Common Stock.
5.4 Preservation of Purchase Price upon Reclassification, Consolidation,
etc. In case of any consolidation of the Company with or merger of the Company
into another corporation or in case of any sale or conveyance to another
corporation of the property, assets or business of the Company as an entirety or
substantially as an entirety, the Company or such successor or purchasing
corporation, as the case may be, shall execute with the Holder an agreement that
the Holder shall have the right thereafter, upon payment of the Exercise Price
in effect immediately prior to such action, to purchase, upon exercise of each
Warrant, the kind and amount of shares and other securities and property which
it would have owned or have been entitled to receive after the occurrence of
such consolidation, merger, sale or conveyance had each Warrant been exercised
immediately prior to such action. In the event of a merger described in Section
368(a)(2)(E) of the Internal Revenue Code of 1986, as amended, in which the
Company is the surviving corporation, the right to purchase sham of Common Stock
under the Warrant shall terminate on the date of such merger and thereupon the
Warrant shall become null and void, but only if the controlling corporation
shall agree to substitute for the Warrant its warrant which entitle the holders
thereof to purchase upon their exercise the kind and amount of shares and other
securities and property which they would have owned or been entitled to receive
had the Warrant been exercised immediately prior to such merger. Any such
agreements referred to in this Subsection 5.4 shall provide for adjustments,
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in Section 5 hereof. The provisions of this Subsection 5.4 shall
similarly apply to successive consolidations, mergers, sales or conveyances.
6. Registration Rights.
6.1 Definitions.
(a) "Commission" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act of
1933, as amended (the "Securities Act").
(b) "Registrable Securities" shall mean (x) shares of Common Stock
issuable upon exercise of the Warrants and (y) any Common Stock issued as a
dividend or other distribution with respect to or in exchange for or in
replacement of the shares referenced in (x) above, provided, however, that
Registrable Securities shall not include any shares of Common Stock which have
previously been registered or which have been sold to the public.
(c) 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, and the declaration or ordering of the effectiveness of
such registration statement.
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(d) "Registration Expenses" shall mean all expenses incurred in
effecting any registration pursuant to this Agreement, including, without
limitation, all registration, qualification, and filing fees, printing expenses,
escrow fem fees and disbursements of counsel for the Company, blue sky fees and
expenses of any regular or special audits incident to or required by any such
registration, but shall not include selling expenses and fees and disbursements
of counsel for the Holder.
(e) "Rule 144" shall mean Rule 144 as promulgated by the Commission
under the Securities Act as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.
(f) "Rule 145" shall mean Rule 145 as promulgated by the Commission
under the Securities Act, as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.
6.2 "Piggyback" Registration. If the Company shall determine to register
any of its shares of Common Stock in a firm commitment public offering for its
own account, other than a registration relating solely to employee benefit
plans, or a registration relating solely to a Rule 145 transaction on Form S-4,
or a registration on any registration form that does not permit secondary sales,
the Company will:
(a) promptly give to Holder written notice thereof,
(b) use its best efforts to include in such registration (and any
related qualification under the blue sky laws or other compliance), except as
set forth in Section 6.3 below, and in any underwriting involved therein, all
the Registrable Securities specified in a written request or requests, made by
Holder within Twenty (20) days after the written, notice from the Company
described in clause 6.2(a) above is given. Such written request may specify all
or a part of Holder's Registrable Securities; and
(c) pay all Registration Expenses, other than the selling expenses
of Holder's Registrable Securities.
6.3 Underwriting. If the registration of which the Company gives notice is
for a registered public offering involving an underwriting, the Company shaft so
advise the Holder as a part of the written notice. In such event, the right of
the Holder to registration pursuant to this Section 6 shall be conditioned upon
Holder's participation in such underwriting and the inclusion of the Holder's
Registrable Securities in the underwriting to the extent provided herein. The
Holder shall (together with the Company) enter into an underwriting agreement in
customary form with the representative of the underwriter of underwriters
selected by the Company.
6.4 Exclusion of Registrable Securities. Notwithstanding any other
provisions of this Section 6, if the representative of the underwriters advises
the Company that marketing factors require a limitation on the number of shares
to be underwritten, the representative may (subject to the limitations set forth
below) exclude all Registrable Securities from, or limit the number of
Registrable Securities to be included in, the registration and underwriting. The
Company shall so advise the Holder, and the number of shares of securities that
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are entitled to be included in the registration and underwriting shall be
allocated first to the Company for securities being sold for its own account and
thereafter to the Holder, pro rata with any other holders of Common Stock having
registration rights. If the Holder does not agree to the terms of any such
underwriting, he shall be excluded therefrom by written notice from the Company
or the underwriter. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration.
If shares are so withdrawn from the registration or if the number of
shares of Registrable Securities to be included in such registration was
previously reduced as a result of marketing factors, the Company shall then
offer to all persons who have retained the right to include securities in the
registration the right to include additional securities in the registration in
an aggregate amount equal to the number of sham so withdrawn, with such sham to
be allocated among the persons requesting additional inclusion pro rata amongst
those persons requesting inclusion.
6.5 Registration Procedures. In the case of each registration effected by
the Company pursuant to Section 6, the Company will keep Holder advised in
writing as to the initiation of each registration and as to the completion
thereof, at its expense, the Company will use its best efforts to:
(a) Keep such registration effective for a period of one hundred
twenty (120) days or until the Holder has completed the distribution described
in the registration statement relating thereto, whichever first occurs;
provided, however, that (x) such 120-days period shall be extended for a period
of time equal to the period the Holder refrains from selling any securities
included in such registration at the request of an underwriter of Common Stock
(or other securities) of the Company; and (y) in the case of any registration of
Registrable Securities on Form S-3 which are intended to be offered on a
continuous or delayed basis, such 120-day period shall be extended, if
necessary, to keep the registration statement effective until all such
Registrable Securities are sold, provided that Rule 145, or any successor rule
under the Securities Act, permits an offering on a continuous or delayed basis,
and provided further that applicable rules under the Securities Act governing
the obligation to file a post-effective amendment permit, in lieu of filing a
post-effective amendment that (I) includes any prospectus required by Section
10(a)(3) of the Securities Act or (II) reflects facts or events representing a
material or fundamental change in the information set forth in the registration
statement, the incorporation by reference of information required to be included
in (I) and (II) above to be contained in periodic reports filed pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 in the registration
statement.
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement;
(c) Furnish such number of prospectuses and other documents incident
thereto, including any amendment of or supplement to the prospectus, as the
Holder from time to time may reasonably request;
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(d) Notify the Holder at any time when a prospectus relating thereto
is required to be delivered under the Securities Act of the happening of any
event as a result of which the prospectus included in such registration
statement; as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or incomplete in the light of the
circumstances then existing, and at the request of Holder, prepare and furnish
to the Holder a reasonable number of copies of a supplement to or an amendment
of such prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such shares, such prospectus shall not include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or incomplete
in the light of the circumstances then existing;
(e) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed;
(f) Provide a transfer agent and registrar for all Registrable
Securities registered, pursuant to such registration statement and a CUSIP
number for all such Registrable Securities, in each case not later than the
effective date of such registration; and
(g) Otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering the
period of at least twelve months, but not more than eighteen months, beginning
with the first month after the effective date of the Registration Statement,
which earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act.
7. Fractional Shares; Issuance of Shares; Legends.
7.1 Fractional Shares. The Company shall not be required to issue
fractional shares of Company Common Stock an the exercise of a Warrant if any
fraction of a share of Stock would, except for the provisions of this Section 6,
be issuable on the exercise of a Warrant (or specified portion thereof), the
Company shall in lieu thereof pay an amount in cash equal to the then Current
Fair Market Value, multiplied by such fraction. For purposes of this Agreement,
the term "Current Fair Market Value" shall mean (i) if the Common Stock is
traded in the over-the-counter market and not in the NASDAQ Small Cap Market or
the National Market nor on any national securities exchange, the average of the
per share closing bid prices of the Common Stock on the 10 consecutive trading
days immediately preceding the date in question, as reported by NASDAQ or an
equivalent generally accepted reporting service, or (ii) if the Common Stock is
traded in the NASDAQ Small Cap Market or the National Market or on a national
securities exchange, the average for the 10 consecutive trading days immediately
preceding the date in question of the daily per share closing prices of the
Common Stock in the NASDAQ Small Cap Market or the National Market or on the
principal stock exchange an on which it is listed, as the case may be or (iii)
if the class of Stock is not publicly traded or quoted, the fair market value as
determined by the Board of Directors of the Company based on (with appropriate
adjustments) the most recent purchases of the Company's Stock and/or other
relevant factors including the Company's income and assets or evaluation reports
received by the Company.
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7.2 Issuance of Shares. All shares of Stock issued upon exercise of a
Warrant will be duly authorized, validly issued, fully paid and nonassessable.
7.3 Legends. If the Stock to be issued upon exercise of this Warrant has
not been registered under the Securities Act of 1933, as amended, then the stock
certificates representing such shares of Common Stock shall bear a legend
substantially in the following form:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR APPLICABLE
STATE SECURITIES LAWS AND ARE RESTRICTED SECURITIES. SUCH SECURITIES MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER THE ACT AND STATE SECURITIES LAWS.
8. Transferability. The Warrant or the Shares of Company Common Stock
underlying the Warrant shall not be transferred, and the Company shall not be
required to register any transfer on the books of the Company, unless the
Company shall have been provided with an opinion of counsel satisfactory to it
prior to such transfer that registration under the Securities Act and applicable
state securities laws is not required in connection with the transaction
resulting in such transfer. Each new Warranty or Company Common Stock
certificate issued upon any transfer as above provided shall bear an appropriate
investment legend, except that such Warrant or Company Common Stock certificate
shall not bear such restrictive legend if the opinion of counsel referred to
above is to further effect that such legend is not required in order to
establish compliance with the provisions of the Securities Act or if such
transfer is made in accordance with the provisions of Rule 144(k) promulgated
under the Securities Act. The Warrant may also be transferred by will or devise
and by the laws of descent.
Any attempt to transfer, sell or otherwise dispose of this Warrant (except
as provided above) shall be void and shall not convey any rights or privileges
to the transferee.
9. Miscellaneous.
9.1 Notices.
All notices, requests, demand and other communications required Or
Permitted to be given hereunder shall be deemed to have been duly given if in
writing and delivered personally, given by prepaid telegram, or mailed first
class, postage prepaid, registered or certified mail, return receipt requested,
to the following addresses:
If to the Company: SHOPPING.COM
2101 E. Coast Hwy., Garden Level
Corona del Mar, California 92625
Attention: Mr. Robert J. McNulty
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With a copy to: Jeffers, Wilson, Shaff & Falk, LLP
18881 Von Karman Avenue, Suite 1400
Irvine, California 92612
Attention: Barry D. Falk, Esq.
If to the Holder: Dr. Carlos Beharie
583 Cherry Hill Road
Princeton, New Jersey 08540-7612
Any party may change the address to which such communications are to
be directed to it by giving written notice to the other party. Except as
otherwise provided in this Warrant, all notices shall be deemed to be given when
delivered in person, or if placed in the mail as aforesaid, then two (2) days
thereafter.
9.2 Modifications. The parties may, by mutual consent, amend, modify,
supplement and waive any right under this Warrant in any manner agreed by them
in writing at any time.
9.3 Entire Agreement. This Agreement, and any documents, instruments or
agreements specifically referred to herein, set forth the entire agreement and
understanding of the parties with respect to the transactions contemplated
hereby and supersede all Prior agreements, arrangements and understandings
relating to the subject matter hereof.
9.4 Headings. The section and paragraph headings contained in this
Agreement am for convenient reference only, and shall not in any way affect the
meaning or interpretation hereof.
9.5 Governing Law; Arbitration. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, without any
regard to the choice of law provisions thereof. Any dispute arising under this
Agreement shall be resolved by binding arbitration under the rules of commercial
arbitration of the American Arbitration Association in Orange County,
California.
9.6 Severability. If any provision of this Agreement shall be hold to be
invalid, illegal or unenforceable, it shall be deemed severable from the
remaining provisions of this Agreement which shall remain in full force and
effect.
9.7 Waiver. No waiver of any provision of this Agreement or any breach
thereof shall be deemed or shall constitute a waiver of any other provision
hereof (whether or not similar) or any other breach hereunder nor shall such
waiver constitute a continuing waiver. Either party may waive performance of any
provision of this Agreement, the nonperformance of which would otherwise
constitute a breach of this Agreement including but not limited to the
nonperformance of any condition precedent to such party's performance, without
affecting the enforceability of this Agreement or the provisions contained
herein.
9.8 Heirs; Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
heirs, successors and assigns of the parties hereto. Holders may transfer and
assign the Warrants only as provided in Section 7 and any assignment in
violation of the foregoing shall be void.
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9.9 Attorneys' Fees. If any legal action is instituted to enforce or
interpret the terms of this Agreement, the prevailing party in such action shall
be entitled to actual attorneys' fees in addition to any other relief to which
the party is entitled.
IN WITNESS WHEREOF, the parties have executed this instrument as of the
date first written above.
SHOPPING.COM, A CALIFORNIA CORPORATION
By: /s/ Robert J. McNulty
---------------------------------
Robert J. McNulty, President
"HOLDER"
/s/ Carlos Beharie 5/15/98
------------------------------------------
Carlos Beharie
/s/ Joan H. Beharie 5/15/98
------------------------------------------
Joan H. Beharie
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EXHIBIT 4.4
-----------
THIS SUBSCRIPTION AGREEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES REFERRED TO HEREIN.
SUBSCRIPTION AGREEMENT
Shopping.com
2101 East Coast Highway
Garden level
Corona Del Mar, CA 92625
Attn: Robert McNulty
Re: Prospective Purchase of Notes and Warrants
Shopping.com, a California corporation
Gentlemen:
The undersigned, by signing the Signature Page attached hereto, hereby
irrevocably tenders this subscription and applies to purchase 16 units (the
"Units") of Shopping.com, a California corporation (the "Company"), at a
purchase price of $25,000 per Unit. Each Unit consists of a Promissory Note in
the principal amount of $25,000 and warrants to purchase 2,500 shares of the
Company's Common Stock, no par value (the "Common Stock"), at an exercise price
of $14.00 per share.
Enclosed, in cash or good funds (in the case of a check, the check should
be payable to the order of "Shopping.com") as tender of the purchase price for
the Units, is the aggregate amount of $50,000.00 ($25,000 minimum).
The undersigned hereby acknowledges receipt of a copy of the Company's
Annual Report on form 10-KSB for the period ending January 31, 1998 (the
"Report"), relating to and describing the terms and conditions of the offer and
sale of the Units.
The undersigned hereby represents and warrants to, and covenants with, the
Company as follows, recognizing that the Company will rely to a material degree
upon such representations, warranties and covenants, each of which shall survive
any acceptance of this subscription in whole or in part by the Company and the
issuance and sale of any Units to the undersigned:
1. All statements made in the Prospective Investor Questionnaire which has
been or is concurrently being furnished to the Company by the undersigned
continue to be and are true, accurate and complete as of the date hereof.
2. The undersigned has been informed and is aware that an investment in
the Units involves a degree of risk and speculation, and has carefully read and
considered the Report in its entirety.
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3. The undersigned confirms that he has been advised that he should rely
on, and that he has consulted and relied upon, his own accounting, legal and
financial advisors with respect to this investment in the Units. The undersigned
and his professional advisor(s) (as defined in Section 260.102.12(g) of the
Rules of the California Corporations Commissioner), if any, have been afforded
an opportunity to meet with the officers and directors of the Company and to ask
and receive answers to any questions about this offering and the proposed
business and affairs of the Company, and to obtain any additional information
which the Company possesses or can acquire without unreasonable effort or
expense that is necessary to verify the accuracy of information provided in the
Report, and have therefore obtained, in the judgement of the undersigned and/or
his or her professional advisor(s), sufficient information to evaluate the
merits and risks of investment in the Units. The undersigned acknowledges and
agrees that he/she has had an opportunity to meet and speak with officers or
representatives and to ask questions and get answers with respect to the Company
and this offering.
4. The undersigned understands and acknowledges that no federal or state
agency has made any finding or determination as to the fairness or suitability
for investment in, nor any recommendation or endorsement of, the Company or the
Units.
5. On the basis of the review of the materials and information described
above, and relying solely thereon and upon the knowledge and experience of the
undersigned and/or his or her professional advisor(s), if any, in business and
financial matters, the undersigned has evaluated the merits and risks of
investment in the Units and has determined that he or she is both willing and
able to undertake the economic risk of this investment.
6. The Units are being acquired by the undersigned for the personal
account of the undersigned for investment and not with a view to, or for resale
in connection with, any distribution thereof or of any interest therein, and no
one else has any beneficial ownership or interest in the Units being acquired by
the undersigned, nor are they to be subject to any lien or pledge. The
undersigned has no present obligation, indebtedness or commitment pending, nor
is any circumstance in existence which will compel the undersigned to secure
funds by the sale, transfer or other distribution of any of the Units or any
interest therein or any Stock that may be distributed in respect thereof.
7. The undersigned understands and agrees that the Units cannot be
transferred or assigned that there is and will be no public market therefor,
and, accordingly, that it may not be possible for the undersigned readily, if at
all, to liquidate this investment in the Units in case of an emergency or
otherwise. The undersigned has the net worth, past income and estimated future
income set forth in the Prospective Investor Questionnaire, can afford to bear
the risks of an investment in the Units, including the risk of losing the entire
investment, for an indefinite period of time, and has adequate means of
providing for his or her current needs and personal contingencies and has no
need for liquidity in this investment.
8. The undersigned understands and acknowledges that the Units are being
offered and sold pursuant to one or more exemptions from the registration and
qualification requirements of the Securities Act of 1933 and the California
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Corporate Securities Act of 1968, the availability of which depend upon the
truth and completeness of the information provided to the Company in the
Prospective Investor Questionnaire and the bona fide nature of the foregoing
representations and warranties. With such realization, the undersigned hereby
authorizes the Company to act as it may see fit in reliance on such information,
representations and warranties, including the placement of the following legend
on the stock certificate(s) issued to the undersigned in addition to any other
legends that may be imposed thereon which, in the reasonable opinion of
Company's counsel, may be required by applicable securities laws:
"THE UNITS REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSIONS UNDER THE SECURITIES ACT OF
1933 OR WITH THE CALIFORNIA DEPARTMENT OF CORPORATIONS UNDER THE
CORPORATE SECURITIES LAW OF 1968, AS AMENDED. THE UNITS MAY NOT
BE PLEDGED, SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACTS COVERING THE UNITS OR AN
OPINION OR QUALIFIED COUNSEL OR OTHER EVIDENCE SATISFACTORY TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
9. The undersigned hereby indemnifies and holds harmless the Company, and
its respective officers, directors, shareholders, employees and agents, as the
case may be, from and against any and all damages suffered and liabilities
incurred by any of them (including costs of investigation and defense and
attorneys' fees) arising out of any inaccuracy in the agreements,
representations, covenants and warranties made by the undersigned herein.
10. If the undersigned is purchasing the Units subscribed for hereby in a
fiduciary capacity, the above representations and warranties shall be deemed to
have been made on behalf of the person or persons for whom the undersigned is so
purchasing.
11. The undersigned hereby acknowledges and agrees that the undersigned is
not entitled to cancel, terminate or revoke this subscription or any agreements
of the undersigned hereunder and that such subscription and agreements shall
survive the death or disability of the undersigned.
12. The undersigned understands and acknowledges that this subscription
may be accepted or rejected by the Company in its sole discretion, together with
a completed and executed Prospective Investor Questionnaire and all information
required by the provisions hereof and payment of the full amount of the
subscription price for the Units subscribed for. Any amounts tendered in excess
of the total payable as the purchase price for Units as to which this
subscription has been accepted will thereafter be delivered to the undersigned
as soon as is practicable, all as described in the Confidential Private
Placement Memorandum. The Company shall signify its rejection by returning to
the undersigned this Subscription Agreement and all funds (without interest or
deduction) submitted by the undersigned.
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NEITHER THE COMPANY, NOR ANY OFFICER, DIRECTOR, SHAREHOLDER, EMPLOYEE OR
AGENT OF ANY OF THEM SHALL BE LIABLE TO ANY PERSON FOR THE REJECTION, IN WHOLE
OR IN PART, OF ANY OFFER TO SUBSCRIBE TO PURCHASE UNITS, NOTWITHSTANDING THAT
THE UNDERSIGNED MAY OTHERWISE BE QUALIFIED AS A PROSPECTIVE INVESTOR.
13. If, prior to the sale of any Units to the undersigned, there is a
material change in die undersigned's investment intention as expressed herein,
or if there occurs any change which would make either the representations or
warranties made by the undersigned herein or the information provided by the
undersigned in the Prospective Investor Questionnaire materially untrue or
misleading, the undersigned agrees to immediately so notify the Company, and any
prior acceptance of the subscription of the undersigned shall be voidable at the
option of the Company.
IN WITNESS WHEREOF, the undersigned executes and agrees to be bound by
this Subscription Agreement by executing the Signature Page attached hereto on
the date therein indicated.
SIGNATURE PAGE
(All information must be completed)
Date: May 15, 1998
/s/ Ray Fisk $50,000 5,000 $50,000
- ------------------ ------------- -------------- ----------------
Signature of Purchaser Purchase Price # of Warrants Total $ Investment
___________________________________ Ray Fisk
Signature of Joint Owner (if any) ---------------------------
Name(s) of Purchaser (Print)
If Joint Ownership, check one:
_____ Joint Tenants, with Residence Address:
Right of Survivorship ------------------
3154 Foxtail Court
_____ Tenants in Common Thousand Oaks, California 91362
_____ Community Property
###-##-####
---------------------------------------
Social Security No. or Taxpayer I.D. No.
ACCEPTED AND AGREED:
SHOPPING.COM
By /s/ Robert J. McNulty
-----------------------------------
Robert J. McNulty, Chief Executive Officer
Date: May __, 1998
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EXHIBIT 4.5
-----------
UNSECURED PROMISSORY NOTE
$50,000.00 Corona Del Mar, California May 15, 1998
1. Principal.
FOR VALUE RECEIVED, the undersigned, SHOPPING.COM ("Maker"),
promises to pay Ray Fisk ("Payee"), or order, at 2101 East Coast Highway, Corona
Del Mar, CA 92625 or such other place as the holder of this Note shall specify,
in lawful money of the United States of America, the principal amount of Fifty
Thousand Dollars ($50,000.00), together with interest at the rate of ten percent
(10%) per annum, payable as hereinafter provided.
2. Payment of Principal and Interest.
All principal of and interest accruing on this Note shall be due and
payable six months from the date of this Note.
Interest shall be calculated on the unpaid principal balance of this
Note on the basis of a year of 360 days and the actual number of days elapsed
until payment, unless such calculation would result in a usurious rate, in which
case interest shall be calculated on the basis of a year of 365 or 366 days, as
the case may be. Interest shall accrue and be payable under this Note whether or
not Maker, or Maker's successors or assigns, should avail themselves of the
protection of the United States bankruptcy laws. From and after the occurrence
of an "event of default" as set forth in Section 7 hereof, interest shall
continue to accrue on the unpaid principal balance of this Note at the same
interest rate as set forth in Section 1 of this Note.
3. Prepayment.
A. This Note may be prepaid at any time or from time to time, in
whole or in part, without penalty.
B. Each such prepayment shall include all interest then accrued but
unpaid on this Note.
C. Any partial prepayment of the outstanding principal balance shall
in no way release, discharge or affect the obligation of the Maker to continue
to make any other payments of principal or interest provided for herein until
this Note is paid in full.
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4. Application of Payments.
Each payment on this Note (whether made when due or otherwise) shall
be credited first, to late charges, fees and other charges due, including
collection costs and attorneys' fees, second against interest then due, and the
remainder of such payment shall be credited against the unpaid principal.
5. Waiver.
Maker and all endorsers, guarantors and all persons liable, or to
become liable on this Note (each hereinafter referred to in this Section as the
"Applicable Party"), jointly and severally, waive presentment, protest and
demand, notice of protest, demand, dishonor and nonpayment of this Note, notice
of acceleration, notice of intent to accelerate, and any and all other notices
or matters of a like nature, and consent to any and all renewals and extensions
of the fine of payment hereof. Each Applicable Party agrees that at any time and
from time to time, without notice, (i) the terms of payment herein, or (ii) the
terms of any guaranty of this Note, or (iii) the security described in any
documents at any time securing this Note, may be modified, increased, changed or
exchanged, in whole or in part, without in any way affecting the liability of
any Applicable Party.
6. Late Charge.
If any payment of interest and/or principal hereunder is not
received by Payee within ten (10) days after the due date thereof, Maker agrees
to pay Payee a late charge equal to five percent (5%) of the unpaid amount.
Maker acknowledges that it would be extremely difficult to fix Payee's actual
damages for the failure of Maker to timely pay any amount due under this Note.
Accordingly, such late charge shall be deemed to be Payee's damages for any such
late payment, provided that such late charge shall not limit Payee's right to
compel prompt performance by Maker or to exercise other remedies available to
Payee.
7. Default by Maker.
Any one or more of the following shall constitute an "Event of
Default" by Maker under the terms of this Note:
A. If Maker fails to pay any payment, whether at maturity or
otherwise, of principal and/or interest upon the due date thereof.
B. If Maker defaults in the performance or observance of any of the
covenants, conditions or agreements set forth in this Note.
C. If Maker institutes proceedings to be adjudicated a voluntary
bankrupt; consents to the filing of a bankruptcy proceeding against Maker; files
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or consents to filing of a petition or answer or consent seeking reorganization
under the federal bankruptcy laws or any other similar applicable federal or
state law; consents to the appointment or a receiver of liquidator or trustee or
assignee in bankruptcy or insolvency of the Maker or a substantial part of
Maker's property; an assignment for the benefit of creditors is made by the
Maker; or Maker admits in writing of Maker's inability to pay Maker's debts
generally as they become due.
8. Remedies Upon Default.
If an Event of Default occurs, at the option of Payee, and upon
written demand, the Payee may accelerate the due date of this Note and declare
the entire outstanding principal balance hereof, including all fees and costs
(if any), and accrued but unpaid interest, immediately due and payable in full.
Each of the options, rights and remedies provided herein or
available at law or in equity which may be exercised by Payee may be exercised
separately or concurrently with any one or more other options, rights or
remedies available to Payee. Failure to exercise any option, right or remedy
shall not constitute a waiver of the right of the Payee to exercise such option,
right or remedy in the event of or with respect to any prior, subsequent or
concurrent transaction or occurrence of the same or a different kind or
character.
9. Attorneys' Fees.
Maker agrees to pay all costs of collection or enforcement of this
Note when incurred, including, but not limited to, reasonable attorneys' fees.
If any suit or action is instituted to enforce this Note, Maker promises to pay,
in addition to the costs and disbursements allowed by law, such sum as the court
may adjudge as reasonable attorneys' fees in such suit or action. Maker shall
also pay all reasonable attorneys' fees and costs incurred by Payee in
connection with any modification, amendment or consent related to any
renegotiation or modification of this Note.
10. Severability.
Every provision of this Note is intended to be severable. If any
term or provision hereof is declared by a court of competent jurisdiction to be
illegal or invalid for any reason whatsoever, such illegality or invalidity
shall not affect the balance of the terms and provisions hereof, which terms and
provisions shall remain binding and enforceable.
11. Governing Law.
This Note shall be governed by and construed in accordance with the
laws of the State of California.
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12. Notices.
All notices, statements or demands shall be in writing and shall be
served in person, by telegraph, by express mail, by certified mail or by private
overnight delivery. Service shall be deemed conclusively made (i) at the time of
service, if personally served, (ii) at the time (as confirmed in writing by the
telegraphic agency) of delivery thereof to the addressee, if served
telegraphically, (iii) twenty-four (24) hours (exclusive of weekends and
national holidays) after deposit in the United States mail, properly addressed
and postage prepaid, if served by express mail, (iv) five (5) calendar days
after deposit in the United States mail, properly addressed and postage prepaid,
return receipt requested, if served by certified mail, (v) twenty-four (24)
hours after delivery by the party giving the notice, statement or demand to the
private overnight deliverer, if served by private overnight delivery and (vi) at
the time of electronic transmission, if a copy of such notice is mailed within
twenty-four (24) hours after the transmission.
Any notice or demand to Maker shall be given to:
Robert J. McNulty
Shopping.com
2101 E. Coast Hwy., Garden Level
Corona del Mar, California 92625
Any notice or demand to Payee shall be given to:
Ray Fisk
3154 Foxtail Court
Thousand Oaks, California 91362
and with a copy to:
Barry D. Falk, Esq.
JEFFERS, WILSON, SHAFF & FALK, LLP
18881 Von Karman Avenue, Suite 1400
Irvine, California 92612
FAX No.: (949) 660-7799
Any party hereto may change its address for the purpose of receiving
notices, demands or other communications as herein provided by a written notice
given in the manner aforesaid to the other party or parties hereto.
13. Successor and Assigns.
All the terms and provisions of this Note shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
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14. Assignability.
Maker's obligation hereunder are nontransferable and nonassignable
without the prior written consent of Payee.
15. Amendment.
Neither this Note nor any term or provision hereof may be modified,
amended or altered except by a written instrument approved by Payee and signed
by Maker.
16. Headings.
Headings at the beginning of each numbered Paragraph of this Note
are intended solely for convenience and are not to be deemed or construed to be
a part of this Note.
17. Purpose of Loan.
The proceeds of this Note are to be used by Maker exclusively for
business purposes, and not for personal, family or household purposes.
18. Time of the Essence.
TIME IS EXPRESSLY DECLARED TO BE THE ESSENCE of each obligation of
the Maker hereunder and in all matters concerning this Note, including all acts
or things to be done or performed in connection herewith, and specifically of
every provision of this Note in which time is an element.
19. Compliance With Usury Laws.
Maker and Payee intent to comply with all applicable usury laws. In
fulfilling this intention, all agreement between Maker and Payee are expressly
limited so that the amount of interest paid or agreed to be paid to Payee for
the use, forbearance, or detention of money under this Note shall not exceed the
maximum amount permissible under applicable law.
If for any reason payment of any amount required under this Note
shall be prohibited by law, then the obligation shall be reduced to the maximum
allowable bylaw. If for any reason Payee receives as interest an amount that
would exceed the highest lawful rate, then the amount which would constitute
excessive interest shall be applied to the reduction of the principal of this
Note and not to the payment of interest. If any conflict arises between this
provision and any provision of any other agreement between Maker and Payee, then
this provision shall control.
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20. Legal Representation.
Maker agrees and represents that such party has been represented by
such party's own legal counsel with regard to all aspects of this Note, or if
such party is acting without legal counsel, that such party has had adequate
opportunity and has been encouraged to seek the advice of such party's own legal
counsel prior to the execution of this Agreement.
21. Jurisdiction.
Any action whatsoever brought upon or relating to this Note shall be
instituted and prosecuted in the state courts of California, County of Orange,
or the federal district court therefore, and each party waives the right to
change the venue. The parties hereto further consent to accept service of
process in any such action or proceeding by certified mail, return receipt
requested.
"MAKER" "PAYEE"
SHOPPING.COM RAY FISK
By /s/ Robert J. McNulty By /s/ Ray Fisk
------------------------- ------------------
Robert J. McNulty Ray Fisk
Title: President and Chief Executive
Officer
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EXHIBIT 4.6
-----------
SHOPPING.COM
WARRANT AGREEMENT
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THIS WARRANT MAY NOT BE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR UNLESS AN EXEMPTION THEREFROM IS AVAILABLE.
This Warrant Agreement (this "Agreement") is entered into as of 15th day
of May, 1998 by and between, SHOPPING.COM, a California corporation (the
"Company"), and Ray Fisk (the "Holder").
RECITALS
WHEREAS, the Company has agreed to grant to Holder warrants to purchase
5,000 shares of Company Common Stock in exchange and in consideration for good
and valuable goods and services.
NOW, THEREFORE, BE IT RESOLVED, the parties agree hereto as follows:
1. Description, Execution.
(a) The Company agrees to issue to the Holder and the Holder agrees
to accept the Warrant Certificate evidencing the right to purchase shares of the
Company common stock at an initial purchase price of Fourteen Dollars ($14.00)
per Share as to which the Warrant is exercisable. The Warrant Certificate shall
be substantially in the form annexed hereto as Exhibit A.
(b) This Agreement shall be executed on behalf of the Company by its
President Upon delivery of this Warrant to the Holder, this Agreement shall be
binding upon the Company, and the Holder shall be entitled to all the benefits
set forth herein.
2. Term of Warrant. The Warrant shall become exercisable at any time after
the date hereof, and remain exercisable, subject to the conditions set forth in
Section 3 until the close of business on May 15, 2001 (the "Expiration Date").
3. Exercise of Warrant.
(a) Subject to (b) below, at any time until the Expiration Date, the
Holder shall have the right to purchase from the Company (and the Company shall
promptly issue to the Holder) one fully-paid and nonassessable share of Common
Stock at the Exercise Price (as defined below) for each Warrant, by surrendering
the appropriate Warrant Certificate and the Subscription Form attached hereto to
the Company at its executive offices and paying the aggregate Exercise Price for
the shares to be purchased, in cash, by check or by cancellation of
indebtedness.
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(b) The Warrant may be exercised in whole and in part but not in
increments of less than 100 shares. In case of a partial exercise, the Warrant
Certificate shall be surrendered and a new Warrant Certificate of the same tenor
and for the purchase of the number of shares not purchased upon such partial
exercise shall be issued by the Company to the Holder hereof. The Warrants shall
be deemed to have been exercised immediately prior to the close of business on
the date of their surrender for exercise as provided above, and the person or
entity entitled to receive the shares of Common Stock issuable upon the exercise
shall be treated for all purposes as the holder of such shares of record as of
the close of business on such date. Prior to any such exercise, neither the
Holder nor any person entitled to receive shares issuable upon exercise shall be
or have any of the rights of a shareholder of the Company. No adjustment shall
be made for dividends or other stockholder rights for which the record date is
prior to the date of exercise. As soon as practicable on or after such date, the
Company shall issue in the name of, and deliver to the person or persons
entitled to receive, a certificate or certificates for the full number of shares
of Common Stock issuable upon such exercise.
4. Exercise Price. The initial Exercise Price for each share of Common
Stock issuable pursuant to the Warrant shall be Fourteen Dollars ($14.00) per
Share, adjusted as provided below. The Exercise Price may be paid, in cash,
cashier's check or by cancellation of indebtedness from the Company to the
Holder.
5. Adjustment of Warrant Price and Number of Shares of Common Stock. The
number and kind of securities purchasable upon the exercise of the Warrants and
the Exercise Price shall be subject to adjustment from time to time upon the
happening of certain events, as follows:
5.1 Adjustments. The Exercise Price of the Warrant shall be subject
to adjustment as follows:
(a) In case the Company shall issue rights, options, warrants or
convertible securities to all or substantially all holders of its Common Stock,
without any charge to such holders, entitling the holder thereof to subscribe
for or purchase Stock at a price per share which is lower at the date of
issuance of such rights, options, warrants or securities than the then Current
Fair Market Value (as defined in Section 7 hereof), the price of shares of Stock
thereafter purchasable upon the exercise of the Warrant shall be reduced to a
price equal to an amount which would entitle the Holder to receive the same
number of shares of Common Stock and other securities that he would have
received had he exercised the Warrants immediately prior to such issuance.
(b) For the purpose of this Section 5, the term "Common Stock" shall
mean (i) the class of stock designated as the Common Stock of the Company at the
date of this Agreement, or (ii) any other class of stock resulting from
successive changes or reclassifications of such Common Stock consisting solely
of changes in par value, or from par value to no par value, or from no par value
to par value.
5.2 No Adjustment for Dividends. Except as provided in Section 5.1
hereof, no adjustment in respect of any dividends or distributions out of
earnings shall be made during the term of a Warrant or upon the exercise of a
Warrant.
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5.3 No Adjustment in Certain Cases. No adjustments shall be made
pursuant to Section 5 hereof in connection with the grant or exercise of
presently authorized or outstanding options to purchase Common Stock under the
Company's existing stock option plan or the exercise of presently outstanding
warrants to purchase Common Stock.
5.4 Preservation of Purchase Rights Upon Reclassification,
Consolidation, etc. In case of any consolidation of the Company with or merger
of the Company into another corporation or in case of any sale or conveyance to
another corporation of the property, assets or business of the Company as an
entirety or substantially as an entirety, the Company or such successor or
purchasing corporation, as the case may be, shall execute with the Holder an
agreement that the Holder shall have the right thereafter, upon payment of the
Exercise Price in effect immediately prior to such action, to purchase, upon
exercise of each Warrant, the kind and amount of shares and other securities and
property which it would have owned or have been entitled to receive after the
occurrence of such consolidation, merger, sale or conveyance had each Warrant
been exercised immediately prior to such action. In the event of a merger
described in Section 368(a)(2)(E) of the Internal Revenue Code of 1986, as
amended, in which the Company is the surviving corporation, the right to
purchase shares of Common Stock under the Warrant shall terminate on the date of
such merger and thereupon the Warrant shall become null and void, but only if
the controlling corporation shall agree to substitute for the Warrant its
warrant which entitle the holders thereof to purchase upon their exercise the
kind and amount of shares and other securities and property which they would
have owned or been entitled to receive had the Warrant been exercised
immediately prior to such merger. Any such agreements referred to in this
Subsection 5.4 shall provide for adjustments, which shall be as nearly
equivalent as may be practicable to the adjustments provided for in Section 5
hereof. The provisions of this Subsection 5.4 shall similarly apply to
successive consolidations, mergers, sales or conveyances.
6. Registration Rights.
6.1 Definitions.
(a) "Commission" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act of
1933, as amended (the "Securities Act").
(b) "Registrable Securities" shall mean (x) shares of Common Stock
issuable upon exercise of the Warrants and (y) any Common Stock issued as a
dividend or other distribution with respect to or in exchange for or in
replacement of the shares referenced in (x) above, provided, however, that
Registrable Securities shall not include any shares of Common Stock which have
previously been registered or which have been sold to the public.
(c) 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, and the declaration or ordering of the effectiveness of
such registration statement.
(d) "Registration Expenses" shall mean all expenses incurred in
effecting any registration pursuant to this Agreement, including, without
limitation, all registration, qualification, and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel for the Company, blue sky fees
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and expenses of any regular or special audits incident to or required by any
such registration, but shall not include selling expenses and fees and
disbursements of counsel for the Holder.
(e) "Rule 144" shall mean Rule 144 as promulgated by the Commission
under the Securities Act as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.
(f) "Rule 145" shall mean Rule 145 as promulgated by the Commission
under the Securities Act, as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.
6.2 "Piggyback" Registration. If the Company shall determine to
register any of its shares of Common Stock in a firm commitment public offering
for its own account, other than a registration relating solely to employee
benefit plans, or a registration relating solely to a Rule 145 transaction on
Form S-4, or a registration on any registration form that does not permit
secondary sales, the Company will:
(a) promptly give to Holder written notice thereof;
(b) use its best efforts to include in such registration (and any
related qualification under the blue sky laws or other compliance), except as
set forth in Section 6.3 below, and in any underwriting involved therein, all
the Registrable Securities specified in a written request or requests, made by
Holder within Twenty (20) days after the written, notice from the Company
described in clause 6.2(a) above is given. Such written request may specify all
or a part of Holder's Registrable Securities; and
(c) pay all Registration Expenses, other than the selling expenses
of Holder's Registrable Securities.
6.3 Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holder as a part of the written notice. In such
event, the right of the Holder to registration pursuant to this Section 6 shall
be conditioned upon Holder's participation in such underwriting and the
inclusion of the Holder's Registrable Securities in the underwriting to the
extent provided herein. The Holder shall (together with the Company) enter into
an underwriting agreement in customary form with the representative of the
underwriter of underwriters selected by the Company.
6.4 Exclusion of Registrable Securities. Notwithstanding any other
provisions of this Section 6, if the representative of the underwriters advises
the Company that marketing factors require a limitation on the number of shares
to be underwritten, the representative may (subject to the limitations set forth
below) exclude all Registrable Securities from, or limit the number of
Registrable Securities to be included in, the registration and underwriting. The
Company shall so advise the Holder, and the number of shares of securities that
are entitled to be included in the registration and underwriting shall be
allocated first to the Company for securities being sold for its own account and
thereafter to the Holder, pro rata with any other holders of Common Stock having
registration rights. If the Holder does not agree to the terms of any such
underwriting, he shall be excluded therefrom by written notice from the Company
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or the underwriter. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration.
If shares are so withdrawn from the registration or if the number of
shares of Registrable Securities to be included in such registration was
previously reduced as a result of marketing factors, the Company shall then
offer to all persons who have retained the right to include securities in the
registration the right to include additional securities in the registration in
an aggregate amount equal to the number of shares so withdrawn, with such shares
to be allocated among the persons requesting additional inclusion pro rata
amongst those persons requesting inclusion.
6.5 Registration Procedures. In the case of each registration
effected by the Company pursuant to Section 6, the Company will keep Holder
advised in writing as to the initiation of each registration and as to the
completion thereof, at its expense, the Company will use its best efforts to:
(a) Keep such registration effective for a period of one hundred
twenty (120) days or until the Holder has completed the distribution described
in the registration statement relating thereto, whichever first occurs;
provided, however, that (x) such 120-days period shall be extended for a period
of time equal to the period the Holder refrains from selling any securities
included in such registration at the request of an underwriter of Common Stock
(or other securities) of the Company; and (y) in the case of any registration of
Registrable Securities on Form S-3 which are intended to be offered on a
continuous or delayed basis, such 120-day period shall be extended, if
necessary, to keep the registration statement effective until all such
Registrable Securities are sold, provided that Rule 145, or any successor rule
under the Securities Act, permits an offering on a continuous or delayed basis,
and provided further that applicable rules under the Securities Act governing
the obligation to file a post-effective amendment permit, in lieu of filing a
post-effective amendment that (I) includes any prospectus required by Section
10(a)(3) of the Securities Act or (II) reflects facts or events representing a
material or fundamental change in the information set forth in the registration
statement, the incorporation by reference of information required to be included
in (I) and (II) above to be contained in periodic reports filed pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 in the registration
statement.
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement;
(c) Furnish such number of prospectuses and other documents incident
thereto, including any amendment of or supplement to the prospectus, as the
Holder from time to time may reasonably request;
(d) Notify the Holder at any time when a prospectus relating thereto
is required to be delivered under the Securities Act of the happening of any
event as a result of which the prospectus included in such registration
statement; as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or incomplete in the light of the
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circumstances then existing, and at the request of Holder, prepare and furnish
to the Holder a reasonable number of copies of a supplement to or an amendment
of such prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such shares, such prospectus shall not include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or incomplete
in the light of the circumstances then existing;
(e) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed;
(f) Provide a transfer agent and registrar for all Registrable
Securities registered, pursuant to such registration statement and a CUSIP
number for all such Registrable Securities, in each case not later than the
effective date of such registration; and
(g) Otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering the
period of at least twelve months, but not more than eighteen months, beginning
with the first month after the effective date of the Registration Statement,
which earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act.
7. Fractional Shares; Issuance of Shares; Legends.
7.1 Fractional Shares. The Company shall not be required to issue
fractional shares of Company Common Stock an the exercise of a Warrant. If any
fraction of a share of Stock would, except for the provisions of this Section 6,
be issuable on the exercise of a Warrant (or specified portion thereof), the
Company shall in lieu thereof pay an amount in cash equal to the then Current
Fair Market Value, multiplied by such fraction. For purposes of this Agreement,
the term "Current Fair Market Value" shall mean (i) if the Common Stock is
traded in the over-the-counter market and not in the NASDAQ Small Cap Market or
the National Market nor on any national securities exchange, the average of the
per share closing bid prices of the Common Stock on the 10 consecutive trading
days immediately preceding the date in question, as reported by NASDAQ or an
equivalent generally accepted reporting service, or (ii) if the Common Stock is
traded in the NASDAQ Small Cap Market or the National Market or on a national
securities exchange, the average for the 10 consecutive trading days immediately
preceding the date in question of the daily per share closing prices of the
Common Stock in the NASDAQ Small Cap Market or the National Market or on the
principal stock exchange on which it is listed, as the case may be or (iii) if
the class of Stock is not publicly traded or quoted, the fair market value as
determined by the Board of Directors of the Company based on (with appropriate
adjustments) the most recent purchases of the Company's Stock and/or other
relevant factors including the Company's income and assets or evaluation reports
received by the Company.
7.2 Issuance of Shares. All shares of Stock issued upon exercise of
a Warrant will be duly authorized, validly issued, fully paid and nonassessable.
7.3 Legends. If the Stock to be issued upon exercise of this Warrant
has not been registered under the Securities Act of 1933, as amended, then the
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stock certificates representing such shares of Common Stock shall bear a legend
substantially in the following form:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR APPLICABLE
STATE SECURITIES LAWS AND ARE RESTRICTED SECURITIES. SUCH SECURITIES MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER THE ACT AND STATE SECURITIES LAWS.
8. Transferability. The Warrant or the Shares of Company Common Stock
underlying the Warrant shall not be transferred, and the Company shall not be
required to register any transfer on the books of the Company, unless the
Company shall have been provided with an opinion of counsel satisfactory to it
prior to such transfer that registration under the Securities Act and applicable
state securities laws is not required in connection with the transaction
resulting in such transfer. Each new Warrant or Company Common Stock certificate
issued upon any transfer as above provided shall bear an appropriate investment
legend, except that such Warrant or Company Common Stock certificate shall not
bear such restrictive legend if the opinion of counsel referred to above is to
further effect that such legend is not required in order to establish compliance
with the provisions of the Securities Act or if such transfer is made in
accordance with the provisions of Rule 144(k) promulgated under the Securities
Act. The Warrant may also be transferred by will or devise and by the laws of
descent.
Any attempt to transfer, sell or otherwise dispose of this Warrant (except
as provided above) shall be void and shall not convey any rights or privileges
to the transferee.
9. Miscellaneous.
9.1 Notices.
All notices, requests, demand and other communications required or
permitted to be given hereunder shall be deemed to have been duly given if in
writing and delivered personally, given by prepaid telegram, or mailed first
class, postage prepaid, registered or certified mail, return receipt requested,
to the following addresses:
If to the Company: SHOPPING.COM
2101 E. Coast Hwy., Garden Level
Corona del Mar, California 92625
Attention: Mr. Robert J. McNulty
With a copy to: Jeffers, Wilson, Shaff & Falk, LLP
18881 Von Karman Avenue, Suite 1400
Irvine, California 92612
Attention: Barry D. Falk, Esq.
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If to the Holder: Ray Fisk
3154 Foxtail Court
Thousand Oaks, California 91362
Any party may change the address to which such communications are to
be directed to it by giving written notice to the other party. Except as
otherwise provided in this Warrant, all notices shall be deemed to be given when
delivered in person, or if placed in the mail as aforesaid, then two (2) days
thereafter.
9.2 Modifications. The parties may, by mutual consent, amend,
modify, supplement and waive any right under this Warrant in any manner agreed
by them in writing at any time.
9.3 Entire Agreement. This Agreement, and any documents, instruments
or agreements specifically referred to herein, set forth the entire agreement
and understanding of the parties with respect to the transactions contemplated
hereby and supersede all prior agreements, arrangements and understandings
relating to the subject matter hereof.
9.4 Headings. The section and paragraph headings contained in this
Agreement are for convenient reference only, and shall not in any way affect the
meaning or interpretation hereof.
9.5 Governing Law; Arbitration. This Agreement shall be governed by
and construed in accordance with the laws of the State of California, without
any regard to the choice of law provisions thereof. Any dispute arising under
this Agreement shall be resolved by binding arbitration under the rules of
commercial arbitration of the American Arbitration Association in Orange County,
California.
9.6 Severability. If any provision of this Agreement shall be hold
to be invalid, illegal or unenforceable, it shall be deemed severable from the
remaining provisions of this Agreement which shall remain in full force and
effect.
9.7 Waiver. No waiver of any provision of this Agreement or any
breach thereof shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar) or any other breach hereunder nor
shall such waiver constitute a continuing waiver. Either party may waive
performance of any provision of this Agreement, the nonperformance of which
would otherwise constitute a breach of this Agreement including but not limited
to the nonperformance of any condition precedent to such party's performance,
without affecting the enforceability of this Agreement or the provisions
contained herein.
9.8 Heirs; Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
heirs, successors and assigns of the parties hereto. Holders may transfer and
assign the Warrants only as provided in Section 7 and any assignment in
violation of the foregoing shall be void.
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9.9 Attorneys' Fees. If any legal action is instituted to enforce or
interpret the terms of this Agreement, the prevailing party in such action shall
be entitled to actual attorneys' fees in addition to any other relief to which
the party is entitled.
IN WITNESS WHEREOF, the parties have executed this instrument as of the
date first written above.
SHOPPING.COM, a California corporation
By: /s/ Robert J. McNulty
------------------------------------
Robert J. McNulty, President
"HOLDER"
/s/ Ray Fisk
----------------------------------------
Ray Fisk
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EXHIBIT 4.7
-----------
THIS SUBSCRIPTION AGREEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES REFERRED TO HEREIN.
SUBSCRIPTION AGREEMENT
Shopping.com
2101 East Coast Highway
Garden level
Corona Del Mar, CA 92625
Attn: Robert McNulty
Re: Prospective Purchase of Notes and Warrants
Shopping.com, a California corporation
Gentlemen:
The undersigned, by signing the Signature Page attached hereto, hereby
irrevocably tenders this subscription and applies to purchase 16 units (the
"Units") of Shopping.com, a California corporation (the "Company"), at a
purchase price of $25,000 per Unit. Each Unit consists of a Promissory Note in
the principal amount of $25,000 and warrants to purchase 2,500 shares of the
Company's Common Stock, no par value (the "Common Stock"), at an exercise price
of $14.00 per share.
Enclosed, in cash or good funds (in the case of a check, the check should
be payable to the order of "Shopping.com") as tender of the purchase price for
the Units, is the aggregate amount of $50,000.00 ($25,000 minimum).
The undersigned hereby acknowledges receipt of a copy of the Company's
Annual Report on form 10-KSB for the period ending January 31, 1998 (the
"Report"), relating to and describing the terms and conditions of the offer and
sale of the Units.
The undersigned hereby represents and warrants to, and covenants with, the
Company as follows, recognizing that the Company will rely to a material degree
upon such representations, warranties and covenants, each of which shall survive
any acceptance of this subscription in whole or in part by the Company and the
issuance and sale of any Units to the undersigned:
1. All statements made in the Prospective Investor Questionnaire which has
been or is concurrently being furnished to the Company by the undersigned
continue to be and are true, accurate and complete as of the date hereof.
2. The undersigned has been informed and is aware that an investment in
the Units involves a degree of risk and speculation, and has carefully read and
considered the Report in its entirety.
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3. The undersigned confirms that he has been advised that he should rely
on, and that he has consulted and relied upon, his own accounting, legal and
financial advisors with respect to this investment in the Units. The undersigned
and his professional advisor(s) (as defined in Section 260.102.12(g) of the
Rules of the California Corporations Commissioner), if any, have been afforded
an opportunity to meet with the officers and directors of the Company and to ask
and receive answers to any questions about this offering and the proposed
business and affairs of the Company, and to obtain any additional information
which the Company possesses or can acquire without unreasonable effort or
expense that is necessary to verify the accuracy of information provided in the
Report, and have therefore obtained, in the judgement of the undersigned and/or
his or her professional advisor(s), sufficient information to evaluate the
merits and risks of investment in the Units. The undersigned acknowledges and
agrees that he/she has had an opportunity to meet and speak with officers or
representatives and to ask questions and get answers with respect to the Company
and this offering.
4. The undersigned understands and acknowledges that no federal or state
agency has made any finding or determination as to the fairness or suitability
for investment in, nor any recommendation or endorsement of, the Company or the
Units.
5. On the basis of the review of the materials and information described
above, and relying solely thereon and upon the knowledge and experience of the
undersigned and/or his or her professional advisor(s), if any, in business and
financial matters, the undersigned has evaluated the merits and risks of
investment in the Units and has determined that he or she is both willing and
able to undertake the economic risk of this investment.
6. The Units are being acquired by the undersigned for the personal
account of the undersigned for investment and not with a view to, or for resale
in connection with, any distribution thereof or of any interest therein, and no
one else has any beneficial ownership or interest in the Units being acquired by
the undersigned, nor are they to be subject to any lien or pledge. The
undersigned has no present obligation, indebtedness or commitment pending, nor
is any circumstance in existence which will compel the undersigned to secure
funds by the sale, transfer or other distribution of any of the Units or any
interest therein or any Stock that may be distributed in respect thereof.
7. The undersigned understands and agrees that the Units cannot be
transferred or assigned that there is and will be no public market therefor,
and, accordingly, that it may not be possible for the undersigned readily, if at
all, to liquidate this investment in the Units in case of an emergency or
otherwise. The undersigned has the net worth, past income and estimated future
income set forth in the Prospective Investor Questionnaire, can afford to bear
the risks of an investment in the Units, including the risk of losing the entire
investment, for an indefinite period of time, and has adequate means of
providing for his or her current needs and personal contingencies and has no
need for liquidity in this investment.
8. The undersigned understands and acknowledges that the Units are being
offered and sold pursuant to one or more exemptions from the registration and
qualification requirements of the Securities Act of 1933 and the California
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<PAGE>
Corporate Securities Act of 1968, the availability of which depend upon the
truth and completeness of the information provided to the Company in the
Prospective Investor Questionnaire and the bona fide nature of the foregoing
representations and warranties. With such realization, the undersigned hereby
authorizes the Company to act as it may see fit in reliance on such information,
representations and warranties, including the placement of the following legend
on the stock certificate(s) issued to the undersigned in addition to any other
legends that may be imposed thereon which, in the reasonable opinion of
Company's counsel, may be required by applicable securities laws:
"THE UNITS REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSIONS UNDER THE SECURITIES ACT OF 1933 OR WITH THE
CALIFORNIA DEPARTMENT OF CORPORATIONS UNDER THE CORPORATE SECURITIES LAW
OF 1968, AS AMENDED. THE UNITS MAY NOT BE PLEDGED, SOLD OR TRANSFERRED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACTS
COVERING THE UNITS OR AN OPINION OR QUALIFIED COUNSEL OR OTHER EVIDENCE
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
9. The undersigned hereby indemnifies and holds harmless the Company, and
its respective officers, directors, shareholders, employees and agents, as the
case may be, from and against any and all damages suffered and liabilities
incurred by any of them (including costs of investigation and defense and
attorneys' fees) arising out of any inaccuracy in the agreements,
representations, covenants and warranties made by the undersigned herein.
