<PAGE> 1
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE
SECURITIES MAY NOT BE SOLD 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 IN WHICH SUCH OFFER OR SALE IS NOT PERMITTED.
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 25, 2000
REGISTRATION STATEMENT NO. 333-
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
E COM VENTURES, INC.
(Exact Name of Registrant as Specified in its Charter)
FLORIDA 65-0977964
- ------------------------------- ----------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
<TABLE>
<S> <C>
ILIA LEKACH
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
E COM VENTURES, INC. E COM VENTURES, INC.
11701 N.W. 101ST ROAD 11701 N.W. 101ST ROAD
MIAMI, FLORIDA 33178 MIAMI, FLORIDA 33178
(305) 889-1600 (305) 889-1600
- ----------------------------------------------------------------- ---------------------------------------------------------
(Address, Including Zip Code, and Telephone Number, (Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices) Include Area Code, of Agent for Service)
</TABLE>
Copies of Communications to:
KENNETH C. HOFFMAN, ESQ.
GREENBERG TRAURIG, P.A.
1221 BRICKELL AVENUE, SUITE 2200
MIAMI, FLORIDA 33131
(305) 579-0500
(FACSIMILE) (305) 579-0717
--------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after this Registration Statement becomes effective.
--------------------
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please 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, as amended (the "Securities Act"), other than securities
offered only in connection with dividend or interest reinvestment 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. [ ]
-------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROSPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
AMOUNT TO BE AGGREGATE OFFERING AGGREGATE OFFERING REGISTRATION
TITLE OF SHARES TO BE REGISTERED REGISTERED(1) PRICE PER UNIT(2) PRICE(2) FEE(2)
- -------------------------------- ------------ ------------------ ------------------ ------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value per share........ 8,641,120 $3.25 $28,083,640 $7,415
</TABLE>
(1) Includes 200% of the number of shares of common stock that would have been
received by the holders of all outstanding notes as follows were converted
on the day before this date of filing: (i) 7,128,714 shares of common stock
issuable upon the conversion of the Registrant's outstanding Series C
Convertible Notes and Series D Convertible Notes and (ii) 1,512,406 shares
of common stock.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457 under the Securities Act of 1933, as
amended. Calculated pursuant to Rule 457(c) based on the average high and
low sales price of the Common Stock as reported on the Nasdaq Stock Market
on April 20, 2000.
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 COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
<PAGE> 2
PROSPECTUS
4,544,321 SHARES
E COM VENTURES, INC.
COMMON STOCK
The selling shareholders are offering up to 4,544,321 shares of our
common stock under this prospectus, 3,031,915 of which may be issued upon
conversion of our Series C and Series D convertible notes. We will not receive
proceeds from the sale of common stock under this prospectus. Some of the
selling shareholders will acquire their shares of common stock upon conversion
of our Series C convertible notes, dated March 9, 2000 and our Series D
convertible notes, dated March 27, 2000. Parlux Fragrances obtained its shares
of common stock in August 1999 pursuant to the terms of a Stock Purchase
Agreement, dated August 13, 1999.
Our common stock is listed for trading on the Nasdaq National Market
under the symbol "ECMV." On April 19, 2000, the last reported sales price of our
common stock on the Nasdaq National Market was $3.50 per share.
-------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 3 TO READ ABOUT THE FACTORS YOU
SHOULD CONSIDER BEFORE BUYING SHARES OF OUR COMMON STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
-------------------
This prospectus is dated April __, 2000.
<PAGE> 3
PROSPECTUS SUMMARY
This summary highlights selected information and does not contain all
of the information that is important to you. We urge you to read the entire
prospectus carefully, including the financial statements and the notes thereto,
before you decide whether to buy our common stock. You should pay special
attention to the risks of investing in our common stock discussed under "Risk
Factors."
E COM VENTURES, INC.
