UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): May 3, 2000
GenesisIntermedia.com, Inc.
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(Exact Name of Registrant as Specified in Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
001-15029 95-4710370
________________________ ___________________________________
(Commission File Number) (IRS Employer Identification No.)
5805 Sepulveda Boulevard, 4th Floor, Van Nuys, California 91411
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (818) 902-4300
__________________
________________________________________________________________________________
(Former Name or Former Address, if Changed Since Last Report)
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Item 5. Other Events.
On May 3, 2000, GenesisIntermedia.com, Inc. ("Registrant") announced
that it had completed its latest round of private placement offerings on May 3,
2000, for a total of $10 million in additional financing. The offerings
consisted of $4 million of Series B Convertible Preferred Stock and related
Warrants and $6 million in long-term debt. The Registrant granted certain
registration rights to purchase of the Series B Convertible Preferred Stock and
related warrants in connection with the private placement.
The funds will be used to expand Registrant's infrastructure, for
general corporate purposes and to expand the Centerlinq network.
The press release issued by Registrant is incorporated by reference and
attached hereto as Exhibit 99.1.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements
None.
(b) Current Report on Form 8-K
None.
(c) Exhibits
See Index to Exhibits on page 4.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GENESISINTERMEDIA.COM, INC.
Dated: May 15, 2000 By: /s/ Ramy El-Batrawi
____________________________
Ramy El-Batrawi
Chairman of the Board
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Index to Exhibits
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Exhibit No. Description
___________ _____________________
<S> <C>
3.1 Certificate of Designations of the Powers, Preferences and Relative, Participating, Optional and Other Special
Rights of Preferred Stock and Qualifications, Limitations and Restrictions Thereof of Series B Cumulative
Convertible Preferred Stock for GenesisIntermedia.com, Inc.
10.1 Securities Purchase Agreement by and between GenesisIntermedia.com, Inc., Elliott Associates, L.P. and Westgate
International, L.P. dated April __, 2000.
10.2 Warrant issued to Elliott Associates, L.P.
10.3 Warrant issued to Westgate International, L.P.
10.4 Registration Rights Agreement by and between GenesisIntermedia.com, Inc., Elliott Associates, L.P. and Westgate
International, L.P. dated April ___, 2000.
99.1 Press Release dated May 3, 2000.
</TABLE>
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CERTIFICATE OF DESIGNATIONS OF THE POWERS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL AND OTHER SPECIAL RIGHTS OF PREFERRED STOCK
AND QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS
THEREOF
of
SERIES B CUMULATIVE CONVERTIBLE PREFERRED STOCK
for
GENESISINTERMEDIA.COM, INC.
GENESISINTERMEDIA.COM, INC., a Delaware corporation (the "Corporation"),
pursuant to the provisions of Section 151 of the General Corporation Law of the
State of Delaware, does hereby make this Certificate of Designations and does
hereby state and certify that pursuant to the authority expressly vested in the
Board of Directors of the Corporation by the Certificate of Incorporation of the
Corporation, the Board of Directors duly adopted the following resolutions,
which resolutions remain in full force and effect as of the date hereof:
RESOLVED, that, pursuant to Article Fourth of the Certificate of
Incorporation of the Corporation, the Board of Directors hereby authorizes the
issuance of, and fixes the designation and preferences and relative,
participating, optional and other special rights, and qualifications,
limitations and restrictions, of a series of Preferred Stock consisting of 4,000
shares, par value $.001, to be designated Series B Cumulative Convertible
Preferred Stock (the "Preferred Shares").
RESOLVED, that subject to the terms and conditions of the Purchase
Agreement (as defined herein), 4,000 Preferred Shares may be issued.
RESOLVED, that each of the Preferred Shares shall rank equally in all
respects and shall be subject to the following terms and provisions:
1. Designation. There is hereby created out of the authorized and unissued
shares of preferred stock of the Corporation a series of preferred stock
designated as the Series B Cumulative Convertible Preferred Stock (the
"Preferred Shares"). The number of shares constituting such series shall be
4,000.
2. Dividends.
(a) Cumulative. The holders of the Preferred Shares shall be entitled to
receive cumulative dividends at the per share rate of five percent (5%) of the
Liquidation Preference (as defined below) of each Preferred Share, per annum
accruing daily and payable quarterly on March 31, June 30, September 30 and
December 31 of each year (each a "Dividend Payment Date") commencing with the
first Dividend Payment Date occurring after the original issuance date of such
share, in preference and priority to any payment of any dividend on the Common
Stock (as defined below) or any other class or series of equity security of the
Corporation. Such dividends shall accrue on any given share from the most recent
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date on which a dividend has been paid with respect to such share, or if no
dividends have been paid, from the date of the original issuance of such share,
and such dividends shall accrue from day to day whether or not declared, based
on the actual number of days elapsed. If at any time dividends on the
outstanding Preferred Shares at the rate set forth above shall not have been
paid or declared and set apart for payment with respect to all preceding
periods, the amount of the deficiency shall be fully paid or declared and set
apart for payment, but without interest, before any distribution, whether by way
of dividend or otherwise, shall be declared or paid upon or set apart for the
shares of any other class or series of equity security of the Corporation. For
so long as any Preferred Shares are outstanding, the Corporation shall not pay
any dividends on any shares of Common Stock or any shares of any other capital
stock, or repurchase any shares of Common Stock or capital stock, without having
received written consent of two-thirds in interest of the holders of Preferred
Shares, except as otherwise provided herein or in the Purchase Agreement or
Registration Rights Agreement (as such terms are defined herein). For purposes
of computing any per diem accrual, calculations shall be made using a 360-day
year.
(b) PIK Payment or Cash Payment. Any dividend payable on the outstanding
Preferred Shares shall be paid by adding the amount thereof to the Liquidation
Preference (as defined below) of such Preferred Shares. Upon the payment of
dividends as required by the immediately preceding sentence, such dividends will
be deemed paid in full. Notwithstanding the foregoing, the Corporation may pay
dividends in cash if on 10 Trading Day' (as defined below) irrevocable prior
written notice, it informs the holders of the Preferred Shares of its election
to pay cash dividends. Following notice of payment of cash dividends by the
Corporation, all dividends on the Preferred Shares shall be paid in cash, until
such time as the Corporation provides 10 Trading Days' irrevocable written
notice to the holders of Preferred Shares of its election to pay dividends
in-kind.
3. Liquidation Preference. In the event of any liquidation, dissolution or
winding up of the Corporation, either voluntary or involuntary, the holders of
the Preferred Shares shall rank senior to the holders of all other classes or
series of equity securities (including without limitation the Series A
Convertible Preferred Stock of the Corporation) and shall be entitled to
receive, out of the assets of the Corporation available for distribution to
stockholders, prior and in preference to any distribution of any assets of the
Corporation to the holders of any other class or series of equity securities
(including without limitation the Series A Convertible Preferred Stock of the
Corporation), the amount of $1,000 per share plus (i) dividends added to the
Liquidation Preference in accordance with Section 2(b) above; (ii) all accrued
but unpaid dividends; and (iii) all "Monthly Delay Payments" payable under the
Registration Rights Agreement (as defined below) (the "Liquidation Preference");
provided, however, in the event that the Corporation obtains a firm commitment
from a reputable financing source, as reasonably determined by the holders of
Preferred Shares, to provide financing ("Refinancing") to the Corporation in
excess of $10 million on terms which would require the Corporation to issue
equity securities ranking pari passu with the Preferred Shares, then if, and
only if, the holders of the Preferred Shares do not consent in writing to such
pari passu ranking within twenty (20) Trading Days of the Corporation's written
request therefor ("Company Request"), the Corporation may elect to purchase all,
but not part, of the outstanding Preferred Shares at a purchase price equal to
the Refinancing Redemption Price (as defined below), subject to the terms
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contained herein. If the Corporation elects to exercise its redemption right
hereunder, the Corporation shall provide at least 30 days prior written notice
to the holders of Preferred Shares specifying such redemption date, which date
shall be on or prior to closing of the Refinancing, and the Corporation shall
pay the entire Refinancing Redemption Price in cash to the holders of Preferred
Shares on such redemption date. The Corporation shall deliver the Company
Request to all holders of Preferred Shares at least thirty (30) days prior to
the closing of such Refinancing, together with the identity of such financing
source and any and all other information concerning the Refinancing reasonably
requested by the holders of Preferred Shares. The Corporation may not deliver a
Company Request hereunder unless at such time there shall exist Effective
Registration (as defined below). The Corporation's redemption right contained
herein, and any consent given by the holders of Preferred Shares hereunder,
shall automatically become null and void and revoked in the event that at any
time after such Company Request through the closing date of the Refinancing
there shall fail to exist Effective Registration. Holders of Preferred Shares
may continue to convert any or all of their Preferred Shares after receiving the
Company Request whether or not they consent and whether or not the Corporation
exercises its redemption right hereunder. Notwithstanding anything contained
herein, no holder of Preferred Shares shall be obligated to redeem any Preferred
Shares held by such holder unless and until each of the following conditions has
been satisfied or exists, each of which shall be a condition precedent to any
such redemption (waivable by any holder with respect to such holder's Preferred
Shares, in which case such holder may compel the Corporation to redeem the
Preferred Shares as provided herein):
(A) no material default or breach exists which has not been cured, and
no event shall have occurred which constitutes (or would constitute with
notice or the passage of time or both) a material default or breach of the
Purchase Agreement, the Registration Rights Agreement, the Warrants or this
Certificate of Designations, which has not been cured;
(B) none of the events described in clauses (i) through (iv) of
Section 2(b) of the Registration Rights Agreement shall have occurred and
be continuing;
(C) the Registration Statement (as defined in the Registration Rights
Agreement) is effective and holders have received unlegended certificates
representing Common Shares with respect to all conversions for which
Conversion Notices have been given and with respect to all exercises of
Warrants for which Notices of Exercise have been given; and
(D) the Corporation and its subsidiaries are able to pay all their
debts as they become due in the ordinary course of business, and the
Corporation is not subject to any liquidation, dissolution or winding up of
its affairs, or any bankruptcy, insolvency or similar proceeding.
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The "Refinancing Redemption Price" shall equal the greater of (x) 135% of the
Liquidation Preference of all such Preferred Shares being sold to the
Corporation, or (y) the Liquidation Preference for the Preferred Shares being
sold to the Corporation divided by the then applicable Conversion Price
multiplied by the greater of the last closing price of the Common Stock on (i)
the Trading Day immediately preceding the redemption date, or (ii) the date on
which the Company Request is delivered, in each case payable in cash.
4. Issuance of Preferred Shares. The Preferred Shares shall be issued by
the Corporation pursuant to a Securities Purchase Agreement, dated on or about
the date hereof ("Purchase Agreement") between the Corporation and the initial
subscriber(s) for the Preferred Shares thereunder (the "Subscriber"), and
holders of Preferred Shares shall enjoy the benefits of the Registration Rights
Agreement, dated the date hereof ("Registration Rights Agreement") between such
parties in connection with the Purchase Agreement.
5. Conversion. Each holder of the Preferred Shares shall have the right at
any time and from time to time, at the option of such holder, to convert any or
all Preferred Shares held by such holder, for such number of fully paid, validly
issued and nonassessable shares ("Common Shares") of common stock, par value
$0.001, of the Corporation ("Common Stock"), free and clear of any liens, claims
or encumbrances, as is determined by dividing (i) the Liquidation Preference
times the number of Preferred Shares being converted (the "Conversion Amount"),
by (ii) the applicable Conversion Price determined as hereinafter provided in
effect on the Conversion Date. Immediately following such conversion, the rights
of the holders of converted Preferred Shares shall cease and the persons
entitled to receive the Common Shares upon the conversion of Preferred Shares
shall be treated for all purposes as having become the owners of such Common
Shares, subject to the rights provided herein to holders.
(a) Mechanics of Conversion. To convert Preferred Shares into Common
Shares, the holder shall give written notice ("Conversion Notice") to the
Corporation in the form of page 1 of Exhibit A hereto (which Conversion Notice
may be given by facsimile transmission no later than the Conversion Date)
stating that such holder elects to convert the same and shall state therein the
number of Preferred Shares to be converted and the name or names in which such
holder wishes the certificate or certificates for Common Shares to be issued
(the conversion date specified in such Conversion Notice shall be referred to
herein as the "Conversion Date"). Either simultaneously with the delivery of the
Conversion Notice, or within one (1) Trading Day (as defined below) thereafter,
the holder shall deliver (which also may be done by facsimile transmission) page
2 to Exhibit A hereto indicating the computation of the number of Common Shares
to be received. As soon as possible after delivery of the Conversion Notice,
such holder shall surrender the certificate or certificates representing the
Preferred Shares being converted, duly endorsed, at the office of the
Corporation or, if identified in writing to all the holders by the Corporation,
at the offices of any transfer agent for such shares. The Corporation shall,
immediately upon receipt of such Conversion Notice, issue and deliver to or upon
the order of such holder, against delivery of the certificates representing the
Preferred Shares which have been converted, a certificate or certificates for
the number of Common Shares to which such holder shall be entitled (with the
number of and denomination of such certificates designated by such holder), and
the Corporation shall immediately issue and deliver to such holder a certificate
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or certificates for the number of Preferred Shares (including any fractional
shares) which such holder has not yet elected to convert hereunder but which are
evidenced in part by the certificate(s) delivered to the Corporation in
connection with such Conversion Notice. The Corporation shall effect such
issuance of Common Shares (and certificates for unconverted Preferred Shares)
within three (3) Trading Days of the Conversion Date and shall transmit the
certificates by messenger or overnight delivery service to reach the address
designated by such holder within three (3) Trading Days after the receipt of
such Conversion Notice ("T+3"). If certificates evidencing the Common Shares are
not received by the holder within five (5) Trading Days of the Conversion
Notice, then the holder will be entitled to revoke and withdraw its Conversion
Notice, in whole or in part, at any time prior to its receipt of those
certificates. In lieu of delivering physical certificates representing the
Common Shares issuable upon conversion of Preferred Shares, provided the
Corporation's transfer agent is participating in the Depository Trust Company
("DTC") Fast Automated Securities Transfer ("FAST") program, upon request of the
holder, the Corporation shall use its best efforts to cause its transfer agent
to electronically transmit the Common Shares issuable upon conversion or
exercise to the holder, by crediting the account of the holder's prime broker
with DTC through its Deposit Withdrawal Agent Commission ("DWAC") system. The
time periods for delivery described above shall apply to the electronic
transmittals through the DWAC system. The parties agree to coordinate with DTC
to accomplish this objective. The conversion pursuant to this Section 5 shall be
deemed to have been made immediately prior to the close of business on the
Conversion Date. The person or persons entitled to receive the Common Shares
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such Common Shares at the close of business on the
Conversion Date.
The term "Trading Day" means a day on which there is trading on the Nasdaq
National Market or such other market or exchange on which the Common Stock is
then principally traded.
If a holder of Preferred Shares converts any of such holder's Preferred
Shares, the Corporation shall pay any documentary or stamp or similar issue or
transfer tax due on the issue of shares of Common Stock upon the conversion.
However, such holder shall pay any such tax that is due because the shares of
Common Stock are issued in a name other than such holder's name.
The Corporation's obligation to issue Common Shares upon conversion of
Preferred Shares shall, except as set forth below, be absolute, is independent
of any covenant of any holder of Preferred Shares, and shall not be subject to:
(i) any offset or defense; or (ii) any claims against the holders of Preferred
Shares whether pursuant to this Certificate, the Purchase Agreement, the
Registration Rights Agreement or otherwise.
(b) Determination of Conversion Price and Optional Redemption.
(i) Conversion Price. The Conversion Price applicable with respect to
the Preferred Shares (the "Conversion Price"), shall be as follows:
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(A) Beginning on the date of closing of the Purchase
Agreement (the "Closing Date"), the Conversion Price shall be a
price equal to 115% of the Closing Price (the "Fixed Price").
(B) Beginning 45 days after the Closing Date, the Conversion
Price shall be the lesser of:
1) the Fixed Price or
2) the Market Price.
As used herein, "Principal Market" shall mean Nasdaq National Market or
such other principal market where the Common Stock is then listed for trading.
As used herein "Closing Price" shall mean the average of the closing prices
of the Common Stock recorded on the Principal Market (as reported by the
Bloomberg financial network or any successor reporting service) for the 5
Trading Days immediately prior to the Closing Date (including the Trading Day
immediately preceding the Closing Date).
As used herein, "Market Price" shall mean the average of the lowest closing
prices of the Common Stock recorded on the Principal Market (as reported by the
Bloomberg financial network or any successor reporting service) on any 3 Trading
Days out of the 15 Trading Days (the "Market Price Period") immediately prior to
the Conversion Date (including the Trading Day immediately preceding the
Conversion Date).
(ii) Optional Redemption. Subject to the provisions of this paragraph (ii),
the Corporation may honor conversions of Preferred Shares by redeeming Preferred
Shares for cash at the Cash Redemption Price (as defined below) by delivering a
written notice ("Cash Conversion Notice") to all holders of Preferred Shares
stating the Corporation's election to honor such conversions by redemption
pursuant to the terms of this Section 5(b)(ii), provided, however, that (a) such
Cash Conversion Notice may only be delivered in the event that the average of
the closing prices for shares of Common Stock recorded on the Principal Market
(as reported by the Bloomberg financial network or any successor reporting
service) for the fifteen (15) consecutive Trading Days immediately preceding the
Cash Conversion Notice is less than Fixed Price, and (b) such election shall
take effect exactly five (5) Trading Days after receipt of the Cash Conversion
Notice and shall continue thereafter until five (5) Trading Days after the
Corporation delivers a written notice ("Withdrawal Notice") to all holders of
Preferred Shares stating that the Corporation will no longer honor conversion of
Preferred Shares through cash redemption (such period of cash redemptions being
hereinafter referred to as the "Cash Redemption Period"). Upon any conversion of
Preferred Shares during the Cash Redemption Period, the Corporation shall redeem
any Preferred Shares submitted for conversion by paying the holder thereof the
Cash Redemption Price within two (2) Trading Days following the date which would
have been the Conversion Date pursuant to the applicable Conversion Notice. In
the event that any such holder does not receive such Cash Redemption Price
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within such two (2) Trading Days, then the amount so due shall accrue interest
daily at a rate of 20% per annum. In addition to and not in lieu of such
interest accrual, if such holder does not receive such Cash Redemption Price
within five (5) Trading Days following such Conversion Date, then such holder
shall have the right at any time thereafter, at the holder's option, to either
(1) to sell any or all of its Preferred Shares then held by such holder at the
Mandatory Repurchase Price (as defined in the Registration Rights Agreement), or
(2) force the Corporation to convert the Preferred Shares submitted for
conversion into Common Shares pursuant to the provisions of Section 5(a) above.
If at any time during the Cash Redemption Period, the closing price for shares
of Common Stock recorded on the Principal Market (as reported by the Bloomberg
financial network or any successor reporting service) exceeds the Fixed Price
for five (5) consecutive Trading Days, any holder may, at the option of such
holder, terminate the Cash Redemption Period, with respect to such holder only,
upon five (5) Trading Days' written notice to the Corporation, and the
Corporation shall again be obligated to convert the Preferred Shares submitted
for conversion by such holder into Common Shares pursuant to the provisions of
Section 5(a) above at any time after such fifth (5th) Trading Day. For
clarification purposes, any Preferred Shares submitted for conversion during the
five (5) Trading Day period immediately following delivery of a Cash Conversion
Notice shall be converted into Common Shares as provided in Section 5(a) hereof,
and any Preferred Shares submitted for conversion during the five (5) Trading
Day period immediately following delivery of a Withdrawal Notice shall be
redeemed for cash as provided in this paragraph. The "Cash Redemption Price"
shall mean the amount equal to (x) the value of one share of Common Stock (based
on the closing price of the Common Stock on the Principal Market on the Trading
Day immediately preceding the date which would have been the Conversion Date had
the conversion occurred in the normal course pursuant to Section 5(a) hereof),
times (y) the number of shares of Common Stock that the holder would have
received had the conversion occurred in the normal course pursuant to Section
5(a) hereof.
(c) Stock Splits; Dividends; Adjustments.
(i) If the Corporation, at any time while the Preferred Shares are
outstanding, (A) shall pay a stock dividend or otherwise make a distribution or
distributions on any equity securities (including instruments or securities
convertible into or exchangeable for such equity securities) in shares of Common
Stock, (B) subdivide outstanding Common Shares into a larger number of shares,
or (C) combine outstanding Common Stock into a smaller number of shares, then
each Affected Conversion Price (as defined below) shall be multiplied by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding before such event and the denominator of which shall be the number
of shares of Common Stock outstanding after such event. Any adjustment made
pursuant to this Section 5(c)(i) shall become effective immediately after the
record date for the determination of stockholders entitled to receive such
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision or combination.
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As used herein, the Affected Conversion Prices (each an "Affected
Conversion Price") shall refer to: (i) the Fixed Price; and (ii) each reported
price for the Common Stock on the Principal Market occurring on any Trading Day
included in the Market Price Period, which Trading Day occurred before the
record date in the case of events referred to in clause (A) of this subparagraph
5(c)(i) and the effective date in the case of the events referred to in clauses
(B) and (C) of this subparagraph 5(c)(i).
(ii) In the event that the Corporation issues or sells any Common Stock or
securities which are convertible into or exchangeable for its Common Stock
(other than Preferred Shares), or any warrants or other rights to subscribe for
or to purchase or any options for the purchase of its Common Stock (other than
shares or options issued or which may be issued pursuant to (i) the
Corporation's current or future employee, director or bona fide consultant
option plans or shares issued upon exercise of options, warrants or rights
outstanding on the date of the Purchase Agreement and listed in the
Corporation's most recent periodic report filed under the Securities Exchange
Act of 1934, as amended, or in the Purchase Agreement, or (ii) arrangements with
the holders of Preferred Shares) at an effective purchase price per share which
is less than the greater of (1) the closing market price per share of the Common
Stock on the Principal Market on the Trading Day next preceding such issue or
sale or, in the case of issuances to holders of its Common stock, the date fixed
for the determination of stockholders entitled to receive such warrants, rights,
or options ("Fair Market Price") or (2) the Fixed Price, then in each such case,
the Fixed Price in effect immediately prior to such issue or sale or record
date, as applicable, shall be reduced effective concurrently with such issue or
sale to an amount determined by multiplying the Fixed Price then in effect by a
fraction, (x) the numerator of which shall be the sum of (1) the number of
shares of Common Stock and Convertible Securities (as defined below) outstanding
immediately prior to such issue or sale, plus (2) the number of shares of Common
Stock which the aggregate consideration received by the Corporation for such
additional shares would purchase at such Fixed Price or Fair Market Price, as
the case may be; and (y) the denominator of which shall be the number of shares
of Common Stock and Convertible Securities (as defined below) of the Corporation
outstanding immediately after such issue or sale.
For purposes of the preceding paragraph, in the event that the effective
purchase price is less than both the Fair Market Price and the Fixed Price, then
the calculation method which yields the greatest downward adjustment in the
Conversion Price shall be used.
For the purposes of the foregoing adjustment, in the case of the issuance
of any convertible securities, warrants, options or other rights to subscribe
for or to purchase or exchange for, shares of Common Stock ("Convertible
Securities"), the maximum number of shares of Common Stock issuable upon
exercise, exchange or conversion of such Convertible Securities shall be deemed
to be outstanding, provided that no further adjustment shall be made upon the
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actual issuance of Common Stock upon exercise, exchange or conversion of such
Convertible Securities.
(iii) If the Corporation, at any time while the Preferred Shares are
outstanding, shall distribute to all holders of Common Stock evidences of its
indebtedness or assets or cash or rights or warrants to subscribe for or
purchase any security of the Corporation or any of its subsidiaries (excluding
those referred to in Sections 5(c)(i) or 5(c)(ii) above), then concurrently with
such distributions to holder of Common Stock, the Corporation shall distribute
to holders of the Preferred Shares, the amount of such indebtedness, assets,
cash or rights or warrants which the holders of Preferred Shares would have
received had they converted all their Preferred Shares into Common Shares
immediately prior to the record date for such distribution.
(iv) Whenever the Conversion Price is adjusted pursuant to Section 5(c)(i)
or (ii) above or the Corporation makes a distribution as described in Section
5(c)(iii) above, the Corporation shall promptly mail to each holder of the
Preferred Shares a notice setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment, or setting forth a description of the distribution and the facts
surrounding same.
(v) All calculations under this Section 5(c) shall be made to the nearest
cent or to the nearest 1/100th of a share, as the case may be.
(vi) No adjustment in the Conversion Price shall reduce the Conversion
price below the then par value of the Common Stock.
(vii) The Corporation from time to time may reduce the Conversion Price by
any amount for any period of time if the period is at least 20 Trading Days and
if the reduction is irrevocable during the period. Whenever the Conversion Price
is reduced, the Corporation shall mail to the holders of Preferred Shares a
notice of the reduction. The Corporation shall mail, first class, postage
prepaid, the notice at least 15 days before the date the reduced Conversion
Price takes effect. The notice shall state the reduced Conversion Price and the
period it will be in effect. A reduction of the Conversion Price does not change
or adjust the Conversion Price otherwise in effect for purposes of Section
5(c)(i), (ii), or (iii).