10. If the undersigned is purchasing the Units subscribed for hereby in a
fiduciary capacity, the above representations and warranties shall be deemed to
have been made on behalf of the person or persons for whom the undersigned is so
purchasing.
11. The undersigned hereby acknowledges and agrees that the undersigned is
not entitled to cancel, terminate or revoke this subscription or any agreements
of the undersigned hereunder and that such subscription and agreements shall
survive the death or disability of the undersigned.
12. The undersigned understands and acknowledges that this subscription
may be accepted or rejected by the Company in its sole discretion, together with
a completed and executed Prospective Investor Questionnaire and all information
required by the provisions hereof and payment of the full amount of the
subscription price for the Units subscribed for. Any amounts tendered in excess
of the total payable as the purchase price for Units as to which this
subscription has been accepted will thereafter be delivered to the undersigned
as soon as is practicable, all as described in the Confidential Private
Placement Memorandum. The Company shall signify its rejection by returning to
the undersigned this Subscription Agreement and all funds (without interest or
deduction) submitted by the undersigned.
NEITHER THE COMPANY, NOR ANY OFFICER, DIRECTOR, SHAREHOLDER, EMPLOYEE OR
AGENT OF ANY OF THEM SHALL BE LIABLE TO ANY PERSON FOR THE REJECTION, IN WHOLE
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OR IN PART, OF ANY OFFER TO SUBSCRIBE TO PURCHASE UNITS, NOTWITHSTANDING THAT
THE UNDERSIGNED MAY OTHERWISE BE QUALIFIED AS A PROSPECTIVE INVESTOR.
13. If, prior to the sale of any Units to the undersigned, there is a
material change in die undersigned's investment intention as expressed herein,
or if there occurs any change which would make either the representations or
warranties made by the undersigned herein or the information provided by the
undersigned in the Prospective Investor Questionnaire materially untrue or
misleading, the undersigned agrees to immediately so notify the Company, and any
prior acceptance of the subscription of the undersigned shall be voidable at the
option of the Company.
IN WITNESS WHEREOF, the undersigned executes and agrees to be bound by
this Subscription Agreement by executing the Signature Page attached hereto on
the date therein indicated.
SIGNATURE PAGE
(All information must be completed)
Date: May 15, 1998
/s/ Zahra Khiaban $75,000 7,500 $75,000
- ---------------------- -------------- -------------- -----------------
Signature of Purchaser Purchase Price # of Warrants Total $ Investment
_________________________________ Zahra Khiaban
Signature of Joint Owner (if any) -------------
Name(s) of Purchaser (Print)
If Joint Ownership, check one:
_____ Joint Tenants, with Residence Address:
Right of Survivorship ------------------
5201 Vascule Avenue
_____ Tenants in Common Woodland Hills, California 91364
_____ Community Property
###-##-####
-----------
Social Security No. or Taxpayer I.D. No.
ACCEPTED AND AGREED:
SHOPPING.COM
By: /s/ Robert J. McNulty
-------------------------------------
Robert J. McNulty, Chief Executive Officer
Date: May __, 1998
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EXHIBIT 4.8
-----------
UNSECURED PROMISSORY NOTE
$75,000.00 Corona Del Mar, California May 15, 1998
1. Principal.
FOR VALUE RECEIVED, the undersigned, SHOPPING.COM ("Maker"),
promises to pay Zahra Khiaban ("Payee"), or order, at 2101 East Coast Highway,
Corona Del Mar, CA 92625 or such other place as the holder of this Note shall
specify, in lawful money of the United States of America, the principal amount
of Seventy-Five Thousand Dollars ($75,000.00), together with interest at the
rate of ten percent (10%) per annum, payable as hereinafter provided.
2. Payment of Principal and Interest.
All principal of and interest accruing on this Note shall be due and
payable six months from the date of this Note.
Interest shall be calculated on the unpaid principal balance of this
Note on the basis of a year of 360 days and the actual number of days elapsed
until payment, unless such calculation would result in a usurious rate, in which
case interest shall be calculated on the basis of a year of 365 or 366 days, as
the case may be. Interest shall accrue and be payable under this Note whether or
not Maker, or Maker's successors or assigns, should avail themselves of the
protection of the United States bankruptcy laws. From and after the occurrence
of an "event of default" as set forth in Section 7 hereof, interest shall
continue to accrue on the unpaid principal balance of this Note at the same
interest rate as set forth in Section 1 of this Note.
3. Prepayment.
A. This Note may be prepaid at any time or from time to time, in
whole or in part, without penalty.
B. Each such prepayment shall include all interest then accrued but
unpaid on this Note.
C. Any partial prepayment of the outstanding principal balance shall
in no way release, discharge or affect the obligation of the Maker to continue
to make any other payments of principal or interest provided for herein until
this Note is paid in full.
4. Application of Payments.
Each payment on this Note (whether made when due or otherwise) shall
be credited first, to late charges, fees and other charges due, including
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collection costs and attorneys' fees, second against interest then due, and the
remainder of such payment shall be credited against the unpaid principal.
5. Waiver.
Maker and all endorsers, guarantors and all persons liable, or to
become liable on this Note (each hereinafter referred to in this Section as the
"Applicable Party"), jointly and severally, waive presentment, protest and
demand, notice of protest, demand, dishonor and nonpayment of this Note, notice
of acceleration, notice of intent to accelerate, and any and all other notices
or matters of a like nature, and consent to any and all renewals and extensions
of the fine of payment hereof. Each Applicable Party agrees that at any time and
from time to time, without notice, (i) the terms of payment herein, or (ii) the
terms of any guaranty of this Note, or (iii) the security described in any
documents at any time securing this Note, may be modified, increased, changed or
exchanged, in whole or in part, without in any way affecting the liability of
any Applicable Party.
6. Late Charge.
If any payment of interest and/or principal hereunder is not
received by Payee within ten (10) days after the due date thereof, Maker agrees
to pay Payee a late charge equal to five percent (5%) of the unpaid amount.
Maker acknowledges that it would be extremely difficult to fix Payee's actual
damages for the failure of Maker to timely pay any amount due under this Note.
Accordingly, such late charge shall be deemed to be Payee's damages for any such
late payment, provided that such late charge shall not limit Payee's right to
compel prompt performance by Maker or to exercise other remedies available to
Payee.
7. Default by Maker.
Any one or more of the following shall constitute an "Event of
Default" by Maker under the terms of this Note:
A. If Maker fails to pay any payment, whether at maturity or
otherwise, of principal and/or interest upon the due date thereof.
B. If Maker defaults in the performance or observance of any of the
covenants, conditions or agreements set forth in this Note.
C. If Maker institutes proceedings to be adjudicated a voluntary
bankrupt; consents to the filing of a bankruptcy proceeding against Maker; files
or consents to filing of a petition or answer or consent seeking reorganization
under the federal bankruptcy laws or any other similar applicable federal or
state law; consents to the appointment or a receiver of liquidator or trustee or
assignee in bankruptcy or insolvency of the Maker or a substantial part of
Maker's property; an assignment for the benefit of creditors is made by the
Maker; or Maker admits in writing of Maker's inability to pay Maker's debts
generally as they become due.
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8. Remedies Upon Default.
If an Event of Default occurs, at the option of Payee, and upon
written demand, the Payee may accelerate the due date of this Note and declare
the entire outstanding principal balance hereof, including all fees and costs
(if any), and accrued but unpaid interest, immediately due and payable in full.
Each of the options, rights and remedies provided herein or
available at law or in equity which may be exercised by Payee may be exercised
separately or concurrently with any one or more other options, rights or
remedies available to Payee. Failure to exercise any option, right or remedy
shall not constitute a waiver of the right of the Payee to exercise such option,
right or remedy in the event of or with respect to any prior, subsequent or
concurrent transaction or occurrence of the same or a different kind or
character.
9. Attorneys' Fees.
Maker agrees to pay all costs of collection or enforcement of this
Note when incurred, including, but not limited to, reasonable attorneys' fees.
If any suit or action is instituted to enforce this Note, Maker promises to pay,
in addition to the costs and disbursements allowed by law, such sum as the court
may adjudge as reasonable attorneys' fees in such suit or action. Maker shall
also pay all reasonable attorneys' fees and costs incurred by Payee in
connection with any modification, amendment or consent related to any
renegotiation or modification of this Note.
10. Severability.
Every provision of this Note is intended to be severable. If any
term or provision hereof is declared by a court of competent jurisdiction to be
illegal or invalid for any reason whatsoever, such illegality or invalidity
shall not affect the balance of the terms and provisions hereof, which terms and
provisions shall remain binding and enforceable.
11. Governing Law.
This Note shall be governed by and construed in accordance with the
laws of the State of California.
12. Notices.
All notices, statements or demands shall be in writing and shall be
served in person, by telegraph, by express mail, by certified mail or by private
overnight delivery. Service shall be deemed conclusively made (i) at the time of
service, if personally served, (ii) at the time (as confirmed in writing by the
telegraphic agency) of delivery thereof to the addressee, if served
telegraphically, (iii) twenty-four (24) hours (exclusive of weekends and
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national holidays) after deposit in the United States mail, properly addressed
and postage prepaid, if served by express mail, (iv) five (5) calendar days
after deposit in the United States mail, properly addressed and postage prepaid,
return receipt requested, if served by certified mail, (v) twenty-four (24)
hours after delivery by the party giving the notice, statement or demand to the
private overnight deliverer, if served by private overnight delivery and (vi) at
the time of electronic transmission, if a copy of such notice is mailed within
twenty-four (24) hours after the transmission.
Any notice or demand to Maker shall be given to:
Robert J. McNulty
Shopping.com
2101 E. Coast Hwy., Garden Level
Corona del Mar, California 92625
Any notice or demand to Payee shall be given to:
Zahra Khiaban
5201 Bascule Avenue
Woodland Hills, California 91364
and with a copy to:
Barry D. Falk, Esq.
JEFFERS, WILSON, SHAFF & FALK, LLP
18881 Von Karman Avenue, Suite 1400
Irvine, California 92612
FAX No.: (949) 660-7799
Any party hereto may change its address for the purpose of receiving
notices, demands or other communications as herein provided by a written notice
given in the manner aforesaid to the other party or parties hereto.
13. Successor and Assigns.
All the terms and provisions of this Note shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
14. Assignability.
Maker's obligation hereunder are nontransferable and nonassignable
without the prior written consent of Payee.
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15. Amendment.
Neither this Note nor any term or provision hereof may be modified,
amended or altered except by a written instrument approved by Payee and signed
by Maker.
16. Headings.
Headings at the beginning of each numbered Paragraph of this Note
are intended solely for convenience and are not to be deemed or construed to be
a part of this Note.
17. Purpose of Loan.
The proceeds of this Note are to be used by Maker exclusively for
business purposes, and not for personal, family or household purposes.
18. Time of the Essence.
TIME IS EXPRESSLY DECLARED TO BE THE ESSENCE of each
obligation of the Maker hereunder and in all matters concerning this Note,
including all acts or things to be done or performed in connection herewith, and
specifically of every provision of this Note in which time is an element.
19. Compliance With Usury Laws.
Maker and Payee intent to comply with all applicable usury laws. In
fulfilling this intention, all agreement between Maker and Payee are expressly
limited so that the amount of interest paid or agreed to be paid to Payee for
the use, forbearance, or detention of money under this Note shall not exceed the
maximum amount permissible under applicable law.
If for any reason payment of any amount required under this Note
shall be prohibited by law, then the obligation shall be reduced to the maximum
allowable bylaw. If for any reason Payee receives as interest an amount that
would exceed the highest lawful rate, then the amount which would constitute
excessive interest shall be applied to the reduction of the principal of this
Note and not to the payment of interest. If any conflict arises between this
provision and any provision of any other agreement between Maker and Payee, then
this provision shall control.
20. Legal Representation.
Maker agrees and represents that such party has been represented by
such party's own legal counsel with regard to all aspects of this Note, or if
such party is acting without legal counsel, that such party has had adequate
opportunity and has been encouraged to seek the advice of such party's own legal
counsel prior to the execution of this Agreement.
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21. Jurisdiction.
Any action whatsoever brought upon or relating to this Note shall be
instituted and prosecuted in the state courts of California, County of Orange,
or the federal district court therefore, and each party waives the right to
change the venue. The parties hereto further consent to accept service of
process in any such action or proceeding by certified mail, return receipt
requested.
"MAKER" "PAYEE"
SHOPPING.COM ZAHRA KHIABAN
By /s/ Robert J. McNulty By /s/ Zahra Khiaban
--------------------- ---------------------
Robert J. McNulty Zahra Khiaban
Title: President and Chief Executive
Officer
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EXHIBIT 4.9
-----------
SHOPPING.COM
WARRANT AGREEMENT
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THIS WARRANT MAY NOT BE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR UNLESS AN EXEMPTION THEREFROM IS AVAILABLE.
This Warrant Agreement (this "Agreement") is entered into as of 15th day
of May, 1998 by and between, SHOPPING.COM, a California corporation (the
"Company"), and Zahra Khiaban (the "Holder").
RECITALS
WHEREAS, the Company has agreed to grant to Holder warrants to purchase
7,500 shares of Company Common Stock in exchange and in consideration for good
and valuable goods and services.
NOW, THEREFORE, BE IT RESOLVED, the parties agree hereto as follows:
1. Description, Execution.
(a) The Company agrees to issue to the Holder and the Holder agrees
to accept the Warrant Certificate evidencing the right to purchase shares of the
Company common stock at an initial purchase price of Fourteen Dollars ($14.00)
per Share as to which the Warrant is exercisable. The Warrant Certificate shall
be substantially in the form annexed hereto as Exhibit A.
(b) This Agreement shall be executed on behalf of the Company by its
President Upon delivery of this Warrant to the Holder, this Agreement shall be
binding upon the Company, and the Holder shall be entitled to all the benefits
set forth herein.
2. Term of Warrant. The Warrant shall become exercisable at any time after
the date hereof, and remain exercisable, subject to the conditions set forth in
Section 3 until the close of business on May 15, 2001 (the "Expiration Date").
3. Exercise of Warrant.
(a) Subject to (b) below, at any time until the Expiration Date, the
Holder shall have the right to purchase from the Company (and the Company shall
promptly issue to the Holder) one fully-paid and nonassessable share of Common
Stock at the Exercise Price (as defined below) for each Warrant, by surrendering
the appropriate Warrant Certificate and the Subscription Form attached hereto to
the Company at its executive offices and paying the aggregate Exercise Price for
the sham to be purchased, in cash, by check or by cancellation of indebtedness.
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(b) The Warrant may be exercised in whole and in part but not in
increments of less than 100 shares. In case of a partial exercise, the Warrant
Certificate shall be surrendered and a new Warrant Certificate of the same tenor
and for the purchase of the number of sham not purchased upon such partial
exercise shall be issued by the Company to the Holder hereof. The Warrants shall
be deemed to have been exercised immediately prior to the close of business on
the date of their surrender for exercise as provided above, and the person or
entity entitled to receive the shares of Common Stock issuable upon the exercise
shall be treated for all purposes as the holder of such shares of record as of
the close of business on such date. Prior to any such exercise, neither the
Holder nor any person entitled to receive shares issuable upon exercise shall be
or have any of the rights of a shareholder of the Company. No adjustment shall
be made for dividends or other stockholder rights for which the record date is
prior to the date of exercise. As soon as practicable on or after such date, the
Company shall issue in the name of, and deliver to the person or persons
entitled to receive, a certificate or certificates for the full number of shares
of Common Stock issuable upon such exercise.
4. Exercise Price. The initial Exercise Price for each share of Common
Stock issuable pursuant to the Warrant shall be Fourteen Dollars ($14.00) per
Share, adjusted as provided below. The Exercise Price may be paid, in cash,
cashier's check or by cancellation of indebtedness from the Company to the
Holder.
5. Adjustment of Warrant Price and Number of Shares of Common Stock. The
number and kind of securities purchasable upon the exercise of the Warrants and
the Exercise Price shall be subject to adjustment from time to time upon the
happening of certain events, as follows:
5.1 Adjustments. The Exercise Price of the Warrant shall be subject
to adjustment as follows:
(a) In case the Company shall issue rights, options, warrants or
convertible securities to all or substantially all holders of its Common Stock,
without any charge to such holders, entitling the holder thereof to subscribe
for or purchase Stock at a price per share which is lower at the date of
issuance of such rights, options, warrants or securities than the then Current
Fair Market Value (as defined in Section 7 hereof), the price of shares of Stock
thereafter purchasable upon the exercise of the Warrant shall be reduced to a
price equal to an amount which would entitle the Holder to receive the same
number of shares of Common Stock and other securities that he would have
received had he exercised the Warrants immediately prior to such issuance.
(b) For the purpose of this Section 5, the term "Common Stock" shall
mean (i) the class of stock designated as the Common Stock of the Company at the
date of this Agreement, or (ii) any other claw of stock resulting from
successive changes or reclassifications of such Common Stock consisting solely
of changes in par value, or from par value to no par value, or from no par value
to par value.
5.2 No Adjustment for Dividends. Except as provided in Section 5.1
hereof, no adjustment in respect of any dividends or distributions out of
earnings shall be made during the term of a Warrant or upon the exercise of a
Warrant.
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5.3 No Adjustment in Certain Cases. No adjustments shall be made
pursuant to Section 5 hereof in connection with the grant or exercise of
presently authorized or outstanding options to purchase Common Stock under the
Company's existing stock option plan or the exercise of presently outstanding
warrants to purchase Common Stock.
5.4 Preservation of Purchase Price upon Reclassification,
Consolidation, etc. In case of any consolidation of the Company with or merger
of the Company into another corporation or in case of any sale or conveyance to
another corporation of the property, assets or business of the Company as an
entirety or substantially as an entirety, the Company or such successor or
purchasing corporation, as the case may be, shall execute with the Holder an
agreement that the Holder shall have the right thereafter, upon payment of the
Exercise Price in effect immediately prior to such action, to purchase, upon
exercise of each Warrant, the kind and amount of shares and other securities and
property which it would have owned or have been entitled to receive after the
occurrence of such consolidation, merger, sale or conveyance had each Warrant
been exercised immediately prior to such action. In the event of a merger
described in Section 368(a)(2)(E) of the Internal Revenue Code of 1986, as
amended, in which the Company is the surviving corporation, the right to
purchase sham of Common Stock under the Warrant shall terminate on the date of
such merger and thereupon the Warrant shall become null and void, but only if
the controlling corporation shall agree to substitute for the Warrant its
warrant which entitle the holders thereof to purchase upon their exercise the
kind and amount of shares and other securities and property which they would
have owned or been entitled to receive had the Warrant been exercised
immediately prior to such merger. Any such agreements referred to in this
Subsection 5.4 shall provide for adjustments, which shall be as nearly
equivalent as may be practicable to the adjustments provided for in Section 5
hereof. The provisions of this Subsection 5.4 shall similarly apply to
successive consolidations, mergers, sales or conveyances.
6. Registration Rights.
6.1 Definitions.
(a) "Commission" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act of
1933, as amended (the "Securities Act").
(b) "Registrable Securities" shall mean (x) shares of Common Stock
issuable upon exercise of the Warrants and (y) any Common Stock issued as a
dividend or other distribution with respect to or in exchange for or in
replacement of the shares referenced in (x) above, provided, however, that
Registrable Securities shall not include any shares of Common Stock which have
previously been registered or which have been sold to the public.
(c) 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, and the declaration or ordering of the effectiveness of
such registration statement.
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(d) "Registration Expenses" shall mean all expenses incurred in
effecting any registration pursuant to this Agreement, including, without
limitation, all registration, qualification, and filing fees, printing expenses,
escrow fees and disbursements of counsel for the Company, blue sky fees and
expenses of any regular or special audits incident to or required by any such
registration, but shall not include selling expenses and fees and disbursements
of counsel for the Holder.
(e) "Rule 144" shall mean Rule 144 as promulgated by the Commission
under the Securities Act as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.
(f) "Rule 145" shall mean Rule 145 as promulgated by the Commission
under the Securities Act, as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.
6.2 "Piggyback" Registration. If the Company shall determine to
register any of its shares of Common Stock in a firm commitment public offering
for its own account, other than a registration relating solely to employee
benefit plans, or a registration relating solely to a Rule 145 transaction on
Form S-4, or a registration on any registration form that does not permit
secondary sales, the Company will:
(a) promptly give to Holder written notice thereof,
(b) use its best efforts to include in such registration (and any
related qualification under the blue sky laws or other compliance), except as
set forth in Section 6.3 below, and in any underwriting involved therein, all
the Registrable Securities specified in a written request or requests, made by
Holder within Twenty (20) days after the written, notice from the Company
described in clause 6.2(a) above is given. Such written request may specify all
or a part of Holder's Registrable Securities; and
(c) pay all Registration Expenses, other than the selling expenses
of Holder's Registrable Securities.
6.3 Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shaft so advise the Holder as a part of the written notice. In such
event, the right of the Holder to registration pursuant to this Section 6 shall
be conditioned upon Holder's participation in such underwriting and the
inclusion of the Holder's Registrable Securities in the underwriting to the
extent provided herein. The Holder shall (together with the Company) enter into
an underwriting agreement in customary form with the representative of the
underwriter of underwriters selected by the Company.
6.4 Exclusion of Registrable Securities. Notwithstanding any other
provisions of this Section 6, if the representative of the underwriters advises
the Company that marketing factors require a limitation on the number of shares
to be underwritten, the representative may (subject to the limitations set forth
below) exclude all Registrable Securities from, or limit the number of
Registrable Securities to be included in, the registration and underwriting. The
Company shall so advise the Holder, and the number of shares of securities that
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<PAGE>
are entitled to be included in the registration and underwriting shall be
allocated first to the Company for securities being sold for its own account and
thereafter to the Holder, pro rata with any other holders of Common Stock having
registration rights. If the Holder does not agree to the terms of any such
underwriting, he shall be excluded therefrom by written notice from the Company
or the underwriter. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration.
If shares are so withdrawn from the registration or if the number of
shares of Registrable Securities to be included in such registration was
previously reduced as a result of marketing factors, the Company shall then
offer to all persons who have retained the right to include securities in the
registration the right to include additional securities in the registration in
an aggregate amount equal to the number of sham so withdrawn, with such sham to
be allocated among the persons requesting additional inclusion pro rata amongst
those persons requesting inclusion.
6.5 Registration Procedures. In the case of each registration
effected by the Company pursuant to Section 6, the Company will keep Holder
advised in writing as to the initiation of each registration and as to the
completion thereof, at its expense, the Company will use its best efforts to:
(a) Keep such registration effective for a period of one hundred
twenty (120) days or until the Holder has completed the distribution described
in the registration statement relating thereto, whichever first occurs;
provided, however, that (x) such 120-days period shall be extended for a period
of time equal to the period the Holder refrains from selling any securities
included in such registration at the request of an underwriter of Common Stock
(or other securities) of the Company; and (y) in the case of any registration of
Registrable Securities on Form S-3 which are intended to be offered on a
continuous or delayed basis, such 120-day period shall be extended, if
necessary, to keep the registration statement effective until all such
Registrable Securities are sold, provided that Rule 145, or any successor rule
under the Securities Act, permits an offering on a continuous or delayed basis,
and provided further that applicable rules under the Securities Act governing
the obligation to file a post-effective amendment permit, in lieu of filing a
post-effective amendment that (I) includes any prospectus required by Section
10(a)(3) of the Securities Act or (II) reflects facts or events representing a
material or fundamental change in the information set forth in the registration
statement, the incorporation by reference of information required to be included
in (I) and (II) above to be contained in periodic reports filed pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 in the registration
statement.
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement;
(c) Furnish such number of prospectuses and other documents incident
thereto, including any amendment of or supplement to the prospectus, as the
Holder from time to time may reasonably request;
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(d) Notify the Holder at any time when a prospectus relating thereto
is required to be delivered under the Securities Act of the happening of any
event as a result of which the prospectus included in such registration
statement; as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or incomplete in the light of the
circumstances then existing, and at the request of Holder, prepare and furnish
to the Holder a reasonable number of copies of a supplement to or an amendment
of such prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such shares, such prospectus shall not include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or incomplete
in the light of the circumstances then existing;
(e) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed;
(f) Provide a transfer agent and registrar for all Registrable
Securities registered, pursuant to such registration statement and a CUSIP
number for all such Registrable Securities, in each case not later than the
effective date of such registration; and
(g) Otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering the
period of at least twelve months, but not more than eighteen months, beginning
with the first month after the effective date of the Registration Statement,
which earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act.
7. Fractional Shares; Issuance of Shares; Legends.
7.1 Fractional Shares. The Company shall not be required to issue
fractional shares of Company Common Stock an the exercise of a Warrant if any
fraction of a share of Stock would, except for the provisions of this Section 6,
be issuable on the exercise of a Warrant (or specified portion thereof), the
Company shall in lieu thereof pay an amount in cash equal to the then Current
Fair Market Value, multiplied by such fraction. For purposes of this Agreement,
the term "Current Fair Market Value" shall mean (i) if the Common Stock is
traded in the over-the-counter market and not in the NASDAQ Small Cap Market or
the National Market nor on any national securities exchange, the average of the
per share closing bid prices of the Common Stock on the 10 consecutive trading
days immediately preceding the date in question, as reported by NASDAQ or an
equivalent generally accepted reporting service, or (ii) if the Common Stock is
traded in the NASDAQ Small Cap Market or the National Market or on a national
securities exchange, the average for the 10 consecutive trading days immediately
preceding the date in question of the daily per share closing prices of the
Common Stock in the NASDAQ Small Cap Market or the National Market or on the
principal stock exchange an on which it is listed, as the case may be or (iii)
if the class of Stock is not publicly traded or quoted, the fair market value as
determined by the Board of Directors of the Company based on (with appropriate
adjustments) the most recent purchases of the Company's Stock and/or other
relevant factors including the Company's income and assets or evaluation reports
received by the Company.
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7.2 Issuance of Shares. All shares of Stock issued upon exercise of
a Warrant will be duly authorized, validly issued, fully paid and nonassessable.
7.3 Legends. If the Stock to be issued upon exercise of this Warrant
has not been registered under the Securities Act of 1933, as amended, then the
stock certificates representing such shares of Common Stock shall bear a legend
substantially in the following form:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR APPLICABLE
STATE SECURITIES LAWS AND ARE RESTRICTED SECURITIES. SUCH SECURITIES MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER THE ACT AND STATE SECURITIES LAWS.
8. Transferability. The Warrant or the Shares of Company Common Stock
underlying the Warrant shall not be transferred, and the Company shall not be
required to register any transfer on the books of the Company, unless the
Company shall have been provided with an opinion of counsel satisfactory to it
prior to such transfer that registration under the Securities Act and applicable
state securities laws is not required in connection with the transaction
resulting in such transfer. Each new Warranty or Company Common Stock
certificate issued upon any transfer as above provided shall bear an appropriate
investment legend, except that such Warrant or Company Common Stock certificate
shall not bear such restrictive legend if the opinion of counsel referred to
above is to further effect that such legend is not required in order to
establish compliance with the provisions of the Securities Act or if such
transfer is made in accordance with the provisions of Rule 144(k) promulgated
under the Securities Act. The Warrant may also be transferred by will or devise
and by the laws of descent.
Any attempt to transfer, sell or otherwise dispose of this Warrant (except
as provided above) shall be void and shall not convey any rights or privileges
to the transferee.
9. Miscellaneous.
9.1 Notices.
All notices, requests, demand and other communications required Or
Permitted to be given hereunder shall be deemed to have been duly given if in
writing and delivered personally, given by prepaid telegram, or mailed first
class, postage prepaid, registered or certified mail, return receipt requested,
to the following addresses:
If to the Company: SHOPPING.COM
2101 E. Coast Hwy., Garden Level
Corona del Mar, California 92625
Attention: Mr. Robert J. McNulty
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With a copy to: Jeffers, Wilson, Shaff & Falk, LLP
18881 Von Karman Avenue, Suite 1400
Irvine, California 92612
Attention: Barry D. Falk, Esq.
If to the Holder: Zahra Khiaban
5201 Bascule Avenue
Woodland Hills, California 91364
Any party may change the address to which such communications are to
be directed to it by giving written notice to the other party. Except as
otherwise provided in this Warrant, all notices shall be deemed to be given when
delivered in person, or if placed in the mail as aforesaid, then two (2) days
thereafter.
9.2 Modifications. The parties may, by mutual consent, amend,
modify, supplement and waive any right under this Warrant in any manner agreed
by them in writing at any time.
9.3 Entire Agreement. This Agreement, and any documents, instruments
or agreements specifically referred to herein, set forth the entire agreement
and understanding of the parties with respect to the transactions contemplated
hereby and supersede all Prior agreements, arrangements and understandings
relating to the subject matter hereof.
9.4 Headings. The section and paragraph headings contained in this
Agreement am for convenient reference only, and shall not in any way affect the
meaning or interpretation hereof.
9.5 Governing Law; Arbitration. This Agreement shall be governed by
and construed in accordance with the laws of the State of California, without
any regard to the choice of law provisions thereof. Any dispute arising under
this Agreement shall be resolved by binding arbitration under the rules of
commercial arbitration of the American Arbitration Association in Orange County,
California.
9.6 Severability. If any provision of this Agreement shall be hold
to be invalid, illegal or unenforceable, it shall be deemed severable from the
remaining provisions of this Agreement which shall remain in full force and
effect.
9.7 Waiver. No waiver of any provision of this Agreement or any
breach thereof shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar) or any other breach hereunder nor
shall such waiver constitute a continuing waiver. Either party may waive
performance of any provision of this Agreement, the nonperformance of which
would otherwise constitute a breach of this Agreement including but not limited
to the nonperformance of any condition precedent to such party's performance,
without affecting the enforceability of this Agreement or the provisions
contained herein.
9.8 Heirs; Successors and Assigns. The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the respective
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heirs, successors and assigns of the parties hereto. Holders may transfer and
assign the Warrants only as provided in Section 7 and any assignment in
violation of the foregoing shall be void.
9.9 Attorneys' Fees. If any legal action is instituted to enforce or
interpret the terms of this Agreement, the prevailing party in such action shall
be entitled to actual attorneys' fees in addition to any other relief to which
the party is entitled.
IN WITNESS WHEREOF, the parties have executed this instrument as of the
date first written above.
SHOPPING.COM, a California corporation
By: /s/ Robert J. McNulty
------------------------------------
Robert J. McNulty, President
"HOLDER"
/s/ Zahra Khiaban
-----------------------------------------
Zahra Khiaban
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EXHIBIT 4.10
------------
THIS SUBSCRIPTION AGREEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES REFERRED TO HEREIN.
SUBSCRIPTION AGREEMENT
Shopping.com
2101 East Coast Highway
Garden level
Corona Del Mar, CA 92625
Attn: Robert McNulty
Re: Prospective Purchase of Notes and Warrants
Shopping.com, a California corporation
Gentlemen:
The undersigned, by signing the Signature Page attached hereto, hereby
irrevocably tenders this subscription and applies to purchase 16 units (the
"Units") of Shopping.com, a California corporation (the "Company"), at a
purchase price of $25,000 per Unit. Each Unit consists of a Promissory Note in
the principal amount of $25,000 and warrants to purchase 2,500 shares of the
Company's Common Stock, no par value (the "Common Stock"), at an exercise price
of $14.00 per share.
Enclosed, in cash or good funds (in the case of a check, the check should
be payable to the order of "Shopping.com") as tender of the purchase price for
the Units, is the aggregate amount of $50,000.00 ($25,000 minimum).
The undersigned hereby acknowledges receipt of a copy of the Company's
Annual Report on form 10-KSB for the period ending January 31, 1998 (the
"Report"), relating to and describing the terms and conditions of the offer and
sale of the Units.
The undersigned hereby represents and warrants to, and covenants with, the
Company as follows, recognizing that the Company will rely to a material degree
upon such representations, warranties and covenants, each of which shall survive
any acceptance of this subscription in whole or in part by the Company and the
issuance and sale of any Units to the undersigned:
1. All statements made in the Prospective Investor Questionnaire which has
been or is concurrently being furnished to the Company by the undersigned
continue to be and are true, accurate and complete as of the date hereof.
2. The undersigned has been informed and is aware that an investment in
the Units involves a degree of risk and speculation, and has carefully read and
considered the Report in its entirety.
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3. The undersigned confirms that he has been advised that he should rely
on, and that he has consulted and relied upon, his own accounting, legal and
financial advisors with respect to this investment in the Units. The undersigned
and his professional advisor(s) (as defined in Section 260.102.12(g) of the
Rules of the California Corporations Commissioner), if any, have been afforded
an opportunity to meet with the officers and directors of the Company and to ask
and receive answers to any questions about this offering and the proposed
business and affairs of the Company, and to obtain any additional information
which the Company possesses or can acquire without unreasonable effort or
expense that is necessary to verify the accuracy of information provided in the
Report, and have therefore obtained, in the judgement of the undersigned and/or
his or her professional advisor(s), sufficient information to evaluate the
merits and risks of investment in the Units. The undersigned acknowledges and
agrees that he/she has had an opportunity to meet and speak with officers or
representatives and to ask questions and get answers with respect to the Company
and this offering.
4. The undersigned understands and acknowledges that no federal or state
agency has made any finding or determination as to the fairness or suitability
for investment in, nor any recommendation or endorsement of, the Company or the
Units.
5. On the basis of the review of the materials and information described
above, and relying solely thereon and upon the knowledge and experience of the
undersigned and/or his or her professional advisor(s), if any, in business and
financial matters, the undersigned has evaluated the merits and risks of
investment in the Units and has determined that he or she is both willing and
able to undertake the economic risk of this investment.
6. The Units are being acquired by the undersigned for the personal
account of the undersigned for investment and not with a view to, or for resale
in connection with, any distribution thereof or of any interest therein, and no
one else has any beneficial ownership or interest in the Units being acquired by
the undersigned, nor are they to be subject to any lien or pledge. The
undersigned has no present obligation, indebtedness or commitment pending, nor
is any circumstance in existence which will compel the undersigned to secure
funds by the sale, transfer or other distribution of any of the Units or any
interest therein or any Stock that may be distributed in respect thereof.
7. The undersigned understands and agrees that the Units cannot be
transferred or assigned that there is and will be no public market therefor,
and, accordingly, that it may not be possible for the undersigned readily, if at
all, to liquidate this investment in the Units in case of an emergency or
otherwise. The undersigned has the net worth, past income and estimated future
income set forth in the Prospective Investor Questionnaire, can afford to bear
the risks of an investment in the Units, including the risk of losing the entire
investment, for an indefinite period of time, and has adequate means of
providing for his or her current needs and personal contingencies and has no
need for liquidity in this investment.
8. The undersigned understands and acknowledges that the Units are being
offered and sold pursuant to one or more exemptions from the registration and
qualification requirements of the Securities Act of 1933 and the California
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Corporate Securities Act of 1968, the availability of which depend upon the
truth and completeness of the information provided to the Company in the
Prospective Investor Questionnaire and the bona fide nature of the foregoing
representations and warranties. With such realization, the undersigned hereby
authorizes the Company to act as it may see fit in reliance on such information,
representations and warranties, including the placement of the following legend
on the stock certificate(s) issued to the undersigned in addition to any other
legends that may be imposed thereon which, in the reasonable opinion of
Company's counsel, may be required by applicable securities laws:
"THE UNITS REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSIONS UNDER THE SECURITIES ACT OF 1933 OR WITH THE
CALIFORNIA DEPARTMENT OF CORPORATIONS UNDER THE CORPORATE SECURITIES LAW
OF 1968, AS AMENDED. THE UNITS MAY NOT BE PLEDGED, SOLD OR TRANSFERRED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACTS
COVERING THE UNITS OR AN OPINION OR QUALIFIED COUNSEL OR OTHER EVIDENCE
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
9. The undersigned hereby indemnifies and holds harmless the Company, and
its respective officers, directors, shareholders, employees and agents, as the
case may be, from and against any and all damages suffered and liabilities
incurred by any of them (including costs of investigation and defense and
attorneys' fees) arising out of any inaccuracy in the agreements,
representations, covenants and warranties made by the undersigned herein.
10. If the undersigned is purchasing the Units subscribed for hereby in a
fiduciary capacity, the above representations and warranties shall be deemed to
have been made on behalf of the person or persons for whom the undersigned is so
purchasing.
11. The undersigned hereby acknowledges and agrees that the undersigned is
not entitled to cancel, terminate or revoke this subscription or any agreements
of the undersigned hereunder and that such subscription and agreements shall
survive the death or disability of the undersigned.
12. The undersigned understands and acknowledges that this subscription
may be accepted or rejected by the Company in its sole discretion, together with
a completed and executed Prospective Investor Questionnaire and all information
required by the provisions hereof and payment of the full amount of the
subscription price for the Units subscribed for. Any amounts tendered in excess
of the total payable as the purchase price for Units as to which this
subscription has been accepted will thereafter be delivered to the undersigned
as soon as is practicable, all as described in the Confidential Private
Placement Memorandum. The Company shall signify its rejection by returning to
the undersigned this Subscription Agreement and all funds (without interest or
deduction) submitted by the undersigned.
NEITHER THE COMPANY, NOR ANY OFFICER, DIRECTOR, SHAREHOLDER, EMPLOYEE OR
AGENT OF ANY OF THEM SHALL BE LIABLE TO ANY PERSON FOR THE REJECTION, IN WHOLE
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OR IN PART, OF ANY OFFER TO SUBSCRIBE TO PURCHASE UNITS, NOTWITHSTANDING THAT
THE UNDERSIGNED MAY OTHERWISE BE QUALIFIED AS A PROSPECTIVE INVESTOR.
13. If, prior to the sale of any Units to the undersigned, there is a
material change in die undersigned's investment intention as expressed herein,
or if there occurs any change which would make either the representations or
warranties made by the undersigned herein or the information provided by the
undersigned in the Prospective Investor Questionnaire materially untrue or
misleading, the undersigned agrees to immediately so notify the Company, and any
prior acceptance of the subscription of the undersigned shall be voidable at the
option of the Company.
IN WITNESS WHEREOF, the undersigned executes and agrees to be bound by
this Subscription Agreement by executing the Signature Page attached hereto on
the date therein indicated.
SIGNATURE PAGE
(All information must be completed)
Date: May 15, 1998
/s/ William D. Schweitzer $50,000 5,000 $50,000
- --------------------------- ---------- ------------- ------------
Signature of Purchaser Purchase Price # of Warrants Total $ Investment
_________________________________ William D. Schweitzer
Signature of Joint Owner (if any) ---------------------
Name(s) of Purchaser (Print)
If Joint Ownership, check one:
_____ Joint Tenants, with Residence Address:
Right of Survivorship ------------------
3401 Creekview
_____ Tenants in Common Grapevine, Texas 76051
_____ Community Property
###-##-####
-----------------------
Social Security No. or Taxpayer I.D. No.
ACCEPTED AND AGREED:
SHOPPING.COM
By /s/ Robert J. McNulty
-----------------------------------
Robert J. McNulty, Chief Executive Officer
Date: May __, 1998
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EXHIBIT 4.11
------------
UNSECURED PROMISSORY NOTE
$50,000.00 Corona Del Mar, California May 15, 1998
1. Principal.
FOR VALUE RECEIVED, the undersigned, SHOPPING.COM ("Maker"),
promises to pay William D. Schweitzer ("Payee"), or order, at 2101 East Coast
Highway, Corona Del Mar, CA 92625 or such other place as the holder of this Note
shall specify, in lawful money of the United States of America, the principal
amount of Fifty Thousand Dollars ($50,000.00), together with interest at the
rate of ten percent (10%) per annum, payable as hereinafter provided.
2. Payment of Principal and Interest.
All principal of and interest accruing on this Note shall be due and
payable six months from the date of this Note.
Interest shall be calculated on the unpaid principal balance of this
Note on the basis of a year of 360 days and the actual number of days elapsed
until payment, unless such calculation would result in a usurious rate, in which
case interest shall be calculated on the basis of a year of 365 or 366 days, as
the case may be. Interest shall accrue and be payable under this Note whether or
not Maker, or Maker's successors or assigns, should avail themselves of the
protection of the United States bankruptcy laws. From and after the occurrence
of an "event of default" as set forth in Section 7 hereof, interest shall
continue to accrue on the unpaid principal balance of this Note at the same
interest rate as set forth in Section 1 of this Note.
3. Prepayment.
A. This Note may be prepaid at any time or from time to time, in
whole or in part, without penalty.
B. Each such prepayment shall include all interest then accrued but
unpaid on this Note.
C. Any partial prepayment of the outstanding principal balance shall
in no way release, discharge or affect the obligation of the Maker to continue
to make any other payments of principal or interest provided for herein until
this Note is paid in full.
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4. Application of Payments.
Each payment on this Note (whether made when due or otherwise) shall
be credited first, to late charges, fees and other charges due, including
collection costs and attorneys' fees, second against interest then due, and the
remainder of such payment shall be credited against the unpaid principal.
5. Waiver.
Maker and all endorsers, guarantors and all persons liable, or to
become liable on this Note (each hereinafter referred to in this Section as the
"Applicable Party"), jointly and severally, waive presentment, protest and
demand, notice of protest, demand, dishonor and nonpayment of this Note, notice
of acceleration, notice of intent to accelerate, and any and all other notices
or matters of a like nature, and consent to any and all renewals and extensions
of the fine of payment hereof. Each Applicable Party agrees that at any time and
from time to time, without notice, (i) the terms of payment herein, or (ii) the
terms of any guaranty of this Note, or (iii) the security described in any
documents at any time securing this Note, may be modified, increased, changed or
exchanged, in whole or in part, without in any way affecting the liability of
any Applicable Party.
6. Late Charge.
If any payment of interest and/or principal hereunder is not
received by Payee within ten (10) days after the due date thereof, Maker agrees
to pay Payee a late charge equal to five percent (5%) of the unpaid amount.
Maker acknowledges that it would be extremely difficult to fix Payee's actual
damages for the failure of Maker to timely pay any amount due under this Note.
Accordingly, such late charge shall be deemed to be Payee's damages for any such
late payment, provided that such late charge shall not limit Payee's right to
compel prompt performance by Maker or to exercise other remedies available to
Payee.
7. Default by Maker.
Any one or more of the following shall constitute an "Event of
Default" by Maker under the terms of this Note:
A. If Maker fails to pay any payment, whether at maturity or
otherwise, of principal and/or interest upon the due date thereof.
B. If Maker defaults in the performance or observance of any of the
covenants, conditions or agreements set forth in this Note.
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C. If Maker institutes proceedings to be adjudicated a voluntary
bankrupt; consents to the filing of a bankruptcy proceeding against Maker; files
or consents to filing of a petition or answer or consent seeking reorganization
under the federal bankruptcy laws or any other similar applicable federal or
state law; consents to the appointment or a receiver of liquidator or trustee or
assignee in bankruptcy or insolvency of the Maker or a substantial part of
Maker's property; an assignment for the benefit of creditors is made by the
Maker; or Maker admits in writing of Maker's inability to pay Maker's debts
generally as they become due.
8. Remedies Upon Default.
If an Event of Default occurs, at the option of Payee, and upon
written demand, the Payee may accelerate the due date of this Note and declare
the entire outstanding principal balance hereof, including all fees and costs
(if any), and accrued but unpaid interest, immediately due and payable in full.
Each of the options, rights and remedies provided herein or
available at law or in equity which may be exercised by Payee may be exercised
separately or concurrently with any one or more other options, rights or
remedies available to Payee. Failure to exercise any option, right or remedy
shall not constitute a waiver of the right of the Payee to exercise such option,
right or remedy in the event of or with respect to any prior, subsequent or
concurrent transaction or occurrence of the same or a different kind or
character.
9. Attorneys' Fees.
Maker agrees to pay all costs of collection or enforcement of this
Note when incurred, including, but not limited to, reasonable attorneys' fees.
If any suit or action is instituted to enforce this Note, Maker promises to pay,
in addition to the costs and disbursements allowed by law, such sum as the court
may adjudge as reasonable attorneys' fees in such suit or action. Maker shall
also pay all reasonable attorneys' fees and costs incurred by Payee in
connection with any modification, amendment or consent related to any
renegotiation or modification of this Note.
10. Severability.
Every provision of this Note is intended to be severable. If any
term or provision hereof is declared by a court of competent jurisdiction to be
illegal or invalid for any reason whatsoever, such illegality or invalidity
shall not affect the balance of the terms and provisions hereof, which terms and
provisions shall remain binding and enforceable.
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11. Governing Law.
This Note shall be governed by and construed in accordance with the
laws of the State of California.
12. Notices.
All notices, statements or demands shall be in writing and shall be
served in person, by telegraph, by express mail, by certified mail or by private
overnight delivery. Service shall be deemed conclusively made (i) at the time of
service, if personally served, (ii) at the time (as confirmed in writing by the
telegraphic agency) of delivery thereof to the addressee, if served
telegraphically, (iii) twenty-four (24) hours (exclusive of weekends and
national holidays) after deposit in the United States mail, properly addressed
and postage prepaid, if served by express mail, (iv) five (5) calendar days
after deposit in the United States mail, properly addressed and postage prepaid,
return receipt requested, if served by certified mail, (v) twenty-four (24)
hours after delivery by the party giving the notice, statement or demand to the
private overnight deliverer, if served by private overnight delivery and (vi) at
the time of electronic transmission, if a copy of such notice is mailed within
twenty-four (24) hours after the transmission.
Any notice or demand to Maker shall be given to:
Robert J. McNulty
Shopping.com
2101 E. Coast Hwy., Garden Level
Corona del Mar, California 92625
Any notice or demand to Payee shall be given to:
William D. Schweitzter
3401 Creekview Drive
Grapevine, Texas 76051-4253
and with a copy to:
Barry D. Falk, Esq.
JEFFERS, WILSON, SHAFF & FALK, LLP
18881 Von Karman Avenue, Suite 1400
Irvine, California 92612
FAX No.: (949) 660-7799
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Any party hereto may change its address for the purpose of receiving
notices, demands or other communications as herein provided by a written notice
given in the manner aforesaid to the other party or parties hereto.
13. Successor and Assigns.
All the terms and provisions of this Note shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
14. Assignability.
Maker's obligation hereunder are nontransferable and nonassignable
without the prior written consent of Payee.
15. Amendment.
Neither this Note nor any term or provision hereof may be modified,
amended or altered except by a written instrument approved by Payee and signed
by Maker.
16. Headings.
Headings at the beginning of each numbered Paragraph of this Note
are intended solely for convenience and are not to be deemed or construed to be
a part of this Note.
17. Purpose of Loan.
The proceeds of this Note are to be used by Maker exclusively for
business purposes, and not for personal, family or household purposes.
18. Time of the Essence.
TIME IS EXPRESSLY DECLARED TO BE THE ESSENCE of each obligation of
the Maker hereunder and in all matters concerning this Note, including all acts
or things to be done or performed in connection herewith, and specifically of
every provision of this Note in which time is an element.
19. Compliance With Usury Laws.
Maker and Payee intent to comply with all applicable usury laws. In
fulfilling this intention, all agreement between Maker and Payee are expressly
limited so that the amount of interest paid or agreed to be paid to Payee for
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the use, forbearance, or detention of money under this Note shall not exceed the
maximum amount permissible under applicable law.
If for any reason payment of any amount required under this Note
shall be prohibited by law, then the obligation shall be reduced to the maximum
allowable bylaw. If for any reason Payee receives as interest an amount that
would exceed the highest lawful rate, then the amount which would constitute
excessive interest shall be applied to the reduction of the principal of this
Note and not to the payment of interest. If any conflict arises between this
provision and any provision of any other agreement between Maker and Payee, then
this provision shall control.
20. Legal Representation.
Maker agrees and represents that such party has been represented by
such party's own legal counsel with regard to all aspects of this Note, or if
such party is acting without legal counsel, that such party has had adequate
opportunity and has been encouraged to seek the advice of such party's own legal
counsel prior to the execution of this Agreement.
21. Jurisdiction.
Any action whatsoever brought upon or relating to this Note shall be
instituted and prosecuted in the state courts of California, County of Orange,
or the federal district court therefore, and each party waives the right to
change the venue. The parties hereto further consent to accept service of
process in any such action or proceeding by certified mail, return receipt
requested.
"MAKER" "PAYEE"
SHOPPING.COM WILLIAM D. SCHWEITZER
By /s/ Robert J. McNulty By /s/ William D. Schweitzer
----------------------- -------------------------
Robert J. McNulty William D. Schweitzer
Title: President and Chief Executive
Officer
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EXHIBIT 4.12
------------
SHOPPING.COM
WARRANT AGREEMENT
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THIS WARRANT MAY NOT BE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR UNLESS AN EXEMPTION THEREFROM IS AVAILABLE.
This Warrant Agreement (this "Agreement") is entered into as of 15th day
of May, 1998 by and between, SHOPPING.COM, a California corporation (the
"Company"), and William D. Schweitzer (the "Holder").
RECITALS
WHEREAS, the Company has agreed to grant to Holder warrants to purchase
5,000 shares of Company Common Stock in exchange and in consideration for good
and valuable goods and services.
NOW, THEREFORE, BE IT RESOLVED, the parties agree hereto as follows:
1. Description, Execution.
(a) The Company agrees to issue to the Holder and the Holder agrees
to accept the Warrant Certificate evidencing the right to purchase shares of the
Company common stock at an initial purchase price of Fourteen Dollars ($14.00)
per Share as to which the Warrant is exercisable. The Warrant Certificate shall
be substantially in the form annexed hereto as Exhibit A.
(b) This Agreement shall be executed on behalf of the Company by its
President Upon delivery of this Warrant to the Holder, this Agreement shall be
binding upon the Company, and the Holder shall be entitled to all the benefits
set forth herein.
2. Term of Warrant. The Warrant shall become exercisable at any time after
the date hereof, and remain exercisable, subject to the conditions set forth in
Section 3 until the close of business on May 15, 2001 (the "Expiration Date").
3. Exercise of Warrant.
(a) Subject to (b) below, at any time until the Expiration Date, the
Holder shall have the right to purchase from the Company (and the Company shall
promptly issue to the Holder) one fully-paid and nonassessable share of Common
Stock at the Exercise Price (as defined below) for each Warrant, by surrendering
the appropriate Warrant Certificate and the Subscription Form attached hereto to
the Company at its executive offices and paying the aggregate Exercise Price for
the sham to be purchased, in cash, by check or by cancellation of indebtedness.
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(b) The Warrant may be exercised in whole and in part but not in
increments of less than 100 shares. In case of a partial exercise, the Warrant
Certificate shall be surrendered and a new Warrant Certificate of the same tenor
and for the purchase of the number of sham not purchased upon such partial
exercise shall be issued by the Company to the Holder hereof. The Warrants shall
be deemed to have been exercised immediately prior to the close of business on
the date of their surrender for exercise as provided above, and the person or
entity entitled to receive the shares of Common Stock issuable upon the exercise
shall be treated for all purposes as the holder of such shares of record as of
the close of business on such date. Prior to any such exercise, neither the
Holder nor any person entitled to receive shares issuable upon exercise shall be
or have any of the rights of a shareholder of the Company. No adjustment shall
be made for dividends or other stockholder rights for which the record date is
prior to the date of exercise. As soon as practicable on or after such date, the
Company shall issue in the name of, and deliver to the person or persons
entitled to receive, a certificate or certificates for the full number of shares
of Common Stock issuable upon such exercise.
4. Exercise Price. The initial Exercise Price for each share of Common
Stock issuable pursuant to the Warrant shall be Fourteen Dollars ($14.00) per
Share, adjusted as provided below. The Exercise Price may be paid, in cash,
cashier's check or by cancellation of indebtedness from the Company to the
Holder.
5. Adjustment of Warrant Price and Number of Shares of Common Stock. The
number and kind of securities purchasable upon the exercise of the Warrants and
the Exercise Price shall be subject to adjustment from time to time upon the
happening of certain events, as follows:
5.1 Adjustments. The Exercise Price of the Warrant shall be subject to
adjustment as follows:
(a) In case the Company shall issue rights, options, warrants or
convertible securities to all or substantially all holders of its Common Stock,
without any charge to such holders, entitling the holder thereof to subscribe
for or purchase Stock at a price per share which is lower at the date of
issuance of such rights, options, warrants or securities than the then Current
Fair Market Value (as defined in Section 7 hereof), the price of shares of Stock
thereafter purchasable upon the exercise of the Warrant shall be reduced to a
price equal to an amount which would entitle the Holder to receive the same
number of shares of Common Stock and other securities that he would have
received had he exercised the Warrants immediately prior to such issuance.
(b) For the purpose of this Section 5, the term "Common Stock" shall
mean (i) the class of stock designated as the Common Stock of the Company at the
date of this Agreement, or (ii) any other claw of stock resulting from
successive changes or reclassifications of such Common Stock consisting solely
of changes in par value, or from par value to no par value, or from no par value
to par value.
5.2 No Adjustment for Dividends. Except as provided in Section 5.1 hereof,
no adjustment in respect of any dividends or distributions out of earnings shall
be made during the term of a Warrant or upon the exercise of a Warrant.
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5.3 No Adjustment in Certain Cases. No adjustments shall be made pursuant
to Section 5 hereof in connection with the grant or exercise of presently
authorized or outstanding options to purchase Common Stock under the Company's
existing stock option plan or the exercise of presently outstanding warrants to
purchase Common Stock.
5.4 Preservation of Purchase Price upon Reclassification, Consolidation,
etc. In case of any consolidation of the Company with or merger of the Company
into another corporation or in case of any sale or conveyance to another
corporation of the property, assets or business of the Company as an entirety or
substantially as an entirety, the Company or such successor or purchasing
corporation, as the case may be, shall execute with the Holder an agreement that
the Holder shall have the right thereafter, upon payment of the Exercise Price
in effect immediately prior to such action, to purchase, upon exercise of each
Warrant, the kind and amount of shares and other securities and property which
it would have owned or have been entitled to receive after the occurrence of
such consolidation, merger, sale or conveyance had each Warrant been exercised
immediately prior to such action. In the event of a merger described in Section
368(a)(2)(E) of the Internal Revenue Code of 1986, as amended, in which the
Company is the surviving corporation, the right to purchase sham of Common Stock
under the Warrant shall terminate on the date of such merger and thereupon the
Warrant shall become null and void, but only if the controlling corporation
shall agree to substitute for the Warrant its warrant which entitle the holders
thereof to purchase upon their exercise the kind and amount of shares and other
securities and property which they would have owned or been entitled to receive
had the Warrant been exercised immediately prior to such merger. Any such
agreements referred to in this Subsection 5.4 shall provide for adjustments,
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in Section 5 hereof. The provisions of this Subsection 5.4 shall
similarly apply to successive consolidations, mergers, sales or conveyances.