OUR BUSINESS
We facilitate cross marketing and cross-promotional opportunities
between our member companies, e-commerce investments and our wholly owned
subsidiary, Perfumania, Inc. We support startups or existing B to B or B to C
companies with development strategies and financial support necessary to
introduce products and services into Internet businesses. Our Internet strategy
includes the internal development and operation of majority-owned subsidiaries
as well as taking strategic positions in other Internet related companies that
have demonstrated synergies with our core business, Perfumania, Inc. Our
strategy also envisions and promotes opportunities for synergistic business
relationships among the Internet companies within our portfolio.
OUR FRAGRANCE AND RELATED PRODUCT OPERATIONS
Through Perfumania we are a leading specialty retailer and wholesale
distributor of a wide range of brand name and designer fragrances. As of April
21, 2000, we operated a chain of 269 retail stores specializing in the sale of
fragrances at discounted prices up to 60% below the manufacturer's suggested
retail prices. Our wholesale division distributes approximately 1,100 stock
keeping units of fragrances and related products to approximately 41 customers,
including national and regional chains and other wholesale distributors
throughout North America and overseas. We manage and own our wholesale business
and our retail business is managed and owned by Magnifique Parfumes and
Cosmetics, Inc., Perfumania's wholly owned subsidiary.
RECENT DEVELOPMENTS
We were incorporated in Florida and previously operated under the name
Perfumania, Inc. In order to provide greater flexibility for expansion, broaden
the alternatives available for future financing and generally provide for
greater administrative and operational flexibility, on February 1, 2000, we
reorganized into a holding company structure with E Com Ventures, Inc. ("ECOMV")
as the holding company and Perfumania as a wholly owned subsidiary.
On December 10, 1999, Perfumania entered into an Option Agreement with an
investment firm granting the investment firm two options to acquire up to 2.5
million shares of common stock of perfumania.com, inc. On January 11, 2000, the
investment firm exercised one of its options to purchase 2.0 million shares of
perfumania.com for $6.00 per share. In connection with such exercise, and upon
satisfaction of applicable SEC regulations, the investment firm obtained control
of the board.
In March 2000, we acquired more than 5% of the outstanding shares of
common stock of The Sportsman's Guide, Inc., a marketer of value priced outdoor
gear and general merchandising. Sportsman's Guide offers its products via
various catalogues and the Internet. We also signed a letter of intent to
acquire additional shares of common stock of Sportsman's Guide, representing
approximately an additional 11% of its outstanding shares of common stock.
In March 2000, we also signed a letter of intent to acquire a 30%
interest in Cellpoint Corporation, an internet based distributor and retailer of
wireless electronic equipment that sells its products both retail and wholesale,
domestically and internationally. This transaction is subject to due diligence
and to date has not been completed. Upon the completion of the transaction, we
will own approximately 30% of Cellpoint's common stock.
Additionally, in exchange for an interest bearing convertible notes, we
invested $1 million in December 1999 and $1 million in March 2000 in
TakeToAuction.com, Inc., an Internet, membership based community that lists and
sells products at online auction sites.
CORPORATE INFORMATION
We are a Florida corporation with our principal executive offices
located at 11701 N.W. 101st Road, Miami, Florida 33128. Our telephone number is
(305) 889-1600.
1
<PAGE> 4
RISK FACTORS
You should carefully consider the following risks before making an
investment decision. If any of the following risks occurs, our business,
financial condition or results of operations could be adversely affected. In
that case, the trading price of our common stock could decline, and you might
lose all or part of your investment.
WE MAY HAVE PROBLEMS RAISING THE MONEY NEEDED IN THE FUTURE.
Our growth strategy includes investment in and acquisition of Internet
related businesses. We may need to obtain funding to achieve our growth
strategy. Additional financing may not be available on acceptable terms if at
all. In order to obtain additional financing, we may be required to issue
securities with greater rights than those currently possessed by holders of our
common stock. We may also be required to take other actions which may lessen the
value of our common stock, including borrowing money on terms that are not
favorable to us.
OUR SUCCESS DEPENDS SIGNIFICANTLY ON INCREASED USE OF THE INTERNET BY BUSINESSES
AND INDIVIDUALS.