(d) Notice of Record Date. In the event of any taking by the Corporation of
a record date of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, any security or right convertible into or entitling the
holder thereof to receive additional Common Shares, or any right to subscribe
for, purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, the Corporation shall
deliver to each holder of Preferred Shares at least 20 days prior to the date
specified therein (or such lesser time as is equal to the period between the
fixing of such record date and such record date, but in no event less than 10
days prior notice), a notice specifying the date on which any such record is to
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be taken for the purpose of such dividend, distribution, security or right and
the amount and character of such dividend, distribution, security or right.
(e) Issue Taxes. The Corporation shall pay any and all issue and other
taxes, excluding any income, franchise or similar taxes, that may be payable in
respect of any issue or delivery of Common Shares on conversion of Preferred
Shares pursuant hereto. However, the holder of any Preferred Shares shall pay
any tax that is due because the Common Shares issuable upon conversion thereof
are issued in a name other than such holder's name.
(f) Reservation of Stock Issuable Upon Conversion. The Corporation shall at
all times reserve and keep available out of its authorized but unissued Common
Stock, solely for the purposes of effecting the conversion of the Preferred
Shares, an amount of Common Shares equal to or greater than 200% of the number
of shares issuable upon conversion of the Preferred Shares at the then
applicable Conversion Price. The Corporation promptly will take such corporate
action as may, in the opinion of its outside counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purpose, including without limitation engaging in
best efforts to obtain the requisite stockholder approval.
(g) Fractional Shares. No fractional shares shall be issued upon the
conversion of any Preferred Shares. All Common Shares (including fractions
thereof) issuable upon conversion of more than one Preferred Share by a holder
thereof and all Preferred Shares issuable upon the purchase thereof shall be
aggregated for purposes of determining whether the conversion and/or purchase
would result in the issuance of any fractional share. If, after the
aforementioned aggregation, the conversion and/or purchase would result in the
issuance of a fraction of a share of Common Stock, the Corporation shall, in
lieu of issuing any fractional share, either round up the number of shares to
the next highest whole number or, at the Corporation's option, pay the holder
otherwise entitled to such fraction a sum in cash equal to the fair market value
of such fraction on the Conversion Date (as determined in good faith by the
Board of Directors of the Corporation).
(h) Reorganization, Merger or Going Private. In case of any reorganization
or any reclassification of the capital stock of the Corporation or any
consolidation or merger of the Corporation with or into any other corporation or
corporations or a sale or transfer of all or substantially all of the assets of
the Corporation to any other person or a "going private" transaction under Rule
13e-3 promulgated pursuant to the Exchange Act, then, as part of such
reorganization, consolidation, merger, or transfer if the holders of shares of
Common Stock receive any publicly traded securities as part or all of the
consideration for such reorganization, consolidation, merger or sale, then it
shall be a condition precedent of any such event or transaction that provision
shall be made such that each Preferred Share shall thereafter be convertible
into such new securities at a conversion price and pricing formula which places
the holders of Preferred Shares in an economically equivalent position as they
would have been if not for such event. In addition to the foregoing, if the
holders of shares of Common Stock receive any non-publicly traded securities or
other property or cash as part or all of the consideration for such
reorganization, consolidation, merger or sale, then such distribution shall be
treated to the extent thereof as a distribution under Section 5(c) above and
such Section shall also apply to such distribution.
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(i) Limitations on Holder's Right to Convert.
(i) Notwithstanding anything to the contrary contained herein, the number
of shares of Common Stock that may be acquired by the holder upon conversion
pursuant to the terms hereof shall not exceed a number that, when added to the
total number of shares of Common Stock deemed beneficially owned by such holder
(other than by virtue of the ownership of securities or rights to acquire
securities that have limitations on the holder's right to convert, exercise or
purchase similar to the limitation set forth herein), together with all shares
of Common Stock deemed beneficially owned by the holder's "affiliates" (as
defined in Rule 144 of the Act) ("Aggregation Parties") that would be aggregated
for purposes of determining whether a group under Section 13(d) of the
Securities Exchange Act of 1934 as amended, exists, would exceed 9.99% of the
total issued and outstanding shares of the Common Stock (the "Restricted
Ownership Percentage"); provided that (w) each holder shall have the right at
any time and from time to time to reduce its Restricted Ownership Percentage
immediately upon notice to the Corporation and (x) each holder shall have the
right (subject to waiver) at any time and from time to time, to increase its
Restricted Ownership Percentage immediately in the event of the announcement as
pending or planned, of a transaction or event referred to in Section 5(m) below.
(ii) Each time (a "Covenant Time") the holder or an Aggregation Party makes
a Triggering Acquisition (as defined below) of shares of Common Stock (the
"Triggering Shares"), the holder will be deemed to covenant that it will not,
during the balance of the day on which such Triggering Acquisition occurs, and
during the 61-day period beginning immediately after that day, acquire
additional shares of Common Stock pursuant to rights-to-acquire existing at that
Covenant Time, if the aggregate amount of such additional shares so acquired
(without reducing that amount by any dispositions) would exceed (x) 9.99% of the
number of shares of Common Stock outstanding at that Covenant Time (including
the Triggering Shares) minus (y) the number of shares of Common Stock actually
owned by the holder at that Covenant Time (regardless of how or when acquired,
and including the Triggering Shares). A "Triggering Acquisition" means the
giving of a Conversion Notice or any other acquisition of Common Stock by the
holder or an Aggregation Party; provided, however, that with respect to the
giving of such Conversion Notice, if the associated issuance of shares of Common
Stock does not occur, such event shall cease to be a Triggering Acquisition and
the related covenant under this paragraph shall terminate. At each Covenant
Time, the holder shall be deemed to waive any right it would otherwise have to
acquire shares of Common Stock to the extent that such acquisition would violate
any covenant given by the holder under this paragraph. Notwithstanding anything
to the contrary in the Transaction Documents, in the event of a conflict between
any covenant given under this paragraph and any obligation of the holder to
convert Preferred Shares pursuant to the Transaction Documents, the former shall
supersede the latter, and the latter shall be reduced accordingly. For the
avoidance of doubt:
(A) The covenant to be given pursuant to this paragraph will be given at
every Covenant Time and shall be calculated based on the circumstances
11
<PAGE>
then in effect. The making of a covenant at one Covenant Time shall
not terminate or modify any prior covenants.
(B) The holder may therefore from time to time be subject to multiple such
covenants, each one having been made at a different Covenant Time, and
some possibly being more restrictive than others. The holder must
comply with all such covenants then in effect.
(iii) Overall Limit on Common Stock Issuable. Notwithstanding anything
contained herein to the contrary, the number of shares of Common Stock issuable
by the Corporation and acquirable by the holders hereunder shall not exceed
19.9% of the number of shares of Common Stock outstanding on the Closing Date,
subject to appropriate adjustment for stock splits, stock dividends, or other
similar recapitalizations affecting the Common Stock (the "Maximum Common Stock
Issuance"), unless the issuance of shares hereunder in excess of the Maximum
Common Stock Issuance shall first be approved by the Corporation's shareholders
in accordance with applicable law and the By-laws and Articles of Incorporation
of the Corporation. If at any point in time and from time to time (each a
"Trigger Date") the number of Common Shares issued pursuant to conversion of the
Preferred Shares and exercise of the Warrants, together with the number of
Common Shares that would then be issuable by the Corporation in the event of
conversion of all the Preferred Shares and exercise of all the Warrants then
outstanding, would exceed the Maximum Common Stock Issuance but for this Section
5(i)(iii), then the Corporation shall, at the Corporation's election, either (A)
promptly call a shareholders meeting to obtain shareholder approval for the
issuance of Common Shares hereunder in excess of the Maximum Common Stock
Issuance, which such shareholder approval shall be obtained within 60 days of
the Trigger Date, or (B) purchase from the holders of Preferred Shares and
Warrants on a pro rata basis such number of Preferred Shares and Warrants which
cannot be converted or exercised due to such Maximum Common Stock Issuance
limitation ("Shortfall") at a redemption price equal to the "Mandatory
Repurchase Price" (as defined in the Registration Rights Agreement), which such
redemption price shall be paid within three (3) Trading Days after a Trigger
Date if this clause (B) is elected. The Corporation shall make such election
with two (2) days following the Trigger Date by giving written notice to all
holders of Preferred Shares and Warrants. If the Corporation fails to timely
make such election, or elects clause (A) but then fails to obtain such
shareholder approval within 60 days following the Trigger Date, then the
Corporation shall purchase the Shortfall at the Mandatory Repurchase Price
within three (3) Trading Days following any such failure.
(j) Certificate for Conversion Price Adjustment. The Corporation shall
promptly furnish or cause to be furnished to each holder a certificate prepared
by the Corporation setting forth any adjustments or readjustments of the
Conversion Price pursuant to this Section 5.
(k) Specific Enforcement. The Corporation agrees that irreparable damage
would occur in the event that any of the provisions of this Certificate of
Designations were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the holders of Preferred
Shares shall be entitled to specific performance, injunctive relief or other
equitable remedies to prevent or cure breaches of the provisions of this
Certificate of Designations and to enforce specifically the terms and provisions
12
<PAGE>
hereof, this being in addition to any other remedy to which any of them may be
entitled under agreement, at law or in equity.
(l) Mandatory Repurchase. Each holder shall have the unilateral option and
right to compel the Corporation to repurchase any or all of such holder's
Preferred Shares within 3 days of a written notice requiring such repurchase, at
a price per Preferred Share equal to the Mandatory Repurchase Price if any of
the following events involving the Corporation shall have occurred:
(i) A Change in Control Transaction (as defined below);
(ii) A "going private" transaction under Rule 13e-3 promulgated
pursuant to the Exchange Act; or
(iii) A tender offer by the Corporation under Rule 13e-4 promulgated
pursuant to the Exchange Act.
A "Change in Control Transaction" will be deemed to exist if (i) there
occurs any consolidation or merger of the Corporation with or into any other
corporation or other entity or person (whether or not the Corporation is the
surviving corporation), or any other corporate reorganization or transaction or
series of related transactions in which in excess of 50% of the Corporation's
voting power is transferred through a merger, consolidation, tender offer or
similar transaction, (ii) any person (as defined in Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), together with
its affiliates and associates (as such terms are defined in Rule 405 under the
Securities Act of 1933, as amended (the "Act")), beneficially owns or is deemed
to beneficially own (as described in Rule 13d-3 under the Exchange Act without
regard to the 60-day exercise period) in excess of 50% of the Corporation's
voting power, (iii) there is a replacement of more than one-half of the members
of the Corporation's Board of Directors which is not approved by those
individuals who are members of the Corporation's Board of Directors on the date
thereof, in one or a series of related transactions or (iv) a sale or transfer
of all or substantially all of the assets of the Corporation, determined on a
consolidated basis.
(m) Automatic Conversion and Forced Conversion.
(1) Automatic Conversion. Subject to Subsections 5(i)(3) and 5(i)(4)
below, on the second (2nd) anniversary of the Closing Date (the "Automatic
Conversion Date"), at the option of the Corporation, all the Preferred
Shares shall either be (i) automatically converted into Common Shares as of
the Automatic Conversion Date at the Conversion Price in effect on such
date or (ii) redeemed by the Corporation pursuant to Section 5(b)(ii)
above; provided, however, that the Corporation shall provide at least
thirty (30) days prior written notice to all holders of its election
hereunder, otherwise each holder of Preferred Shares will have the option
to choose such cash redemption or conversion on the Automatic Conversion
Date, and provided further, that such Automatic Conversion Date shall be
deferred, at the sole option of a holder of Preferred Shares, for up to
such number of days as is equal to 1.5 times the number of days (A) there
is a lack of Effective Registration (as defined in subsection (5) below) at
any time after 120 days following the Closing Date; (B) there is not a
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<PAGE>
sufficient amount of Common Stock available for conversion of all
outstanding Preferred Shares and exercise of all outstanding Warrants (as
defined in the Purchase Agreement); (C) for any other reason the
Corporation refuses or announces its refusal to honor conversion of
Preferred Shares or exercise of Warrants; or (D) for any other reason there
is a suspension, restriction or limitation in the ability of holders of
Preferred Shares or Warrants to sell Common Shares received upon conversion
of Preferred Shares or exercise of Warrants pursuant to the prospectus
included in the Registration Rights Agreement.
(2) Forced Conversion. Subject to Subsections 5(i)(3) and 5(i)(4)
below, in the event that the in the event that the closing price for shares
of Common Stock recorded on the Principal Market (as reported by the
Bloomberg financial network or any successor reporting service) exceeds
200% times the Fixed Price for twenty (20) consecutive Trading Days, the
Corporation shall have the right to compel holders of Preferred Shares (on
a pro rata basis) to convert all or a portion of their Preferred Shares at
the Conversion Price in effect on the conversion date by delivering written
notice ("Forced Conversion Notice") to all holders of its election
hereunder, specifying the conversion date ("Forced Conversion Date") and
the number of shares to be converted; provided, however, that (1) the
Forced Conversion Date shall not occur until at least fifteen (15) Trading
Days' following the Forced Conversion Notice, (2) the closing price for
shares of Common Stock recorded on the Principal Market (as reported by the
Bloomberg financial network or any successor reporting service) shall
exceed 200% times the Fixed Price for at least twenty (20) Trading Days
immediately preceding delivery of the Forced Conversion Notice and at all
times thereafter through and including the Forced Conversion Date, (3)
there shall be an Effective Registration at the time of such election
notice and all times thereafter through and including the Forced Conversion
Date, and (4) holders of Preferred Shares may continue to convert any or
all of their Preferred Shares after receiving the Corporation's election
notice under this Section 5(m)(2). Such forced conversion shall be subject
to and governed by all the provisions relating to voluntary conversion of
the Preferred Shares contained herein. If such forced conversion occurs
during a Cash Redemption Period, then the provisions of Section 5(b)(ii)
shall apply.
(3) Notwithstanding the preceding subsections (1) and (2), no holder
of Preferred Shares shall be obligated to convert or redeem any Preferred
Shares held by such holder on the applicable Automatic Conversion Date or
Forced Conversion Date, as the case may be, unless and until each of the
following conditions has been satisfied or exists, each of which shall be a
condition precedent to any such automatic conversion or forced conversion
(waivable by any holder with respect to such holder's Preferred Shares):
(A) no material default or breach exists which has not been
cured, and no event shall have occurred which constitutes (or would
constitute with notice or the passage of time or both) a material
default or breach of the Purchase Agreement, the Registration Rights
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<PAGE>
Agreement, the Warrants or this Certificate of Designations, which has
not been cured;
(B) none of the events described in clauses (i) through (iv) of
Section 2(b) of the Registration Rights Agreement shall have occurred
and be continuing;
(C) the Registration Statement (as defined in the Registration
Rights Agreement) is effective and holders have received unlegended
certificates representing Common Shares with respect to all
conversions for which Conversion Notices have been given and with
respect to all exercises of Warrants for which Notices of Exercise
have been given; and
(D) the Corporation and its subsidiaries are able to pay all
their debts as they become due in the ordinary course of business, and
the Corporation is not subject to any liquidation, dissolution or
winding up of its affairs, or any bankruptcy, insolvency or similar
proceeding.
(4) Notwithstanding anything contained in subsections (1) or (2)
above, no holder's Preferred Shares shall be subject to automatic
conversion or forced conversion to the extent such conversion would result
in the holder of Preferred Shares exceeding the limitation contained in
Section 5(i) above. In such event, the Preferred Shares of such holder
shall be converted in such amount until such limitation is reached, and the
remaining Preferred Shares shall be purchased by the Corporation at the
Cash Redemption Price or Mandatory Redemption Price, as applicable, as if
such Preferred Shares were being redeemed pursuant to Section 5(b)(ii)
above.
(5) For purposes of this Certificate of Designations, a lack of
Effective Registration shall be deemed to have occurred at any time the
Common Shares issuable upon conversion of the Preferred Shares or exercise
of the Warrants are not capable of being sold on an Approved Market (as
defined in the Purchase Agreement) pursuant to an effective registration
statement and deliverable prospectus.
6. Voting Rights. In addition to all other requirements imposed by Delaware
law, and all other voting rights granted under the Corporation's Certificate of
Incorporation, the affirmative vote of two-thirds in interest of the
Corporation's outstanding Preferred Shares shall be necessary for (i) any
amendment, modification or repeal of this Certificate of Designations (whether
by merger, consolidation or otherwise) or for any merger, reclassification,
consolidation or reorganization,) or (ii) any amendment to the Certificate of
Incorporation or by-laws of the Corporation that may amend or change or
adversely affect any of the rights, preferences, or privileges of the Preferred
Shares, provided, however, that holders of Preferred Shares (other than the
Investor under the Purchase Agreement and their affiliates) who are affiliates
of the Corporation (and the Corporation itself) shall not participate in such
15
<PAGE>
vote and the Preferred Shares of such holders shall be disregarded and deemed
not to be outstanding for purposes of such vote.
7. Notices. The Corporation shall distribute to the holders of Preferred
Shares copies of all notices, materials, annual and quarterly reports, proxy
statements, information statements and any other documents distributed generally
to the holders of shares of Common Stock of the Corporation, at such times and
by such method as such documents are distributed to such holders of such Common
Stock.
8. Replacement Certificates. The certificate(s) representing the Preferred
Shares held by any holder of Preferred Shares may be exchanged by such holder at
any time and from time to time for certificates with different denominations
representing an equal aggregate number of Preferred Shares, as reasonably
requested by such holder, upon surrendering the same. No service charge will be
made for such registration or transfer or exchange. Upon receipt by the
Corporation of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of any stock certificate representing the Preferred
Shares and, in the case of loss, theft or destruction, of indemnity reasonably
satisfactory to it, or upon surrender and cancellation of such stock certificate
if mutilated, the Corporation will make and deliver a new stock certificate of
like tenor and dated as of such cancellation at no charge to the holder.
9. Attorneys' Fees. In connection with enforcement by a holder of Preferred
Shares of any obligation of the Corporation hereunder, the prevailing party
shall be entitled to recovery of reasonable attorney' fees and expenses
incurred.
10. No Reissuance. No Preferred Shares acquired by the Corporation by
reason of redemption, purchase, conversion or otherwise shall be reissued.
11. Severability of Provisions. If any right, preference or limitation of
the Preferred Shares set forth in this Certificate of Designations (as this
Certificate of Designations may be amended from time to time) is invalid,
unlawful or incapable of being enforced by reason of any rule or law or public
policy, all other rights, preferences and limitations set forth in this
Certificate of Designations, which can be given effect without the invalid,
unlawful or unenforceable right, preference or limitation shall nevertheless
remain in full force and effect, and no right, preference or limitation herein
set forth be deemed dependent upon any such other right, preference or
limitation unless so expressed herein.
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<PAGE>
12. Limitations. Except as may otherwise be required by law and as are set
forth in the Purchase Agreement and the Registration Rights Agreement, the
Preferred Shares shall not have any powers, preference or relative
participating, optional or other special rights other than those specifically
set forth in this Certificate of Designations (as may be amended from time to
time) or otherwise in the Certificate of Incorporation of the Corporation.
Signed on April _____, 2000
GENESISINTERMEDIA.COM, INC.
By:________________________________
Name: Ramy El-Batrawi
Title: President
<PAGE>
EXHIBIT A
(To be Executed by Holder
in order to Convert Preferred Shares)
CONVERSION NOTICE
FOR
SERIES B CUMULATIVE CONVERTIBLE PREFERRED STOCK
The undersigned, as a holder ("Holder") of shares of SERIES B Cumulative
Convertible Preferred Stock ("Preferred Shares") of GenesisIntermedia.com, Inc.
(the "Corporation"), hereby irrevocably elects to convert _____________
Preferred Shares for shares ("Common Shares") of common stock, par value $0.001
per share (the "Common Stock"), of the Corporation according to the terms and
conditions of the Certificate of Designations for the Preferred Shares as of the
date written below. The undersigned hereby requests that share certificates for
the Common Shares to be issued to the undersigned pursuant to this Conversion
Notice be issued in the name of, and delivered to, the undersigned or its
designee as indicated below. No fee will be charged to the Holder of Preferred
Shares for any conversion. Capitalized terms used herein and not otherwise
defined shall have the meanings ascribed thereto in the Certificate of
Designations.
Conversion Date: __________________________
Conversion Information: NAME OF HOLDER:_________________________________
By:_____________________________________________
Print Name:_____________________________________
Print Title:____________________________________
Print Address of Holder:
_________________________________________________
_________________________________________________
Issue Common Stock to:___________________________
at:______________________________________________
_________________________________________________
If Common Shares are to be issued to a person other than Holder,
Holder's signature must be guaranteed below:
SIGNATURE GUARANTEED BY:
THE COMPUTATION OF NUMBER OF COMMON SHARES TO BE RECEIVED IS SET FORTH ON PAGE 2
OF THE CONVERSION NOTICE.
Page 1 of Conversion Notice
<PAGE>
Page 2 to Conversion Notice dated _______________ for:__________________________
(Conversion Date) (Name of Holder)
COMPUTATION OF NUMBER OF COMMON SHARES TO BE RECEIVED
Number of Preferred Shares converted:___________________ shares
Number of Preferred Shares converted x Liquidation Preference $
Total dollar amount converted $
===========
Conversion Price $
Number of Common Shares = Total dollar amount converted = ___________
______________________________
Conversion Price
Number of Common Shares = _______________
If the conversion is not being settled by DTC, please issue and deliver _____
certificate(s) for Common Shares in the following amount(s):
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
If the Holder is receiving certificate(s) for Preferred Shares upon the
conversion, please issue and deliver _____ certificate(s) for Preferred Shares
in the following amounts:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT ("Agreement") dated as of April __, 2000
between GenesisIntermedia.com, Inc., a Delaware corporation (the "Company"), and
Elliott Associates, L.P., a Delaware limited partnership, and Westgate
International, L.P., a Cayman Islands limited partnership (individually and
collectively, the "Investor").
W I T N E S S E T H:
Whereas, the Company desires to sell and issue to the Investor, and the
Investor wishes to purchase from the Company, an aggregate of 4,000 shares of
the Company's Series B Cumulative Convertible Preferred Stock, liquidation
preference $1,000 per share (all of such shares being the "Preferred Shares"),
having the rights, designations and preferences set forth in the Certificate of
Designations (the "Certificate") in the form of Exhibit A attached hereto, and
Warrants (the "Warrants"), in the form of Exhibit B to attached hereto, to
purchase Common Shares (as defined below), on the terms and conditions set forth
herein; and
Whereas, the Preferred Shares will be convertible into shares ("Common
Shares") of common stock, par value $0.001, of the Company ("Common Stock"),
pursuant to the terms of the Certificate, and the Investor will have
registration rights with respect to the Common Shares issuable upon conversion
of the Preferred Shares and exercise of the Warrants, pursuant to the terms of
that certain Registration Rights Agreement to be entered into between the
Company and the Investor substantially in the form of Exhibit C hereto
("Registration Rights Agreement");
Now, Therefore, in consideration of the foregoing premises and the
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
Article I
Purchase and Sale of Preferred Shares
Section 1.1 Issuance of Preferred Shares and Warrants. Upon the following
terms and conditions, the Company shall issue and sell to the Investor, and the
Investor shall purchase from the Company, the number of Preferred Shares and
Warrants indicated next to the Investor's name on Schedule I attached hereto.
Section 1.2 Purchase Price. The purchase price for the Preferred Shares and
Warrants to be acquired by the Investor (the "Purchase Price") shall be the
Purchase Price set forth next to the Investor's name on Schedule I.
<PAGE>
Section 1.3 The Closing.
(a) Timing. Subject to the fulfillment or waiver of the conditions set
forth in Article V hereof, the purchase and sale of the Preferred Shares and
Warrants shall take place at a closing (the "Closing"), on or about April
______, 2000 or such other date as the Investor and the Company may agree upon
(the "Closing Date").
(b) Form of Payment. Each Investor shall pay their respective purchase
price for the Preferred Shares and Warrants by wire transfer to the account or
accounts designated by the Company upon delivery by the Company to the
Investors' counsel of the applicable Preferred Shares and Warrants and upon
satisfaction of the other conditions to the Closing. In addition, each party
shall deliver all documents, instruments and writings required to be delivered
by such party pursuant to this Agreement at or prior to the Closing.
Article II
Representations and Warranties
Section 2.1 Representations and Warranties of the Company. The Company
hereby makes the following representations and warranties to the Investor as of
the date hereof and the Closing Date:
(a) Organization and Qualification; Material Adverse Effect. The Company is
a corporation duly incorporated and existing in good standing under the laws of
the State of Delaware and has the requisite corporate power to own its
properties and to carry on its business as now being conducted. The Company does
not have any subsidiaries other than the subsidiaries listed on Schedule 2.1(a)
attached hereto ("Subsidiaries"). Except where specifically indicated to the
contrary, all references in this Agreement to subsidiaries shall be deemed to
refer to all direct and indirect subsidiaries of the Company. The Company is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary other than those in which the
failure so to qualify would not have a Material Adverse Effect. "Material
Adverse Effect" means any adverse effect on the business, operations,
properties, prospects or financial condition of the Company and its
subsidiaries, if any, and which is (either alone or together with all other
adverse effects) material to the Company and its Subsidiaries, if any, taken as
a whole, and any material adverse effect on the transactions contemplated under
this Agreement, the Certificate and the Registration Rights Agreement, or any
other agreement or document contemplated hereby or thereby.