6. Registration Rights.
6.1 Definitions.
(a) "Commission" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act of
1933, as amended (the "Securities Act").
(b) "Registrable Securities" shall mean (x) shares of Common Stock
issuable upon exercise of the Warrants and (y) any Common Stock issued as a
dividend or other distribution with respect to or in exchange for or in
replacement of the shares referenced in (x) above, provided, however, that
Registrable Securities shall not include any shares of Common Stock which have
previously been registered or which have been sold to the public.
(c) 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, and the declaration or ordering of the effectiveness of
such registration statement.
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(d) "Registration Expenses" shall mean all expenses incurred in
effecting any registration pursuant to this Agreement, including, without
limitation, all registration, qualification, and filing fees, printing expenses,
escrow fees and disbursements of counsel for the Company, blue sky fees and
expenses of any regular or special audits incident to or required by any such
registration, but shall not include selling expenses and fees and disbursements
of counsel for the Holder.
(e) "Rule 144" shall mean Rule 144 as promulgated by the Commission
under the Securities Act as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.
(f) "Rule 145" shall mean Rule 145 as promulgated by the Commission
under the Securities Act, as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.
6.2 "Piggyback" Registration. If the Company shall determine to register
any of its shares of Common Stock in a firm commitment public offering for its
own account, other than a registration relating solely to employee benefit
plans, or a registration relating solely to a Rule 145 transaction on Form S-4,
or a registration on any registration form that does not permit secondary sales,
the Company will:
(a) promptly give to Holder written notice thereof,
(b) use its best efforts to include in such registration (and any
related qualification under the blue sky laws or other compliance), except as
set forth in Section 6.3 below, and in any underwriting involved therein, all
the Registrable Securities specified in a written request or requests, made by
Holder within Twenty (20) days after the written, notice from the Company
described in clause 6.2(a) above is given. Such written request may specify all
or a part of Holder's Registrable Securities; and
(c) pay all Registration Expenses, other than the selling expenses
of Holder's Registrable Securities.
6.3 Underwriting. If the registration of which the Company gives notice is
for a registered public offering involving an underwriting, the Company shaft so
advise the Holder as a part of the written notice. In such event, the right of
the Holder to registration pursuant to this Section 6 shall be conditioned upon
Holder's participation in such underwriting and the inclusion of the Holder's
Registrable Securities in the underwriting to the extent provided herein. The
Holder shall (together with the Company) enter into an underwriting agreement in
customary form with the representative of the underwriter of underwriters
selected by the Company.
6.4 Exclusion of Registrable Securities. Notwithstanding any other
provisions of this Section 6, if the representative of the underwriters advises
the Company that marketing factors require a limitation on the number of shares
to be underwritten, the representative may (subject to the limitations set forth
below) exclude all Registrable Securities from, or limit the number of
Registrable Securities to be included in, the registration and underwriting. The
Company shall so advise the Holder, and the number of shares of securities that
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are entitled to be included in the registration and underwriting shall be
allocated first to the Company for securities being sold for its own account and
thereafter to the Holder, pro rata with any other holders of Common Stock having
registration rights. If the Holder does not agree to the terms of any such
underwriting, he shall be excluded therefrom by written notice from the Company
or the underwriter. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration.
If shares are so withdrawn from the registration or if the number of
shares of Registrable Securities to be included in such registration was
previously reduced as a result of marketing factors, the Company shall then
offer to all persons who have retained the right to include securities in the
registration the right to include additional securities in the registration in
an aggregate amount equal to the number of sham so withdrawn, with such sham to
be allocated among the persons requesting additional inclusion pro rata amongst
those persons requesting inclusion.
6.5 Registration Procedures. In the case of each registration effected by
the Company pursuant to Section 6, the Company will keep Holder advised in
writing as to the initiation of each registration and as to the completion
thereof, at its expense, the Company will use its best efforts to:
(a) Keep such registration effective for a period of one hundred
twenty (120) days or until the Holder has completed the distribution described
in the registration statement relating thereto, whichever first occurs;
provided, however, that (x) such 120-days period shall be extended for a period
of time equal to the period the Holder refrains from selling any securities
included in such registration at the request of an underwriter of Common Stock
(or other securities) of the Company; and (y) in the case of any registration of
Registrable Securities on Form S-3 which are intended to be offered on a
continuous or delayed basis, such 120-day period shall be extended, if
necessary, to keep the registration statement effective until all such
Registrable Securities are sold, provided that Rule 145, or any successor rule
under the Securities Act, permits an offering on a continuous or delayed basis,
and provided further that applicable rules under the Securities Act governing
the obligation to file a post-effective amendment permit, in lieu of filing a
post-effective amendment that (I) includes any prospectus required by Section
10(a)(3) of the Securities Act or (II) reflects facts or events representing a
material or fundamental change in the information set forth in the registration
statement, the incorporation by reference of information required to be included
in (I) and (II) above to be contained in periodic reports filed pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 in the registration
statement.
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement;
(c) Furnish such number of prospectuses and other documents incident
thereto, including any amendment of or supplement to the prospectus, as the
Holder from time to time may reasonably request;
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(d) Notify the Holder at any time when a prospectus relating thereto
is required to be delivered under the Securities Act of the happening of any
event as a result of which the prospectus included in such registration
statement; as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or incomplete in the light of the
circumstances then existing, and at the request of Holder, prepare and furnish
to the Holder a reasonable number of copies of a supplement to or an amendment
of such prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such shares, such prospectus shall not include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or incomplete
in the light of the circumstances then existing;
(e) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed;
(f) Provide a transfer agent and registrar for all Registrable
Securities registered, pursuant to such registration statement and a CUSIP
number for all such Registrable Securities, in each case not later than the
effective date of such registration; and
(g) Otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering the
period of at least twelve months, but not more than eighteen months, beginning
with the first month after the effective date of the Registration Statement,
which earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act.
7. Fractional Shares; Issuance of Shares; Legends.
7.1 Fractional Shares. The Company shall not be required to issue
fractional shares of Company Common Stock an the exercise of a Warrant if any
fraction of a share of Stock would, except for the provisions of this Section 6,
be issuable on the exercise of a Warrant (or specified portion thereof), the
Company shall in lieu thereof pay an amount in cash equal to the then Current
Fair Market Value, multiplied by such fraction. For purposes of this Agreement,
the term "Current Fair Market Value" shall mean (i) if the Common Stock is
traded in the over-the-counter market and not in the NASDAQ Small Cap Market or
the National Market nor on any national securities exchange, the average of the
per share closing bid prices of the Common Stock on the 10 consecutive trading
days immediately preceding the date in question, as reported by NASDAQ or an
equivalent generally accepted reporting service, or (ii) if the Common Stock is
traded in the NASDAQ Small Cap Market or the National Market or on a national
securities exchange, the average for the 10 consecutive trading days immediately
preceding the date in question of the daily per share closing prices of the
Common Stock in the NASDAQ Small Cap Market or the National Market or on the
principal stock exchange an on which it is listed, as the case may be or (iii)
if the class of Stock is not publicly traded or quoted, the fair market value as
determined by the Board of Directors of the Company based on (with appropriate
adjustments) the most recent purchases of the Company's Stock and/or other
relevant factors including the Company's income and assets or evaluation reports
received by the Company.
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7.2 Issuance of Shares. All shares of Stock issued upon exercise of a
Warrant will be duly authorized, validly issued, fully paid and nonassessable.
7.3 Legends. If the Stock to be issued upon exercise of this Warrant has
not been registered under the Securities Act of 1933, as amended, then the stock
certificates representing such shares of Common Stock shall bear a legend
substantially in the following form:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR APPLICABLE
STATE SECURITIES LAWS AND ARE RESTRICTED SECURITIES. SUCH SECURITIES MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER THE ACT AND STATE SECURITIES LAWS.
8. Transferability. The Warrant or the Shares of Company Common Stock
underlying the Warrant shall not be transferred, and the Company shall not be
required to register any transfer on the books of the Company, unless the
Company shall have been provided with an opinion of counsel satisfactory to it
prior to such transfer that registration under the Securities Act and applicable
state securities laws is not required in connection with the transaction
resulting in such transfer. Each new Warranty or Company Common Stock
certificate issued upon any transfer as above provided shall bear an appropriate
investment legend, except that such Warrant or Company Common Stock certificate
shall not bear such restrictive legend if the opinion of counsel referred to
above is to further effect that such legend is not required in order to
establish compliance with the provisions of the Securities Act or if such
transfer is made in accordance with the provisions of Rule 144(k) promulgated
under the Securities Act. The Warrant may also be transferred by will or devise
and by the laws of descent.
Any attempt to transfer, sell or otherwise dispose of this Warrant (except
as provided above) shall be void and shall not convey any rights or privileges
to the transferee.
9. Miscellaneous.
9.1 Notices.
All notices, requests, demand and other communications required Or
Permitted to be given hereunder shall be deemed to have been duly given if in
writing and delivered personally, given by prepaid telegram, or mailed first
class, postage prepaid, registered or certified mail, return receipt requested,
to the following addresses:
If to the Company: SHOPPING.COM
2101 E. Coast Hwy., Garden Level
Corona del Mar, California 92625
Attention: Mr. Robert J. McNulty
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With a copy to: Jeffers, Wilson, Shaff & Falk, LLP
18881 Von Karman Avenue, Suite 1400
Irvine, California 92612
Attention: Barry D. Falk, Esq.
If to the Holder: William D. Schweitzer
3041 Creekview Drive
Grapevine, Texas 76051
Any party may change the address to which such communications are to
be directed to it by giving written notice to the other party. Except as
otherwise provided in this Warrant, all notices shall be deemed to be given when
delivered in person, or if placed in the mail as aforesaid, then two (2) days
thereafter.
9.2 Modifications. The parties may, by mutual consent, amend, modify,
supplement and waive any right under this Warrant in any manner agreed by them
in writing at any time.
9.3 Entire Agreement. This Agreement, and any documents, instruments or
agreements specifically referred to herein, set forth the entire agreement and
understanding of the parties with respect to the transactions contemplated
hereby and supersede all Prior agreements, arrangements and understandings
relating to the subject matter hereof.
9.4 Headings. The section and paragraph headings contained in this
Agreement am for convenient reference only, and shall not in any way affect the
meaning or interpretation hereof.
9.5 Governing Law; Arbitration. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, without any
regard to the choice of law provisions thereof. Any dispute arising under this
Agreement shall be resolved by binding arbitration under the rules of commercial
arbitration of the American Arbitration Association in Orange County,
California.
9.6 Severability. If any provision of this Agreement shall be hold to be
invalid, illegal or unenforceable, it shall be deemed severable from the
remaining provisions of this Agreement which shall remain in full force and
effect.
9.7 Waiver. No waiver of any provision of this Agreement or any breach
thereof shall be deemed or shall constitute a waiver of any other provision
hereof (whether or not similar) or any other breach hereunder nor shall such
waiver constitute a continuing waiver. Either party may waive performance of any
provision of this Agreement, the nonperformance of which would otherwise
constitute a breach of this Agreement including but not limited to the
nonperformance of any condition precedent to such party's performance, without
affecting the enforceability of this Agreement or the provisions contained
herein.
9.8 Heirs; Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
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heirs, successors and assigns of the parties hereto. Holders may transfer and
assign the Warrants only as provided in Section 7 and any assignment in
violation of the foregoing shall be void.
9.9 Attorneys' Fees. If any legal action is instituted to enforce or
interpret the terms of this Agreement, the prevailing party in such action shall
be entitled to actual attorneys' fees in addition to any other relief to which
the party is entitled.
IN WITNESS WHEREOF, the parties have executed this instrument as of the
date first written above.
SHOPPING.COM, a California corporation
By: /s/ Robert J. McNulty
------------------------------
Robert J. McNulty, President
"HOLDER"
/s/ William D. Schweitzer
------------------------------------
William D. Schweitzer
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EXHIBIT 4.13
------------
THIS SUBSCRIPTION AGREEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES REFERRED TO HEREIN.
SUBSCRIPTION AGREEMENT
Shopping.com
2101 East Coast Highway
Garden level
Corona Del Mar, CA 92625
Attn: Robert McNulty
Re: Prospective Purchase of Notes and Warrants
Shopping.com, a California corporation
Gentlemen:
The undersigned, by signing the Signature Page attached hereto, hereby
irrevocably tenders this subscription and applies to purchase 16 units (the
"Units") of Shopping.com, a California corporation (the "Company"), at a
purchase price of $25,000 per Unit. Each Unit consists of a Promissory Note in
the principal amount of $25,000 and warrants to purchase 2,500 shares of the
Company's Common Stock, no par value (the "Common Stock"), at an exercise price
of $14.00 per share.
Enclosed, in cash or good funds (in the case of a check, the check should
be payable to the order of "Shopping.com") as tender of the purchase price for
the Units, is the aggregate amount of $100,000.00 ($25,000 minimum).
The undersigned hereby acknowledges receipt of a copy of the Company's
Annual Report on form 10-KSB for the period ending January 31, 1998 (the
"Report"), relating to and describing the terms and conditions of the offer and
sale of the Units.
The undersigned hereby represents and warrants to, and covenants with, the
Company as follows, recognizing that the Company will rely to a material degree
upon such representations, warranties and covenants, each of which shall survive
any acceptance of this subscription in whole or in part by the Company and the
issuance and sale of any Units to the undersigned:
1. All statements made in the Prospective Investor Questionnaire which has
been or is concurrently being furnished to the Company by the undersigned
continue to be and are true, accurate and complete as of the date hereof.
2. The undersigned has been informed and is aware that an investment in
the Units involves a degree of risk and speculation, and has carefully read and
considered the Report in its entirety.
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<PAGE>
3. The undersigned confirms that he has been advised that he should rely
on, and that he has consulted and relied upon, his own accounting, legal and
financial advisors with respect to this investment in the Units. The undersigned
and his professional advisor(s) (as defined in Section 260.102.12(g) of the
Rules of the California Corporations Commissioner), if any, have been afforded
an opportunity to meet with the officers and directors of the Company and to ask
and receive answers to any questions about this offering and the proposed
business and affairs of the Company, and to obtain any additional information
which the Company possesses or can acquire without unreasonable effort or
expense that is necessary to verify the accuracy of information provided in the
Report, and have therefore obtained, in the judgement of the undersigned and/or
his or her professional advisor(s), sufficient information to evaluate the
merits and risks of investment in the Units. The undersigned acknowledges and
agrees that he/she has had an opportunity to meet and speak with officers or
representatives and to ask questions and get answers with respect to the Company
and this offering.
4. The undersigned understands and acknowledges that no federal or state
agency has made any finding or determination as to the fairness or suitability
for investment in, nor any recommendation or endorsement of, the Company or the
Units.
5. On the basis of the review of the materials and information described
above, and relying solely thereon and upon the knowledge and experience of the
undersigned and/or his or her professional advisor(s), if any, in business and
financial matters, the undersigned has evaluated the merits and risks of
investment in the Units and has determined that he or she is both willing and
able to undertake the economic risk of this investment.
6. The Units are being acquired by the undersigned for the personal
account of the undersigned for investment and not with a view to, or for resale
in connection with, any distribution thereof or of any interest therein, and no
one else has any beneficial ownership or interest in the Units being acquired by
the undersigned, nor are they to be subject to any lien or pledge. The
undersigned has no present obligation, indebtedness or commitment pending, nor
is any circumstance in existence which will compel the undersigned to secure
funds by the sale, transfer or other distribution of any of the Units or any
interest therein or any Stock that may be distributed in respect thereof.
7. The undersigned understands and agrees that the Units cannot be
transferred or assigned that there is and will be no public market therefor,
and, accordingly, that it may not be possible for the undersigned readily, if at
all, to liquidate this investment in the Units in case of an emergency or
otherwise. The undersigned has the net worth, past income and estimated future
income set forth in the Prospective Investor Questionnaire, can afford to bear
the risks of an investment in the Units, including the risk of losing the entire
investment, for an indefinite period of time, and has adequate means of
providing for his or her current needs and personal contingencies and has no
need for liquidity in this investment.
8. The undersigned understands and acknowledges that the Units are being
offered and sold pursuant to one or more exemptions from the registration and
qualification requirements of the Securities Act of 1933 and the California
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Corporate Securities Act of 1968, the availability of which depend upon the
truth and completeness of the information provided to the Company in the
Prospective Investor Questionnaire and the bona fide nature of the foregoing
representations and warranties. With such realization, the undersigned hereby
authorizes the Company to act as it may see fit in reliance on such information,
representations and warranties, including the placement of the following legend
on the stock certificate(s) issued to the undersigned in addition to any other
legends that may be imposed thereon which, in the reasonable opinion of
Company's counsel, may be required by applicable securities laws:
"THE UNITS REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSIONS UNDER THE SECURITIES ACT OF 1933 OR WITH THE
CALIFORNIA DEPARTMENT OF CORPORATIONS UNDER THE CORPORATE SECURITIES LAW
OF 1968, AS AMENDED. THE UNITS MAY NOT BE PLEDGED, SOLD OR TRANSFERRED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACTS
COVERING THE UNITS OR AN OPINION OR QUALIFIED COUNSEL OR OTHER EVIDENCE
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
9. The undersigned hereby indemnifies and holds harmless the Company, and
its respective officers, directors, shareholders, employees and agents, as the
case may be, from and against any and all damages suffered and liabilities
incurred by any of them (including costs of investigation and defense and
attorneys' fees) arising out of any inaccuracy in the agreements,
representations, covenants and warranties made by the undersigned herein.
10. If the undersigned is purchasing the Units subscribed for hereby in a
fiduciary capacity, the above representations and warranties shall be deemed to
have been made on behalf of the person or persons for whom the undersigned is so
purchasing.
11. The undersigned hereby acknowledges and agrees that the undersigned is
not entitled to cancel, terminate or revoke this subscription or any agreements
of the undersigned hereunder and that such subscription and agreements shall
survive the death or disability of the undersigned.
12. The undersigned understands and acknowledges that this subscription
may be accepted or rejected by the Company in its sole discretion, together with
a completed and executed Prospective Investor Questionnaire and all information
required by the provisions hereof and payment of the full amount of the
subscription price for the Units subscribed for. Any amounts tendered in excess
of the total payable as the purchase price for Units as to which this
subscription has been accepted will thereafter be delivered to the undersigned
as soon as is practicable, all as described in the Confidential Private
Placement Memorandum. The Company shall signify its rejection by returning to
the undersigned this Subscription Agreement and all funds (without interest or
deduction) submitted by the undersigned.
NEITHER THE COMPANY, NOR ANY OFFICER, DIRECTOR, SHAREHOLDER, EMPLOYEE OR
AGENT OF ANY OF THEM SHALL BE LIABLE TO ANY PERSON FOR THE REJECTION, IN WHOLE
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OR IN PART, OF ANY OFFER TO SUBSCRIBE TO PURCHASE UNITS, NOTWITHSTANDING THAT
THE UNDERSIGNED MAY OTHERWISE BE QUALIFIED AS A PROSPECTIVE INVESTOR.
13. If, prior to the sale of any Units to the undersigned, there is a
material change in die undersigned's investment intention as expressed herein,
or if there occurs any change which would make either the representations or
warranties made by the undersigned herein or the information provided by the
undersigned in the Prospective Investor Questionnaire materially untrue or
misleading, the undersigned agrees to immediately so notify the Company, and any
prior acceptance of the subscription of the undersigned shall be voidable at the
option of the Company.
IN WITNESS WHEREOF, the undersigned executes and agrees to be bound by
this Subscription Agreement by executing the Signature Page attached hereto on
the date therein indicated.
SIGNATURE PAGE
(All information must be completed)
Date: May 15, 1998
/s/ Michael Wiekamp $100,000 10,000 $100,000
- ---------------------- -------------- -------------- --------------
Signature of Purchaser Purchase Price # of Warrants Total $ Investment
/s/ Mary Kathleen Wiekamp Michael Wiekamp & Mary Kathleen Wiekamp
- ------------------------- ---------------------------------------
Signature of Joint Owner (if any) Name(s) of Purchaser (Print)
If Joint Ownership, check one:
Residence Address:
X Joint Tenants, with ------------------
- ----- Right of Survivorship 41 Blue Horizon
Laguna Niguel, California 92677
_____ Tenants in Common
_____ Community Property ###-##-#### (Mary)
-------------------
###-##-#### (Michael)
----------------------
Social Security No. or Taxpayer I.D. No.
ACCEPTED AND AGREED:
SHOPPING.COM
By /s/ Robert J. McNulty
-------------------------------
Robert J. McNulty, Chief Executive Officer
Date: May __, 1998
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<PAGE>
EXHIBIT 4.14
------------
UNSECURED PROMISSORY NOTE
$100,000.00 Corona Del Mar, California May 15, 1998
1. Principal.
FOR VALUE RECEIVED, the undersigned, SHOPPING.COM ("Maker"),
promises to pay Mike Wiekamp ("Payee"), or order, at 2101 East Coast Highway,
Corona Del Mar, CA 92625 or such other place as the holder of this Note shall
specify, in lawful money of the United States of America, the principal amount
of One Hundred Thousand Dollars ($100,000.00), together with interest at the
rate of ten percent (10%) per annum, payable as hereinafter provided.
2. Payment of Principal and Interest.
All principal of and interest accruing on this Note shall be due and
payable six months from the date of this Note.
Interest shall be calculated on the unpaid principal balance of this
Note on the basis of a year of 360 days and the actual number of days elapsed
until payment, unless such calculation would result in a usurious rate, in which
case interest shall be calculated on the basis of a year of 365 or 366 days, as
the case may be. Interest shall accrue and be payable under this Note whether or
not Maker, or Maker's successors or assigns, should avail themselves of the
protection of the United States bankruptcy laws. From and after the occurrence
of an "event of default" as set forth in Section 7 hereof, interest shall
continue to accrue on the unpaid principal balance of this Note at the same
interest rate as set forth in Section 1 of this Note.
3. Prepayment.
A. This Note may be prepaid at any time or from time to time, in
whole or in part, without penalty.
B. Each such prepayment shall include all interest then accrued but
unpaid on this Note.
C. Any partial prepayment of the outstanding principal balance shall
in no way release, discharge or affect the obligation of the Maker to continue
to make any other payments of principal or interest provided for herein until
this Note is paid in full.
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4. Application of Payments.
Each payment on this Note (whether made when due or otherwise) shall
be credited first, to late charges, fees and other charges due, including
collection costs and attorneys' fees, second against interest then due, and the
remainder of such payment shall be credited against the unpaid principal.
5. Waiver.
Maker and all endorsers, guarantors and all persons liable, or to
become liable on this Note (each hereinafter referred to in this Section as the
"Applicable Party"), jointly and severally, waive presentment, protest and
demand, notice of protest, demand, dishonor and nonpayment of this Note, notice
of acceleration, notice of intent to accelerate, and any and all other notices
or matters of a like nature, and consent to any and all renewals and extensions
of the fine of payment hereof. Each Applicable Party agrees that at any time and
from time to time, without notice, (i) the terms of payment herein, or (ii) the
terms of any guaranty of this Note, or (iii) the security described in any
documents at any time securing this Note, may be modified, increased, changed or
exchanged, in whole or in part, without in any way affecting the liability of
any Applicable Party.
6. Late Charge.
If any payment of interest and/or principal hereunder is not
received by Payee within ten (10) days after the due date thereof, Maker agrees
to pay Payee a late charge equal to five percent (5%) of the unpaid amount.
Maker acknowledges that it would be extremely difficult to fix Payee's actual
damages for the failure of Maker to timely pay any amount due under this Note.
Accordingly, such late charge shall be deemed to be Payee's damages for any such
late payment, provided that such late charge shall not limit Payee's right to
compel prompt performance by Maker or to exercise other remedies available to
Payee.
7. Default by Maker.
Any one or more of the following shall constitute an "Event of
Default" by Maker under the terms of this Note:
A. If Maker fails to pay any payment, whether at maturity or
otherwise, of principal and/or interest upon the due date thereof.
B. If Maker defaults in the performance or observance of any of the
covenants, conditions or agreements set forth in this Note.
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<PAGE>
C. If Maker institutes proceedings to be adjudicated a voluntary
bankrupt; consents to the filing of a bankruptcy proceeding against Maker; files
or consents to filing of a petition or answer or consent seeking reorganization
under the federal bankruptcy laws or any other similar applicable federal or
state law; consents to the appointment or a receiver of liquidator or trustee or
assignee in bankruptcy or insolvency of the Maker or a substantial part of
Maker's property; an assignment for the benefit of creditors is made by the
Maker; or Maker admits in writing of Maker's inability to pay Maker's debts
generally as they become due.
8. Remedies Upon Default.
If an Event of Default occurs, at the option of Payee, and upon
written demand, the Payee may accelerate the due date of this Note and declare
the entire outstanding principal balance hereof, including all fees and costs
(if any), and accrued but unpaid interest, immediately due and payable in full.
Each of the options, rights and remedies provided herein or
available at law or in equity which may be exercised by Payee may be exercised
separately or concurrently with any one or more other options, rights or
remedies available to Payee. Failure to exercise any option, right or remedy
shall not constitute a waiver of the right of the Payee to exercise such option,
right or remedy in the event of or with respect to any prior, subsequent or
concurrent transaction or occurrence of the same or a different kind or
character.
9. Attorneys' Fees.
Maker agrees to pay all costs of collection or enforcement of this
Note when incurred, including, but not limited to, reasonable attorneys' fees.
If any suit or action is instituted to enforce this Note, Maker promises to pay,
in addition to the costs and disbursements allowed by law, such sum as the court
may adjudge as reasonable attorneys' fees in such suit or action. Maker shall
also pay all reasonable attorneys' fees and costs incurred by Payee in
connection with any modification, amendment or consent related to any
renegotiation or modification of this Note.
10. Severability.
Every provision of this Note is intended to be severable. If any
term or provision hereof is declared by a court of competent jurisdiction to be
illegal or invalid for any reason whatsoever, such illegality or invalidity
shall not affect the balance of the terms and provisions hereof, which terms and
provisions shall remain binding and enforceable.
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<PAGE>
11. Governing Law.
This Note shall be governed by and construed in accordance with the
laws of the State of California.
12. Notices.
All notices, statements or demands shall be in writing and shall be
served in person, by telegraph, by express mail, by certified mail or by private
overnight delivery. Service shall be deemed conclusively made (i) at the time of
service, if personally served, (ii) at the time (as confirmed in writing by the
telegraphic agency) of delivery thereof to the addressee, if served
telegraphically, (iii) twenty-four (24) hours (exclusive of weekends and
national holidays) after deposit in the United States mail, properly addressed
and postage prepaid, if served by express mail, (iv) five (5) calendar days
after deposit in the United States mail, properly addressed and postage prepaid,
return receipt requested, if served by certified mail, (v) twenty-four (24)
hours after delivery by the party giving the notice, statement or demand to the
private overnight deliverer, if served by private overnight delivery and (vi) at
the time of electronic transmission, if a copy of such notice is mailed within
twenty-four (24) hours after the transmission.
Any notice or demand to Maker shall be given to:
Robert J. McNulty
Shopping.com
2101 E. Coast Hwy., Garden Level
Corona del Mar, California 92625
Any notice or demand to Payee shall be given to:
Mike Wiekamp
41 Blue Horizon
Laguna Niguel, California 92677
and with a copy to:
Barry D. Falk, Esq.
JEFFERS, WILSON, SHAFF & FALK, LLP
18881 Von Karman Avenue, Suite 1400
Irvine, California 92612
FAX No.: (949) 660-7799
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<PAGE>
Any party hereto may change its address for the purpose of receiving
notices, demands or other communications as herein provided by a written notice
given in the manner aforesaid to the other party or parties hereto.
13. Successor and Assigns.
All the terms and provisions of this Note shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
14. Assignability.
Maker's obligation hereunder are nontransferable and nonassignable
without the prior written consent of Payee.
15. Amendment.
Neither this Note nor any term or provision hereof may be modified,
amended or altered except by a written instrument approved by Payee and signed
by Maker.
16. Headings.
Headings at the beginning of each numbered Paragraph of this Note
are intended solely for convenience and are not to be deemed or construed to be
a part of this Note.
17. Purpose of Loan.
The proceeds of this Note are to be used by Maker exclusively for
business purposes, and not for personal, family or household purposes.
18. Time of the Essence.
TIME IS EXPRESSLY DECLARED TO BE THE ESSENCE of each
obligation of the Maker hereunder and in all matters concerning this Note,
including all acts or things to be done or performed in connection herewith, and
specifically of every provision of this Note in which time is an element.
19. Compliance With Usury Laws.
Maker and Payee intent to comply with all applicable usury laws. In
fulfilling this intention, all agreement between Maker and Payee are expressly
limited so that the amount of interest paid or agreed to be paid to Payee for
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<PAGE>
the use, forbearance, or detention of money under this Note shall not exceed the
maximum amount permissible under applicable law.
If for any reason payment of any amount required under this Note
shall be prohibited by law, then the obligation shall be reduced to the maximum
allowable bylaw. If for any reason Payee receives as interest an amount that
would exceed the highest lawful rate, then the amount which would constitute
excessive interest shall be applied to the reduction of the principal of this
Note and not to the payment of interest. If any conflict arises between this
provision and any provision of any other agreement between Maker and Payee, then
this provision shall control.
20. Legal Representation.
Maker agrees and represents that such party has been represented by
such party's own legal counsel with regard to all aspects of this Note, or if
such party is acting without legal counsel, that such party has had adequate
opportunity and has been encouraged to seek the advice of such party's own legal
counsel prior to the execution of this Agreement.
21. Jurisdiction.
Any action whatsoever brought upon or relating to this Note shall be
instituted and prosecuted in the state courts of California, County of Orange,
or the federal district court therefore, and each party waives the right to
change the venue. The parties hereto further consent to accept service of
process in any such action or proceeding by certified mail, return receipt
requested.
"MAKER" "PAYEE"
SHOPPING.COM MIKE WIEKAMP
By /s/ Robert J. McNulty By /s/ Mike Wiekamp
------------------------- -------------------------
Robert J. McNulty Mike Wiekamp
Title: President and Chief Executive
Officer
By /s/ Mary Kathleen Wiekamp
-------------------------
Mary Kathleen Wiekamp
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<PAGE>
EXHIBIT 4.15
------------
SHOPPING.COM
WARRANT AGREEMENT
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THIS WARRANT MAY NOT BE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR UNLESS AN EXEMPTION THEREFROM IS AVAILABLE.
This Warrant Agreement (this "Agreement") is entered into as of 15th day
of May, 1998 by and between, SHOPPING.COM, a California corporation (the
"Company"), and Michael Wiekamp and Mary Kathleen Wiekamp (the "Holder").
RECITALS
WHEREAS, the Company has agreed to grant to Holder warrants to purchase
10,000 shares of Company Common Stock in exchange and in consideration for good
and valuable goods and services.
NOW, THEREFORE, BE IT RESOLVED, the parties agree hereto as follows:
1. Description, Execution.
(a) The Company agrees to issue to the Holder and the Holder agrees
to accept the Warrant Certificate evidencing the right to purchase shares of the
Company common stock at an initial purchase price of Fourteen Dollars ($14.00)
per Share as to which the Warrant is exercisable. The Warrant Certificate shall
be substantially in the form annexed hereto as Exhibit A.
(b) This Agreement shall be executed on behalf of the Company by its
President Upon delivery of this Warrant to the Holder, this Agreement shall be
binding upon the Company, and the Holder shall be entitled to all the benefits
set forth herein.
2. Term of Warrant. The Warrant shall become exercisable at any time after
the date hereof, and remain exercisable, subject to the conditions set forth in
Section 3 until the close of business on May 15, 2001 (the "Expiration Date").
3. Exercise of Warrant.
(a) Subject to (b) below, at any time until the Expiration Date, the
Holder shall have the right to purchase from the Company (and the Company shall
promptly issue to the Holder) one fully-paid and nonassessable share of Common
Stock at the Exercise Price (as defined below) for each Warrant, by surrendering
the appropriate Warrant Certificate and the Subscription Form attached hereto to
the Company at its executive offices and paying the aggregate Exercise Price for
the sham to be purchased, in cash, by check or by cancellation of indebtedness.
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(b) The Warrant may be exercised in whole and in part but not in
increments of less than 100 shares. In case of a partial exercise, the Warrant
Certificate shall be surrendered and a new Warrant Certificate of the same tenor
and for the purchase of the number of sham not purchased upon such partial
exercise shall be issued by the Company to the Holder hereof. The Warrants shall
be deemed to have been exercised immediately prior to the close of business on
the date of their surrender for exercise as provided above, and the person or
entity entitled to receive the shares of Common Stock issuable upon the exercise
shall be treated for all purposes as the holder of such shares of record as of
the close of business on such date. Prior to any such exercise, neither the
Holder nor any person entitled to receive shares issuable upon exercise shall be
or have any of the rights of a shareholder of the Company. No adjustment shall
be made for dividends or other stockholder rights for which the record date is
prior to the date of exercise. As soon as practicable on or after such date, the
Company shall issue in the name of, and deliver to the person or persons
entitled to receive, a certificate or certificates for the full number of shares
of Common Stock issuable upon such exercise.
4. Exercise Price. The initial Exercise Price for each share of Common
Stock issuable pursuant to the Warrant shall be Fourteen Dollars ($14.00) per
Share, adjusted as provided below. The Exercise Price may be paid, in cash,
cashier's check or by cancellation of indebtedness from the Company to the
Holder.
5. Adjustment of Warrant Price and Number of Shares of Common Stock. The
number and kind of securities purchasable upon the exercise of the Warrants and
the Exercise Price shall be subject to adjustment from time to time upon the
happening of certain events, as follows:
5.1 Adjustments. The Exercise Price of the Warrant shall be subject to
adjustment as follows:
(a) In case the Company shall issue rights, options, warrants or
convertible securities to all or substantially all holders of its Common Stock,
without any charge to such holders, entitling the holder thereof to subscribe
for or purchase Stock at a price per share which is lower at the date of
issuance of such rights, options, warrants or securities than the then Current
Fair Market Value (as defined in Section 7 hereof), the price of shares of Stock
thereafter purchasable upon the exercise of the Warrant shall be reduced to a
price equal to an amount which would entitle the Holder to receive the same
number of shares of Common Stock and other securities that he would have
received had he exercised the Warrants immediately prior to such issuance.
(b) For the purpose of this Section 5, the term "Common Stock" shall
mean (i) the class of stock designated as the Common Stock of the Company at the
date of this Agreement, or (ii) any other claw of stock resulting from
successive changes or reclassifications of such Common Stock consisting solely
of changes in par value, or from par value to no par value, or from no par value
to par value.
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5.2 No Adjustment for Dividends. Except as provided in Section 5.1 hereof,
no adjustment in respect of any dividends or distributions out of earnings shall
be made during the term of a Warrant or upon the exercise of a Warrant.
5.3 No Adjustment in Certain Cases. No adjustments shall be made pursuant
to Section 5 hereof in connection with the grant or exercise of presently
authorized or outstanding options to purchase Common Stock under the Company's
existing stock option plan or the exercise of presently outstanding warrants to
purchase Common Stock.
5.4 Preservation of Purchase Price upon Reclassification, Consolidation,
etc. In case of any consolidation of the Company with or merger of the Company
into another corporation or in case of any sale or conveyance to another
corporation of the property, assets or business of the Company as an entirety or
substantially as an entirety, the Company or such successor or purchasing
corporation, as the case may be, shall execute with the Holder an agreement that
the Holder shall have the right thereafter, upon payment of the Exercise Price
in effect immediately prior to such action, to purchase, upon exercise of each
Warrant, the kind and amount of shares and other securities and property which
it would have owned or have been entitled to receive after the occurrence of
such consolidation, merger, sale or conveyance had each Warrant been exercised
immediately prior to such action. In the event of a merger described in Section
368(a)(2)(E) of the Internal Revenue Code of 1986, as amended, in which the
Company is the surviving corporation, the right to purchase sham of Common Stock
under the Warrant shall terminate on the date of such merger and thereupon the
Warrant shall become null and void, but only if the controlling corporation
shall agree to substitute for the Warrant its warrant which entitle the holders
thereof to purchase upon their exercise the kind and amount of shares and other
securities and property which they would have owned or been entitled to receive
had the Warrant been exercised immediately prior to such merger. Any such
agreements referred to in this Subsection 5.4 shall provide for adjustments,
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in Section 5 hereof. The provisions of this Subsection 5.4 shall
similarly apply to successive consolidations, mergers, sales or conveyances.
6. Registration Rights.
6.1 Definitions.
(a) "Commission" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act of
1933, as amended (the "Securities Act").
(b) "Registrable Securities" shall mean (x) shares of Common Stock
issuable upon exercise of the Warrants and (y) any Common Stock issued as a
dividend or other distribution with respect to or in exchange for or in
replacement of the shares referenced in (x) above, provided, however, that
Registrable Securities shall not include any shares of Common Stock which have
previously been registered or which have been sold to the public.
(c) The terms "register," "registered" and "registration" shall
refer to a registration effected by preparing and filing a registration
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statement in compliance with the securities Act and applicable rules and
regulations thereunder, and the declaration or ordering of the effectiveness of
such registration statement.
(d) "Registration Expenses" shall mean all expenses incurred in
effecting any registration pursuant to this Agreement, including, without
limitation, all registration, qualification, and filing fees, printing expenses,
escrow fem fees and disbursements of counsel for the Company, blue sky fees and
expenses of any regular or special audits incident to or required by any such
registration, but shall not include selling expenses and fees and disbursements
of counsel for the Holder.
(e) "Rule 144" shall mean Rule 144 as promulgated by the Commission
under the Securities Act as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.
(f) "Rule 145" shall mean Rule 145 as promulgated by the Commission
under the Securities Act, as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.
6.2 "Piggyback" Registration. If the Company shall determine to register
any of its shares of Common Stock in a firm commitment public offering for its
own account, other than a registration relating solely to employee benefit
plans, or a registration relating solely to a Rule 145 transaction on Form S-4,
or a registration on any registration form that does not permit secondary sales,
the Company will:
(a) promptly give to Holder written notice thereof,
(b) use its best efforts to include in such registration (and any
related qualification under the blue sky laws or other compliance), except as
set forth in Section 6.3 below, and in any underwriting involved therein, all
the Registrable Securities specified in a written request or requests, made by
Holder within Twenty (20) days after the written, notice from the Company
described in clause 6.2(a) above is given. Such written request may specify all
or a part of Holder's Registrable Securities; and
(c) pay all Registration Expenses, other than the selling expenses
of Holder's Registrable Securities.
6.3 Underwriting. If the registration of which the Company gives notice is
for a registered public offering involving an underwriting, the Company shaft so
advise the Holder as a part of the written notice. In such event, the right of
the Holder to registration pursuant to this Section 6 shall be conditioned upon
Holder's participation in such underwriting and the inclusion of the Holder's
Registrable Securities in the underwriting to the extent provided herein. The
Holder shall (together with the Company) enter into an underwriting agreement in
customary form with the representative of the underwriter of underwriters
selected by the Company.
6.4 Exclusion of Registrable Securities. Notwithstanding any other
provisions of this Section 6, if the representative of the underwriters advises
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<PAGE>
the Company that marketing factors require a limitation on the number of shares
to be underwritten, the representative may (subject to the limitations set forth
below) exclude all Registrable Securities from, or limit the number of
Registrable Securities to be included in, the registration and underwriting. The
Company shall so advise the Holder, and the number of shares of securities that
are entitled to be included in the registration and underwriting shall be
allocated first to the Company for securities being sold for its own account and
thereafter to the Holder, pro rata with any other holders of Common Stock having
registration rights. If the Holder does not agree to the terms of any such
underwriting, he shall be excluded therefrom by written notice from the Company
or the underwriter. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration.
If shares are so withdrawn from the registration or if the number of
shares of Registrable Securities to be included in such registration was
previously reduced as a result of marketing factors, the Company shall then
offer to all persons who have retained the right to include securities in the
registration the right to include additional securities in the registration in
an aggregate amount equal to the number of sham so withdrawn, with such sham to
be allocated among the persons requesting additional inclusion pro rata amongst
those persons requesting inclusion.
6.5 Registration Procedures. In the case of each registration effected by
the Company pursuant to Section 6, the Company will keep Holder advised in
writing as to the initiation of each registration and as to the completion
thereof, at its expense, the Company will use its best efforts to:
(a) Keep such registration effective for a period of one hundred
twenty (120) days or until the Holder has completed the distribution described
in the registration statement relating thereto, whichever first occurs;
provided, however, that (x) such 120-days period shall be extended for a period
of time equal to the period the Holder refrains from selling any securities
included in such registration at the request of an underwriter of Common Stock
(or other securities) of the Company; and (y) in the case of any registration of
Registrable Securities on Form S-3 which are intended to be offered on a
continuous or delayed basis, such 120-day period shall be extended, if
necessary, to keep the registration statement effective until all such
Registrable Securities are sold, provided that Rule 145, or any successor rule
under the Securities Act, permits an offering on a continuous or delayed basis,
and provided further that applicable rules under the Securities Act governing
the obligation to file a post-effective amendment permit, in lieu of filing a
post-effective amendment that (I) includes any prospectus required by Section
10(a)(3) of the Securities Act or (II) reflects facts or events representing a
material or fundamental change in the information set forth in the registration
statement, the incorporation by reference of information required to be included
in (I) and (II) above to be contained in periodic reports filed pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 in the registration
statement.
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement;
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<PAGE>
(c) Furnish such number of prospectuses and other documents incident
thereto, including any amendment of or supplement to the prospectus, as the
Holder from time to time may reasonably request;
(d) Notify the Holder at any time when a prospectus relating thereto
is required to be delivered under the Securities Act of the happening of any
event as a result of which the prospectus included in such registration
statement; as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or incomplete in the light of the
circumstances then existing, and at the request of Holder, prepare and furnish
to the Holder a reasonable number of copies of a supplement to or an amendment
of such prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such shares, such prospectus shall not include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or incomplete
in the light of the circumstances then existing;
(e) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed;
(f) Provide a transfer agent and registrar for all Registrable
Securities registered, pursuant to such registration statement and a CUSIP
number for all such Registrable Securities, in each case not later than the
effective date of such registration; and
(g) Otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering the
period of at least twelve months, but not more than eighteen months, beginning
with the first month after the effective date of the Registration Statement,
which earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act.
7. Fractional Shares; Issuance of Shares; Legends.
7.1 Fractional Shares. The Company shall not be required to issue
fractional shares of Company Common Stock an the exercise of a Warrant if any
fraction of a share of Stock would, except for the provisions of this Section 6,
be issuable on the exercise of a Warrant (or specified portion thereof), the
Company shall in lieu thereof pay an amount in cash equal to the then Current
Fair Market Value, multiplied by such fraction. For purposes of this Agreement,
the term "Current Fair Market Value" shall mean (i) if the Common Stock is
traded in the over-the-counter market and not in the NASDAQ Small Cap Market or
the National Market nor on any national securities exchange, the average of the
per share closing bid prices of the Common Stock on the 10 consecutive trading
days immediately preceding the date in question, as reported by NASDAQ or an
equivalent generally accepted reporting service, or (ii) if the Common Stock is
traded in the NASDAQ Small Cap Market or the National Market or on a national
securities exchange, the average for the 10 consecutive trading days immediately
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preceding the date in question of the daily per share closing prices of the
Common Stock in the NASDAQ Small Cap Market or the National Market or on the
principal stock exchange an on which it is listed, as the case may be or (iii)
if the class of Stock is not publicly traded or quoted, the fair market value as
determined by the Board of Directors of the Company based on (with appropriate
adjustments) the most recent purchases of the Company's Stock and/or other
relevant factors including the Company's income and assets or evaluation reports
received by the Company.
7.2 Issuance of Shares. All shares of Stock issued upon exercise of a
Warrant will be duly authorized, validly issued, fully paid and nonassessable.
7.3 Legends. If the Stock to be issued upon exercise of this Warrant has
not been registered under the Securities Act of 1933, as amended, then the stock
certificates representing such shares of Common Stock shall bear a legend
substantially in the following form:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR APPLICABLE
STATE SECURITIES LAWS AND ARE RESTRICTED SECURITIES. SUCH SECURITIES MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER THE ACT AND STATE SECURITIES LAWS.
8. Transferability. The Warrant or the Shares of Company Common Stock
underlying the Warrant shall not be transferred, and the Company shall not be
required to register any transfer on the books of the Company, unless the
Company shall have been provided with an opinion of counsel satisfactory to it
prior to such transfer that registration under the Securities Act and applicable
state securities laws is not required in connection with the transaction
resulting in such transfer. Each new Warranty or Company Common Stock
certificate issued upon any transfer as above provided shall bear an appropriate
investment legend, except that such Warrant or Company Common Stock certificate
shall not bear such restrictive legend if the opinion of counsel referred to
above is to further effect that such legend is not required in order to
establish compliance with the provisions of the Securities Act or if such
transfer is made in accordance with the provisions of Rule 144(k) promulgated
under the Securities Act. The Warrant may also be transferred by will or devise
and by the laws of descent.
Any attempt to transfer, sell or otherwise dispose of this Warrant (except
as provided above) shall be void and shall not convey any rights or privileges
to the transferee.
9. Miscellaneous.
9.1 Notices.
All notices, requests, demand and other communications required Or
Permitted to be given hereunder shall be deemed to have been duly given if in
writing and delivered personally, given by prepaid telegram, or mailed first
class, postage prepaid, registered or certified mail, return receipt requested,
to the following addresses:
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If to the Company: SHOPPING.COM
2101 E. Coast Hwy., Garden Level
Corona del Mar, California 92625
Attention: Mr. Robert J. McNulty
With a copy to: Jeffers, Wilson, Shaff & Falk, LLP
18881 Von Karman Avenue, Suite 1400
Irvine, California 92612
Attention: Barry D. Falk, Esq.
If to the Holder: Michael Wiekamp
Mary Kathleen Wiekamp
41 Blue Horizon
Laguna Niguel, California 92677
Any party may change the address to which such communications are to
be directed to it by giving written notice to the other party. Except as
otherwise provided in this Warrant, all notices shall be deemed to be given when
delivered in person, or if placed in the mail as aforesaid, then two (2) days
thereafter.
9.2 Modifications. The parties may, by mutual consent, amend, modify,
supplement and waive any right under this Warrant in any manner agreed by them
in writing at any time.
9.3 Entire Agreement. This Agreement, and any documents, instruments or
agreements specifically referred to herein, set forth the entire agreement and
understanding of the parties with respect to the transactions contemplated
hereby and supersede all Prior agreements, arrangements and understandings
relating to the subject matter hereof.
9.4 Headings. The section and paragraph headings contained in this
Agreement am for convenient reference only, and shall not in any way affect the
meaning or interpretation hereof.
9.5 Governing Law; Arbitration. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, without any
regard to the choice of law provisions thereof. Any dispute arising under this
Agreement shall be resolved by binding arbitration under the rules of commercial
arbitration of the American Arbitration Association in Orange County,
California.
9.6 Severability. If any provision of this Agreement shall be hold to be
invalid, illegal or unenforceable, it shall be deemed severable from the
remaining provisions of this Agreement which shall remain in full force and
effect.
9.7 Waiver. No waiver of any provision of this Agreement or any breach
thereof shall be deemed or shall constitute a waiver of any other provision
hereof (whether or not similar) or any other breach hereunder nor shall such
waiver constitute a continuing waiver. Either party may waive performance of any
provision of this Agreement, the nonperformance of which would otherwise
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constitute a breach of this Agreement including but not limited to the
nonperformance of any condition precedent to such party's performance, without
affecting the enforceability of this Agreement or the provisions contained
herein.
9.8 Heirs; Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
heirs, successors and assigns of the parties hereto. Holders may transfer and
assign the Warrants only as provided in Section 7 and any assignment in
violation of the foregoing shall be void.
9.9 Attorneys' Fees. If any legal action is instituted to enforce or
interpret the terms of this Agreement, the prevailing party in such action shall
be entitled to actual attorneys' fees in addition to any other relief to which
the party is entitled.
IN WITNESS WHEREOF, the parties have executed this instrument as of the
date first written above.
SHOPPING.COM, A CALIFORNIA CORPORATION
By: /s/ Robert J. McNulty
-----------------------------------
Robert J. McNulty, President
"HOLDER"
/s/ Michael Wiekamp
-------------------------------------
Michael Wiekamp
/s/ Mary Kathleen Wiekamp
-------------------------------------
Mary Kathleen Wiekamp
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EXHIBIT 4.16
------------
THIS SUBSCRIPTION AGREEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES REFERRED TO HEREIN.
SUBSCRIPTION AGREEMENT
Shopping.com
2101 East Coast Highway
Garden level
Corona Del Mar, CA 92625
Attn: Robert McNulty
Re: Prospective Purchase of Notes and Warrants
Shopping.com, a California corporation
Gentlemen:
The undersigned, by signing the Signature Page attached hereto, hereby
irrevocably tenders this subscription and applies to purchase 16 units (the
"Units") of Shopping.com, a California corporation (the "Company"), at a
purchase price of $25,000 per Unit. Each Unit consists of a Promissory Note in
the principal amount of $25,000 and warrants to purchase 2,500 shares of the
Company's Common Stock, no par value (the "Common Stock"), at an exercise price
of $14.00 per share.
Enclosed, in cash or good funds (in the case of a check, the check should
be payable to the order of "Shopping.com") as tender of the purchase price for
the Units, is the aggregate amount of $500,000.00 ($25,000 minimum).
The undersigned hereby acknowledges receipt of a copy of the Company's
Annual Report on form 10-KSB for the period ending January 31, 1998 (the
"Report"), relating to and describing the terms and conditions of the offer and
sale of the Units.
The undersigned hereby represents and warrants to, and covenants with, the
Company as follows, recognizing that the Company will rely to a material degree
upon such representations, warranties and covenants, each of which shall survive
any acceptance of this subscription in whole or in part by the Company and the
issuance and sale of any Units to the undersigned:
1. All statements made in the Prospective Investor Questionnaire which has
been or is concurrently being furnished to the Company by the undersigned
continue to be and are true, accurate and complete as of the date hereof.
2. The undersigned has been informed and is aware that an investment in
the Units involves a degree of risk and speculation, and has carefully read and
considered the Report in its entirety.
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3. The undersigned confirms that he has been advised that he should rely
on, and that he has consulted and relied upon, his own accounting, legal and
financial advisors with respect to this investment in the Units. The undersigned
and his professional advisor(s) (as defined in Section 260.102.12(g) of the
Rules of the California Corporations Commissioner), if any, have been afforded
an opportunity to meet with the officers and directors of the Company and to ask
and receive answers to any questions about this offering and the proposed
business and affairs of the Company, and to obtain any additional information
which the Company possesses or can acquire without unreasonable effort or
expense that is necessary to verify the accuracy of information provided in the
Report, and have therefore obtained, in the judgment of the undersigned and/or
his or her professional advisor(s), sufficient information to evaluate the
merits and risks of investment in the Units. The undersigned acknowledges and
agrees that he/she has had an opportunity to meet and speak with officers or
representatives and to ask questions and get answers with respect to the Company
and this offering.
4. The undersigned understands and acknowledges that no federal or state
agency has made any finding or determination as to the fairness or suitability
for investment in, nor any recommendation or endorsement of, the Company or the
Units.
5. On the basis of the review of the materials and information described
above, and relying solely thereon and upon the knowledge and experience of the
undersigned and/or his or her professional advisor(s), if any, in business and
financial matters, the undersigned has evaluated the merits and risks of
investment in the Units and has determined that he or she is both willing and
able to undertake the economic risk of this investment.
6. The Units are being acquired by the undersigned for the personal
account of the undersigned for investment and not with a view to, or for resale
in connection with, any distribution thereof or of any interest therein, and no
one else has any beneficial ownership or interest in the Units being acquired by
the undersigned, nor are they to be subject to any lien or pledge. The
undersigned has no present obligation, indebtedness or commitment pending, nor
is any circumstance in existence which will compel the undersigned to secure
funds by the sale, transfer or other distribution of any of the Units or any
interest therein or any Stock that may be distributed in respect thereof.
7. The undersigned understands and agrees that the Units cannot be
transferred or assigned that there is and will be no public market therefor,
and, accordingly, that it may not be possible for the undersigned readily, if at
all, to liquidate this investment in the Units in case of an emergency or
otherwise. The undersigned has the net worth, past income and estimated future
income set forth in the Prospective Investor Questionnaire, can afford to bear
the risks of an investment in the Units, including the risk of losing the entire
investment, for an indefinite period of time, and has adequate means of
providing for his or her current needs and personal contingencies and has no
need for liquidity in this investment.
8. The undersigned understands and acknowledges that the Units are being
offered and sold pursuant to one or more exemptions from the registration and
qualification requirements of the Securities Act of 1933 and the California
Corporate Securities Act of 1968, the availability
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<PAGE>
of which depend upon the truth and completeness of the information provided to
the Company in the Prospective Investor Questionnaire and the bona fide nature
of the foregoing representations and warranties. With such realization, the
undersigned hereby authorizes the Company to act as it may see fit in reliance
on such information, representations and warranties, including the placement of
the following legend on the stock certificate(s) issued to the undersigned in
addition to any other legends that may be imposed thereon which, in the
reasonable opinion of Company's counsel, may be required by applicable
securities laws:
"THE UNITS REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSIONS UNDER THE SECURITIES ACT OF 1933 OR WITH THE
CALIFORNIA DEPARTMENT OF CORPORATIONS UNDER THE CORPORATE SECURITIES LAW
OF 1968, AS AMENDED. THE UNITS MAY NOT BE PLEDGED, SOLD OR TRANSFERRED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACTS
COVERING THE UNITS OR AN OPINION OR QUALIFIED COUNSEL OR OTHER EVIDENCE
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
9. The undersigned hereby indemnifies and holds harmless the Company, and
its respective officers, directors, shareholders, employees and agents, as the
case may be, from and against any and all damages suffered and liabilities
incurred by any of them (including costs of investigation and defense and
attorneys' fees) arising out of any inaccuracy in the agreements,
representations, covenants and warranties made by the undersigned herein.
10. If the undersigned is purchasing the Units subscribed for hereby in a
fiduciary capacity, the above representations and warranties shall be deemed to
have been made on behalf of the person or persons for whom the undersigned is so
purchasing.
11. The undersigned hereby acknowledges and agrees that the undersigned is
not entitled to cancel, terminate or revoke this subscription or any agreements
of the undersigned hereunder and that such subscription and agreements shall
survive the death or disability of the undersigned.