Our success depends significantly on increased use of the Internet for
advertising, marketing, providing services, and conducting business. Commercial
use of the Internet is currently at an early stage of development and the future
of the Internet is not clear. Our business strategy will suffer if commercial
use of the Internet fails to grow in the future.
OUR STRATEGY OF EXPANDING OUR BUSINESS THROUGH ACQUISITIONS AND INVESTMENTS IN
OTHER BUSINESSES AND TECHNOLOGIES PRESENTS SPECIAL RISKS.
We intend to expand through the acquisition of and investment in other
businesses. Acquisitions involve a number of special problems, including:
o difficulty integrating acquired technologies, operations, and
personnel with our existing business;
o diversion of management's attention in connection with both
negotiating the acquisitions and integrating the assets;
o the need to incur additional debt;
o strain on managerial and operational resources as management
tries to oversee larger operations; and
o exposure to unforeseen liabilities of acquired companies.
We may not be able to successfully address these problems. Moreover,
our future operating results will depend to a significant degree on our ability
to successfully manage growth and integrate acquisitions. In addition, many of
our investments will be in early-stage companies with limited operating
histories and limited or no revenues. We may not be able to successfully develop
these young companies.
IF THE UNITED STATES OR OTHER GOVERNMENTS REGULATE THE INTERNET MORE CLOSELY,
OUR BUSINESS MAY BE HARMED.
Because of the Internet's popularity and increasing use, new laws and
regulations may be adopted. These laws and regulations may cover issues such as
privacy, pricing, taxation and content. The enactment of any additional laws or
regulations may impede the growth of the Internet and our Internet-related
business and could place additional financial burdens on our business.
TO SUCCEED, WE MUST RESPOND TO THE RAPID CHANGES IN TECHNOLOGY AND DISTRIBUTION
CHANNELS RELATED TO THE INTERNET.
The markets for our Internet products and services are characterized
by:
o rapidly changing technology;
o evolving industry standards;
o frequent new product and service introductions;
2
<PAGE> 5
o shifting distribution channels; and
o changing customer demands.
Our success will depend on our ability to adapt to this rapidly
evolving marketplace. We may not be able to adequately adapt our products and
services or to acquire new products and services that can compete successfully.
WE ARE SUBJECT TO INTENSE COMPETITION.
The market for Internet products and services is highly competitive.
Moreover, the market for Internet products and services lacks significant
barriers to entry, enabling new businesses to enter this market relatively
easily. Competition in the market for Internet products and services may
intensify in the future. Numerous well-established companies and smaller
entrepreneurial companies are focusing significant resources on developing and
marketing products and services that will compete with our products and
services. In addition, many of our current and potential competitors have
greater financial, technical, operational, and marketing resources. We may not
be able to compete successfully against these competitors in developing our
services. Competitive pressures may also force prices for Internet goods and
services down and such price reductions may affect our potential future revenue.
FUTURE GROWTH MAY PLACE STRAINS ON OUR MANAGERIAL, OPERATIONAL AND FINANCIAL
RESOURCES.
If we grow as expected, a significant strain on our managerial,
operational and financial resources may occur. Further, as the number of our
users, advertisers and other business partners grows, we will be required to
manage multiple relationships with various customers, strategic partners and
other third parties. Future growth or increase in the number of our strategic
relationships will strain our managerial, operational and financial resources,
inhibiting our ability to achieve the rapid execution necessary to successfully
implement our business plan. In addition, our future success will also depend on
our ability to expand our sales and marketing organization and our support
organization commensurate with the growth of our business and the Internet.
PERFUMANIA'S BUSINESS IS SUBJECT TO SEASONAL FLUCTUATIONS, WHICH COULD LEAD TO
FLUCTUATIONS IN OUR STOCK PRICE.
