<PAGE>
As filed with the Securities and Exchange Commission on April 11, 2000
Registration No.
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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e4L, Inc.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
13-2658741
(I.R.S. Employer Identification Number)
15821 VENTURA BOULEVARD
5TH FLOOR
LOS ANGELES, CALIFORNIA 91436
(Address of principal executive offices)
DANIEL M. YUKELSON
EXECUTIVE VICE PRESIDENT/FINANCE AND CHIEF FINANCIAL OFFICER, AND SECRETARY
15821 VENTURA BOULEVARD
5TH FLOOR
LOS ANGELES, CALIFORNIA 91436
(Name and address of agent for service)
(818) 461-6400
(Telephone number, including area code, of agent for service)
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after the Registration Statement becomes effective.
If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, check the following box: / /
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
investment plans. Check the following box. /X/
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /_______
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /_______
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box./ /
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Proposed Proposed Amount of
Title of Securities Amount to be Maximum Maximum Registration
to be Registered Registered Offering Aggregate Fee
Price Per Share Offering Price
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<S> <C> <C> <C> <C>
Common Stock, par value
$.01 per share 8,570,393 $1.77/share (1) $15,169,595 (1) $4,005.00 (1)
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</TABLE>
(1) Based on the average of the high and low trading price of the
Registrant's Common Stock as reported by the New York Stock Exchange on
April 5, 2000, as estimated solely for the purpose of calculating the
registration fee in accordance with Rule 457(c) under the Securities Act
of 1933.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
<PAGE>
SUBJECT TO COMPLETION - APRIL 11, 2000
PROSPECTUS
e4L, INC.
15821 VENTURA BOULEVARD
5TH FLOOR
LOS ANGELES, CALIFORNIA 91436
(818) 461-6400
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8,570,393 SHARES OF COMMON STOCK
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The Selling Stockholders are offering and selling up to 8,570,393
shares of common stock. The Selling Stockholders may acquire the shares of
common stock offered pursuant to this Prospectus upon exercise of warrants or
upon conversion of Series G Convertible Preferred Stock and Series H Convertible
Preferred Stock.
The Selling Stockholders may offer the shares of common stock through
public or private transactions, on the New York Stock Exchange, at prevailing
market prices, or at privately negotiated prices.
e4L's common stock is listed on the New York Stock Exchange under the
symbol "ETV." On April 6, 2000, the closing sale price for the common stock, as
quoted on the New York Stock Exchange, was $1.75 per share.
SEE "RISK FACTORS" BEGINNING ON PAGE 4 FOR CERTAIN INFORMATION
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SHARES OF COMMON STOCK OR
DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is __________________
<PAGE>
The information in this Prospectus is not complete and may be changed.
The selling stockholders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
Prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS..........................3
RISK FACTORS...............................................................4
THE COMPANY................................................................8
USE OF PROCEEDS............................................................8
SELLING STOCKHOLDERS.......................................................9
PLAN OF DISTRIBUTION......................................................11
LEGAL MATTERS.............................................................12
EXPERTS .................................................................12
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE...........................13
WHERE YOU CAN GET MORE INFORMATION........................................13
</TABLE>
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements contained in this Prospectus discuss future
expectations, contain projections of results of operations or financial
condition or state other "forward-looking" information regarding e4L and its
subsidiaries. Those statements are subject to known and unknown risks,
uncertainties and other factors that could cause the actual results to differ
materially from those contemplated by the statements. The forward-looking
information is based on various factors and has been derived using numerous
assumptions.
Important factors that may cause e4L's actual results to differ from
projections include, for example,
- the success or failure of e4L's efforts to implement its business
strategies;
- competition for products and media time;
- the ability to raise sufficient capital to expand e4L's business;
- the ability to develop or obtain rights to successful new
products and ability to exploit alternative distribution channels
such as wholesale/retail and electronic commerce;
- the ability to attract and retain quality employees and talented
performers for e4L's direct response television programming; and
- other risks which may be described in e4L's future filings with
the SEC.
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RISK FACTORS
You should carefully consider each of the following factors and other
information in this prospectus before deciding to invest in shares of e4L's
Common Stock.
e4L HAS HISTORICALLY SUFFERED LOSSES WHICH HAS ADVERSELY AFFECTED CASH FLOW
e4L has incurred significant losses in four of its last five fiscal
years. In fiscal 1999, e4L reported a net loss of approximately $43.6 million.
For the first nine months of fiscal 2000, e4L reported a net loss of $5.6
million. Because of e4L's historical financial condition as well as other
unfavorable conditions, e4L developed a business plan and implemented new
strategies designed to increase net revenue, reduce costs and return it to
profitability. If the business plan does not adequately address the
circumstances and situations which resulted in e4L's historic poor performance
or result in profitable operations, e4L would be required to seek alternative
forms of financing, the availability of which is uncertain, or be forced to go
out of business.
THE DIRECT RESPONSE MARKETING AND ELECTRONIC COMMERCE INDUSTRIES ARE EXTREMELY
COMPETITIVE
e4L experiences extreme competition for products, customers and media
access in the direct response marketing and electronic commerce industries.
Accordingly, to be successful, e4L must:
- Accurately predict consumer needs and market conditions,
including consumers' acceptance of the Internet as a medium for
commerce and competition;
- Introduce successful products;
- Produce compelling direct response television programs and
Internet sales initiatives;
- Acquire appropriate amounts of media time;
- Manage its media time effectively;
- Fulfill customer orders timely and efficiently;
- Provide courteous and informative customer service;
- Maintain adequate vendor relationships and terms;
- Enhance successful products to generate additional sales;
- Expand the methods used to sell products, including greater use
of the Internet as a sales medium;
- Expand in existing geographic markets; and
- Integrate acquired companies and businesses efficiently.
e4L's historical operating results were primarily caused by delays in
product introductions, lack of successful products, failure to adequately
leverage its global spending and economic conditions in the Asian (including the
South Pacific Rim) market. More recently, reduced media availability and limited
new products have negatively affected e4L's operating results. e4L actively
seeks out new products, new sources of products and alternative distribution
channels, including wholesale/retail and the Internet. e4L cannot be certain
that inventors and product manufacturers will select it to market their
products. Significant delays in product introductions or a lack of successful
products could prevent e4L from selling adequate amounts of its products and
otherwise have a negative effect on e4L's business.
e4L DEPENDS UPON FOREIGN SALES FOR REVENUE, WHICH EXPOSES E4L TO ADDITIONAL
RISKS
e4L markets products to consumers in over 70 countries. In recent
years, e4L has derived approximately forty percent of its net revenue from sales
to customers outside the United States. e4L's largest international markets are
Europe and Asia, primarily Japan, Australia and New Zealand. The economic
environment in the Asian region has had and, for the foreseeable future, may
continue to have, an adverse effect on e4L. e4L's international expansion has
caused an increase in its working capital requirements due to the additional
time required to deliver products abroad and receive payment from foreign
countries.
While e4L's foreign operations have the advantage of airing direct
response television programs that have already proven successful in the United
States, as well as successful direct response television programs
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<PAGE>
produced by other direct marketing companies with limited media access and
distribution capabilities, there can be no assurance that e4L's foreign
operations will continue to generate similar revenue or operate profitability.
Competition in the international marketplace is intense. In addition, e4L is
subject to many risks associated with doing business abroad including:
- adverse fluctuations in currency exchange rates;
- transportation delays and interruptions;
- political and economic disruptions;
- the imposition of tariffs and import and export controls; and
- increased customs or local regulations.
The occurrence of any of these risks could have an adverse effect on
e4L's business.
AS e4L ENTERS NEW MARKETS, IT IS CONFRONTED WITH NEW AND COMPLEX ISSUES
As e4L enters new markets, it is faced with the uncertainty of never
having done business in that country's particular commercial, political and
social environment. Accordingly, despite e4L's best efforts, the likelihood of
success is unpredictable for reasons particular to each new market. For example,
e4L's success in any new market is based primarily on strong product acceptance
by consumers in the new market. It is also possible that, despite e4L's
apparently successful entrance into a new market, some unforeseen circumstance
could arise which would limit e4L's ability to continue to do business, operate
profitability or to expand in that new market.
e4L DEPENDS ON THE INTRODUCTION OF SUCCESSFUL NEW PRODUCTS TO BE PROFITABLE
e4L is dependent on its continuing ability to introduce successful new
products to supplement or replace existing products as they mature through their
product life cycles. e4L's five most successful products each year typically
account for a substantial amount of e4L's annual net revenue. Generally, e4L's
successful products change from year to year. Accordingly, e4L's future results
of operations depend on its ability to introduce successful products
consistently and to capture the full revenue potential of each product at all
stages of consumer marketing and distribution channels during the product's life
cycle.
In addition to a supply of successful new products, e4L's revenue and
results of operations depend on a positive customer response to its direct
response television programming and the effective management of product
inventory and media time. Consumer response to e4L's programming depends on many
variables, including the appeal of the products being marketed, the
effectiveness of the direct response program, the availability of competing
products and the timing and frequency of program airings. We cannot assure you
that e4L's programming will receive market acceptance.
e4L must have an adequate supply of inventory to meet consumer demand.
Most of e4L's products have a limited market life, so it is extremely important
that e4L generate maximum sales during this time period. If production delays or
shortages, poor inventory management or inadequate cash flow prevent e4L from
maintaining sufficient inventory, e4L could lose potential product sales, which
may never be recouped. In addition, unanticipated obsolescence of a product may
occur or problems may arise regarding regulatory, intellectual property, product
liability or other issues which adversely affect future sales of a product even
though e4L may still hold a large quantity of the product in inventory.
Accordingly, e4L's ability to maintain systems and procedures to effectively
manage its inventory is of critical importance to e4L's cash flow and results of
operations.
The average product life cycle in the United States and internationally
is less than two years. Generally, products generate their most significant
revenue in their first year of sales. In addition, e4L must adapt to market
conditions and competition as well as other factors which may cut short a
product's life cycle and adversely affect e4L's results of operations.
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<PAGE>
e4L offers a limited money-back guarantee on of its products if the
customer is not fully satisfied. Accordingly, e4L's results of operations may be
adversely affected by product returns under e4L's guarantee, its product
warranty or otherwise. Although e4L establishes reserves against product returns
which it believes are adequate based on product mix and returns history, e4L
cannot assure you that it will not experience unexpectedly high levels of
product returns which exceed the reserves for that product. If product returns
do exceed reserves, e4L's results of operations could be adversely affected.
e4L DEPENDS ON THIRD PARTY MANUFACTURERS AND SERVICE PROVIDERS FOR MANY OF ITS
ACTIVITIES
Substantially all of e4L's products are manufactured by other domestic
and foreign companies. In addition, e4L utilizes other companies to fulfill
orders placed for e4L's products and to provide telemarketing services. If e4L's
suppliers are unable, either temporarily or permanently, to deliver products to
e4L in time to fulfill sales orders, it could have a negative effect on e4L's
results of operations. Moreover, because the time from the initial approval of a
product by e4L's product development department until the first sale of a
product must be short, e4L must be able to cause its product manufacturers to
quickly produce high-quality, reasonably priced products for e4L to sell.