12. The undersigned understands and acknowledges that this subscription
may be accepted or rejected by the Company in its sole discretion, together with
a completed and executed Prospective Investor Questionnaire and all information
required by the provisions hereof and payment of the full amount of the
subscription price for the Units subscribed for. Any amounts tendered in excess
of the total payable as the purchase price for Units as to which this
subscription has been accepted will thereafter be delivered to the undersigned
as soon as is practicable, all as described in the Confidential Private
Placement Memorandum. The Company shall signify its rejection by returning to
the undersigned this Subscription Agreement and all funds (without interest or
deduction) submitted by the undersigned.
NEITHER THE COMPANY, NOR ANY OFFICER, DIRECTOR, SHAREHOLDER,
EMPLOYEE OR AGENT OF ANY OF THEM SHALL BE LIABLE TO ANY PERSON FOR
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THE REJECTION, IN WHOLE OR IN PART, OF ANY OFFER TO SUBSCRIBE TO PURCHASE UNITS,
NOTWITHSTANDING THAT THE UNDERSIGNED MAY OTHERWISE BE QUALIFIED AS A PROSPECTIVE
INVESTOR.
13. If, prior to the sale of any Units to the undersigned, there is a
material change in die undersigned's investment intention as expressed herein,
or if there occurs any change which would make either the representations or
warranties made by the undersigned herein or the information provided by the
undersigned in the Prospective Investor Questionnaire materially untrue or
misleading, the undersigned agrees to immediately so notify the Company, and any
prior acceptance of the subscription of the undersigned shall be voidable at the
option of the Company.
IN WITNESS WHEREOF, the undersigned executes and agrees to be bound by
this Subscription Agreement by executing the Signature Page attached hereto on
the date therein indicated.
SIGNATURE PAGE
(All information must be completed)
Date: May 15, 1998
/s/ Jon Aubry $500,000 50,000 $500,000
- -------------- --------- -------- ---------
Signature of Purchaser Purchase Price # of Warrants Total $ Investment
Jon Aubry
- ---------------------------------- --------------------------
Signature of Joint Owner (if any) Name(s) of Purchaser (Print)
If Joint Ownership, check one: Residence Address:
1301 Summit Avenue
- ----- Joint Tenants, with Fort Worth, Texas 76102
Right of Survivorship
- ----- Tenants in Common
- ----- Community Property ###-##-####
---------------------------
Social Security No. or
Taxpayer I.D. No.
ACCEPTED AND AGREED:
SHOPPING.COM
By /s/ Robert J. McNulty
------------------------------------------
Robert J. McNulty, Chief Executive Officer
Date: May __, 1998
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EXHIBIT 4.17
------------
UNSECURED PROMISSORY NOTE
$500,000.00 CORONA DEL MAR, CALIFORNIA MAY 15, 1998
1. PRINCIPAL.
FOR VALUE RECEIVED, the undersigned, SHOPPING.COM ("Maker"),
promises to pay Jon Aubry ("Payee"), or order, at 2101 East Coast Highway,
Corona Del Mar, CA 92625 or such other place as the holder of this Note shall
specify, in lawful money of the United States of America, the principal amount
of FIVE HUNDRED THOUSAND DOLLARS ($500,000.00), together with interest at the
rate of ten percent (10%) per annum, payable as hereinafter provided.
2. PAYMENT OF PRINCIPAL AND INTEREST.
All principal of and interest accruing on this Note shall be due and
payable six months from the date of this Note.
Interest shall be calculated on the unpaid principal balance of this
Note on the basis of a year of 360 days and the actual number of days elapsed
until payment, unless such calculation would result in a usurious rate, in which
case interest shall be calculated on the basis of a year of 365 or 366 days, as
the case may be. Interest shall accrue and be payable under this Note whether or
not Maker, or Maker's successors or assigns, should avail themselves of the
protection of the United States bankruptcy laws. From and after the occurrence
of an "event of default" as set forth in Section 7 hereof, interest shall
continue to accrue on the unpaid principal balance of this Note at the same
interest rate as set forth in Section 1 of this Note.
3. PREPAYMENT.
A. This Note may be prepaid at any time or from time to time, in
whole or in part, without penalty.
B. Each such prepayment shall include all interest then accrued but
unpaid on this Note.
C. Any partial prepayment of the outstanding principal balance shall
in no way release, discharge or affect the obligation of the Maker to continue
to make any other payments of principal or interest provided for herein until
this Note is paid in full.
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4. APPLICATION OF PAYMENTS.
Each payment on this Note (whether made when due or otherwise) shall
be credited first, to late charges, fees and other charges due, including
collection costs and attorneys' fees, second against interest then due, and the
remainder of such payment shall be credited against the unpaid principal.
5. WAIVER.
Maker and all endorsers, guarantors and all persons liable, or to
become liable on this Note (each hereinafter referred to in this Section as the
"Applicable Party"), jointly and severally, waive presentment, protest and
demand, notice of protest, demand, dishonor and nonpayment of this Note, notice
of acceleration, notice of intent to accelerate, and any and all other notices
or matters of a like nature, and consent to any and all renewals and extensions
of the fine of payment hereof. Each Applicable Party agrees that at any time and
from time to time, without notice, (i) the terms of payment herein, or (ii) the
terms of any guaranty of this Note, or (iii) the security described in any
documents at any time securing this Note, may be modified, increased, changed or
exchanged, in whole or in part, without in any way affecting the liability of
any Applicable Party.
6. LATE CHARGE.
If any payment of interest and/or principal hereunder is not
received by Payee within ten (10) days after the due date thereof, Maker agrees
to pay Payee a late charge equal to five percent (5%) of the unpaid amount.
Maker acknowledges that it would be extremely difficult to fix Payee's actual
damages for the failure of Maker to timely pay any amount due under this Note.
Accordingly, such late charge shall be deemed to be Payee's damages for any such
late payment, provided that such late charge shall not limit Payee's right to
compel prompt performance by Maker or to exercise other remedies available to
Payee.
7. DEFAULT BY MAKER.
Any one or more of the following shall constitute an "Event of
Default" by Maker under the terms of this Note:
A. If Maker fails to pay any payment, whether at maturity or
otherwise, of principal and/or interest upon the due date thereof.
B. If Maker defaults in the performance or observance of any of the
covenants, conditions or agreements set forth in this Note.
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C. If Maker institutes proceedings to be adjudicated a voluntary
bankrupt; consents to the filing of a bankruptcy proceeding against Maker; files
or consents to filing of a petition or answer or consent seeking reorganization
under the federal bankruptcy laws or any other similar applicable federal or
state law; consents to the appointment or a receiver of liquidator or trustee or
assignee in bankruptcy or insolvency of the Maker or a substantial part of
Maker's property; an assignment for the benefit of creditors is made by the
Maker; or Maker admits in writing of Maker's inability to pay Maker's debts
generally as they become due.
8. REMEDIES UPON DEFAULT.
If an Event of Default occurs, at the option of Payee, and upon
written demand, the Payee may accelerate the due date of this Note and declare
the entire outstanding principal balance hereof, including all fees and costs
(if any), and accrued but unpaid interest, immediately due and payable in full.
Each of the options, rights and remedies provided herein or
available at law or in equity which may be exercised by Payee may be exercised
separately or concurrently with any one or more other options, rights or
remedies available to Payee. Failure to exercise any option, right or remedy
shall not constitute a waiver of the right of the Payee to exercise such option,
right or remedy in the event of or with respect to any prior, subsequent or
concurrent transaction or occurrence of the same or a different kind or
character.
9. ATTORNEYS' FEES.
Maker agrees to pay all costs of collection or enforcement of this
Note when incurred, including, but not limited to, reasonable attorneys' fees.
If any suit or action is instituted to enforce this Note, Maker promises to pay,
in addition to the costs and disbursements allowed by law, such sum as the court
may adjudge as reasonable attorneys' fees in such suit or action. Maker shall
also pay all reasonable attorneys' fees and costs incurred by Payee in
connection with any modification, amendment or consent related to any
renegotiation or modification of this Note.
10. SEVERABILITY.
Every provision of this Note is intended to be severable. If any
term or provision hereof is declared by a court of competent jurisdiction to be
illegal or invalid for any reason whatsoever, such illegality or invalidity
shall not affect the balance of the terms and provisions hereof, which terms and
provisions shall remain binding and enforceable.
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11. GOVERNING LAW.
This Note shall be governed by and construed in accordance with the
laws of the State of California.
12. NOTICES.
All notices, statements or demands shall be in writing and shall be
served in person, by telegraph, by express mail, by certified mail or by private
overnight delivery. Service shall be deemed conclusively made (i) at the time of
service, if personally served, (ii) at the time (as confirmed in writing by the
telegraphic agency) of delivery thereof to the addressee, if served
telegraphically, (iii) twenty-four (24) hours (exclusive of weekends and
national holidays) after deposit in the United States mail, properly addressed
and postage prepaid, if served by express mail, (iv) five (5) calendar days
after deposit in the United States mail, properly addressed and postage prepaid,
return receipt requested, if served by certified mail, (v) twenty-four (24)
hours after delivery by the party giving the notice, statement or demand to the
private overnight deliverer, if served by private overnight delivery and (vi) at
the time of electronic transmission, if a copy of such notice is mailed within
twenty-four (24) hours after the transmission.
Any notice or demand to Maker shall be given to:
Robert J. McNulty
Shopping.com
2101 E. Coast Hwy., Garden Level
Corona del Mar, California 92625
Any notice or demand to Payee shall be given to:
Jon Aubry
1301 Summit Avenue
Fort Worth Texas 76102-4423
and with a copy to:
Barry D. Falk, Esq.
JEFFERS, WILSON, SHAFF & FALK, LLP
18881 Von Karman Avenue, Suite 1400
Irvine, California 92612
FAX No.: (949) 660-7799
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Any party hereto may change its address for the purpose of receiving
notices, demands or other communications as herein provided by a written notice
given in the manner aforesaid to the other party or parties hereto.
13. SUCCESSOR AND ASSIGNS.
All the terms and provisions of this Note shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
14. ASSIGNABILITY.
Maker's obligation hereunder are nontransferable and nonassignable
without the prior written consent of Payee.
15. AMENDMENT.
Neither this Note nor any term or provision hereof may be modified,
amended or altered except by a written instrument approved by Payee and signed
by Maker.
16. HEADINGS.
Headings at the beginning of each numbered Paragraph of this Note
are intended solely for convenience and are not to be deemed or construed to be
a part of this Note.
17. PURPOSE OF LOAN.
The proceeds of this Note are to be used by Maker exclusively for
business purposes, and not for personal, family or household purposes.
18. TIME OF THE ESSENCE.
TIME IS EXPRESSLY DECLARED TO BE THE ESSENCE of each
obligation of the Maker hereunder and in all matters concerning this Note,
including all acts or things to be done or performed in connection herewith, and
specifically of every provision of this Note in which time is an element.
19. COMPLIANCE WITH USURY LAWS.
Maker and Payee intent to comply with all applicable usury laws. In
fulfilling this intention, all agreement between Maker and Payee are expressly
limited so that the amount of interest paid or agreed to be paid to Payee for
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<PAGE>
the use, forbearance, or detention of money under this Note shall not exceed the
maximum amount permissible under applicable law.
If for any reason payment of any amount required under this Note
shall be prohibited by law, then the obligation shall be reduced to the maximum
allowable bylaw. If for any reason Payee receives as interest an amount that
would exceed the highest lawful rate, then the amount which would constitute
excessive interest shall be applied to the reduction of the principal of this
Note and not to the payment of interest. If any conflict arises between this
provision and any provision of any other agreement between Maker and Payee, then
this provision shall control.
20. LEGAL REPRESENTATION.
Maker agrees and represents that such party has been represented by
such party's own legal counsel with regard to all aspects of this Note, or if
such party is acting without legal counsel, that such party has had adequate
opportunity and has been encouraged to seek the advice of such party's own legal
counsel prior to the execution of this Agreement.
21. JURISDICTION.
Any action whatsoever brought upon or relating to this Note shall be
instituted and prosecuted in the state courts of California, County of Orange,
or the federal district court therefore, and each party waives the right to
change the venue. The parties hereto further consent to accept service of
process in any such action or proceeding by certified mail, return receipt
requested.
"MAKER" "PAYEE"
SHOPPING.COM JON AUBRY
By /s/ Robert J. McNulty By /s/ John Aubry
-------------------------------- -----------------------------
Robert J. McNulty Jon Aubry
Title: President and Chief Executive
Officer
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<PAGE>
EXHIBIT 4.18
------------
SHOPPING.COM
WARRANT AGREEMENT
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THIS WARRANT MAY NOT BE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR UNLESS AN EXEMPTION THEREFROM IS AVAILABLE.
This Warrant Agreement (this "Agreement") is entered into as of 15th day
of May, 1998 by and between, SHOPPING.COM, a California corporation (the
"Company"), and Jon Aubry (the "Holder").
RECITALS
WHEREAS, the Company has agreed to grant to Holder warrants to purchase
50,000 shares of Company Common Stock in exchange and in consideration for good
and valuable goods and services.
NOW, THEREFORE, BE IT RESOLVED, the parties agree hereto as follows:
1. Description, Execution.
(a) The Company agrees to issue to the Holder and the Holder agrees
to accept the Warrant Certificate evidencing the right to purchase shares of the
Company common stock at an initial purchase price of Fourteen Dollars ($14.00)
per Share as to which the Warrant is exercisable. The Warrant Certificate shall
be substantially in the form annexed hereto as Exhibit A.
(b) This Agreement shall be executed on behalf of the Company by its
President Upon delivery of this Warrant to the Holder, this Agreement shall be
binding upon the Company, and the Holder shall be entitled to all the benefits
set forth herein.
2. Term of Warrant. The Warrant shall become exercisable at any time after
the date hereof, and remain exercisable, subject to the conditions set forth in
Section 3 until the close of business on May 15, 2001 (the "Expiration Date").
3. Exercise of Warrant.
(a) Subject to (b) below, at any time until the Expiration Date, the
Holder shall have the right to purchase from the Company (and the Company shall
promptly issue to the Holder) one fully-paid and nonassessable share of Common
Stock at the Exercise Price (as defined below) for each Warrant, by surrendering
the appropriate Warrant Certificate and the Subscription Form attached hereto to
the Company at its executive offices and paying the aggregate Exercise Price for
the sham to be purchased, in cash, by check or by cancellation of indebtedness.
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(b) The Warrant may be exercised in whole and in part but not in
increments of less than 100 shares. In case of a partial exercise, the Warrant
Certificate shall be surrendered and a new Warrant Certificate of the same tenor
and for the purchase of the number of sham not purchased upon such partial
exercise shall be issued by the Company to the Holder hereof. The Warrants shall
be deemed to have been exercised immediately prior to the close of business on
the date of their surrender for exercise as provided above, and the person or
entity entitled to receive the shares of Common Stock issuable upon the exercise
shall be treated for all purposes as the holder of such shares of record as of
the close of business on such date. Prior to any such exercise, neither the
Holder nor any person entitled to receive shares issuable upon exercise shall be
or have any of the rights of a shareholder of the Company. No adjustment shall
be made for dividends or other stockholder rights for which the record date is
prior to the date of exercise. As soon as practicable on or after such date, the
Company shall issue in the name of, and deliver to the person or persons
entitled to receive, a certificate or certificates for the full number of shares
of Common Stock issuable upon such exercise.
4. Exercise Price. The initial Exercise Price for each share of Common
Stock issuable pursuant to the Warrant shall be Fourteen Dollars ($14.00) per
Share, adjusted as provided below. The Exercise Price may be paid, in cash,
cashier's check or by cancellation of indebtedness from the Company to the
Holder.
5. Adjustment of Warrant Price and Number of Shares of Common Stock. The
number and kind of securities purchasable upon the exercise of the Warrants and
the Exercise Price shall be subject to adjustment from time to time upon the
happening of certain events, as follows:
5.1 Adjustments. The Exercise Price of the Warrant shall be subject
to adjustment as follows:
(a) In case the Company shall issue rights, options, warrants or
convertible securities to all or substantially all holders of its Common Stock,
without any charge to such holders, entitling the holder thereof to subscribe
for or purchase Stock at a price per share which is lower at the date of
issuance of such rights, options, warrants or securities than the then Current
Fair Market Value (as defined in Section 7 hereof), the price of shares of Stock
thereafter purchasable upon the exercise of the Warrant shall be reduced to a
price equal to an amount which would entitle the Holder to receive the same
number of shares of Common Stock and other securities that he would have
received had he exercised the Warrants immediately prior to such issuance.
(b) For the purpose of this Section 5, the term "Common Stock" shall
mean (i) the class of stock designated as the Common Stock of the Company at the
date of this Agreement, or (ii) any other claw of stock resulting from
successive changes or reclassifications of such Common Stock consisting solely
of changes in par value, or from par value to no par value, or from no par value
to par value.
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5.2 No Adjustment for Dividends. Except as provided in Section 5.1
hereof, no adjustment in respect of any dividends or distributions out of
earnings shall be made during the term of a Warrant or upon the exercise of a
Warrant.
5.3 No Adjustment in Certain Cases. No adjustments shall be made
pursuant to Section 5 hereof in connection with the grant or exercise of
presently authorized or outstanding options to purchase Common Stock under the
Company's existing stock option plan or the exercise of presently outstanding
warrants to purchase Common Stock.
5.4 Preservation of Purchase Price upon Reclassification,
Consolidation, etc. In case of any consolidation of the Company with or merger
of the Company into another corporation or in case of any sale or conveyance to
another corporation of the property, assets or business of the Company as an
entirety or substantially as an entirety, the Company or such successor or
purchasing corporation, as the case may be, shall execute with the Holder an
agreement that the Holder shall have the right thereafter, upon payment of the
Exercise Price in effect immediately prior to such action, to purchase, upon
exercise of each Warrant, the kind and amount of shares and other securities and
property which it would have owned or have been entitled to receive after the
occurrence of such consolidation, merger, sale or conveyance had each Warrant
been exercised immediately prior to such action. In the event of a merger
described in Section 368(a)(2)(E) of the Internal Revenue Code of 1986, as
amended, in which the Company is the surviving corporation, the right to
purchase sham of Common Stock under the Warrant shall terminate on the date of
such merger and thereupon the Warrant shall become null and void, but only if
the controlling corporation shall agree to substitute for the Warrant its
warrant which entitle the holders thereof to purchase upon their exercise the
kind and amount of shares and other securities and property which they would
have owned or been entitled to receive had the Warrant been exercised
immediately prior to such merger. Any such agreements referred to in this
Subsection 5.4 shall provide for adjustments, which shall be as nearly
equivalent as may be practicable to the adjustments provided for in Section 5
hereof. The provisions of this Subsection 5.4 shall similarly apply to
successive consolidations, mergers, sales or conveyances.
6. Registration Rights.
6.1 Definitions.
(a) "Commission" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act of
1933, as amended (the "Securities Act").
(b) "Registrable Securities" shall mean (x) shares of Common Stock
issuable upon exercise of the Warrants and (y) any Common Stock issued as a
dividend or other distribution with respect to or in exchange for or in
replacement of the shares referenced in (x) above, provided, however, that
Registrable Securities shall not include any shares of Common Stock which have
previously been registered or which have been sold to the public.
(c) The terms "register," "registered" and "registration" shall
refer to a registration effected by preparing and filing a registration
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<PAGE>
statement in compliance with the Securities Act and applicable rules and
regulations thereunder, and the declaration or ordering of the effectiveness of
such registration statement.
(d) "Registration Expenses" shall mean all expenses incurred in
effecting any registration pursuant to this Agreement, including, without
limitation, all registration, qualification, and filing fees, printing expenses,
escrow fem fees and disbursements of counsel for the Company, blue sky fees and
expenses of any regular or special audits incident to or required by any such
registration, but shall not include selling expenses and fees and disbursements
of counsel for the Holder.
(e) "Rule 144" shall mean Rule 144 as promulgated by the Commission
under the Securities Act as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.
(f) "Rule 145" shall mean Rule 145 as promulgated by the Commission
under the Securities Act, as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.
6.2 "Piggyback" Registration. If the Company shall determine to
register any of its shares of Common Stock in a firm commitment public offering
for its own account, other than a registration relating solely to employee
benefit plans, or a registration relating solely to a Rule 145 transaction on
Form S-4, or a registration on any registration form that does not permit
secondary sales, the Company will:
(a) promptly give to Holder written notice thereof,
(b) use its best efforts to include in such registration (and any
related qualification under the blue sky laws or other compliance), except as
set forth in Section 6.3 below, and in any underwriting involved therein, all
the Registrable Securities specified in a written request or requests, made by
Holder within Twenty (20) days after the written, notice from the Company
described in clause 6.2(a) above is given. Such written request may specify all
or a part of Holder's Registrable Securities; and
(c) pay all Registration Expenses, other than the selling expenses
of Holder's Registrable Securities.
6.3 Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shaft so advise the Holder as a part of the written notice. In such
event, the right of the Holder to registration pursuant to this Section 6 shall
be conditioned upon Holder's participation in such underwriting and the
inclusion of the Holder's Registrable Securities in the underwriting to the
extent provided herein. The Holder shall (together with the Company) enter into
an underwriting agreement in customary form with the representative of the
underwriter of underwriters selected by the Company.
6.4 Exclusion of Registrable Securities. Notwithstanding any other
provisions of this Section 6, if the representative of the underwriters
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<PAGE>
advises the Company that marketing factors require a limitation on the number of
shares to be underwritten, the representative may (subject to the limitations
set forth below) exclude all Registrable Securities from, or limit the number of
Registrable Securities to be included in, the registration and underwriting. The
Company shall so advise the Holder, and the number of shares of securities that
are entitled to be included in the registration and underwriting shall be
allocated first to the Company for securities being sold for its own account and
thereafter to the Holder, pro rata with any other holders of Common Stock having
registration rights. If the Holder does not agree to the terms of any such
underwriting, he shall be excluded therefrom by written notice from the Company
or the underwriter. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration.
If shares are so withdrawn from the registration or if the number of
shares of Registrable Securities to be included in such registration was
previously reduced as a result of marketing factors, the Company shall then
offer to all persons who have retained the right to include securities in the
registration the right to include additional securities in the registration in
an aggregate amount equal to the number of sham so withdrawn, with such sham to
be allocated among the persons requesting additional inclusion pro rata amongst
those persons requesting inclusion.
6.5 Registration Procedures. In the case of each registration
effected by the Company pursuant to Section 6, the Company will keep Holder
advised in writing as to the initiation of each registration and as to the
completion thereof, at its expense, the Company will use its best efforts to:
(a) Keep such registration effective for a period of one hundred
twenty (120) days or until the Holder has completed the distribution described
in the registration statement relating thereto, whichever first occurs;
provided, however, that (x) such 120-days period shall be extended for a period
of time equal to the period the Holder refrains from selling any securities
included in such registration at the request of an underwriter of Common Stock
(or other securities) of the Company; and (y) in the case of any registration of
Registrable Securities on Form S-3 which are intended to be offered on a
continuous or delayed basis, such 120-day period shall be extended, if
necessary, to keep the registration statement effective until all such
Registrable Securities are sold, provided that Rule 145, or any successor rule
under the Securities Act, permits an offering on a continuous or delayed basis,
and provided further that applicable rules under the Securities Act governing
the obligation to file a post-effective amendment permit, in lieu of filing a
post-effective amendment that (I) includes any prospectus required by Section
10(a)(3) of the Securities Act or (II) reflects facts or events representing a
material or fundamental change in the information set forth in the registration
statement, the incorporation by reference of information required to be included
in (I) and (II) above to be contained in periodic reports filed pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 in the registration
statement.
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement;
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(c) Furnish such number of prospectuses and other documents incident
thereto, including any amendment of or supplement to the prospectus, as the
Holder from time to time may reasonably request;
(d) Notify the Holder at any time when a prospectus relating thereto
is required to be delivered under the Securities Act of the happening of any
event as a result of which the prospectus included in such registration
statement; as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or incomplete in the light of the
circumstances then existing, and at the request of Holder, prepare and furnish
to the Holder a reasonable number of copies of a supplement to or an amendment
of such prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such shares, such prospectus shall not include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or incomplete
in the light of the circumstances then existing;
(e) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed;
(f) Provide a transfer agent and registrar for all Registrable
Securities registered, pursuant to such registration statement and a CUSIP
number for all such Registrable Securities, in each case not later than the
effective date of such registration; and
(g) Otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering the
period of at least twelve months, but not more than eighteen months, beginning
with the first month after the effective date of the Registration Statement,
which earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act.
7. Fractional Shares; Issuance of Shares; Legends.
7.1 Fractional Shares. The Company shall not be required to issue
fractional shares of Company Common Stock an the exercise of a Warrant if any
fraction of a share of Stock would, except for the provisions of this Section 6,
be issuable on the exercise of a Warrant (or specified portion thereof), the
Company shall in lieu thereof pay an amount in cash equal to the then Current
Fair Market Value, multiplied by such fraction. For purposes of this Agreement,
the term "Current Fair Market Value" shall mean (i) if the Common Stock is
traded in the over-the-counter market and not in the NASDAQ Small Cap Market or
the National Market nor on any national securities exchange, the average of the
per share closing bid prices of the Common Stock on the 10 consecutive trading
days immediately preceding the date in question, as reported by NASDAQ or an
equivalent generally accepted reporting service, or (ii) if the Common Stock is
traded in the NASDAQ Small Cap Market or the National Market or on a national
securities exchange, the average for the 10 consecutive trading days immediately
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preceding the date in question of the daily per share closing prices of the
Common Stock in the NASDAQ Small Cap Market or the National Market or on the
principal stock exchange an on which it is listed, as the case may be or (iii)
if the class of Stock is not publicly traded or quoted, the fair market value as
determined by the Board of Directors of the Company based on (with appropriate
adjustments) the most recent purchases of the Company's Stock and/or other
relevant factors including the Company's income and assets or evaluation reports
received by the Company.
7.2 Issuance of Shares. All shares of Stock issued upon exercise of
a Warrant will be duly authorized, validly issued, fully paid and nonassessable.
7.3 Legends. If the Stock to be issued upon exercise of this Warrant
has not been registered under the Securities Act of 1933, as amended, then the
stock certificates representing such shares of Common Stock shall bear a legend
substantially in the following form:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR APPLICABLE
STATE SECURITIES LAWS AND ARE RESTRICTED SECURITIES. SUCH SECURITIES MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER THE ACT AND STATE SECURITIES LAWS.
8. Transferability. The Warrant or the Shares of Company Common Stock
underlying the Warrant shall not be transferred, and the Company shall not be
required to register any transfer on the books of the Company, unless the
Company shall have been provided with an opinion of counsel satisfactory to it
prior to such transfer that registration under the Securities Act and applicable
state securities laws is not required in connection with the transaction
resulting in such transfer. Each new Warranty or Company Common Stock
certificate issued upon any transfer as above provided shall bear an appropriate
investment legend, except that such Warrant or Company Common Stock certificate
shall not bear such restrictive legend if the opinion of counsel referred to
above is to further effect that such legend is not required in order to
establish compliance with the provisions of the Securities Act or if such
transfer is made in accordance with the provisions of Rule 144(k) promulgated
under the Securities Act. The Warrant may also be transferred by will or devise
and by the laws of descent.
Any attempt to transfer, sell or otherwise dispose of this Warrant (except
as provided above) shall be void and shall not convey any rights or privileges
to the transferee.
9. Miscellaneous.
9.1 Notices.
All notices, requests, demand and other communications required Or
Permitted to be given hereunder shall be deemed to have been duly given if in
writing and delivered personally, given by prepaid telegram, or mailed first
class, postage prepaid, registered or certified mail, return receipt requested,
to the following addresses:
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If to the Company: SHOPPING.COM
2101 E. Coast Hwy., Garden Level
Corona del Mar, California 92625
Attention: Mr. Robert J. McNulty
With a copy to: Jeffers, Wilson, Shaff & Falk, LLP
18881 Von Karman Avenue, Suite 1400
Irvine, California 92612
Attention: Barry D. Falk, Esq.
If to the Holder: Jon Aubry
1301 Summit Avenue
Forth Worth Texas 76102-4423
Any party may change the address to which such communications are to
be directed to ft by giving written notice to the other patty. Except as
otherwise provided in this Warrant, all notices shall be deemed to be given when
delivered in person, or if placed in the mail as aforesaid, then two (2) days
thereafter.
9.2 Modifications. The parties may, by mutual consent, amend,
modify, supplement and waive any right under this Warrant in any manner agreed
by them in writing at any time.
9.3 Entire Agreement. This Agreement, and any documents, instruments
or agreements specifically referred to herein, set forth the entire agreement
and understanding of the parties with respect to the transactions contemplated
hereby and supersede all Prior agreements, arrangements and understandings
relating to the subject matter hereof.
9.4 Headings. The section and paragraph headings contained in this
Agreement am for convenient reference only, and shall not in any way affect the
meaning or interpretation hereof.
9.5 Governing Law; Arbitration. This Agreement shall be governed by
and construed in accordance with the laws of the State of California, without
any regard to the choice of law provisions thereof. Any dispute arising under
this Agreement shall be resolved by binding arbitration under the rules of
commercial arbitration of the American Arbitration Association in Orange County,
California.
9.6 Severability. If any provision of this Agreement shall be hold
to be invalid, illegal or unenforceable, it shall be deemed severable from the
remaining provisions of this Agreement which shall remain in full force and
effect.
9.7 Waiver. No waiver of any provision of this Agreement or any
breach thereof shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar) or any other breach hereunder nor
shall such waiver constitute a continuing waiver. Either party may waive
performance of any provision of this Agreement, the nonperformance of which
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would otherwise constitute a breach of this Agreement including but not limited
to the nonperformance of any condition precedent to such party's performance,
without affecting the enforceability of this Agreement or the provisions
contained herein.
9.8 Heirs; Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
heirs, successors and assigns of the parties hereto. Holders may transfer and
assign the Warrants only as provided in Section 7 and any assignment in
violation of the foregoing shall be void.
9.9 Attorneys' Fees. If any legal action is instituted to enforce or
interpret the terms of this Agreement, the prevailing party in such action shall
be entitled to actual attorneys' fees in addition to any other relief to which
the party is entitled.
IN WITNESS WHEREOF, the parties have executed this instrument as of the
date first written above.
SHOPPING.COM, A CALIFORNIA CORPORATION
By: /s/ Robert J. McNulty
--------------------------------
Robert J. McNulty, President
"HOLDER"
/s/ Jon Aubry
- -----------------------------
Jon Aubry
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EXHIBIT 4.19
------------
THIS SUBSCRIPTION AGREEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES REFERRED TO HEREIN.
SUBSCRIPTION AGREEMENT
Shopping.com
2101 East Coast Highway
Garden level
Corona Del Mar, CA 92625
Attn: Robert McNulty
Re: Prospective Purchase of Notes and Warrants
Shopping.com, a California corporation
Gentlemen:
The undersigned, by signing the Signature Page attached hereto, hereby
irrevocably tenders this subscription and applies to purchase 16 units (the
"Units") of Shopping.com, a California corporation (the "Company"), at a
purchase price of $25,000 per Unit. Each Unit consists of a Promissory Note in
the principal amount of $25,000 and warrants to purchase 2,500 shares of the
Company's Common Stock, no par value (the "Common Stock"), at an exercise price
of $14.00 per share.
Enclosed, in cash or good funds (in the case of a check, the check should
be payable to the order of "Shopping.com") as tender of the purchase price for
the Units, is the aggregate amount of $50,000.00 ($25,000 minimum).
The undersigned hereby acknowledges receipt of a copy of the Company's
Annual Report on form 10-KSB for the period ending January 31, 1998 (the
"Report"), relating to and describing the terms and conditions of the offer and
sale of the Units.
The undersigned hereby represents and warrants to, and covenants with, the
Company as follows, recognizing that the Company will rely to a material degree
upon such representations, warranties and covenants, each of which shall survive
any acceptance of this subscription in whole or in part by the Company and the
issuance and sale of any Units to the undersigned:
1. All statements made in the Prospective Investor Questionnaire which has
been or is concurrently being furnished to the Company by the undersigned
continue to be and are true, accurate and complete as of the date hereof.
2. The undersigned has been informed and is aware that an investment in
the Units involves a degree of risk and speculation, and has carefully read and
considered the Report in its entirety.
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3. The undersigned confirms that he has been advised that he should rely
on, and that he has consulted and relied upon, his own accounting, legal and
financial advisors with respect to this investment in the Units. The undersigned
and his professional advisor(s) (as defined in Section 260.102.12(g) of the
Rules of the California Corporations Commissioner), if any, have been afforded
an opportunity to meet with the officers and directors of the Company and to ask
and receive answers to any questions about this offering and the proposed
business and affairs of the Company, and to obtain any additional information
which the Company possesses or can acquire without unreasonable effort or
expense that is necessary to verify the accuracy of information provided in the
Report, and have therefore obtained, in the judgement of the undersigned and/or
his or her professional advisor(s), sufficient information to evaluate the
merits and risks of investment in the Units. The undersigned acknowledges and
agrees that he/she has had an opportunity to meet and speak with officers or
representatives and to ask questions and get answers with respect to the Company
and this offering.
4. The undersigned understands and acknowledges that no federal or state
agency has made any finding or determination as to the fairness or suitability
for investment in, nor any recommendation or endorsement of, the Company or the
Units.
5. On the basis of the review of the materials and information described
above, and relying solely thereon and upon the knowledge and experience of the
undersigned and/or his or her professional advisor(s), if any, in business and
financial matters, the undersigned has evaluated the merits and risks of
investment in the Units and has determined that he or she is both willing and
able to undertake the economic risk of this investment.
6. The Units are being acquired by the undersigned for the personal
account of the undersigned for investment and not with a view to, or for resale
in connection with, any distribution thereof or of any interest therein, and no
one else has any beneficial ownership or interest in the Units being acquired by
the undersigned, nor are they to be subject to any lien or pledge. The
undersigned has no present obligation, indebtedness or commitment pending, nor
is any circumstance in existence which will compel the undersigned to secure
funds by the sale, transfer or other distribution of any of the Units or any
interest therein or any Stock that may be distributed in respect thereof.
7. The undersigned understands and agrees that the Units cannot be
transferred or assigned that there is and will be no public market therefor,
and, accordingly, that it may not be possible for the undersigned readily, if at
all, to liquidate this investment in the Units in case of an emergency or
otherwise. The undersigned has the net worth, past income and estimated future
income set forth in the Prospective Investor Questionnaire, can afford to bear
the risks of an investment in the Units, including the risk of losing the entire
investment, for an indefinite period of time, and has adequate means of
providing for his or her current needs and personal contingencies and has no
need for liquidity in this investment.
8. The undersigned understands and acknowledges that the Units are being
offered and sold pursuant to one or more exemptions from the registration and
qualification requirements of the Securities Act of 1933 and the California
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<PAGE>
Corporate Securities Act of 1968, the availability of which depend upon the
truth and completeness of the information provided to the Company in the
Prospective Investor Questionnaire and the bona fide nature of the foregoing
representations and warranties. With such realization, the undersigned hereby
authorizes the Company to act as it may see fit in reliance on such information,
representations and warranties, including the placement of the following legend
on the stock certificate(s) issued to the undersigned in addition to any other
legends that may be imposed thereon which, in the reasonable opinion of
Company's counsel, may be required by applicable securities laws:
"THE UNITS REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSIONS UNDER THE SECURITIES ACT OF 1933 OR WITH THE
CALIFORNIA DEPARTMENT OF CORPORATIONS UNDER THE CORPORATE SECURITIES LAW
OF 1968, AS AMENDED. THE UNITS MAY NOT BE PLEDGED, SOLD OR TRANSFERRED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACTS
COVERING THE UNITS OR AN OPINION OR QUALIFIED COUNSEL OR OTHER EVIDENCE
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
9. The undersigned hereby indemnifies and holds harmless the Company, and
its respective officers, directors, shareholders, employees and agents, as the
case may be, from and against any and all damages suffered and liabilities
incurred by any of them (including costs of investigation and defense and
attorneys' fees) arising out of any inaccuracy in the agreements,
representations, covenants and warranties made by the undersigned herein.
10. If the undersigned is purchasing the Units subscribed for hereby in a
fiduciary capacity, the above representations and warranties shall be deemed to
have been made on behalf of the person or persons for whom the undersigned is so
purchasing.
11. The undersigned hereby acknowledges and agrees that the undersigned is
not entitled to cancel, terminate or revoke this subscription or any agreements
of the undersigned hereunder and that such subscription and agreements shall
survive the death or disability of the undersigned.
12. The undersigned understands and acknowledges that this subscription
may be accepted or rejected by the Company in its sole discretion, together with
a completed and executed Prospective Investor Questionnaire and all information
required by the provisions hereof and payment of the full amount of the
subscription price for the Units subscribed for. Any amounts tendered in excess
of the total payable as the purchase price for Units as to which this
subscription has been accepted will thereafter be delivered to the undersigned
as soon as is practicable, all as described in the Confidential Private
Placement Memorandum. The Company shall signify its rejection by returning to
the undersigned this Subscription Agreement and all funds (without interest or
deduction) submitted by the undersigned.
NEITHER THE COMPANY, NOR ANY OFFICER, DIRECTOR, SHAREHOLDER, EMPLOYEE OR
AGENT OF ANY OF THEM SHALL BE LIABLE TO ANY PERSON FOR THE REJECTION, IN WHOLE
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<PAGE>
OR IN PART, OF ANY OFFER TO SUBSCRIBE TO PURCHASE UNITS, NOTWITHSTANDING THAT
THE UNDERSIGNED MAY OTHERWISE BE QUALIFIED AS A PROSPECTIVE INVESTOR.
13. If, prior to the sale of any Units to the undersigned, there is a
material change in die undersigned's investment intention as expressed herein,
or if there occurs any change which would make either the representations or
warranties made by the undersigned herein or the information provided by the
undersigned in the Prospective Investor Questionnaire materially untrue or
misleading, the undersigned agrees to immediately so notify the Company, and any
prior acceptance of the subscription of the undersigned shall be voidable at the
option of the Company.
IN WITNESS WHEREOF, the undersigned executes and agrees to be bound by
this Subscription Agreement by executing the Signature Page attached hereto on
the date therein indicated.
SIGNATURE PAGE
(All information must be completed)
Date: May 15, 1998
/s/ Tony Nikolich $50,000 5,000 $50,000
- ---------------------- -------------- ------------- ---------------
Signature of Purchaser Purchase Price # of Warrants Total $ Investment
_________________________________ Tony Nikolich
Signature of Joint Owner (if any) ----------------------------
Name(s) of Purchaser (Print)
If Joint Ownership, check one:
_____ Joint Tenants, with Residence Address:
Right of Survivorship ------------------
2704 Trophy Drive
_____ Tenants in Common Plano, Texas 75025
_____ Community Property
###-##-####
---------------------------
Social Security No. or Taxpayer I.D. No.
ACCEPTED AND AGREED:
SHOPPING.COM
By /s/ Robert J. McNulty
-------------------------------
Robert J. McNulty, Chief Executive Officer
Date: May __, 1998
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<PAGE>
EXHIBIT 4.20
------------
UNSECURED PROMISSORY NOTE
$50,000.00 Corona Del Mar, California May 15, 1998
1. Principal.
FOR VALUE RECEIVED, the undersigned, SHOPPING.COM ("Maker"),
promises to pay to Tony Nikolich ("Payee"), or order, at 2101 East Coast
Highway, Corona Del Mar, CA 92625 or such other place as the holder of this Note
shall specify, in lawful money of the United States of America, the principal
amount of Fifty Thousand Dollars ($50,000.00), together with interest at the
rate of ten percent (10%) per annum, payable as hereinafter provided.
2. Payment of Principal and Interest.
All principal of and interest accruing on this Note shall be due and
payable six months from the date of this Note.
Interest shall be calculated on the unpaid principal balance of this
Note on the basis of a year of 360 days and the actual number of days elapsed
until payment, unless such calculation would result in a usurious rate, in which
case interest shall be calculated on the basis of a year of 365 or 366 days, as
the case may be. Interest shall accrue and be payable under this Note whether or
not Maker, or Maker's successors or assigns, should avail themselves of the
protection of the United States bankruptcy laws. From and after the occurrence
of an "event of default" as set forth in Section 7 hereof, interest shall
continue to accrue on the unpaid principal balance of this Note at the same
interest rate as set forth in Section 1 of this Note.
3. Prepayment.
A. This Note may be prepaid at any time or from time to time, in
whole or in part, without penalty.
B. Each such prepayment shall include all interest then accrued but
unpaid on this Note.
C. Any partial prepayment of the outstanding principal balance shall
in no way release, discharge or affect the obligation of the Maker to continue
to make any other payments of principal or interest provided for herein until
this Note is paid in full.
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4. Application of Payments.
Each payment on this Note (whether made when due or otherwise) shall
be credited first, to late charges, fees and other charges due, including
collection costs and attorneys' fees, second against interest then due, and the
remainder of such payment shall be credited against the unpaid principal.
5. Waiver.
Maker and all endorsers, guarantors and all persons liable, or to
become liable on this Note (each hereinafter referred to in this Section as the
"Applicable Party"), jointly and severally, waive presentment, protest and
demand, notice of protest, demand, dishonor and nonpayment of this Note, notice
of acceleration, notice of intent to accelerate, and any and all other notices
or matters of a like nature, and consent to any and all renewals and extensions
of the fine of payment hereof. Each Applicable Party agrees that at any time and
from time to time, without notice, (i) the terms of payment herein, or (ii) the
terms of any guaranty of this Note, or (iii) the security described in any
documents at any time securing this Note, may be modified, increased, changed or
exchanged, in whole or in part, without in any way affecting the liability of
any Applicable Party.
6. Late Charge.
If any payment of interest and/or principal hereunder is not
received by Payee within ten (10) days after the due date thereof, Maker agrees
to pay Payee a late charge equal to five percent (5%) of the unpaid amount.
Maker acknowledges that it would be extremely difficult to fix Payee's actual
damages for the failure of Maker to timely pay any amount due under this Note.
Accordingly, such late charge shall be deemed to be Payee's damages for any such
late payment, provided that such late charge shall not limit Payee's right to
compel prompt performance by Maker or to exercise other remedies available to
Payee.
7. Default by Maker.
Any one or more of the following shall constitute an "Event of
Default" by Maker under the terms of this Note:
A. If Maker fails to pay any payment, whether at maturity or
otherwise, of principal and/or interest upon the due date thereof.
B. If Maker defaults in the performance or observance of any of the
covenants, conditions or agreements set forth in this Note.
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<PAGE>
C. If Maker institutes proceedings to be adjudicated a voluntary
bankrupt; consents to the filing of a bankruptcy proceeding against Maker; files
or consents to filing of a petition or answer or consent seeking reorganization
under the federal bankruptcy laws or any other similar applicable federal or
state law; consents to the appointment or a receiver of liquidator or trustee or
assignee in bankruptcy or insolvency of the Maker or a substantial part of
Maker's property; an assignment for the benefit of creditors is made by the
Maker; or Maker admits in writing of Maker's inability to pay Maker's debts
generally as they become due.
8. Remedies Upon Default.
If an Event of Default occurs, at the option of Payee, and upon
written demand, the Payee may accelerate the due date of this Note and declare
the entire outstanding principal balance hereof, including all fees and costs
(if any), and accrued but unpaid interest, immediately due and payable in full.
Each of the options, rights and remedies provided herein or
available at law or in equity which may be exercised by Payee may be exercised
separately or concurrently with any one or more other options, rights or
remedies available to Payee. Failure to exercise any option, right or remedy
shall not constitute a waiver of the right of the Payee to exercise such option,
right or remedy in the event of or with respect to any prior, subsequent or
concurrent transaction or occurrence of the same or a different kind or
character.
9. Attorneys' Fees.
Maker agrees to pay all costs of collection or enforcement of this
Note when incurred, including, but not limited to, reasonable attorneys' fees.
If any suit or action is instituted to enforce this Note, Maker promises to pay,
in addition to the costs and disbursements allowed by law, such sum as the court
may adjudge as reasonable attorneys' fees in such suit or action. Maker shall
also pay all reasonable attorneys' fees and costs incurred by Payee in
connection with any modification, amendment or consent related to any
renegotiation or modification of this Note.
10. Severability.
Every provision of this Note is intended to be severable. If any
term or provision hereof is declared by a court of competent jurisdiction to be
illegal or invalid for any reason whatsoever, such illegality or invalidity
shall not affect the balance of the terms and provisions hereof, which terms and
provisions shall remain binding and enforceable.
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<PAGE>
11. Governing Law.
This Note shall be governed by and construed in accordance with the
laws of the State of California.
12. Notices.
All notices, statements or demands shall be in writing and shall be
served in person, by telegraph, by express mail, by certified mail or by private
overnight delivery. Service shall be deemed conclusively made (i) at the time of
service, if personally served, (ii) at the time (as confirmed in writing by the
telegraphic agency) of delivery thereof to the addressee, if served
telegraphically, (iii) twenty-four (24) hours (exclusive of weekends and
national holidays) after deposit in the United States mail, properly addressed
and postage prepaid, if served by express mail, (iv) five (5) calendar days
after deposit in the United States mail, properly addressed and postage prepaid,
return receipt requested, if served by certified mail, (v) twenty-four (24)
hours after delivery by the party giving the notice, statement or demand to the
private overnight deliverer, if served by private overnight delivery and (vi) at
the time of electronic transmission, if a copy of such notice is mailed within
twenty-four (24) hours after the transmission.
Any notice or demand to Maker shall be given to:
Robert J. McNulty
Shopping.com
2101 E. Coast Hwy., Garden Level
Corona del Mar, California 92625
Any notice or demand to Payee shall be given to:
Tony Nikolich
2704 Trophy Drive
Plano, Texas 75025
and with a copy to:
Barry D. Falk, Esq.
JEFFERS, WILSON, SHAFF & FALK, LLP
18881 Von Karman Avenue, Suite 1400
Irvine, California 92612
FAX No.: (949) 660-7799
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<PAGE>
Any party hereto may change its address for the purpose of receiving
notices, demands or other communications as herein provided by a written notice
given in the manner aforesaid to the other party or parties hereto.
13. Successor and Assigns.
All the terms and provisions of this Note shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
14. Assignability.
Maker's obligation hereunder are nontransferable and nonassignable
without the prior written consent of Payee.
15. Amendment.
Neither this Note nor any term or provision hereof may be modified,
amended or altered except by a written instrument approved by Payee and signed
by Maker.
16. Headings.
Headings at the beginning of each numbered Paragraph of this Note
are intended solely for convenience and are not to be deemed or construed to be
a part of this Note.
17. Purpose of Loan.
The proceeds of this Note are to be used by Maker exclusively for
business purposes, and not for personal, family or household purposes.
18. Time of the Essence.
TIME IS EXPRESSLY DECLARED TO BE THE ESSENCE of each obligation of
the Maker hereunder and in all matters concerning this Note, including all acts
or things to be done or performed in connection herewith, and specifically of
every provision of this Note in which time is an element.
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<PAGE>
19. Compliance With Usury Laws.
Maker and Payee intent to comply with all applicable usury laws. In
fulfilling this intention, all agreement between Maker and Payee are expressly
limited so that the amount of interest paid or agreed to be paid to Payee for
the use, forbearance, or detention of money under this Note shall not exceed the
maximum amount permissible under applicable law.
If for any reason payment of any amount required under this Note
shall be prohibited by law, then the obligation shall be reduced to the maximum
allowable bylaw. If for any reason Payee receives as interest an amount that
would exceed the highest lawful rate, then the amount which would constitute
excessive interest shall be applied to the reduction of the principal of this
Note and not to the payment of interest. If any conflict arises between this
provision and any provision of any other agreement between Maker and Payee, then
this provision shall control.
20. Legal Representation.
Maker agrees and represents that such party has been represented by
such party's own legal counsel with regard to all aspects of this Note, or if
such party is acting without legal counsel, that such party has had adequate
opportunity and has been encouraged to seek the advice of such party's own legal
counsel prior to the execution of this Agreement.
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<PAGE>
21. Jurisdiction.
Any action whatsoever brought upon or relating to this Note shall be
instituted and prosecuted in the state courts of California, County of Orange,
or the federal district court therefore, and each party waives the right to
change the venue. The parties hereto further consent to accept service of
process in any such action or proceeding by certified mail, return receipt
requested.
"MAKER" "PAYEE"
SHOPPING.COM TONY NIKOLICH
By: /s/ Robert J. McNulty By: /s/ Tony Nikolich
---------------------------- ---------------------------
Robert J. McNulty Tony Nikolich 5/15/98
Title: President and Chief Executive
Officer
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<PAGE>
EXHIBIT 4.21
------------
SHOPPING.COM
WARRANT AGREEMENT
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THIS WARRANT MAY NOT BE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR UNLESS AN EXEMPTION THEREFROM IS AVAILABLE.
This Warrant Agreement (this "Agreement") is entered into as of 15th day
of May, 1998 by and between, SHOPPING.COM, a California corporation (the
"Company"), and Tony Nikolich (the "Holder").
RECITALS
WHEREAS, the Company has agreed to grant to Holder warrants to purchase
5,000 shares of Company Common Stock in exchange and in consideration for good
and valuable goods and services.
NOW, THEREFORE, BE IT RESOLVED, the parties agree hereto as follows:
1. Description, Execution.
(a) The Company agrees to issue to the Holder and the Holder agrees
to accept the Warrant Certificate evidencing the right to purchase shares of the
Company common stock at an initial purchase price of Fourteen Dollars ($14.00)
per Share as to which the Warrant is exercisable. The Warrant Certificate shall
be substantially in the form annexed hereto as Exhibit A.
(b) This Agreement shall be executed on behalf of the Company by its
President Upon delivery of this Warrant to the Holder, this Agreement shall be
binding upon the Company, and the Holder shall be entitled to all the benefits
set forth herein.
2. Term of Warrant. The Warrant shall become exercisable at any time
after the date hereof, and remain exercisable, subject to the conditions set
forth in Section 3 until the close of business on May 15, 2001 (the "Expiration
Date").
3. Exercise of Warrant.
(a) Subject to (b) below, at any time until the Expiration Date, the
Holder shall have the right to purchase from the Company (and the Company shall
promptly issue to the Holder) one fully-paid and nonassessable share of Common
Stock at the Exercise Price (as defined below) for each Warrant, by surrendering
the appropriate Warrant Certificate and the Subscription Form attached hereto to
the Company at its executive offices and paying the aggregate Exercise Price for
the sham to be purchased, in cash, by check or by cancellation of indebtedness.
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<PAGE>
(b) The Warrant may be exercised in whole and in part but not in
increments of less than 100 shares. In case of a partial exercise, the Warrant
Certificate shall be surrendered and a new Warrant Certificate of the same tenor
and for the purchase of the number of sham not purchased upon such partial
exercise shall be issued by the Company to the Holder hereof. The Warrants shall
be deemed to have been exercised immediately prior to the close of business on
the date of their surrender for exercise as provided above, and the person or
entity entitled to receive the shares of Common Stock issuable upon the exercise
shall be treated for all purposes as the holder of such shares of record as of
the close of business on such date. Prior to any such exercise, neither the
Holder nor any person entitled to receive shares issuable upon exercise shall be
or have any of the rights of a shareholder of the Company. No adjustment shall
be made for dividends or other stockholder rights for which the record date is
prior to the date of exercise. As soon as practicable on or after such date, the
Company shall issue in the name of, and deliver to the person or persons
entitled to receive, a certificate or certificates for the full number of shares
of Common Stock issuable upon such exercise.
4. Exercise Price. The initial Exercise Price for each share of Common
Stock issuable pursuant to the Warrant shall be Fourteen Dollars ($14.00) per
Share, adjusted as provided below. The Exercise Price may be paid, in cash,
cashier's check or by cancellation of indebtedness from the Company to the
Holder.
5. Adjustment of Warrant Price and Number of Shares of Common Stock. The
number and kind of securities purchasable upon the exercise of the Warrants and
the Exercise Price shall be subject to adjustment from time to time upon the
happening of certain events, as follows:
5.1 Adjustments. The Exercise Price of the Warrant shall be subject to
adjustment as follows:
(a) In case the Company shall issue rights, options, warrants or
convertible securities to all or substantially all holders of its Common Stock,
without any charge to such holders, entitling the holder thereof to subscribe
for or purchase Stock at a price per share which is lower at the date of
issuance of such rights, options, warrants or securities than the then Current
Fair Market Value (as defined in Section 7 hereof), the price of shares of Stock
thereafter purchasable upon the exercise of the Warrant shall be reduced to a
price equal to an amount which would entitle the Holder to receive the same
number of shares of Common Stock and other securities that he would have
received had he exercised the Warrants immediately prior to such issuance.
(b) For the purpose of this Section 5, the term "Common Stock" shall
mean (i) the class of stock designated as the Common Stock of the Company at the
date of this Agreement, or (ii) any other claw of stock resulting from
successive changes or reclassifications of such Common Stock consisting solely
of changes in par value, or from par value to no par value, or from no par value
to par value.
5.2 No Adjustment for Dividends. Except as provided in Section 5.1 hereof,
no adjustment in respect of any dividends or distributions out of earnings shall
be made during the term of a Warrant or upon the exercise of a Warrant.
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<PAGE>
5.3 No Adjustment in Certain Cases. No adjustments shall be made pursuant
to Section 5 hereof in connection with the grant or exercise of presently
authorized or outstanding options to purchase Common Stock under the Company's
existing stock option plan or the exercise of presently outstanding warrants to
purchase Common Stock.
5.4 Preservation of Purchase Price upon Reclassification, Consolidation,
etc. In case of any consolidation of the Company with or merger of the Company
into another corporation or in case of any sale or conveyance to another
corporation of the property, assets or business of the Company as an entirety or
substantially as an entirety, the Company or such successor or purchasing
corporation, as the case may be, shall execute with the Holder an agreement that
the Holder shall have the right thereafter, upon payment of the Exercise Price
in effect immediately prior to such action, to purchase, upon exercise of each
Warrant, the kind and amount of shares and other securities and property which
it would have owned or have been entitled to receive after the occurrence of
such consolidation, merger, sale or conveyance had each Warrant been exercised
immediately prior to such action. In the event of a merger described in Section
368(a)(2)(E) of the Internal Revenue Code of 1986, as amended, in which the
Company is the surviving corporation, the right to purchase sham of Common Stock
under the Warrant shall terminate on the date of such merger and thereupon the
Warrant shall become null and void, but only if the controlling corporation
shall agree to substitute for the Warrant its warrant which entitle the holders
thereof to purchase upon their exercise the kind and amount of shares and other
securities and property which they would have owned or been entitled to receive
had the Warrant been exercised immediately prior to such merger. Any such
agreements referred to in this Subsection 5.4 shall provide for adjustments,
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in Section 5 hereof. The provisions of this Subsection 5.4 shall
similarly apply to successive consolidations, mergers, sales or conveyances.