(b) Authorization; Enforcement. (i) The Company has all requisite corporate
power and authority to enter into and perform this Agreement, the Certificate,
the Registration Rights Agreement, the Warrants and the Escrow Agreement
("Transaction Documents") and to issue the Preferred Shares and the Warrants in
accordance with the terms hereof, (ii) the execution and delivery of this
Agreement, the Registration Rights Agreement, the Warrants and the Escrow
Agreement by the Company and the consummation by it of the transactions
contemplated hereby and thereby, including the issuance of the Preferred Shares
and Warrants and the resolutions contained in the Certificate, have been duly
2
<PAGE>
authorized by all necessary corporate action, and no further consent or
authorization of the Company or its Board of Directors (or any committee or
subcommittee thereof) or stockholders is required, (iii) this Agreement, the
Registration Rights Agreement, the Warrants and the Escrow Agreement have been
duly executed and delivered by the Company, (iv) this Agreement, the
Certificate, the Registration Rights Agreement, the Warrants and the Escrow
Agreement constitute valid and binding obligations of the Company enforceable
against the Company in accordance with their terms, except (A) as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of creditors' rights and remedies or by
other equitable principles of general application, and (B) to the extent the
indemnification provisions contained in this Agreement and the Registration
Rights Agreement may be limited by applicable federal or state securities laws
and (v) the Preferred Shares, the Warrants and the Common Shares issuable upon
the conversion and/or exercise thereof have been duly authorized and, upon
issuance thereof and payment therefor in accordance with the terms of this
Agreement, the Preferred Shares, the Warrants and the Common Shares issuable
upon the conversion and/or exercise thereof will be validly issued, fully paid
and non-assessable, free and clear of any and all liens, claims and
encumbrances.
(c) Capitalization. As of the date hereof, the authorized capital stock of
the Company consists of (i) 25,000,000 shares of Common Stock, of which as of
the date hereof, [5,299,600] shares are issued and outstanding, _________ shares
are issuable and reserved for issuance pursuant to the Company's stock option
and purchase plans and _________ shares are issuable and reserved for issuance
pursuant to securities exercisable or exchangeable for, or convertible into,
shares of Common Stock, and (ii) 5,000,000 shares of preferred stock, of which
as of the date hereof no shares designated as Series A Convertible Preferred
Stock are issued and outstanding and 4,000 preferred shares have been designated
as Series B Cumulative Convertible Preferred Stock. All of such outstanding
shares have been, or upon issuance will be, validly issued, fully paid and
nonassessable. As of the date hereof, except as disclosed in Schedule 2.1(c),
(i) no shares of the Company's capital stock are subject to preemptive rights or
any other similar rights or any liens or encumbrances suffered or permitted by
the Company, (ii) there are no outstanding debt securities, (iii) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
Subsidiaries, or contracts, commitments, understandings or arrangements by which
the Company or any of its Subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its Subsidiaries or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its Subsidiaries, (iv) there
are no agreements or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of their securities under
the Securities Act of 1933, as amended ("Securities Act" or "1933 Act") (except
the Registration Rights Agreement, (v) there are no outstanding securities of
the Company or any of its Subsidiaries which contain any redemption or similar
provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to redeem a security of the Company or any of its Subsidiaries, (vi) there
are no securities or instruments containing anti-dilution or similar provisions
that will be triggered by the issuance of the Preferred Shares or the Warrants
as described in this Agreement, the Certificate or the Warrants and (vii) the
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Company does not have any stock appreciation rights or "phantom stock" plans or
agreements or any similar plan or agreement. The Company has furnished to the
Investor true and correct copies of the Company's Certificate of Incorporation,
as amended and as in effect on the date hereof (the "Certificate of
Incorporation"), and the Company's By-laws, as in effect on the date hereof (the
"By-laws"), and the terms of all securities convertible or exchangeable into or
exercisable for Common Stock and the material rights of the holders thereof in
respect thereto. All restrictions upon the shares of Common Stock contained in
Article FOURTH, Sections B(1)(b), B(1)(c) and B(1)(d) of the Company's
Certificate of Incorporation have lapsed and are of no further force and effect
pursuant to Article FOURTH, Section B(1)(f)(i) thereof. Schedule 2.1(c) also
lists all outstanding debt of the Company with sufficient detail acceptable to
Investor, including without limitation approximately $1.1 million of outstanding
debt to Merrill Lynch ("Merrill Lynch").
(d) Issuance of Shares. Upon issuance in accordance with this Agreement and
the Certificate, the Preferred Shares, Warrants and Common Shares will be
validly issued, fully paid and nonassessable and free from all taxes, liens and
charges with respect to the issue thereof.
(e) No Conflicts. Except as disclosed in Schedule 2.1(e), the execution,
delivery and performance of the Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
and issuance of the Preferred Shares, the Warrants and the Common Shares
underlying the Preferred Shares or the Warrants will not (i) result in a
violation of the Certificate of Incorporation, any certificate of designations,
preferences and rights of any outstanding series of preferred stock of the
Company or the By-laws; (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its Subsidiaries is a party, or (iii) result in a violation of any law,
rule, regulation, order, judgment or decree (including United States federal and
state securities laws and regulations and the rules and regulations of the
Nasdaq National Market ("Principal Market") or principal securities exchange or
trading market on which the Common Stock is traded or listed) applicable to the
Company or any of its Subsidiaries or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected. Except as disclosed in
Schedule 2.1(e), neither the Company nor its Subsidiaries is in violation of any
term of, or in default under, (x) its certificate of incorporation, any
certificate of designations, preferences and rights of any outstanding series of
preferred stock or By-laws or their organizational charter or by-laws,
respectively, (y) any material contract, agreement, mortgage, indebtedness,
indenture, instrument, or (z) any judgment, decree or order or any statute, rule
or regulation applicable to the Company or its Subsidiaries, the non-compliance
with which (in the case of (z) only), would be material to the Company or its
Subsidiaries or interfere with the performance of its obligations under the
Transaction Documents. Except as specifically contemplated by this Agreement and
as required under the 1933 Act, the Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court, governmental agency or any regulatory or self-regulatory agency in order
for it to execute, deliver or perform any of its obligations under, or
contemplated by, the Transaction Documents or the issuance of the Preferred
Shares, the Warrants and the Common Shares underlying the Preferred Shares or
the Warrants in accordance with the terms hereof or thereof. Except as disclosed
in Schedule 2.1(e), all consents, authorizations, orders, filings and
registrations which the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the date hereof. The
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Company complies with and is not in violation of the listing requirements of the
Principal Market as in effect on the date hereof and on each of the Closing
Dates and is not aware of any facts which would reasonably lead to delisting or
suspension of the Common Stock by the Principal Market in the foreseeable
future.
(f) SEC Documents; Financial Statements. Since June 14, 1999, the Company
has filed all reports, schedules, forms, statements and other documents required
to be filed by it with the SEC pursuant to the reporting requirements of the
Securities Exchange Act of 1934, as amended (the "1934 Act") (all of the
foregoing filed prior to the date hereof and all exhibits included therein and
financial statements and schedules thereto and documents incorporated by
reference therein being hereinafter referred to as the "SEC Documents"). The
Company has delivered to the Investor or its representatives true and complete
copies of any SEC Documents that were not filed electronically via EDGAR. As of
their respective dates, the SEC Documents complied in all material respects with
the requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. As of their
respective dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). No other written
information provided by or on behalf of the Company to the Investor which is not
included in the SEC Documents, including, without limitation, information
referred to in Section 2.2(b) of this Agreement, contains any untrue statement
of a material fact or omits to state any material fact necessary in order to
make the statements therein, in the light of the circumstance under which they
are or were made, not misleading. Neither the Company nor any of its
Subsidiaries or any of their officers, directors, employees or agents have
provided the Investor with any material, nonpublic information which was not
publicly disclosed prior to the date hereof.
(g) Absence of Certain Changes. Except as disclosed in Schedule 2.1(g) or
the SEC Documents filed at least thirty (30) days prior to the date hereof,
since December 31, 1998 there has been no adverse change or adverse development
in the business, properties, assets, operations, financial condition, prospects,
liabilities or results of operations of the Company or its Subsidiaries which
has had or, to the knowledge of the Company or its Subsidiaries, is reasonably
likely to have a Material Adverse Effect. The Company has not taken any steps,
and does not currently expect to take any steps, to seek protection pursuant to
any bankruptcy law nor does the Company or its Subsidiaries have any knowledge
or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings. Schedule 2.1(g) lists all material events, transactions
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and agreements which have occurred or been entered into affecting the Company
since December 31, 1999.
(h) Absence of Litigation. There is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the Company
or any of its Subsidiaries, threatened against or affecting the Company, the
Common Stock or any of the Company's Subsidiaries or any of the Company's or the
Company's Subsidiaries' officers or directors in their capacities as such, (i)
except as set forth in SEC Documents which were filed at least 10 days before
the date hereof, (ii) except as set forth in Schedule 2.1(h), and (iii) except
which individually and in the aggregate, respectively, would be reasonably
likely to result in liability to the Company in excess of $50,000 and $100,000,
respectively.
(i) Acknowledgment Regarding Investor's Purchase of Shares. The Company
acknowledges and agrees that the Investor is acting solely in the capacity of
arm's length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby. The Company further acknowledges
that the Investor is not acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to the Transaction Documents
and the transactions contemplated hereby and thereby, and any advice given by
the Investor or any of its respective representatives or agents in connection
with the Transaction Documents and the transactions contemplated hereby and
thereby is merely incidental to the Investor's purchase of the Preferred Shares
and the Warrants. The Company further represents to the Investor that the
Company's decision to enter into the Transaction Documents has been based solely
on the independent evaluation by the Company and its representatives.
(j) No Undisclosed Events, Liabilities, Developments or Circumstances. No
event, liability, development or circumstance has occurred or exists with
respect to the Company or its Subsidiaries or their respective business,
properties, prospects, operations or financial condition, that would be required
to be disclosed by the Company under applicable securities laws on a
registration statement filed with the SEC relating to an issuance and sale by
the Company of its Common Stock and which has not been publicly disclosed.
(k) No Inside Information. The Company has not provided and, the Company
shall not provide, any Investor with any non-public information.
(l) No Integrated Offering. Neither the Company, nor any of its affiliates,
nor any person acting on its or their behalf has, directly or indirectly, made
any offers or sales of any security or solicited any offers to buy any security,
under circumstances that would cause this offering of Preferred Shares and
Warrants to the Investor to be integrated with prior offerings by the Company
for purposes of the 1933 Act or any applicable shareholder approval provisions,
including, without limitation, under the rules and regulations of the Principal
Market or other Approved Market, nor will the Company or any of its Subsidiaries
take any action or steps that would cause the offering of the Preferred Shares
to be integrated with other offerings.
(m) Employee Relations. Neither the Company nor any of its Subsidiaries is
involved in any labor dispute nor, to the knowledge of the Company or any of its
Subsidiaries, is any such dispute threatened, the effect of which would be
reasonably likely to result in a Material Adverse Effect. Neither the Company
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nor any of its Subsidiaries is a party to a collective bargaining agreement. The
Company and its Subsidiaries believe that relations between the Company and its
Subsidiaries and their respective employees are good. No executive officer (as
defined in Rule 501(f) of the 1933 Act) whose departure would be adverse to the
Company has notified the Company that such officer intends to leave the Company
or otherwise terminate such officer's employment with the Company.
(n) Intellectual Property Rights. The Company and its Subsidiaries own or
possess adequate rights or licenses to use all trademarks, trade names, service
marks, service mark registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, governmental authorizations, trade
secrets and rights necessary to conduct their respective businesses as now
conducted. Except as set forth on Schedule 2.1(n), none of the Company's
trademarks, trade names, service marks, service mark registrations, service
names, patents, patent rights, copyrights, inventions, licenses, approvals,
government authorizations, trade secrets or other intellectual property rights
have expired or terminated, or are expected to expire or terminate within two
(2) years from the date of this Agreement. The Company and its Subsidiaries do
not have any knowledge of any infringement by the Company or its Subsidiaries of
trademark, trade name rights, patents, patent rights, copyrights, inventions,
licenses, service names, service marks, service mark registrations, trade secret
or other similar rights of others, or of any such development of similar or
identical trade secrets or technical information by others and, except as set
forth on Schedule 2.1(n), there is no claim, action or proceeding being made or
brought against, or to the Company's knowledge, being threatened against, the
Company or its Subsidiaries regarding trademarks, trade name rights, patents,
patent rights, inventions, copyrights, licenses, service names, service marks,
service mark registrations, trade secrets or other infringement. The Company and
its Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their intellectual properties.
(o) Environmental Laws. The Company and its Subsidiaries (i) are in
compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval where such noncompliance or
failure to receive permits, licenses or approvals referred to in clauses (i),
(ii) or (iii) above could have, individually or in the aggregate, a Material
Adverse Effect.
(p) Title. The Company and its Subsidiaries have good and marketable title
in fee simple to all real property and good and marketable title to all personal
property owned by them which is material to the business of the Company and its
Subsidiaries, in each case free and clear of all liens, encumbrances and defects
except such as are described in Schedule 2.1(p) or such as do not materially and
adversely affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company or any of its
Subsidiaries. Any real property and facilities held under lease by the Company
or any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
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with the use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.
(q) Insurance. The Company and each of its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged. Neither the Company nor any such Subsidiary has been refused any
insurance coverage sought or applied for and neither the Company nor any such
Subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the condition,
financial or otherwise, or the earnings, business or operations of the Company
and its Subsidiaries taken as a whole.
(r) Regulatory Permits. The Company and its Subsidiaries possess all
material certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities, necessary to conduct their
respective businesses, and neither the Company nor any such Subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit.
(s) Internal Accounting Controls. The Company and each of its Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management's general
or specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(t) Foreign Corrupt Practices Act. Neither the Company, nor any director,
officer, agent, employee or other person acting on behalf of the Company or any
Subsidiary has, in the course of acting for, or on behalf of, the Company,
directly or indirectly used any corporate funds for any unlawful contribution,
gift, entertainment or other unlawful expenses relating to political activity;
directly or indirectly made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds;
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended, or any similar treaties of the United States;
or directly or indirectly made any bribe, rebate, payoff, influence payment,
kickback or other unlawful payment to any foreign or domestic government or
party official or employee.
(u) Tax Status. The Company and each of its Subsidiaries has made or filed
all United States federal and state income and all other tax returns, reports
and declarations required by any jurisdiction to which it is subject and (i) has
paid all taxes and other governmental assessments and charges, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and (ii) has set aside on its books provisions
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no
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unpaid taxes claimed to be due by the taxing authority of any jurisdiction, and
the Company is not aware of any basis for any such claim.
(v) Certain Transactions. Except as set forth on Schedule 2.1(v) and in the
SEC Documents filed on EDGAR at least thirty (30) Trading Days prior to the date
hereof and except for arm's length transactions pursuant to which the Company
makes payments in the ordinary course of business upon terms no less favorable
than the Company could obtain from third parties and other than the grant of
stock options disclosed on Schedule 2.1(c), none of the officers, directors or
employees of the Company is presently a party to any transaction with the
Company or any of its Subsidiaries (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any officer, director
or any such employee has a substantial interest or is an officer, director,
trustee or partner.
(w) Dilutive Effect. The Company understands and acknowledges that the
number of Common Shares issuable upon conversion of Preferred Shares and
exercise of the Warrants purchased pursuant to this Agreement will increase in
certain circumstances. The Company further acknowledges that, subject to such
limitations as are expressly set forth in the Transaction Documents, its
obligation to issue Common Shares upon conversion of Preferred Shares and
exercise of the Warrants purchased pursuant to this Agreement, is absolute and
unconditional regardless of the dilutive effect that such issuance may have on
the ownership interests of other shareholders of the Company.
(x) Application of Takeover Protections. There are no anti-takeover
provisions contained in the Company's Certificate of Incorporation or otherwise
which will or could be triggered as a result of the transactions contemplated by
this Agreement, including, without limitation, the Company's issuance of the
Common Shares and the Investor's ownership of the Common Shares.
(y) Rights Plan. Neither the Company nor any of its Subsidiaries has
adopted a shareholder rights plan or similar arrangement relating to
accumulations of beneficial ownership of Common Stock or a change in control of
the Company. The Company confirms that no provision of such plan will, under any
present or future circumstances, delay, prevent or interfere with the
performance of any of the Company's obligations under the Transaction Documents
and such plan will not be "triggered" by such performance.
(z) Market Capitalization. As of the date hereof, the aggregate market
value of the voting common equity of the Company held by non-affiliates of the
Company is greater than $40 million.
(aa) Obligations Absolute. Each of the Company and the Investor agrees
that, subject only to the conditions, qualifications and exceptions (if any)
specifically set forth in the Transaction Documents, its obligations under the
Transaction Documents are unconditional and absolute. Except to the extent (if
any) specifically set forth in the Transaction Documents, each party's
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obligations thereunder are not subject to any right of set off, counterclaim,
delay or reduction.
(bb) Issuance of Common Shares. The Common Shares are duly authorized and
reserved for issuance and, upon conversion of Preferred Shares in accordance
with the Certificate or exercise of the Warrants in accordance with the terms
thereof, such Common Shares will be validly issued, fully paid and
non-assessable, free and clear of any and all liens, claims and encumbrances,
and entitled to be traded on the Pacific Exchange and the Principal Market or
the New York Stock Exchange or the American Stock Exchange, or the Nasdaq Small
Cap Market (collectively with the Principal Market, the "Approved Markets"), and
the holders of such Common Shares shall be entitled to all rights and
preferences accorded to a holder of Common Stock. As of the date of this
Agreement, the outstanding shares of Common Stock are currently listed on the
Principal Market and the Pacific Exchange.
(cc) Form S-3. After June 14, 2000 the Company will be eligible to file the
Registration Statement (as defined in the Registration Rights Agreement) for
secondary offerings on Form S-3 (as in effect on the date of this Agreement)
under the 1933 Act and rules promulgated thereunder, and Form S-3 (as in effect
on the date of this Agreement) will be permitted to be used for the transactions
contemplated hereby under the 1933 Act and rules promulgated thereunder.
(dd) Brokers. The Company has taken no action which would give rise to any
claim by any person for brokerage commissions, finder's fees or similar payments
by the Company or the Investor relating to this Agreement or the transactions
contemplated hereby, except for the broker's fee of Shoreline Pacific
Institutional Finance, the Institutional Division of Financial West Group
("Shoreline"), which shall be paid by the Company out of the Closing proceeds.
Section 2.2 Representations and Warranties of the Investor. The Investor
hereby makes the following representations and warranties to the Company as of
the date hereof and the Closing Date:
(a) Accredited Investor Status; Sophisticated Investor. The Investor is an
"accredited investor" as that term is defined in Rule 501(a) of Regulation D
under the 1933 Act. The Investor has such knowledge and experience in financial
and business matters that it is capable of evaluating the merits and risks of
investment in the Preferred Shares, the Warrants and Common Shares.
(b) Information. The Investor and its advisors, if any, have been furnished
with all materials relating to the business, finances and operations of the
Company which have been requested and materials relating to the offer and sale
of the Preferred Shares, the Warrants and Common Shares which have been
requested by the Investor. The Investor and its advisors, if any, have been
afforded the opportunity to ask questions of the Company. The Investor has not
received any material, non-public information concerning the Company. Neither
such inquiries nor any other due diligence investigations conducted by the
Investor or its advisors, if any, or its representatives shall modify, amend or
affect the Investor's right to rely on the Company's representations and
warranties contained in Section 2.1 above. The Investor understands that its
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investment in the Preferred Shares, the Warrants and Common Shares involves a
high degree of risk. The Investor has sought such accounting, legal and tax
advice as it has considered necessary to make an informed investment decision
with respect to its acquisition of the Preferred Shares, the Warrants and Common
Shares.
(c) No Governmental Review. The Investor 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 Preferred Shares, the
Warrants and Common Shares or the fairness or suitability of the investment in
the Preferred Shares, the Warrants and Common Shares nor have such authorities
passed upon or endorsed the merits of the offering of the Preferred Shares, the
Warrants and Common Shares.
(d) Legends. The Company shall issue certificates for the Preferred Shares,
the Warrants and Common Shares to the Investor without any legend except as
described in Article VI below. The Investor covenants that, in connection with
any transfer of Common Shares by the Investor pursuant to the registration
statement contemplated by the Registration Rights Agreement, it will comply with
the applicable prospectus delivery requirements of the 1933 Act, provided that
copies of a current prospectus relating to such effective registration statement
are or have been supplied to the Investor.
(e) Authorization; Enforcement. Each of this Agreement, the Registration
Rights Agreement and the Escrow Agreement have been duly and validly authorized,
executed and delivered on behalf of the Investor and is a valid and binding
agreement of the Investor enforceable against the Investor in accordance with
their terms, subject as to enforceability to general principles of equity and to
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies. The Investor has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement, the Registration Rights Agreement and the Escrow Agreement and
each other agreement entered into by the parties hereto in connection with the
transactions contemplated by this Agreement.
(f) Residency. The Investor is a resident of the jurisdiction indicated on
Schedule I.
(g) No Conflicts. The execution, delivery and performance of this Agreement
and the Registration Rights Agreement by the Investor and the consummation by
the Investor of the transactions contemplated hereby and thereby will not (i)
result in a violation of the certificate of incorporation, by-laws or other
documents of organization of the Investor, (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Investor is bound, or (iii) result in a violation of any law, rule,
regulation or decree applicable to the Investor.
(h) Investment Representation. The Investor is purchasing the Preferred
Shares and the Warrants for its own account and not with a view to distribution
in violation of any securities laws. The Investor has been advised and
understands that neither the Preferred Shares, the Warrants nor the shares of
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Common Stock issuable upon conversion or exercise thereof have been registered
under the 1933 Act or under the "blue sky" laws of any jurisdiction and may be
resold only if registered pursuant to the provisions of the 1933 Act or if an
exemption from registration is available, except under circumstances where
neither such registration nor such an exemption is required by law. The Investor
has been advised and understands that the Company, in issuing the Preferred
Shares and Warrants, is relying upon, among other things, the representations
and warranties of the Investor contained in this Section 2.2 in concluding that
such issuance is a "private offering" and is exempt from the registration
provisions of the 1933 Act.
(i) Rule 144. The Investor understands that there is no public trading
market for the Preferred Shares, or the Warrants, that none is expected to
develop, and that the Preferred Shares and Warrants must be held indefinitely
unless and until such Preferred Shares, Warrants or Common Shares received upon
conversion or exercise thereof are registered under the 1933 Act or an exemption
from registration is available. The Investor has been advised or is aware of the
provisions of Rule 144 promulgated under the 1933 Act.
(j) Brokers. The Investor has taken no action which would give rise to any
claim by any person for brokerage commissions, finder's fees or similar payments
by the Company or the Investor relating to this Agreement or the transactions
contemplated hereby except for the broker's fee of Shoreline which shall be paid
by the Company out of the Closing proceeds.
(k) Reliance by the Company. The Investor understands that the Preferred
Shares and Warrants are being offered and sold in reliance on a transactional
exemption from the registration requirements of Federal and state securities
laws and that the Company is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and understandings of
the Investor set forth herein in order to determine the applicability of such
exemptions and the suitability of the Investor to acquire the Preferred Shares
and Warrants.
Article III
Covenants
Section 3.1 Registration and Listing; Effective Registration. Until such
time as no Preferred Shares or Warrants are outstanding, the Company will cause
the Common Stock to continue at all times to be registered under Sections 12(b)
or (g) of the Exchange Act, will comply in all material respects with its
reporting and filing obligations under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and will not take any action or file any document
(whether or not permitted by the Exchange Act or the rules thereunder) to
terminate or suspend such reporting and filing obligations. Until such time as
no Preferred Shares or Warrants are outstanding, the Company shall continue the
listing or trading of the Common Stock on the Principal Market or one of the
other Approved Markets and comply in all material respects with the Company's
reporting, filing and other obligations under the bylaws or rules of the
Approved Market on which the Common Stock is listed. The Company shall cause the
Common Shares to be listed on the Pacific Exchange and the Principal Market or
one of the other Approved Markets no later than the effectiveness of the
registration of the Common Shares under the Act, and shall continue such
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listing(s) on one of the Approved Markets, for so long as any Preferred Shares
or Warrants are outstanding.
Section 3.2 Certificates on Conversion. Upon any conversion by the Investor
(or then holder of Preferred Shares) of the Preferred Shares pursuant to the
Certificate, the Company shall issue and deliver to the Investor (or holder)
within three (3) trading days of the conversion date a new certificate or
certificates for the number of Preferred Shares which the Investor (or holder)
has not yet elected to convert but which are evidenced in part by the
certificate(s) submitted to the Company in connection with such conversion (with
the denominations of such new certificate(s) designated by the Investor or
holder).