However, because e4L's primary product manufacturers are foreign companies which
require longer lead times for products, any delay in production or delivery
would adversely affect sales of the product and e4L's results of operations. In
addition, e4L's use of foreign manufacturers further exposes e4L to the general
risks of doing business abroad.
e4L MUST BE ABLE TO ACQUIRE AND EFFECTIVELY USE MEDIA TIME TO SELL PRODUCTS AND
BUILD BRAND AWARENESS
e4L must have access to media time to televise its direct response
television programming on cable and broadcast networks, network affiliates and
local stations. e4L purchases a significant amount of media time from cable
television and satellite networks, which assemble programming for transmission
to cable system operators. If demand for airtime increases, cable system
operators and broadcasters may limit the amount of time available for these
broadcasts. Larger multiple cable system operators also sell 'dark' time, (i.e.,
the hours during which a network does not broadcast its own programming) to
third parties which may cause prices for such media to rise. Significant
increases in the cost of media time or significant decreases in e4L's access to
media could negatively impact e4L. In addition, periodic world events may limit
e4L's access to air time and reduce the number of persons viewing e4L's direct
response programming in one or more markets, which would negatively impact e4L
for these periods.
Recently, international media suppliers have begun to negotiate for
fixed media rates and minimum revenue guarantees, each of which increase e4L's
cost of media and risk. In addition to acquiring adequate amounts of media time,
e4L's business depends on its ability to manage efficiently its acquisitions of
media time, by analyzing the need for, and making purchases of, long term media
and spot media. e4L must also properly allocate its available airtime among its
current library of direct response television programs. Whenever e4L makes
advance purchases and commitments to purchase media time, it must manage the
media time effectively, because the failure to do so could negatively affect
e4L's business. If e4L cannot use all of the media time it has acquired, it
attempts to sell its excess media time to others. However, e4L cannot assure you
that it will be able to use or sell its excess media time.
In April 1998, e4L began leasing a twenty-four hour transponder on the
Eutelstat Satellite, which broadcasts across Europe. e4L incurred significant
start-up costs in connection with the transponder lease. If e4L is unable to use
effectively or sell the remaining transponder media time, e4L's future
operations could be negatively affected. During the year ended March 31, 1999,
e4L classified a portion of this contract as unfavorable and recorded a $5.3
million unusual charge. e4L in presently in the process of subleasing a portion
of the satellite transponder's capacity.
e4L HAS BEEN SUBJECT TO NUMEROUS LAWSUITS AND REGULATORY ACTIONS
There have been many lawsuits against companies in the direct marketing
industry. In recent years, e4L has been involved in significant legal
proceedings and regulatory actions by the Federal Trade Commission and Consumer
Products Safety Commission, which have resulted in significant costs and
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<PAGE>
charges to e4L. In addition, e4L, its wholly owned subsidiary, Positive Response
Television, Inc. and Positive Response's chief executive officer are subject to
FTC consent orders which require them to submit periodic compliance reports to
the FTC. Any additional FTC or CPSC violations or significant new litigation
could have an adverse effect on e4L's business.
e4L IS EXPOSED TO PRODUCT LIABILITY CLAIMS BY CONSUMERS
Products sold by e4L may expose it to potential liability from damage
claims by users of the products. In certain instances, e4L is able to obtain
contractual indemnification rights against these liabilities from the
manufacturers of the products. In addition, e4L generally requires its
manufacturers to carry product liability insurance. However, e4L cannot be
certain that manufacturers will maintain this insurance or that their coverage
will be adequate to cover all claims. In addition, e4L cannot be certain that it
will be able to maintain its insurance coverage or obtain additional coverage on
acceptable terms, or that its insurance will provide adequate coverage against
all claims.
e4L COMPETES WITH MANY OTHER TYPES OF COMPANIES FOR CUSTOMERS
e4L competes directly with companies which generate sales from direct
response television programs and other direct marketing and electronic commerce
companies. e4L also competes with a large number of consumer product retailers,
many of which have substantially greater financial, marketing and other
resources than e4L. Some of these retailers have recently begun, or indicated
that they intend to begin, selling products through direct response marketing
methods, including sales in various e-commerce channels, such as the Internet.
e4L also competes with companies that make imitations of e4L's products at
substantially lower prices, which may be sold in department stores, pharmacies,
general merchandise stores and through magazines, newspapers, direct mail
advertising, catalogs and the Internet.
e4L PLACES GREAT RELIANCE ON ITS KEY PERSONNEL
e4L's executive officers have substantial experience and expertise in
direct response sales and marketing, electronic commerce and media. In addition,
e4L is highly dependent on certain of its employees responsible for product
development and production of direct response television programs. If any of
these individuals leave e4L, e4L's business could be negatively affected.
e4L's BUSINESS IS AFFECTED BY SEASONALITY ISSUES
e4L's revenue varies throughout the year. e4L's revenue has
historically been highest in its third and fourth fiscal quarters and lower in
its first and second fiscal quarters due to fluctuations in the number of
television viewers. These seasonal trends have been and may continue to be
affected by the timing and success of new product offerings and the potential
growth in e4L's electronic commerce businesses.
e4L's STOCK PRICE MAY BE ADVERSELY AFFECTED BY SALES OF SHARES OF COMMON STOCK
UNDERLYING ITS CONVERTIBLE SECURITIES
Sales of a substantial number of shares of e4L's Common Stock in the
public market could adversely affect the market price of Common Stock. As of
April 6, 2000, there are approximately 42.6 million shares of Common Stock
issued and outstanding, nearly all of which are freely tradable. In addition,
approximately 43.1 million shares of Common Stock are currently reserved for
issuance upon the exercise of outstanding options and warrants and the
conversion of convertible preferred stock. For example, approximately 15.6
million shares of Common Stock may be issued to holders of e4L's Series D
Convertible Preferred Stock (based on a conversion price of $1.073125 per share)
and approximately 5.5 million shares of Common Stock may be issued to holders of
e4L's Series E Convertible Preferred Stock (based on a conversion price of $1.50
per share and not including any shares of e4L Common Stock that are issuable to
holders of Series E Convertible Preferred Stock in satisfaction of the one-year
4% premium payable upon conversion). In addition, shares of Series G Convertible
Preferred Stock and Series H Convertible Preferred Stock are convertible into
shares of Common Stock at an initial conversion price equal to $2.9575 per
share. Based on this initial conversion price of $2.9575 per share, the Series G
Convertible Preferred Stock and Series H Convertible Preferred Stock, which has
an aggregated stated value of $10 million, would be convertible
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<PAGE>
into approximately 3.4 million shares of Common Stock. Beginning on December 21,
2000 (and on each six-month anniversary thereafter), the conversion price will
be reset to the lesser of (i) $2.9575 per share or (ii) the average of the ten
lowest trade prices on each of ten trading days on which the lowest trade prices
occurred out of the 20 trading days immediately preceding a reset date. For
example, if this average trading price equaled $2.00 per share, the Series G
Convertible Preferred Stock and Series H Convertible Preferred Stock would be
convertible into 5,000,000 shares of e4L Common Stock (excluding conversion of
unpaid dividends).
THE COMPANY
e4L is principally engaged in the use of direct response transactional
television programming, also known as infomercials, wholesale/retail
distribution and electronic commerce, to sell consumer products worldwide. e4L
manages all phases of direct marketing for the majority of its consumer products
in both the United States and international markets, including product selection
and development, manufacturing by third parties, production and broadcast of
direct response programs, order processing and fulfillment and customer service.
e4L is engaged in direct marketing of consumer products in the United
States through its wholly-owned subsidiary, Quantum North America, Inc.
(formerly Media Arts International, Ltd. and d/b/a e4L North America), which e4L
acquired in 1986, and internationally through its wholly-owned subsidiaries:
Quantum International Limited, which e4L acquired in 1991; Quantum Prestige
Limited, through which e4L operates in New Zealand and in all Asian countries
other than Japan; Quantum International (Japan) Company Limited, which e4L
formed in June 1995; and Suzanne Paul Holdings Pty Limited and its operating
subsidiaries which e4L acquired in July 1996. e4L produces television
programming through e4L Television (formerly d/b/a DirectAmerica Corporation),
which e4L acquired in October 1995.
e4L is a Delaware corporation, with its principal executive offices
located at 15821 Ventura Boulevard, 5th Floor, Los Angeles, California 91436,
and its telephone number is (818) 461-6400 and facsimile number is (818)
461-6525.
USE OF PROCEEDS
e4L will not receive any proceeds from the sale of the shares of Common
Stock offered by the Selling Stockholders pursuant to this Prospectus. The
Selling Stockholders will remit to e4L the exercise price of the warrants in
connection with an exercise of such securities (other than cashless exercises).
e4L will use the proceeds from such warrant exercises, if any, for working
capital purposes.
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SELLING STOCKHOLDERS
The following table sets forth the name of each Selling Stockholder,
the number of shares of Common Stock owned by each Selling Stockholder as of
April 6, 2000, and the number of shares of Common Stock which may be offered for
sale pursuant to this Prospectus by each Selling Stockholder. The Offered Shares
may be offered from time to time by each Selling Stockholder named below. See
"Plan of Distribution." However, the Selling Stockholders are under no
obligation to sell all or any portion of the shares of Common Stock offered
hereby, nor is any Selling Stockholder obligated to sell such shares of Common
Stock immediately under this Prospectus. Because the Selling Stockholders may
sell all or part of the shares of Common Stock offered hereby, no estimate can
be given as to the number of shares of Common Stock that will be held by each
Selling Stockholder upon termination of any offering made hereby.
Pursuant to Rule 416(a) under the Securities Act, the shares of Common
Stock issuable in respect of the warrants are subject to adjustment by reason of
stock splits, stock dividends and other similar transactions in the Common
Stock.
<TABLE>
<CAPTION>
Common Shares
Owned After Offering (1)
Number of Common -------------------------
Shares Owned Common Shares Percent of
Name of Selling Stockholder Prior to Offering Offered Hereby Number Outstanding
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<S> <C> <C> <C> <C>
Advantage Fund II Ltd. (2)(3) 2,082,500(4) 4,887,236(4) 0 0
Koch Investment Group Limited (2)(5) 2,082,500(4) 3,258,157(4) 0 0
Foothill Capital Corporation (6) 325,000 325,000 0 0
Robert K. Schachter (6) 57,000 57,000 0 0
Thomas J. Greisel (6) 14,250 14,250 0 0
David Schachter (6) 11,280 11,280 0 0
Andrew Shayne (6) 11,280 11,280 0 0
Kevin Pelletier (6) 1,190 1.190 0 0
Financial West Group (6) 5,000 5,000 0 0
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</TABLE>
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(1) Assumes the sale of all shares of Common Stock offered hereby. e4L is
not aware of any plans of the Selling Stockholders to dispose of their
Common Stock.