6. Registration Rights.
6.1 Definitions.
(a) "Commission" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act of
1933, as amended (the "Securities Act").
(b) "Registrable Securities" shall mean (x) shares of Common Stock
issuable upon exercise of the Warrants and (y) any Common Stock issued as a
dividend or other distribution with respect to or in exchange for or in
replacement of the shares referenced in (x) above, provided, however, that
Registrable Securities shall not include any shares of Common Stock which have
previously been registered or which have been sold to the public.
(c) 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, and the declaration or ordering of the effectiveness of
such registration statement.
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(d) "Registration Expenses" shall mean all expenses incurred in
effecting any registration pursuant to this Agreement, including, without
limitation, all registration, qualification, and filing fees, printing expenses,
escrow fees and disbursements of counsel for the Company, blue sky fees and
expenses of any regular or special audits incident to or required by any such
registration, but shall not include selling expenses and fees and disbursements
of counsel for the Holder.
(e) "Rule 144" shall mean Rule 144 as promulgated by the Commission
under the Securities Act as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.
(f) "Rule 145" shall mean Rule 145 as promulgated by the Commission
under the Securities Act, as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.
6.2 "Piggyback" Registration. If the Company shall determine to register
any of its shares of Common Stock in a firm commitment public offering for its
own account, other than a registration relating solely to employee benefit
plans, or a registration relating solely to a Rule 145 transaction on Form S-4,
or a registration on any registration form that does not permit secondary sales,
the Company will:
(a) promptly give to Holder written notice thereof,
(b) use its best efforts to include in such registration (and any
related qualification under the blue sky laws or other compliance), except as
set forth in Section 6.3 below, and in any underwriting involved therein, all
the Registrable Securities specified in a written request or requests, made by
Holder within Twenty (20) days after the written, notice from the Company
described in clause 6.2(a) above is given. Such written request may specify all
or a part of Holder's Registrable Securities; and
(c) pay all Registration Expenses, other than the selling expenses
of Holder's Registrable Securities.
6.3 Underwriting. If the registration of which the Company gives notice is
for a registered public offering involving an underwriting, the Company shaft so
advise the Holder as a part of the written notice. In such event, the right of
the Holder to registration pursuant to this Section 6 shall be conditioned upon
Holder's participation in such underwriting and the inclusion of the Holder's
Registrable Securities in the underwriting to the extent provided herein. The
Holder shall (together with the Company) enter into an underwriting agreement in
customary form with the representative of the underwriter of underwriters
selected by the Company.
6.4 Exclusion of Registrable Securities. Notwithstanding any other
provisions of this Section 6, if the representative of the underwriters advises
the Company that marketing factors require a limitation on the number of shares
to be underwritten, the representative may (subject to the limitations set forth
below) exclude all Registrable Securities from, or limit the number of
Registrable Securities to be included in, the registration and underwriting. The
Company shall so advise the Holder, and the number of shares of securities that
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<PAGE>
are entitled to be included in the registration and underwriting shall be
allocated first to the Company for securities being sold for its own account and
thereafter to the Holder, pro rata with any other holders of Common Stock having
registration rights. If the Holder does not agree to the terms of any such
underwriting, he shall be excluded therefrom by written notice from the Company
or the underwriter. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration.
If shares are so withdrawn from the registration or if the number of
shares of Registrable Securities to be included in such registration was
previously reduced as a result of marketing factors, the Company shall then
offer to all persons who have retained the right to include securities in the
registration the right to include additional securities in the registration in
an aggregate amount equal to the number of sham so withdrawn, with such sham to
be allocated among the persons requesting additional inclusion pro rata amongst
those persons requesting inclusion.
6.5 Registration Procedures. In the case of each registration effected by
the Company pursuant to Section 6, the Company will keep Holder advised in
writing as to the initiation of each registration and as to the completion
thereof, at its expense, the Company will use its best efforts to:
(a) Keep such registration effective for a period of one hundred
twenty (120) days or until the Holder has completed the distribution described
in the registration statement relating thereto, whichever first occurs;
provided, however, that (x) such 120-days period shall be extended for a period
of time equal to the period the Holder refrains from selling any securities
included in such registration at the request of an underwriter of Common Stock
(or other securities) of the Company; and (y) in the case of any registration of
Registrable Securities on Form S-3 which are intended to be offered on a
continuous or delayed basis, such 120-day period shall be extended, if
necessary, to keep the registration statement effective until all such
Registrable Securities are sold, provided that Rule 145, or any successor rule
under the Securities Act, permits an offering on a continuous or delayed basis,
and provided further that applicable rules under the Securities Act governing
the obligation to file a post-effective amendment permit, in lieu of filing a
post-effective amendment that (I) includes any prospectus required by Section
10(a)(3) of the Securities Act or (II) reflects facts or events representing a
material or fundamental change in the information set forth in the registration
statement, the incorporation by reference of information required to be included
in (I) and (II) above to be contained in periodic reports filed pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 in the registration
statement.
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement;
(c) Furnish such number of prospectuses and other documents incident
thereto, including any amendment of or supplement to the prospectus, as the
Holder from time to time may reasonably request;
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(d) Notify the Holder at any time when a prospectus relating thereto
is required to be delivered under the Securities Act of the happening of any
event as a result of which the prospectus included in such registration
statement; as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or incomplete in the light of the
circumstances then existing, and at the request of Holder, prepare and furnish
to the Holder a reasonable number of copies of a supplement to or an amendment
of such prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such shares, such prospectus shall not include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or incomplete
in the light of the circumstances then existing;
(e) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed;
(f) Provide a transfer agent and registrar for all Registrable
Securities registered, pursuant to such registration statement and a CUSIP
number for all such Registrable Securities, in each case not later than the
effective date of such registration; and
(g) Otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering the
period of at least twelve months, but not more than eighteen months, beginning
with the first month after the effective date of the Registration Statement,
which earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act.
7. Fractional Shares; Issuance of Shares; Legends.
7.1 Fractional Shares. The Company shall not be required to issue
fractional shares of Company Common Stock an the exercise of a Warrant if any
fraction of a share of Stock would, except for the provisions of this Section 6,
be issuable on the exercise of a Warrant (or specified portion thereof), the
Company shall in lieu thereof pay an amount in cash equal to the then Current
Fair Market Value, multiplied by such fraction. For purposes of this Agreement,
the term "Current Fair Market Value" shall mean (i) if the Common Stock is
traded in the over-the-counter market and not in the NASDAQ Small Cap Market or
the National Market nor on any national securities exchange, the average of the
per share closing bid prices of the Common Stock on the 10 consecutive trading
days immediately preceding the date in question, as reported by NASDAQ or an
equivalent generally accepted reporting service, or (ii) if the Common Stock is
traded in the NASDAQ Small Cap Market or the National Market or on a national
securities exchange, the average for the 10 consecutive trading days immediately
preceding the date in question of the daily per share closing prices of the
Common Stock in the NASDAQ Small Cap Market or the National Market or on the
principal stock exchange an on which it is listed, as the case may be or (iii)
if the class of Stock is not publicly traded or quoted, the fair market value as
determined by the Board of Directors of the Company based on (with appropriate
adjustments) the most recent purchases of the Company's Stock and/or other
relevant factors including the Company's income and assets or evaluation reports
received by the Company.
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7.2 Issuance of Shares. All shares of Stock issued upon exercise of a
Warrant will be duly authorized, validly issued, fully paid and nonassessable.
7.3 Legends. If the Stock to be issued upon exercise of this Warrant has
not been registered under the Securities Act of 1933, as amended, then the stock
certificates representing such shares of Common Stock shall bear a legend
substantially in the following form:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR APPLICABLE
STATE SECURITIES LAWS AND ARE RESTRICTED SECURITIES. SUCH SECURITIES MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER THE ACT AND STATE SECURITIES LAWS.
8. Transferability. The Warrant or the Shares of Company Common Stock
underlying the Warrant shall not be transferred, and the Company shall not be
required to register any transfer on the books of the Company, unless the
Company shall have been provided with an opinion of counsel satisfactory to it
prior to such transfer that registration under the Securities Act and applicable
state securities laws is not required in connection with the transaction
resulting in such transfer. Each new Warranty or Company Common Stock
certificate issued upon any transfer as above provided shall bear an appropriate
investment legend, except that such Warrant or Company Common Stock certificate
shall not bear such restrictive legend if the opinion of counsel referred to
above is to further effect that such legend is not required in order to
establish compliance with the provisions of the Securities Act or if such
transfer is made in accordance with the provisions of Rule 144(k) promulgated
under the Securities Act. The Warrant may also be transferred by will or devise
and by the laws of descent.
Any attempt to transfer, sell or otherwise dispose of this Warrant (except
as provided above) shall be void and shall not convey any rights or privileges
to the transferee.
9. Miscellaneous.
9.1 Notices.
All notices, requests, demand and other communications required Or
Permitted to be given hereunder shall be deemed to have been duly given if in
writing and delivered personally, given by prepaid telegram, or mailed first
class, postage prepaid, registered or certified mail, return receipt requested,
to the following addresses:
If to the Company: SHOPPING.COM
2101 E. Coast Hwy., Garden Level
Corona del Mar, California 92625
Attention: Mr. Robert J. McNulty
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With a copy to: Jeffers, Wilson, Shaff & Falk, LLP
18881 Von Karman Avenue, Suite 1400
Irvine, California 92612
Attention: Barry D. Falk, Esq.
If to the Holder: Tony Nikolich
2704 Trophy Drive
Plano, Texas 75025
Any party may change the address to which such communications are to
be directed to it by giving written notice to the other party. Except as
otherwise provided in this Warrant, all notices shall be deemed to be given when
delivered in person, or if placed in the mail as aforesaid, then two (2) days
thereafter.
9.2 Modifications. The parties may, by mutual consent, amend, modify,
supplement and waive any right under this Warrant in any manner agreed by them
in writing at any time.
9.3 Entire Agreement. This Agreement, and any documents, instruments or
agreements specifically referred to herein, set forth the entire agreement and
understanding of the parties with respect to the transactions contemplated
hereby and supersede all Prior agreements, arrangements and understandings
relating to the subject matter hereof.
9.4 Headings. The section and paragraph headings contained in this
Agreement am for convenient reference only, and shall not in any way affect the
meaning or interpretation hereof.
9.5 Governing Law; Arbitration. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, without any
regard to the choice of law provisions thereof. Any dispute arising under this
Agreement shall be resolved by binding arbitration under the rules of commercial
arbitration of the American Arbitration Association in Orange County,
California.
9.6 Severability. If any provision of this Agreement shall be hold to be
invalid, illegal or unenforceable, it shall be deemed severable from the
remaining provisions of this Agreement which shall remain in full force and
effect.
9.7 Waiver. No waiver of any provision of this Agreement or any breach
thereof shall be deemed or shall constitute a waiver of any other provision
hereof (whether or not similar) or any other breach hereunder nor shall such
waiver constitute a continuing waiver. Either party may waive performance of any
provision of this Agreement, the nonperformance of which would otherwise
constitute a breach of this Agreement including but not limited to the
nonperformance of any condition precedent to such party's performance, without
affecting the enforceability of this Agreement or the provisions contained
herein.
9.8 Heirs; Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
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heirs, successors and assigns of the parties hereto. Holders may transfer and
assign the Warrants only as provided in Section 7 and any assignment in
violation of the foregoing shall be void.
9.9 Attorneys' Fees. If any legal action is instituted to enforce or
interpret the terms of this Agreement, the prevailing party in such action shall
be entitled to actual attorneys' fees in addition to any other relief to which
the party is entitled.
IN WITNESS WHEREOF, the parties have executed this instrument as of the
date first written above.
SHOPPING.COM, a California corporation
By: /s/ Robert J. McNulty
-----------------------------------
Robert J. McNulty, President
"HOLDER"
/s/ Tony Nikolich 5/15/98
--------------------------------------
Tony Nikolich
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EXHIBIT 4.22
------------
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of the date of acceptance set
forth below, is entered into by and between SHOPPING.COM, a California
corporation, with headquarters located at 2101 East Coast Highway, Garden Level,
Costa del Mar, CA 92625 (the "Company"), and each entity named on a signature
page hereto (each, a "Buyer") (each agreement with a Buyer being deemed a
separate and independent agreement between the Company and such Buyer, except
that each Buyer acknowledges and consents to the rights granted to each other
Buyer under such agreement and the Transaction Agreements, as defined below,
referred to therein).
WITNESSETH:
WHEREAS, the Company and the Buyer are executing and delivering this
Agreement in accordance with and in reliance upon the exemption from securities
registration afforded, inter alia by Rule 506 under Regulation D ("Regulation
D") as promulgated by the United States Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933, as amended (the "1933 Act"), and for
Section 4(2) of the 1933 Act; and
WHEREAS, the Buyer wishes to purchase, upon the terms and subject to the
conditions of this Agreement, 8% Convertible Debentures of the Company (the
"Debentures") which will be convertible into shares of Common Stock, no par
value per share, of the Company (the "Common Stock"), upon the terms and subject
to the conditions of such Convertible Debentures, together with the Warrants (as
defined below) exercisable for the purchase of shares of Common Stock (the
"Warrant Shares"), and subject to acceptance of this Agreement by the Company;
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
a. Purchase; Certain Definitions.
(i) The undersigned hereby agrees to initially purchase from the
Company the Debentures in the principal amount set forth on the signature page
of this Agreement (the "Initial Debentures"), out of a total offering of
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$10,000,000 of such Debentures, and having the terms and conditions and being in
the form attached hereto as Annex 1. The purchase price for the Initial
Debentures shall be as set forth on the signature page hereto and shall be
payable in United States Dollars.
(ii) As used herein, the term "Debentures" means the Initial
Debentures and the Additional Debentures (as defined below), unless the context
otherwise requires.
(iii) As used herein, the term" Securities," means, the Debentures,
the Warrants and the Common Stock issuable upon conversion of the Debentures or
the exercise of the Warrants.
(iv) As used herein, the term "Purchase Price" means the purchase
price for the Initial Debentures or the Additional Debentures, as the case may
be.
(v) As used herein, the term "Initial Closing Date" means the date
of the closing of the purchase and sale of the Initial Debentures, as provided
herein.
(vi) As used herein, the term "Additional Closing Date" means the
date of the closing of the purchase and sale of the relevant Additional
Debentures, as provided herein.
(vii) As used herein, the term "Closing Date" means the relevant
Initial Closing Date or Additional Closing Date, as the case may be.
(viii) As used herein, the term "Market Price of the Common Stock"
means (x) the average closing bid price of the Common Stock for the five (5)
trading days ending on the trading day immediately before the date indicated in
the relevant provision hereof (unless a different relevant period is specified
in the relevant provision), as reported by Bloomberg, LP or, if not so reported,
as reported on the over-the-counter market or (y) if the Common Stock is listed
on a stock exchange, the closing price on such exchange on the date indicated in
the relevant provision hereof, as reported in The Wall Street Journal.
b. Form of Payment; Delivery of Debentures.
(i) The Buyer shall pay the Purchase Price for the relevant
Debentures by delivering immediately available good funds in United States
Dollars to the escrow agent (the "Escrow Agent") identified in the Joint Escrow
Instructions attached hereto as Annex II (the "Joint Escrow Instructions") on
the date prior to the relevant Closing Date.
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(ii) No later than the relevant Closing Date, but in any event
promptly following payment by the Buyer to the Escrow Agent of the relevant
Purchase Price, the Company shall deliver the relevant Debentures duly executed
on behalf of the Company to the Escrow Agent.
(iii) By signing this Agreement, each of the Buyer and the Company,
subject to acceptance by the Escrow Agent, agrees to all of the terms and
conditions of, and becomes a party to, the Joint Escrow Instructions, all of the
provisions of which are incorporated herein by this reference as if set forth in
full.
c. Method of Payment. Payment into escrow of the Purchase Price
shall be made by wire transfer of funds to:
Bank of Now York
350 Fifth Avenue
New York, New York 10001
ABA# 021000018
For credit to the account of Krieger & Prager, Esqs.
Account No.: [To be provided by Krieger & Prager]
Not later than 5:00 p.m., New York time, on the date which is seven (7) New York
Stock Exchange trading days after the Company shall have accepted this Agreement
and returned a signed counterpart of this Agreement to the Escrow Agent by
facsimile, the Buyer shall deposit with the Escrow Agent the Purchase Price for
the Initial Debentures in currently available funds. Time is of the essence with
respect to such payment, and failure by the Buyer to make such payment, shall
allow the Company to cancel this Agreement.
d. Escrow Property. The Purchase Price and the Debentures delivered
to the Escrow Agent as contemplated by Sections l(b) and (c) hereof are referred
to as the "Escrow Property."
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO
INFORMATION; INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees with,
the Company as follows:
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<PAGE>
a. Without limiting Buyer's right to sell the Common Stock pursuant
to the Registration Statement (as that term is defined in the Registration
Rights Agreement defined below), the Buyer is purchasing the Debentures and the
Warrants and will be acquiring the shares of Common Stock issuable upon
conversion of the Debentures (the "Converted Shares") and the Warrant Shares for
its own account for investment only and not with a view towards the public sale
or distribution thereof and not with a view to or for sale in connection with
any distribution thereof.
b. The Buyer is (i) an "accredited investor" as that term is defined
in Rule 501 of the General Rules and Regulations under the 1933 Act by reason of
Rule 501(a)(3), "experienced in making investments of the kind described in this
Agreement and the related documents, (iii) able, by reason of the business and
financial experience of its officers (if an entity) and professional advisors
(who are not affiliated with or compensated in any way by the Company or any of
its affiliates, or selling agents), to protect its own interests in connection
with the transactions described in this Agreement, and the related documents,
and (iv) able to afford the entire loss of its investment in the Securities.
c. All subsequent offers and sales of the Debentures and the shares
of Common Stock representing the Converted Shares and the Warrant Shares (such
Common Stock sometimes referred to as the "'Shares") by the Buyer shall be made
pursuant to registration of the Shares under the 1933 Act or pursuant to an
exemption from registration.
d. The Buyer understands that the Debentures are being offered and
sold to it in reliance on specific exemptions from the registration requirements
of United States federal and state securities laws and that the Company is
relying upon the truth and accuracy of, and the Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the Buyer set forth herein in order to determine the availability of such
exemptions and the eligibility of the Buyer to acquire the Debentures.
e. The Buyer and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Debentures and the offer of the
Shares which have been requested by the Buyer, including Annex V hereto. The
Buyer and its advisors, if any, have been afforded the opportunity to ask
questions of the Company and have received complete and satisfactory answers to
any such inquiries. Without limiting the generality of the foregoing, the Buyer
has also had the opportunity to obtain and to review the Company's (1) Annual
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Report on Form 10-K for the fiscal year ended January 31, 1998, and (2)
Prospectus, dated November 25, 1997 (collectively, the "Company's SEC
Documents").
f. The Buyer understands that its investment in the Securities
involves a high degree of risk.
g. The Buyer understands that no United States federal or state
agency or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities.
h. This Agreement has been duly and validly authorized, executed and
delivered on behalf of the Buyer and is a valid and binding agreement of the
Buyer enforceable in accordance with its terms, subject as to enforceability to
general principles of equity and to bankruptcy, insolvency, moratorium and other
similar laws affecting the enforcement of creditors' rights generally.
i. Notwithstanding the provisions hereof or of the Debentures, in no
event (except (i) with respect to an automatic conversion, if any, of a
Debenture as provided in the Debentures or a conversion pursuant to a Redemption
Notice Conversion [as defined in the Debentures], or (ii) if the Company is in
default under any Debenture or any of the Transaction Agreements, as defined
below and the Purchaser has asserted such default) shall the holder be entitled
to convert any Debenture to the extent that, after such conversion, the sum of
(1) the number of shares of Common Stock beneficially owned by the Buyer and its
affiliates (other than shares of Common Stock which may be deemed beneficially
owned through the ownership of the unconverted portion of the Debentures), and
(2) the number of shares of Common Stock issuable upon the conversion of the
Debentures with respect to which the determination of this provision is being
made, would result in beneficial ownership by the Buyer and its affiliates of
more than 9.99% of the outstanding shares of Common Stock. For purposes of the
proviso to the immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended (the "1934 Act"), except as otherwise provided in clause (1) of
such proviso. The Buyer further agrees that if the Buyer transfers or assigns
any of the Debentures to a party who or which would not be considered such an
affiliate, such assignment shall be made subject to the transferee's or
assignee's specific agreement to be bound by the provisions of this Section 2(i)
as if such transferee or assignee were a signatory to this Agreement.
j. The Buyer represents that, for the five (5) trading days prior to
the date hereof, the Buyer has not engaged in any puts, calls, futures
contracts, short sales and hedging and arbitrage transactions with respect to
the Common Stock.
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3. COMPANY REPRESENTATIONS, ETC.
The Company represents and warrants to the Buyer that, except as
provided in Annex V hereto:
a. Concerning the Debentures and the Shares. There are no preemptive
rights of any stockholder of the Company, as such, to acquire the Debentures,
the Warrants or the Shares.
b. Reporting Company Status. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California and has the requisite corporate power to own its properties and to
carry on its business as now being conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in each jurisdiction
where the nature of the business conducted or property owned by it makes such
qualification necessary, other than those jurisdictions in which the failure to
so qualify would not have a material adverse effect on the business, operations
or condition (financial or otherwise) of the Company. The Company has registered
its Common Stock pursuant to Section 12 of the 1934 Act, and the Common Stock is
listed and traded on The NASDAQ/Bulletin Board Market. The Company has received
no notice, either oral or written, with respect to the continued eligibility of
the Common Stock for such listing, and the Company has maintained all
requirements for the continuation of such listing.
c. Authorized Shares. The Company has sufficient authorized and
unissued Shares as may be reasonably necessary to effect the conversion of the
Debentures and to issue the Warrant Shares. The Converted Shares and the Warrant
Shares have been duly authorized and, when issued upon conversion of, or as
interest on, the Debentures or upon exercise of the Warrants, each in accordance
with its respective terms, will be duly and validly issued, fully paid and
non-assessable and will not subject the holder thereof to personal liability by
reason of being such holder.
d. Securities Purchase Agreement; Registration Rights Agreement and
Stock. This Agreement and the Registration Rights Agreement, the form of which
is attached hereto as Annex IV (the "Registration Rights Agreement"), and the
transactions contemplated thereby, have been duly and validly authorized by the
Company, this Agreement has been duly executed and delivered by the Company and
this Agreement is, and the Debentures, the Warrants and the Registration Rights
Agreement, when executed and delivered by the Company, will be, valid and
binding agreements of the Company enforceable in accordance with their
respective terms, subject as to enforceability to general principles of equity
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and to bankruptcy, insolvency, moratorium, and other similar laws affecting the
enforcement of creditors' rights generally.
e. Non-contravention. The execution and delivery of this Agreement
and the Registration Rights Agreement by the Company, the issuance of the
Securities, and the consummation by the Company of the other transactions
contemplated by this Agreement, the Registration Rights Agreement and the
Debentures do not and will not conflict with or result in a breach by the
Company of any of the terms or provisions of, or constitute a default under (i)
the articles of incorporation or by-laws of the Company, each as currently in
effect, (ii) any indenture, mortgage, deed of trust, or other material agreement
or instrument to which the Company is a party or by which it or any of its
properties or assets are bound, including any listing agreement for the Common
Stock except as herein set forth, (iii) to its knowledge, any existing
applicable law, rule, or regulation or any applicable decree, judgment, or order
of any court, United States federal or state regulatory body, administrative
agency, or other governmental body having jurisdiction over the Company or any
of its properties or assets, or (iv) the Company's listing agreement for its
Common Stock, except such conflict, breach or default which would not have a
material adverse effect on the Company or on the transactions contemplated
herein.
f. Approvals. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market or the stockholders of the Company is required to be obtained
by the Company for the issuance and sale of the Securities to the Buyer as
contemplated by this Agreement, except such authorizations, approvals and
consents that have been obtained.
g. SEC Filings. None of the Company's SEC Documents contained, at
the time they were filed, any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make the
statements made therein in light of the circumstances under which they were
made, not misleading. The Company has since January 1, 1997 timely filed all
requisite forms, reports and exhibits thereto with the SEC.
h. Absence of Certain Changes. Since January 31, 1998, there has
been no material adverse change and no material adverse development in the
business, properties, operations, condition (financial or otherwise), or results
of operations of the Company, except as disclosed in the Company's SEC
Documents. Since January 31, 1998, except as provided in the Company's SEC
Documents, the Company has not (i) incurred or become subject to any material
liabilities (absolute or contingent) except liabilities incurred in the ordinary
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course of business consistent with past practices; (ii) discharged or satisfied
any material lien or encumbrance or paid any material obligation or liability
(absolute or contingent), other than current liabilities paid in the ordinary
course of business consistent with past practices; (iii) declared or made any
payment or distribution of cash or other property to stockholders with respect
to its capital stock, or purchased or redeemed, or made any agreements to
purchase or redeem, any shares of its capital stock; (iv) sold, assigned or
transferred any other tangible assets, or canceled any debts or claims, except
in the ordinary course of business consistent with past practices; (v) suffered
any substantial losses or waived any rights of material value, whether or not in
the ordinary course of business, or suffered the loss of any material amount of
existing business; (vi) made any changes in employee compensation, except in the
ordinary course of business consistent with past practices; or (vii) experienced
any material problems with labor or management in connection with the terms and
conditions of their employment.
i. Full Disclosure. There is no fact known to the Company (other
than general economic conditions known to the public generally or as disclosed
in the Company's SEC Documents) that has not been disclosed in writing to the
Buyer that (i) would reasonably be expected to have a material adverse effect on
the business or financial condition of the Company, (ii) would reasonably be
expected to materially and adversely affect the ability of the Company to
perform its obligations pursuant to this Agreement or any of the agreements
hereby (collectively, including this Agreement, the "Transaction Agreements") or
(iii) would reasonably be expected to materially and adversely affect the value
of the rights granted to the Buyer in the Transaction Agreements.
j. Absence of Litigation. Except as set forth in the Company's SEC
Documents, there is no action, suit, proceeding, inquiry or investigation before
or by any court, public board or body pending or, to the knowledge of the
Company, threatened against or affecting the Company, wherein an unfavorable
decision, ruling or finding would have a material adverse effect on the
properties, business or financial condition, or results of operation of the
Company and its subsidiaries taken as a whole or the transactions contemplated
by any of the Transaction Agreements or which would adversely affect the
validity or enforceability of, or the authority or ability of the Company to
perform its obligations under, any of the Transaction Agreements.
k. Absence of Events of Default. Except as set forth in Section 3(e)
hereof, no Event of Default (or its equivalent term), as defined in the
respective agreement to which the Company is a party, and no event which, with
the giving of notice or the passage of time or both, would become an Event of
Default (or its equivalent term) (as so defined in such agreement), has occurred
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and is continuing, which would have a material adverse effect on the Company's
financial condition or results of operations.
l. Prior Issues. During the twelve (12) months preceding the date
hereof, the Company has not issued any convertible securities. The presently
outstanding unconverted principal amount of each such issuance as at May 26,
1998 are set forth in Annex V.
m. No Undisclosed Liabilities or Events. The Company has no
liabilities or obligations other than those disclosed in the Company's SEC
Documents or those incurred in the ordinary course of the Company's business
since January 31, 1998, and which individually or in the aggregate, do not or
would not have a material adverse effect on the properties, business, condition
(financial or otherwise), or results of operations of the Company. No event or
circumstances has occurred or exists with respect to the Company or its
properties, business, condition (financial or otherwise), or results of
operations, which, under applicable law, rule or regulation, requires public
disclosure or announcement prior to the date hereof by the Company but which has
not been so publicly announced or disclosed. There are no proposals currently
under consideration or currently anticipated to be under consideration by the
Board of Directors or the executive officers of the Company which proposal would
(x) change the charter or by-laws of the Company, each as currently in effect,
with or without shareholder approval, which change would reduce or otherwise
adversely affect the rights and powers of the shareholders of the Common Stock
or (y) materially or substantially change the business, assets or capital of the
Company, including its interests in subsidiaries.
n. No Default. The Company is not in default in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any material indenture, mortgage, deed of trust or other material
instrument or agreement to which it is a party or by which it or its property is
bound.
o. No Integrated Offering. Neither the Company nor any of its
affiliates nor any person acting on its or their behalf has, directly or
indirectly, at any time since January 1, 1997, made any offer or sales of any
security or solicited any offers to buy any security under circumstances that
would eliminate the availability of the exemption from registration under Rule
506 of Regulation D in connection with the offer and sale of the Securities as
contemplated hereby.
p. Dilution. The number of Shares issuable upon conversion of the
Debentures and the exercise of the Warrants may increase substantially in
certain circumstances, including, but not necessarily limited to, the
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circumstance wherein the trading price of the Common Stock declines prior to the
conversion of the Debentures. The Company's executive officers and directors
have studied and fully understand the nature of the Securities being sold hereby
and recognize that they have a potential dilutive effect. The board of directors
of the Company has concluded, in its good faith business judgment, that such
issuance is in the best interests of the Company. The Company specifically
acknowledges that its obligation to issue the Shares upon conversion of the
Debentures and upon exercise of the Warrants is binding upon the Company and
enforceable regardless of the dilution such issuance may have on the ownership
interests of other shareholders of the Company.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. Transfer Restrictions. The Buyer acknowledges that (1) the
Debentures have not been and are not being registered under the provisions of
the 1933 Act and, except as provided in the Registration Rights Agreement the
Shares have not been and are not being registered under the 1933 Act, and may
not be transferred unless (A) subsequently registered thereunder or (B) the
Buyer shall. have delivered to the Company and opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that the
Securities to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration; (2) any sale of the Securities made in
reliance on Rule 144 promulgated under the 1933 Act may be made only in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such Securities under circumstances in which the
seller, or the person through whom the sale is made, may be deemed to be an
underwriter, as that term is used in the 1933 Act, may require compliance with
some other exemption under the 1933 Act or the rules and regulations of the SEC
thereunder; and (3) neither the Company nor any other person is under any
obligation to register the Securities (other than pursuant to the Registration
Rights Agreement) under the 1933 Act or to comply with the terms and conditions
of any exemption thereunder.
b. Restrictive Legend. The Buyer acknowledges and agrees that the
Debentures and the Warrants, and, until such time as the Common Stock has been
registered under the 1933 Act as contemplated by the Registration Rights
Agreement and sold in accordance with an effective Registration Statement,
certificates and other instruments representing any of the Securities shall bear
a restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of any such Securities):
THESE SECURITIES ("THE SECURITIES") HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR
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OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER
EVIDENCE ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION IS
NOT REQUIRED.
c. Registration Rights Agreement. The parties hereto agree to enter
into the Registration Rights Agreement on or before the Initial Closing Date.
d. Filings. The Company undertakes and agrees to make all necessary
filings in connection with the sale of the Debentures to the Buyer under any
United States laws and regulations applicable to the Company, or by any domestic
securities exchange or trading market, and to provide a copy thereof to the
Buyer promptly after such filing.
e. Reporting Status. So long as the Buyer beneficially owns any of
the Debentures, the Company shall file all reports required to be filed with the
SEC pursuant to Section 13 or 15(d) of the 1934 Act, and the Company shall not
terminate its status as an issuer required to file reports under the 1934 Act
even if the 1934 Act or the rules and regulations thereunder would permit such
termination. The Company will take all reasonable action under its control to
obtain and to continue the listing and trading of its Common Stock (including,
without limitation, all Registrable Securities) on The NASDAQ/Bulletin Board
Market and will comply in all material respects with the Company's reporting,
filing and other obligations under the by-laws or rules of the National
Association of Securities Dealers, Inc. ("NASD") or The NASDAQ/Bulletin Board
Market.
f. Use of Proceeds. The Company will use the proceeds from the sale
of the Debentures (excluding amounts paid by the Company for legal fees,
finder's fees and escrow fees in connection with the sale of the Debentures) for
internal working capital purposes, and shall not, directly or indirectly, use
such proceeds for any loan to or investment in any other corporation,
partnership enterprise or other person.
g. Certain Agreements.
(i) The Company covenants and agrees that it will not, without the
prior written consent of the Buyer, enter into any subsequent or further offer
or sale of Common Stock or securities convertible into Common Stock
(collectively, "New Common Stock") with any third party pursuant to a
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transaction which in any manner permits the sale of the New Common Stock on
any date which is earlier than one hundred eighty (180) days after the
later of (A) the Effective Date (as defined below) or (B) the latest
Additional Closing Date.
(ii) The provisions of subparagraph (g)(i) will not apply to (x) the
issuance of securities (other than for cash) in connection with an acquisition,
merger, consolidation, sale of assets, disposition, or (y) the exchange of the
capital stock for assets, stock or other joint venture interests; provided,
however, that any action contemplated under this subparagraph (g)(ii) is subject
to the condition that registration rights, if any, in connection with such
action shall not require the filing of a Registration Statement in respect of
such stock prior to sixty (60) days after the Effective Date.
(iii) The term "Effective Date" means the effective date of the
Registration Statement covering the Registrable Securities (as that term is
defined in the Registration Rights Agreement).
(iv) In the event the Company breaches the Provisions of this
Section 4(g), the Conversion Rate (as defined in the Debentures) shall be
amended to be equal to (x) 90% of (y) the amount determined in accordance with
the provisions of the Debenture without regard to this provision, and the
Purchaser may require the Company to immediately redeem all outstanding
Debentures in accordance with Section 4(k)(y) hereof.
h. Future Purchases.
(i) The Buyer hereby unconditionally and irrevocably agrees to
purchase from the Company, at the option of the Company exercised as provided
below, up to an additional principal amount of Debentures (the "Second
Debentures") equal to $2,500,000 multiplied by a fraction, of which the
numerator is the principal amount of the Initial Debentures and the denominator
is $2,500,000 in one tranche (the "Second Tranche"), on the terms and subject to
the conditions hereinafter provided.
(ii) The closing for the Second Tranche shall occur if the Company
gives the Buyer notice (the "Second Tranche Notice") that the Company commits to
issuing the Second Debentures to the Buyer on the closing date for the Second
Tranche (the "Second Closing Date"), provided, however, that the Second Tranche
Notice must be received by the Buyer within thirty (30) days of the Effective
Date. If the Second Tranche Notice is given after the Effective Date, the Second
Tranche Notice shall state the Effective Date. If the Second Tranche Notice is
given prior to the Effective Date, the Company shall include a commitment to
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give notice to the Buyer by telephone and facsimile transmission of the
Effective Date no later than the business day immediately following the
Effective Date. Provided the Company has provided confirmation of the Effective
Date in the manner provided in this subsection (ii), the Second Closing Date
shall be five (5) business days after the later of the Effective Date or the
date the Buyer receives the Second Tranche Notice, unless otherwise agreed to by
the Company and the Buyer.
(iii) The Initial Debentures and the Second Debentures are referred
to collectively as the "Basic Debentures."
(iv) The Company and the Buyer agree that, subject to the mutual
agreement of the Company and the Buyer, the Buyer will purchase from the Company
and the Company will issue to the Buyer, subsequent to the Second Closing Date,
additional debentures (the "Subsequent Debentures") aggregating up to $5,000,000
multiplied by a fraction, of which the numerator is the principal amount of the
Basic Debentures and the denominator is $5,000,000 in one or more tranches
(collectively, the "Subsequent Tranches"), on the terms and subject to the
conditions hereinafter provided or otherwise agreed to by the Company and the
Buyer.
(v) The closing for each of the Subsequent Tranches (each, a
"Subsequent Closing Date") shall take place on a date mutually agreed to by the
Buyer and the Company.
(vi) Each of the Second Tranche and each Subsequent Tranche is
referred to as an "Additional Tranche." Each of the Second Closing Date and each
Subsequent Closing Date is referred to as an ""Additional Closing Date." Each of
the Second Debentures and each of the Subsequent Debentures is referred to as an
"Additional Debenture."
(vii) The closing of each Additional Tranche shall be conducted upon
the same terms and conditions as those applicable to the Initial Debentures.
(viii) It shall be a condition to the Buyer's obligation to purchase
the Additional Debentures that, as of the Additional Closing Date, (A) the
Market Price of the Common Stock, as adjusted to reflect any stock splits,
reverse stock splits or stock dividends effected or declared after the Initial
Closing Date, be Five Dollars ($5.00) or more and (B) the average trading volume
for the five (5) consecutive trading days ending the day before the Additional
Closing Date be Five Hundred Thousand Dollars ($500,000.00) or more.
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(ix) On each Additional Closing Date, (A) the Registration Statement
required to be filed under the Registration Rights Agreement shall continue to
be effective and shall cover at least all Registrable Securities for Debentures
issued prior to or on the relevant Closing Date, (B) the representations and
warranties of the Company contained in Section 3 hereof shall be true and
correct in all material respects (and the Company's issuance of the relevant
Additional Debenture shall constitute the Company's making each such
representation and warranty as of such date) and there shall have been no
material adverse changes (financial or otherwise) in the business or conditions
of the Company from the Initial Closing Date through and including the relevant
Additional Closing Date (and the Company's issuance of the relevant Additional
Debentures shall constitute the Company's making such representation and
warranty as of such date), (C) the Company shall have timely issued all shares
issuable upon conversion of the Debentures prior to the date of such Additional
Closing Date, and (D) either the aggregate of the Common Stock issuable
(i) upon conversion of the relevant Additional Debentures as a group or
together with the Common stock issuable upon conversion of the then
previously issued Debentures, and
(ii) upon exercise of the Warrants which might be issued as a result of
the conversion of the Additional Debentures, as a group or together with
the Warrants then previously issued
(in each case assuming for such computation a Conversion Rate computed based on
a Market Price equal to 50% of the Market Price on such Additional Closing Date)
will not result in the issuance of shares in excess of the Cap Regulations (as
defined below) or the Company shall have obtained the consent of its
shareholders, as contemplated by the Cap Regulations, to such issuance.
(x) In furtherance of the provisions of the immediately preceding
subparagraph (ix) hereof the Company (a) commits to using its beg efforts to
obtain any shareholder authorization contemplated by said subparagraph (ix) by
written consent of shareholders holding at least the minimum number of shares
necessary to take such action without a meeting of all shareholders and, if such
consent is not obtained, by vote of the shareholders at a meeting of
shareholders duly called and held, and (b) represents to the Buyer that the
Company has obtained the binding irrevocable commitment or proxy (each, a
"Principal Voter Proxy") of each Principal Voter (as defined below) that such
Principal Voter will vote in favor of any shareholder authorization contemplated
by said subparagraph (ix). A "Principal Voter" is a person who meets any one or
more of the following criteria: (A) a person who is a director or principal
officer of the Company (each, a "Company Principal") and who, directly or
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indirectly, holds any shares of Common Stock of the Company; (B) a spouse of a
Company Principal (a "Principal's Spouse") who, directly or indirectly, holds
any shares of Common Stock of the Company, (C) a parent, sibling or child of a
Company Principal who resides in the household of a Company Principal or of a
Principal's Spouse (each, a "Principal's Relative") and who, directly or
indirectly, holds any shares of Common Stock or (D) any other person or entity,
including, without limitation, for profit or non-profit corporations,
partnerships and trusts, whose voting rights regarding Common Stock of the
Company is subject to the direction, control or other influence of any Company
Principal, Principal's Spouse or Principal's Relative. The Company will deliver
such Principal Voter Proxies to the Buyer or the Buyee's designee within ten
(10) business days after the Initial Closing Date, together with an opinion of
the Company's counsel that each such Principal Voter Proxy is binding and
irrevocable and is enforceable or exercisable by the Buyer or the Buyer's
designee. If, as of any Additional Closing Date, there are any additional
Principal Voters, the Company shall have obtained the Principal Voter Proxy of
each such additional Principal Voter and shall deliver each such additional
Principal Voter Proxy to the Buyer or the Buyer's designee, together with an
opinion of the Company's counsel that each such additional Principal Voter Proxy
is binding and irrevocable and is enforceable or exercisable by the Buyer or the
Buyer's designee, no later than the relevant Additional Closing Date. Compliance
with the foregoing provisions of this subsection (k) shall be a condition to the
Buyer's obligation to purchase Additional Debentures on such Additional Closing
Date.
i. Available Shares. The Company shall have at all times authorized
and reserved for issuance, free from preemptive rights, shares of Common Stock
sufficient to yield two hundred percent (200%) of the number of shares of Common
Stock issuable (i) at conversion as may be required to satisfy the conversion
rights of the Buyer pursuant to the terms and conditions of the Debentures and
(ii) upon exercise as may be required to satisfy the exercise rights of the
Buyer pursuant to the terms and conditions of the Warrants.
j. Warrants. The Company agrees to issue to the Buyer on or within
one business day of each Delivery Date transferable, divisible warrants (the
"Warrants") for the purchase of one share of Common Stock for each two shares of
Common Stock issuable in connection with the corresponding conversion of the
Debentures. The Warrants attributable to each such conversion shall bear an
exercise price equal to the lesser of (x) one hundred twenty percent (120%) of
the relevant Conversion Rate or (Y) one hundred twenty-five percent (125%) of
the Base Price (as defined in the Debentures). The Warrants will expire on the
fifth anniversary of the Initial Closing Date. The Warrants shall be in the form
annexed hereto as Annex VI, together with registration rights as provided in the
Registration Rights Agreement.
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k. Limitation on Issuance of Shares. The Company may be limited in
the number of shams of Common Stock it way issue by virtue of (i) the number of
authorized shares or (ii) the applicable rules and regulations of the principal
securities market on which the Common Stork is listed or traded, including, but
not necessarily limited to, NASDAQ Rule 4310(c)(25)(H)(i)(d)(2) (collectively,
the "Cap Regulations"). Without limiting the offer provisions thereof, the
Debentures shall provide that (i) the Company will take all steps reasonably
necessary to be in a position to issue shares of Common Stock on conversion of
the Debentures without violating the Cap Regulations and (d) if, despite taking
such steps, the Company still can not issue such shares of Common Stock without
violating the Cap Regulations, the holder of a Debenture which can not be
converted as result of the Cap Regulations (each such Debenture, an "Unconverted
Debenture") shall have the option, exercisable in such holder's sole and
absolute discretion, to elect either of the following remedies:
(x) require the Company to issue shares of Common Stock in
accordance with such holders notice of conversion at a conversion purchase
price equal to the average of the closing bid price per share of Common
Stock for any five (5) consecutive trading days (subject to certain
equitable adjustments for certain events occurring during such period)
during the sixty (60) trading days immediately preceding the date of
notice of conversion; or
(y) require the Company to redeem each Unconverted Debenture for an
amount (the "Redemption Amount"), payable in cash, equal to:
V
----- x M
CP
"V" means the principal of an Unconverted Debenture plus any accrued
but unpaid interest thereon;
"CP" means the conversion price in effect on the date of redemption
(the "Redemption Date") specified in the notice from the holder of the
Unconverted Debentures electing this remedy; and
"M" means the highest closing bid price per share of the Common
Stock during the period beginning on the Redemption Date and ending on the
date of payment of the Redemption Amount.
A holder of an Unconverted Debenture may elect one of the above remedies with
respect to a portion of such Unconverted Debenture and the other remedy with
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respect to other portions of the Unconverted Debenture. The Debentures shall
contain provisions substantially consistent with the above terms, with such
additional provisions as may be consented to by the Buyer. The provisions of
this paragraph are not intended to limit the scope of the provisions otherwise
included in the Debentures.
l. Hedging Transactions.
(i) The Company understands that the Buyer may be a so-called
"hedge" fund, and the Company hereby expressly agrees that, except as provided
in subparagraph (ii) of this paragraph (l), the Buyer shall not in any way be
prohibited or restricted from any purchases or sales of any securities or other
instruments of, or related to, the Company or any of its securities, including,
but not necessarily limited to, puts, calls, future contracts, short sales and
hedging and arbitrage transactions. The Buyer acknowledges that such purchases,
sales and other transactions may be subject to various federal and state
securities laws and agrees to comply with all such applicable securities laws.
(ii) The Buyer agrees that, prior to the Effective Date, the Buyer
will not engage in any puts, calls, future contracts, short sales and hedging
and arbitrage transactions with respect to the Common Stock.
m. Right of First Refusal.
(i) The Company covenants and agrees that if during the period from
the date hereof through and including the date which is one hundred twenty (120)
days after the later of (A) the Effective Date or (B) the latest Additional
Closing Date, the Company offers to enter into any transaction (a "New
Transaction") for the sale of New Common Stock, the Company shall notify the
Buyer in writing of all of the terms of such offer (a "New Transaction Offer").
The Buyer shall have the right (the "Right of First Refusal"), exercisable by
written notice given to the Company by the close of business on the fifth
business day after the Buyer's receipt of the New Transaction Offer (the "Right
of First Refusal Expiration Date"), to participate in all or any part of the New
Transaction Offer on the terms so specified.
(ii) If, and only if, the Buyer does not exercise the Right of First
Refusal in full, the Company may consummate the remaining portion of the New
Transaction with any New Investor on the terms specified in the New Transaction
Offer within thirty (30) days of the Right of First Refusal Expiration Date.
(iii) If the terms of the New Transaction to be consummated with
such other party differ from the terms specified in the New Transaction Offer so
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that the terms are more beneficial in any respect to the New Investor, the
Company shall give the Buyer a New Transaction Offer relating to the terms of
the New Transaction, as so changed, and the Buyer's Right of First Refusal and
the preceding terms of this paragraph (m) shall apply with respect to such
changed terms.
(iv) If there is more than one Buyer signatory to this Agreement,
the preceding provisions of this (m) shall apply pro rata among them (based on
the Debentures purchased by each of them hereunder), except that, to the extent
any such Buyer does not exercise its Right of First Refusal in full (a
"Declining Buyer"), the remaining Buyer or Buyers who or which have exercised
their own Right of First Refusal in full, shall have the right (pro rata among
them, if more than one) to exercise all or a portion of such Declining Buyer's
unexercised Right of Refusal. Nothing in this paragraph (m) shall be deemed to
permit a transaction not otherwise permitted by subparagraph (g)(i), as modified
by the provisions of subparagraph (g)(ii).
(v) In the event the New Transaction is consummated with such other
third party on terms providing for (k) either a sale price equal to or computed
based on, or a determination of a conversion price based on, a lower percentage
of the then current market price (howsoever defined or computed) than provided
in the Debentures for determining the Conversion Rate or a lower Base Price
(howsoever defined or computed) and/or (y) the issuance of warrants at an
exercise price lower than that provided in the Warrants, the terms of any
unissued or unconverted Debentures or any unissued or unexercised Warrants shall
be modified to reduce the relevant Conversion Rate, Base Price or Warrant
exercise price to be equal to that provided in the New Transaction as so
consummated.
5. TRANSFER AGENT INSTRUCTIONS.
a. Promptly following the delivery by the Buyer of the Purchase
Price for the Initial Debentures in accordance with Section 1(c) hereof, the
Company will irrevocably instruct its transfer agent to issue Common Stock from
time to time upon conversion of the Debentures in such amounts as specified from
time to time by the Company to the transfer agent, bearing the restrictive
legend specified in Section 4(b) of this Agreement prior to registration of the
Shares under the 1933 Act, registered in the name of the Buyer or its nominee
and in such denominations to be specified by the Buyer in connection with each
conversion of the Debentures. The Company warrants that m instruction other than
such instructions referred to in this Section 5 and stop transfer instructions
to give effect to Section 4(a) hereof prior to registration and sale of the
Shares under the 1933 Act will be given by the Company to the transfer agent and
that the Shares shall otherwise be freely transferable on the books and records
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of the Company as and to the extent provided in this Agreement, the Registration
Rights Agreement, and applicable law. Nothing in this Section shall affect in
any way the Buyees obligations and agreement to comply with all applicable
securities laws upon resale of the Securities. If the Buyer provides the Company
with an opinion of counsel reasonably satisfactory to the Company that
registration of a resale by the Buyer of any of the Securities in accordance
with clause (1)(B) of Section 4(a) of this Agreement is not required under the
1933 Act, the Company shall (except as provided in clause (2) of Section 4(a) of
this Agreement) permit the transfer of the Securities and, in the case of the
Converted Shares or the Warrant Shares, as the case may be, promptly instruct
the Company's transfer agent to issue one or more certificates for Common Stock
without legend in such name and in such denominations as specified by the Buyer.
b. (i) The Company will permit the Buyer to exercise its right to
convert the Debentures by telecopying or delivering an executed and completed
Notice of Conversion to the Company and delivering, within five (5) business
days thereafter, the original Debentures being converted to the Company by
express courier, with a copy to the transfer agent.
(ii) The term "Conversion Date" means, with respect to any
conversion elected by the holder of the Debentures, the date specified in the
Notice of Conversion, provided the copy of the Notice of Conversion is
telecopied to or otherwise delivered to the Company in accordance with do
provisions hereof that is received by the Company on or before such specified
date.
(iii) The Company will transmit the certificates representing
the Converted Shares issuable upon conversion of any Debentures (together with
Debentures not being so converted) to the Buyer via express courier, by
electronic transfer or otherwise, within three (3) business days (such third
business day, the "Delivery Date") after (A) the business day on which the
Company has received both of the Notice of Conversion (by facsimile or other
delivery) and the original Debentures being converted (and if the same me not
delivered to the Company on the same date, the date of delivery of the second of
such items) or (B) the date an interest payment on the Debenture, which the
Company has elected to pay by the issuance of Common Stock, as contemplated by
the Debentures, was due.
c. The Company understands that a delay in the issuance of the
Shares of Common Stock beyond the Delivery Date could result in economic loss to
the Buyer. As compensation to the Buyer for such loss, the Company agrees to pay
late payments to the Buyer for late issuance of Shares upon Conversion in
accordance with the following schedule (where "No. Business Days Late" is
defined as the number of business days beyond two (2) business days from the
Delivery Date):
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Late Payment For Each $10,000
of Debenture Principal or Interest
No. Business Days Late Amount Being Converted
---------------------- ----------------------------------
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
>10 $1,000+$200 for each
Business Day Late
beyond 10 days
The Company shall pay any payments incurred under this Section in immediately
available funds upon demand. Nothing herein shall limit the Buyees right to
pursue actual damages for the Company's failure to issue and deliver the Common
Stock to the Buyer. Furthermore, in addition to any other remedies which may be
available to the Buyer, in the event that the Company fails for any reason to
effect delivery of such shares of Common Stock within two (2) business days
after the Delivery Date, the Buyer will be entitled to revoke the relevant
Notice of Conversion by delivering a notice to such effect to the Company
whereupon the Company and the Buyer shall each be restored to their respective
positions immediately prior to delivery of such Notice of Conversion.
d. If, by the relevant Delivery Date, the Company fails for any
reason to deliver the Shares to be issued upon conversion of a Debenture and
after such Delivery Date, the holder of the Debentures being converted (a
"Converting Holder") purchases, in an open market transaction or otherwise,
shares of Common Stock (the "Covering Shares") in order to make delivery in
satisfaction of a sale of Common Stock by the Converting Holder (the "Sold
Shares"), which delivery such Converting Holder anticipated to make using the
Shares to be issued upon such conversion (a "Buy-In"), the Company shall pay to
the Converting Holder, in addition to all other amounts contemplated in other
provisions of the Transaction Agreements, and not in lieu thereof, the Buy-In
Adjustment Amount (as defined below). The "Buy-In Adjustment Amount' is the
amount equal to the excess, if any, of (k) the Converting Holder's total
purchase price (including brokerage commissions, if any) for the Covering
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Shares over (y) the net proceeds (after brokerage commissions, if any) received
by the Converting Holder from the sale of the Sold Shares. The Company shall pay
the Buy-In Adjustment Amount to the Company in immediately available funds
immediately upon demand by the Converting Holder. By way of illustration and not
in limitation of the foregoing, if the Converting Holder purchases shares of
Common Stock having a total purchase price (including brokerage commissions) of
$11,000 to cover a Buy-In with respect to shares of Common Stock it sold for net
proceeds of $10,000, the Buy-In Adjustment Amount which Company will be required
to pay to the Converting Holder will be $1,000.
e. In lieu of delivering physical certificates representing the
Common Stock issuable upon conversion, provided the Company's transfer agent is
participating in the Depository Trust Company ("DTC") Fast Automated Securities
Transfer program, upon request of the Buyer and its compliance with the
provisions contained in this paragraph, so long as the certificates therefor do
not bear a legend and the Buyer thereof is not obligated to return such
certificate for the placement of a legend thereon, the Company shall use its
best efforts to cause its transfer agent to electronically transmit the Common
Stock issuable upon conversion to the Buyer by crediting the account of Buyer's
Prime Broker with DTC through its Deposit Withdrawal Agent Commission system.
f. The Company will authorize its transfer agent to give information
relating to the Company directly to the Buyer or the Buyer's representatives
upon the request of the Buyer or any such representative. The Company will
provide the Buyer with a copy of the authorization so given to the transfer
agent.
6. DELIVERY INSTRUCTIONS.
The Initial Debentures or the Additional Debentures, as the case may
be, shall be delivered by the Company to the Escrow Agent pursuant to Section
1(b) hereof, on a delivery against payment basis, no later than on the relevant
Closing Date.
7. CLOSING DATE.
a. The Initial Closing Date shall occur on the date which is the
first NYSE trading day after the fulfillment or waiver of all closing conditions
pursuant to Sections 8 and 9 hereof or such other date and time as is mutually
agreed upon by the Company and the Buyer. The date of the Additional Closing
Date shall be the date specified by either party to other on at least ten (10)
business days' advance notice to the other; provided, however, that it shall be
a condition of any Additional Closing Date that, on or before such date, each of
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the conditions contemplated by Section 4(g) and by Sections 8 and 9 hereof shall
have either been satisfied or been waived by the party in whose favor such
conditions run.
b. Each closing of the purchase and issuance of Debentures shall
occur on the relevant Closing Date at the offices of the Escrow Agent and shall
take place no later than 12:00 Noon, New York time, on such day or such other
time as is mutually agreed upon by the Company and the Buyer.
c. Notwithstanding anything to the contrary contained herein, the
Escrow Agent will be authorized to release the Escrow Property only upon
satisfaction of the conditions set forth in Sections 8 and 9 hereof. The
relevant Debentures shall be delivered by the Company to the Escrow Agent
pursuant to Section l(b) hereof no later than on the relevant Closing Date.
8. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell the
Debentures to the Buyer pursuant to this Agreement on the relevant Closing Date
is conditioned upon:
a. The execution and delivery of this Agreement by the Buyer;
b. Delivery by the Buyer to the Escrow Agent of good funds as
payment in full of an amount equal to the purchase price for the relevant
Debentures in accordance with this Agreement;
c. The accuracy on such Closing Date of the representations and
warranties of the Buyer contained in this Agreement, each as if made on such
date, and the performance by the Buyer on or before such date of all covenants
and agreements of the Buyer required to be performed on or before such date; and
d. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained.
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9. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyers, obligation to purchase the
Debentures on the relevant Closing Date is conditioned upon:
a. The execution and delivery of this Agreement and the
Registration Rights Agreement by the Company;
b. Delivery by the Company to the Escrow Agent of the relevant
Debentures in accordance with this Agreement,
c. The accuracy in all material respects on such Closing Date of the
representations and warranties of the Company contained in this Agreement each
as if made on such date, and the by the Company on or before such date of all
covenants and agreements of the Company required to be performed an or before
such date;
d. On such Closing Date, the Registration Rights Agreement shall be
in full force and effect and the Company shall not be in default thereunder,
e. On such Closing Date, the Buyer shall, have received an opinion
of counsel for the Company, dated such Closing Date, in form, scope and
substance reasonably satisfactory to the Buyer, substantially to the effect set
forth in Annex III attached hereto;
f. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained;
g. From and after the date hereof to and including the relevant
Closing Date, the trading of the Common Stock shall not have been suspended by
the SEC or the NASD and trading in securities generally on the New York Stock
Exchange or The NASDAQ/Bulletin Board Market shall not have been suspended or
limited, nor shall minimum prices been established for securities traded on The
NASDAQ/Bulletin Board Market, nor shall there be any outbreak or escalation of
hostilities involving the United States or any material adverse change in any
financial market that in either case in the reasonable judgment of the Buyer
makes it impracticable or inadvisable to purchase the relevant Debentures;
h. As of the trading date before the relevant Closing Date, there
shall be at least three (3) market makers for the Company's Common Stock who
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<PAGE>
have not announced that they are required to or intend to suspend or cease
trading in such Common Stock; and
i. With respect to each Additional Closing Date, each of the
conditions set forth in Section 4(h) hereof shall have either been satisfied or
been waived by the Buyer and there shall be an effective Registration Statement
covering the Registrable Securities issuable upon conversion of the Debentures
previously issued and to be issued on such Additional Closing Date and upon
exercise of all Warrants previously issued and to be issued on such Additional
Closing Date.
10. GOVERNING LAW: MISCELLANEOUS.
a. This Agreement shall be governed by and interpreted in accordance
with the laws of the State of New York for contracts to be wholly performed in
such state and without giving effect to the principles thereof regarding the
conflict of laws. Each of the parties consents to the jurisdiction of the
federal courts whose districts encompass any part of the City of New York or the
state courts of the State of New York sitting in the City of New York in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on forum non conveniens, to the bringing of any such proceeding in such
jurisdictions. To the extent determined by such court, the Company shall
reimburse the Buyer for any reasonable legal fees and disbursements incurred by
the Buyer in enforcement of or protection of any of its rights under any of the
Transaction Agreements.
b. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
c. This Agreement shall inure to the benefit of and be binding upon
the successors and assigns of each of the parties hereto.
d. All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
e. A facsimile transmission of this signed Agreement shall be legal
and binding on all parties hereto.
f. This Agreement may be signed in one or more counterparts, each of
which shall be deemed an original.
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<PAGE>
g. The headings of this Agreement are for convenience of reference
and shall not form part of, or affect the interpretation of, this Agreement.
h. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
i. This Agreement may be amended only by an instrument in writing
signed by the party to be charged with enforcement thereof
j. This Agreement supersedes all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof.
11. NOTICES.
Any notice required or permitted hereunder shall be given in writing
(unless otherwise specified herein) and shall be deemed effectively given on the
earliest of
(a) the dale delivered, if delivered by personal delivery as against
written receipt therefor or by confirmed facsimile transmission,
(b) the seventh business, day after deposit, postage prepaid, in the
United States Postal Service by registered or certified mail, or
(c) the third business day after mailing by international express
courier, with delivery costs and fees prepaid,
in each case, addressed to each of the other parties thereunto entitled at the
following addresses (or at such other addresses as such party may designate by
ten (10) days' advance written notice similarly given to each of the other
parties hereto):
COMPANY: SHOPPING.COM
2101 East Coast Highway
Garden Level
Costa del Mar, CA 92625
ATTN: John Markley
Telephone No.: (714) 640-4393
Telecopier No.: (714) 640-4374
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<PAGE>
with a copy to:
Jeffers Wilson Shaff & Falk
18881 Von Karman, Ave., Tower 17
Suite 1400
Irvine, CA 92715
ATTN: Barry Falk, Esq.
Telephone No.: (714) 660-7700
Telecopier No.: (714) 660-7799
BUYER: At the address set forth on the signature page of this
Agreement.
with a copy to:
Krieger & Prager, Esqs.
319 Fifth Avenue
New York, New York 10016
Telephone No.: (212) 689-3322
Telecopier No.: (212) 213-2077
ESCROW AGENT: Krieger & Prager, Esqs.
319 Fifth Avenue
New York, New York 10016
Telephone No.: (212) 689-3322
Telecopier No.: (212) 213-2077
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
The Company's and the Buyees representations and warranties herein
shall survive the execution and delivery of this Agreement and the delivery of
the Debentures and payment of the Purchase Price, and shall inure to the benefit
of the Buyer and the Company and their respective successors and assigns.
IN WITNESS WHEREOF, this Agreement has been duly executed by the
Buyer by one of its officers thereunto duly authorized as of the date set forth
below.
AMOUNT AND PURCHASE PRICE OF INITIAL DEBENTURES: $
-26-
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<PAGE>
SIGNATURES FOR ENTITIES
IN WITNESS WHEREOF, the undersigned represents that the foregoing
statements are true and correct and that it has caused this Securities Purchase
Agreement to be duly executed an its behalf this _____ day of ______________
1998.
______________________________ ________________________________________
Address Printed Name of Subscriber
______________________________ By:_____________________________________
(Signature of Authorized Person)
Telecopier No.________________ ________________________________________
Printed Name and Title
______________________________
Jurisdiction of Incorporation or
Organization
As of the date set forth below, the undersigned hereby accepts this Agreement
and represents that the foregoing statements are true and correct and that it
has caused this Securities Purchase Agreement to be duly executed on its behalf.
SHOPPING.COM
By: __________________________
Title:__________________________
Date: __________________________
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed by their respective offices thereunto duly authorized as of the
day and year first above written.
COMPANY:
SHOPPING.COM
By:__________________________
Name: John H. Markley
Title: President and CEO
INITIAL INVESTOR:
Star High Yield Investment Management
Corporation
By:__________________________
Name: Simche Hecht
Title: Attorney in fact
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed by their respective offices thereunto duly authorized as of the
day and year first above written.
COMPANY:
SHOPPING.COM
By:__________________________
Name: John H. Markley
Title: President and CEO
INITIAL INVESTOR:
Chesterfield Capital Resources Ltd.
By:__________________________
Name:
Title:
-29-
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed by their respective offices thereunto duly authorized as of the
day and year first above written.
COMPANY:
SHOPPING.COM
By:__________________________
Name: John H. Markley
Title: President and CEO
INITIAL INVESTOR:
Wayne Invest & Trade Inc.
By:__________________________
Name: Mosi Kraus
Title: Attorney in fact
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed by their respective offices thereunto duly authorized as of the
day and year first above written.
COMPANY:
SHOPPING.COM
By:__________________________
Name: John H. Markley
Title: President and CEO
INITIAL INVESTOR:
Maslo Fund Ltd.
By:__________________________
Name: Minna Ledereich
Title: Director
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed by their respective offices thereunto duly authorized as of the
day and year first above written.
COMPANY:
SHOPPING.COM
By:__________________________
Name: John H. Markley
Title: President and CEO
INITIAL INVESTOR:
Burstein & Lindsay Securities Corp.
By:__________________________
Name: Mosi Kraus
Title: Attorney in fact
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the
Buyer by one of its officers thereunto duly authorized as of the date set forth
below.
AMOUNT AND PURCHASE PRICE OF INITIAL DEBENTURES: $250,000
SIGNATURES FOR ENTITIES
IN WITNESS WHEREOF, the undersigned represents that the foregoing
statements are true and correct and that it has caused this Securities Purchase
Agreement to be duly executed an its behalf this _____ day of _____________
1998.
c/o Advisor Associates Inc. Star High Yield Investment Management
Corp. Address Printed Name of Subscriber
1575 45th St.
Brooklyn, NY 11219 By:___________________________________
(Signature of Authorized Person)
Telecopier No. (718) 972-6400 Simche Hecht/attorney in fact
Printed Name and Title
Panama
Jurisdiction of Incorporation or
Organization
As of the date set forth below, the undersigned hereby accepts this Agreement
and represents that the foregoing statements are true and correct and that it
has caused this Securities Purchase Agreement to be duly executed on its behalf.
SHOPPING.COM
By: __________________________
Title:__________________________
Date: __________________________
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the
Buyer by one of its officers thereunto duly authorized as of the date set forth
below.
AMOUNT AND PURCHASE PRICE OF INITIAL DEBENTURES: $250,000.00
SIGNATURES FOR ENTITIES
IN WITNESS WHEREOF, the undersigned represents that the foregoing
statements are true and correct and that it has caused this Securities Purchase
Agreement to be duly executed an its behalf this _____ day of ___________ 1998.
55 Frederick St. Chesterfield Capital Resources Ltd.
Address Printed Name of Subscriber
Nassau, Bahamas
__________________________ By:_______________________________
(Signature of Authorized Person)
Telecopier No. _____________ Nancy Lake
Printed Name and Title
Bahamas
Jurisdiction of Incorporation or
Organization
As of the date set forth below, the undersigned hereby accepts this Agreement
and represents that the foregoing statements are true and correct and that it
has caused this Securities Purchase Agreement to be duly executed on its behalf.
SHOPPING.COM
By: __________________________
Title:__________________________
Date: __________________________
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the
Buyer by one of its officers thereunto duly authorized as of the date set forth
below.
AMOUNT AND PURCHASE PRICE OF INITIAL DEBENTURES: $250,000
SIGNATURES FOR ENTITIES
IN WITNESS WHEREOF, the undersigned represents that the foregoing
statements are true and correct and that it has caused this Securities Purchase
Agreement to be duly executed an its behalf this _____ day of 1998.
c/o Advisor Associates Inc. Wayne Invest & Trade Inc.
Address Printed Name of Subscriber
1575 45th St.
Brooklyn, NY 11219 By:______________________________
(Signature of Authorized Person)
Telecopier No. (718) 972-8400 Mosi Kraus, attorney in fact
Printed Name and Title
Panama
Jurisdiction of Incorporation or
Organization
As of the date set forth below, the undersigned hereby accepts this Agreement
and represents that the foregoing statements are true and correct and that it
has caused this Securities Purchase Agreement to be duly executed on its behalf.
SHOPPING.COM
By: __________________________
Title:__________________________
Date: __________________________
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the
Buyer by one of its officers thereunto duly authorized as of the date set forth
below.
AMOUNT AND PURCHASE PRICE OF INITIAL DEBENTURES: $250,000
SIGNATURES FOR ENTITIES
IN WITNESS WHEREOF, the undersigned represents that the foregoing
statements are true and correct and that it has caused this Securities Purchase
Agreement to be duly executed an its behalf this _____ day of _____________
1998.
c/o Advisor Associates Inc. Maslo Fund Ltd.
Address Printed Name of Subscriber
1575 45th St.
Brooklyn, NY 11219 By:______________________________
(Signature of Authorized Person)
Telecopier No. (718) 972-6400 Minna Ledereich, Director
Printed Name and Title
Republic of the Marshall Island
Jurisdiction of Incorporation or
Organization
As of the date set forth below, the undersigned hereby accepts this Agreement
and represents that the foregoing statements are true and correct and that it
has caused this Securities Purchase Agreement to be duly executed on its behalf.
SHOPPING.COM
By: __________________________
Title:__________________________
Date: __________________________
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the
Buyer by one of its officers thereunto duly authorized as of the date set forth
below.
AMOUNT AND PURCHASE PRICE OF INITIAL DEBENTURES: $250,000
SIGNATURES FOR ENTITIES
IN WITNESS WHEREOF, the undersigned represents that the foregoing
statements are true and correct and that it has caused this Securities Purchase
Agreement to be duly executed an its behalf this _____ day of ____________ 1998.
c/o Advisor Associates Inc. Burstein & Lindsay Securities Corp.
Address Printed Name of Subscriber
1575 45th St.
Brooklyn, NY 11219 By:_____________________________
(Signature of Authorized Person)
Telecopier No. (718) 972-6400 Mosi Kraus, attorney in fact
Printed Name and Title
British Virgin Island
Jurisdiction of Incorporation or
Organization
As of the date set forth below, the undersigned hereby accepts this Agreement
and represents that the foregoing statements are true and correct and that it
has caused this Securities Purchase Agreement to be duly executed on its behalf.
SHOPPING.COM
By: __________________________
Title:__________________________
Date: __________________________
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<PAGE>
EXHIBIT 4.23
------------
ANNEX IV
TO
SECURITIES PURCHASE
AGREEMENT
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of May ___, 1998 (this
"Agreement"), is made by and between SHOPPING.COM, a California corporation,
with headquarters located at 2101 East Coast Highway, Garden Level, Costa del
Mar, CA 92625 (the "Company"), and each entity named on a signature page hereto
(each, an "Initial Investor") (each agreement, with an INITIAL Investor being
deemed a separate and independent agreement between the Company and such INITIAL
Investor, except that each Initial Investor acknowledges and consents to the
rights granted to each other Initial Investor under such agreement).
WITNESSETH:
WHEREAS, upon the terms and subject to the conditions of the
Securities Purchase Agreement, dated as of June 5, 1998, between the Initial
Investor and the Company (the "Securities Purchase Agreement": terms not
otherwise defined herein shall have the meanings ascribed to them in the
Securities Purchase Agreement), the Company has agreed to issue and sell to the
Initial Investor one or more 8% Convertible Debentures of the Company, in an
aggregate principal amount not exceeding $10,000,000 (the "Debentures"); and
WHEREAS, the Company has agreed to issue the Warrants to the
Initial Investor in connection with the issuance of the Debentures; and
WHEREAS, the Debentures are convertible into shares of Common Stock
(the "Conversion Shares") upon the terms and subject to the conditions contained
in the Debentures and the Warrants may be exercised for the purchase of shares
of Common Stock (the "Warrant Shares") upon the terms and conditions of the
Warrants; and
WHEREAS, to induce the Initial Investor to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), with respect to the Conversion Shares and the Warrant Shares;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investor hereby agree as follows:
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<PAGE>
1. DEFINITIONS.
(a) As used in this Agreement, the following terms shall have the
following meanings:
(i) "Investor" means the Initial Investor and any permitted
transferee or assignee who agrees to become bound by the provisions of this
Agreement in accordance with Section 9 hereof.
(ii) "Potential Material Event means any of the following: (a) the
possession by the Company of material information not ripe for disclosure in a
registration statement, which shall be evidenced by determinations in good faith
by the Board of Directors of the Company that disclosure of such information in
the registration statement would be detrimental to the business and affairs of
the Company; or (b) any material engagement or activity by the Company which
would, in the good faith determination of the Board of Directors of the Company,
be adversely affected by disclosure in a registration statement at such time,
which determination shall be accompanied by a good faith n by the Board of
Directors of the Company that the registration statement would be materially
misleading absent the inclusion of such information.
(iii) "Register," "Registered," and "Registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"'), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
(iv) "Registrable Securities" mean the Conversion Shares and the
Warrant Shares.
(v) "Registration Statement" means a registration statement of the
Company under the Securities Act.
(vi) "Initial Closing Date" has the meaning ascribed to it in the
Securities Purchase Agreement with respect to the earliest Initial Closing Date
applicable to any of the Initial Investors signatory to this Agreement, despite
the fact that the Initial Closing Date contemplated by the Securities Purchase
Agreement with respect to other Initial Investors may be later than such date.
(b) Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Securities Purchase
Agreement.
2. REGISTRATION.
(A) MANDATORY REGISTRATION. The Company shall prepare and file with
the SEC, as soon as possible after the Initial Closing Date but no later than
sixty (60) days following the Initial Closing Date, either a Registration
Statement on Form SB-2 or an amendment to an existing Registration Statement, in
either event registering for resale by the Investor a sufficient number of
-2-
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<PAGE>
shares of Common Stock for the Initial Investors to sell the Registrable
Securities (or such lesser number as may be required by the SEC, but
in no event less than two hundred percent (200%) of the aggregate number of
shares (i) into which the Initial Debentures and the Additional Debentures all
Debentures and all interest thereon through their respective Maturity Dates
would be convertible at the time of filing of such Registration Statement
(assuming for such purposes that the maximum Additional Debentures had been
issued at such date and that all Debentures had been eligible to be converted,
and had been converted, into Conversion Shares in accordance with their terms,
whether or not such issuance, accrual of interest, eligibility or conversion had
in fact occurred as of such date) and (ii) which would be issued upon exercise
of all of the Warrants at the time of filing of the Registration Statement
(assuming for such purposes that the Warrants issued in connection with the
purchase and sale of the maximum amount of Debentures had been issued and that
all Warrants had been eligible to be exercised for the maximum number of shares
contemplated thereby and had been exercised in accordance with their terms,
whether or not such issuance, eligibility or exercise had in fact occurred as of
such date). The Registration Statement (i) shall include only the Registrable
Securities and the shares specifically listed on EXHIBIT 1 annexed hereto and
(ii) shall also state that, in accordance with Rule 416 and 457 under the
Securities Act, it also covers such indeterminate number of additional shares of
Common Stock as may become issuable upon conversion of the Debentures and the
exercise of the Warrants resulting from adjustment in the Conversion Price or
the Warrant exercise price, as the case may be, or to prevent dilution resulting
from stock splits, or stock dividends. The Company will use its reasonable best
efforts to cause such Registration Statement to be declared effective no later
than the earlier of (x) five (5) days after notice by the SEC that it may be
declared effective or (y) one hundred five (105) days after the Initial Closing
Date. If at any time the number of shares of Common Stock into which the
Debentures may be converted and which would be issued upon exercise of the
Warrants exceeds the aggregate number of shares of Common Stock then registered,
the Company shall, within ten (10) business days after receipt of a written
notice from any Investor, either (i) amend the Registration Statement filed by
the Company pursuant to the preceding provisions of this Section 2, if such
Registration Statement has not been declared effective by the SEC at that time,
to register all shares of Common Stock into which the Debentures may currently
or in the future be converted and which would be issued currently or in the
future upon exercise of the Warrants, or (ii) if such Registration Statement has
been declared effective by the SEC at that time, file with the SEC an additional
Registration Statement on SB-2 or other appropriate form to register the shares
of Common Stock into which the Debentures may currently or in the future be
converted and which would be issued currently or in the future upon exercise of
the Warrants that exceed the aggregate number of shares of Common Stock already
registered.
(B) PAYMENTS BY THE COMPANY.
(i) If the Registration Statement covering the Registrable
Securities is not filed in proper form with the SEC within sixty (60) days after
the Initial Closing Date (the "Required Filing Date"), the Company will make
payment to the Initial Investor in such amounts and at such times as shall be
determined pursuant to this Section 2(b).
(ii) If the Registration Statement covering the Registrable
Securities is not effective (a) within the earlier of (1) five (5) days after
notice by the SEC that it may be declared effective or (2) one hundred five
(105) days following the Initial Closing Date (the "Required Effective Date"),
-3-
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<PAGE>
or (b) after a Suspension Period (as defined below), then the Company
will make payments to the Initial Investor in such amounts and at such times
as shall be determined pursuant to this Section 2(b).
(ii) The amount (the "Periodic Amount") to be paid by the Company
to the Initial Investor shall be determined as of each Computation Date (as
defined below) and such amount shall be equal to (A) two percent (2%) of the
purchase price paid by the Initial Investor (the "Purchase Price) for all
Debentures purchased pursuant to the Securities Purchase Agreement for the
period from the date following the Required Filing Date or the Required Elective
Date, as the case may be, to the first relevant Computation Date, and (B) three
percent (3%) to each Computation Date thereafter. By way of illustration and not
in limitation of the foregoing, if the Registration Statement is timely filed
but is not declared effective until one hundred eighty (180) days after the
Initial Closing Date, the Periodic Amount will aggregate eight percent (8%) of
the Purchase Price of the Debentures (2% for days 106-135, plus 3% for days
136-165 and 3% for days 165-180).
(iv) Each Periodic Amount will be payable by the Company in cash or
other immediately available funds to the Investor monthly, without requiring
demand therefor by the Investor.
(v) The parties acknowledge that the damages which may be incurred
by the Investor if the Registration Statement is not filed by the Required
Filing Date or if the Registration Statement has not been declared effective by
the Required Registration Date may be difficult to ascertain. The parties agree
that the Periodic Amount represent a reasonable estimate on the part of the
parties, as of the date of this Agreement, of the amount of such damages.
(vi) Notwithstanding the foregoing, the amounts payable by the
Company pursuant to this provision shall not be payable to the extent any delay
in the effectiveness of the Registration Statement occurs because of an act of,
or a failure to act or to act timely by the Initial Investor or its counsel, or
in the event all of the Registrable Securities may be sold pursuant to Rule 144
or another available exemption under the Act.
(vii) "Computation Date" means (i) the date which is the earlier of
(A) thirty (30) days after the Required Filing Date and the Required Effective
Date, as the case may be, or (B) the date after the Required Filing Date or the
Required Registration Date on which the Registration Statement is filed (with
respect to payments due as contemplated by Section 2(b)(i) hereof) or declared
effective (with respect to payments due as contemplated by Section 2(b)(U)
hereof), as the case may be, and (h) each date which is the earlier of (A)
thirty (30) days after the previous Computation Date or (B) the date after the
previous Computation Date on which the Registration Statement is filed (with
respect to payments due as contemplated by Section 2(b)(i) hereof) or declared
effective (with respect to payments due as contemplated by Section 2(b)(ii)
hereof), as the case may be.
3. OBLIGATIONS OF THE COMPANY. In connection with the registration
of the Registrable Securities, the Company shall do each of the following.
-4-
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<PAGE>
(a) Prepare promptly and file with the SEC by sixth (60) days after
the Initial Closing Date, a Registration Statement with respect to not less than
the number of Registrable Securities provided in Section 2(a) above, and
thereafter use its reasonable best efforts to cause each Registration Statement
relating to Registrable Securities to become effective by the Required Effective
Date and keep the Registration Statement effective at all times during the
period (the "Registration Period") continuing until the earliest of (i) the date
that is two (2) years after the last day of the month following the month in
which the Initial Closing Date occurs, (ii) the date when the Investors may sell
all Registrable Securities under Rule 144 or (iii) the date the Investors no
longer own any of the Registrable Securities, which Registration Statement
(including any or supplements thereto and prospectuses contained therein) shall
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading;
(b) Prepare and file with the SEC such (including post-effective
amendments) and supplements to the Registration Statement and the prospectus
used in connection with the Registration Statement as may be necessary to keep
the Registration effective at all times during the Registration Period, and,
during the Registration Period, comply with the provisions of the Securities Act
with respect to the disposition of all Registrable Securities of the Company
covered by the Registration Statement until such time as all of such Registrable
Securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in the Registration
Statement;
(c) The Company shall permit a single firm of counsel designated by
the Initial Investors to review the Registration Statement and all amendments
and supplements thereto a reasonable period of time (but not less than three (3)
business days) prior to their filing with the SEC, and not file any document in
a form to which such counsel reasonably objects.
(d) Notify each Holder of Registrable Securities to be sold, their
Counsel and any managing underwriters immediately (and, in the case of (i)(A)
below, not less than five (5) days prior to such filing) and (if requested by
any such Person) confirm such notice in writing no later than one (1) Business
Day following the day (i)(A) when a Prospectus or any Prospectus supplement or
post effective amendment to the Registration Statement is proposed to be filed;
(B) whenever the SEC notifies the Company whether there will be a "review" of
such Registration Statement; (C) whenever the Company receives (or a
representative of the Company receives on its behalf) any oral or written
comments from the SEC respect of a Registration Statement (copies or, in the
case of oral comments, summaries of such comments shall be promptly furnished by
the Company to the Holders); and (D) with respect to the Registration Statement
or any post-effective amendment, when the same has become effective; (ii) of any
request by the SEC or any other Federal or state governmental authority for
amendments or supplements to the Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement covering any or all
of the Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) if at any time any of the representations or warranties of the
Company contained in any agreement (including any underwriting agreement)
contemplated hereby ceases to he true and correct in all material respects; (y)
of the receipt by the Company of any notification with respect to the suspension
of the qualification or exemption from qualification of any of the Registrable
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Securities for sale in any jurisdiction, or the initiation or threatening
of any Proceeding for such purpose; and (vi) of the occurrence of any event
that to the best knowledge of the Company makes any statement made in
the Registration Statement or Prospectus or any document incorporated or deemed
to be incorporated therein by reference untrue, in any material respect or that
require any revisions to the Registration Statement, Prospectus or other
documents so that in the case of the Registration Statement or the Prospectus,
as the case may be, it Will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. In addition, the Company shall furnish the Holders with
copies of all intended written responses to the comments contemplated in clause
(C) of this Section 3(d) not later than one (1) Business Day in advance of the
filing of such responses with the SEC so that the Holders shall have the
opportunity to comment thereon.
(e) Furnish to each Investor whose Registrable Securities are
included in the Registration Statement and its legal counsel identified to the
Company, (i) promptly after the same is prepared and publicly distributed, filed
with the SEC, or received by the Company, one (1) copy of the Registration
Statement, each preliminary prospectus and prospectus, and each amendment or
supplement thereto, and (ii) such number of copies of a prospectus, and all
amendments and supplements thereto and such other documents, as such Investor
may reasonably request in order to facilitate the disposition of the Registrable
Securities owned by. such Investor;
(f) As promptly as practicable after becoming aware of such event
notify each Investor of the happening of any event of which the Company has
knowledge, as a result of which the prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and use its best efforts promptly to prepare a supplement
or amendment to the Registration Statement or other appropriate filing with the
SEC to correct such untrue statement or omission, and deliver a number of copies
of such supplement or amendment to each Investor as such Investor may reasonably
request;
(g) As promptly as practicable after becoming aware of such event,
notify each Investor who holds Registrable Securities being sold (or, in the
event of an underwritten offering, the managing underwriters) of the issuance by
the SEC of a Notice of Effectiveness or any notice of effectiveness or any stop
order or other suspension of the effectiveness of the Registration Statement at
the earliest possible time;
(h) Notwithstanding the foregoing, if at any time or from time to
time after the date of effectiveness of the Registration Statement, the Company
notifies the Investors in writing of the existence of a Potential Material
Event, the Investors shall not offer or sell any Registrable Securities, or
engage in any other transaction involving or relating to the Registrable
Securities, from the time of the giving of notice with respect to a Potential
Material Event until such Investor receives written notice from the Company that
such Potential Material Event either has been disclosed to the public or no
longer constitutes a Potential Material Event; provided, however, that the
Company may not so suspend the right to such holders of Registrable Securities
for more than. two twenty (20) day periods in the aggregate during any 12-month
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period ("Suspension Period) with at least a ten (10) business day interval
between such periods, during the periods the Registration Statement is required
to be in effect;
(i) Use its reasonable efforts to secure designation of all the
Registrable Securities covered by the Registration Statement on the "OTC
Bulletin Board Market" of the National Association of Securities Dealers
Automated Quotations System ("NASDAQ") within the meaning of Rule 11Aa2-1 of the
SEC under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and the quotation of the Registrable Securities on The NASDAQ Bulletin Board
Market; and, without limiting the generality of the foregoing, to arrange for at
least two market makers to register with the National Association of Securities
Dealers, Inc. ("NASD") as such with respect to such Registrable Securities;
(j) Provide a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date of the
Registration Statement;
(k) Cooperate with the Investors who hold Registrable Securities
being offered to facilitate the timely preparation and delivery of certificates
for the Registrable Securities to be offered pursuant to the Registration
Statement and enable such certificates for the Registrable Securities to be in
such denominations or amounts as the case may be, as the Investors may
reasonably request, and, within three (3) business days after a Registration
Statement which includes Registrable Securities is ordered effective by the SEC,
the Company shall deliver, and shall cause legal counsel selected by the Company
to deliver, to the transfer agent for the Registrable Securities (with copies to
the Investors whose Registrable Securities are included in such Registration
Statement) an appropriate instruction and opinion of such counsel; and
(l) Take all other reasonable actions necessary to expedite and
facilitate disposition by the Investor of the Registrable Securities pursuant to
the Registration Statement.
4. OBLIGATIONS OF THE INVESTORS. In connection with the
registration of the Registrable Securities, the Investors shall have the
following obligations:
(a) It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of the Registrable
Securities held by it, as shall be reasonably required to effect the
registration of such Registrable Securities and shall execute such documents in
connection with such registration as the Company may reasonably request. At
least five (5) days prior to the first anticipated filing date of the
Registration Statement, the Company shall notify each Investor of the
information the Company requires from each such Investor (the "Requested
Information") if such Investor elects to have any of such Investor's Registrable
Securities included in the Registration Statement. If at least two (2.) business
days prior to the filing date the Company has not received the Requested
Information from an Investor (a "Non-Responsive Investor"), then the Company may
file the Registration Statement without including Registrable Securities of such
Non-Responsive Investor;
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(b) Each Investor, by such Investors 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 the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement; and
(c) Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(e) or
3(f), above, such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(e) or 3(f) and, if
so directed by the Company, such Investor shall deliver to the Company (at the
expense of the Company) or destroy (and deliver to the Company a certificate of
destruction) all copies in such Investor's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
5. EXPENSES OF REGISTRATION. (a) All reasonable expenses (other
than underwriting discounts and commissions of the Investor) incurred in
connection with registrations, filings or qualifications pursuant to Section 3,
but including, without limitation, all registration, listing, and qualifications
fees, printers and accounting fees, the fees and disbursements of counsel for
the Company and a fee for a single counsel for the Investor not exceeding
$3,500, shall be borne by the Company.
(b) Except as and to the extent specifically set forth in EXHIBIT 1
attached hereto, neither the Company nor any of its subsidiaries has, as of the
date hereof, nor shall the Company nor any of its subsidiaries, on or after the
date of this Agreement enter into any agreement with respect to its securities
that is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereto. Except as and to the extent
specifically set forth in Exhibit I attached hereto, neither the Company nor any
of its subsidiaries has previously entered into any agreement granting any
registration rights with respect to any of its securities to any Person. Without
limiting the generality of the foregoing, without the written consent of the
Holders of a majority of the then outstanding Registrable Securities, the
Company shall not grant to any person the right to request the Company to
register any securities of the Company under the Securities Act unless the
rights so granted are subject in all respects to the prior rights in full of the
Holders set forth herein, and are not otherwise in conflict or inconsistent with
the provisions of this Agreement.
6. INDEMNIFICATION. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Investor who holds such Registrable Securities, the
directors, if any, of such Investor, the officers, if any, of such Investor,
each person, if any, who controls any Investor within the meaning of the
Securities Act or the Exchange Act (each, an "Indemnified Person" or
"Indemnified Party"), against any losses, claims, damages, liabilities or
expenses joint or several) incurred (collectively, "Claims") to which any of
them may become subject under the Securities Act, the Exchange Act or otherwise,
insofar as such Claims (or actions or proceedings, whether commenced or
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threatened, in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations in the Registration Statement or
any post-effective amendment thereof, or any prospectus included therein: (i)
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or any post-effective amendment thereof or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, (ii)
any untrue statement or alleged untrue statement of a material fact contained in
the final prospectus (as amended or supplemented, if the Company files any
amendment thereof or supplement thereto with the SEC) or the omission or alleged
omission to state therein any material fact necessary to make the statements
made therein, in light of the circumstances under which the statements therein
were made, not misleading or (iii) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act, any state securities law or any
rule or regulation under the Securities Act, the Exchange Act or any state
securities law (the matters in the foregoing clauses (i) through (iii) being,
collectively, "Violations"). Subject to clause (b) of this Section 6, the
Company shall reimburse the Investors, promptly as such expenses are incurred
and are due and payable, for any legal fees or other reasonable expenses
incurred by them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a) shall not (1) apply to a Claim arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company by or on behalf of any
Indemnified Person expressly for use in connection with the preparation of the
Registration Statement or any such amendment thereof or supplement thereto, if
such prospectus was timely made available by the Company pursuant to Section
3(c) hereof; (11) be available to the extent such Claim is based on a failure of
the Investor to deliver or cause to be delivered the prospectus made available
by the Company; or (III) apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld. Each Investor will indemnify
the Company and its officers, directors and agents against any claims arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company, by or on behalf of such
Investor, expressly for use in connection with the preparation of the
Registration Statement subject to such limitations and conditions as are
applicable to the Indemnification provided by the Company to this Section 6.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the transfer of the Registrable Securities by the investors pursuant to Section
9.
(b) Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be. In case any such action is brought against any Indemnified Person
or Indemnified Party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate in, and, to the
extent that it may wish, jointly with any other indemnifying party similarly
notified assume the defense thereof, subject to the provisions herein stated
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<PAGE>
and after notice from the indemnifying party to such Indemnified Person or
Indemnified Party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such Indemnified Person or Indemnified
Party under this Section 6 for any legal or other reasonable out-of-pocket
expenses subsequently incurred by such Person or Indemnified Party in connection
with the defense thereof other than reasonable costs of investigation, unless
the indemnifying party shall not pursue the action of its final conclusion. The
Indemnified Person or Indemnified Party shall have the right to employ separate
counsel in any such action and to participate in the defense thereof, but the
fees and reasonable out-of-pocket expenses of such counsel shall not be at the
expense of the indemnifying party if the indemnifying party has assumed the
defense of the action with counsel reasonably satisfactory to the Indemnified
Person or Indemnified Party. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the went
that the indemnifying party is prejudiced in its ability to defend such action.
The indemnification required by this Section 6 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as such expense, loss, damage or liability is incurred and is due and
payable.
7. CONTRIBUTION. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 6 to the fullest extent permitted by
law, provided, however, that (a) no contribution shall be made under
circumstances where the maker would not have been liable for indemnification
under the fault standards set forth in Section 6; (b) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of Section
I I (f) of the Securities Act) shall be entitled to contribution from any seller
of Registrable Securities who was not guilty of such fraudulent
misrepresentation; and (c) contribution by any seller of Registrable Securities
shall be limited in amount to the net amount of proceeds received by such seller
from the sale of such Registrable Securities-
8. REPORTS UNDER EXCHANGE ACT. With a view to making available to
the investors the benefits of Rule 144 promulgated under the Securities Act or
any other similar rule or regulation of the SEC that may at any time permit the
Investors to sell securities of the Company to the public without registration
("Rule 144"), the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Ride 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
Securities Act and the Exchange Act, (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company and (iii) such other information as may be reasonably requested to
permit the Investors to sell such securities pursuant to Rule 144 without
registration.
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9. ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to have the
Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the investors to any transferee of the Registrable
Securities (or all or any portion of any Debenture of the Company which is
convertible into such securities) only if. (a) the Investor agrees in writing
with the transferee or assignee to assign such rights, and a copy of such
agreement is furnished to the Company within. a reasonable time after such
assignment, (b) the Company is, within a reasonable time after such transfer or
assignment, furnished with written notice of (i) the name and address of such
transferee or assignee and (ii) the securities with respect to which such
registration rights are being transferred or assigned, (c) immediately following
such transfer or assignment the further disposition of such securities by the
transferee or assignee is restricted under the Securities Act and applicable
state securities laws, and (d) at or before the time the Company received the
written notice contemplated by clause (b) of this sentence the transferee or
assignee agrees in writing with the Company to be bound by all of the provisions
contained herein. In the event of any delay in filing or effectiveness of the
Registration Statement as a result of such assignment, the Company shall not be
liable for any damages arising from such delay, or the payments set forth in
Section 2(c) hereof
10. AMENDMENT OF REGISTRATION RIGHTS. Any provision of this
Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and Investors who
hold an eighty (80%) percent interest of the Registrable Securities. Any
amendment or waiver effected in accordance with this Section 10 shall be binding
upon each Investor and the Company.
11. MISCELLANEOUS.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Notices required or permitted to be given hereunder shall be in
writing and be deemed to be sufficiently given when personally delivered (by
hand, by courier, by telephone line facsimile transmission, receipt confirmed,
or other means) or sent by certified mail, return receipt requested, properly
addressed and with proper postage pre-paid (i) if to the Company, SHOPPING.COM,
2101 East Coast Highway, Garden Level, Costa del Mar, CA 92625, ATTN: John
Markley, Telecopier No.: (714) 640-4374; with a copy to Jeffers Wilson Shaff &
Falk, 18881 Von Karman Avenue, Tower 17, Suite 1400, Irvine CA 92715, ATTN:
Barry Falk, Esq., Telecopier No. (714) 660-7799; (ii) if to the Initial
Investor, at the address set forth under its name in the Securities Purchase
Agreement, with a copy to Samuel Krieger, Esq, Krieger & Prager, 319 Fifth
Avenue, Third Floor, New York, NY 10016, Telecopier No.: (212) 213-2077; and
(iii) if to any other Investor, at such address as such Investor shall have
provided in writing to the Company, or at such other address as each such party
furnishes by notice given in accordance with this Section II (b), and shall be
effective, when personally delivered, upon receipt and, when so sent by
registered or certified mail, four (4) calendar days after deposit with the
United States Postal. Service.
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(c) Failure of any party to exercise any right or remedy under this
Agreement Or otherwise, or delay by a party in exercising: such right or remedy,
shall not Operate as a waiver thereof.
(d) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York for contracts to be wholly
performed in such state and without giving effect to the principles thereof
regarding the conflict of laws. Each of the parties consent to the jurisdiction
of the federal courts whose districts encompass any part of the City of New York
or the state courts of the State of New York sitting in the City of New York in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on FORUM NON COVENIENS, to the bringing of any such proceeding in such
jurisdictions. To the extent determined by such court, the Company shall
reimburse the Buyer for any reasonable legal fees and disbursements incurred by
the Buyer in enforcement of or protection of any of its rights under this
Agreement
(e) If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
(f) Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.
(g) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning thereof
(i) This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by telephone line facsimile transmission of
a copy of this Agreement bearing the signature of the party so delivering this
Agreement.
(j) The Company acknowledges that any failure by the Company to
perform its obligations under Section 3(a) hereof, or any delay in such
performance could result in loss to the Investors and the Company agrees that in
addition to any other liability the Company may have by reason of such failure
or delay, the Company shall be liable for all direct damages caused by any such
failure or delay, unless the same is the result of force majeure. Neither party
shall be liable for consequential damages.
(k) This Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
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This Agreement may be amended only by an instrument in writing signed by the
party to be charged with enforcement thereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized as of the
day and year first above written.
"COMPANY:
SHOPPING.COM
By: /s/ JOHN H. MARKLEY
--------------------------
Name: John H. Markley
Title: President
INITIAL INVESTOR:
-----------------------------------
By: ____________________________________
Name:
Title:
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<PAGE>
EXHIBIT 1
Shares Permitted to Be Included in Registration Statement
---------------------------------------------------------
Owned/Description
Shareholder Name Shares of Common Stock of Right to Acquire
- ---------------- ---------------------- -------------------
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EXHIBIT 4.24
------------
DEBENTURE
NEITHER THESE SECURITIES OR THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE
BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR The
SECURITIES COMMISSION OF ANY STATE OR UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THE SECURITIES ARE RESTRICTED AND MAY NOT BE OFFERED, RESOLD, PLEDGED
OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION OR
EXEMPTION OR SAFE HARBOR THEREFROM.
No. 98-1 US $250,000.00
SHOPPING.COM
8% CONVERTIBLE DEBENTURE DUE MAY 31, 2000
THIS DEBENTURE is one of a duly authorized issue of up to $10,000,000 in
Debentures of SHOPPING.COM, a corporation organized and existing under the laws
of the State of Delaware (the "Company") designated as its 8% Convertible
Debentures. Such Debentures may be issued in series, each of which may have a
different maturity date, but which otherwise have substantially similar terms.
FOR VALUE RECEIVED, the Company promises to pay to Burstein & Lindsay
Securities Corp., the registered holder hereof (the "Holder), the principal sum
of Two Hundred Fifty Thousand Dollars and 00/100 Dollars (US $250,000.00) on May
31, 2000 (the "Maturity Date") and to pay interest on the principal sum
outstanding from time to time in arrears (i) prior to the Maturity Date,
quarterly, on the last day of March, June, September and December of each year,
(ii) upon conversion as provided herein or (iii) on the Maturity Date, at the
rate of 9% per annum accruing from ______________, 1998 the date of initial
issuance of this Debenture. Accrual of interest shall commence on the first such
business day to occur after the date hereof and shall continue to accrue on a
daily basis until payment in full of the principal sum has been made or duly
provided for. Subject to the provisions of Sections 4 and 5 below (the terms of
which shall govern as if this sentence were not included in this Debenture),
prior to the Maturity Date, interest on this Debenture is payable, at the option
of the Company, in shares of Common Stock of the Company, no par value ("Common
Stock"), at the Conversion Rate (as defined below) in effect on the date of
payment, or in cash.
This Debenture is subject to the following additional provisions:
1. The Debentures are issuable in denominations of TEN Thousand Dollars
(US $10,000) and integral multiples thereof. The Debentures are exchangeable for
an equal aggregate principal amount of Debentures of different authorized
denominations, as requested by the Holder surrendering the same. No service
charge will be made for such registration or transfer or exchange.
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2. The Company shall be entitled to withhold from all payments of
principal of, and interest on, this Debenture any amounts required to be
withheld under the applicable provisions of the United States income tax laws or
other applicable laws at the time of such payments, and Holder shall execute and
deliver all required documentation in connection therewith.
3. This Debenture has been issued subject to investment of the original
purchaser hereof and may be transferred or exchanged only in compliance with the
Securities Act of 1933, as amended (the "Act"), and other applicable state and
foreign securities laws. In the event of any proposed transfer of this
Debenture, the Company may require, prior to issuance of a new Debenture in the
name of such other person, that it receive reasonable transfer documentation
including legal opinions that the issuance of the Debenture in such other name
does not and will not cause a violation of the Act or any applicable state or
foreign securities laws. Prior to due presentment for transfer of this
Debenture, the Company and any agent of the Company may treat the person in
whose name this Debenture is duly registered on the Company's Debenture Register
as the owner hereof for the purpose of receiving payment as herein provided and
for all other purposes, whether or not this Debenture be overdue, and neither
the Company nor any such agent shall be affected by notice to the contrary.
4. A. The Holder of this Debenture is entitled, at its option, subject to
the following provisions of this Section 4, to convert all or a portion of this
Debenture into shares of Common Stock of the Company at any time until the
Maturity Date, at a conversion price for each share of Common Stock (the
"Conversion Rate) equal to the lower of (x) the lowest Market Price (as defined
below) for any three (3) trading days selected by the Holder from the thirty
(30) trading days ending on the wading day before the Conversion Date, or (y)
$16.00 (the "Base Price"; which amount is subject to adjustment as hereinafter
provided); provided that the principal amount being converted is at least US
$10,000 (unless if at the time of such election to convert the aggregate
principal amount of all Debentures registered to the Holder is less than Ten
Thousand Dollars [US $10,000] then the whole amount thereof).
B. The Holder of this Debenture is entitled, at its option, to
convert this Debenture in accordance with the following schedule:
(i) at any time from the thirtieth day until the ninetieth day after the
date (the "Debenture Date") of the original date of issue of this
Debenture (including any predecessors which were subsequently reissued on
account of conversion, transfer, loss or other reason), up to twenty
percent (20%) of the original principal amount of the Basic Debentures (as
defined in the Securities Purchase Agreement defined below) may be
converted whether from this Debenture or any other Basic Debenture;
(ii) at any time thereafter until the one hundred twentieth day after the
Debenture Date, up to an additional twenty-five percent (25%) (cumulative
forty-five percent [45%]) of the original principal amount of the Basic
Debentures may be converted, whether from this Debenture or any other
Basic Debenture;
(iii) at any time thereafter until the one hundred fiftieth day after the
Debenture Date, up to an additional thirty-five percent (35%) (cumulative
eighty percent [80%]) of the Basic Debentures may be converted, whether
from this Debenture or any other Basic Debenture; and
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<PAGE>
(iv) at any time thereafter, all the principal amount of the Basic
Debentures may be converted.
C. Conversion shall be effectuated by surrendering the Debentures to be
converted to the Company's transfer agent, US Stock Transfer & Trust,
accompanied by or preceded by facsimile or other delivery of the form of
conversion notice attached hereto as Exhibit A, executed by the Holder of the
Debenture evidencing such Holder's intention to convert this Debenture or a
specified portion hereof, and accompanied, if required by the Company, by proper
assignment hereof in blank. interest accrued or accruing from the date of
issuance to the date of conversion shall at the option of the Company, be paid
in cash or Common Stock upon conversion at the Conversion Rate applicable to
such conversion. No fractional shares of Common Stock or scrip representing
fractions of shares will be issued on conversion, but the number of shares
issuable shall be rounded to the nearest whole share. The date on which notice
of conversion is given (the "Conversion Date") shall be deemed to be the date on
which the Holder faxes or otherwise delivers the conversion notice ("Notice of
Conversion!'), substantially in the form annexed hereto as Exhibit A, duly
executed, to the Company, provided that the Holder shall deliver to the Companys
trader agent or the Company the original Debentures being converted within five
(5) business days thereafter (and if not so delivered with such time, the
Conversion Date shall be the date on which the later of the Notice of Conversion
and the original Debentures being converted is received by the Company).
Facsimile delivery of the Notice of Conversion shall be accepted by the Company
at facsimile number (714) 640-4374; Attn: Bob McNulty. Certificates representing
Common Stock upon conversion will be delivered within three (3) business days
from the date later of the Notice of Conversion is delivered to the Company as
contemplated in the first sentence of this paragraph C or the original Debenture
is delivered to the Company's transfer agent or the Company.
D. For purposes of this Debenture, the term "Market Price" shall mean (x)
the average closing bid price of the Common Stock as reported by Bloomberg, LP
or the average closing bid price on the over-the-counter market, (i) if a period
of time is specified in the relevant provision of this Debenture, for such
period, and (ii) if no period of time is specified in the relevant provision of
this Debenture, then for the five (5) trading days ending on the trading day
immediately preceding the relevant date, or (y) if the Common Stock is listed on
a stock exchange, the closing price on such exchange on the date indicated in
the relevant provision hereof, as reported in The Wall Street Journal.
E. Anything herein to the contrary notwithstanding, in the event the
Company breaches the provisions of this Section 4(g) of the Securities Purchase
Agreement, the Conversion Rate shall be amended to be equal to (i) 90% of (ii)
the Conversion Rate determined in accordance with the other provisions of this
Debenture without regard to this Section 4(E), and the Holder may require the
Company to immediately redeem the outstanding portion of this Debenture in
accordance with Section 6(y) hereof.
5. A. (i) Notwithstanding any other provision hereof to the contrary, at
any time prior to the Conversion Date, the Company shall have the right to
redeem all or any portion of the then outstanding principal amount of the
Debentures then held by the Holder in cash for an amount (the "Redemption
Amount") equal to the sum of (a) such outstanding principal of the Debentures
plus all accrued but unpaid interest thereon through the date the Redemption
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Amount is paid to the Holder (the "Redemption Payment Date), plus (b) the
Redemption Premium (as defined below).
(ii) The "Redemption Premium" shall be an amount equal to the
excess, if any, of (a) an amount equal to (1) the number of shares of Common
Stock into which the Holder could have converted the Debentures being redeemed
had the Holder effected such conversion on the date the Company gave the Notice
of Redemption (the "Redemption Notice Date'), multiplied by (U) the closing ask
price of the Common Stock on the Redemption Notice Date, over (b) the principal
of the Debentures so redeemed.
(iii) The Company shall give at least ten (10) business days'
written notice of such redemption to the Holder (the "Notice of Redemption").
Anything in the preceding provisions of this Section 5 to the contrary
notwithstanding, the Redemption Amount shall, unless otherwise agreed to in
writing by the Holder after receiving the Notice of Redemption, be paid to the
Holder in good funds at least five (5) but not more than ten (10) business days
from the date of the Notice of Redemption, except that, with respect to any
Debentures for which a Notice of Redemption is given, the Holder shall have the
right, exercisable by giving a Notice of Conversion is submitted to the Company
within five (5) business days of the Holder's receipt of the Company's Notice of
Redemption, to convert any or all of the Debentures sought to be redeemed (a
"Redemption Notice Conversion") and the Redemption Notice Conversion shall take
precedence over the redemption contemplated by the Notice of Redemption. Such
Debentures shall be converted in accordance with the terms hereof. Furthermore,
in the event such Redemption Amount is not timely made, any rights of the
Company to redeem outstanding Debentures shall terminate, and the Notice of
Redemption shall be null and void. Any redemption contemplated by this Debenture
shall be made only in cash by the payment of immediately available good funds to
the Holder.
B. Any Debentures not previously converted as of the Maturity Date,
shall be deemed to be automatically converted, without further action of any
land by the Company or any of its agents, employees or representatives as of the
Maturity Date at the Conversion Rate applicable on the Maturity Date ("Mandatory
Conversion").
6. The Holder recognizes that the Company may be limited in the number of
shares of Common Stock it may issue by (i) reason of its authorized shares, or
(ii) the applicable rules and regulations of the principal securities market on
which the Common Stock is listed or traded (collectively, the "Cap
Regulations"). Without limiting the other provisions hereof, (i) the Company
will take all steps reasonably necessary to be in a position to issue shares of
Common Stock on conversion of the Debentures without violating the Cap
Regulations and (ii) if, despite taking such steps, the Company still can not
issue such shares of Common Stock without violating the Cap Regulations, the
Holder of this Debenture (to the extent the same can not be converted in
compliance with the Cap Regulations (an "Unconverted Debenture"), shall have the
option, exercisable in the Holder's sole and absolute discretion, to elect any
one of the following remedies:
(x) require the Company to issue shares of Common Stock in
accordance with such Holder's, Notice of Conversion relating to the
Unconverted Debenture at a conversion purchase price equal to the average
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of the closing bid price per share of Common Stock for any five (5)
consecutive trading days (subject to the equitable adjustments for
certain events occurring during such period as provided in this Debenture)
during the sixty (60) trading days immediately preceding the date of the
Notice of Conversion; or
(y) require the Company to redeem each Unconverted Debenture for an
amount (the "Cap Redemption Amount"), payable in cash, equal to:
V x M
-----
CP
where:
"V" means the outstanding principal plus accrued interest through
the Cap Redemption Date (as defined below) of an Unconverted Debenture;
"CP" means the Conversion Rate in effect on the date of redemption
(the "Cap Redemption Date") specified in the notice from the Holder
electing this remedy; and
"M" means the highest Market Price during the period beginning on
the Cap Redemption Date and ending on the date of payment of the Cap
Redemption Amount.
The holder of an Unconverted Debenture May elect one of the above remedies with
respect to a portion of such Unconverted Debenture and the other remedy with
respect to other portions of the Unconverted Debenture.
7. Subject to the terms of the Securities Purchase Agreement, dated
____________, 1998 (the "Securities Purchase Agreement"), between the Company
and the Holder (or the Holder's predecessor in interest), no provision of this
Debenture shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of, and interest on, this Debenture at
the time, place, and rate, and in the coin or currency, herein prescribed. This
Debenture and all other Debentures now or hereafter issued of similar terms are
direct obligations of the Company.
8. No recourse shall be bad for the payment of the principal of, or the
interest on, this Debenture, or for any claim based hereon, or otherwise in
respect hereof, against any incorporator, shareholder, officer or director, as
such, past, present or future, of the Company or any successor corporation,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise, all such liability being,
by the acceptance hereof and as part of the consideration for the issue hereof,
expressly waived and released.
9. If the Company merges or consolidates with another corporation or sells
or transfers all or substantially all of its assets to another person and the
holders of the Common Stock are entitled to receive stock, securities or
property in respect of or in exchange for Common Stock, then as a condition of
such merger, consolidation, sale or transfer, the Company and any such
successor, purchaser or transferee agree that the Debenture may thereafter be
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convected on the terms and subject to the conditions set forth above into the
kind and amount of stock securities or property receivable upon such merger,
consolidation, We or transfer by a holder of the number of shares of Common
Stock into which this Debenture might have been converted immediately before
such merger, consolidation, sale or transfer, subject to adjustments which shall
be as nearly equivalent as may be practicable. In the event of any proposed
merger, consolidation or sale or transfer of all or substantially all of the
assets of the Company (a "Sale"), the Holder hereof shall have the right to
convert by delivering a Notice of Conversion to the Company within fifteen (15)
days of receipt of notice of such Sale from the Company. In the event the Holder
hereof shall elect not to convert, the Company may prepay any outstanding
principal and accrued interest on this Debenture by paying the Redemption Amount
contemplated by Section S(A) hereof, less all amounts required by law to be
deducted, upon which tender of payment following such notice, the right of
conversion shall terminate.
10. If, for any reason, prior to the Conversion Date or the Redemption
Payment Date, the Company spins off or otherwise divests itself of a part of its
business or operations of disposes all or of a part of its assets in a
transaction (the "Spin Off") in which the Company does not receive compensation
for such business, operations or assets, but causes securities of another entity
(the "Spin Off Securities") to be issued to security holders of the Company,
then the Company shall cause (i) to be reserved Spin Off Securities equal to the
number thereof which would have been issued to the Holder had all of the
Holder's Debentures outstanding on the record date (the "Record Date") for
determining the amount and number of Spin Off Securities to be issued to
security holders of the Company (the "Outstanding Debentures) been converted as
of the close of business on the trading day immediately before the Record Date
(the "Reserved Spin Off Shares"), and (ii) to be issued to the Holder on the
conversion of all or any of the Outstanding Debentures, such amount of the
Reserved Spin Off Shares equal to (x) the Reserved Spin Off Shares multiplied by
(y) a fraction, of which (I) the numerator is the principal amount of the
Outstanding Debentures then being converted, and (II) the denominator is the
principal amount of the Outstanding Debentures.
11. If, at any time while any portion of this Debenture remains
outstanding, the Company effectuates a stock split or reverse stock split of its
Common Stock or issues a dividend on its Common Stock consisting of shares of
Common Stock, the Base Price shall be equitably adjusted to reflect such action.