Section 3.3 Replacement Certificates. The certificate(s) representing the
Preferred Shares held by any Investor (or then holder) may be exchanged by the
Investor (or such holder) at any time and from time to time for certificates
with different denominations representing an equal aggregate number of Preferred
Shares, as requested by the Investor (or such holder) upon surrendering the
same. No service charge will be made for such registration or transfer or
exchange.
Section 3.4 Securities Compliance. The Company shall notify the SEC and the
Principal Market, in accordance with their requirements, of the transactions
contemplated by this Agreement, the Certificate, the Warrants and the
Registration Rights Agreement, and shall take all other necessary action and
proceedings as may be required and permitted by applicable law, rule and
regulation, for the legal and valid issuance of the Preferred Shares and
Warrants hereunder and the Common Shares issuable upon conversion or exercise
thereof.
Section 3.5 Notices. The Company agrees to provide all holders of Preferred
Shares and Warrants with copies of all notices and information, including
without limitation notices and proxy statements in connection with any meetings,
that are provided to the holders of shares of Common Stock, contemporaneously
with the delivery of such notices or information to such Common Stock holders.
Section 3.6 Use of Proceeds. The Company agrees that the net proceeds
received by the Company from the sale of the Preferred Shares hereunder and
payment of the exercise price of the Warrants shall be used for legally
permitted corporate purposes, provided that upon or within two (2) days
following Closing a portion of such proceeds shall be used to pay off the
Merrill Debt in full.
Section 3.7 Reservation of Shares; Stock Issuable Upon Conversion.
(a) The Company shall reserve all authorized but unissued Series B
Cumulative Convertible Preferred Stock for issuance to the Investor pursuant to
the terms of this Agreement.
(b) The Company shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the Preferred Shares and exercise of the Warrants,
such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all Preferred Shares and exercise of all
of the Warrants, and if at any time the number of authorized but unissued shares
of Common Stock shall not be sufficient to effect the conversion of all the then
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outstanding Preferred Shares and all of the then outstanding Warrants, the
Company will take such corporate action as may be necessary to expeditiously
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose, including without limitation
engaging in best efforts to obtain the requisite shareholder approval and taking
the actions described in the Certificate. Without in any way limiting the
foregoing, the Company agrees to reserve and at all times keep available solely
for purposes of conversion of Preferred Shares and exercise of the Warrants,
such number of authorized but unissued shares of Common Stock that is at least
equal to 200% of the number of Common Shares issuable upon conversion of all
Preferred Shares and exercise of all of the Warrants, computed as if all
Preferred Shares are convertible at the Conversion Price (as defined in the
Certificate) and all Warrants are exercisable at the Exercise Price (as defined
in the Warrants). If at any time the number of authorized but unissued shares of
Common Stock is not sufficient to effect such issuance, conversion, or exercise,
respectively, up to the Maximum Common Stock Issuance (as defined in Section
5(i)(iii)of the Certificate of Designations), of all the then outstanding
Preferred Shares and the Warrants, the Investor shall be entitled to, inter
alia, the redemption rights provided in the Registration Rights Agreement.
Section 3.8 Best Efforts. The parties shall use their best efforts to
satisfy timely each of the conditions described in Article V of this Agreement.
Section 3.9 Form D; Blue Sky Laws. The Company agrees to file a Form D with
respect to the Preferred Shares, the Warrants and Common Shares, as required
under Regulation D and to provide a copy thereof to the Investor promptly after
such filing. The Company shall, on or before the Closing Date, take such action
as the Company shall have reasonably determined is necessary to qualify the
Preferred Shares, the Warrants and Common Shares for sale to the Investor under
applicable securities or "blue sky" laws of the states of the United States (or
to obtain an exemption from such qualification), and shall provide evidence of
any such action so taken to the Investor on or prior to the Closing Date;
provided, however, that the Company shall not be required in connection
therewith to register or qualify as a foreign corporation in any jurisdiction
where it is not now so qualified or to take any action that would subject it to
service of process in suits or taxation, in each case, in any jurisdiction where
it is not now so subject.
Section 3.10 Publicity. The Company shall, immediately upon the Closing,
issue a press release with respect to such transactions, in the form of press
release attached as Exhibit D hereto.
Section 3.11 Shareholder Rights Plan. None of the acquisitions of Preferred
Shares, Warrants or Common Shares nor the deemed beneficial ownership of shares
of Common Stock prior to, or the acquisition of such shares pursuant to, the
conversion of Preferred Shares or exercise of the Warrants will in any event
under any circumstances trigger the poison pill provisions of any stockholders'
rights or similar agreements, or a substantially similar occurrence under any
successor or similar plan.
Section 3.12 Financial Information. The Company agrees to send the
following to the Investor for so long as any Preferred Shares or Warrants are
outstanding: (i) on the same day as the release thereof, facsimile or e-mail
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copies of all press releases issued by the Company or any of its Subsidiaries;
and (ii) copies of any notices and other information made available or given to
the shareholders of the Company generally, contemporaneously with the making
available or giving thereof to the shareholders.
Section 3.13 Transactions With Affiliates. The Company agrees that any
transaction or arrangement between it or any of its subsidiaries and any
affiliate or employee of the Company shall be effected on an arms' length basis
in accordance with customary commercial practice and, except with respect to
grants of options and stock to service providers, including employees, shall be
approved by a majority of the Company's outside directors.
Section 3.14 Amendment to Certificate of Incorporation. The Company agrees
that at the next shareholders meeting or pursuant to the next shareholders
consent solicitation, it shall obtain the requisite shareholder approval for
amendment of the Company's Certificate of Incorporation to delete Article
FOURTH, Section B(1) thereof and/or otherwise clarify that all restrictions upon
the shares of Common Stock contained in Article FOURTH, Sections B(1)(b),
B(1)(c) and B(1)(d) of the Company's Certificate of Incorporation have lapsed
and are of no further force and effect pursuant to Article FOURTH, Section
B(1)(f)(i) thereof.
Section 3.15 Trading Restrictions. Each Investor agrees that so long as any
Preferred Shares or Warrants are outstanding, such Investor will not on any
given date have a net short position in the Common Stock which exceeds the
number of shares of Common Stock which such Investor would reasonably expect to
receive upon conversion of all the Preferred Shares and exercise of all the
Warrants then held by such Investor and upon conversion or exercise of all other
securities issued by the Company then held by such Investor. In addition, so
long as any Preferred Shares remain outstanding, if the closing bid price on any
Trading Day ("Prior Day Close") is less than the Closing Price (as defined in
the Certificate), then the Investor agrees it will not sell short on the
Principal Market more than $150,000 of shares of Common Stock (based on net
proceeds of shares actually sold) on the following Trading Day (any such
following day hereinafter referred to as a "Limitation Day"); provided, however,
that if at any time and from time to time on such Limitation Day a sale of
Common Stock on the Principal Market occurs at a price which is greater than
both (i) 120% of the then applicable Conversion Price (as defined in the
Certificate) and (ii) the Prior Day Close, then the limitation contained in this
sentence shall no longer apply and the Investor may sell or continue to sell
short shares of Common Stock during such Limitation Day on the Principal Market
until such time as a sale of Common Stock on the Principal Market occurs at a
price which is equal to or less than the Prior Day Close, provided that if from
time to time during the Limitation Day a later sale occurs above the Prior Day
Close, the limitation contained in this sentence shall again no longer apply;
provided further, that the limitation contained in this sentence shall not apply
if the Investor converts all of the outstanding Preferred Shares held by it
within five (5) Trading Days following any day which would have been a
Limitation Day but for this proviso.
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Article IV
Transfer Agent Instructions.
The Company shall issue irrevocable instructions to its transfer agent, and
any subsequent transfer agent, to issue certificates, registered in the name of
the Investor or its respective nominee(s), for the Common Shares in such amounts
as specified from time to time by the Investor to the Company upon delivery of a
conversion or exercise notice (the "Irrevocable Transfer Agent Instructions").
The Company warrants that no instruction relating to the Common Shares other
than the Irrevocable Transfer Agent Instructions referred to in this Article IV
will be given by the Company to its transfer agent and that the Common Shares
shall be freely transferable on the books and records of the Company as
contemplated by Article VI below when the legend referred to therein may be
removed. Nothing in this Article IV shall affect in any way the Investor's
obligations and agreements set forth in Section 2.2(d) to comply with all
applicable prospectus delivery requirements, if any, upon resale of the Common
Shares. The Company shall instruct its transfer agent to issue one or more
certificates in such name and in such denominations as specified by the Investor
and without any restrictive legends. The Company acknowledges that a breach by
it of its obligations hereunder will cause irreparable harm to the Investor by
vitiating the intent and purpose of the transaction contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations under this Section will be inadequate and agrees, in the event of a
breach or threatened breach by the Company of the provisions of this Section,
that the Investor shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach and requiring immediate
issuance and transfer, without the necessity of showing economic loss and
without any bond or other security being required.
Article V
Conditions to Closings
Section 5.1 Conditions Precedent to the Obligation of the Company to Sell
the Preferred Shares and Warrants. The obligation hereunder of the Company to
issue and/or sell the Preferred Shares and the Warrants to the Investor at the
Closing is subject to the satisfaction, at or before the Closing, of each of the
applicable conditions set forth below. These conditions are for the Company's
sole benefit and may be waived by the Company at any time in its sole
discretion.
(a) Accuracy of the Investor's Representations and Warranties. The
representations and warranties of the Investor will be true and correct in all
material respects as of the date when made and as of the Closing Date, as though
made at that time.
(b) Performance by the Investor. The Investor shall have performed all
agreements and satisfied all conditions required to be performed or satisfied by
the Investor at or prior to the Closing, including payment of the purchase price
set forth on Schedule I.
(c) No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
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by any court or governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement or
the Registration Rights Agreement or the Certificate.
(d) Certificate. The Investor shall have delivered a certificate to the
Company certifying that the representations and warranties of the Investor
contained in Section 2.2 are true and correct in all material respects as of the
Closing Date.
Section 5.2 Conditions Precedent to the Obligation of the Investor to
Purchase the Preferred Shares. The obligation hereunder of the Investor to
acquire and pay for the Preferred Shares at the Closing is subject to the
satisfaction, at or before the Closing, of each of the applicable conditions set
forth below. These conditions are for the Investor's benefit and may be waived
by the Investor at any time in its sole discretion.
(a) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made at that time (except for representations and warranties as of an earlier
date, which shall be true and correct in all material respects as of such date).
(b) Performance by the Company. The Company shall have performed all
agreements and satisfied all conditions required to be performed or satisfied by
the Company at or prior to the Closing, including, without limitation, delivery
of certificates representing the Preferred Shares and Warrants issued to
Investor.
(c) Nasdaq Trading. From the date hereof to the Closing Date, trading in
the Company's Common Stock shall not have been suspended by the SEC and trading
in securities generally as reported by the Principal Market (or other Approved
Market) shall not have been suspended or limited, and the Common Stock shall be
listed on the Principal Market or another Approved Market.
(d) No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement, the
Warrants, the Registration Rights Agreement or the Certificate. The NASD shall
not have objected or indicated that it may object to the consummation of any of
the transactions contemplated by this Agreement.
(e) Opinion of Counsel. At the Closing, the Investor shall have received an
opinion of counsel to the Company in the form attached hereto as Exhibit E and
such other opinions, certificates and documents as the Investor or their counsel
shall reasonably require incident to the Closing.
(f) Registration Rights Agreement. The Company and the Investor shall have
executed and delivered the Registration Rights Agreement in the form and
substance of Exhibit C attached hereto.
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(g) Officer's Certificate. The Company shall have delivered to the Investor
a certificate in form and substance satisfactory to the Investor and the
Investor's counsel, executed by an officer of the Company, certifying as to
satisfaction of closing conditions, incumbency of signing officers, and the
true, correct and complete nature of the Certificate of Incorporation, By-Laws,
good standing and authorizing resolutions of the Company.
(h) Certificate. The Certificate shall have been accepted for filing by the
Secretary of State of the State of Delaware and a stamped copy thereof shall
have been provided to the Investor's counsel.
(i) Miscellaneous. The Company shall have delivered to the Investor such
other documents relating to the transactions contemplated by this Agreement or
the Investor or its counsel may reasonable request.
Article VI
Legend and Stock
Upon payment therefor as provided in this Agreement, the Company will issue
one or more certificates representing the Preferred Shares and Warrants in the
name the Investor or its designees and in such denominations to be specified by
the Investor prior to (or from time to time subsequent to) Closing. Each
certificate representing the Preferred Shares or Warrants and any Common Shares
issued upon conversion or exercise thereof, prior to such Common Shares being
registered under the 1933 Act for resale or available for resale under Rule 144
under the 1933 Act, shall be stamped or otherwise imprinted with a legend
substantially in substantially the following form:
These Securities Have Not Been Registered For Offer or Sale Under The
Securities Act Of 1933 Or Any State securities laws. They May Not Be Sold Or
Offered For Sale Except Pursuant To An Effective Registration Statement Under
Said Act And Any Applicable State Securities Law Or An Applicable Exemption From
Such Registration Requirements.
The Company agrees to reissue Preferred Shares, Warrants and/or Common
Shares issuable upon conversion of Preferred Shares or exercise of Warrants,
without the legend set forth above, at such time as (i) the holder thereof is
permitted to dispose of such Preferred Shares or Warrants and/or Common Shares
issuable upon conversion of the Preferred Shares or exercise of the Warrants
pursuant to Rule 144(k) under the 1933 Act, or (ii) such Preferred Shares are
sold to a purchaser or purchasers who (in the opinion of counsel to the seller
or such purchaser(s), in form and substance reasonably satisfactory to the
Company and its counsel) are able to dispose of such shares publicly without
registration under the 1933 Act, or (iii) such securities have been registered
under the 1933 Act.
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Prior to the Registration Statement (as defined in the Registration Rights
Agreement) being declared effective, any Common Shares issued pursuant to
conversion of Preferred Shares or exercise of the Warrants shall bear a legend
in the same form as the legend indicated above; provided that such legend shall
be removed from the Common Shares and the Company shall issue new certificates
without such legend if (i) the holder has sold or disposed of such Common Shares
pursuant to Rule 144(k) under the 1933 Act, or the holder is permitted to
dispose of such Common Shares pursuant to Rule 144(k) under the 1933 Act, (ii)
such Common Shares are registered for resale under the 1933 Act, or (iii) such
Common Shares are sold to a purchaser or purchasers who (in the opinion of
counsel to the seller or such purchaser(s), in form and substance reasonably
satisfactory to the Company and it counsel) are able to dispose of such shares
publicly without registration under the 1933 Act. Upon such Registration
Statement becoming effective, the Company agrees to promptly, but no later than
three (3) business days thereafter, issue new certificates representing such
Common Shares without such legend. Any Common Shares issued after the
Registration Statement has become effective shall be free and clear of any
legends, transfer restrictions and stop orders. Notwithstanding the removal of
such legend, the Investor agrees to sell the Common Shares represented by the
new certificates in accordance with the applicable prospectus delivery
requirements (if copies of a current prospectus are provided to the Investor by
the Company) or in accordance with an exemption from the registration
requirements of the 1933 Act.
Nothing herein shall limit the right of any holder to pledge these
securities pursuant to a bona fide margin account or lending arrangement entered
into in compliance with law, including applicable securities laws.
Article VII
Termination
Section 7.1 Termination by Mutual Consent. This Agreement may be terminated
at any time prior to the Closing by the mutual written consent of the Company
and the Investor.
Section 7.2 Other Termination. This Agreement may be terminated by action
of the Board of Directors of the Company or by the Investor at any time if the
Closing shall not have been consummated by the third business day following the
date of this Agreement; provided, however, that the party (or parties) prepared
to close shall retain its (or their) right to sue for any breach by the other
party (or parties).
Article VIII
Indemnification
In consideration of the Investor's execution and delivery of the this
Agreement and the Registration Rights Agreement and acquiring the Preferred
Shares hereunder and in addition to all of the Company's other obligations under
the Transaction Documents, the Company shall defend, protect, indemnify and hold
harmless the Investor and all of its partners, officers, directors, employees,
members and direct or indirect investors and any of the foregoing person's
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agents or other representatives (including, without limitation, those retained
in connection with the transactions contemplated by this Agreement)
(collectively, the "Indemnitees") from and against any and all actions, causes
of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses in connection therewith (irrespective of whether any such
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys' fees and disbursements (the
"Indemnified Liabilities"), incurred by any Indemnitee as a result of, or
arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in the Transaction Documents or
any other certificate or document contemplated hereby or thereby, (b) any breach
of any covenant, agreement or obligation of the Company contained in the
Transaction Documents or any other certificate or document contemplated hereby
or thereby, (c) any cause of action, suit or claim brought or made against such
Indemnitee by a third party and arising out of or resulting from (i) the
execution, delivery, performance, breach by the Company or enforcement of the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, (ii) any transaction financed or to be financed
in whole or in part, directly or indirectly, with the proceeds of the issuance
of the Preferred Shares or (iii) the status of the Investor or holder of the
Preferred Shares or Warrants as an investor in the Company and (d) the
enforcement of this Section. Notwithstanding the foregoing, Indemnified
Liabilities shall not include any liability of any Indemnitee arising solely out
of such Indemnitee's willful misconduct or fraudulent action(s). To the extent
that the foregoing undertaking by the Company may be unenforceable for any
reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law. Except as otherwise set forth herein, the mechanics and
procedures with respect to the rights and obligations under this Article VIII
shall be the same as those set forth in Section 6 (other than Section 6(b)) of
the Registration Rights Agreement, including, without limitation, those
procedures with respect to the settlement of claims and Company's right to
assume the defense of claims.
Article IX
Governing Law, Miscellaneous.
Section 9.1 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICT OF LAWS. EACH PARTY HEREBY IRREVOCABLY SUBMITS TO
THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY
OF NEW YORK, BOROUGH OF MANHATTAN, FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER
OR IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR
DISCUSSED HEREIN, AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN ANY
SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT
IN AN INCONVENIENT FORUM OR THAT THE VENUE OF SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND
CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY
MAILING A COPY THEREOF TO SUCH PARTY AT THE ADDRESS FOR SUCH NOTICES TO IT UNDER
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THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT
SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED
TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW.
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 IN THAT JURISDICTION OR THE
VALIDITY OR ENFORCEABILITY OF ANY PROVISION OF THIS AGREEMENT IN ANY OTHER
JURISDICTION. EACH PARTY HERETO IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY.
Section 9.2 Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
Section 9.3 Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
Section 9.4 Severability. 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 in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
Section 9.5 Entire Agreement; Amendments; Waivers.
(a) This Agreement supersedes all other prior oral or written agreements
between the Investor, the Company, their affiliates and persons acting on their
behalf with respect to the matters discussed herein, and this Agreement and the
instruments referenced herein (including the other Transaction Documents)
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor the Investor makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be amended other than by an instrument in writing signed by
the Company and the Investor, and no provision hereof may be waived other than
by an instrument in writing signed by the party against whom enforcement is
sought.
(b) The Investor may at any time elect, by notice to the Company, to waive
(whether permanently or temporarily, and subject to such conditions, if any, as
the Investor may specify in such notice) any of its rights under any of the
Transaction Documents to acquire shares of Common Stock from the Company, in
which event such waiver shall be binding against the Investor in accordance with
its terms; provided, however, that the voluntary waiver contemplated by this
sentence may not reduce the Investor's obligations to the Company under the
Transaction Documents.
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Section 9.6 Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing, must be delivered by (i) courier, mail or hand delivery or (ii)
facsimile, and will be deemed to have been delivered upon receipt. The addresses
and facsimile numbers for such communications shall be:
If to the Company:
GenesisIntermedia.com, Inc.
5805 Sepulveda Boulevard
Van Nuys, California 91411
Telephone: (818) 902-4100
Facsimile: (818) 902-4301
Attention: Ramy El-Batrawi
With a copy to:
Nida & Maloney, LLP
800 Anacapa Street
Santa Barbara, CA 93101
Telephone: (805) 568-1151
Facsimile: (805) 568-1955
Attention: Theodore R. Maloney
If to the Transfer Agent:
U.S. Stock Transfer Corporation
1745 Gardena Avenue
Glendale, California 91204
Telephone: (818) 502-1404
Facsimile: (818) 502-0674
Attention: Syed Hussaimi
If to the Investor:
Elliott Associates, L.P.
c/o Stonington Management Corporation
712 Fifth Avenue
New York, New York 10019
Telephone: 212-506-2999
Facsimile: 212-974-2093 and (212) 586-9467
Attention: Brett Cohen
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and
Westgate International, L.P.
c/o Stonington Management Corporation
712 Fifth Avenue
New York, New York 10019
Telephone: 212-506-2999
Facsimile: 212-974-2093 and (212) 586-9467
Attention: Brett Cohen
With a copy to:
Kleinberg, Kaplan, Wolff & Cohen, P.C.
551 Fifth Avenue, 18th Floor
New York, New York 10176
Telephone: 212-986-6000
Facsimile: 212-986-8866
Attention: Stephen M. Schultz
Each party shall provide five (5) days prior written notice to the other
party of any change in address, telephone number or facsimile number. Written
confirmation of receipt (A) given by the recipient of such notice, consent,
waiver or other communication, (B) mechanically or electronically generated by
the sender's facsimile machine containing the time, date, recipient facsimile
number and an image of the first page of such transmission or (C) provided by a
nationally recognized overnight delivery service, shall be rebuttable evidence
of personal service, receipt by facsimile or receipt from a nationally
recognized overnight delivery service in accordance with clause (i), (ii) or
(iii) above, respectively.
Section 9.7 Successors and Assigns. Except as otherwise provided herein,
this Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns, including any Permitted Assignee (as
defined below). The Company shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Investor,
including by merger or consolidation. The Investor may assign some or all of its
rights hereunder to any assignee of the Preferred Shares, Warrants or Common
Shares (in each case, a "Permitted Assignee"); provided, however, that any such
assignment shall not release the Investor from its obligations hereunder unless
such obligations are assumed by such assignee and the Company has consented to
such assignment and assumption. Notwithstanding anything to the contrary
contained in the Transaction Documents, the Investor shall be entitled to pledge
the Preferred Shares, Warrants or Common Shares in connection with a bona fide
margin account.
Section 9.8 No Third Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
Section 9.9 Survival. The representations, warranties and agreements of the
Company and the Investor contained in the Agreement shall survive the Closing.
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Section 9.10 Further Assurances. Each party shall do and perform, or cause
to be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments and documents,
as the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
Section 9.11 Placement Agent. The Investor and the Company each
acknowledges and warrants that it has not engaged any placement agent in
connection with the sale of the Preferred Shares and the Warrants other than
Shoreline, whose fees will be paid exclusively by the Company. The Company and
the Investor shall each be responsible for the payment of any other fees or
commissions of placement agents or brokers engaged, directly or indirectly, by
the Company or the Investor, respectively, in connection with the purchase of
the Preferred Shares and the Warrants by the Investor. The Company and the
Investor shall pay, and hold the other party harmless against, any liability,
loss or expense (including, without limitation, reasonable attorneys' fees and
out-of-pocket expenses) arising in connection with any such claim.
Section 9.12 No Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
Section 9.13 Remedies. The Investor and each Permitted Assignee shall have
all rights and remedies set forth in this Agreement and the Registration Rights
Agreement and all rights and remedies which such holders have been granted at
any time under any other agreement or contract and all of the rights which such
holders have under any law. Any person having any rights under any provision of
this Agreement or the Registration Rights Agreement shall be entitled to enforce
such rights specifically (without posting a bond or other security), to recover
damages by reason of any breach of any provision of this Agreement or the
Registration Rights Agreement and to exercise all other rights granted by law.
The Investor and each Permitted Assignee without prejudice may withdraw, revoke
or suspend its pursuit of any remedy at any time prior to its complete recovery
as a result of such remedy.
Section 9.14 Payment Set Aside. To the extent that the Company makes a
payment or payments to the Investor hereunder or under the Registration Rights
Agreement or the Investor enforces or exercises its rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other person under any law (including, without limitation, any
bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred.
Section 9.15 Days. Unless the context refers to "business days" or "Trading
Days", all references herein to "days" shall mean calendar days.
24
<PAGE>
Section 9.16 Rescission and Withdrawal Right. Notwithstanding anything to
the contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, wherever the Investor exercises a right, election, demand
or option under a Transaction Document and the Company does not fully perform
its related obligations within the periods therein provided, then the Investor
in its sole discretion may rescind or withdraw from time to time any relevant
notice, demand or election in whole or in part without prejudice to its future
actions and rights.
* * * * *
[Signature Page Follows]
IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed as of the date and year first above written.
COMPANY: INVESTORS:
GENESISINTERMEDIA.COM, INC. WESTGATE INTERNATIONAL, L.P.