(2) Pursuant to Subscription Agreements, dated as of March 21, 2000,
Advantage Fund II Ltd. and Koch Investment Group Limited (collectively,
the "Preferred Investors") purchased an aggregate of 5,000 shares of
Series G Convertible Preferred Stock, an aggregate of 5,000 shares of
Series H Convertible Preferred Stock (together with the Series G
Convertible Preferred Stock, the "Preferred Stock") and warrants to
acquire 659,340 shares of Common Stock (the "Preferred Stock
Warrants").
(3) Genesee International, Inc., the investment manager of Advantange Fund
II Ltd., may be deemed to beneficially own the shares of Common Stock
offered by Advantage through its shared dispositive and voting power
over such shares. Mr. Donald R. Morken, the controlling stockholder of
Genesee International, may be deemed to control the exercise by Genesee
International of such shared dispositive and voting power over such
shares.
(4) Represents pro rata allocation between the Preferred Investors of
7,486,053 shares of Common Stock which may be issued upon conversion of
the Preferred Stock and conversion of two years of accrued dividends on
the Preferred Stock and 659,340 shares of Common Stock issuable upon
exercise of the Preferred Stock Warrants which e4L is registering for
resale hereunder pursuant to registration rights agreements between e4L
and each of the Preferred Investors. Pursuant to the terms of the
Certificates of Designations of the Preferred Stock, the actual number
of shares of Common Stock
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issuable upon conversion of the Preferred Stock will equal the number
of shares of Common Stock as is determined by dividing (i) the
aggregate stated value of the Preferred Stock being converted by (ii)
the conversion price then in effect, which shall initially be set at
$2.9575 per share of Common Stock (the "Fixed Conversion Price").
$2.9575 equals 130% of the ten day average closing price of the Common
Stock prior to March 21, 2000, the closing date of the transaction.
Beginning on December 21, 2000 (and on each six-month anniversary
thereafter, each a "Reset Date"), the conversion price will be reset to
the lesser of (i) the Fixed Conversion Price or (ii) the average of the
ten lowest trade prices on each of ten trading days out of the 20
trading days on which the lowest trade prices occurred immediately
preceding a Reset Date. Following December 21, 2000, if the Common
Stock trades at greater than $4.50 per share for any 20 consecutive
trading days, then the conversion price of the Series G Convertible
Preferred Stock shall be $2.9575 per share thereafter. Following
December 21, 2000, if the Common Stock trades at greater than $5.50 per
share for any 20 consecutive trading days, then the conversion price of
the Series H Convertible Preferred Stock shall be $2.9575 per share
thereafter. The 7,486,053 shares of Common Stock which may be issued
upon conversion of the Preferred Stock include 3,834,320 additional
shares of Common Stock which will be issuable only in the event a reset
price is less than the Fixed Conversion Price.
The Preferred Investors may not convert Preferred Stock or exercise
Preferred Stock Warrants to the extent that the shares of Common Stock
to be received by a Preferred Investor upon such conversion or exercise
would cause the Preferred Investors to beneficially own more than 4.9%
of the Common Stock. Therefore, the aggregate number of shares shown as
owned prior to the offering excludes shares in excess of such 4.9%
limitation, and the aggregate number of shares offered hereby and which
a Preferred Investor may sell pursuant to this Prospectus may exceed
the number of shares of Common Stock the Preferred Investors may
otherwise beneficially own at any one time as determined pursuant to
Section 13(d) of the Exchange Act.
(5) Koch Industries, Inc., the indirect parent company of Koch Investment
Group Limited, may be deemed to beneficially own the shares of Common
Stock offered by Koch Investment Group Limited through its shared
dispositive and voting power over such shares. Messrs. Charles Koch and
David Koch, the majority stockholders of Koch Industries, may be deemed
to control the exercise by Koch Industries of such shared dispositive
and voting power over such shares.
(6) Consists of shares of Common Stock issuable upon exercise of warrants.
-10-
<PAGE>
PLAN OF DISTRIBUTION
The shares of Common Stock are being offered on behalf of each of the
Selling Stockholders and e4L will not receive any proceeds from the Offering.
The shares of Common Stock may be sold or distributed from time to time by each
Selling Stockholder, or by pledgees, donees or transferees of, or other
successors in interest to, each Selling Stockholder, directly to one or more
purchasers (including pledgees) or through brokers, dealers, agents or
underwriters who may act solely as agent or may acquire such shares as
principals, at market prices prevailing at the time of sale, at prices related
to such prevailing market prices, at negotiated prices, or at fixed prices,
which may be subject to change. The sale of the shares of Common Stock may be
effected in one or more of the following methods: (i) ordinary brokers'
transactions, which may include long or short sales; (ii) transactions involving
cross or block trades or otherwise on the New York Stock Exchange; (iii)
purchases by brokers, dealers or underwriters as principal and resale by such
purchasers for their own accounts pursuant to this Prospectus; (iv) "at the
market" to or through market makers or into established trading markets,
including direct sales to purchasers or sales effected through agents; (v) or
any other exchange on which the Common Stock is listed (including any
over-the-counter listing service); (vi) any combination of the foregoing, or by
any other legally available means. In addition, each Selling Stockholder or its
successor in interest may enter into hedging transactions with broker-dealers
who may engage in short sales of shares of Common Stock in the course of hedging
the position they assume with such Selling Stockholder. Each Selling Stockholder
or its successor in interest may also enter into option or other transactions
with broker-dealers that require the delivery by such broker-dealers of the
shares of Common Stock, which shares of Common Stock may be resold thereafter
pursuant to this prospectus. There can be no assurance that all or any of the
shares of Common Stock will be issued to, or sold by, each Selling Stockholder.
Brokers, dealers, underwriters or agents participating in the sale of
the shares of Common Stock as agents may receive compensation in the form of
commissions, discounts or concessions from each Selling Stockholder and/or
purchasers of the Common Stock for whom such broker-dealers may act as agent, or
to whom they may sell as principal, or both (which compensation to a particular
broker-dealer may be less than or in excess of customary commissions). Each
Selling Stockholder and any broker-dealers or other persons who act in
connection with the sale of the Common Stock hereunder may be deemed to be
"underwriters" within the meaning of the Securities Act, and any commission they
receive and proceeds of any sale of such shares may be deemed to be underwriting
discounts and commissions under the Securities Act. Neither e4L nor any of the
Selling Stockholders can presently estimate the amount of such compensation. e4L
knows of no existing arrangements between any Selling Stockholders and any other
stockholders, broker, dealer, underwriter or agent relating to the sale or
distribution of the shares of Common Stock.
A Selling Stockholder may decide not to sell any shares. e4L cannot
assure you that any Selling Stockholder will use this prospectus to sell any or
all of the shares of Common Stock. Any shares covered by this prospectus which
qualify for sale pursuant to Rule 144 or Rule 144A of the Securities Act may be
sold under Rule 144 or Rule 144A rather than pursuant to this prospectus. In
addition, a Selling Stockholder may transfer, devise or gift the shares by other
means not described in this prospectus.
Each Selling Stockholder and any other persons participating in the
sale or distribution of the Common Stock will be subject to applicable
provisions of the Exchange Act and the rules and regulations thereunder, which
provisions may limit the timing of purchases and sales of any of the Common
Stock by any Selling Stockholder or any other such persons. The foregoing may
affect the marketability of the Common Stock.
e4L will pay substantially all of the expenses incident to the
registration, offering and sale of the Common Stock to the public other than
commissions or discounts of underwriters, broker-dealers or agents. e4L has also
agreed to indemnify each Selling Stockholder and certain related persons against
certain liabilities, including liabilities under the Securities Act.
-11-
<PAGE>
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby has been
passed upon for e4L by e4L's outside legal counsel, Klehr, Harrison, Harvey,
Branzburg & Ellers LLP, Philadelphia, Pennsylvania.
EXPERTS
The consolidated financial statements and schedule of e4L, Inc.
appearing in e4L's Annual Report (Form 10-K) for the year ended March 31, 1999
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon included therein and incorporated herein by reference. Such
consolidated financial statements and schedule are incorporated herein by
reference in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
-12-
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows companies to "incorporate by reference" the information
filed with them, which means that e4L can disclose important information to you
by referring you to those documents. The information incorporated by reference
is considered to be part of this Prospectus and information e4L files later with
the SEC will automatically update and supersede this information. e4L
incorporates by reference the documents listed below and any future filings it
will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange
Act:
(a) e4L's Annual Report on Form 10-K for the fiscal year ended March
31, 1999;
(b) e4L's Quarterly Reports on Form 10-Q for the quarters ended June
30, 1999, September 30, 1999 and December 31, 1999;
(c) e4L's Current Reports on Form 8-K dated June 8, 1999, August 30,
1999, September 22, 1999 and March 23, 2000;
(d) e4L's Proxy Statements on Schedule 14A, dated August 23, 1999 and
December 16, 1999; and
(e) the description of e4L's Common Stock contained in e4L's
Registration Statement on Form 8-A, dated August 28, 1990,
including all amendments and reports filed for the purpose of
updating such description.
This Prospectus is part of a registration statement e4L filed with the
SEC. You should rely only on the information or representations provided in this
Prospectus. e4L has authorized no one to provide you with different information.
e4L is not offering or selling these securities in any state where the offer or
sale is not permitted. You should not assume that the information in this
Prospectus is accurate as of any date other than the date stated on the front
cover page of this Prospectus.
e4L will provide without charge to each person to whom this Prospectus
is delivered, upon written or oral request, a copy of any or all of such
documents which are incorporated herein by reference. You should direct your
requests for copies to e4L, Inc., 15821 Ventura Boulevard, 5th Floor, Los
Angeles, California 91436; Attention: Investor Relations, telephone number
(818) 461-6400, facsimile number (818) 461-6525.
WHERE YOU CAN GET MORE INFORMATION
At your request, e4L will provide you, without charge, a copy of any
exhibits to e4L's Registration Statement. If you would like more information,
write or call e4L at:
e4L, Inc.
Attention: Investor Relations
15821 Ventura Boulevard, 5th Floor
Los Angeles, California 91436
Telephone: (818) 461-6555
Facsimile: (818) 461-6530
e4L's fiscal year ends on March 31. e4L intends to provide to its
stockholders annual reports containing audited financial statements and other
appropriate reports. In addition, e4L files annual, quarterly and current
reports, proxy statements and other information with the SEC. You may read and
copy any reports, statements or other information e4L files at the SEC's public
reference room in Washington, D.C. You can request copies of these documents,
upon payment of a duplicating fee, by writing to the SEC. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the public reference
rooms. e4L's SEC filings are also available to the public on the SEC's Internet
site at http\\www.sec.gov.