By way of illustration, and not in limitation, of the foregoing (i) if the
Company effectuates, a 2:1 split of its Common Stock, thereafter, with respect
to any conversion for which the Company issues the shares after the record date
of such split, the Base Price shall be deemed to be one-half of what it had been
calculated to be immediately prior to such split; (ii) if the Company
effectuates a 1:10 reverse split of its Common Stock, thereafter, with respect
to any conversion for which the Company issues the shares after the record date
of such reverse split, the Base Price shall be deemed to be ten times what it
had been calculated to be immediately prior to such split; and (iii) if the
Company declares a stock dividend of one share of Common Stock for every 10
shares outstanding, thereafter, with respect to any conversion for which the
Company issues the shares after the record date of such dividend, the Base Price
shall be deemed to be the amount of such Base Price calculated immediately prior
to such record date multiplied by a fraction, of which the numerator is the
number of shares (10) for which a dividend share will be issued and the
denominator is such number of shares plus the dividend share(s) issuable or
issued thereon (11).
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12. All payments contemplated hereby to be made "in cash" shall be made in
immediately available good funds in such coin or currency of the United States
of America as at the time of payment is legal tender for payment of public and
private debts. All payments of cash and each delivery of shares of Common Stock
issuable to the Holder as contemplated hereby shall be made to the Holder at the
address last appearing on the Debenture Register of the Company as designated in
writing by the Holder from time to time; except that the Holder can designate by
notice to the Company, a different delivery address for any one or more specific
payments or deliveries.
13. The Holder of the Debenture, by acceptance hereof, agrees that this
Debenture is being acquired for investment and that such Holder will not offer,
sell or otherwise dispose of this Debenture or the Shares of Common Stock
issuable upon conversion thereof except under circumstances which will not
result in a violation of the Act or any applicable state Blue Sky or foreign
laws or similar laws relating to the sale of securities.
14. This Debenture shall be governed by and construed in accordance with
the laws of the State of New York. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of the
City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection, including
any objection based on FORUM NON COVENIENS, to the bringing of any such
proceeding in such jurisdictions.
15. The following shall constitute an "Event of Default":
a. The Company shall default in the payment of principal or interest on
this Debenture and same shall continue for a period of three (3)
days; or
b. Any of the representations or warranties made by the Company herein,
in the Securities Purchase Agreement, the Registration. Rights
Agreement or in any certificate or financial or other written
statements heretofore or hereafter finished by the Company in
connection with the execution and delivery of this Debenture or the
Securities Purchase Agreement shall be false or misleading in any
material respect at the time made; or
c. The Company fails to issue shares of Common Stock to the Holder or
to cause its Transfer Agent to issue shares of Common Stock upon
exercise by the Holder of their conversion rights of the Holder in
accordance with the terms of this Debenture, fails to transfer or
to cause its Transfer Agent to transfer any certificate for shares
of Common Stock issued to the Holder upon conversion of this
Debenture and when required by this Debenture or the Registration
Rights Agreement, and such transfer is otherwise lawful, or fails
to remove any restrictive legend or to cause its Transfer Agent to
transfer on any certificate or any shares of Common Stock issued to
the Holder upon conversion of this Debenture as and when required
by this Debenture, the Agreement or the Registration Rights
Agreement and such legend removal is otherwise lawful, and
any such failure shall continue uncured for five (5) business days.
-7-
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<PAGE>
d. The Company shall fail to perform or observe, in any material
respect, any other covenant, term, provision, condition, agreement
or obligation of any Debenture in this series and such failure shall
continue uncured for a period of thirty (30) days after written
notice from the Holder of such failure; or
e. The Company shall fail to perform or observe, in any material
respect, any covenant, term, provision, condition, agreement or
obligation of the Company under the Securities Purchase Agreement
or the Registration Rights Agreement and such failure shall
continue uncured for a period of thirty (30) days after written
notice from the Holder of such failure (other than a failure to
cause the Registration Statement to become effective no later than
the Required Effective Date, as defined and provided in the
Registration Rights Agreement, as to which no such cure period
shall apply); or
d. The Company shall (1) admit in writing its inability to pay its
debts generally as they mature; (2) make an assignment for the
benefit of creditors or commence proceedings for its dissolution; or
(3) apply for or consent to the appointment of a trustee, liquidator
or receiver for its or for a substantial part of its property or
business; or
g. A trustee, liquidator or receiver shall be appointed for the Company
or for a substantial part of its property or business without its
consent and shall not be discharged within sixty (60) days after
such appointment; or
h. Any governmental agency or any court of competent jurisdiction at
the instance of any governmental agency shall assume custody or
control of the whole or arty substantial portion of the properties
or assets of the Company and shall not be dismissed within sixty
(60) days thereafter; or
i. Any money judgment, writ or warrant of attachment, or similar
process in excess of Two Hundred Thousand ($200,000) Dollars in the
aggregate shall be entered or filed against the Company or any of
its properties or other assets and shall remain unpaid, unvacated,
unbonded or unstayed for a period of sixty (60) days or in any event
later than five (5) days prior to the date of any proposed sale
thereunder; or
j. Bankruptcy, reorganization, insolvency Or liquidation Proceedings Or
Other proceedings for relief under any bankruptcy law or any law for
the relief of debtors shall be instituted by or against the Company
and, if instituted against the Company, shall not be dismissed
within sixty (60) days after such institution or the Company shall
by any action or answer approve of, consent to, or acquiesce in any
such proceedings or admit the material allegations of, or default in
answering a petition Med in any such proceeding; or
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<PAGE>
k. The Company shall have its Common Stock suspended or delisted from
an exchange or over-the-counter market from trading for in excess of
five (5) trading days.
Then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in. writing by the Holder (which waiver
shall not be deemed to be a waiver of any subsequent default) at the option of
the Holder and in the Holders sole discretion, the Holder May consider this
Debenture immediately due and payable, without presentment, demand, protest or
notice of any kinds, all of which are hereby expressly waived, anything herein
or in any note or other instruments contained to the contrary notwithstanding,
and the Holder may immediately enforce any and all of the Holder's rights and
remedies provided herein or any other rights or remedies afforded by law.
16. Nothing contained in this Debenture shall be construed as conferring
upon the Holder the right to vote or to receive dividends or to consent or
receive notice as a shareholder in respect of any meeting of shareholders or any
rights whatsoever as a shareholder of the Company, unless and to the extent
converted in accordance with the terms hereof.
17. In the event for any reason, any payment by or art of the Company or
the Holder shall result in payment of interest which would exceed the limit
authorized by or be in violation of the law of the jurisdiction applicable to
this Debenture, the ipso facto the obligation of the Company to pay interest or
perform such act or requirement shall be reduced to the limit authorized under
such law, so that in no event shall the Company be obligated to pay any such
interest, perform any such act or be bound by any requirement which would result
in the payment of interest in excess of the limit so authorized. In the event
any payment by or act of the Company shall result in the extraction of a rate of
interest in excess of a sum which is lawfully collectible as interest, then such
amount (to the extent of such excess not returned to the Company) shall, without
further agreement or notice between or by the Company or the Holder, be deemed
applied to the payment of principal, if any, hereunder immediately upon receipt
of such excess funds by the Holder, with the same force and effect as though the
Company had specifically designated such sums to be so applied to principal and
the Holder had agreed to accept such sums as an interest-free prepayment of this
Debenture. If any part of such excess remains after the principal has been paid
in full, whether by the provisions of the preceding sentences of this Section 17
or otherwise, such excess shall be deemed to be an interest free loan from the
Company to the Holder, which loan shall be payable immediately upon demand by
the Company. The provisions of this Section 17 shall control every other
provision of this Debenture.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer there unto duly authorized.
Dated: June 5, 1998
SHOPPING.COM
By: /s/ John Markley
-------------------------------
Chief Financial Officer
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<PAGE>
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert of the principal
amount of the above Debenture No. _______________ into Shares of Common Stock of
SHOPPING.COM (the "Company") according to the conditions hereof, as of the date
written below.
Conversion Date*
- ---------------------------------------------------------------------------
Applicable Conversion Price
- ----------------------------------------------------------------------------
Signature
- ----------------------------------------------------------------------------
[Name]
Address:
- -----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
* This original Debenture must be received by the Company or its transfer agent
by the fifth business date following the Conversion Date.
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<PAGE>
EXHIBIT 4.25
------------
DEBENTURE
NEITHER THESE SECURITIES OR THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE
BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE OR UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THE SECURITIES ARE RESTRICTED AND MAY NOT BE OFFERED, RESOLD, PLEDGED
OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION OR
EXEMPTION OR SAFE HARBOR THEREFROM.
No. 98-2 US $250,000.00
SHOPPING.COM
8% CONVERTIBLE DEBENTURE DUE MAY 31, 2000
THIS DEBENTURE is one of a duly authorized issue of up to $10,000,000 in
Debentures of SHOPPING.COM, a corporation organized and existing under the laws
of the State of Delaware (the "Company") designated as its 8% Convertible
Debentures. Such Debentures may be issued in series, each of which may have a
different maturity date, but which otherwise have substantially similar terms.
FOR VALUE RECEIVED, the Company promises to pay to Malso Fund, Ltd., the
registered holder hereof (the "Holder), the principal sum of Two Hundred Fifty
Thousand Dollars and 00/100 Dollars (US $250,000.00) on May 31, 2000 (the
"Maturity Date") and to pay interest on the principal sum outstanding from time
to time in arrears (i) prior to the Maturity Date, quarterly, on the last day of
March, June, September and December of each year, (ii) upon conversion as
provided herein or (iii) on the Maturity Date, at the rate of 9% per annum
accruing from ______________, 1998 the date of initial issuance of this
Debenture. Accrual of interest shall commence on the first such business day to
occur after the date hereof and shall continue to accrue on a daily basis until
payment in full of the principal sum has been made or duly provided for. Subject
to the provisions of Sections 4 and 5 below (the terms of which shall govern as
if this sentence were not included in this Debenture), prior to the Maturity
Date, interest on this Debenture is payable, at the option of the Company, in
shares of Common Stock of the Company, no par value ("Common Stock"), at the
Conversion Rate (as defined below) in effect on the date of payment, or in cash.
This Debenture is subject to the following additional provisions:
1. The Debentures are issuable in denominations of TEN Thousand Dollars
(US $10,000) and integral multiples thereof. The Debentures are exchangeable for
an equal aggregate principal amount of Debentures of different authorized
denominations, as requested by the Holder surrendering the same. No service
charge will be made for such registration or transfer or exchange.
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2. The Company shall be entitled to withhold from all payments of
principal of, and interest on, this Debenture any amounts required to be
withheld under the applicable provisions of the United States income tax laws
or other applicable laws at the time of such payments, and Holder shall execute
and deliver all required documentation in connection therewith.
3. This Debenture has been issued subject to investment of the original
purchaser hereof and may be transferred or exchanged only in compliance with the
Securities Act of 1933, as amended (the "Act"), and other applicable state and
foreign securities laws. In the event of any proposed transfer of this
Debenture, the Company may require, prior to issuance of a new Debenture in the
name of such other person, that it receive reasonable transfer documentation
including legal opinions that the issuance of the Debenture in such other name
does not and will not cause a violation of the Act or any applicable state or
foreign securities laws. Prior to due presentment for transfer of this
Debenture, the Company and any agent of the Company may treat the person in
whose name this Debenture is duly registered on the Company's Debenture Register
as the owner hereof for the purpose of receiving payment as herein provided and
for all other purposes, whether or not this Debenture be overdue, and neither
the Company nor any such agent shall be affected by notice to the contrary.
4. A. The Holder of this Debenture is entitled, at its option, subject to
the following provisions of this Section 4, to convert all or a portion of this
Debenture into shares of Common Stock of the Company at any time until the
Maturity Date, at a conversion price for each share of Common Stock (the
"Conversion Rate) equal to the lower of (x) the lowest Market Price (as defined
below) for any three (3) trading days selected by the Holder from the thirty
(30) trading days ending on the wading day before the Conversion Date, or (y)
$16.00 (the "Base Price"; which amount is subject to adjustment as hereinafter
provided); provided that the principal amount being converted is at least US
$10,000 (unless if at the time of such election to convert the aggregate
principal amount of all Debentures registered to the Holder is less than Ten
Thousand Dollars [US $10,000] then the whole amount thereof).
B. The Holder of this Debenture is entitled, at its option, to
convert this Debenture in accordance with the following schedule:
(i) at any time from the thirtieth day until the ninetieth day after the
date (the "Debenture Date") of the original date of issue of this
Debenture (including any predecessors which were subsequently reissued on
account of conversion, transfer, loss or other reason), up to twenty
percent (20%) of the original principal amount of the Basic Debentures (as
defined in the Securities Purchase Agreement defined below) may be
converted whether from this Debenture or any other Basic Debenture;
(ii) at any time thereafter until the one hundred twentieth day after the
Debenture Date, up to an additional twenty-five percent (25%) (cumulative
forty-five percent [45%]) of the original principal amount of the Basic
Debentures may be converted, whether from this Debenture or any other
Basic Debenture;
(iii) at any time thereafter until the one hundred fiftieth day after the
Debenture Date, up to an additional thirty-five percent (35%) (cumulative
eighty percent [80%]) of the Basic Debentures may be converted, whether
from this Debenture or any other Basic Debenture; and
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<PAGE>
(iv) at any time thereafter, all the principal amount of the Basic
Debentures may be converted.
C. Conversion shall be effectuated by surrendering the Debentures to be
converted to the Company's transfer agent, US Stock Transfer & Trust,
accompanied by or preceded by facsimile or other delivery of the form of
conversion notice attached hereto as Exhibit A, executed by the Holder of the
Debenture evidencing such Holder's intention to convert this Debenture or a
specified portion hereof, and accompanied, if required by the Company, by proper
assignment hereof in blank. interest accrued or accruing from the date of
issuance to the date of conversion shall at the option of the Company, be paid
in cash or Common Stock upon conversion at the Conversion Rate applicable to
such conversion. No fractional shares of Common Stock or scrip representing
fractions of shares will be issued on conversion, but the number of shares
issuable shall be rounded to the nearest whole share. The date on which notice
of conversion is given (the "Conversion Date") shall be deemed to be the date on
which the Holder faxes or otherwise delivers the conversion notice ("Notice of
Conversion!'), substantially in the form annexed hereto as Exhibit A, duly
executed, to the Company, provided that the Holder shall deliver to the Companys
trader agent or the Company the original Debentures being converted within five
(5) business days thereafter (and if not so delivered with such time, the
Conversion Date shall be the date on which the later of the Notice of Conversion
and the original Debentures being converted is received by the Company).
Facsimile delivery of the Notice of Conversion shall be accepted by the Company
at facsimile number (714) 640-4374; Attn: Bob McNulty. Certificates representing
Common Stock upon conversion will be delivered within three (3) business days
from the date later of the Notice of Conversion is delivered to the Company as
contemplated in the first sentence of this paragraph C or the original Debenture
is delivered to the Company's transfer agent or the Company.
D. For purposes of this Debenture, the term "Market Price" shall mean (x)
the average closing bid price of the Common Stock as reported by Bloomberg, LP
or the average closing bid price on the over-the-counter market, (i) if a period
of time is specified in the relevant provision of this Debenture, for such
period, and (ii) if no period of time is specified in the relevant provision of
this Debenture, then for the five (5) trading days ending on the trading day
immediately preceding the relevant date, or (y) if the Common Stock is listed on
a stock exchange, the closing price on such exchange on the date indicated in
the relevant provision hereof, as reported in The Wall Street Journal.
E. Anything herein to the contrary notwithstanding, in the event the
Company breaches the provisions of this Section 4(g) of the Securities Purchase
Agreement, the Conversion Rate shall be amended to be equal to (i) 90% of (ii)
the Conversion Rate determined in accordance with the other provisions of this
Debenture without regard to this Section 4(E), and the Holder may require the
Company to immediately redeem the outstanding portion of this Debenture in
accordance with Section 6(y) hereof.
5. A. (i) Notwithstanding any other provision hereof to the contrary, at
any time prior to the Conversion Date, the Company shall have the right to
redeem all or any portion of the then outstanding principal amount of the
Debentures then held by the Holder in cash for an amount (the "Redemption
Amount") equal to the sum of (a) such outstanding principal of the Debentures
plus all accrued but unpaid interest thereon through the date the Redemption
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Amount is paid to the Holder (the "Redemption Payment Date), plus (b) the
Redemption Premium (as defined below).
(ii) The "Redemption Premium" shall be an amount equal to the
excess, if any, of (a) an amount equal to (1) the number of shares of Common
Stock into which the Holder could have converted the Debentures being redeemed
had the Holder effected such conversion on the date the Company gave the Notice
of Redemption (the "Redemption Notice Date'), multiplied by (U) the closing ask
price of the Common Stock on the Redemption Notice Date, over (b) the principal
of the Debentures so redeemed.
(iii) The Company shall give at least ten (10) business days'
written notice of such redemption to the Holder (the "Notice of Redemption").
Anything in the preceding provisions of this Section 5 to the contrary
notwithstanding, the Redemption Amount shall, unless otherwise agreed to in
writing by the Holder after receiving the Notice of Redemption, be paid to the
Holder in good funds at least five (5) but not more than ten (10) business days
from the date of the Notice of Redemption, except that, with respect to any
Debentures for which a Notice of Redemption is given, the Holder shall have the
right, exercisable by giving a Notice of Conversion is submitted to the Company
within five (5) business days of the Holder's receipt of the Company's Notice of
Redemption, to convert any or all of the Debentures sought to be redeemed (a
"Redemption Notice Conversion") and the Redemption Notice Conversion shall take
precedence over the redemption contemplated by the Notice of Redemption. Such
Debentures shall be converted in accordance with the terms hereof. Furthermore,
in the event such Redemption Amount is not timely made, any rights of the
Company to redeem outstanding Debentures shall terminate, and the Notice of
Redemption shall be null and void. Any redemption contemplated by this Debenture
shall be made only in cash by the payment of immediately available good funds to
the Holder.
B. Any Debentures not previously converted as of the Maturity Date,
shall be deemed to be automatically converted, without further action of any
land by the Company or any of its agents, employees or representatives as of the
Maturity Date at the Conversion Rate applicable on the Maturity Date ("Mandatory
Conversion").
6. The Holder recognizes that the Company may be limited in the number of
shares of Common Stock it may issue by (i) reason of its authorized shares, or
(ii) the applicable rules and regulations of the principal securities market on
which the Common Stock is listed or traded (collectively, the "Cap
Regulations"). Without limiting the other provisions hereof, (i) the Company
will take all steps reasonably necessary to be in a position to issue shares of
Common Stock on conversion of the Debentures without violating the Cap
Regulations and (ii) if, despite taking such steps, the Company still can not
issue such shares of Common Stock without violating the Cap Regulations, the
Holder of this Debenture (to the extent the same can not be converted in
compliance with the Cap Regulations (an "Unconverted Debenture"), shall have the
option, exercisable in the Holder's sole and absolute discretion, to elect any
one of the following remedies:
(x) require the Company to issue shares of Common Stock in
accordance with such Holder's, Notice of Conversion relating to the
Unconverted Debenture at a conversion purchase price equal to the average
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of the closing bid price per share of Common Stock for any five (5)
consecutive trading days (subject to the equitable adjustments for
certain events occurring during such period as provided in this
Debenture) during the sixty (60) trading days immediately preceding the
date of the Notice of Conversion; or
(y) require the Company to redeem each Unconverted Debenture for an
amount (the "Cap Redemption Amount"), payable in cash, equal to:
V x M
---
CP
where:
"V" means the outstanding principal plus accrued interest through
the Cap Redemption Date (as defined below) of an Unconverted Debenture;
"CP" means the Conversion Rate in effect on the date of redemption
(the "Cap Redemption Date") specified in the notice from the Holder
electing this remedy; and
"M" means the highest Market Price during the period beginning on
the Cap Redemption Date and ending on the date of payment of the Cap
Redemption Amount.
The holder of an Unconverted Debenture May elect one of the above remedies with
respect to a portion of such Unconverted Debenture and the other remedy with
respect to other portions of the Unconverted Debenture.
7. Subject to the terms of the Securities Purchase Agreement, dated
____________, 1998 (the "Securities Purchase Agreement"), between the Company
and the Holder (or the Holder's predecessor in interest), no provision of this
Debenture shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of, and interest on, this Debenture at
the time, place, and rate, and in the coin or currency, herein prescribed. This
Debenture and all other Debentures now or hereafter issued of similar terms are
direct obligations of the Company.
8. No recourse shall be bad for the payment of the principal of, or the
interest on, this Debenture, or for any claim based hereon, or otherwise in
respect hereof, against any incorporator, shareholder, officer or director, as
such, past, present or future, of the Company or any successor corporation,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise, all such liability being,
by the acceptance hereof and as part of the consideration for the issue hereof,
expressly waived and released.
9. If the Company merges or consolidates with another corporation or sells
or transfers all or substantially all of its assets to another person and the
holders of the Common Stock are entitled to receive stock, securities or
property in respect of or in exchange for Common Stock, then as a condition of
such merger, consolidation, sale or transfer, the Company and any such
successor, purchaser or transferee agree that the Debenture may thereafter be
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convected on the terms and subject to the conditions set forth above into the
kind and amount of stock securities or property receivable upon such merger,
consolidation, We or transfer by a holder of the number of shares of Common
Stock into which this Debenture might have been converted immediately before
such merger, consolidation, sale or transfer, subject to adjustments which shall
be as nearly equivalent as may be practicable. In the event of any proposed
merger, consolidation or sale or transfer of all or substantially all of the
assets of the Company (a "Sale"), the Holder hereof shall have the right to
convert by delivering a Notice of Conversion to the Company within fifteen (15)
days of receipt of notice of such Sale from the Company. In the event the Holder
hereof shall elect not to convert, the Company may prepay any outstanding
principal and accrued interest on this Debenture by paying the Redemption Amount
contemplated by Section S(A) hereof, less all amounts required by law to be
deducted, upon which tender of payment following such notice, the right of
conversion shall terminate.
10. If, for any reason, prior to the Conversion Date or the Redemption
Payment Date, the Company spins off or otherwise divests itself of a part of its
business or operations of disposes all or of a part of its assets in a
transaction (the "Spin Off") in which the Company does not receive compensation
for such business, operations or assets, but causes securities of another entity
(the "Spin Off Securities") to be issued to security holders of the Company,
then the Company shall cause (i) to be reserved Spin Off Securities equal to the
number thereof which would have been issued to the Holder had all of the
Holder's Debentures outstanding on the record date (the "Record Date") for
determining the amount and number of Spin Off Securities to be issued to
security holders of the Company (the "Outstanding Debentures) been converted as
of the close of business on the trading day immediately before the Record Date
(the "Reserved Spin Off Shares"), and (ii) to be issued to the Holder on the
conversion of all or any of the Outstanding Debentures, such amount of the
Reserved Spin Off Shares equal to (x) the Reserved Spin Off Shares multiplied by
(y) a fraction, of which (I) the numerator is the principal amount of the
Outstanding Debentures then being converted, and (II) the denominator is the
principal amount of the Outstanding Debentures.
11. If, at any time while any portion of this Debenture remains
outstanding, the Company effectuates a stock split or reverse stock split of its
Common Stock or issues a dividend on its Common Stock consisting of shares of
Common Stock, the Base Price shall be equitably adjusted to reflect such action.
By way of illustration, and not in limitation, of the foregoing (i) if the
Company effectuates, a 2:1 split of its Common Stock, thereafter, with respect
to any conversion for which the Company issues the shares after the record date
of such split, the Base Price shall be deemed to be one-half of what it had been
calculated to be immediately prior to such split; (ii) if the Company
effectuates a 1:10 reverse split of its Common Stock, thereafter, with respect
to any conversion for which the Company issues the shares after the record date
of such reverse split, the Base Price shall be deemed to be ten times what it
had been calculated to be immediately prior to such split; and (iii) if the
Company declares a stock dividend of one share of Common Stock for every 10
shares outstanding, thereafter, with respect to any conversion for which the
Company issues the shares after the record date of such dividend, the Base Price
shall be deemed to be the amount of such Base Price calculated immediately prior
to such record date multiplied by a fraction, of which the numerator is the
number of shares (10) for which a dividend share will be issued and the
denominator is such number of shares plus the dividend share(s) issuable or
issued thereon (11).
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12. All payments contemplated hereby to be made "in cash" shall be made in
immediately available good funds in such coin or currency of the United States
of America as at the time of payment is legal tender for payment of public and
private debts. All payments of cash and each delivery of shares of Common Stock
issuable to the Holder as contemplated hereby shall be made to the Holder at the
address last appearing on the Debenture Register of the Company as designated in
writing by the Holder from time to time; except that the Holder can designate by
notice to the Company, a different delivery address for any one or more specific
payments or deliveries.
13. The Holder of the Debenture, by acceptance hereof, agrees that this
Debenture is being acquired for investment and that such Holder will not offer,
sell or otherwise dispose of this Debenture or the Shares of Common Stock
issuable upon conversion thereof except under circumstances which will not
result in a violation of the Act or any applicable state Blue Sky or foreign
laws or similar laws relating to the sale of securities.
14. This Debenture shall be governed by and construed in accordance with
the laws of the State of New York. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of the
City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection, including
any objection based on FORUM NON COVENIENS, to the bringing of any such
proceeding in such jurisdictions.
15. The following shall constitute an "Event of Default":
a. The Company shall default in the payment of principal or interest on
this Debenture and same shall continue for a period of three (3)
days; or
b. Any of the representations or warranties made by the Company herein,
in the Securities Purchase Agreement, the Registration. Rights
Agreement or in any certificate or financial or other written
statements heretofore or hereafter finished by the Company in
connection with the execution and delivery of this Debenture or the
Securities Purchase Agreement shall be false or misleading in any
material respect at the time made; or
c. The Company fails to issue shares of Common Stock to the Holder or
to cause its Transfer Agent to issue shares of Common Stock upon
exercise by the Holder of their conversion rights of the Holder in
accordance with the terms of this Debenture, fails to transfer or to
cause its Transfer Agent to transfer any certificate for shares of
Common Stock issued to the Holder upon conversion of this Debenture
and when required by this Debenture or the Registration Rights
Agreement, and such transfer is otherwise lawful, or fails to remove
any restrictive legend or to cause its Transfer Agent to transfer on
any certificate or any shares of Common Stock issued to the Holder
upon conversion of this Debenture as and when required by this
Debenture, the Agreement or the Registration Rights Agreement and
such legend removal is otherwise lawful, and any such failure shall
continue uncured for five (5) business days.
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d. The Company shall fail to perform or observe, in any material
respect, any other covenant, term, provision, condition, agreement
or obligation of any Debenture in this series and such failure shall
continue uncured for a period of thirty (30) days after written
notice from the Holder of such failure; or
e. The Company shall fail to perform or observe, in any material
respect, any covenant, term, provision, condition, agreement or
obligation of the Company under the Securities Purchase Agreement or
the Registration Rights Agreement and such failure shall continue
uncured for a period of thirty (30) days after written notice from
the Holder of such failure (other than a failure to cause the
Registration Statement to become effective no later than the
Required Effective Date, as defined and provided in the Registration
Rights Agreement, as to which no such cure period shall apply); or
d. The Company shall (1) admit in writing its inability to pay its
debts generally as they mature; (2) make an assignment for the
benefit of creditors or commence proceedings for its dissolution; or
(3) apply for or consent to the appointment of a trustee, liquidator
or receiver for its or for a substantial part of its property or
business; or
g. A trustee, liquidator or receiver shall be appointed for the Company
or for a substantial part of its property or business without its
consent and shall not be discharged within sixty (60) days after
such appointment; or
h. Any governmental agency or any court of competent jurisdiction at
the instance of any governmental agency shall assume custody or
control of the whole or arty substantial portion of the properties
or assets of the Company and shall not be dismissed within sixty
(60) days thereafter; or
i. Any money judgment, writ or warrant of attachment, or similar
process in excess of Two Hundred Thousand ($200,000) Dollars in the
aggregate shall be entered or filed against the Company or any of
its properties or other assets and shall remain unpaid, unvacated,
unbonded or unstayed for a period of sixty (60) days or in any event
later than five (5) days prior to the date of any proposed sale
thereunder; or
j. Bankruptcy, reorganization, insolvency Or liquidation Proceedings Or
Other proceedings for relief under any bankruptcy law or any law for
the relief of debtors shall be instituted by or against the Company
and, if instituted against the Company, shall not be dismissed
within sixty (60) days after such institution or the Company shall
by any action or answer approve of, consent to, or acquiesce in any
such proceedings or admit the material allegations of, or default in
answering a petition Med in any such proceeding; or
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k. The Company shall have its Common Stock suspended or delisted from
an exchange or over-the-counter market from trading for in excess of
five (5) trading days.
Then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in. writing by the Holder (which waiver
shall not be deemed to be a waiver of any subsequent default) at the option of
the Holder and in the Holders sole discretion, the Holder May consider this
Debenture immediately due and payable, without presentment, demand, protest or
notice of any kinds, all of which are hereby expressly waived, anything herein
or in any note or other instruments contained to the contrary notwithstanding,
and the Holder may immediately enforce any and all of the Holder's rights and
remedies provided herein or any other rights or remedies afforded by law.
16. Nothing contained in this Debenture shall be construed as conferring
upon the Holder the right to vote or to receive dividends or to consent or
receive notice as a shareholder in respect of any meeting of shareholders or any
rights whatsoever as a shareholder of the Company, unless and to the extent
converted in accordance with the terms hereof.
17. In the event for any reason, any payment by or art of the Company or
the Holder shall result in payment of interest which would exceed the limit
authorized by or be in violation of the law of the jurisdiction applicable to
this Debenture, the ipso facto the obligation of the Company to pay interest or
perform such act or requirement shall be reduced to the limit authorized under
such law, so that in no event shall the Company be obligated to pay any such
interest, perform any such act or be bound by any requirement which would result
in the payment of interest in excess of the limit so authorized. In the event
any payment by or act of the Company shall result in the extraction of a rate of
interest in excess of a sum which is lawfully collectible as interest, then such
amount (to the extent of such excess not returned to the Company) shall, without
further agreement or notice between or by the Company or the Holder, be deemed
applied to the payment of principal, if any, hereunder immediately upon receipt
of such excess funds by the Holder, with the same force and effect as though the
Company had specifically designated such sums to be so applied to principal and
the Holder had agreed to accept such sums as an interest-free prepayment of this
Debenture. If any part of such excess remains after the principal has been paid
in full, whether by the provisions of the preceding sentences of this Section 17
or otherwise, such excess shall be deemed to be an interest free loan from the
Company to the Holder, which loan shall be payable immediately upon demand by
the Company. The provisions of this Section 17 shall control every other
provision of this Debenture.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer there unto duly authorized.
Dated: June 5, 1998
SHOPPING.COM
By: /s/ John Markley,
--------------------------
Chief Financial Officer
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EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert of the principal
amount of the above Debenture No. _______________ into Shares of Common Stock of
SHOPPING.COM (the "Company") according to the conditions hereof, as of the date
written below.
Conversion Date*
- ---------------------------------------------------------------------------
Applicable Conversion Price
- ----------------------------------------------------------------------------
Signature
- ----------------------------------------------------------------------------
[Name]
Address:
- -----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
* This original Debenture must be received by the Company or its transfer agent
by the fifth business date following the Conversion Date.
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EXHIBIT 4.26
------------
DEBENTURE
NEITHER THESE SECURITIES OR THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE
BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE OR UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THE SECURITIES ARE RESTRICTED AND MAY NOT BE OFFERED, RESOLD, PLEDGED
OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION OR
EXEMPTION OR SAFE HARBOR THEREFROM.
No. 98-3 US $250,000.00
SHOPPING.COM
8% CONVERTIBLE DEBENTURE DUE MAY 31, 2000
THIS DEBENTURE is one of a duly authorized issue of up to $10,000,000 in
Debentures of SHOPPING.COM, a corporation organized and existing under the laws
of the State of Delaware (the "Company") designated as its 8% Convertible
Debentures. Such Debentures may be issued in series, each of which may have a
different maturity date, but which otherwise have substantially similar terms.
FOR VALUE RECEIVED, the Company promises to pay to Wayne Invest & Trade,
Inc., the registered holder hereof (the "Holder), the principal sum of Two
Hundred Fifty Thousand Dollars and 00/100 Dollars (US $250,000.00) on May 31,
2000 (the "Maturity Date") and to pay interest on the principal sum outstanding
from time to time in arrears (i) prior to the Maturity Date, quarterly, on the
last day of March, June, September and December of each year, (ii) upon
conversion as provided herein or (iii) on the Maturity Date, at the rate of 9%
per annum accruing from ______________, 1998 the date of initial issuance of
this Debenture. Accrual of interest shall commence on the first such business
day to occur after the date hereof and shall continue to accrue on a daily basis
until payment in full of the principal sum has been made or duly provided for.
Subject to the provisions of Sections 4 and 5 below (the terms of which shall
govern as if this sentence were not included in this Debenture), prior to the
Maturity Date, interest on this Debenture is payable, at the option of the
Company, in shares of Common Stock of the Company, no par value ("Common
Stock"), at the Conversion Rate (as defined below) in effect on the date of
payment, or in cash.
This Debenture is subject to the following additional provisions:
1. The Debentures are issuable in denominations of TEN Thousand Dollars
(US $10,000) and integral multiples thereof. The Debentures are exchangeable for
an equal aggregate principal amount of Debentures of different authorized
denominations, as requested by the Holder surrendering the same. No service
charge will be made for such registration or transfer or exchange.
2. The Company shall be entitled to withhold from all payments of
principal of, and interest on, this Debenture any amounts required to be
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withheld under the applicable provisions of the United States income tax laws or
other applicable laws at the time of such payments, and Holder shall execute and
deliver all required documentation in connection therewith.
3. This Debenture has been issued subject to investment of the original
purchaser hereof and may be transferred or exchanged only in compliance with the
Securities Act of 1933, as amended (the "Act"), and other applicable state and
foreign securities laws. In the event of any proposed transfer of this
Debenture, the Company may require, prior to issuance of a new Debenture in the
name of such other person, that it receive reasonable transfer documentation
including legal opinions that the issuance of the Debenture in such other name
does not and will not cause a violation of the Act or any applicable state or
foreign securities laws. Prior to due presentment for transfer of this
Debenture, the Company and any agent of the Company may treat the person in
whose name this Debenture is duly registered on the Company's Debenture Register
as the owner hereof for the purpose of receiving payment as herein provided and
for all other purposes, whether or not this Debenture be overdue, and neither
the Company nor any such agent shall be affected by notice to the contrary.
4. A. The Holder of this Debenture is entitled, at its option, subject to
the following provisions of this Section 4, to convert all or a portion of this
Debenture into shares of Common Stock of the Company at any time until the
Maturity Date, at a conversion price for each share of Common Stock (the
"Conversion Rate") equal to the lower of (x) the lowest Market Price (as defined
below) for any three (3) trading days selected by the Holder from the thirty
(30) trading days ending on the wading day before the Conversion Date, or (y)
$16.00 (the "Base Price"; which amount is subject to adjustment as hereinafter
provided); provided that the principal amount being converted is at least US
$10,000 (unless if at the time of such election to convert the aggregate
principal amount of all Debentures registered to the Holder is less than Ten
Thousand Dollars [US $10,000] then the whole amount thereof).
B. The Holder of this Debenture is entitled, at its option, to
convert this Debenture in accordance with the following schedule:
(i) at any time from the thirtieth day until the ninetieth day after the
date (the "Debenture Date") of the original date of issue of this
Debenture (including any predecessors which were subsequently reissued on
account of conversion, transfer, loss or other reason), up to twenty
percent (20%) of the original principal amount of the Basic Debentures (as
defined in the Securities Purchase Agreement defined below) may be
converted whether from this Debenture or any other Basic Debenture;
(ii) at any time thereafter until the one hundred twentieth day after the
Debenture Date, up to an additional twenty-five percent (25%) (cumulative
forty-five percent [45%]) of the original principal amount of the Basic
Debentures may be converted, whether from this Debenture or any other
Basic Debenture;
(iii) at any time thereafter until the one hundred fiftieth day after the
Debenture Date, up to an additional thirty-five percent (35%) (cumulative
eighty percent [80%]) of the Basic Debentures may be converted, whether
from this Debenture or any other Basic Debenture; and
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(iv) at any time thereafter, all the principal amount of the Basic
Debentures may be converted.
C. Conversion shall be effectuated by surrendering the Debentures to be
converted to the Company's transfer agent, US Stock Transfer & Trust,
accompanied by or preceded by facsimile or other delivery of the form of
conversion notice attached hereto as Exhibit A, executed by the Holder of the
Debenture evidencing such Holder's intention to convert this Debenture or a
specified portion hereof, and accompanied, if required by the Company, by proper
assignment hereof in blank. interest accrued or accruing from the date of
issuance to the date of conversion shall at the option of the Company, be paid
in cash or Common Stock upon conversion at the Conversion Rate applicable to
such conversion. No fractional shares of Common Stock or scrip representing
fractions of shares will be issued on conversion, but the number of shares
issuable shall be rounded to the nearest whole share. The date on which notice
of conversion is given (the "Conversion Date") shall be deemed to be the date on
which the Holder faxes or otherwise delivers the conversion notice ("Notice of
Conversion"), substantially in the form annexed hereto as Exhibit A, duly
executed, to the Company, provided that the Holder shall deliver to the
Company's transfer agent or the Company the original Debentures being converted
time, the Conversion Date shall be the date on which the later of the Notice of
Conversion and the original Debentures being converted is received by the
Company). Facsimile delivery of the Notice of Conversion shall be accepted by
the Company at facsimile number (714) 640-4374; Attn: Bob McNulty. Certificates
representing Common Stock upon conversion will be delivered within three (3)
business days from the date later of the Notice of Conversion is delivered to
the Company as contemplated in the first sentence of this paragraph C or the
original Debenture is delivered to the Company's transfer agent or the Company.
D. For purposes of this Debenture, the term "Market Price" shall mean (x)
the average closing bid price of the Common Stock as reported by Bloomberg, LP
or the average closing bid price on the over-the-counter market, (i) if a period
of time is specified in the relevant provision of this Debenture, for such
period, and (ii) if no period of time is specified in the relevant provision of
this Debenture, then for the five (5) trading days ending on the trading day
immediately preceding the relevant date, or (y) if the Common Stock is listed on
a stock exchange, the closing price on such exchange on the date indicated in
the relevant provision hereof, as reported in The Wall Street Journal.
E. Anything herein to the contrary notwithstanding, in the event the
Company breaches the provisions of this Section 4(g) of the Securities Purchase
Agreement, the Conversion Rate shall be amended to be equal to (i) 90% of (ii)
the Conversion Rate determined in accordance with the other provisions of this
Debenture without regard to this Section 4(E), and the Holder may require the
Company to immediately redeem the outstanding portion of this Debenture in
accordance with Section 6(y) hereof.
5. A. (i) Notwithstanding any other provision hereof to the contrary, at
any time prior to the Conversion Date, the Company shall have the right to
redeem all or any portion of the then outstanding principal amount of the
Debentures then held by the Holder in cash for an amount (the "Redemption
Amount") equal to the sum of (a) such outstanding principal of the Debentures
plus all accrued but unpaid interest thereon through the date the Redemption
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Amount is paid to the Holder (the "Redemption Payment Date"), plus (b) the
Redemption Premium (as defined below).
(ii) The "Redemption Premium" shall be an amount equal to the
excess, if any, of (a) an amount equal to (1) the number of shares of Common
Stock into which the Holder could have converted the Debentures being redeemed
had the Holder effected such conversion on the date the Company gave the Notice
of Redemption (the "Redemption Notice Date"), multiplied by (U) the closing ask
price of the Common Stock on the Redemption Notice Date, over (b) the principal
of the Debentures so redeemed.
(iii) The Company shall give at least ten (10) business days'
written notice of such redemption to the Holder (the "Notice of Redemption").
Anything in the preceding provisions of this Section 5 to the contrary
notwithstanding, the Redemption Amount shall, unless otherwise agreed to in
writing by the Holder after receiving the Notice of Redemption, be paid to the
Holder in good funds at least five (5) but not more than ten (10) business days
from the date of the Notice of Redemption, except that, with respect to any
Debentures for which a Notice of Redemption is given, the Holder shall have the
right, exercisable by giving a Notice of Conversion is submitted to the Company
within five (5) business days of the Holder's receipt of the Company's Notice of
Redemption, to convert any or all of the Debentures sought to be redeemed (a
"Redemption Notice Conversion") and the Redemption Notice Conversion shall take
precedence over the redemption contemplated by the Notice of Redemption. Such
Debentures shall be converted in accordance with the terms hereof. Furthermore,
in the event such Redemption Amount is not timely made, any rights of the
Company to redeem outstanding Debentures shall terminate, and the Notice of
Redemption shall be null and void. Any redemption contemplated by this Debenture
shall be made only in cash by the payment of immediately available good funds to
the Holder.
B. Any Debentures not previously converted as of the Maturity Date,
shall be deemed to be automatically converted, without further action of any
land by the Company or any of its agents, employees or representatives as of the
Maturity Date at the Conversion Rate applicable on the Maturity Date ("Mandatory
Conversion").
6. The Holder recognizes that the Company may be limited in the number of
shares of Common Stock it may issue by (i) reason of its authorized shares, or
(ii) the applicable rules and regulations of the principal securities market on
which the Common Stock is listed or traded (collectively, the "Cap
Regulations"). Without limiting the other provisions hereof, (i) the Company
will take all steps reasonably necessary to be in a position to issue shares of
Common Stock on conversion of the Debentures without violating the Cap
Regulations and (ii) if, despite taking such steps, the Company still can not
issue such shares of Common Stock without violating the Cap Regulations, the
Holder of this Debenture (to the extent the same can not be converted in
compliance with the Cap Regulations (an "Unconverted Debenture"), shall have the
option, exercisable in the Holder's sole and absolute discretion, to elect any
one of the following remedies:
(x) require the Company to issue shares of Common Stock in
accordance with such Holder's, Notice of Conversion relating to the
Unconverted Debenture at a conversion purchase price equal to the average
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of the closing bid price per share of Common Stock for any five (5)
consecutive trading days (subject to the equitable adjustments for certain
events occurring during such period as provided in this Debenture) during
the sixty (60) trading days immediately preceding the date of the Notice
of Conversion; or
(y) require the Company to redeem each Unconverted Debenture for an
amount (the "Cap Redemption Amount"), payable in cash, equal to:
V
----- x M
CP
where:
"V" means the outstanding principal plus accrued interest through
the Cap Redemption Date (as defined below) of an Unconverted Debenture;
"CP" means the Conversion Rate in effect on the date of redemption
(the "Cap Redemption Date") specified in the notice from the Holder
electing this remedy; and
"M" means the highest Market Price during the period beginning on
the Cap Redemption Date and ending on the date of payment of the Cap
Redemption Amount.
The holder of an Unconverted Debenture May elect one of the above remedies with
respect to a portion of such Unconverted Debenture and the other remedy with
respect to other portions of the Unconverted Debenture.
7. Subject to the terms of the Securities Purchase Agreement, dated
____________, 1998 (the "Securities Purchase Agreement"), between the Company
and the Holder (or the Holder's predecessor in interest), no provision of this
Debenture shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of, and interest on, this Debenture at
the time, place, and rate, and in the coin or currency, herein prescribed. This
Debenture and all other Debentures now or hereafter issued of similar terms are
direct obligations of the Company.
8. No recourse shall be bad for the payment of the principal of, or the
interest on, this Debenture, or for any claim based hereon, or otherwise in
respect hereof, against any incorporator, shareholder, officer or director, as
such, past, present or future, of the Company or any successor corporation,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise, all such liability being,
by the acceptance hereof and as part of the consideration for the issue hereof,
expressly waived and released.
9. If the Company merges or consolidates with another corporation or sells
or transfers all or substantially all of its assets to another person and the
holders of the Common Stock are entitled to receive stock, securities or
property in respect of or in exchange for Common Stock, then as a condition of
such merger, consolidation, sale or transfer, the Company and any such
successor, purchaser or transferee agree that the Debenture may thereafter be
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convected on the terms and subject to the conditions set forth above into the
kind and amount of stock securities or property receivable upon such merger,
consolidation, We or transfer by a holder of the number of shares of Common
Stock into which this Debenture might have been converted immediately before
such merger, consolidation, sale or transfer, subject to adjustments which shall
be as nearly equivalent as may be practicable. In the event of any proposed
merger, consolidation or sale or transfer of all or substantially all of the
assets of the Company (a "Sale"), the Holder hereof shall have the right to
convert by delivering a Notice of Conversion to the Company within fifteen (15)
days of receipt of notice of such Sale from the Company. In the event the Holder
hereof shall elect not to convert, the Company may prepay any outstanding
principal and accrued interest on this Debenture by paying the Redemption Amount
contemplated by Section 5(A) hereof, less all amounts required by law to be
deducted, upon which tender of payment following such notice, the right of
conversion shall terminate.
10. If, for any reason, prior to the Conversion Date or the Redemption
Payment Date, the Company spins off or otherwise divests itself of a part of its
business or operations of disposes all or of a part of its assets in a
transaction (the "Spin Off") in which the Company does not receive compensation
for such business, operations or assets, but causes securities of another entity
(the "Spin Off Securities") to be issued to security holders of the Company,
then the Company shall cause (i) to be reserved Spin Off Securities equal to the
number thereof which would have been issued to the Holder had all of the
Holder's Debentures outstanding on the record date (the "Record Date") for
determining the amount and number of Spin Off Securities to be issued to
security holders of the Company (the "Outstanding Debentures") been converted as
of the close of business on the trading day immediately before the Record Date
(the "Reserved Spin Off Shares"), and (ii) to be issued to the Holder on the
conversion of all or any of the Outstanding Debentures, such amount of the
Reserved Spin Off Shares equal to (x) the Reserved Spin Off Shares multiplied by
(y) a fraction, of which (I) the numerator is the principal amount of the
Outstanding Debentures then being converted, and (II) the denominator is the
principal amount of the Outstanding Debentures.
11. If, at any time while any portion of this Debenture remains
outstanding, the Company effectuates a stock split or reverse stock split of its
Common Stock or issues a dividend on its Common Stock consisting of shares of
Common Stock, the Base Price shall be equitably adjusted to reflect such action.
By way of illustration, and not in limitation, of the foregoing (i) if the
Company effectuates, a 2:1 split of its Common Stock, thereafter, with respect
to any conversion for which the Company issues the shares after the record date
of such split, the Base Price shall be deemed to be one-half of what it had been
calculated to be immediately prior to such split; (ii) if the Company
effectuates a 1:10 reverse split of its Common Stock, thereafter, with respect
to any conversion for which the Company issues the shares after the record date
of such reverse split, the Base Price shall be deemed to be ten times what it
had been calculated to be immediately prior to such split; and (iii) if the
Company declares a stock dividend of one share of Common Stock for every 10
shares outstanding, thereafter, with respect to any conversion for which the
Company issues the shares after the record date of such dividend, the Base Price
shall be deemed to be the amount of such Base Price calculated immediately prior
to such record date multiplied by a fraction, of which the numerator is the
number of shares (10) for which a dividend share will be issued and the
denominator is such number of shares plus the dividend share(s) issuable or
issued thereon (11).
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12. All payments contemplated hereby to be made "in cash" shall be made in
immediately available good funds in such coin or currency of the United States
of America as at the time of payment is legal tender for payment of public and
private debts. All payments of cash and each delivery of shares of Common Stock
issuable to the Holder as contemplated hereby shall be made to the Holder at the
address last appearing on the Debenture Register of the Company as designated in
writing by the Holder from time to time; except that the Holder can designate by
notice to the Company, a different delivery address for any one or more specific
payments or deliveries.
13. The Holder of the Debenture, by acceptance hereof, agrees that this
Debenture is being acquired for investment and that such Holder will not offer,
sell or otherwise dispose of this Debenture or the Shares of Common Stock
issuable upon conversion thereof except under circumstances which will not
result in a violation of the Act or any applicable state Blue Sky or foreign
laws or similar laws relating to the sale of securities.
14. This Debenture shall be governed by and construed in accordance with
the laws of the State of New York. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of the
City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection, including
any objection based on forum non coveniens, to the bringing of any such
proceeding in such jurisdictions.
15. The following shall constitute an "Event of Default":
a. The Company shall default in the payment of principal or interest on
this Debenture and same shall continue for a period of three (3)
days; or
b. Any of the representations or warranties made by the Company herein,
in the Securities Purchase Agreement, the Registration. Rights
Agreement or in any certificate or financial or other written
statements heretofore or hereafter finished by the Company in
connection with the execution and delivery of this Debenture or the
Securities Purchase Agreement shall be false or misleading in any
material respect at the time made; or
c. The Company fails to issue shares of Common Stock to the Holder or
to cause its Transfer Agent to issue shares of Common Stock upon
exercise by the Holder of their conversion rights of the Holder in
accordance with the terms of this Debenture, fails to transfer or to
cause its Transfer Agent to transfer any certificate for shares of
Common Stock issued to the Holder upon conversion of this Debenture
and when required by this Debenture or the Registration Rights
Agreement, and such transfer is otherwise lawful, or fails to remove
any restrictive legend or to cause its Transfer Agent to transfer on
any certificate or any shares of Common Stock issued to the Holder
upon conversion of this Debenture as and when required by this
Debenture, the Agreement or the Registration Rights Agreement and
such legend removal is otherwise lawful, and any such failure shall
continue uncured for five (5) business days.
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<PAGE>
d. The Company shall fail to perform or observe, in any material
respect, any other covenant, term, provision, condition, agreement
or obligation of any Debenture in this series and such failure shall
continue uncured for a period of thirty (30) days after written
notice from the Holder of such failure; or
e. The Company shall fail to perform or observe, in any material
respect, any covenant, term, provision, condition, agreement or
obligation of the Company under the Securities Purchase Agreement or
the Registration Rights Agreement and such failure shall continue
uncured for a period of thirty (30) days after written notice from
the Holder of such failure (other than a failure to cause the
Registration Statement to become effective no later than the
Required Effective Date, as defined and provided in the Registration
Rights Agreement, as to which no such cure period shall apply); or
f. The Company shall (1) admit in writing its inability to pay its
debts generally as they mature; (2) make an assignment for the
benefit of creditors or commence proceedings for its dissolution; or
(3) apply for or consent to the appointment of a trustee, liquidator
or receiver for its or for a substantial part of its property or
business; or
g. A trustee, liquidator or receiver shall be appointed for the Company
or for a substantial part of its property or business without its
consent and shall not be discharged within sixty (60) days after
such appointment; or
h. Any governmental agency or any court of competent jurisdiction at
the instance of any governmental agency shall assume custody or
control of the whole or arty substantial portion of the properties
or assets of the Company and shall not be dismissed within sixty
(60) days thereafter; or
i. Any money judgment, writ or warrant of attachment, or similar
process in excess of Two Hundred Thousand ($200,000) Dollars in the
aggregate shall be entered or filed against the Company or any of
its properties or other assets and shall remain unpaid, unvacated,
unbonded or unstayed for a period of sixty (60) days or in any event
later than five (5) days prior to the date of any proposed sale
thereunder; or
j. Bankruptcy, reorganization, insolvency Or liquidation Proceedings Or
Other proceedings for relief under any bankruptcy law or any law for
the relief of debtors shall be instituted by or against the Company
and, if instituted against the Company, shall not be dismissed
within sixty (60) days after such institution or the Company shall
by any action or answer approve of, consent to, or acquiesce in any
such proceedings or admit the material allegations of, or default in
answering a petition filed in any such proceeding; or
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<PAGE>
k. The Company shall have its Common Stock suspended or delisted from
an exchange or over-the-counter market from trading for in excess of
five (5) trading days.
Then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in. writing by the Holder (which waiver
shall not be deemed to be a waiver of any subsequent default) at the option of
the Holder and in the Holders sole discretion, the Holder May consider this
Debenture immediately due and payable, without presentment, demand, protest or
notice of any kinds, all of which are hereby expressly waived, anything herein
or in any note or other instruments contained to the contrary notwithstanding,
and the Holder may immediately enforce any and all of the Holder's rights and
remedies provided herein or any other rights or remedies afforded by law.
16. Nothing contained in this Debenture shall be construed as conferring
upon the Holder the right to vote or to receive dividends or to consent or
receive notice as a shareholder in respect of any meeting of shareholders or any
rights whatsoever as a shareholder of the Company, unless and to the extent
converted in accordance with the terms hereof.
17. In the event for any reason, any payment by or art of the Company or
the Holder shall result in payment of interest which would exceed the limit
authorized by or be in violation of the law of the jurisdiction applicable to
this Debenture, the ipso facto the obligation of the Company to pay interest or
perform such act or requirement shall be reduced to the limit authorized under
such law, so that in no event shall the Company be obligated to pay any such
interest, perform any such act or be bound by any requirement which would result
in the payment of interest in excess of the limit so authorized. In the event
any payment by or act of the Company shall result in the extraction of a rate of
interest in excess of a sum which is lawfully collectible as interest, then such
amount (to the extent of such excess not returned to the Company) shall, without
further agreement or notice between or by the Company or the Holder, be deemed
applied to the payment of principal, if any, hereunder immediately upon receipt
of such excess funds by the Holder, with the same force and effect as though the
Company had specifically designated such sums to be so applied to principal and
the Holder had agreed to accept such sums as an interest-free prepayment of this
Debenture. If any part of such excess remains after the principal has been paid
in full, whether by the provisions of the preceding sentences of this Section 17
or otherwise, such excess shall be deemed to be an interestfim loan from the
Company to the Holder, which loan shall be payable immediately upon demand by
the Company. The provisions of this Section 17 shall control every other
provision of this Debenture.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
Dated: June 5, 1998
SHOPPING.COM
By: /s/ John Markley
----------------------------
John Markley, Chief Executive Officer
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EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert of the principal
amount of the above Debenture No. _______________ into Shares of Common Stock of
SHOPPING.COM (the "Company") according to the conditions hereof, as of the date
written below.
Conversion Date*
- ----------------------------------------------------------------------------
Applicable Conversion Price
- ----------------------------------------------------------------------------
Signature
- ----------------------------------------------------------------------------
[Name]
Address:
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
* This original Debenture must be received by the Company or its transfer agent
by the fifth business date following the Conversion Date.
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<PAGE>
EXHIBIT 4.27
------------
DEBENTURE
NEITHER THESE SECURITIES OR THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE
BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE OR UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THE SECURITIES ARE RESTRICTED AND MAY NOT BE OFFERED, RESOLD, PLEDGED
OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION OR
EXEMPTION OR SAFE HARBOR THEREFROM.