By: MARTLEY INTERNATIONAL, INC., as
attorney-in-fact
By: __________________________ By: _____________________________
Name: Ramy El-Batrawi Name: Paul E. Singer
Title: President Title: President
ELLIOTT ASSOCIATES, L.P.
By: _____________________________
Name: Paul E. Singer
Title: General Partner
<PAGE>
List of Schedules
Schedule 2.1(a) Subsidiaries
Schedule 2.1(c) Capitalization
Schedule 2.1(e) No Conflicts
Schedule 2.1(g) Certain Changes
Schedule 2.1(h) Litigation
Schedule 2.1(n) Intellectual Property Rights
Schedule 2.1(p) Title
Schedule 2.1(v) Certain Transactions
Schedule I Investors
List of Exhibits
EXHIBIT A Certificate of Designation
EXHIBIT B Warrant
EXHIBIT C Registration Rights Agreement
EXHIBIT D Form of Press Release
EXHIBIT E Opinion of Counsel
<PAGE>
SCHEDULE I
<TABLE>
Jurisdiction of
Organization Number of Number of
Investor Preferred Shares Warrants Purchase Price
<S> <C> <C> <C> <C>
Elliott Associates, L.P. Delaware, U.S.A. 2,000 56,000 $2,000,000
Westgate International, L.P. Cayman Islands, B.W.I. 2,000 56,000 $2,000,000
</TABLE>
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT") THIS WARRANT SHALL NOT CONSTITUTE AN OFFER
TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURIITES IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE SECURIITES ARE
"RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE
ACT PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
COMMON STOCK PURCHASE WARRANT
To Purchase Shares of $0.001 Par Value Common Stock ("Common Stock") of
GENESISINTERMEDIA.COM, INC.
THIS CERTIFIES that, for value received, ELLIOTT ASSOCIATES, L.P. (the
"Investor") is entitled, upon the terms and subject to the conditions
hereinafter set forth, at any time on or after the date hereof and on or prior
to 8:00 p.m. New York City Time on April 27, 2003 (the "Termination Date"), but
not thereafter, to subscribe for and purchase from GenesisIntermedia.com, Inc.,
a Delaware corporation (the "Company"), 56,000 shares of Common Stock (the
"Warrant Shares") at an Exercise Price equal to $17.74 per share [115% of the
Closing Price] (as adjusted from time to time pursuant to the terms hereof, the
"Exercise Price"). The Exercise Price and the number of shares for which the
Warrant is exercisable shall be subject to adjustment as provided herein. This
Warrant is being issued in connection with the Securities Purchase Agreement
dated April 28, 2000 (the "Purchase Agreement") entered into between the Company
and the Investor. Capitalized terms used herein and not otherwise defined shall
have the meaning ascribed thereto in the Purchase Agreement.
1. Title of Warrant. Prior to the expiration hereof and subject to
compliance with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company by the
Holder hereof in person or by duly authorized attorney, upon surrender of this
Warrant together with (a) the Assignment Form annexed hereto properly endorsed,
and (b) any other documentation reasonably necessary to satisfy the Company that
such transfer is in compliance with all applicable securities laws. The term
"Holder" shall refer to the Investor or any subsequent transferee of this
Warrant.
2. Authorization of Shares. The Company covenants that all shares of Common
Stock which may be issued upon the exercise of rights represented by this
Warrant will, upon exercise of the rights represented by this Warrant and
payment of the Exercise Price as set forth herein will be duly authorized,
validly issued, fully paid and nonassessable and free from all taxes, liens and
charges in respect of the issue thereof (other than taxes in respect of any
transfer occurring contemporaneously with such issue or otherwise specified
herein).
<PAGE>
3. Exercise of Warrant.
(a) The Holder may exercise this Warrant, in whole or in part, at any time
and from time to time, by delivering to the offices of the Company or any
transfer agent for the Common Stock this Warrant, together with a Notice of
Exercise in the form annexed hereto specifying the number of Warrant Shares with
respect to which this Warrant is being exercised, together with payment to the
Company of the Exercise Price therefor.
In the event that the Warrant is not exercised in full, the number of
Warrant Shares shall be reduced by the number of such Warrant Shares for which
this Warrant is exercised and/or surrendered, and the Company, at its expense,
shall within three (3) Trading Days (as defined below) issue and deliver to the
Holder a new Warrant of like tenor in the name of the Holder or as the Holder
(upon payment by Holder of any applicable transfer taxes) may request,
reflecting such adjusted Warrant Shares.
Certificates for shares of Common Stock purchased hereunder shall be
delivered to the Holder hereof within two (2) Trading Days after the date on
which this Warrant shall have been exercised as aforesaid. The Holder may
withdraw its Notice of Exercise at any time if the Company fails to timely
deliver the relevant certificates to the Holder as provided in this Agreement. A
Notice of Exercise shall be deemed sent on the date of delivery if delivered
before 8:00 p.m. Eastern Time on such date, or the day following such date if
delivered after 8:00 p.m. East Time; provided that the Company is only obligated
to deliver Warrant Shares against delivery of the Exercise Price from the holder
hereof and surrender of this Warrant (or appropriate affidavit and/or indemnity
in lieu thereof).
In lieu of delivering physical certificates representing the Warrant Shares
issuable upon conversion of this Warrant, provided the Company's transfer agent
is participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer ("FAST") program, upon request of the Holder, the Company
shall use its best efforts to cause its transfer agent to electronically
transmit the Warrant Shares issuable upon exercise to the Holder, by crediting
the account of the Holder's prime broker with DTC through its Deposit Withdrawal
Agent Commission ("DWAC") system. The time periods for delivery described above
shall apply to the electronic transmittals through the DWAC system. The Company
agrees to coordinate with DTC to accomplish this objective.
Notwithstanding the foregoing provision regarding payment of the Exercise
Price in cash, during any time that the Warrant Shares are not subject to an
effective Registration Statement as required by the terms of the Registration
Rights Agreement (as defined in the Purchase Agreement), the Holder may elect to
receive a reduced number of Warrant Shares in lieu of tendering the Exercise
Price in cash. In such case, the number of Warrant Shares to be issued to the
Holder shall be computed using the following formula:
2
<PAGE>
X = Y x (A-B)
A
where: X = the number of Warrant Shares to be issued to the Holder;
Y = the number of Warrant Shares to be exercised under this Warrant
Certificate;
A = the Market Value (defined below) of one share of Common Stock; and
B = the Exercise Price.
(b) The term "Trading Day" means (x) if the Common Stock is not listed on
the New York or American Stock Exchange but sale prices of the Common Stock are
reported on Nasdaq National Market or another automated quotation system, a day
on which trading is reported on the principal automated quotation system on
which sales of the Common Stock are reported, (y) if the Common Stock is listed
on the New York Stock Exchange or the American Stock Exchange, a day on which
there is trading on such stock exchange, or (z) if the foregoing provisions are
inapplicable, a day on which quotations are reported by National Quotation
Bureau Incorporated.
The term "Market Value" means the closing bid price of the Common Stock (as
reported by Bloomberg, L.P.) on the day before the Notice of Exercise and this
Warrant are duly surrendered to the Company for a full or partial exercise
hereof. Notwithstanding the foregoing definition, if the Common Stock is not
listed on a national securities exchange or quoted in the Nasdaq System at the
time said Notice of Exercise is submitted to the Company in the foregoing
manner, the Market Value of the Common Stock shall be as reasonably determined
in good faith by the Board of Directors of the Company and such Holder, unless
the Company shall become subject to a merger, acquisition, or other
consolidation pursuant to which the Company is not the surviving entity, in
which case the Market Value of the Common Stock shall be deemed to be the value
received by the Company's common shareholders pursuant to the Company's
acquisition (subject to Section 12 below).
4. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. In lieu of issuance of a fractional share upon any exercise hereunder,
the Company will either round up to nearest whole number of shares or pay the
cash value of that fractional share calculated on the basis of the Market Value.
5. Charges, Taxes and Expenses. Issuance of certificates for shares of
Common Stock upon the exercise of this Warrant shall be made without charge to
the Holder hereof for any issue or transfer tax or other incidental expense in
respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the name
of the Holder of this Warrant or in such name or names as may be directed by the
Holder of this Warrant; provided, however, that in the event certificates for
shares of Common Stock are to be issued in a name other than the name of the
Holder of this Warrant, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the Holder
hereof; and provided further, that the Company shall not be required to pay any
tax or taxes which may be payable in respect of any transfer involved in the
issuance of any Warrant certificates or any certificates for the Warrant Shares
other than the issuance of a Warrant Certificate to the Holder in connection
with the Holder's surrender of a Warrant Certificate upon the exercise of all or
less than all of the Warrants evidenced thereby.
6. Closing of Books. The Company will at no time close its shareholder
books or records in any manner which interferes with the timely exercise of this
Warrant.
3
<PAGE>
7. No Rights as Shareholder until Exercise. Subject to Section 12 of this
Warrant and the provisions of any other written agreement between the Company
and the Investor, the Investor shall not be entitled to vote or receive
dividends or be deemed the holder of Warrant Shares or any other securities of
the Company that may at any time be issuable on the exercise hereof for any
purpose, nor shall anything contained herein be construed to confer upon the
Investor, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action (whether upon any recapitalization, issuance of stock,
reclassification of stock, change of par value, or change of stock to no par
value, consolidation, merger, conveyance or otherwise) or to receive notice of
meetings, or to receive dividends or subscription rights or otherwise until the
Warrant shall have been exercised as provided herein. However, at the time of
the exercise of this Warrant pursuant to Section 3 hereof, the Warrant Shares so
purchased hereunder shall be deemed to be issued to such Holder as the record
owner of such shares as of the close of business on the date on which this
Warrant shall have been exercised.
8. Assignment and Transfer of Warrant. This Warrant may be assigned by the
surrender of this Warrant and the Assignment Form annexed hereto duly executed
at the office of the Company (or such other office or agency of the Company or
its transfer agent as the Company may designate by notice in writing to the
registered Holder hereof at the address of such Holder appearing on the books of
the Company); provided, however, that this Warrant may not be resold or
otherwise transferred except (i) in a transaction registered under the
Securities Act of 1933, as amended (the "Act"), or (ii) in a transaction
pursuant to an exemption, if available, from registration under the Act and
whereby, if reasonably requested by the Company, an opinion of counsel
reasonably satisfactory to the Company is obtained by the Holder of this Warrant
to the effect that the transaction is so exempt. If this Warrant is duly
assigned in accordance with the terms hereof, then the Company agrees, upon the
request of the assignee, to amend or supplement promptly any effective
registration statement covering the Warrant Shares so that the direct assignee
of the original holder is added as a selling stockholder thereunder.
9. Loss, Theft, Destruction or Mutilation of Warrant; Exchange. The Company
represents warrants and covenants that (a) upon receipt by the Company of
evidence and/or indemnity reasonably satisfactory to it of the loss, theft,
destruction or mutilation of any Warrant or stock certificate representing the
Warrant Shares, and in case of loss, theft or destruction, of indemnity
reasonably satisfactory to it, and (b) upon surrender and cancellation of such
Warrant or stock certificate, if mutilated, the Company will make and deliver a
new Warrant or stock certificate of like tenor and dated as of such
cancellation, in lieu of this Warrant or stock certificate, without any charge
therefor. This Warrant is exchangeable at any time for an equal aggregate number
of Warrants of different denominations, as requested by the holder surrendering
the same, or in such denominations as may be requested by the Holder following
determination of the Exercise Price. No service charge will be made for such
registration or transfer, exchange or reissuance.
10. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall be a Saturday, Sunday or a legal holiday, then such action may be taken or
such right may be exercised on the next succeeding day not a legal holiday.
4
<PAGE>
11. Effect of Certain Events. If at any time while this Warrant or any
portion thereof is outstanding and unexpired there shall be a transaction (by
merger or otherwise) in which more than 50% of the voting power of the Company
is disposed of (collectively, a "Sale or Merger Transaction"), the Holder of
this Warrant shall have the right thereafter to purchase, by exercise of this
Warrant and payment of the aggregate Exercise Price in effect immediately prior
to such action, the kind and amount of shares and other securities and property
which it would have owned or have been entitled to receive after the happening
of such transaction had this Warrant been exercised immediately prior thereto,
subject to further adjustment as provided in Section 12.
12. Adjustments of Exercise Price and Number of Warrant Shares.
The number of and kind of securities purchasable upon exercise of this
Warrant and the Exercise Price shall be subject to adjustment from time to time
as set forth in this Section 12.
(a) Subdivisions, Combinations, Stock Dividends and other Issuances. If the
Company shall, at any time while this Warrant is outstanding, (A) pay a stock
dividend or otherwise make a distribution or distributions on any equity
securities (including instruments or securities convertible into or exchangeable
for such equity securities) in shares of Common Stock, (B) subdivide outstanding
shares of Common Stock into a larger number of shares, or (C) combine
outstanding Common Stock into a smaller number of shares, then each Affected
Exercise Price (as defined below) shall be multiplied by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
before such event and the denominator of which shall be the number of shares of
Common Stock outstanding after such event. Any adjustment made pursuant to this
Section 12(a) shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a
subdivision or combination. As used herein, the Affected Exercise Prices (each
an "Affected Exercise Price") shall refer to: (i) the Exercise Price and (ii)
each reported price for the Common Stock on the Principal Market (as defined in
the Purchase Agreement) occurring on any Trading Day included in the period used
for determining the Closing Price, which Trading Day occurred before the record
date in the case of events referred to in clause (A) of this subparagraph 12(a)
and the effective date in the case of the events referred to in clauses (B) and
(C) of this subparagraph 12(a). "Closing Price" shall have the meaning set forth
in the Purchase Agreement. The number of shares which may be purchased hereunder
shall be increased proportionately to any reduction in Exercise Price pursuant
to this paragraph 12(a), so that after such adjustments the aggregate Exercise
Price payable hereunder for the increased number of shares shall be the same as
the aggregate Exercise Price in effect just prior to such adjustments.
(b) Other Distributions. If at any time after the date hereof the Company
distributes to holders of its Common Stock, other than as part of its
dissolution, liquidation or the winding up of its affairs, any shares of its
capital stock, any evidence of indebtedness or any of its assets (other than
Common Stock), then the number of Warrant Shares for which this Warrant is
exercisable shall be increased to equal: (i) the number of Warrant Shares for
which this Warrant is exercisable immediately prior to such event, (ii)
multiplied by a fraction, (A) the numerator of which shall be the Fair Market
Value (as defined below) per share of Common Stock on the record date for the
dividend or distribution, and (B) the denominator of which shall be the Fair
Market Value price per share of Common Stock on the record date for the dividend
or distribution minus the amount allocable to one share of Common Stock of the
value (as jointly determined in good faith by the Board of Directors of the
Company and the Holder) of any and all such evidences of indebtedness, shares of
capital stock, other securities or property, so distributed. For purposes of
this Warrant, "Fair Market Value" shall equal the 5 Trading Day average closing
trading price of the Common Stock on the Principal Market (as defined in the
Purchase Agreement) for the 5 Trading Days preceding the date of determination
or, if the Common Stock is not listed or admitted to trading on any Principal
Market, and the average price cannot be determined as contemplated above, the
5
<PAGE>
Fair Market Value of the Common Stock shall be as reasonably determined in good
faith by the Company's Board of Directors and the Holder. The Exercise Price
shall be reduced to equal: (i) the Exercise Price in effect immediately before
the occurrence of any event (ii) multiplied by a fraction, (A) the numerator of
which is the number of Warrant Shares for which this Warrant is exercisable
immediately before the adjustment, and (B) the denominator of which is the
number of Warrant Shares for which this Warrant is exercisable immediately after
the adjustment.
(c) Merger, etc. If at any time after the date hereof there shall be a
merger or consolidation of the Company with or into or a transfer of all or
substantially all of the assets of the Company to another entity, then the
Holder shall be entitled to receive upon or after such transfer, merger or
consolidation becoming effective, and upon payment of the Exercise Price then in
effect, the number of shares or other securities or property of the Company or
of the successor corporation resulting from such merger or consolidation, which
would have been received by the Holder for the shares of stock subject to this
Warrant had this Warrant been exercised just prior to such transfer, merger or
consolidation becoming effective or to the applicable record date thereof, as
the case may be. The Company will not merge or consolidate with or into any
other corporation, or sell or otherwise transfer its property, assets and
business substantially as an entirety to another corporation, unless the
corporation resulting from such merger or consolidation (if not the Company), or
such transferee corporation, as the case may be, shall expressly assume in
writing the due and punctual performance and observance of each and every
covenant and condition of this Warrant to be performed and observed by the
Company.
(d) Reclassification, etc. If at any time after the date hereof there shall
be a reorganization or reclassification of the securities as to which purchase
rights under this Warrant exist into the same or a different number of
securities of any other class or classes, then the Holder shall thereafter be
entitled to receive upon exercise of this Warrant, during the period specified
herein and upon payment of the Exercise Price then in effect, the number of
shares or other securities or property resulting from such reorganization or
reclassification, which would have been received by the Holder for the shares of
stock subject to this Warrant had this Warrant at such time been exercised.
(e) Exercise Price Adjustment. In the event that the Company issues or
sells any Common Stock or securities which are convertible into or exchangeable
for its Common Stock or any convertible securities, or any warrants or other
rights to subscribe for or to purchase or any options for the purchase of its
Common Stock or any such convertible securities (other than shares or options
issued or which may be issued pursuant to (i) the Company's current employee
option plans or shares issued upon exercise of options, warrants or rights
outstanding on the date of the Agreement and listed in the Company's most recent
periodic report filed under the Exchange Act or in the Purchase Agreement, or
(ii) arrangements with the Investor) at an effective price per share which is
less than the greater of the Exercise Price then in effect or the Fair Market
Value (as described in Section 12(b) above) of the Common Stock on the trading
day next preceding such issue or sale, then in each such case, the Exercise
Price in effect immediately prior to such issue or sale shall be reduced
effective concurrently with such issue or sale to an amount determined by
multiplying the Exercise Price then in effect by a fraction, (x) the numerator
of which shall be the sum of (1) the number of shares of Common Stock
outstanding immediately prior to such issue or sale, plus (2) the number of
shares of Common Stock which the aggregate consideration received by the Company
for such additional shares would purchase at such Fair Market Value or Exercise
Price, whichever is greater, then in effect; and (y) the denominator of which
shall be the number of shares of Common Stock of the Company outstanding
immediately after such issue or sale.
6
<PAGE>
For the purposes of the foregoing adjustment, in the case of the issuance
of any convertible securities, warrants, options or other rights to subscribe
for or to purchase or exchange for, shares of Common Stock ("Convertible
Securities"), the maximum number of shares of Common Stock issuable upon
exercise, exchange or conversion of such Convertible Securities shall be deemed
to be outstanding, provided that no further adjustment shall be made upon the
actual issuance of Common Stock upon exercise, exchange or conversion of such
Convertible Securities.
The number of shares which may be purchased hereunder shall be increased
proportionately to any reduction in Exercise Price pursuant to this paragraph
12(e), so that after such adjustments the aggregate Exercise Price payable
hereunder for the increased number of shares shall be the same as the aggregate
Exercise Price in effect just prior to such adjustments.
In the event of any such issuance for a consideration which is less than
such Fair Market Value and also less than the Exercise Price then in effect,
than there shall be only one such adjustment by reason of such issuance, such
adjustment to be that which results in the greatest reduction of the Exercise
Price computed as aforesaid.
(f) (i) The terms of any reorganization, consolidation, merger, sale,
transfer or share exchange shall include such terms so as to continue to give to
the holder hereof the right to receive the securities or property set forth in
this Section 12 upon any exercise following any such reclassification,
consolidation, merger, sale, transfer or share exchange.
(ii) In the event of any adjustment in the number of Warrant Shares
issuable hereunder upon exercise, the Exercise Price shall be inversely
proportionately increased or decreased as the case may be, such that aggregate
purchase price for Warrant Shares upon full exercise of this Warrant shall
remain the same. Similarly, in the event of any adjustment in the Exercise
Price, the number of Warrant Shares issuable hereunder upon exercise shall be
inversely proportionately increased or decreased as the case may be, such that
aggregate purchase price for Warrant Shares upon full exercise of this Warrant
shall remain the same.
13. Voluntary Adjustment by the Company. The Company may at its option, at
any time during the term of this Warrant, reduce but not increase the then
current Exercise Price to any amount and for any period of time deemed
appropriate by the Board of Directors of the Company.
14. Notice of Adjustment; Notice of Events. (i) Whenever the number of
Warrant Shares or number or kind of securities or other property purchasable
upon the exercise of this Warrant or the Exercise Price is adjusted, the Company
shall promptly mail to the Holder of this Warrant a notice setting forth the
number of Warrant Shares (and other securities or property) purchasable upon the
exercise of this Warrant and the Exercise Price of such Warrant Shares after
7
<PAGE>
such adjustment and setting forth the computation of such adjustment and a brief
statement of the facts requiring such adjustment. (ii) If: (A) the Company shall
declare a dividend (or any other distribution) on its Common Stock; or (B) the
Company shall declare a special nonrecurring cash dividend on or a redemption of
its Common Stock; or (C) the Company shall authorize the granting to all holders
of the Common Stock rights or warrants to subscribe for or purchase any shares
of capital stock of any class or of any rights; or (D) the approval of any
stockholders of the Company shall be required in connection with any
reclassification of the Common Stock of the Company, any consolidation or merger
to which the Company is a party, any sale or transfer of all or substantially
all of the assets of the Company, or any compulsory share exchange whereby the
Common Stock is converted into other securities, cash or property; or (E) the
Company shall authorize the voluntary dissolution, liquidation or winding up of
the affairs of the Company, then the Company shall cause to be mailed to each
Warrant holder at their last addresses as they shall appear upon the Warrant
register of the Company, at least 30 calendar days prior to the applicable
record or effective date hereinafter specified (or such lesser time as is equal
to the period between the date of fixing such record or effective date and such
record or effective date, but in no event less than 10 days), a notice stating
(x) the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up.
15. Authorized Shares. The Company covenants that during the period the
Warrant is outstanding and exercisable, it will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of the Warrant Shares upon the exercise of any and all purchase rights under
this Warrant. The Company further covenants that its issuance of this Warrant
shall constitute full authority to its officers who are charged with the duty of
executing stock certificates to execute and issue the necessary certificates for
the Warrant Shares upon the exercise of the purchase rights under this Warrant.
The Company will take all such reasonable action as may be necessary to assure
that such Warrant Shares may be issued as provided herein without violation of
any applicable law, regulation, or rule of any applicable market or exchange.
16. 9.99% Limitation.
(i) Notwithstanding anything to the contrary contained herein, the number
of shares of Common Stock that may be acquired by the holder upon exercise
pursuant to the terms hereof shall not exceed a number that, when added to the
total number of shares of Common Stock deemed beneficially owned by such holder
(other than by virtue of the ownership of securities or rights to acquire
securities that have limitations on the holder's right to convert, exercise or
8
<PAGE>
purchase similar to the limitation set forth herein), together with all shares
of Common Stock deemed beneficially owned by the holder's "affiliates" (as
defined in Rule 144 of the Act) ("Aggregation Parties") that would be aggregated
for purposes of determining whether a group under Section 13(d) of the
Securities Exchange Act of 1934 as amended, exists, would exceed 9.99% of the
total issued and outstanding shares of the Common Stock (the "Restricted
Ownership Percentage"); provided that (w) each holder shall have the right at
any time and from time to time to reduce its Restricted Ownership Percentage
immediately upon notice to the Company and (x) each holder shall have the right
(subject to waiver) at any time and from time to time, to increase its
Restricted Ownership Percentage immediately in the event of the announcement as
pending or planned, of a transaction or event referred to in Section 5(m) of the
Certificate.
(ii) Each time (a "Covenant Time") the holder or an Aggregation Party makes
a Triggering Acquisition (as defined below) of shares of Common Stock (the
"Triggering Shares"), the holder will be deemed to covenant that it will not,
during the balance of the day on which such Triggering Acquisition occurs, and
during the 61-day period beginning immediately after that day, acquire
additional shares of Common Stock pursuant to rights-to-acquire existing at that
Covenant Time, if the aggregate amount of such additional shares so acquired
(without reducing that amount by any dispositions) would exceed (x) 9.99% of the
number of shares of Common Stock outstanding at that Covenant Time (including
the Triggering Shares) minus (y) the number of shares of Common Stock actually
owned by the holder at that Covenant Time (regardless of how or when acquired,
and including the Triggering Shares). A "Triggering Acquisition" means the
giving of a Notice of Exercise or any other acquisition of Common Stock by the
holder or an Aggregation Party; provided, however, that with respect to the
giving of such Notice of Exercise, if the associated issuance of shares of
Common Stock does not occur, such event shall cease to be a Triggering
Acquisition and the related covenant under this paragraph shall terminate. At
each Covenant Time, the holder shall be deemed to waive any right it would
otherwise have to acquire shares of Common Stock to the extent that such
acquisition would violate any covenant given by the holder under this paragraph.