-13-
<PAGE>
No dealer, salesman or any other person has been authorized to give any
information or to make any representations not contained in this Prospectus in
connection with the offering described herein and, if given or made, such
information or representation must not be relied upon as having been authorized
by e4L or the Selling Stockholders. This Prospectus does not constitute an offer
to sell or a solicitation of an offer to buy a security other than the shares of
Common Stock offered hereby, nor does it constitute an offer to sell or a
solicitation of an offer to buy any of the securities offered hereby in any
jurisdiction to any person to whom it is unlawful to make such offer or
solicitation in such jurisdiction. Neither the delivery of this Prospectus nor
any sale made hereunder shall, under any circumstances, create any implication
that the information contained herein is correct as of any date subsequent to
the date hereof.
8,570,393 Shares of Common Stock
e4L, INC.
-------
PROSPECTUS
-------
April 11, 2000
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is an itemized statement of the estimated amounts of all
expenses payable by e4L in connection with the registration of the shares of
Common Stock offered hereby, other than underwriting discounts and commissions:
<TABLE>
<CAPTION>
<S> <C>
Registration Fee--Securities and Exchange Commission....... $ 4,005.00
*Blue Sky fees and expenses................................. $ 0
*Accountants' fees and expenses ............................ $ 5,000.00
*Legal fees and expenses ................................... $15,000.00
*Printing and EDGAR expenses .............................. $ 2,000.00
*Miscellaneous ............................................ $ 2,000.00
Total ............................................. $29,005.00
</TABLE>
- ------------------
* Estimate
Item 15. Indemnification of Directors and Officers.
e4L has adopted in its Certificate of Incorporation and Bylaws the
provisions of Section 102(b)(7) of the Delaware General Corporation Law which
eliminate or limit the personal liability of a director of e4L or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except that this provision shall not eliminate or limit the liability of a
director for any breach of the director's duty of loyalty to e4L or its
stockholders, for acts or omissions not in good faith or which involve
intentional misconduct or a known violation of the law, under Section 174 of the
Delaware General Corporation Law, or for any transaction from which the director
derived an improper personal benefit.
Further, e4L's Certificate of Incorporation and Bylaws provide that e4L
shall indemnify all persons whom it may indemnify pursuant to Section 145 of the
Delaware Corporation Law to the full extent permitted therein. Section 145
provides, subject to various exceptions and limitations, that e4L may indemnify
its directors or officers if such director or officer is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that he is or was a director or officer of e4L, or is or was
serving at the request of e4L as a director or officer of another corporation,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of e4L, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The determination of whether indemnification
is proper under the circumstances, unless made by a court, shall be made by a
majority of a quorum of disinterested members of the Board of Directors,
independent legal counsel or the stockholders of e4L. In addition, e4L shall
indemnify its directors or officers to the extent that they have been successful
on the merits or otherwise in defense of any such action, suit or proceeding, or
in the defense of any claim, issue or matter therein, against expenses
(including attorneys' fees) actually and reasonably incurred by them in
connection therewith.
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Schedule of Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
- ---------- -------
<S> <C>
4.1(1) Certificate of Designations of the Series G Convertible
Preferred Stock.
4.2(1) Certificate of Designations of the Series H Convertible
Preferred Stock.
4.3(1) Form of Warrant issued in connection with the Series G
Convertible Preferred Stock and Series H Convertible Preferred
Stock.
4.4(2) Form of Warrant issued to Foothill Capital Information.
4.5(2) Form of Warrant issued to certain affiliates of Reedland
Capital Partners.
5.1(2) Opinion and Consent of Klehr, Harrison, Harvey, Branzburg &
Ellers LLP.
10.1(1) Form of Subscription Agreement, dated as of March 21, 2000,
between e4L and the Preferred Investors.
10.2(1) Form of Registration Rights Agreement, dated as of March 21,
2000, between e4L and the Preferred Investors.
23.1(2) Consent of Ernst & Young LLP, independent auditors.
</TABLE>
- ----------------
(1) Incorporated by reference from e4L's Current Report on Form 8-K dated March
23, 2000.
(2) Filed herewith.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(i) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(A) to include any prospectus required by section 10(a)(3) of
the Securities Act;
(B) to reflect in the Prospectus any facts or events arising
after the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the Registration
Statement.
(C) to include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement; provided,
however, that paragraphs (1)(i) and (1)(ii) do not apply if the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the registrant pursuant to Section 13 or
Section 15(d) of the Exchange Act that are incorporated by reference in the
Registration Statement.
II-2
<PAGE>
(ii) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(iii) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(iv) For purposes of determining any liability under the Securities Act,
each filing of the registrant's annual report pursuant to Section 13(a) or 15(d)
of the Exchange Act that is incorporated by reference in the Registration
Statement shall be deemed to be a new registration statement relating to the
securities offered herein, and the offering of such securities at that time
shall be deemed to be the initial BONA FIDE offering thereof.
(b) Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Los Angeles, State of California, on this 7th
day of April, 2000.
e4L, INC.
BY:/s/ Stephen C. Lehman
---------------------
Stephen C. Lehman, Chairman of the Board of
Directors and Chief Executive Officer
POWER OF ATTORNEY
Each of the undersigned officers and directors of e4L, Inc. whose
signature appears below hereby appoints Stephen C. Lehman and Daniel M. Yukelson
as true and lawful attorney-in-fact for the undersigned with full power of
substitution, to execute in his name and on his behalf in each capacity stated
below, any and all amendments (including post-effective amendments) to this
Registration Statement as the attorney-in-fact shall deem appropriate, and to
cause to be filed any such amendment (including exhibits thereto and other
documents in connection therewith) to this Registration Statement with the
Securities and Exchange Commission, as fully and to all intents and purposes as
such person might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact, or any of them, may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on this 7th day of April, 2000.
<TABLE>
<CAPTION>
Signature Title(s)
--------- --------
<S> <C>
/s/ Stephen C. Lehman Chairman of the Board of Directors and
- --------------------- Chief Executive Officer
Stephen C. Lehman
/s/ Daniel M. Yukelson Executive Vice President/Finance and Chief
- ---------------------- Financial Officer, and Secretary
Daniel M. Yukelson
/s/ Stuart D. Buchalter Director
- -----------------------
Stuart D. Buchalter
/s/ David E. Salzman Director
- --------------------
David E. Salzman
/s/ Andrew S. Schuon Director
- --------------------
Andrew M. Schuon
/s/ Eric R. Weiss Vice Chairman of the Board of Directors
- ----------------- and Chief Operating Officer
Eric R. Weiss
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
Exhibit No.
- -----------
<S> <C>
4.4 Form of Warrant issued to Foothill Capital Corporation.
4.5 Form of Warrant issued to certain affiliates of Reedland Capital
Partners.
5.1 Opinion and Consent of Klehr, Harrison, Harvey, Branzburg &
Ellers LLP.
23.1 Consent of Ernst & Young LLP, independent auditors.
</TABLE>
<PAGE>
EXHIBIT 4.4
VOID AFTER 5:00 P.M. NEW YORK CITY
TIME ON FEBRUARY 8, 2005
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR THE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
JURISDICTION. THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED OR
SOLD IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER APPLICABLE SECURITIES LAWS OR UNLESS OFFERED, SOLD OR
TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THOSE LAWS.
Right to Purchase 325,000 Shares of
Common Stock, par value $.01 per share
Date: February 8, 2000
e4L, INC.
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, FOOTHILL CAPITAL CORPORATION
or its registered assigns, is entitled to purchase from e4L, Inc., a corporation
organized under the laws of the State of Delaware (the "COMPANY"), at any time
or from time to time during the period specified in Section 2 hereof, Three
Hundred Twenty-Five Thousand (325,000) fully paid and nonassessable shares of
the Company's common stock, par value $.01 per share (the "COMMON STOCK"), at an
exercise price per share (the "EXERCISE PRICE") equal to $2.5625. The number of
shares of Common Stock purchasable hereunder (the "WARRANT SHARES") and the
Exercise Price are subject to adjustment as provided in Section 4 hereof.
This Warrant is subject to the following terms, provisions, and
conditions:
1. MANNER OF EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR
SHARES. Subject to the provisions hereof, including, without limitation, the
limitations contained in Section 7 hereof, this Warrant may be exercised by the
holder hereof, in whole or in part, by the surrender of this Warrant, together
with a completed exercise agreement in the form attached hereto (the "EXERCISE
AGREEMENT"), to the Company during normal business hours on any business day at
the Company's principal executive offices (or such other office or agency of the
Company as it may designate by notice to the holder hereof), and upon (i)
payment to the Company in cash, by certified or official bank check or by wire
transfer for the account of the Company, of the Exercise Price for the Warrant
Shares specified in the Exercise Agreement or (ii) if the holder is permitted to
effect a Cashless Exercise (as defined in Section 10(c) hereof) pursuant to
Section 10(c) hereof, delivery to the Company of a written notice of an election
to effect a Cashless Exercise for the Warrant Shares specified in the Exercise
Agreement. The Warrant Shares so purchased shall be deemed to be issued to the
holder hereof, as the record owner of such shares, as of the close of business
on the date on which this Warrant shall have been surrendered, the completed
Exercise Agreement shall have been deliv ered, and payment shall have been made
for such shares as set forth above or, if such date is not a business date, on
the next succeeding business date. Certificates for the Warrant Shares so
purchased, representing the aggregate number of shares specified in the Exercise
Agreement, shall be delivered to the holder hereof within a reasonable time
after this Warrant shall have been so exercised (the "DELIVERY PERIOD"). The
certificates so delivered shall be in such denominations as may be requested by
the holder hereof and shall be registered in the name of such holder or such
other name as shall be designated by such holder. If this Warrant shall have
been exercised only in part, then, unless this Warrant has expired, the Company
shall,
<PAGE>
at its expense, at the time of delivery of such certificates, deliver to the
holder a new Warrant representing the number of shares with respect to which
this Warrant shall not then have been exercised.
2. Period of Exercise.
2.1 This Warrant is exercisable, at any time or from time to time
on or after the date of initial issuance of this Warrant (the "ISSUE DATE") and
before 5:00 p.m., New York City time on, February 7, 2005 (the "EXERCISE
PERIOD").