No. 98-4 US $250,000.00
SHOPPING.COM
8% CONVERTIBLE DEBENTURE DUE MAY 31, 2000
THIS DEBENTURE is one of a duly authorized issue of up to $10,000,000 in
Debentures of SHOPPING.COM, a corporation organized and existing under the laws
of the State of Delaware (the "Company") designated as its 8% Convertible
Debentures. Such Debentures may be issued in series, each of which may have a
different maturity date, but which otherwise have substantially similar terms.
FOR VALUE RECEIVED, the Company promises to pay to Chesterfield Capital
Resources, Ltd., the registered holder hereof (the "Holder), the principal sum
of Two Hundred Fifty Thousand Dollars and 00/100 Dollars (US $250,000.00) on May
31, 2000 (the "Maturity Date") and to pay interest on the principal sum
outstanding from time to time in arrears (i) prior to the Maturity Date,
quarterly, on the last day of March, June, September and December of each year,
(ii) upon conversion as provided herein or (iii) on the Maturity Date, at the
rate of 9% per annum accruing from ______________, 1998 the date of initial
issuance of this Debenture. Accrual of interest shall commence on the first such
business day to occur after the date hereof and shall continue to accrue on a
daily basis until payment in full of the principal sum has been made or duly
provided for. Subject to the provisions of Sections 4 and 5 below (the terms of
which shall govern as if this sentence were not included in this Debenture),
prior to the Maturity Date, interest on this Debenture is payable, at the option
of the Company, in shares of Common Stock of the Company, no par value ("Common
Stock"), at the Conversion Rate (as defined below) in effect on the date of
payment, or in cash.
This Debenture is subject to the following additional provisions:
1. The Debentures are issuable in denominations of TEN Thousand Dollars
(US $10,000) and integral multiples thereof. The Debentures are exchangeable for
an equal aggregate principal amount of Debentures of different authorized
denominations, as requested by the Holder surrendering the same. No service
charge will be made for such registration or transfer or exchange.
2. The Company shall be entitled to withhold from all payments of
principal of, and interest on, this Debenture any amounts required to be
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withheld under the applicable provisions of the United States income tax laws or
other applicable laws at the time of such payments, and Holder shall execute and
deliver all required documentation in connection therewith.
3. This Debenture has been issued subject to investment of the original
purchaser hereof and may be transferred or exchanged only in compliance with the
Securities Act of 1933, as amended (the "Act"), and other applicable state and
foreign securities laws. In the event of any proposed transfer of this
Debenture, the Company may require, prior to issuance of a new Debenture in the
name of such other person, that it receive reasonable transfer documentation
including legal opinions that the issuance of the Debenture in such other name
does not and will not cause a violation of the Act or any applicable state or
foreign securities laws. Prior to due presentment for transfer of this
Debenture, the Company and any agent of the Company may treat the person in
whose name this Debenture is duly registered on the Company's Debenture Register
as the owner hereof for the purpose of receiving payment as herein provided and
for all other purposes, whether or not this Debenture be overdue, and neither
the Company nor any such agent shall be affected by notice to the contrary.
4. A. The Holder of this Debenture is entitled, at its option, subject to
the following provisions of this Section 4, to convert all or a portion of this
Debenture into shares of Common Stock of the Company at any time until the
Maturity Date, at a conversion price for each share of Common Stock (the
"Conversion Rate) equal to the lower of (x) the lowest Market Price (as defined
below) for any three (3) trading days selected by the Holder from the thirty
(30) trading days ending on the wading day before the Conversion Date, or (y)
$16.00 (the "Base Price"; which amount is subject to adjustment as hereinafter
provided); provided that the principal amount being converted is at least US
$10,000 (unless if at the time of such election to convert the aggregate
principal amount of all Debentures registered to the Holder is less than Ten
Thousand Dollars [US $10,000] then the whole amount thereof).
B. The Holder of this Debenture is entitled, at its option, to
convert this Debenture in accordance with the following schedule:
(i) at any time from the thirtieth day until the ninetieth day after the
date (the "Debenture Date") of the original date of issue of this
Debenture (including any predecessors which were subsequently reissued on
account of conversion, transfer, loss or other reason), up to twenty
percent (20%) of the original principal amount of the Basic Debentures (as
defined in the Securities Purchase Agreement defined below) may be
converted whether from this Debenture or any other Basic Debenture;
(ii) at any time thereafter until the one hundred twentieth day after the
Debenture Date, up to an additional twenty-five percent (25%) (cumulative
forty-five percent [45%]) of the original principal amount of the Basic
Debentures may be converted, whether from this Debenture or any other
Basic Debenture;
(iii) at any time thereafter until the one hundred fiftieth day after the
Debenture Date, up to an additional thirty-five percent (35%) (cumulative
eighty percent [80%]) of the Basic Debentures may be converted, whether
from this Debenture or any other Basic Debenture; and
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<PAGE>
(iv) at any time thereafter, all the principal amount of the Basic
Debentures may be converted.
C. Conversion shall be effectuated by surrendering the Debentures to be
converted to the Company's transfer agent, US Stock Transfer & Trust,
accompanied by or preceded by facsimile or other delivery of the form of
conversion notice attached hereto as Exhibit A, executed by the Holder of the
Debenture evidencing such Holder's intention to convert this Debenture or a
specified portion hereof, and accompanied, if required by the Company, by proper
assignment hereof in blank. interest accrued or accruing from the date of
issuance to the date of conversion shall at the option of the Company, be paid
in cash or Common Stock upon conversion at the Conversion Rate applicable to
such conversion. No fractional shares of Common Stock or scrip representing
fractions of shares will be issued on conversion, but the number of shares
issuable shall be rounded to the nearest whole share. The date on which notice
of conversion is given (the "Conversion Date") shall be deemed to be the date on
which the Holder faxes or otherwise delivers the conversion notice ("Notice of
Conversion!'), substantially in the form annexed hereto as Exhibit A, duly
executed, to the Company, provided that the Holder shall deliver to the
Company's transfer agent or the Company the original Debentures being converted
within five (5) business days thereafter (and if not so delivered with such
time, the Conversion Date shall be the date on which the later of the Notice of
Conversion and the original Debentures being converted is received by the
Company). Facsimile delivery of the Notice of Conversion shall be accepted by
the Company at facsimile number (714) 640-4374; Attn: Bob McNulty. Certificates
representing Common Stock upon conversion will be delivered within three (3)
business days from the date later of the Notice of Conversion is delivered to
the Company as contemplated in the first sentence of this paragraph C or the
original Debenture is delivered to the Company's transfer agent or the Company.
D. For purposes of this Debenture, the term "Market Price" shall mean (x)
the average closing bid price of the Common Stock as reported by Bloomberg, LP
or the average closing bid price on the over-the-counter market, (i) if a period
of time is specified in the relevant provision of this Debenture, for such
period, and (ii) if no period of time is specified in the relevant provision of
this Debenture, then for the five (5) trading days ending on the trading day
immediately preceding the relevant date, or (y) if the Common Stock is listed on
a stock exchange, the closing price on such exchange on the date indicated in
the relevant provision hereof, as reported in The Wall Street Journal.
E. Anything herein to the contrary notwithstanding, in the event the
Company breaches the provisions of this Section 4(g) of the Securities Purchase
Agreement, the Conversion Rate shall be amended to be equal to (i) 90% of (ii)
the Conversion Rate determined in accordance with the other provisions of this
Debenture without regard to this Section 4(E), and the Holder may require the
Company to immediately redeem the outstanding portion of this Debenture in
accordance with Section 6(y) hereof.
5. A. (i) Notwithstanding any other provision hereof to the contrary, at
any time prior to the Conversion Date, the Company shall have the right to
redeem all or any portion of the then outstanding principal amount of the
Debentures then held by the Holder in cash for an amount (the "Redemption
Amount") equal to the sum of (a) such outstanding principal of the Debentures
plus all accrued but unpaid interest thereon through the date the Redemption
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<PAGE>
Amount is paid to the Holder (the "Redemption Payment Date"), plus (b) the
Redemption Premium (as defined below).
(ii) The "Redemption Premium" shall be an amount equal to the
excess, if any, of (a) an amount equal to (1) the number of shares of Common
Stock into which the Holder could have converted the Debentures being redeemed
had the Holder effected such conversion on the date the Company gave the Notice
of Redemption (the "Redemption Notice Date'), multiplied by (U) the closing ask
price of the Common Stock on the Redemption Notice Date, over (b) the principal
of the Debentures so redeemed.
(iii) The Company shall give at least ten (10) business days'
written notice of such redemption to the Holder (the "Notice of Redemption").
Anything in the preceding provisions of this Section 5 to the contrary
notwithstanding, the Redemption Amount shall, unless otherwise agreed to in
writing by the Holder after receiving the Notice of Redemption, be paid to the
Holder in good funds at least five (5) but not more than ten (10) business days
from the date of the Notice of Redemption, except that, with respect to any
Debentures for which a Notice of Redemption is given, the Holder shall have the
right, exercisable by giving a Notice of Conversion is submitted to the Company
within five (5) business days of the Holder's receipt of the Company's Notice of
Redemption, to convert any or all of the Debentures sought to be redeemed (a
"Redemption Notice Conversion") and the Redemption Notice Conversion shall take
precedence over the redemption contemplated by the Notice of Redemption. Such
Debentures shall be converted in accordance with the terms hereof. Furthermore,
in the event such Redemption Amount is not timely made, any rights of the
Company to redeem outstanding Debentures shall terminate, and the Notice of
Redemption shall be null and void. Any redemption contemplated by this Debenture
shall be made only in cash by the payment of immediately available good funds to
the Holder.
B. Any Debentures not previously converted as of the Maturity Date,
shall be deemed to be automatically converted, without further action of any
land by the Company or any of its agents, employees or representatives as of the
Maturity Date at the Conversion Rate applicable on the Maturity Date ("Mandatory
Conversion").
6. The Holder recognizes that the Company may be limited in the number of
shares of Common Stock it may issue by (i) reason of its authorized shares, or
(ii) the applicable rules and regulations of the principal securities market on
which the Common Stock is listed or traded (collectively, the "Cap
Regulations"). Without limiting the other provisions hereof, (i) the Company
will take all steps reasonably necessary to be in a position to issue shares of
Common Stock on conversion of the Debentures without violating the Cap
Regulations and (ii) if, despite taking such steps, the Company still can not
issue such shares of Common Stock without violating the Cap Regulations, the
Holder of this Debenture (to the extent the same can not be converted in
compliance with the Cap Regulations (an "Unconverted Debenture"), shall have the
option, exercisable in the Holder's sole and absolute discretion, to elect any
one of the following remedies:
(x) require the Company to issue shares of Common Stock in
accordance with such Holder's, Notice of Conversion relating to the
Unconverted Debenture at a conversion purchase price equal to the average
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<PAGE>
of the closing bid price per share of Common Stock for any five (5)
consecutive trading days (subject to the equitable adjustments for certain
events occurring during such period as provided in this Debenture) during
the sixty (60) trading days immediately preceding the date of the Notice
of Conversion; or
(y) require the Company to redeem each Unconverted Debenture for an
amount (the "Cap Redemption Amount"), payable in cash, equal to:
V
------ x M
CP
where:
"V" means the outstanding principal plus accrued interest through
the Cap Redemption Date (as defined below) of an Unconverted Debenture;
"CP" means the Conversion Rate in effect on the date of redemption
(the "Cap Redemption Date") specified in the notice from the Holder
electing this remedy; and
"M" means the highest Market Price during the period beginning on
the Cap Redemption Date and ending on the date of payment of the Cap
Redemption Amount.
The holder of an Unconverted Debenture May elect one of the above remedies with
respect to a portion of such Unconverted Debenture and the other remedy with
respect to other portions of the Unconverted Debenture.
7. Subject to the terms of the Securities Purchase Agreement, dated
____________, 1998 (the "Securities Purchase Agreement"), between the Company
and the Holder (or the Holder's predecessor in interest), no provision of this
Debenture shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of, and interest on, this Debenture at
the time, place, and rate, and in the coin or currency, herein prescribed. This
Debenture and all other Debentures now or hereafter issued of similar terms are
direct obligations of the Company.
8. No recourse shall be bad for the payment of the principal of, or the
interest on, this Debenture, or for any claim based hereon, or otherwise in
respect hereof, against any incorporator, shareholder, officer or director, as
such, past, present or future, of the Company or any successor corporation,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise, all such liability being,
by the acceptance hereof and as part of the consideration for the issue hereof,
expressly waived and released.
9. If the Company merges or consolidates with another corporation or sells
or transfers all or substantially all of its assets to another person and the
holders of the Common Stock are entitled to receive stock, securities or
property in respect of or in exchange for Common Stock, then as a condition of
such merger, consolidation, sale or transfer, the Company and any such
successor, purchaser or transferee agree that the Debenture may thereafter be
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convected on the terms and subject to the conditions set forth above into the
kind and amount of stock securities or property receivable upon such merger,
consolidation, We or transfer by a holder of the number of shares of Common
Stock into which this Debenture might have been converted immediately before
such merger, consolidation, sale or transfer, subject to adjustments which shall
be as nearly equivalent as may be practicable. In the event of any proposed
merger, consolidation or sale or transfer of all or substantially all of the
assets of the Company (a "Sale"), the Holder hereof shall have the right to
convert by delivering a Notice of Conversion to the Company within fifteen (15)
days of receipt of notice of such Sale from the Company. In the event the Holder
hereof shall elect not to convert, the Company may prepay any outstanding
principal and accrued interest on this Debenture by paying the Redemption Amount
contemplated by Section 5(A) hereof, less all amounts required by law to be
deducted, upon which tender of payment following such notice, the right of
conversion shall terminate.
10. If, for any reason, prior to the Conversion Date or the Redemption
Payment Date, the Company spins off or otherwise divests itself of a part of its
business or operations of disposes all or of a part of its assets in a
transaction (the "Spin Off") in which the Company does not receive compensation
for such business, operations or assets, but causes securities of another entity
(the "Spin Off Securities") to be issued to security holders of the Company,
then the Company shall cause (i) to be reserved Spin Off Securities equal to the
number thereof which would have been issued to the Holder had all of the
Holder's Debentures outstanding on the record date (the "Record Date") for
determining the amount and number of Spin Off Securities to be issued to
security holders of the Company (the "Outstanding Debentures) been converted as
of the close of business on the trading day immediately before the Record Date
(the "Reserved Spin Off Shares"), and (ii) to be issued to the Holder on the
conversion of all or any of the Outstanding Debentures, such amount of the
Reserved Spin Off Shares equal to (x) the Reserved Spin Off Shares multiplied by
(y) a fraction, of which (I) the numerator is the principal amount of the
Outstanding Debentures then being converted, and (II) the denominator is the
principal amount of the Outstanding Debentures.
11. If, at any time while any portion of this Debenture remains
outstanding, the Company effectuates a stock split or reverse stock split of its
Common Stock or issues a dividend on its Common Stock consisting of shares of
Common Stock, the Base Price shall be equitably adjusted to reflect such action.
By way of illustration, and not in limitation, of the foregoing (i) if the
Company effectuates, a 2:1 split of its Common Stock, thereafter, with respect
to any conversion for which the Company issues the shares after the record date
of such split, the Base Price shall be deemed to be one-half of what it had been
calculated to be immediately prior to such split; (ii) if the Company
effectuates a 1:10 reverse split of its Common Stock, thereafter, with respect
to any conversion for which the Company issues the shares after the record date
of such reverse split, the Base Price shall be deemed to be ten times what it
had been calculated to be immediately prior to such split; and (iii) if the
Company declares a stock dividend of one share of Common Stock for every 10
shares outstanding, thereafter, with respect to any conversion for which the
Company issues the shares after the record date of such dividend, the Base Price
shall be deemed to be the amount of such Base Price calculated immediately prior
to such record date multiplied by a fraction, of which the numerator is the
number of shares (10) for which a dividend share will be issued and the
denominator is such number of shares plus the dividend share(s) issuable or
issued thereon (11).
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12. All payments contemplated hereby to be made "in cash" shall be made in
immediately available good funds in such coin or currency of the United States
of America as at the time of payment is legal tender for payment of public and
private debts. All payments of cash and each delivery of shares of Common Stock
issuable to the Holder as contemplated hereby shall be made to the Holder at the
address last appearing on the Debenture Register of the Company as designated in
writing by the Holder from time to time; except that the Holder can designate by
notice to the Company, a different delivery address for any one or more specific
payments or deliveries.
13. The Holder of the Debenture, by acceptance hereof, agrees that this
Debenture is being acquired for investment and that such Holder will not offer,
sell or otherwise dispose of this Debenture or the Shares of Common Stock
issuable upon conversion thereof except under circumstances which will not
result in a violation of the Act or any applicable state Blue Sky or foreign
laws or similar laws relating to the sale of securities.
14. This Debenture shall be governed by and construed in accordance with
the laws of the State of New York. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of the
City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection, including
any objection based on forum non coveniens, to the bringing of any such
proceeding in such jurisdictions.
15. The following shall constitute an "Event of Default":
a. The Company shall default in the payment of principal or interest on
this Debenture and same shall continue for a period of three (3)
days; or
b. Any of the representations or warranties made by the Company herein,
in the Securities Purchase Agreement, the Registration. Rights
Agreement or in any certificate or financial or other written
statements heretofore or hereafter finished by the Company in
connection with the execution and delivery of this Debenture or the
Securities Purchase Agreement shall be false or misleading in any
material respect at the time made; or
c. The Company fails to issue shares of Common Stock to the Holder or
to cause its Transfer Agent to issue shares of Common Stock upon
exercise by the Holder of their conversion rights of the Holder in
accordance with the terms of this Debenture, fails to transfer or to
cause its Transfer Agent to transfer any certificate for shares of
Common Stock issued to the Holder upon conversion of this Debenture
and when required by this Debenture or the Registration Rights
Agreement, and such transfer is otherwise lawful, or fails to remove
any restrictive legend or to cause its Transfer Agent to transfer on
any certificate or any shares of Common Stock issued to the Holder
upon conversion of this Debenture as and when required by this
Debenture, the Agreement or the Registration Rights Agreement and
such legend removal is otherwise lawful, and any such failure shall
continue uncured for five (5) business days.
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d. The Company shall fail to perform or observe, in any material
respect, any other covenant, term, provision, condition, agreement
or obligation of any Debenture in this series and such failure shall
continue uncured for a period of thirty (30) days after written
notice from the Holder of such failure; or
e. The Company shall fail to perform or observe, in any material
respect, any covenant, term, provision, condition, agreement or
obligation of the Company under the Securities Purchase Agreement or
the Registration Rights Agreement and such failure shall continue
uncured for a period of thirty (30) days after written notice from
the Holder of such failure (other than a failure to cause the
Registration Statement to become effective no later than the
Required Effective Date, as defined and provided in the Registration
Rights Agreement, as to which no such cure period shall apply); or
f. The Company shall (1) admit in writing its inability to pay its
debts generally as they mature; (2) make an assignment for the
benefit of creditors or commence proceedings for its dissolution; or
(3) apply for or consent to the appointment of a trustee, liquidator
or receiver for its or for a substantial part of its property or
business; or
g. A trustee, liquidator or receiver shall be appointed for the Company
or for a substantial part of its property or business without its
consent and shall not be discharged within sixty (60) days after
such appointment; or
h. Any governmental agency or any court of competent jurisdiction at
the instance of any governmental agency shall assume custody or
control of the whole or arty substantial portion of the properties
or assets of the Company and shall not be dismissed within sixty
(60) days thereafter; or
i. Any money judgment, writ or warrant of attachment, or similar
process in excess of Two Hundred Thousand ($200,000) Dollars in the
aggregate shall be entered or filed against the Company or any of
its properties or other assets and shall remain unpaid, unvacated,
unbonded or unstayed for a period of sixty (60) days or in any event
later than five (5) days prior to the date of any proposed sale
thereunder; or
j. Bankruptcy, reorganization, insolvency Or liquidation Proceedings Or
Other proceedings for relief under any bankruptcy law or any law for
the relief of debtors shall be instituted by or against the Company
and, if instituted against the Company, shall not be dismissed
within sixty (60) days after such institution or the Company shall
by any action or answer approve of, consent to, or acquiesce in any
such proceedings or admit the material allegations of, or default in
answering a petition filed in any such proceeding; or
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k. The Company shall have its Common Stock suspended or delisted from
an exchange or over-the-counter market from trading for in excess of
five (5) trading days.
Then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in. writing by the Holder (which waiver
shall not be deemed to be a waiver of any subsequent default) at the option of
the Holder and in the Holders sole discretion, the Holder May consider this
Debenture immediately due and payable, without presentment, demand, protest or
notice of any kinds, all of which are hereby expressly waived, anything herein
or in any note or other instruments contained to the contrary notwithstanding,
and the Holder may immediately enforce any and all of the Holder's rights and
remedies provided herein or any other rights or remedies afforded by law.
16. Nothing contained in this Debenture shall be construed as conferring
upon the Holder the right to vote or to receive dividends or to consent or
receive notice as a shareholder in respect of any meeting of shareholders or any
rights whatsoever as a shareholder of the Company, unless and to the extent
converted in accordance with the terms hereof.
17. In the event for any reason, any payment by or art of the Company or
the Holder shall result in payment of interest which would exceed the limit
authorized by or be in violation of the law of the jurisdiction applicable to
this Debenture, the ipso facto the obligation of the Company to pay interest or
perform such act or requirement shall be reduced to the limit authorized under
such law, so that in no event shall the Company be obligated to pay any such
interest, perform any such act or be bound by any requirement which would result
in the payment of interest in excess of the limit so authorized. In the event
any payment by or act of the Company shall result in the extraction of a rate of
interest in excess of a sum which is lawfully collectible as interest, then such
amount (to the extent of such excess not returned to the Company) shall, without
further agreement or notice between or by the Company or the Holder, be deemed
applied to the payment of principal, if any, hereunder immediately upon receipt
of such excess funds by the Holder, with the same force and effect as though the
Company had specifically designated such sums to be so applied to principal and
the Holder had agreed to accept such sums as an interest-free prepayment of this
Debenture. If any part of such excess remains after the principal has been paid
in full, whether by the provisions of the preceding sentences of this Section 17
or otherwise, such excess shall be deemed to be an interestfim loan from the
Company to the Holder, which loan shall be payable immediately upon demand by
the Company. The provisions of this Section 17 shall control every other
provision of this Debenture.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
Dated: June 5, 1998
SHOPPING.COM
By: /s/ John Markley
----------------------------------
John Markley, Chief Executive Officer
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EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert of the principal
amount of the above Debenture No. _______________ into Shares of Common Stock of
SHOPPING.COM (the "Company") according to the conditions hereof, as of the date
written below.
Conversion Date*
- ---------------------------------------------------------------------------
Applicable Conversion Price
- ----------------------------------------------------------------------------
Signature
- ----------------------------------------------------------------------------
[Name]
Address:
- -----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
* This original Debenture must be received by the Company or its transfer agent
by the fifth business date following the Conversion Date.
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<PAGE>
EXHIBIT 4.28
------------
DEBENTURE
NEITHER THESE SECURITIES OR THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE
BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE OR UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THE SECURITIES ARE RESTRICTED AND MAY NOT BE OFFERED, RESOLD, PLEDGED
OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION OR
EXEMPTION OR SAFE HARBOR THEREFROM.
No. 98-5 US $250,000.00
SHOPPING.COM
8% CONVERTIBLE DEBENTURE DUE MAY 31, 2000
THIS DEBENTURE is one of a duly authorized issue of up to $10,000,000 in
Debentures of SHOPPING.COM, a corporation organized and existing under the laws
of the State of Delaware (the "Company") designated as its 8% Convertible
Debentures. Such Debentures may be issued in series, each of which may have a
different maturity date, but which otherwise have substantially similar terms.
FOR VALUE RECEIVED, the Company promises to pay to Star High Yield
Investment Management Corporation, the registered holder hereof (the "Holder),
the principal sum of Two Hundred Fifty Thousand Dollars and 00/100 Dollars (US
$250,000.00) on May 31, 2000 (the "Maturity Date") and to pay interest on the
principal sum outstanding from time to time in arrears (i) prior to the Maturity
Date, quarterly, on the last day of March, June, September and December of each
year, (ii) upon conversion as provided herein or (iii) on the Maturity Date, at
the rate of 9% per annum accruing from ______________, 1998 the date of initial
issuance of this Debenture. Accrual of interest shall commence on the first such
business day to occur after the date hereof and shall continue to accrue on a
daily basis until payment in full of the principal sum has been made or duly
provided for. Subject to the provisions of Sections 4 and 5 below (the terms of
which shall govern as if this sentence were not included in this Debenture),
prior to the Maturity Date, interest on this Debenture is payable, at the option
of the Company, in shares of Common Stock of the Company, no par value ("Common
Stock"), at the Conversion Rate (as defined below) in effect on the date of
payment, or in cash.
This Debenture is subject to the following additional provisions:
1. The Debentures are issuable in denominations of TEN Thousand Dollars
(US $10,000) and integral multiples thereof. The Debentures are exchangeable for
an equal aggregate principal amount of Debentures of different authorized
denominations, as requested by the Holder surrendering the same. No service
charge will be made for such registration or transfer or exchange.
2. The Company shall be entitled to withhold from all payments of
principal of, and interest on, this Debenture any amounts required to be
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<PAGE>
withheld under the applicable provisions of the United States income tax laws or
other applicable laws at the time of such payments, and Holder shall execute and
deliver all required documentation in connection therewith.
3. This Debenture has been issued subject to investment of the original
purchaser hereof and may be transferred or exchanged only in compliance with the
Securities Act of 1933, as amended (the "Act"), and other applicable state and
foreign securities laws. In the event of any proposed transfer of this
Debenture, the Company may require, prior to issuance of a new Debenture in the
name of such other person, that it receive reasonable transfer documentation
including legal opinions that the issuance of the Debenture in such other name
does not and will not cause a violation of the Act or any applicable state or
foreign securities laws. Prior to due presentment for transfer of this
Debenture, the Company and any agent of the Company may treat the person in
whose name this Debenture is duly registered on the Company's Debenture Register
as the owner hereof for the purpose of receiving payment as herein provided and
for all other purposes, whether or not this Debenture be overdue, and neither
the Company nor any such agent shall be affected by notice to the contrary.
4. A. The Holder of this Debenture is entitled, at its option, subject
to the following provisions of this Section 4, to convert all or a portion of
this Debenture into shares of Common Stock of the Company at any time until the
Maturity Date, at a conversion price for each share of Common Stock (the
"Conversion Rate) equal to the lower of (x) the lowest Market Price (as defined
below) for any three (3) trading days selected by the Holder from the thirty
(30) trading days ending on the wading day before the Conversion Date, or (y)
$16.00 (the "Base Price"; which amount is subject to adjustment as hereinafter
provided); provided that the principal amount being converted is at least US
$10,000 (unless if at the time of such election to convert the aggregate
principal amount of all Debentures registered to the Holder is less than Ten
Thousand Dollars [US $10,000] then the whole amount thereof).
B. The Holder of this Debenture is entitled, at its option, to
convert this Debenture in accordance with the following schedule:
(i) at any time from the thirtieth day until the ninetieth day after the
date (the "Debenture Date") of the original date of issue of this
Debenture (including any predecessors which were subsequently reissued on
account of conversion, transfer, loss or other reason), up to twenty
percent (20%) of the original principal amount of the Basic Debentures (as
defined in the Securities Purchase Agreement defined below) may be
converted whether from this Debenture or any other Basic Debenture;
(ii) at any time thereafter until the one hundred twentieth day after the
Debenture Date, up to an additional twenty-five percent (25%) (cumulative
forty-five percent [45%]) of the original principal amount of the Basic
Debentures may be converted, whether from this Debenture or any other
Basic Debenture;
(iii) at any time thereafter until the one hundred fiftieth day after the
Debenture Date, up to an additional thirty-five percent (35%) (cumulative
eighty percent [80%]) of the Basic Debentures may be converted, whether
from this Debenture or any other Basic Debenture; and
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<PAGE>
(iv) at any time thereafter, all the principal amount of the Basic
Debentures may be converted.
C. Conversion shall be effectuated by surrendering the Debentures to be
converted to the Company's transfer agent, US Stock Transfer & Trust,
accompanied by or preceded by facsimile or other delivery of the form of
conversion notice attached hereto as Exhibit A, executed by the Holder of the
Debenture evidencing such Holder's intention to convert this Debenture or a
specified portion hereof, and accompanied, if required by the Company, by proper
assignment hereof in blank. interest accrued or accruing from the date of
issuance to the date of conversion shall at the option of the Company, be paid
in cash or Common Stock upon conversion at the Conversion Rate applicable to
such conversion. No fractional shares of Common Stock or scrip representing
fractions of shares will be issued on conversion, but the number of shares
issuable shall be rounded to the nearest whole share. The date on which notice
of conversion is given (the "Conversion Date") shall be deemed to be the date on
which the Holder faxes or otherwise delivers the conversion notice ("Notice of
Conversion!'), substantially in the form annexed hereto as Exhibit A, duly
executed, to the Company, provided that the Holder shall deliver to the
Company's transfer agent or the Company the original Debentures being converted
within five (5) business days thereafter (and if not so delivered with such
time, the Conversion Date shall be the date on which the later of the Notice of
Conversion and the original Debentures being converted is received by the
Company). Facsimile delivery of the Notice of Conversion shall be accepted by
the Company at facsimile number (714) 640-4374; Attn: Bob McNulty. Certificates
representing Common Stock upon conversion will be delivered within three (3)
business days from the date later of the Notice of Conversion is delivered to
the Company as contemplated in the first sentence of this paragraph C or the
original Debenture is delivered to the Company's transfer agent or the Company.
D. For purposes of this Debenture, the term "Market Price" shall mean (x)
the average closing bid price of the Common Stock as reported by Bloomberg, LP
or the average closing bid price on the over-the-counter market, (i) if a period
of time is specified in the relevant provision of this Debenture, for such
period, and (ii) if no period of time is specified in the relevant provision of
this Debenture, then for the five (5) trading days ending on the trading day
immediately preceding the relevant date, or (y) if the Common Stock is listed on
a stock exchange, the closing price on such exchange on the date indicated in
the relevant provision hereof, as reported in The Wall Street Journal.
E. Anything herein to the contrary notwithstanding, in the event the
Company breaches the provisions of this Section 4(g) of the Securities Purchase
Agreement, the Conversion Rate shall be amended to be equal to (i) 90% of (ii)
the Conversion Rate determined in accordance with the other provisions of this
Debenture without regard to this Section 4(E), and the Holder may require the
Company to immediately redeem the outstanding portion of this Debenture in
accordance with Section 6(y) hereof.
5. A. (i) Notwithstanding any other provision hereof to the contrary, at
any time prior to the Conversion Date, the Company shall have the right to
redeem all or any portion of the then outstanding principal amount of the
Debentures then held by the Holder in cash for an amount (the "Redemption
Amount") equal to the sum of (a) such outstanding principal of the Debentures
plus all accrued but unpaid interest thereon through the date the Redemption
-3-
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<PAGE>
Amount is paid to the Holder (the "Redemption Payment Date"), plus (b) the
Redemption Premium (as defined below).
(ii) The "Redemption Premium" shall be an amount equal to the
excess, if any, of (a) an amount equal to (1) the number of shares of Common
Stock into which the Holder could have converted the Debentures being redeemed
had the Holder effected such conversion on the date the Company gave the Notice
of Redemption (the "Redemption Notice Date'), multiplied by (U) the closing ask
price of the Common Stock on the Redemption Notice Date, over (b) the principal
of the Debentures so redeemed.
(iii) The Company shall give at least ten (10) business days'
written notice of such redemption to the Holder (the "Notice of Redemption").
Anything in the preceding provisions of this Section 5 to the contrary
notwithstanding, the Redemption Amount shall, unless otherwise agreed to in
writing by the Holder after receiving the Notice of Redemption, be paid to the
Holder in good funds at least five (5) but not more than ten (10) business days
from the date of the Notice of Redemption, except that, with respect to any
Debentures for which a Notice of Redemption is given, the Holder shall have the
right, exercisable by giving a Notice of Conversion is submitted to the Company
within five (5) business days of the Holder's receipt of the Company's Notice of
Redemption, to convert any or all of the Debentures sought to be redeemed (a
"Redemption Notice Conversion") and the Redemption Notice Conversion shall take
precedence over the redemption contemplated by the Notice of Redemption. Such
Debentures shall be converted in accordance with the terms hereof. Furthermore,
in the event such Redemption Amount is not timely made, any rights of the
Company to redeem outstanding Debentures shall terminate, and the Notice of
Redemption shall be null and void. Any redemption contemplated by this Debenture
shall be made only in cash by the payment of immediately available good funds to
the Holder.
B. Any Debentures not previously converted as of the Maturity Date,
shall be deemed to be automatically converted, without further action of any
land by the Company or any of its agents, employees or representatives as of the
Maturity Date at the Conversion Rate applicable on the Maturity Date ("Mandatory
Conversion").
6. The Holder recognizes that the Company may be limited in the number of
shares of Common Stock it may issue by (i) reason of its authorized shares, or
(ii) the applicable rules and regulations of the principal securities market on
which the Common Stock is listed or traded (collectively, the "Cap
Regulations"). Without limiting the other provisions hereof, (i) the Company
will take all steps reasonably necessary to be in a position to issue shares of
Common Stock on conversion of the Debentures without violating the Cap
Regulations and (ii) if, despite taking such steps, the Company still can not
issue such shares of Common Stock without violating the Cap Regulations, the
Holder of this Debenture (to the extent the same can not be converted in
compliance with the Cap Regulations (an "Unconverted Debenture"), shall have the
option, exercisable in the Holder's sole and absolute discretion, to elect any
one of the following remedies:
(x) require the Company to issue shares of Common Stock in
accordance with such Holder's, Notice of Conversion relating to the
Unconverted Debenture at a conversion purchase price equal to the average
of the closing bid price per share of
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<PAGE>
Common Stock for any five (5) consecutive trading days (subject to the
equitable adjustments for certain events occurring during such period as
provided in this Debenture) during the sixty (60) trading days immediately
preceding the date of the Notice of Conversion; or
(y) require the Company to redeem each Unconverted Debenture for an
amount (the "Cap Redemption Amount"), payable in cash, equal to:
V
----- x M
CP
where:
"V" means the outstanding principal plus accrued interest through
the Cap Redemption Date (as defined below) of an Unconverted Debenture;
"CP" means the Conversion Rate in effect on the date of redemption
(the "Cap Redemption Date") specified in the notice from the Holder
electing this remedy; and
"M" means the highest Market Price during the period beginning on
the Cap Redemption Date and ending on the date of payment of the Cap
Redemption Amount.
The holder of an Unconverted Debenture May elect one of the above remedies with
respect to a portion of such Unconverted Debenture and the other remedy with
respect to other portions of the Unconverted Debenture.
7. Subject to the terms of the Securities Purchase Agreement, dated
____________, 1998 (the "Securities Purchase Agreement"), between the Company
and the Holder (or the Holder's predecessor in interest), no provision of this
Debenture shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of, and interest on, this Debenture at
the time, place, and rate, and in the coin or currency, herein prescribed. This
Debenture and all other Debentures now or hereafter issued of similar terms are
direct obligations of the Company.
8. No recourse shall be bad for the payment of the principal of, or the
interest on, this Debenture, or for any claim based hereon, or otherwise in
respect hereof, against any incorporator, shareholder, officer or director, as
such, past, present or future, of the Company or any successor corporation,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise, all such liability being,
by the acceptance hereof and as part of the consideration for the issue hereof,
expressly waived and released.
9. If the Company merges or consolidates with another corporation or sells
or transfers all or substantially all of its assets to another person and the
holders of the Common Stock are entitled to receive stock, securities or
property in respect of or in exchange for Common Stock, then as a condition of
such merger, consolidation, sale or transfer, the Company and any such
successor, purchaser or transferee agree that the Debenture may thereafter be
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<PAGE>
convected on the terms and subject to the conditions set forth above into the
kind and amount of stock securities or property receivable upon such merger,
consolidation, We or transfer by a holder of the number of shares of Common
Stock into which this Debenture might have been converted immediately before
such merger, consolidation, sale or transfer, subject to adjustments which shall
be as nearly equivalent as may be practicable. In the event of any proposed
merger, consolidation or sale or transfer of all or substantially all of the
assets of the Company (a "Sale"), the Holder hereof shall have the right to
convert by delivering a Notice of Conversion to the Company within fifteen (15)
days of receipt of notice of such Sale from the Company. In the event the Holder
hereof shall elect not to convert, the Company may prepay any outstanding
principal and accrued interest on this Debenture by paying the Redemption Amount
contemplated by Section 5(A) hereof, less all amounts required by law to be
deducted, upon which tender of payment following such notice, the right of
conversion shall terminate.
10. If, for any reason, prior to the Conversion Date or the Redemption
Payment Date, the Company spins off or otherwise divests itself of a part of its
business or operations of disposes all or of a part of its assets in a
transaction (the "Spin Off") in which the Company does not receive compensation
for such business, operations or assets, but causes securities of another entity
(the "Spin Off Securities") to be issued to security holders of the Company,
then the Company shall cause (i) to be reserved Spin Off Securities equal to the
number thereof which would have been issued to the Holder had all of the
Holder's Debentures outstanding on the record date (the "Record Date") for
determining the amount and number of Spin Off Securities to be issued to
security holders of the Company (the "Outstanding Debentures) been converted as
of the close of business on the trading day immediately before the Record Date
(the "Reserved Spin Off Shares"), and (ii) to be issued to the Holder on the
conversion of all or any of the Outstanding Debentures, such amount of the
Reserved Spin Off Shares equal to (x) the Reserved Spin Off Shares multiplied by
(y) a fraction, of which (I) the numerator is the principal amount of the
Outstanding Debentures then being converted, and (II) the denominator is the
principal amount of the Outstanding Debentures.
11. If, at any time while any portion of this Debenture remains
outstanding, the Company effectuates a stock split or reverse stock split of its
Common Stock or issues a dividend on its Common Stock consisting of shares of
Common Stock, the Base Price shall be equitably adjusted to reflect such action.
By way of illustration, and not in limitation, of the foregoing (i) if the
Company effectuates, a 2:1 split of its Common Stock, thereafter, with respect
to any conversion for which the Company issues the shares after the record date
of such split, the Base Price shall be deemed to be one-half of what it had been
calculated to be immediately prior to such split; (ii) if the Company
effectuates a 1:10 reverse split of its Common Stock, thereafter, with respect
to any conversion for which the Company issues the shares after the record date
of such reverse split, the Base Price shall be deemed to be ten times what it
had been calculated to be immediately prior to such split; and (iii) if the
Company declares a stock dividend of one share of Common Stock for every 10
shares outstanding, thereafter, with respect to any conversion for which the
Company issues the shares after the record date of such dividend, the Base Price
shall be deemed to be the amount of such Base Price calculated immediately prior
to such record date multiplied by a fraction, of which the numerator is the
number of shares (10) for which a dividend share will be issued and the
denominator is such number of shares plus the dividend share(s) issuable or
issued thereon (11).
-6-
Page 278 of 290
<PAGE>
12. All payments contemplated hereby to be made "in cash" shall be made in
immediately available good funds in such coin or currency of the United States
of America as at the time of payment is legal tender for payment of public and
private debts. All payments of cash and each delivery of shares of Common Stock
issuable to the Holder as contemplated hereby shall be made to the Holder at the
address last appearing on the Debenture Register of the Company as designated in
writing by the Holder from time to time; except that the Holder can designate by
notice to the Company, a different delivery address for any one or more specific
payments or deliveries.
13. The Holder of the Debenture, by acceptance hereof, agrees that this
Debenture is being acquired for investment and that such Holder will not offer,
sell or otherwise dispose of this Debenture or the Shares of Common Stock
issuable upon conversion thereof except under circumstances which will not
result in a violation of the Act or any applicable state Blue Sky or foreign
laws or similar laws relating to the sale of securities.
14. This Debenture shall be governed by and construed in accordance with
the laws of the State of New York. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of the
City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection, including
any objection based on forum non coveniens, to the bringing of any such
proceeding in such jurisdictions.
15. The following shall constitute an "Event of Default":
a. The Company shall default in the payment of principal or interest on
this Debenture and same shall continue for a period of three (3)
days; or
b. Any of the representations or warranties made by the Company herein,
in the Securities Purchase Agreement, the Registration. Rights
Agreement or in any certificate or financial or other written
statements heretofore or hereafter finished by the Company in
connection with the execution and delivery of this Debenture or the
Securities Purchase Agreement shall be false or misleading in any
material respect at the time made; or
c. The Company fails to issue shares of Common Stock to the Holder or
to cause its Transfer Agent to issue shares of Common Stock upon
exercise by the Holder of their conversion rights of the Holder in
accordance with the terms of this Debenture, fails to transfer or to
cause its Transfer Agent to transfer any certificate for shares of
Common Stock issued to the Holder upon conversion of this Debenture
and when required by this Debenture or the Registration Rights
Agreement, and such transfer is otherwise lawful, or fails to remove
any restrictive legend or to cause its Transfer Agent to transfer on
any certificate or any shares of Common Stock issued to the Holder
upon conversion of this Debenture as and when required by this
Debenture, the Agreement or the Registration Rights Agreement and
such legend removal is otherwise lawful, and any such failure shall
continue uncured for five (5) business days.
-7-
Page 279 of 290
<PAGE>
d. The Company shall fail to perform or observe, in any material
respect, any other covenant, term, provision, condition, agreement
or obligation of any Debenture in this series and such failure shall
continue uncured for a period of thirty (30) days after written
notice from the Holder of such failure; or
e. The Company shall fail to perform or observe, in any material
respect, any covenant, term, provision, condition, agreement or
obligation of the Company under the Securities Purchase Agreement or
the Registration Rights Agreement and such failure shall continue
uncured for a period of thirty (30) days after written notice from
the Holder of such failure (other than a failure to cause the
Registration Statement to become effective no later than the
Required Effective Date, as defined and provided in the Registration
Rights Agreement, as to which no such cure period shall apply); or
f. The Company shall (1) admit in writing its inability to pay its
debts generally as they mature; (2) make an assignment for the
benefit of creditors or commence proceedings for its dissolution; or
(3) apply for or consent to the appointment of a trustee, liquidator
or receiver for its or for a substantial part of its property or
business; or
g. A trustee, liquidator or receiver shall be appointed for the Company
or for a substantial part of its property or business without its
consent and shall not be discharged within sixty (60) days after
such appointment; or
h. Any governmental agency or any court of competent jurisdiction at
the instance of any governmental agency shall assume custody or
control of the whole or arty substantial portion of the properties
or assets of the Company and shall not be dismissed within sixty
(60) days thereafter; or
i. Any money judgment, writ or warrant of attachment, or similar
process in excess of Two Hundred Thousand ($200,000) Dollars in the
aggregate shall be entered or filed against the Company or any of
its properties or other assets and shall remain unpaid, unvacated,
unbonded or unstayed for a period of sixty (60) days or in any event
later than five (5) days prior to the date of any proposed sale
thereunder; or
j. Bankruptcy, reorganization, insolvency Or liquidation Proceedings Or
Other proceedings for relief under any bankruptcy law or any law for
the relief of debtors shall be instituted by or against the Company
and, if instituted against the Company, shall not be dismissed
within sixty (60) days after such institution or the Company shall
by any action or answer approve of, consent to, or acquiesce in any
such proceedings or admit the material allegations of, or default in
answering a petition made in any such proceeding; or
-8-
Page 280 of 290
<PAGE>
k. The Company shall have its Common Stock suspended or delisted from
an exchange or over-the-counter market from trading for in excess of
five (5) trading days.
Then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in. writing by the Holder (which waiver
shall not be deemed to be a waiver of any subsequent default) at the option of
the Holder and in the Holders sole discretion, the Holder May consider this
Debenture immediately due and payable, without presentment, demand, protest or
notice of any kinds, all of which are hereby expressly waived, anything herein
or in any note or other instruments contained to the contrary notwithstanding,
and the Holder may immediately enforce any and all of the Holder's rights and
remedies provided herein or any other rights or remedies afforded by law.
16. Nothing contained in this Debenture shall be construed as conferring
upon the Holder the right to vote or to receive dividends or to consent or
receive notice as a shareholder in respect of any meeting of shareholders or any
rights whatsoever as a shareholder of the Company, unless and to the extent
converted in accordance with the terms hereof.
17. In the event for any reason, any payment by or art of the Company or
the Holder shall result in payment of interest which would exceed the limit
authorized by or be in violation of the law of the jurisdiction applicable to
this Debenture, the ipso facto the obligation of the Company to pay interest or
perform such act or requirement shall be reduced to the limit authorized under
such law, so that in no event shall the Company be obligated to pay any such
interest, perform any such act or be bound by any requirement which would result
in the payment of interest in excess of the limit so authorized. In the event
any payment by or act of the Company shall result in the extraction of a rate of
interest in excess of a sum which is lawfully collectible as interest, then such
amount (to the extent of such excess not returned to the Company) shall, without
further agreement or notice between or by the Company or the Holder, be deemed
applied to the payment of principal, if any, hereunder immediately upon receipt
of such excess funds by the Holder, with the same force and effect as though the
Company had specifically designated such sums to be so applied to principal and
the Holder had agreed to accept such sums as an interest-free prepayment of this
Debenture. If any part of such excess remains after the principal has been paid
in full, whether by the provisions of the preceding sentences of this Section 17
or otherwise, such excess shall be deemed to be an interestfim loan from the
Company to the Holder, which loan shall be payable immediately upon demand by
the Company. The provisions of this Section 17 shall control every other
provision of this Debenture.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
Dated: June 5, 1998
SHOPPING.COM
By: /s/ John Markley
-----------------------------------
John Markley, Chief Executive Officer
-9-
Page 281 of 290
<PAGE>
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert of the principal
amount of the above Debenture No. _______________ into Shares of Common Stock of
SHOPPING.COM (the "Company") according to the conditions hereof, as of the date
written below.
Conversion Date*
- ---------------------------------------------------------------------------
Applicable Conversion Price
- ---------------------------------------------------------------------------
Signature
- ---------------------------------------------------------------------------
[Name]
Address:
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
* This original Debenture must be received by the Company or its transfer agent
by the fifth business date following the Conversion Date.
-10-
Page 282 of 290
<PAGE>
EXHIBIT 10.4
------------
AGREEMENT
This agreement is made on April 1, 1998 between STILDEN CO., INC. (SCI), a Texas
Corporation, and SHOPPING.COM (S.C), a California Corporation. Stilden Co. Inc.
is in the consulting business and Shopping.Com wishes to employ the consulting
services of SCI.
NOW, THEREFORE, in consideration of the mutual covenants contained herein, the
parties hereto agree as follows:
ARTICLE I
Term
1. The term of this agreement shall be for a period of two years commencing
April 1, 1998 and ending on March 31, 2000. The contract will automatically be
renewed in one year increments unless either party terminates via giving written
notice by January 31 each year starting with January 31, 2000.
ARTICLE II
Services
SCI shall provide general services relating to the operation, promotion and
financing of S.C's business. SCI shall also provide specific consulting service
on special projects as assigned by the Board of Directors and/or the Chief
Executive Officer of the company. SCI shall work a minimum of 80 hours per month
on matters directly related to S.C's business.
-1-
Page 283 of 290
<PAGE>
ARTICLE III
Fees
SCI shall receive $7000 monthly fee which will be invoiced to S.C on the first
of each succeeding month. S.C agrees to pay SCI invoices by the 10th of each
succeeding month. Actual business expenses will be 100% reimbursed by S.C. SCI
will document all expenses on an approved expense form. SCI will invoice
expenses monthly and S.C shall reimburse remitted expenses by the 10th day of
each succeeding month. S.C has authorized a $1600 per month housing allowance
for twelve months which will be detailed on the monthly invoice.
ARTICLE IV
Non-Disclosure and Secrecy
1. SCI agrees that, during the term of this Agreement, and at all times
thereafter, it will keep and cause all group consultants to keep all S.C
information in strictest confidence and will not itself either directly or
indirectly use or allow to be used for its benefit, or the benefit of others,
disseminate or disclose any Confidential Information or Trade Secrets (as such
terms are defined below) used and/or obtained in providing the Services
hereunder, except to parties to this Agreement, regardless of whether the
Confidential information or Trade Secrets have been conceived or developed, in
whole or in part by SCI. SCI acknowledges and agrees that the terms
-2-
Page 284 of 290
<PAGE>
"Confidential Information" and "Trade Secrets" as used in this Agreement include
without limitation, the whole or any portion or phase of any design, process,
service, procedure, formula, improvement, customer list, information with
respect to customer requirements and practices, marketing research and
development information, statistical data, sources of merchandise, technical
information, computer models, and all other information concerning the industry
and business in which the S.C concept operates and which is of value in the
operation of S.C business, or is otherwise understood to be, of a confidential
character and which has not been published or otherwise become a matter of
general public knowledge, under circumstances involving no breach of this
Agreement. SCI agrees that all Trade Secrets and Confidential Information are
and shall be the property of S.C regardless of whether conceived or developed by
SCI pursuant to the Services. To that end, SCI hereby assigns to S.C all rights
and all Trade Secrets and proprietary information developed by SCI in providing
the Services.
2. Upon termination or earlier expiration of this Agreement SCI shall surrender
to S.C at any time of such expiration or termination of this Agreement or upon
demand by S.C at any time all material of a confidential and secret nature,
-3-
Page 285 of 290
<PAGE>
including without limitation, the Confidential Information and Trade Secrets,
and any other documents of a proprietary nature as may then be in SCI(s)
possession or control.
ARTICLE V
Covenant Not to Compete
1. SCI hereby agrees that during the term of this Agreement and for a period of
three (3) years following the expiration of this Agreement, it will not be
directly or indirectly engaged in any business in any form or fashion including
partner, consultant, controlling stockholder, joint venture, or employee of any
business which may compete, directly or indirectly, with the business as
contemplated by the Concept of S.C within the state of California without prior
written agreement from S.C. It is the desire and intent of the parties to this
Agreement that the terms and provisions for this Article be enforced to the
fullest extent permissible under the law and public policy, If any element of
this Article is adjudicated to be invalid or unenforceable, such deletion or
reformation is to apply only with respect to the operation of this Article in
the particular jurisdiction in which such adjudication is made. SCI specifically
acknowledges and agrees that the limitations as to time, geographical area and
scope of activity as set forth in this Article V are reasonable and do not
impose a greater restraint than is necessary in SCI's sole opinion to protect
the good will and other business interest of S.C given the terms and conditions
of this Agreement with respect to the Services and Concept.
-4-
Page 286 of 290
<PAGE>
ARTICLE VI
Miscellaneous
1. Injunctive Relief. SCI acknowledges and agrees that any breach of obligations
to be performed by and pursuant to Articles IV and V is likely to result in
irreparable harm to S.C and SCI therefore consents and agrees that if it
violates any such obligations, S.C shall be entitled, among and in addition to
any other rights and remedies available under this Agreement or otherwise, to
temporary and permanent injunctive relief to prevent SCI from committing or
continuing a breach of such obligations.
2. Entire Agreement. This agreement constitutes the whole Agreement between the
parties hereto and there are no other terms other than those contained herein.
This Agreement supersedes any prior contract or understanding related to
retaining SCI.
3. Amendment. No variation of this Agreement shall be deemed valid unless in
writing and signed by the parties hereto.
4. Governing Law. This agreement shall be construed and enforced in according
with the laws of California.
5. Severability. Each provision of this Agreement is intended to be severable
from the other so that if any provision or term hereof is illegal or invalid for
any reason whatsoever, such illegality or invalidity shall not effect the
validity of the remaining provisions and terms hereof.
-5-
Page 287 of 290
<PAGE>
6. Independent Contractors. SCI hereby acknowledges and agrees that it is an
independent Contractor with respect to the Services to be rendered and performed
pursuant to this Agreement and that no terms or provisions of this Agreement
shall be implied to create an employer/employee relationship between S.C and
SCI.
7. Indemnity and Hold Harmless. SCI agrees to indemnify and does hold harmless
S.C and its subsidiaries, affiliated companies, shareholders, officers,
directors, agents, employees, successors and assigns from and against any and
all liabilities, claims, demands, damages, costs and expenses (including
attorney's fees) resulting from, arising out of, or occasioned by breach of the
nondisclosure, secrecy and/or covenant not to compete terms and provisions made
part of this Agreement.
8. Assignment. This Agreement may not be assigned by SCI to any other person or
party without S.C's prior written consent which may be withheld in S.C's sole
discretion. Notwithstanding the forgoing, S.C may assign this Agreement to any
successor corporation, affiliated company or subsidiary. In the case of
assignment by S.C, Assignee shall assume, in writing, S.C obligations.
9. Representation and Warranty. Each Consultant hereby agrees that any documents
produced with respect to the Services and/or the Concept shall be marked
"Confidential" and "Property of SHOPPING.COM" whether those documents are
produced by SCI or by a vendor chosen by SCI.
10. Captions. Captions used in this Agreement are used for convenience only and
are not intended to, nor are they to be construed to, have any substantive
meaning or control in the construction of this Agreement.
-6-
Page 288 of 290
<PAGE>
11. Notices. Any notice given by one party to any other party hereunder shall be
delivered to the party at the address indicated below that party's signature to
this Agreement. Such notice shall be given to U.S. Mail, certified, and shall be
deemed delivered on the date of actual receipt or the date of first refusal to
accept delivery.
Signed by each party as indicated below, to be effective April 1, 1998.
SHOPPING.COM: STILDEN CO. INC.:
/s/ Robert McNulty CEO /s/ Frank W. Denny
- ----------------------------- --------------------------
Robert McNulty /s/ 4/28/98 Frank W. Denny
President President
7514 Reindeer Trail
San Antonio, Texas
78238
-7-
Page 289 of 290
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-END> APR-30-1998
<CASH> 1,476,109
<SECURITIES> 0
<RECEIVABLES> 143,477
<ALLOWANCES> 55,600
<INVENTORY> 0
<CURRENT-ASSETS> 1,897,411
<PP&E> 3,501,102
<DEPRECIATION> 369,593
<TOTAL-ASSETS> 5,568,985
<CURRENT-LIABILITIES> 2,248,154
<BONDS> 0
0
0
<COMMON> 13,394,651
<OTHER-SE> (10,429,304)
<TOTAL-LIABILITY-AND-EQUITY> 5,568,985
<SALES> 917,836
<TOTAL-REVENUES> 917,836
<CGS> 864,889
<TOTAL-COSTS> 4,793,491
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,452
<INCOME-PRETAX> (4,705,578)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,705,578)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,705,578)
<EPS-PRIMARY> (1.17)
<EPS-DILUTED> (1.17)
</TABLE>