Notwithstanding anything to the contrary in the Transaction Documents, in the
event of a conflict between any covenant given under this paragraph and any
obligation of the holder to exercise this Warrant pursuant to the Transaction
Documents, the former shall supersede the latter, and the latter shall be
reduced accordingly. For the avoidance of doubt:
(A) The covenant to be given pursuant to this paragraph will be given
at every Covenant Time and shall be calculated based on the circumstances
then in effect. The making of a covenant at one Covenant Time shall not
terminate or modify any prior covenants.
(B) The holder may therefore from time to time be subject to multiple
such covenants, each one having been made at a different Covenant Time, and
some possibly being more restrictive than others. The holder must comply
with all such covenants then in effect.
17. Compliance with Securities Laws. (a) The Holder hereof acknowledges
that the Warrant Shares acquired upon the exercise of this Warrant, if not
registered (or if no exemption from registration exists), will have restrictions
upon resale imposed by state and federal securities laws. Each certificate
representing the Warrant Shares issued to the Holder upon exercise (if not
registered, for resale or otherwise, or if no exemption from registration
exists) will bear substantially the following legend:
9
<PAGE>
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED WITH
THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE
IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED,
TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS.
(b) Without limiting the Investor's right to transfer, assign or otherwise
convey the Warrant or Warrant Shares in compliance with all applicable
securities laws, the Investor of this Warrant, by acceptance hereof,
acknowledges that this Warrant and the Warrant Shares to be issued upon exercise
hereof are being acquired solely for the Investor's own account and not as a
nominee for any other party, and that the Investor will not offer, sell or
otherwise dispose of this Warrant or any Warrant Shares to be issued upon
exercise hereof except under circumstances that will not result in a violation
of applicable federal and state securities laws.
18. Miscellaneous.
(a) Issue Date; Choice of Law; Venue; Jurisdiction. The provisions of this
Warrant shall be construed and shall be given effect in all respects as if it
had been issued and delivered by the Company on the date hereof. This Warrant
shall be binding upon any successors or assigns of the Company. This Warrant
will be construed and enforced in accordance with and governed by the laws of
the State of New York, except for matters arising under the Act, without
reference to principles of conflicts of law. Each of the parties consents to the
exclusive jurisdiction of the FEDERAL AND STATE CourtS sitting in the COUNTY of
New York in the State of New York in connection with any dispute arising under
this Warrant and hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on forum non conveniens OR VENUE, to
the bringing of any such proceeding in such jurisdiction. Each party hereby
agrees that if the other party to this Warrant obtains a judgment against it in
such a proceeding, the party which obtained such judgment may enforce same by
summary judgment in the courts of any country having jurisdiction over the party
against whom such judgment was obtained, and each party hereby waives any
defenses available to it under local law and agrees to the enforcement of such a
judgment. Each party to this Warrant irrevocably consents to the service of
process in any such proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to such party at its address in accordance with
Section 18(c). Nothing herein shall affect the right of any party to serve
process in any other manner permitted by law.
(b) Modification and Waiver. This Warrant and any provisions hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought. Any
amendment effected in accordance with this paragraph shall be binding upon the
Investor, each future holder of this Warrant and the Company. No waivers of, or
exceptions to, any term, condition or provision of this Warrant, in any one or
more instances, shall be deemed to be, or construed as, a further or continuing
waiver of any such term, condition or provision.
(c) Notices. Any notice, request or other document required or permitted to
be given or delivered to the Investor or future holders hereof or the Company
shall be personally delivered or shall be sent by certified or registered mail,
postage prepaid, to the Investor or each such holder at its address as shown on
the books of the Company or to the Company at the address set forth in the
Purchase Agreement. All notices under this Warrant shall be deemed to have been
given when received.
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<PAGE>
A party may from time to time change the address to which notices to it are
to be delivered or mailed hereunder by notice in accordance with the provisions
of this Section 18(c).
(d) Severability. Whenever possible, each provision of this Warrant shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Warrant is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
the validity, legality or enforceability of any other provision of this Warrant
in such jurisdiction or affect the validity, legality or enforceability of any
provision in any other jurisdiction, but this Warrant shall be reformed,
construed and enforced in such jurisdiction as if such invalid, illegal or
unenforceable provision had never been contained herein.
(e) No Impairment. The Company will not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holder against impairment.
Without limiting the generality of the foregoing, the Company (a) will not
increase the par value of any Warrant Shares above the amount payable therefor
on such exercise, and (b) will take all such action as may be reasonably
necessary or appropriate in order that the Company may validly and legally issue
fully paid and nonassessable Warrant Shares on the exercise of this Warrant.
(f) Specific Enforcement. The Company and the Holder acknowledge and agree
that irreparable damage would occur in the event that any of the provisions of
this Warrant were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall he entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Warrant and to enforce specifically the terms and provisions hereof, this
being in addition to any other remedy to which either of them may be entitled by
law or equity.
[Signature Page Follows]
11
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its officers thereunto duly authorized.
Dated: April _______, 2000
GenesisIntermedia.com, Inc.
By: ______________________________
Name: Ramy El-Batrawi
Title: President
ATTEST:
________________________
Print Name:
<PAGE>
NOTICE OF EXERCISE
To: GenesisIntermedia.com, Inc.
(1) The undersigned hereby elects to exercise the attached Warrant for and
to purchase thereunder, ______ shares of Common Stock, and herewith makes
payment therefor of $_______, or elects to use the cashless exercise option of
the Warrant in the event Warrant Shares are not registered as required in the
Registration Rights Agreement.
(2) Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
_______________________________
(Name)
_______________________________
(Address)
_______________________________
(3) Please issue a new Warrant for the unexercised portion of the attached
Warrant in the name of the undersigned or in such other name as is specified
below:
___________________________________
(Name)
____________________ ___________________________________
(Date) (Signature)
___________________________________
(Address)
Dated:
______________________________
Signature
<PAGE>
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby
are hereby assigned to ___________________________ whose address is
____________________________________________.
Dated: ______________,
Holder's Signature: _____________________________
Holder's Address: _____________________________
_____________________________
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in an fiduciary or other representative
capacity should file proper evidence of authority to assign the foregoing
Warrant.
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT") THIS WARRANT SHALL NOT CONSTITUTE AN OFFER
TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURIITES IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE SECURIITES ARE
"RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE
ACT PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
COMMON STOCK PURCHASE WARRANT
To Purchase Shares of $0.001 Par Value Common Stock ("Common Stock") of
GENESISINTERMEDIA.COM, INC.
THIS CERTIFIES that, for value received, WESTGATE INTERNATIONAL, L.P. (the
"Investor") is entitled, upon the terms and subject to the conditions
hereinafter set forth, at any time on or after the date hereof and on or prior
to 8:00 p.m. New York City Time on April 27, 2003 (the "Termination Date"), but
not thereafter, to subscribe for and purchase from GenesisIntermedia.com, Inc.,
a Delaware corporation (the "Company"), 56,000 shares of Common Stock (the
"Warrant Shares") at an Exercise Price equal to $17.74 per share [115% of the
Closing Price] (as adjusted from time to time pursuant to the terms hereof, the
"Exercise Price"). The Exercise Price and the number of shares for which the
Warrant is exercisable shall be subject to adjustment as provided herein. This
Warrant is being issued in connection with the Securities Purchase Agreement
dated April 28, 2000 (the "Purchase Agreement") entered into between the Company
and the Investor. Capitalized terms used herein and not otherwise defined shall
have the meaning ascribed thereto in the Purchase Agreement.
1. Title of Warrant. Prior to the expiration hereof and subject to
compliance with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company by the
Holder hereof in person or by duly authorized attorney, upon surrender of this
Warrant together with (a) the Assignment Form annexed hereto properly endorsed,
and (b) any other documentation reasonably necessary to satisfy the Company that
such transfer is in compliance with all applicable securities laws. The term
"Holder" shall refer to the Investor or any subsequent transferee of this
Warrant.
2. Authorization of Shares. The Company covenants that all shares of Common
Stock which may be issued upon the exercise of rights represented by this
Warrant will, upon exercise of the rights represented by this Warrant and
payment of the Exercise Price as set forth herein will be duly authorized,
validly issued, fully paid and nonassessable and free from all taxes, liens and
charges in respect of the issue thereof (other than taxes in respect of any
transfer occurring contemporaneously with such issue or otherwise specified
herein).
<PAGE>
3. Exercise of Warrant.
(a) The Holder may exercise this Warrant, in whole or in part, at any time
and from time to time, by delivering to the offices of the Company or any
transfer agent for the Common Stock this Warrant, together with a Notice of
Exercise in the form annexed hereto specifying the number of Warrant Shares with
respect to which this Warrant is being exercised, together with payment to the
Company of the Exercise Price therefor.
In the event that the Warrant is not exercised in full, the number of
Warrant Shares shall be reduced by the number of such Warrant Shares for which
this Warrant is exercised and/or surrendered, and the Company, at its expense,
shall within three (3) Trading Days (as defined below) issue and deliver to the
Holder a new Warrant of like tenor in the name of the Holder or as the Holder
(upon payment by Holder of any applicable transfer taxes) may request,
reflecting such adjusted Warrant Shares.
Certificates for shares of Common Stock purchased hereunder shall be
delivered to the Holder hereof within two (2) Trading Days after the date on
which this Warrant shall have been exercised as aforesaid. The Holder may
withdraw its Notice of Exercise at any time if the Company fails to timely
deliver the relevant certificates to the Holder as provided in this Agreement. A
Notice of Exercise shall be deemed sent on the date of delivery if delivered
before 8:00 p.m. Eastern Time on such date, or the day following such date if
delivered after 8:00 p.m. East Time; provided that the Company is only obligated
to deliver Warrant Shares against delivery of the Exercise Price from the holder
hereof and surrender of this Warrant (or appropriate affidavit and/or indemnity
in lieu thereof).
In lieu of delivering physical certificates representing the Warrant Shares
issuable upon conversion of this Warrant, provided the Company's transfer agent
is participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer ("FAST") program, upon request of the Holder, the Company
shall use its best efforts to cause its transfer agent to electronically
transmit the Warrant Shares issuable upon exercise to the Holder, by crediting
the account of the Holder's prime broker with DTC through its Deposit Withdrawal
Agent Commission ("DWAC") system. The time periods for delivery described above
shall apply to the electronic transmittals through the DWAC system. The Company
agrees to coordinate with DTC to accomplish this objective.
Notwithstanding the foregoing provision regarding payment of the Exercise
Price in cash, during any time that the Warrant Shares are not subject to an
effective Registration Statement as required by the terms of the Registration
Rights Agreement (as defined in the Purchase Agreement), the Holder may elect to
receive a reduced number of Warrant Shares in lieu of tendering the Exercise
Price in cash. In such case, the number of Warrant Shares to be issued to the
Holder shall be computed using the following formula:
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<PAGE>
X = Y x (A-B)
A
where: X = the number of Warrant Shares to be issued to the Holder;
Y = the number of Warrant Shares to be exercised under this Warrant
Certificate;
A = the Market Value (defined below) of one share of Common Stock; and
B = the Exercise Price.
(b) The term "Trading Day" means (x) if the Common Stock is not listed on
the New York or American Stock Exchange but sale prices of the Common Stock are
reported on Nasdaq National Market or another automated quotation system, a day
on which trading is reported on the principal automated quotation system on
which sales of the Common Stock are reported, (y) if the Common Stock is listed
on the New York Stock Exchange or the American Stock Exchange, a day on which
there is trading on such stock exchange, or (z) if the foregoing provisions are
inapplicable, a day on which quotations are reported by National Quotation
Bureau Incorporated.
The term "Market Value" means the closing bid price of the Common Stock (as
reported by Bloomberg, L.P.) on the day before the Notice of Exercise and this
Warrant are duly surrendered to the Company for a full or partial exercise
hereof. Notwithstanding the foregoing definition, if the Common Stock is not
listed on a national securities exchange or quoted in the Nasdaq System at the
time said Notice of Exercise is submitted to the Company in the foregoing
manner, the Market Value of the Common Stock shall be as reasonably determined
in good faith by the Board of Directors of the Company and such Holder, unless
the Company shall become subject to a merger, acquisition, or other
consolidation pursuant to which the Company is not the surviving entity, in
which case the Market Value of the Common Stock shall be deemed to be the value
received by the Company's common shareholders pursuant to the Company's
acquisition (subject to Section 12 below).
4. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. In lieu of issuance of a fractional share upon any exercise hereunder,
the Company will either round up to nearest whole number of shares or pay the
cash value of that fractional share calculated on the basis of the Market Value.
5. Charges, Taxes and Expenses. Issuance of certificates for shares of
Common Stock upon the exercise of this Warrant shall be made without charge to
the Holder hereof for any issue or transfer tax or other incidental expense in
respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the name
of the Holder of this Warrant or in such name or names as may be directed by the
Holder of this Warrant; provided, however, that in the event certificates for
shares of Common Stock are to be issued in a name other than the name of the
Holder of this Warrant, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the Holder
hereof; and provided further, that the Company shall not be required to pay any
tax or taxes which may be payable in respect of any transfer involved in the
issuance of any Warrant certificates or any certificates for the Warrant Shares
other than the issuance of a Warrant Certificate to the Holder in connection
with the Holder's surrender of a Warrant Certificate upon the exercise of all or
less than all of the Warrants evidenced thereby.
6. Closing of Books. The Company will at no time close its shareholder
books or records in any manner which interferes with the timely exercise of this
Warrant.
3
<PAGE>
7. No Rights as Shareholder until Exercise. Subject to Section 12 of this
Warrant and the provisions of any other written agreement between the Company
and the Investor, the Investor shall not be entitled to vote or receive
dividends or be deemed the holder of Warrant Shares or any other securities of
the Company that may at any time be issuable on the exercise hereof for any
purpose, nor shall anything contained herein be construed to confer upon the
Investor, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action (whether upon any recapitalization, issuance of stock,
reclassification of stock, change of par value, or change of stock to no par
value, consolidation, merger, conveyance or otherwise) or to receive notice of
meetings, or to receive dividends or subscription rights or otherwise until the
Warrant shall have been exercised as provided herein. However, at the time of
the exercise of this Warrant pursuant to Section 3 hereof, the Warrant Shares so
purchased hereunder shall be deemed to be issued to such Holder as the record
owner of such shares as of the close of business on the date on which this
Warrant shall have been exercised.
8. Assignment and Transfer of Warrant. This Warrant may be assigned by the
surrender of this Warrant and the Assignment Form annexed hereto duly executed
at the office of the Company (or such other office or agency of the Company or
its transfer agent as the Company may designate by notice in writing to the
registered Holder hereof at the address of such Holder appearing on the books of
the Company); provided, however, that this Warrant may not be resold or
otherwise transferred except (i) in a transaction registered under the
Securities Act of 1933, as amended (the "Act"), or (ii) in a transaction
pursuant to an exemption, if available, from registration under the Act and
whereby, if reasonably requested by the Company, an opinion of counsel
reasonably satisfactory to the Company is obtained by the Holder of this Warrant
to the effect that the transaction is so exempt. If this Warrant is duly
assigned in accordance with the terms hereof, then the Company agrees, upon the
request of the assignee, to amend or supplement promptly any effective
registration statement covering the Warrant Shares so that the direct assignee
of the original holder is added as a selling stockholder thereunder.
9. Loss, Theft, Destruction or Mutilation of Warrant; Exchange. The Company
represents warrants and covenants that (a) upon receipt by the Company of
evidence and/or indemnity reasonably satisfactory to it of the loss, theft,
destruction or mutilation of any Warrant or stock certificate representing the
Warrant Shares, and in case of loss, theft or destruction, of indemnity
reasonably satisfactory to it, and (b) upon surrender and cancellation of such
Warrant or stock certificate, if mutilated, the Company will make and deliver a
new Warrant or stock certificate of like tenor and dated as of such
cancellation, in lieu of this Warrant or stock certificate, without any charge
therefor. This Warrant is exchangeable at any time for an equal aggregate number
of Warrants of different denominations, as requested by the holder surrendering
the same, or in such denominations as may be requested by the Holder following
determination of the Exercise Price. No service charge will be made for such
registration or transfer, exchange or reissuance.
10. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall be a Saturday, Sunday or a legal holiday, then such action may be taken or
such right may be exercised on the next succeeding day not a legal holiday.
4
<PAGE>
11. Effect of Certain Events. If at any time while this Warrant or any
portion thereof is outstanding and unexpired there shall be a transaction (by
merger or otherwise) in which more than 50% of the voting power of the Company
is disposed of (collectively, a "Sale or Merger Transaction"), the Holder of
this Warrant shall have the right thereafter to purchase, by exercise of this
Warrant and payment of the aggregate Exercise Price in effect immediately prior
to such action, the kind and amount of shares and other securities and property
which it would have owned or have been entitled to receive after the happening
of such transaction had this Warrant been exercised immediately prior thereto,
subject to further adjustment as provided in Section 12.
12. Adjustments of Exercise Price and Number of Warrant Shares.
The number of and kind of securities purchasable upon exercise of this
Warrant and the Exercise Price shall be subject to adjustment from time to time
as set forth in this Section 12.
(a) Subdivisions, Combinations, Stock Dividends and other Issuances. If the
Company shall, at any time while this Warrant is outstanding, (A) pay a stock
dividend or otherwise make a distribution or distributions on any equity
securities (including instruments or securities convertible into or exchangeable
for such equity securities) in shares of Common Stock, (B) subdivide outstanding
shares of Common Stock into a larger number of shares, or (C) combine
outstanding Common Stock into a smaller number of shares, then each Affected
Exercise Price (as defined below) shall be multiplied by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
before such event and the denominator of which shall be the number of shares of
Common Stock outstanding after such event. Any adjustment made pursuant to this
Section 12(a) shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a
subdivision or combination. As used herein, the Affected Exercise Prices (each
an "Affected Exercise Price") shall refer to: (i) the Exercise Price and (ii)
each reported price for the Common Stock on the Principal Market (as defined in
the Purchase Agreement) occurring on any Trading Day included in the period used
for determining the Closing Price, which Trading Day occurred before the record
date in the case of events referred to in clause (A) of this subparagraph 12(a)
and the effective date in the case of the events referred to in clauses (B) and
(C) of this subparagraph 12(a). "Closing Price" shall have the meaning set forth
in the Purchase Agreement. The number of shares which may be purchased hereunder
shall be increased proportionately to any reduction in Exercise Price pursuant
to this paragraph 12(a), so that after such adjustments the aggregate Exercise
Price payable hereunder for the increased number of shares shall be the same as
the aggregate Exercise Price in effect just prior to such adjustments.
(b) Other Distributions. If at any time after the date hereof the Company
distributes to holders of its Common Stock, other than as part of its
dissolution, liquidation or the winding up of its affairs, any shares of its
capital stock, any evidence of indebtedness or any of its assets (other than
Common Stock), then the number of Warrant Shares for which this Warrant is
exercisable shall be increased to equal: (i) the number of Warrant Shares for
which this Warrant is exercisable immediately prior to such event, (ii)
multiplied by a fraction, (A) the numerator of which shall be the Fair Market
Value (as defined below) per share of Common Stock on the record date for the
dividend or distribution, and (B) the denominator of which shall be the Fair
Market Value price per share of Common Stock on the record date for the dividend
or distribution minus the amount allocable to one share of Common Stock of the
value (as jointly determined in good faith by the Board of Directors of the
Company and the Holder) of any and all such evidences of indebtedness, shares of
capital stock, other securities or property, so distributed. For purposes of
this Warrant, "Fair Market Value" shall equal the 5 Trading Day average closing
trading price of the Common Stock on the Principal Market (as defined in the
Purchase Agreement) for the 5 Trading Days preceding the date of determination
or, if the Common Stock is not listed or admitted to trading on any Principal
Market, and the average price cannot be determined as contemplated above, the
Fair Market Value of the Common Stock shall be as reasonably determined in good
faith by the Company's Board of Directors and the Holder. The Exercise Price
shall be reduced to equal: (i) the Exercise Price in effect immediately before
the occurrence of any event (ii) multiplied by a fraction, (A) the numerator of
which is the number of Warrant Shares for which this Warrant is exercisable
immediately before the adjustment, and (B) the denominator of which is the
number of Warrant Shares for which this Warrant is exercisable immediately after
the adjustment.
5
<PAGE>
(c) Merger, etc. If at any time after the date hereof there shall be a
merger or consolidation of the Company with or into or a transfer of all or
substantially all of the assets of the Company to another entity, then the
Holder shall be entitled to receive upon or after such transfer, merger or
consolidation becoming effective, and upon payment of the Exercise Price then in
effect, the number of shares or other securities or property of the Company or
of the successor corporation resulting from such merger or consolidation, which
would have been received by the Holder for the shares of stock subject to this
Warrant had this Warrant been exercised just prior to such transfer, merger or
consolidation becoming effective or to the applicable record date thereof, as
the case may be. The Company will not merge or consolidate with or into any
other corporation, or sell or otherwise transfer its property, assets and
business substantially as an entirety to another corporation, unless the
corporation resulting from such merger or consolidation (if not the Company), or
such transferee corporation, as the case may be, shall expressly assume in
writing the due and punctual performance and observance of each and every
covenant and condition of this Warrant to be performed and observed by the
Company.
(d) Reclassification, etc. If at any time after the date hereof there shall
be a reorganization or reclassification of the securities as to which purchase
rights under this Warrant exist into the same or a different number of
securities of any other class or classes, then the Holder shall thereafter be
entitled to receive upon exercise of this Warrant, during the period specified
herein and upon payment of the Exercise Price then in effect, the number of
shares or other securities or property resulting from such reorganization or
reclassification, which would have been received by the Holder for the shares of
stock subject to this Warrant had this Warrant at such time been exercised.
(e) Exercise Price Adjustment. In the event that the Company issues or
sells any Common Stock or securities which are convertible into or exchangeable
for its Common Stock or any convertible securities, or any warrants or other
rights to subscribe for or to purchase or any options for the purchase of its
Common Stock or any such convertible securities (other than shares or options
issued or which may be issued pursuant to (i) the Company's current employee
option plans or shares issued upon exercise of options, warrants or rights
outstanding on the date of the Agreement and listed in the Company's most recent
periodic report filed under the Exchange Act or in the Purchase Agreement, or
(ii) arrangements with the Investor) at an effective price per share which is
less than the greater of the Exercise Price then in effect or the Fair Market
Value (as described in Section 12(b) above) of the Common Stock on the trading
day next preceding such issue or sale, then in each such case, the Exercise
Price in effect immediately prior to such issue or sale shall be reduced
effective concurrently with such issue or sale to an amount determined by
multiplying the Exercise Price then in effect by a fraction, (x) the numerator
of which shall be the sum of (1) the number of shares of Common Stock
outstanding immediately prior to such issue or sale, plus (2) the number of
shares of Common Stock which the aggregate consideration received by the Company
for such additional shares would purchase at such Fair Market Value or Exercise
Price, whichever is greater, then in effect; and (y) the denominator of which
shall be the number of shares of Common Stock of the Company outstanding
immediately after such issue or sale.
For the purposes of the foregoing adjustment, in the case of the issuance
of any convertible securities, warrants, options or other rights to subscribe
for or to purchase or exchange for, shares of Common Stock ("Convertible
6
<PAGE>
Securities"), the maximum number of shares of Common Stock issuable upon
exercise, exchange or conversion of such Convertible Securities shall be deemed
to be outstanding, provided that no further adjustment shall be made upon the
actual issuance of Common Stock upon exercise, exchange or conversion of such
Convertible Securities.
The number of shares which may be purchased hereunder shall be increased
proportionately to any reduction in Exercise Price pursuant to this paragraph
12(e), so that after such adjustments the aggregate Exercise Price payable
hereunder for the increased number of shares shall be the same as the aggregate
Exercise Price in effect just prior to such adjustments.
In the event of any such issuance for a consideration which is less than
such Fair Market Value and also less than the Exercise Price then in effect,
than there shall be only one such adjustment by reason of such issuance, such
adjustment to be that which results in the greatest reduction of the Exercise
Price computed as aforesaid.
(f) (i) The terms of any reorganization, consolidation, merger, sale,
transfer or share exchange shall include such terms so as to continue to give to
the holder hereof the right to receive the securities or property set forth in
this Section 12 upon any exercise following any such reclassification,
consolidation, merger, sale, transfer or share exchange.
(ii) In the event of any adjustment in the number of Warrant Shares
issuable hereunder upon exercise, the Exercise Price shall be inversely
proportionately increased or decreased as the case may be, such that aggregate
purchase price for Warrant Shares upon full exercise of this Warrant shall
remain the same. Similarly, in the event of any adjustment in the Exercise
Price, the number of Warrant Shares issuable hereunder upon exercise shall be
inversely proportionately increased or decreased as the case may be, such that
aggregate purchase price for Warrant Shares upon full exercise of this Warrant
shall remain the same.
13. Voluntary Adjustment by the Company. The Company may at its option, at
any time during the term of this Warrant, reduce but not increase the then
current Exercise Price to any amount and for any period of time deemed
appropriate by the Board of Directors of the Company.