2.2 In the event that any portion of this Warrant is unexercised
as of the end of the Exercise Period (the "EXPIRATION DATE") such portion of
this Warrant shall be deemed to have been converted automatically into shares of
Common Stock pursuant to the terms of Section 10(c) hereof immediately prior to
the close of business (Los Angeles time) on the Expiration Date (or, in the
event that the Expiration Date is not a business day, the immediately preceding
business day) (the "Automatic Conversion Date") and the person entitled to
receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the holder of record of such Warrant Shares as of
the close of business (Los Angeles time) on such Automatic Conversion Date. This
Warrant shall be deemed to be surrendered to the Company on the Automatic
Conversion Date, by virtue of this Section 2(b) and without any action by the
holder of this Warrant or any other person. As promptly as practicable on or
after the Automatic Conversion Date and in any event within thirty (30) days
thereafter, the Company at its expense shall issue and deliver to the person or
persons entitled to receive the same a certificate or certificates for the
number of Warrant Shares issuable upon such conversion.
3. CERTAIN AGREEMENTS OF THE COMPANY. The Company hereby
covenants and agrees as follows:
3.1 SHARES TO BE FULLY PAID. All Warrant Shares will, upon
issuance in accordance with the terms of this Warrant, be validly issued, fully
paid, and nonassessable and free from all taxes, liens, claims and encumbrances.
3.2 RESERVATION OF WARRANT SHARES. 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 exercise of the Warrant, a number
of shares equal to the sum of (i) 325,000 and (ii) the number of its shares of
Common Stock as shall from time to time be sufficient to effect the exercise of
the Warrant at the then applicable Exercise Price, and if at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient to
effect the exercise of the Warrant, the Company will take such corporate action
as may, in the opinion of its 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
reasonable best efforts to obtain the requisite stockholder approval. The
Company or, if appointed, the transfer agent for the Common Stock (the "Transfer
Agent") and every subsequent transfer agent for any shares of the Company's
capital stock issuable upon the exercise of any of the rights of purchase
aforesaid will be irrevocably authorized and directed at all times to reserve
such number of authorized shares as shall be required for such purpose. The
Company will keep a copy of this Warrant on file with the Transfer Agent and
with every subsequent transfer agent for any shares of the company's capital
stock issuable upon the exercise of the rights of purchase represented by the
Warrant. The Company will furnish such Transfer Agent a copy of all notices of
adjustments and certificates related thereto, transmitted to each holder
pursuant to Section 8 hereof. If the effect of any such adjustment is to reduce
the Exercise Price below the then par value (if any) of the Warrant Shares, the
Company will take any corporate action which may, in the opinion of its counsel,
be necessary in order that the Company may validly and legally issue fully paid
and nonassessable Warrant Shares at the Exercise Price as so adjusted. The
Company covenants that all Warrant Shares which may be issued upon exercise of
the Warrant will, upon issue, be fully paid, nonassessable, free of preemptive
rights and free from all taxes, liens, charges and security interests with
respect to the issue thereof. If and so long as the outstanding shares of Common
Stock may be listed on any securities exchange in the United States, the Company
shall use its reasonable best efforts
2
<PAGE>
to cause all Warrant Shares reserved for issuance upon exercise of the Warrant
to be listed on each such exchange upon official notice of issuance upon such
exercise.
3.3 LISTING; REGISTRATION. The Company shall promptly secure the
listing of the shares of Common Stock issuable upon exercise of this Warrant
upon each national securities exchange or automated quotation system, if any,
upon which shares of Common Stock are then listed or become listed (subject to
official notice of issuance upon exercise of this Warrant) and shall maintain,
so long as any other shares of Common Stock shall be so listed, such listing of
all shares of Common Stock from time to time issuable upon the exercise of this
Warrant; and the Company shall so list on each national securities exchange or
automated quotation system, as the case may be, and shall maintain such listing
of, any other shares of capital stock of the Company issuable upon the exercise
of this Warrant if and so long as any shares of the same class shall be listed
on such national securities exchange or automated quotation system. The holder
of this Warrant shall be entitled to the benefits of such registration rights in
respect of the Warrant Shares as are set forth in a Registration Rights
Agreement, dated as of the date hereof, between Foothill Capital Corporation and
the Company.
3.4 SUCCESSORS AND ASSIGNS. This Warrant will be binding upon any
entity succeeding to the Company by merger, consolidation, or acquisition of all
or substantially all of the Company's assets.
4. ANTIDILUTION PROVISIONS. The Exercise Price and the number of
Warrant Shares issuable hereunder and for which this Warrant is then exercisable
pursuant to Section 2 hereof shall be subject to adjustment from time to time as
provided in this Section 4.
In the event that any adjustment of the Exercise Price as required
herein results in a fraction of a cent, such Exercise Price shall be rounded up
or down to the nearest cent.
4.1 ADJUSTMENT OF EXERCISE PRICE. Except as otherwise provided in
Sections 4(c) and 4(e) hereof, if and whenever after the Issue Date the Company
issues or sells, or in accordance with Section 4(b) hereof is deemed to have
issued or sold, any shares of Common Stock for no consideration or for a
consideration per share less than the Market Price (as hereinafter defined) on
the date of issuance (a "Dilutive Issuance"), then effective immediately upon
the Dilutive Issuance, the Exercise Price will be adjusted in accordance with
the following formula:
E' = E x O + P/M
---------
CSDO
where:
E' = the adjusted Exercise Price;
E = the then current Exercise Price;
M = the then current Market Price
(as defined in Section 4(1));
O = the number of shares of Common Stock
outstanding immediately prior to
the Dilutive Issuance;
P = the aggregate consideration, calculated as
set forth in Section 4(b) hereof, received
by the Company upon such Dilutive Issuance;
and
CSDO = the total number of shares of Common Stock
Deemed Outstanding (as defined in Section
4(j)) immediately after the Dilutive
Issuance.
4.2 EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes of
determining the adjusted Exercise Price under Section 4(a) hereof, the following
will be applicable:
(a) ISSUANCE OF RIGHTS OR OPTIONS. If the Company in any
manner issues or grants any warrants, rights or options, whether or not
immediately exercisable, to subscribe for or to purchase
3
<PAGE>
Common Stock or other securities exercisable, convertible into or exchangeable
for Common Stock ("CONVERTIBLE SECURITIES") (such warrants, rights and options
to purchase Common Stock or Convertible Securities are hereinafter referred to
as "OPTIONS") and the price per share for which Common Stock is issuable upon
the exercise of such Options is less than the Market Price on the date of
issuance ("BELOW MARKET OPTIONS"), then the maximum total number of shares of
Common Stock issuable upon the exercise of all such Below Market Options
(assuming full exercise, conversion or exchange of Convertible Securities, if
applicable) will, as of the date of the issuance or grant of such Below Market
Options, be deemed to be outstanding and to have been issued and sold by the
Company for such price per share. For purposes of the preceding sentence, the
"price per share for which Common Stock is issuable upon the exercise of such
Below Market Options" is determined by dividing (i) the total amount, if any,
received or receivable by the Company as consideration for the issuance or
granting of all such Below Market Options, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the exercise of
all such Below Market Options, plus, in the case of Convertible Securities
issuable upon the exercise of such Below Market Options, the minimum aggregate
amount of additional consideration payable upon the exercise, conversion or
exchange thereof at the time such Convertible Securities first become
exercisable, convertible or exchangeable, by (ii) the maximum total number of
shares of Common Stock issuable upon the exercise of all such Below Market
Options (assuming full conversion of Convertible Securities, if applicable). No
further adjustment to the Exercise Price will be made upon the actual issuance
of such Common Stock upon the exercise of such Below Market Options or upon the
exercise, conversion or exchange of Convertible Securities issuable upon
exercise of such Below Market Options.
(b) ISSUANCE OF CONVERTIBLE SECURITIES. If the Company in any
manner issues or sells any Convertible Securities, whether or not immediately
convertible (other than where the same are issuable upon the exercise of
Options) and the price per share for which Common Stock is issuable upon such
exercise, conversion or exchange (as determined pursuant to Section 4(b)(ii)(B)
if applicable) is less than the Market Price on the date of issuance, then the
maximum total number of shares of Common Stock issuable upon the exercise,
conversion or exchange of all such Convertible Securities will, as of the date
of the issuance of such Convertible Securities, be deemed to be outstanding and
to have been issued and sold by the Company for such price per share. For the
purposes of the preceding sentence, the "price per share for which Common Stock
is issuable upon such exercise, conversion or exchange" is determined by
dividing (i) the total amount, if any, received or receivable by the Company as
consideration for the issuance or sale of all such Convertible Securities, plus
the minimum aggregate amount of additional consideration, if any, payable to the
Company upon the exercise, conversion or exchange thereof at the time such
Convertible Securities first become exercisable, convertible or exchangeable, by
(ii) the maximum total number of shares of Common Stock issuable upon the
exercise, conversion or exchange of all such Convertible Securities. No further
adjustment to the Exercise Price will be made upon the actual issuance of such
Common Stock upon exercise, conversion or exchange of such Convertible
Securities.
(c) CHANGE IN OPTION PRICE OR CONVERSION RATE. If there is a
change at any time in (i) the amount of additional consideration payable to the
Company upon the exercise of any Options; (ii) the amount of additional
consideration, if any, payable to the Company upon the exercise, conversion or
exchange of any Convertible Securities; or (iii) the rate at which any
Convertible Securities are convertible into or exchangeable for Common Stock
(other than under or by reason of provisions designed to protect against
dilution), the Exercise Price in effect at the time of such change will be
readjusted to the Exercise Price which would have been in effect at such time
had such Options or Convertible Securities still outstanding provided for such
changed additional consideration or changed conversion rate, as the case may be,
at the time initially granted, issued or sold.
(d) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE
SECURITIES. If, in any case, the total number of shares of Common Stock issuable
upon exercise of any Option or upon exercise, conversion or exchange of any
Convertible Securities is not, in fact, issued and the rights to exercise such
Option or to exercise, convert or exchange such Convertible Securities shall
have expired or terminated, the Exercise Price then in effect will be readjusted
to the Exercise Price which would have been
4
<PAGE>
in effect at the time of such expiration or termination had such Option or
Convertible Securities, to the extent outstanding immediately prior to such
expiration or termination (other than in respect of the actual number of shares
of Common Stock issued upon exercise or conversion thereof), never been issued.
(e) CALCULATION OF CONSIDERATION RECEIVED. If any Common
Stock, Options or Convertible Securities are issued, granted or sold for cash,
the consideration received therefor for purposes of this Warrant will be the
amount received by the Company therefor, before deduction of reasonable
commissions, underwriting discounts or allowances or other reasonable expenses
paid or incurred by the Company in connection with such issuance, grant or sale.
In case any Common Stock, Options or Convertible Securities are issued or sold
for a consideration part or all of which shall be other than cash, the amount of
the consideration other than cash received by the Company will be the fair
market value of such consideration, except where such consideration consists of
securities, in which case the amount of consideration received by the Company
will be the Market Price thereof as of the date of receipt. In case any Common
Stock, Options or Convertible Securities are issued in connection with any
merger or consolidation in which the Company is the surviving corporation, the
amount of consideration therefor will be deemed to be the fair market value of
such portion of the net assets and business of the non-surviving corporation as
is attributable to such Common Stock, Options or Convertible Securities, as the
case may be. The fair market value of any consideration other than cash or
securities will be determined in good faith by an investment banker or other
appropriate expert of national reputation selected by the Company and reasonably
acceptable to the holder hereof, with the costs of such appraisal to be borne by
the Company.
(f) EXCEPTIONS TO ADJUSTMENT OF EXERCISE PRICE. No adjustment
to the Exercise Price will be made (i) upon the exercise of any warrants,
options or convertible securities issued and outstanding on the Issue Date; or
(ii) upon the grant or exercise of any stock or options which may hereafter be
granted or exercised under any employee benefit plan of the Company now existing
or to be implemented in the future.
4.3 SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company,
at any time after the Issue Date, subdivides (by any stock split, stock
dividend, recapitalization, reorganization, reclassification or otherwise) its
shares of Common Stock into a greater number of shares, then, after the date of
record for effecting such subdivision, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced. If the Company, at
any time after the Issue Date, combines (by reverse stock split,
recapitalization, reorganization, reclassification or otherwise) its shares of
Common Stock into a smaller number of shares, then, after the date of record for
effecting such combination, the Exercise Price in effect immediately prior to
such combination will be proportionately increased.
4.4 ADJUSTMENT IN NUMBER OF SHARES. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Section 4, the number of
shares of Common Stock issuable upon exercise of this Warrant and for which this
Warrant is or may become exercisable shall be adjusted by multiplying a number
equal to the Exercise Price in effect immediately prior to such adjustment by
the number of shares of Common Stock issuable or for which this Warrant is or
may become exercisable (as applicable) upon exercise of this Warrant immediately
prior to such adjustment and dividing the product so obtained by the adjusted
Exercise Price.
4.5 CONSOLIDATION, MERGER OR SALE. In case of any reorganization
or consolidation of the Company with, or merger of the Company into any other
corporation, or in case of any sale or conveyance of all or substantially all of
the assets of the Company other than in connection with a plan of complete
liquidation of the Company at any time during the Exercise Period, then as a
condition of such consolidation, merger or sale or conveyance, adequate
provision will be made whereby the holder of this Warrant will have the right to
acquire and receive upon exercise of this Warrant in lieu of the shares of
Common Stock immediately theretofore acquirable upon the exercise of this
Warrant, such shares of stock, securities, cash or assets as were issued or
payable with respect to or in exchange for the number of shares of Common Stock
immediately theretofore acquirable and receivable upon exercise of this Warrant
had such consolidation,
5
<PAGE>
merger or sale or conveyance not taken place. In any such case, the Company will
make appropriate provision to ensure that the provisions of this Section 4
hereof will thereafter be applicable as nearly as may be in relation to any
shares of stock or securities thereafter deliverable upon the exercise of this
Warrant.
4.6 NOTICE OF ADJUSTMENT. Upon the occurrence of any event which
requires any adjustment of the Exercise Price, then, and in each such case, the
Company shall give notice thereof to the holder of this Warrant within ten (10)
days of such adjustment, which notice shall state the Exercise Price resulting
from such adjustment and the increase or decrease in the number of Warrant
Shares purchasable at such price upon exercise, setting forth in reasonable
detail the method of calculation and the facts upon which such calculation is
based.
4.7 MINIMUM ADJUSTMENT OF EXERCISE PRICE. No adjustment of the
Exercise Price shall be made in an amount of less than 1% of the Exercise Price
in effect at the time such adjustment is otherwise required to be made, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.
4.8 NO FRACTIONAL SHARES. No fractional shares of Common Stock
are to be issued upon the exercise of this Warrant, but the Company shall pay a
cash adjustment in respect of any fractional share which would otherwise be
issuable in an amount equal to the same fraction of the Market Price of a share
of Common Stock on the date of such exercise.
4.9 CERTAIN EVENTS. If, at any time after the Issue Date, any
event occurs of the type contemplated by the adjustment provisions of this
Section 4 but not expressly provided for by such provisions, the Company will
give notice of such event as provided in Section 4(f) hereof, and the Company's
Board of Directors will make an appropriate adjustment in the Exercise Price and
the number of shares of Common Stock acquirable upon exercise of this Warrant so
that the rights of the holder shall be neither enhanced nor diminished by such
event.
4.10 CERTAIN DEFINITIONS.
(a) "COMMON STOCK DEEMED OUTSTANDING" shall mean the number
of shares of Common Stock actually outstanding (not including shares of Common
Stock held in the treasury of the Company), plus (x) in the case of any
adjustment required by Section 4(a) resulting from the issuance of any Options,
the maximum total number of shares of Common Stock issuable upon the exercise of
the Options for which the adjustment is required (including any Common Stock
issuable upon the conversion of Convertible Securities issuable upon the
exercise of such Options), and (y) in the case of any adjustment required by
Section 4(a) resulting from the issuance of any Convertible Securities, the
maximum total number of shares of Common Stock issuable upon the exercise,
conversion or exchange of the Convertible Securities for which the adjustment is
required, as of the date of issuance of such Convertible Securities, if any.
(b) "MARKET PRICE," as of any date, (i) means the volume
weighted average sale price for the shares of Common Stock as reported on the
New York Stock Exchange for the trading day immediately preceding such date, or
(ii) if the New York Stock Exchange is not the principal trading market for the
shares of Common Stock, the volume weighted average sale prices on the principal
trading market for the Common Stock for the trading day immediately preceding
such date, or (iii) if market value cannot be calculated as of such date on any
of the foregoing bases, the Market Price shall be the average fair market value
as reasonably determined by an investment banking firm selected by the Company
and reasonably acceptable to the holder, with the costs of the appraisal to be
borne by the Company. The manner of determining the Market Price of the Common
Stock set forth in the foregoing definition shall apply with respect to any
other security in respect of which a determination as to market value must be
made hereunder.
6
<PAGE>
(c) "COMMON STOCK," for purposes of this Section 4, includes
the Common Stock and any additional class of stock of the Company having no
preference as to dividends or distributions on liquidation, provided that the
shares purchasable pursuant to this Warrant shall include only Common Stock in
respect of which this Warrant is exercisable, or shares resulting from any
subdivision or combination of such Common Stock, or in the case of any
reorganization, reclassification, consolidation, merger, or sale of the
character referred to in Section 4(e) hereof, the stock or other securities or
property provided for in such Section.
5. ISSUE TAX. The issuance of certificates for Warrant Shares upon
the exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax or other costs in respect thereof,
provided that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than the holder of this Warrant.
6. NO RIGHTS OR LIABILITIES AS A SHAREHOLDER. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the holder hereof to purchase Warrant Shares, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Exercise Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
7. TRANSFER AND REPLACEMENT OF WARRANT.
7.1 RESTRICTION ON TRANSFER. This Warrant and the rights granted
to the holder hereof are transferable, in whole or in part, upon surrender of
this Warrant, together with a properly executed assignment in the form attached
hereto, at the office or agency of the Company referred to in Section 8 below,
provided, however, that any transfer or assignment shall be subject to the
conditions set forth in Section 7(d) hereof and to the provisions of Sections
2(f) and 2(g) of the Securities Purchase Agreement. Until due presentment for
registration of transfer on the books of the Company, the Company may treat the
registered holder hereof as the owner and holder hereof for all purposes, and
the Company shall not be affected by any notice to the contrary.
7.2 REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
7.3 CANCELLATION; PAYMENT OF EXPENSES. Upon the surrender of this
Warrant in connection with any transfer or replacement as provided in this
Section 7, this Warrant shall be promptly canceled by the Company.
7.4 EXERCISE OR TRANSFER WITHOUT REGISTRATION. If, at the time of
the surrender of this Warrant in connection with any exercise, transfer, or
exchange of this Warrant, this Warrant (or, in the case of any exercise, the
Warrant Shares issuable hereunder), shall not be registered under the Securities
Act and under applicable state securities or blue sky laws, the Company may
require, as a condition of allowing such exercise, transfer, or exchange, (i)
that the holder or transferee of this Warrant, as the case may be, furnish to
the Company a written opinion of counsel (which opinion shall be in form,
substance and scope customary for opinions of counsel in comparable
transactions) to the effect that such exercise, transfer, or exchange may be
made without registration under the Securities Act and under applicable state
securities or blue sky laws, (ii) that the holder or transferee execute and
deliver to the Company an investment letter in form and sub stance acceptable to
the Company and (iii) that the transferee be an "ACCREDITED INVESTOR" as defined
in Rule
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<PAGE>
501(a) promulgated under the Securities Act; PROVIDED that no such opinion,
letter, status as an "accredited investor" shall be required in connection with
a transfer pursuant to Rule 144 under the Securities Act.
8. NOTICES. Any notices required or permitted to be given under the
terms of this Warrant shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
telecopy, and shall be effective five days after being placed in the mail, if
mailed, or upon receipt or refusal of receipt, if delivered personally or by
courier, or by confirmed telecopy, in each case addressed to a party. The
addresses for such communications shall be:
If to the Company:
e4L, Inc.
15821 Ventura Boulevard, 5th Floor
Los Angeles, CA 91436
Telecopy: (818) 461-6530
Attn: Daniel M. Yukelson
with a copy to:
Klehr, Harrison, Harvey, Branzburg & Ellers LLP
260 S. Broad Street
Philadelphia, PA 19102
Telecopy: (215) 568-6603
Attn: William W. Matthews, III, Esquire
If to the holder, at such address as such holder shall have provided in writing
to the Company, or at such other address as such holder furnishes by notice
given in accordance with this Section 8.
9. GOVERNING LAW; JURISDICTION. This Warrant shall be governed by
and construed in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed in the State of Delaware.
10. MISCELLANEOUS.
10.1 AMENDMENTS. This Warrant and any provision hereof may only
be amended by an instrument in writing signed by the Company and the holder
hereof.
10.2 DESCRIPTIVE HEADINGS. The descriptive headings of the
several Sections of this Warrant are inserted for purposes of reference only,
and shall not affect the meaning or construction of any of the provisions
hereof.
10.3 CASHLESS EXERCISE. Notwithstanding anything to the contrary
contained in this Warrant, this Warrant may be exercised at any time by
presentation and surrender of this Warrant to the Company at its principal
executive offices with a written notice of the holder's intention to effect a
cashless exercise, including a calculation of the number of shares of Common
Stock to be issued upon such exercise in accordance with the terms hereof (a
"CASHLESS EXERCISE"). In the event of a Cashless Exercise, in lieu of paying the
Exercise Price in cash, the holder shall surrender this Warrant for that number
of shares of Common Stock determined by multiplying the number of Warrant Shares
to which it would otherwise be entitled by a fraction, the numerator of which
shall be the difference between the Market Price of a share of the Common Stock
on the date of exercise and the Exercise Price, and the denominator of which
shall be such Market Price per share of Common Stock.