14. Notice of Adjustment; Notice of Events. (i) Whenever the number of
Warrant Shares or number or kind of securities or other property purchasable
upon the exercise of this Warrant or the Exercise Price is adjusted, the Company
shall promptly mail to the Holder of this Warrant a notice setting forth the
number of Warrant Shares (and other securities or property) purchasable upon the
exercise of this Warrant and the Exercise Price of such Warrant Shares after
such adjustment and setting forth the computation of such adjustment and a brief
statement of the facts requiring such adjustment. (ii) If: (A) the Company shall
declare a dividend (or any other distribution) on its Common Stock; or (B) the
Company shall declare a special nonrecurring cash dividend on or a redemption of
its Common Stock; or (C) the Company shall authorize the granting to all holders
of the Common Stock rights or warrants to subscribe for or purchase any shares
of capital stock of any class or of any rights; or (D) the approval of any
stockholders of the Company shall be required in connection with any
reclassification of the Common Stock of the Company, any consolidation or merger
to which the Company is a party, any sale or transfer of all or substantially
all of the assets of the Company, or any compulsory share exchange whereby the
Common Stock is converted into other securities, cash or property; or (E) the
Company shall authorize the voluntary dissolution, liquidation or winding up of
the affairs of the Company, then the Company shall cause to be mailed to each
Warrant holder at their last addresses as they shall appear upon the Warrant
register of the Company, at least 30 calendar days prior to the applicable
7
<PAGE>
record or effective date hereinafter specified (or such lesser time as is equal
to the period between the date of fixing such record or effective date and such
record or effective date, but in no event less than 10 days), a notice stating
(x) the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up.
15. Authorized Shares. The Company covenants that during the period the
Warrant is outstanding and exercisable, it will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of the Warrant Shares upon the exercise of any and all purchase rights under
this Warrant. The Company further covenants that its issuance of this Warrant
shall constitute full authority to its officers who are charged with the duty of
executing stock certificates to execute and issue the necessary certificates for
the Warrant Shares upon the exercise of the purchase rights under this Warrant.
The Company will take all such reasonable action as may be necessary to assure
that such Warrant Shares may be issued as provided herein without violation of
any applicable law, regulation, or rule of any applicable market or exchange.
16. 9.99% Limitation.
(i) Notwithstanding anything to the contrary contained herein, the number
of shares of Common Stock that may be acquired by the holder upon exercise
pursuant to the terms hereof shall not exceed a number that, when added to the
total number of shares of Common Stock deemed beneficially owned by such holder
(other than by virtue of the ownership of securities or rights to acquire
securities that have limitations on the holder's right to convert, exercise or
purchase similar to the limitation set forth herein), together with all shares
of Common Stock deemed beneficially owned by the holder's "affiliates" (as
defined in Rule 144 of the Act) ("Aggregation Parties") that would be aggregated
for purposes of determining whether a group under Section 13(d) of the
Securities Exchange Act of 1934 as amended, exists, would exceed 9.99% of the
total issued and outstanding shares of the Common Stock (the "Restricted
Ownership Percentage"); provided that (w) each holder shall have the right at
any time and from time to time to reduce its Restricted Ownership Percentage
immediately upon notice to the Company and (x) each holder shall have the right
(subject to waiver) at any time and from time to time, to increase its
Restricted Ownership Percentage immediately in the event of the announcement as
pending or planned, of a transaction or event referred to in Section 5(m) of the
Certificate.
(ii) Each time (a "Covenant Time") the holder or an Aggregation Party makes
a Triggering Acquisition (as defined below) of shares of Common Stock (the
"Triggering Shares"), the holder will be deemed to covenant that it will not,
during the balance of the day on which such Triggering Acquisition occurs, and
during the 61-day period beginning immediately after that day, acquire
additional shares of Common Stock pursuant to rights-to-acquire existing at that
Covenant Time, if the aggregate amount of such additional shares so acquired
(without reducing that amount by any dispositions) would exceed (x) 9.99% of the
number of shares of Common Stock outstanding at that Covenant Time (including
the Triggering Shares) minus (y) the number of shares of Common Stock actually
owned by the holder at that Covenant Time (regardless of how or when acquired,
and including the Triggering Shares). A "Triggering Acquisition" means the
giving of a Notice of Exercise or any other acquisition of Common Stock by the
holder or an Aggregation Party; provided, however, that with respect to the
giving of such Notice of Exercise, if the associated issuance of shares of
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<PAGE>
Common Stock does not occur, such event shall cease to be a Triggering
Acquisition and the related covenant under this paragraph shall terminate. At
each Covenant Time, the holder shall be deemed to waive any right it would
otherwise have to acquire shares of Common Stock to the extent that such
acquisition would violate any covenant given by the holder under this paragraph.
Notwithstanding anything to the contrary in the Transaction Documents, in the
event of a conflict between any covenant given under this paragraph and any
obligation of the holder to exercise this Warrant pursuant to the Transaction
Documents, the former shall supersede the latter, and the latter shall be
reduced accordingly. For the avoidance of doubt:
(A) The covenant to be given pursuant to this paragraph will be
given at every Covenant Time and shall be calculated based on the
circumstances then in effect. The making of a covenant at one Covenant
Time shall not terminate or modify any prior covenants.
(B) The holder may therefore from time to time be subject to
multiple such covenants, each one having been made at a different
Covenant Time, and some possibly being more restrictive than others.
The holder must comply with all such covenants then in effect.
17. Compliance with Securities Laws. (a) The Holder hereof acknowledges
that the Warrant Shares acquired upon the exercise of this Warrant, if not
registered (or if no exemption from registration exists), will have restrictions
upon resale imposed by state and federal securities laws. Each certificate
representing the Warrant Shares issued to the Holder upon exercise (if not
registered, for resale or otherwise, or if no exemption from registration
exists) will bear substantially the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED,
TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS.
(b) Without limiting the Investor's right to transfer, assign or otherwise
convey the Warrant or Warrant Shares in compliance with all applicable
securities laws, the Investor of this Warrant, by acceptance hereof,
acknowledges that this Warrant and the Warrant Shares to be issued upon exercise
hereof are being acquired solely for the Investor's own account and not as a
nominee for any other party, and that the Investor will not offer, sell or
otherwise dispose of this Warrant or any Warrant Shares to be issued upon
exercise hereof except under circumstances that will not result in a violation
of applicable federal and state securities laws.
18. Miscellaneous.
(a) Issue Date; Choice of Law; Venue; Jurisdiction. The provisions of this
Warrant shall be construed and shall be given effect in all respects as if it
had been issued and delivered by the Company on the date hereof. This Warrant
shall be binding upon any successors or assigns of the Company. This Warrant
will be construed and enforced in accordance with and governed by the laws of
9
<PAGE>
the State of New York, except for matters arising under the Act, without
reference to principles of conflicts of law. Each of the parties consents to the
exclusive jurisdiction of the FEDERAL AND STATE CourtS sitting in the COUNTY of
New York in the State of New York in connection with any dispute arising under
this Warrant and hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on forum non conveniens OR VENUE, to
the bringing of any such proceeding in such jurisdiction. Each party hereby
agrees that if the other party to this Warrant obtains a judgment against it in
such a proceeding, the party which obtained such judgment may enforce same by
summary judgment in the courts of any country having jurisdiction over the party
against whom such judgment was obtained, and each party hereby waives any
defenses available to it under local law and agrees to the enforcement of such a
judgment. Each party to this Warrant irrevocably consents to the service of
process in any such proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to such party at its address in accordance with
Section 18(c). Nothing herein shall affect the right of any party to serve
process in any other manner permitted by law.
(b) Modification and Waiver. This Warrant and any provisions hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought. Any
amendment effected in accordance with this paragraph shall be binding upon the
Investor, each future holder of this Warrant and the Company. No waivers of, or
exceptions to, any term, condition or provision of this Warrant, in any one or
more instances, shall be deemed to be, or construed as, a further or continuing
waiver of any such term, condition or provision.
(c) Notices. Any notice, request or other document required or permitted to
be given or delivered to the Investor or future holders hereof or the Company
shall be personally delivered or shall be sent by certified or registered mail,
postage prepaid, to the Investor or each such holder at its address as shown on
the books of the Company or to the Company at the address set forth in the
Purchase Agreement. All notices under this Warrant shall be deemed to have been
given when received.
A party may from time to time change the address to which notices to it are
to be delivered or mailed hereunder by notice in accordance with the provisions
of this Section 18(c).
(d) Severability. Whenever possible, each provision of this Warrant shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Warrant is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
the validity, legality or enforceability of any other provision of this Warrant
in such jurisdiction or affect the validity, legality or enforceability of any
provision in any other jurisdiction, but this Warrant shall be reformed,
construed and enforced in such jurisdiction as if such invalid, illegal or
unenforceable provision had never been contained herein.
(e) No Impairment. The Company will not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holder against impairment.
Without limiting the generality of the foregoing, the Company (a) will not
increase the par value of any Warrant Shares above the amount payable therefor
on such exercise, and (b) will take all such action as may be reasonably
necessary or appropriate in order that the Company may validly and legally issue
fully paid and nonassessable Warrant Shares on the exercise of this Warrant.
(f) Specific Enforcement. The Company and the Holder acknowledge and agree
that irreparable damage would occur in the event that any of the provisions of
this Warrant were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall he entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Warrant and to enforce specifically the terms and provisions hereof, this
being in addition to any other remedy to which either of them may be entitled by
law or equity.
[Signature Page Follows]
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its officers thereunto duly authorized.
Dated: April _______, 2000
GenesisIntermedia.com, Inc.
By: ______________________________
Name: Ramy El-Batrawi
Title: President
ATTEST:
________________________
Print Name:
<PAGE>
NOTICE OF EXERCISE
To: GenesisIntermedia.com, Inc.
(1) The undersigned hereby elects to exercise the attached Warrant for and
to purchase thereunder, ______ shares of Common Stock, and herewith makes
payment therefor of $_______, or elects to use the cashless exercise option of
the Warrant in the event Warrant Shares are not registered as required in the
Registration Rights Agreement.
(2) Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
_______________________________
(Name)
_______________________________
(Address)
_______________________________
(3) Please issue a new Warrant for the unexercised portion of the attached
Warrant in the name of the undersigned or in such other name as is specified
below:
___________________________________
(Name)
____________________ ___________________________________
(Date) (Signature)
___________________________________
(Address)
Dated:
______________________________
Signature
<PAGE>
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby
are hereby assigned to ___________________________ whose address is
____________________________________________.
Dated: ______________,
Holder's Signature: _____________________________
Holder's Address: _____________________________
_____________________________
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in an fiduciary or other representative
capacity should file proper evidence of authority to assign the foregoing
Warrant.
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement ("Agreement") is entered into as of
April __, 2000, between GenesisIntermedia.com, Inc., a Delaware corporation with
offices at 5805 Sepulveda Boulevard, Van Nuys, California 91411 (the "Company")
and Elliott Associates, L.P., a Delaware limited partnership, and Westgate
International, L.P., a Cayman Islands limited partnership (individually and
collectively, the "Investor").
W I T N E S S E T H:
Whereas, pursuant to that certain Securities Purchase Agreement, dated on
or about the date hereof, by and between the Company and the Investor (the
"Purchase Agreement"), the Company has agreed to sell and issue to the Investor,
and the Investor has agreed to purchase from the Company, an aggregate of 4,000
shares, Liquidation Preference $1,000 each, of the Company's Series B Cumulative
Convertible Preferred Stock (the "Preferred Shares") subject to the terms and
conditions set forth therein, and Warrants (the "Warrants") to purchase shares
of the Company's Common Stock, par value $0.001 per share (the "Common Stock")
subject to the terms and conditions set forth therein; and
Whereas, the Purchase Agreement contemplates that the Preferred Shares will
be convertible into shares (the "Common Shares") of Common Stock pursuant to the
terms and conditions set forth in the Certificate of Designations for the
Preferred Shares (the "Certificate"); and
Now, Therefore, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in the Purchase Agreement and
this Agreement, the Company and the Investors agree as follows:
1. Certain Definitions. Capitalized terms used herein and not otherwise
defined shall have the meaning ascribed thereto in the Purchase Agreement or the
Certificate. As used in this Agreement, the following terms shall have the
following respective meanings:
"Closing" and "Closing Date" shall have the meanings ascribed to such terms
in the Purchase Agreement.
"Commission" or "SEC" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
"Holder" and "Holders" shall include the Investor and any transferee or
transferees of the Preferred Shares, Warrants, Common Shares or Registrable
Securities which have not been sold to the public to whom the registration
rights conferred by this Agreement have been transferred in compliance with this
Agreement and the Purchase Agreement.
<PAGE>
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.
"Registrable Securities" shall mean: (i) the Common Shares or other
securities issued or issuable to each Holder or its permitted transferee or
designee upon conversion of the Preferred Shares or exercise of the Warrants;
(ii) securities issued or issuable upon any stock split, stock dividend,
recapitalization or similar event with respect to such Common Shares; and (iii)
any other security issued as a dividend or other distribution with respect to,
in exchange for or in replacement of the securities referred to in the preceding
clauses.
"Registration Expenses" shall mean all expenses to be incurred by the
Company in connection with each Holder's registration rights under this
Agreement, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel for the Company, blue sky
fees and expenses, reasonable fees and disbursements of counsel to Holders
(using a single counsel selected by a majority in interest of the Holders) for a
review of the Registration Statement and related documents, and the expense of
any special audits incident to or required by any such registration (but
excluding the compensation of regular employees of the Company, which shall be
paid in any event by the Company).
"Registration Statement" shall have the meaning set forth in Section 2(a)
herein.
"Regulation D" shall mean Regulation D as promulgated pursuant to the
Securities Act, and as subsequently amended.
"Securities Act" or "Act" shall mean the Securities Act of 1933, as
amended.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities and all fees and
disbursements of counsel for Holders not included within "Registration
Expenses".
2. Registration Requirements. The Company shall use its best efforts to
effect the registration of the Registrable Securities (including, without
limitation, the execution of an undertaking to file post-effective amendments,
appropriate qualification under applicable blue sky or other state securities
laws and appropriate compliance with applicable regulations issued under the
Securities Act) as would permit or facilitate the sale or distribution of all
the Registrable Securities in the manner (including manner of sale) and in all
states reasonably requested by the Holder. Such best efforts by the Company
shall include, without limitation, the following:
2
<PAGE>
(a) The Company shall, as expeditiously as possible after the Closing Date:
i) But in any event within 75 days of the Closing, prepare and file a
registration statement with the Commission pursuant to Rule 415 under the
Securities Act on Form S-3 under the Securities Act (or in the event that
the Company is ineligible to use such form, such other form as the Company
is eligible to use under the Securities Act provided that such other form
shall be converted into an S-3 as soon as Form S-3 becomes available to the
Company) covering resales by the Holders of the Registrable Securities and
no other securities ("Registration Statement"), which Registration
Statement, to the extent allowable under the Securities Act and the rules
promulgated thereunder (including Rule 416), shall state that such
Registration Statement also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon conversion of the
Preferred Shares and exercise of the Warrants. The number of shares of
Common Stock initially included in such Registration Statement shall be no
less than the sum of two times the number of Common Shares that are then
issuable upon conversion of the Preferred Shares and the number of shares
issuable upon exercise of the Warrants (assuming full conversion or
exercise, respectively, at the then applicable Conversion Price (as defined
in the Certificate) or Exercise Price (as defined in the Warrant). Nothing
in the preceding sentence will limit the Company's obligations to reserve
shares of Common Stock pursuant to Section 3.7 of the Purchase Agreement.
Thereafter the Company shall use its best efforts to cause such
Registration Statement and other filings to be declared effective as soon
as possible, and in any event prior to 135 days following the Closing Date.
Without limiting the foregoing, the Company will promptly respond to all
SEC comments, inquiries and requests, and shall request acceleration of
effectiveness at the earliest possible date. The Company shall provide the
Holders reasonable opportunity to review any such Registration Statement or
amendment or supplement thereto prior to filing.
ii) Prepare and file with the SEC 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 Act with respect to the disposition of all securities covered by such
Registration Statement and notify the Holders of the filing and
effectiveness of such Registration Statement and any amendments or
supplements.
iii) Furnish to each Holder such numbers of copies of a current
prospectus conforming with the requirements of the Act, copies of the
Registration Statement, any amendment or supplement thereto and any
documents incorporated by reference therein and such other documents as
such Holder may reasonably require in order to facilitate the disposition
of Registrable Securities owned by such Holder.
3
<PAGE>
iv) Register and qualify the securities covered by such Registration
Statement under the securities or "Blue Sky" laws of all domestic
jurisdictions; provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or
to file a general consent to service of process in any such states or
jurisdictions.
v) Notify each Holder immediately of the happening of any event (but
not the substance or details of any such events unless specifically
requested by a Holder) as a result of which the prospectus (including any
supplements thereto or thereof) included in such Registration Statement, as
then in effect, includes an untrue statement of material fact or omits to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances then
existing, and use its best efforts to promptly update and/or correct such
prospectus.
vi) Notify each Holder immediately of the issuance by the Commission
or any state securities commission or agency of any stop order suspending
the effectiveness of the Registration Statement or the threat or initiation
of any proceedings for that purpose. The Company shall use its best efforts
to prevent the issuance of any stop order and, if any stop order is issued,
to obtain the lifting thereof at the earliest possible time.
vii) Permit counsel to the Holders to review the Registration
Statement and all amendments and supplements thereto within a reasonable
period of time (but not less than 5 full Trading Days (as defined in the
Certificate)) prior to each filing, and shall not file any document in a
form to which such counsel reasonably objects and will not request
acceleration of the Registration Statement without prior notice to such
counsel. viii) List the Registrable Securities covered by such Registration
Statement with all securities exchange(s) and/or markets on which the
Common Stock is then listed and prepare and file any required filings with
the Nasdaq National Market and Pacific Exchange or any exchange or market
where the Common Shares are traded.
ix) Take all steps necessary to enable Holders to avail themselves of
the prospectus delivery mechanism set forth in Rule 153 (or successor
thereto) under the Act.
(b) Set forth below in this Section 2(b) are (I) events that may arise that
the Investors consider will interfere with the full enjoyment of their rights
under this Agreement, the Purchase Agreement, the Warrants and the Certificate
(the "Interfering Events"), and (II) certain remedies applicable in each of
these events.
4
<PAGE>
Paragraphs (i) through (iv) of this Section 2(b) describe the Interfering
Events, provide a remedy to the Investors if an Interfering Event occurs and
provide that the Investors may require that the Company repurchase outstanding
Preferred Shares and Warrants at a specified price if certain Interfering Events
are not timely cured.
Paragraph (v) provides, inter alia, that if default adjustments required as
the remedy in the case of certain of the Interfering Events are not provided
when due, the Company may be required by the Investors to redeem outstanding
Preferred Shares and Warrants at a specified price.
Paragraph (vi) provides, inter alia, that the Investors have the right to
specific performance.
The preceding paragraphs in this Section 2(b) are meant to serve only as an
introduction to this Section 2(b), are for convenience only, and are not to be
considered in applying, construing or interpreting this Section 2(b). i) Delay
in Effectiveness of Registration Statement.
(A) In the event that such Registration Statement has not been
declared effective within 135 days from the Closing Date, or the Company at
any time fails to issue unlegended Registrable Securities as required by
Article VI of the Purchase Agreement, then the Company shall pay each
Holder a Monthly Delay Payment (as defined below) for each 30-day period
(or portion thereof) that effectiveness of the Registration Statement is
delayed or failure to issue such unlegended Registrable Securities
persists. In addition to the foregoing, if the Registration Statement has
not been declared effective within 210 days after the Closing Date, then
each Holder shall have the right to sell, at any time after the 210th day
after the Closing Date, any or all of its Preferred Shares and Warrants to
the Company for consideration (the "Mandatory Repurchase Price") equal to
(I) for the Preferred Shares, the greater of (x) 125% of the Liquidation
Preference of all such Preferred Shares being sold to the Company, or (y)
the Liquidation Preference for the Preferred Shares being sold to the
Company divided by the then applicable Conversion Price multiplied by the
greater of the last closing price of the Common Stock on (i) the date a
Holder exercises its option pursuant to this Section 2(b) to require
repurchase of Preferred Shares or (ii) the date on which the event
triggering Holder's remedies under this Section 2(b) first occurred, in
each case payable in cash and (II) for the Warrants, 125% of the product of
(a) the difference between the greater of clauses (i) or (ii) above and the
5
<PAGE>
exercise price of the Warrants, multiplied by (b) the number of Warrants
being sold to the Company, payable in cash.
(B) As used in this Agreement, a "Monthly Delay Payment" shall be a
cash payment equal to 1% of the Liquidation Preference of the Preferred
Shares held by a Holder for the first 30-day period (or portion thereof)
that the specified condition in this Section 2(b) has not been fulfilled or
the specified deficiency has not been remedied, 2% of such Liquidation
Preference for the next 30-day period (or portion thereof) that the
specified condition in this Section 2(b) has not been fulfilled or the
specified deficiency has not been remedied, and 3% of such Liquidation
Preference thereafter for each subsequent 30-day period (or portion
thereof) that the specified condition in this Section 2(b) has not been
fulfilled or the specified deficiency has not been remedied (prorated in
each case as appropriate). Payment of the Monthly Delay Payments and
Mandatory Repurchase Price shall be due and payable from the Company to
such Holder within 5 business days of demand therefor. Without limiting the
foregoing, if cash payment of the Mandatory Repurchase Price is not made
within such 5 business day period, the Holder may revoke and withdraw its
election to cause the Company to make such mandatory purchase at any time
prior to its receipt of such cash. At the option of the Holder, Monthly
Delay Payments may be added to the Liquidation Preference of the Preferred
Shares held by it.
(C) Notwithstanding the foregoing, there shall be excluded from the
calculation of the number of days that the Registration Statement has not
been declared effective the delays which are solely attributable to delays
in the Investor providing information required for the Registration
Statement.
(ii) No Listing; Premium Price Redemption for Delisting of Class of Shares.
(A) In the event that the Company fails, refuses or for any other
reason is unable to cause the Registrable Securities covered by the
Registration Statement to be listed with the Pacific Exchange and the
Nasdaq National Market or one of the other Approved Markets (as defined in
the Purchase Agreement) at all times during the period ("Listing Period")
from the earlier of the effectiveness of the Registration Statement and the
135th day following the Closing Date until such time as the registration
period specified in Section 5 terminates, then the Company shall provide to
each Holder a Monthly Delay Payment, for each 30 day period or portion
6
<PAGE>
thereof during which such listing is not in effect. In addition to the
foregoing, following the 10th day that such listing is not in effect, each
Holder shall have the right to sell to the Company any or all of its
Preferred Shares and Warrants at the Mandatory Repurchase Price. The
provisions of Section 2(b)(i)(B) shall apply to this Section 2(b)(ii)(A).
(B) In the event that shares of Common Stock of the Company are not
listed on any of the Approved Markets at all times following the Closing
Date, or are otherwise suspended from trading and remain unlisted or
suspended for 3 consecutive days, then the Company shall provide to each
Holder a Monthly Delay Payment for each 30-day period or portion thereof
(appropriately prorated) during which such listing is not in effect. In
addition to the foregoing, following the 5th day that the shares are not so
listed or are otherwise suspended, at the option of each Holder and to the
extent such Holder so elects, each Holder shall have the right to sell to
the Company the Preferred Shares and the Warrants held by such Holder, in
whole or in part, for the Mandatory Repurchase Price on the terms set forth
in Section 2(b)(i)(B) above.
(iii) Blackout Periods. In the event any Holder's ability to sell
Registrable Securities under the Registration Statement is suspended for more
than (i) five (5) consecutive days or (ii) twenty (20) days in any calendar year
("Suspension Grace Period"), including without limitation by reason of any
suspension or stop order with respect to the Registration Statement or the fact
that an event has occurred as a result of which the prospectus (including any
supplements thereto) included in such Registration Statement then in effect
includes an untrue statement of material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing (a "Blackout"), then the
Company shall provide to each Holder a Monthly Delay Payment for each 30-day
period or portion thereof (appropriately prorated) from and after the expiration
of the Suspension Grace Period, on the terms set forth in Section 2(b)(i)(B)
above. In addition, at any time following the expiration of the Suspension Grace
Period if the Blackout continues for more than five (5) additional consecutive
days, a Holder shall have the right to sell to the Company its Preferred Shares
and/or Warrants in whole or in part for the Mandatory Repurchase Price on the
terms set forth in Section 2(b)(i)(B) above.
(iv) Redemption for Conversion Deficiency. In the event that the Company
does not have a sufficient number of Common Shares available to satisfy the
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Company's obligations to any Holder upon receipt of a Conversion Notice (as
defined in the Certificate) or exercise of the Warrants or is otherwise unable
or unwilling for any reason to issue such Common Shares (other than failure of
the Holder to comply with the conversion notice and delivery requirements of
Section 5 of the Certificate) (each, a "Conversion/Exercise Deficiency") in
accordance with the terms of the Certificate, Purchase Agreement and Warrants
for any reason after receipt of a Conversion Notice or exercise notice from any
Holder, then:
(A) The Company shall provide to each Holder a Monthly Delay Payment
for each 30-day period or portion thereof (appropriately prorated)
following the Conversion/Exercise Deficiency on all outstanding Preferred
Shares and Warrants, on the terms set forth in Section 2(b)(i)(B) above.