8
<PAGE>
10.4 BUSINESS DAY. For purposes of this Warrant, the term
"business day" means any day, other than a Saturday or Sunday or a day on which
banking institutions in the State of New York are authorized or obligated by
law, regulation or executive order to close.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer.
e4L, INC.
By:
---------------------------------------
Name:
---------------------------------
Title:
--------------------------------
9
<PAGE>
FORM OF EXERCISE AGREEMENT
(TO BE EXECUTED BY THE HOLDER IN ORDER TO EXERCISE THE WARRANT)
To: e4L, Inc.
15821 Ventura Boulevard, 5th Floor
Los Angeles, CA 91436
Telecopy: (818) 461-6530
Attn: Daniel M. Yukelson
The undersigned hereby irrevocably exercises the right to purchase
_____________ shares of the Common Stock of e4L, Inc., a corporation organized
under the laws of the State of Delaware (the "COMPANY"), evidenced by the
attached Warrant, and herewith makes payment of the Exercise Price with respect
to such shares in full, all in accordance with the conditions and provisions of
said Warrant.
(a) The undersigned agrees not to offer, sell, transfer or otherwise
dispose of any Common Stock obtained on exercise of the Warrant, except under
circumstances that will not result in a violation of the Securities Act of 1933,
as amended, or any state securities laws, and agrees that the following legend
may be affixed to the stock certificate for the Common Stock hereby subscribed
for if resale of such Common Stock is not registered or if Rule 144 is
unavailable:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR THE SECURITIES LAWS OF
ANY STATE OF THE UNITED STATES. THE SECURITIES REPRESENTED HEREBY MAY
NOT BE OFFERED OR SOLD IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS OR UNLESS
OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
(b) The undersigned requests that stock certificates for such shares be
issued, and a Warrant representing any unexercised portion hereof be issued,
pursuant to the Warrant in the name of the Holder and delivered to the
undersigned at the address set forth below:
Dated:
--------------------- ----------------------------
Signature of Holder
----------------------------
Name of Holder (Print)
Address:
----------------------------
----------------------------
----------------------------
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers all the rights of the undersigned under the within Warrant, with
respect to the number of shares of Common Stock covered thereby set forth
hereinbelow, to:
<TABLE>
<S> <C> <C>
Name of Assignee Address No of Shares
- ---------------- ------- ------------
</TABLE>
, and hereby irrevocably constitutes and appoints ______________
________________________ as agent and attorney-in-fact to transfer said Warrant
on the books of the within-named corporation, with full power of substitution in
the premises.
Dated: , ,
--------------------- -----
In the presence of
- ------------------
Name:
-------------------------------------------
Signature:
---------------------------------
Title of Signing Officer or Agent (if any):
---------------------------------
Address:
---------------------------------
---------------------------------
Note: The above signature should correspond
exactly with the name on the face of
the within Warrant.
<PAGE>
EXHIBIT 4.5
VOID AFTER 5:00 P.M. NEW YORK CITY
TIME ON MARCH 21, 2005
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY OTHER JURISDICTION. THE SECURITIES REPRESENTED HEREBY MAY
NOT BE OFFERED OR SOLD IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS OR UNLESS
OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
Right to Purchase____________ Shares of
Common Stock, par value $.01 per share
Date: March 21, 2000
e4L, Inc.
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, , or its
registered assigns, is entitled to purchase from e4L, Inc., a corporation
organized under the laws of the State of Delaware (the "COMPANY"), at any
time or from time to time during the period specified in Section 2 hereof,
( ) fully paid and nonassessable shares of the Company's
common stock, par value $.01 per share (the "COMMON STOCK"), at an exercise
price per share (the "Exercise Price") equal to $2.9575. The number of shares
of Common Stock purchasable hereunder (the "Warrant Shares") and the Exercise
Price are subject to adjustment as provided in Section 4 hereof. The term
"Warrants" means this Warrant.
<PAGE>
This Warrant is subject to the following terms, provisions, and
conditions:
1. MANNER OF EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
Subject to the provisions hereof, including, without limitation, the limitations
contained in Section 7 hereof, this Warrant may be exercised by the holder
hereof, in whole or in part, by the surrender of this Warrant, together with a
completed exercise agreement in the form attached hereto (the "Exercise
Agreement"), to the Company during normal business hours on any business day at
the Company's principal executive offices (or such other office or agency of the
Company as it may designate by notice to the holder hereof), and upon (i)
payment to the Company in cash, by certified or official bank check or by wire
transfer for the account of the Company, of the Exercise Price for the Warrant
Shares specified in the Exercise Agreement or (ii) if the holder is permitted to
effect a Cashless Exercise (as defined in Section 10.3 hereof) pursuant to
Section 10.3 hereof, delivery to the Company of a written notice of an election
to effect a Cashless Exercise for the Warrant Shares specified in the Exercise
Agreement. The Warrant Shares so purchased shall be deemed to be issued to the
holder hereof, as the record owner of such shares, as of the close of business
on the date on which this Warrant shall have been surrendered, the completed
Exercise Agreement shall have been deliv ered, and payment shall have been made
for such shares as set forth above or, if such date is not a business date, on
the next succeeding business date. Certificates for the Warrant Shares so
purchased, representing the aggregate number of shares specified in the Exercise
Agreement, shall be delivered to the holder hereof within a reasonable time (but
in no event later than fifteen business days) after this Warrant shall have been
so exercised (the "DELIVERY PERIOD"). The certificates so delivered shall be in
such denominations as may be requested by the holder hereof and shall be
registered in the name of such holder or such other name as shall be designated
by such holder. If this Warrant shall have been exercised only in part, then,
unless this Warrant has expired, the Company shall, at its expense, at the time
of delivery of such certificates, deliver to the holder a new Warrant
representing the number of shares with respect to which this Warrant shall not
then have been exercised.
2. PERIOD OF EXERCISE.
2.1 This Warrant is exercisable, at any time or from time to time
on or after the date of initial issuance of this Warrant (the "ISSUE DATE") and
before 5:00 p.m., New York City time on, March 20, 2005 (the "EXERCISE PERIOD").
3. CERTAIN AGREEMENTS OF THE COMPANY. The Company hereby covenants
and agrees as follows:
3.1 SHARES TO BE FULLY PAID. All Warrant Shares will, upon
issuance in accordance with the terms of this Warrant, be validly issued, fully
paid, and nonassessable and free from all taxes, liens, claims and encumbrances.
3.2 RESERVATION OF SHARES. During the Exercise Period, the
Company shall at all times have authorized, and reserved for the purpose of
issuance upon exercise of this Warrant, a sufficient number of shares of Common
Stock to provide for the exercise in full of this Warrant.
3.3 LISTING. The Company shall promptly secure the listing of the
shares of Common Stock issuable upon exercise of this Warrant upon each national
securities exchange or automated quotation system, if any, upon which shares of
Common Stock are then listed or become listed (subject to official notice of
issuance upon exercise of this Warrant) and shall maintain, so long as any other
shares of Common Stock shall be so listed, such listing of all shares of Common
Stock from time to time issuable upon the exercise of this Warrant; and the
Company shall so list on each national securities exchange or automated
quotation system, as the case may be, and shall maintain such listing of, any
other shares of capital stock of the Company issuable upon the exercise of this
Warrant if and so long as any shares of the same class shall be listed on such
national securities exchange or automated quotation system.
2
<PAGE>
3.4 SUCCESSORS AND ASSIGNS. This Warrant will be binding upon any
entity succeeding to the Company by merger, consolidation, or acquisition of all
or substantially all of the Company's assets.
4. ANTIDILUTION PROVISIONS. The Exercise Price and the number of
Warrant Shares issuable hereunder and for which this Warrant is then exercisable
pursuant to Section 2 hereof shall be subject to adjustment from time to time as
provided in this Section 4.
In the event that any adjustment of the Exercise Price as
required herein results in a fraction of a cent, such Exercise Price shall be
rounded up or down to the nearest cent.
4.1 SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company,
at any time after the Issue Date, subdivides (by any stock split, stock
dividend, recapitalization, reorganization, reclassification or otherwise) its
shares of Common Stock into a greater number of shares, then, after the date of
record for effecting such subdivision, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced. If the Company, at
any time after the Issue Date, combines (by reverse stock split,
recapitalization, reorganization, reclassification or otherwise) its shares of
Common Stock into a smaller number of shares, then, after the date of record for
effecting such combination, the Exercise Price in effect immediately prior to
such combination will be proportionately increased.
4.2 ADJUSTMENT IN NUMBER OF SHARES. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Section 4, the number of
shares of Common Stock issuable upon exercise of this Warrant and for which this
Warrant is or may become exercisable shall be adjusted by multiplying a number
equal to the Exercise Price in effect immediately prior to such adjustment by
the number of shares of Common Stock issuable or for which this Warrant is or
may become exercisable (as applicable) upon exercise of this Warrant immediately
prior to such adjustment and dividing the product so obtained by the adjusted
Exercise Price.
4.3 CONSOLIDATION, MERGER OR SALE. In case of any consolidation
of the Company with, or merger of the Company into any other corporation, or in
case of any sale or conveyance of all or substantially all of the assets of the
Company other than in connection with a plan of complete liquidation of the
Company at any time during the Exercise Period, then as a condition of such
consolidation, merger or sale or conveyance, adequate provision will be made
whereby the holder of this Warrant will have the right to acquire and receive
upon exercise of this Warrant in lieu of the shares of Common Stock immediately
theretofore acquirable upon the exercise of this Warrant, such shares of stock,
securities, cash or assets as were issued or payable with respect to or in
exchange for the number of shares of Common Stock immediately theretofore
acquirable and receivable upon exercise of this Warrant had such consolidation,
merger or sale or conveyance not taken place. In any such case, the Company will
make appropriate provision to insure that the provisions of this Section 4
hereof will thereafter be applicable as nearly as may be in relation to any
shares of stock or securities thereafter deliverable upon the exercise of this
Warrant.
4.4 NOTICE OF ADJUSTMENT. Upon the occurrence of any event which
requires any adjustment of the Exercise Price, then, and in each such case, the
Company shall give notice thereof to the holder of this Warrant, which notice
shall state the Exercise Price resulting from such adjustment and the increase
or decrease in the number of Warrant Shares purchasable at such price upon
exercise, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based.
4.5 MINIMUM ADJUSTMENT OF EXERCISE PRICE. No adjustment of the
Exercise Price shall be made in an amount of less than 1% of the Exercise Price
in effect at the time such adjustment is otherwise required to be made, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.
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4.6 NO FRACTIONAL SHARES. No fractional shares of Common Stock
are to be issued upon the exercise of this Warrant, but the Company shall pay a
cash adjustment in respect of any fractional share which would otherwise be
issuable in an amount equal to the same fraction of the Market Price of a share
of Common Stock on the date of such exercise.
4.7 CERTAIN EVENTS. If, at any time after the Issue Date, any
event occurs of the type contemplated by the adjustment provisions of this
Section 4 but not expressly provided for by such provisions, the Company will
give notice of such event as provided in Section 4.4 hereof, and the Company's
Board of Directors will make an appropriate adjustment in the Exercise Price and
the number of shares of Common Stock acquirable upon exercise of this Warrant so
that the rights of the holder shall be neither enhanced nor diminished by such
event.
5. ISSUE TAX. The issuance of certificates for Warrant Shares upon
the exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax or other costs in respect thereof,
provided that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than the holder of this Warrant.
6. NO RIGHTS OR LIABILITIES AS A SHAREHOLDER. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the holder hereof to purchase Warrant Shares, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Exercise Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
7. TRANSFER AND REPLACEMENT OF WARRANT.
7.1 RESTRICTION ON TRANSFER. This Warrant and the rights granted
to the holder hereof are transferable, in whole or in part, upon surrender of
this Warrant, together with a properly executed assignment in the form attached
hereto, at the office or agency of the Company referred to in Section 9 below,
provided, however, that any transfer or assignment shall be subject to the
conditions set forth in Section 7.4 hereof. Until due presentment for
registration of transfer on the books of the Company, the Company may treat the
registered holder hereof as the owner and holder hereof for all purposes, and
the Company shall not be affected by any notice to the contrary. Notwithstanding
anything to the contrary contained herein, the registration rights described in
Section 8 hereof are not assignable.
7.2 REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
7.3 CANCELLATION; PAYMENT OF EXPENSES. Upon the surrender of this
Warrant in connection with any transfer or replacement as provided in this
Section 7, this Warrant shall be promptly canceled by the Company.
7.4 EXERCISE OR TRANSFER WITHOUT REGISTRATION. If, at the time of
the surrender of this Warrant in connection with any exercise, transfer, or
exchange of this Warrant, this Warrant (or, in the case of any exercise, the
Warrant Shares issuable hereunder), shall not be registered under the Securities
Act and under applicable state securities or blue sky laws, the Company may
require, as a condition of allowing such
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exercise, transfer, or exchange, (i) that the holder or transferee of this
Warrant, as the case may be, furnish to the Company a written opinion of counsel
(which opinion shall be in form, substance and scope customary for opinions of
counsel in comparable transactions) to the effect that such exercise, transfer,
or exchange may be made without registration under the Securities Act and under
applicable state securities or blue sky laws, (ii) that the holder or transferee
execute and deliver to the Company an investment letter in form and sub stance
acceptable to the Company and (iii) that the transferee be an "accredited
investor" as defined in Rule 501(a) promulgated under the Securities Act;
PROVIDED that no such opinion, letter, status as an "accredited investor" shall
be required in connection with a transfer pursuant to Rule 144 under the
Securities Act.
8. NOTICES. Any notices required or permitted to be given under the
terms of this Warrant shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
telecopy, and shall be effective five days after being placed in the mail, if
mailed, or upon receipt or refusal of receipt, if delivered personally or by
courier, or by confirmed telecopy, in each case addressed to a party. The
addresses for such communications shall be:
If to the Company:
e4L, Inc.
15821 Ventura Boulevard, 5th Floor
Los Angeles, CA 91436
Telecopy: (818) 461-6530
Attn: Daniel M. Yukelson
with a copy to:
Klehr, Harrison, Harvey, Branzburg & Ellers LLP
260 S. Broad Street
Philadelphia, PA 19102
Telecopy: (215) 568-6603
Attn: William W. Matthews, III, Esquire
If to the holder, at such address as such holder shall have provided in writing
to the Company, or at such other address as such holder furnishes by notice
given in accordance with this Section 8.
9. GOVERNING LAW; JURISDICTION. This Warrant shall be governed by
and construed in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed in the State of Delaware.
10. MISCELLANEOUS.
10.1 AMENDMENTS. This Warrant and any provision hereof may only
be amended by an instrument in writing signed by the Company and the holder
hereof.
10.2 DESCRIPTIVE HEADINGS. The descriptive headings of the
several Sections of this Warrant are inserted for purposes of reference only,
and shall not affect the meaning or construction of any of the provisions
hereof.
10.3 CASHLESS EXERCISE. Notwithstanding anything to the contrary
contained in this Warrant, if the resale of the Warrant Shares by the holder is
not then registered pursuant to an effective registration statement under the
Securities Act, this Warrant may be exercised at any time after the first
anniversary of the Issue Date until the end of the Exercise Period, by
presentation and surrender of this
5
<PAGE>
Warrant to the Company at its principal executive offices with a written notice
of the holder's intention to effect a cashless exercise, including a calculation
of the number of shares of Common Stock to be issued upon such exercise in
accordance with the terms hereof (a "Cashless Exercise"). In the event of a
Cashless Exercise, in lieu of paying the Exercise Price in cash, the holder
shall surrender this Warrant for that number of shares of Common Stock
determined by multiplying the number of Warrant Shares to which it would
otherwise be entitled by a fraction, the numerator of which shall be the
difference between the Market Price of a share of the Common Stock on the date
of exercise and the Exercise Price, and the denominator of which shall be such
Market Price per share of Common Stock.
10.4 BUSINESS DAY. For purposes of this Warrant, the term
"business day" means any day, other than a Saturday or Sunday or a day on which
banking institutions in the State of New York are authorized or obligated by
law, regulation or executive order to close.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer.
e4L, INC.
By:
-------------------------------------
Name:
-------------------------------
Title:
------------------------------
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FORM OF EXERCISE AGREEMENT
(TO BE EXECUTED BY THE HOLDER IN ORDER TO EXERCISE THE WARRANT)
To: e4L, Inc.
15821 Ventura Boulevard, 5th Floor
Los Angeles, CA 91436
Telecopy: (818) 461-6530
Attn: Daniel M. Yukelson
The undersigned hereby irrevocably exercises the right to purchase
_____________ shares of the Common Stock of e4L, Inc., a corporation organized
under the laws of the State of Delaware (the "COMPANY"), evidenced by the
attached Warrant, and herewith makes payment of the Exercise Price with respect
to such shares in full, all in accordance with the conditions and provisions of
said Warrant.
The undersigned agrees not to offer, sell, transfer or otherwise
dispose of any Common Stock obtained on exercise of the Warrant, except under
circumstances that will not result in a violation of the Securities Act of 1933,
as amended, or any state securities laws, and agrees that the following legend
may be affixed to the stock certificate for the Common Stock hereby subscribed
for if resale of such Common Stock is not registered or if Rule 144 is
unavailable:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR THE SECURITIES LAWS OF
ANY STATE OF THE UNITED STATES. THE SECURITIES REPRESENTED HEREBY MAY
NOT BE OFFERED OR SOLD IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS OR UNLESS
OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
The undersigned requests that stock certificates for such shares be
issued, and a Warrant representing any unexercised portion hereof be issued,
pursuant to the Warrant in the name of the Holder and delivered to the
undersigned at the address set forth below:
Dated:
-------------------- ----------------------------------
Signature of Holder
----------------------------------
Name of Holder (Print)
Address:
----------------------------------
----------------------------------
----------------------------------
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers all the rights of the undersigned under the within Warrant, with
respect to the number of shares of Common Stock covered thereby set forth
hereinbelow, to:
<TABLE>
<S> <C> <C>
Name of Assignee Address No of Shares
- ---------------- ------- ------------
</TABLE>
, and hereby irrevocably constitutes and appoints ______________
________________________ as agent and attorney-in-fact to transfer said Warrant
on the books of the within-named corporation, with full power of substitution in
the premises.
Dated: , ,
--------------------- ----
In the presence of
- ------------------
Name:
-------------------------------------------
Signature:
---------------------------------
Title of Signing Officer or Agent (if any):
---------------------------------
Address:
---------------------------------
---------------------------------
Note: The above signature should correspond
exactly with the name on the face of
the within Warrant.
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF KLEHR, HARRISON, HARVEY, BRANZBURG & ELLERS LLP]
April 7, 2000
Board of Directors
e4L, Inc.
15821 Ventura Boulevard, 5th Floor
Los Angeles, California 91436
RE: Registration Statement on Form S-3
Gentlemen:
We have acted as counsel to e4L, Inc., a Delaware corporation (the
"Company"), in connection with the preparation of the Company's Registration
Statement on Form S-3 (the "Registration Statement") being filed with the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Act"). The Registration Statement relates to (i) the
resale of up to an aggregate of 7,486,053 shares (the "Preferred Shares") of the
Company's common stock, par value $.01 per share ("Common Stock") issuable upon
conversion of the Company's Series G Convertible Preferred Stock and Series H
Convertible Preferred Stock (the "Preferred Stock") and (ii) the resale of up to
1,084,340 shares (the "Warrant Shares") of Common Stock issuable upon exercise
of warrants (the "Warrants").
In connection with this opinion, we have examined and relied upon the
original or copies of (i) the Certificate of Incorporation and the By-laws of
the Company, (ii) minutes and records of the corporate proceedings with respect
to the issuance of the Preferred Stock, the Warrants, the Preferred Shares and
the Warrant Shares, and (iii) such other documents as we have deemed necessary
as a basis for the opinion hereinafter set forth.
In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such latter documents. As to any facts material
to the opinions expressed herein that were not independently established or
verified, we have relied upon oral or written statements and representations of
officers and other representatives of the Company and others.
This opinion is limited to the laws of the State of Delaware and we
express no opinion as to the laws of any other jurisdiction.
Based upon and subject to the foregoing, we are of the opinion that (i)
the Preferred Shares issuable upon conversion of the Preferred Stock, when
issued upon conversion of the Preferred Stock in accordance with the terms of
the Certificates of Designations of the Preferred Stock, will be validly issued,
fully paid and non-assessable and (ii) the Warrant Shares issuable upon exercise
of the Warrants, when issued in accordance with the terms of the Warrants, will
be validly issued, fully paid and non-assessable.
This opinion is being furnished to you solely for your benefit in
connection with the Registration Statement and is not to be used, circulated,
quoted or referred to or relied upon for any other purpose without our express
written permission.
<PAGE>
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving such consent, we do not thereby admit that we
come within the category of persons whose consent is required under Section 7 of
the Act, or the rules and regulations of the Commission promulgated thereunder.
Very truly yours,
/s/ Klehr, Harrison, Harvey, Branzburg & Ellers LLP
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EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of e4L, Inc. for the
registration of 8,570,393 shares of its common stock and to the incorporation by
reference therein of our report dated June 25, 1999, with respect to the
consolidated financial statements and schedule of e4L, Inc. included in its
Annual Report (Form 10-K) for the year ended March 31, 1999, filed with the
Securities and Exchange Commission.
/s/ Ernst & Young LLP
Los Angeles, California
April 7, 2000