(B) At any time five days after the commencement of the running of the
first 30-day period described above in clause (A) of this paragraph (iv),
at the request of any Holder, the Company promptly shall purchase from such
Holder, for the Mandatory Repurchase Price and on the terms set forth in
Section 2(b)(i)(B) above, any and all outstanding Preferred Shares and/or
Warrants, if the failure to issue Common Shares results from the lack of a
sufficient number thereof and shall purchase all of such Holder's Preferred
Shares and/or Warrants (or such portion requested by such Holder) for such
consideration and on such terms if the failure to issue Common Shares
results from any other cause, or is without cause.
(C) The Holder shall have the right to withdraw any request for
redemption hereunder at any time prior to its receipt of the Mandatory
Repurchase Price.
(v) Mandatory Purchase Price for Defaults.
(A) The Company acknowledges that any failure, refusal or inability by
the Company to perform the obligations described in the foregoing
paragraphs (i) through (iv) will cause the Holders to suffer damages in an
amount that will be difficult to ascertain, including without limitation
damages resulting from the loss of liquidity in the Registrable Securities
and the additional investment risk in holding the Preferred Shares,
Warrants and Registrable Securities. Accordingly, the parties agree, after
consulting with counsel, that it is appropriate to include in this
Agreement the foregoing provisions for Monthly Delay Payments and mandatory
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redemptions in order to compensate the Holders for such damages. The
parties acknowledge and agree that the Monthly Delay Payments and mandatory
redemptions set forth above represent the parties' good faith effort to
quantify such damages and, as such, agree that the form and amount of such
payments and mandatory redemptions are reasonable and will not constitute a
penalty.
(B) In the event that the Company fails to pay any Monthly Delay
Payment within 5 business days of demand therefor, each Holder shall have
the right to sell to the Company any or all of its Preferred Shares and/or
Warrants at the Mandatory Repurchase Price on the terms set forth in
Section 2(b)(i)(B) above.
(C) The Holder shall have the right to withdraw any request for
redemption hereunder at any time prior to its receipt of the Mandatory
Repurchase Price.
(vi) Cumulative Remedies. The Monthly Delay Payments and mandatory
purchases provided for above are in addition to and not in lieu or limitation of
any other rights the Holders may have at law, in equity or under the terms of
the Certificate, the Purchase Agreement, the Warrants and this Agreement,
including without limitation the right to monetary contract damages and specific
performance. Each Holder shall be entitled to specific performance of any and
all obligations of the Company in connection with the registration rights of the
Holders hereunder.
(vii) Remedies for Registrable Securities. In any case in which a Holder of
Preferred Shares and/or Warrants has the right to cause the purchase of its
securities under this Section 2(b), it shall also have the right to cause the
purchase of the Registrable Securities that it owns, in whole or in part at the
Holder's option, as follows: such shares shall be purchased at a price ("Common
Purchase Price") equal to the Mandatory Repurchase Price of the Preferred Shares
which were converted into Common Shares or Warrants which were exercised for
Common Shares.
In the case in which a Holder of Preferred Shares or Warrants would have
the right to receive Monthly Delay Payments with respect to Preferred Shares or
Warrants under Section 2(b), it shall also have the right to receive payments
with respect to Registrable Securities owned by it in an amount at the rate of
the Monthly Delay Payments that would have applied to the Preferred Shares or
Warrants converted into or exercised for Common Shares had such Preferred Shares
or Warrants not been converted or exercised.
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(c) If the Holder(s) intend to distribute the Registrable Securities by
means of an underwriting, the Holder(s) shall so advise the Company. Any such
underwriting may only be administered by nationally or regionally recognized
investment bankers reasonably satisfactory to the Company.
(d) The Company shall enter into such customary agreements for secondary
offerings (including a customary underwriting agreement with the underwriter or
underwriters, if any) and take all such other reasonable actions reasonably
requested by the Holders in connection therewith in order to expedite or
facilitate the disposition of such Registrable Securities and in such
connection, whether or not an underwriting agreement is entered into and whether
or not the Registrable Securities are to be sold in an underwritten offering:
i) make such representations and warranties to the Holders and the
underwriter or underwriters, if any, in form, substance and scope as are
customarily made by issuers to underwriters in secondary offerings;
ii) cause to be delivered to the sellers of Registrable Securities and
the underwriter or underwriters, if any, opinions of independent counsel to
the Company, on and dated as of the effective day (or in the case of an
underwritten offering, dated the date of delivery of any Registrable
Securities sold pursuant thereto) of the Registration Statement, and within
ninety (90) days following the end of each fiscal year thereafter, which
counsel and opinions (in form, scope and substance) shall be reasonably
satisfactory to the Holders and the underwriter(s), if any, and their
counsel and covering, without limitation, such matters as the due
authorization and issuance of the securities being registered and
compliance with securities laws by the Company in connection with the
authorization, issuance and registration thereof and other matters that are
customarily given to underwriters in underwritten offerings, addressed to
the Holders and each underwriter, if any;
iii) cause to be delivered, immediately prior to the effectiveness of
the Registration Statement (and, in the case of an underwritten offering,
at the time of delivery of any Registrable Securities sold pursuant
thereto), and at the beginning of each fiscal year following a year during
which the Company's independent certified public accountants shall have
reviewed any of the Company's books or records, a "comfort" letter from the
Company's independent certified public accountants addressed to each
underwriter, if any, stating that such accountants are independent public
accountants within the meaning of the Securities Act and the applicable
published rules and regulations thereunder, and otherwise in customary form
and covering such financial and accounting matters as are customarily
covered by letters of the independent certified public accountants
delivered in connection with secondary offerings; such accountants shall
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<PAGE>
have undertaken in each such letter to update the same during each such
fiscal year in which such books or records are being reviewed so that each
such letter shall remain current, correct and complete throughout such
fiscal year; and each such letter and update thereof, if any, shall be
reasonably satisfactory to such underwriters;
iv) if an underwriting agreement is entered into, the same shall
include customary indemnification and contribution provisions to and from
the underwriters and procedures for secondary underwritten offerings; and
v) deliver such documents and certificates as may be reasonably
requested by the Holders of the Registrable Securities being sold or the
managing underwriter or underwriters, if any, to evidence compliance with
clause (i) above and with any customary conditions contained in the
underwriting agreement, if any.
(e) The Company shall make available for inspection by the Holders,
representative(s) of all the Holders together, any underwriter participating in
any disposition pursuant to a Registration Statement, and any attorney or
accountant retained by any Holder or underwriter, all financial and other
records customary for purposes of the Holders' due diligence examination of the
Company and review of any Registration Statement, all SEC Documents (as defined
in the Purchase Agreement) filed subsequent to the Closing, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors and employees to supply all information reasonably requested by any
such representative, underwriter, attorney or accountant in connection with such
Registration Statement, provided that such parties agree to keep such
information confidential.
(f) Subject to Section 2(b) above, the Company may suspend the use of any
prospectus used in connection with the Registration Statement only in the event,
and for such period of time as, such a suspension is required by the rules and
regulations of the Commission. The Company will use its best efforts to cause
such suspension to terminate at the earliest possible date.
(g) The Company shall file a Registration Statement with respect to any
newly authorized and/or reserved Registrable Securities consisting of Common
Shares described in clause (i) of the definition of Registrable Securities
within five (5) business days of any stockholders meeting authorizing same and
shall use its best efforts to cause such Registration Statement to become
effective within sixty (60) days of such stockholders meeting. If the Holders
become entitled, pursuant to an event described in clause (ii) and (iii) of the
definition of Registrable Securities, to receive any securities in respect of
Registrable Securities that were already included in a Registration Statement,
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<PAGE>
subsequent to the date such Registration Statement is declared effective, and
the Company is unable under the securities laws to add such securities to the
then effective Registration Statement, the Company shall promptly file, in
accordance with the procedures set forth herein, an additional Registration
Statement with respect to such newly Registrable Securities. The Company shall
use its best efforts to (i) cause any such additional Registration Statement,
when filed, to become effective under the Securities Act, and (ii) keep such
additional Registration Statement effective during the period described in
Section 5 below and cause such Registration Statement to become effective within
30 days of that date that the need to file the Registration Statement arose. All
of the registration rights and remedies under this Agreement shall apply to the
registration of such newly reserved shares and such new Registrable Securities,
including without limitation the provisions providing for default payments and
mandatory redemptions contained herein.
3. Expenses of Registration. All Registration Expenses in connection with
any registration, qualification or compliance with registration pursuant to this
Agreement shall be borne by the Company, and all Selling Expenses of a Holder
shall be borne by such Holder.
4. Registration on Form S-3. The Company shall use its best efforts to
remain qualified for registration on Form S-3 or any comparable or successor
form or forms, or in the event that the Company is ineligible to use such form,
such form as the Company is eligible to use under the Securities Act, provided
that if such other form is used, the Company shall convert such other form to a
Form S-3 as soon as the Company becomes so eligible.
5. Registration Period. In the case of the registration effected by the
Company pursuant to this Agreement, the Company shall keep such registration
effective until the later of (a) the date on which all the Holders have
completed the sales or distribution described in the Registration Statement
relating thereto or, if earlier, until such Registrable Securities may be sold
by the Holders under Rule 144(k) (provided that the Company's transfer agent has
accepted an instruction from the Company to such effect), or (b) the third (3rd)
anniversary of the Closing Date.
6. Indemnification.
(a) Company Indemnity. The Company will indemnify each Holder, each of its
officers, directors, agents and partners, and each person controlling each of
the foregoing, within the meaning of Section 15 of the Securities Act and the
rules and regulations thereunder with respect to which registration,
qualification or compliance has been effected pursuant to this Agreement, and
each underwriter, if any, and each person who controls, within the meaning of
Section 15 of the Securities Act and the rules and regulations thereunder, any
underwriter, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus, offering
circular or other document (including any related registration statement,
notification or the like) incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances under which they were made,
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<PAGE>
or any violation by the Company of the Securities Act or any state securities
law or in either case, any rule or regulation thereunder applicable to the
Company and relating to action or inaction required of the Company in connection
with any such registration, qualification or compliance, and will reimburse each
Holder, each of its officers, directors, agents and partners, and each person
controlling each of the foregoing, each such underwriter and each person who
controls any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating and defending any such claim, loss,
damage, liability or action, provided that the Company will not be liable in any
such case to a Holder to the extent that any such claim, loss, damage, liability
or expense arises out of or is based on any untrue statement or omission based
upon written information furnished to the Company by such Holder or the
underwriter (if any) therefor and stated to be specifically for use therein. The
indemnity agreement contained in this Section 6(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent will
not be unreasonably withheld).
(b) Holder Indemnity. Each Holder will, severally and not jointly, if
Registrable Securities held by it are included in the securities as to which
such registration, qualification or compliance is being effected, indemnify the
Company, each of its directors, officers, agents and partners, and each
underwriter, if any, of the Company's securities covered by such a registration
statement, each person who controls the Company or such underwriter within the
meaning of Section 15 of the Securities Act and the rules and regulations
thereunder, each other Holder (if any), and each of their officers, directors
and partners, and each person controlling such other Holder(s) against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration statement, prospectus, offering
circular or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statement therein not misleading in light of the circumstances under which they
were made, and will reimburse the Company and such other Holder(s) and their
directors, officers and partners, underwriters or control persons for any legal
or any other expenses reasonably incurred in connection with investigating and
defending any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by such Holder
and stated to be specifically for use therein, and provided that the maximum
amount for which such Holder shall be liable under this indemnity shall not
exceed the net proceeds received by such Holder from the sale of the Registrable
Securities pursuant to the registration statement in question. The indemnity
agreement contained in this Section 6(b) shall not apply to amounts paid in
settlement of any such claims, losses, damages or liabilities if such settlement
is effected without the consent of such Holder (which consent shall not be
unreasonably withheld).
(c) Procedure. Each party entitled to indemnification under this Section 6
(the "Indemnified Party") shall give notice to the party required to provide
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<PAGE>
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim in any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
be unreasonably withheld), and the Indemnified Party may participate in such
defense at its own expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 6 except to the extent
that the Indemnifying Party is materially and adversely affected by such failure
to provide notice. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. Each Indemnified Party shall furnish such non-privileged information
regarding itself or the claim in question as an Indemnifying Party may
reasonably request in writing and as shall be reasonably required in connection
with the defense of such claim and litigation resulting therefrom.
7. Contribution. If the indemnification provided for in Section 6 herein is
unavailable to the Indemnified Parties in respect of any losses, claims, damages
or liabilities referred to herein (other than by reason of the exceptions
provided therein), then each such Indemnifying Party, in lieu of indemnifying
such Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities as
between the Company on the one hand and any Holder on the other, in such
proportion as is appropriate to reflect the relative fault of the Company and of
such Holder in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative fault of the Company on the one hand and
of any Holder on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to information
supplied by the Company or by such Holder.
In no event shall the obligation of any Indemnifying Party to contribute
under this Section 7 exceed the amount that such Indemnifying Party would have
been obligated to pay by way of indemnification if the indemnification provided
for under Section 6(a) or 6(b) hereof had been available under the
circumstances.
The Company and the Holders agree that it would not be just and equitable
if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Holders or the underwriters were treated as one entity
for such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately preceding
paragraphs. The amount paid or payable by an Indemnified Party as a result of
the losses, claims, damages and liabilities referred to in the immediately
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<PAGE>
preceding paragraphs shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such Indemnified
Party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this section, no Holder or underwriter shall
be required to contribute any amount in excess of the amount by which (i) in the
case of any Holder, the net proceeds received by such Holder from the sale of
Registrable Securities pursuant to the registration statement in question or
(ii) in the case of an underwriter, the total price at which the Registrable
Securities purchased by it and distributed to the public were offered to the
public exceeds, in any such case, the amount of any damages that such Holder or
underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
8. Survival. The indemnity and contribution agreements contained in
Sections 6 and 7 and the representations and warranties of the Company referred
to in Section 2(d)(i) shall remain operative and in full force and effect
regardless of (i) any termination of this Agreement or the Purchase Agreement or
any underwriting agreement, (ii) any investigation made by or on behalf of any
Indemnified Party or by or on behalf of the Company, and (iii) the consummation
of the sale or successive resales of the Registrable Securities.
9. Information by Holders. Each Holder shall furnish to the Company such
information regarding such Holder and the distribution and/or sale proposed by
such Holder as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Agreement. The intended method or methods of
disposition and/or sale (Plan of Distribution) of such securities as so provided
by such Investor shall be included without alteration in the Registration
Statement covering the Registrable Securities and shall not be changed without
written consent of such Holder.
10. Replacement Certificates. The certificate(s) representing the Common
Shares held by any Investor (or then Holder) may be exchanged by such Investor
(or such Holder) at any time and from time to time for certificates with
different denominations representing an equal aggregate number of Common Shares,
as reasonably requested by such Investor (or such Holder) upon surrendering the
same. No service charge will be made for such registration or transfer or
exchange. Upon receipt by the Corporation of evidence reasonably satisfactory to
it of the loss, theft, destruction or mutilation of any certificate representing
the Preferred Shares or the Warrants, or the underlying Common Shares of any of
the foregoing, and, in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it, or upon surrender and cancellation of such
certificate if mutilated, the Corporation will make and deliver a new
certificate of like tenor and dated as of such cancellation at no charge to the
holder.
11. Transfer or Assignment. Except as otherwise provided herein, this
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The rights granted to the Investor by
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<PAGE>
the Company under this Agreement to cause the Company to register Registrable
Securities may be transferred or assigned (in whole or in part) to a transferee
or assignee of Preferred Shares, Warrants or Registrable Securities, and all
other rights granted to the Investor by the Company hereunder may be transferred
or assigned to any transferee or assignee of any Preferred Shares, Warrants or
Registrable Securities; provided in each case that the Company must be given
written notice by the Investor at the time of or within a reasonable time after
said transfer or assignment, stating the name and address of said transferee or
assignee and identifying the securities with respect to which such registration
rights are being transferred or assigned; and provided further that the
transferee or assignee of such rights agrees in writing to be bound by the
registration provisions of this Agreement.
12. Miscellaneous.
(a) Remedies. The Company and the Investor acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Agreement and to enforce specifically the terms and provisions hereof, this
being in addition to any other remedy to which any of them may be entitled by
law or equity.
(b) Jurisdiction. Each of the Company and the Investor (i) hereby
irrevocably submits to the exclusive jurisdiction of the United States District
Court, the New York State courts and other courts of the United States sitting
in the Borough of Manhattan, New York County, New York State for the purposes of
any suit, action or proceeding arising out of or relating to this Agreement and
(ii) hereby waives, and agrees not to assert in any such suit action or
proceeding, any claim that it is not personally subject to the jurisdiction of
such court, that the suit, action or proceeding is brought in an inconvenient
forum or that the venue of the suit, action or proceeding is improper. The
Company and the Investor consent to process being served in any such suit,
action or proceeding by mailing a copy thereof to such party at the address in
effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing in
this paragraph shall affect or limit any right to serve process in any other
manner permitted by law.
(c) Notices. Any notice or other communication required or permitted to be
given hereunder shall be in writing by facsimile, mail or personal delivery and
shall be effective upon actual receipt of such notice. The addresses for such
communications shall be:
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to the Company:
GenesisIntermedia.com, Inc.
5805 Sepulveda Boulevard
Van Nuys, CA 91411
Telephone: (818) 902-4100
Facsimile: (818) 902-4301
Attention: Ramy El-Batrawi
with a copy to:
Nida & Maloney, LLP
800 Anacapa Street
Santa Barbara, CA 93101
Telephone: (805) 568-1151
Facsimile: (805) 568-1955
Attention: Theodore R. Maloney
to the Investor:
Elliott Associates, L.P.
c/o Stonington Management Corporation
712 Fifth Avenue
New York, New York 10019
Telephone: 212-506-2999
Facsimile: 212-974-2093 and (212) 586-9467
Attention: Brett Cohen
and
Westgate International, L.P.
c/o Stonington Management Corporation
712 Fifth Avenue
New York, New York 10019
Telephone: 212-506-2999
Facsimile: 212-974-2093 and (212) 586-9467
Attention: Brett Cohen
with a copy to:
Kleinberg, Kaplan, Wolff & Cohen, P.C.
551 Fifth Avenue, 18th Floor
New York, New York 10176
Telephone: 212-986-6000
Facsimile: 212-986-8866
Attention: Stephen M. Schultz
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Any party hereto may from time to time change its address for notices by giving
at least five days' written notice of such changed address to the other parties
hereto.
(d) Indemnity. Each party shall indemnify each other party against any
loss, cost or damages (including reasonable attorney's fees) incurred as a
result of such parties' breach of any representation, warranty, covenant or
agreement in this Agreement, including, without limitation, any enforcement of
this indemnity.
(e) Waivers. No waiver by any party of any default with respect to any
provision, condition or requirement of this Agreement shall be deemed to be a
continuing waiver in the future or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of any party to exercise any
right hereunder in any manner impair the exercise of any such right accruing to
it thereafter. The representations and warranties and the agreements and
covenants of the Company and each Investor contained herein shall survive the
Closing.
(f) Execution in Counterpart. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement, it
being understood that all parties need not sign the same counterpart.
(g) Signatures. Facsimile signatures shall be valid and binding on each
party submitting the same.
(h) Entire Agreement; Amendment. This Agreement, together with the Purchase
Agreement, the Certificate, the Warrants and the agreements and documents
contemplated hereby and thereby, contains the entire understanding and agreement
of the parties, and may not be amended, modified or terminated except by a
written agreement signed by the Company plus the Holders of 75% of the Preferred
Shares issued under the Purchase Agreement to that date; provided that for the
purposes of this Section 12(h) the Holders of Common Shares still entitled to
registration rights under this Agreement will be deemed to still be Holders of
that number of Preferred Shares which were converted into such number of Common
Shares issued upon conversion which are still held by them.
(i) Governing Law. This Agreement and the validity and performance of the
terms hereof shall be governed by and construed in accordance with the laws of
the State of New York applicable to contracts executed and to be performed
entirely within such state, except to the extent that the law of the State of
Delaware regulates the Company's issuance of securities.
(j) Jury Trial. EACH PARTY HERETO WAIVES THE RIGHT TO A TRIAL BY JURY.
(k) Titles. The titles used in this Agreement are used for convenience only
and are not to be considered in construing or interpreting this Agreement.
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(l) No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rule of strict construction will be applied against any party.
[Signature Page Follows]
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In Witness Whereof, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
GENESISINTERMEDIA.COM, INC.
By: ______________________________
Name: Ramy El-Batrawi
Title: President
WESTGATE INTERNATIONAL, L.P.
By: MARTLEY INTERNATIONAL, INC., as
attorney-in-fact
By: ____________________________
Name: Paul E. Singer
Title: President
ELLIOTT ASSOCIATES, L.P.
By:______________________________
Name: Paul E. Singer
Title: General Partner
GENESISINTERMEDIA.COM
Contact: Robert Bleckman, Director of Investor Relations
Tel: (818) 902-4397 Fax: (818) 902-4302
E-mail: [email protected]
GENESISINTERMEDIA.COM CLOSES $10 MILLION IN ADDITIONAL
FINANCING FOR EXPANSION OF CENTERLINQ NETWORK
LOS ANGELES, CALIFORNIA - MAY 3, 2000 - GenesisIntermedia.com, Inc.
(NASDAQ:GENI) (PCX: GNS) (Frankfurt: GIA), a developer of Internet technologies
and Internet companies, today announced that, as part of an ongoing fundraising
program, it has completed its latest round of financing, consisting of a
placement of $4 million in Series B Convertible Preferred with institutional
investors, and $6 million in long-term debt. The funds will be used to expand
GENI's infrastructure, for general corporate purposes and to expand the
CENTERLINQ network.
Ramy El-Batrawi, Chairman of GenesisIntermedia.com, Inc., stated "The new
capital infusion will put us in a stronger market position, and gives us
additional resources to extend the CENTERLINQ brand, maintain our first-mover
position and bring additional talent into CENTERLINQ."
El Batrawi continues, "This tranche of financing helps us strengthen our
existing core competencies, as we continue to drive high-growth businesses and
technologies. Our incubation business model nurtured CENTERLINQ and gave it a
good start, and even though we are still in the investment phase with respect to
building the network, CENTERLINQ is beginning to influence the flows of retail
advertising, and achieve respectable market share. We intend to continue
building market share to make CENTERLINQ one of the most recognized and
sought-after advertising networks in the country. A continued investment of this
scope will be reflected in future quarterly results."
GenesisIntermedia.com, Inc. has historically derived its revenues from its
conventional media and interactive multimedia technologies. The implementation
of CENTERLINQ was the logical outgrowth of these core competencies, and now GENI
is working toward creating long-term shareholder value by building a
high-growth, technology investment platform to actively proliferate new
opportunities. While continuing to invest in growth-oriented areas as part of
its ongoing shareholder value initiative, the Company is likewise slowing down
investments in capital-intensive, low-margin segments of its business, such as
media placement, that do not provide enhanced long-term value for shareholders.
The Company may determine similar steps for other areas of its broad-based
business in the future.
<PAGE>
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About CENTERLINQ
CENTERLINQ is a rapidly expanding unified network that's accessible via the
world wide web and through public access touch-screen Internet kiosks in
shopping malls. Currently reaching more than 22,000,000 consumers per month,
CENTERLINQ attracts a diverse audience with one of the largest loyalty shopping
programs in the U.S., providing coupons, directories and quick-touch access to
high-profile national advertising partners. The kiosks also provide information
regarding the preferences and interests of the consumers who utilize them,
enabling businesses to successfully target consumers likely to purchase their
products and services in the future.
CENTERLINQ was recently honored by Microsoft Corp. (NASDAQ: MSFT) with the 2000
Retail Application Developer "RAD" award for "Best Retail Headquarters
Application" in the category of Core Retail Marketing, its second such honor
within three years.
CENTERLINQ is installed in malls in the United States with an aggressive
long-term expansion program underway. Current contracts for CENTERLINQ
deployment and operation include ones with the Taubman Company, Urban Retail
Properties and Crown American Realty.
About GENI
GenesisIntermedia.com, Inc. (GENI) is a developer of Internet technologies and
Internet companies. As it has done with CENTERLINQ, GENI leverages its strength
in operations, marketing and the deployment of traditional and new media to
advance new and innovative technologies within strategically identified market
segments.
GENI's execution of the CENTERLINQ platform, the first technology deployed
within the Company's incubation model, has resulted in rapid expansion for the
network into 20 shopping malls in the United States, with 17 of those
installations occurring in the fourth quarter of 1999.
This document contains certain forward-looking statements that are
subject to risks and uncertainties. For such statements,
GenesisIntermedia.com claims the protection of the safe harbor for
forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995. Actual events or results may differ
materially from those discussed in forward-looking statements as a
result of various factors discussed in GenesisIntermedia.com's Form
10(k) filed with the Securities and Exchange Commission.