The operation of Perfumania has historically experienced higher sales
in the third and fourth fiscal quarters than in the first and second fiscal
quarters. People increase their purchases of fragrances as gift items during the
Christmas holiday season which results in significantly higher fourth fiscal
quarter retail sales. If our quarterly operating results are below the
expectations of stock market analysts, our stock price would likely decline. Our
quarterly results may also vary as a result of the timing of new store openings,
net sales contributed by new stores and fluctuations in comparable sales of
existing stores. Sales levels of new and existing stores are affected by a
variety of factors, including the retail sales environment, the level of
competition, the effect of marketing and promotional programs, acceptance of new
product introductions, adverse weather conditions and general economic
conditions.
PERFUMANIA MAY EXPERIENCE SHORTAGES OF THE SUPPLIES IT NEEDS BECAUSE IT DOES NOT
HAVE LONG-TERM AGREEMENTS WITH SUPPLIERS.
Perfumania's success depends to a large degree on our ability to
provide an extensive assortment of brand name and designer fragrances.
Perfumania has no long-term purchase contracts or other contractual assurance of
continued supply, pricing or access to new products. While we believe that
Perfumania has good relationships with its vendors, if Perfumania is unable to
obtain merchandise from one or more key vendors on a timely basis, or if there
is a material change in Perfumania's ability to obtain necessary merchandise,
our results of operations could be seriously harmed.
PERFUMANIA MAY NOT BE ABLE TO OBTAIN THE FUNDS NEEDED UNDER ITS LINE OF CREDIT
TO OPERATE ITS BUSINESS.
As discussed above, Perfumania's sales and operating results fluctuate
by season, like many specialty retailers. Perfumania's line of credit funds
inventory purchases and supports new retail store openings. Any future
limitation on its borrowing ability and access to financing could limit the
opening of new stores and obtaining
3
<PAGE> 6
merchandise on satisfactory terms. Perfumania's current debt agreement expires
May 31, 2000 and will automatically renew on a month to month basis thereafter,
unless the lender makes demand for repayment or we terminate the agreement.
While Perfumania has received formal loan approval for a three year $40 million
line of credit with another lender which is expected to close prior to May 31,
2000, there can be no assurance that this closing will occur as currently
expected.
PERFUMANIA'S PRESIDENT AND KEY PERSONNEL ARE CRITICAL TO OUR BUSINESS, AND THESE
KEY PERSONNEL MAY NOT REMAIN WITH PERFUMANIA IN THE FUTURE.
Jerome Falic, Perfumania's President, is primarily responsible for its
merchandise purchases. He has developed strong, reliable relationships with
suppliers and customers of Perfumania's wholesale division in the United States,
Europe, Asia and South America. The loss of his service or any of Perfumania's
other current executive officers could seriously harm us.
PERFUMANIA RECEIVED AN ACCOUNTANTS' REPORT WHICH INDICATES THERE ARE DOUBTS
ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN.
The report of our independent accountants in connection with
Perfumania's audited consolidated financial statements as of January 31, 1998
and January 30, 1999 and for each of the three years in the period ended January
30, 1999, contains an explanatory paragraph indicating factors which create
substantial doubt about Perfumania's ability to continue as a going concern.
These factors included recurring net losses in fiscal 1998 and 1997 and
Perfumania's default on our bank line of credit agreement as a result of our
violation of some debt covenants. On July 14, 1999 Perfumania obtained a waiver
of default from the bank through September 30, 1999 as of and for the year
ending January 30, 1999.
PERFUMANIA NEEDS TO SUCCESSFULLY MANAGE ITS GROWTH IN ORDER FOR THE ADDITION OF
OUR NEW STORES TO BE PROFITABLE.
Even though Perfumania has grown significantly in the past several
years, it may not be able to sustain the growth in the number of retail stores
and revenues that it has achieved historically. Perfumania's growth is
dependent, in large part, upon opening and operating new retail stores on a
profitable basis, which in turn is subject to, among other things, securing
suitable store sites on satisfactory terms, hiring, training and retaining
qualified management and other personnel, having adequate capital resources and
successfully integrating new stores into existing operations. It is possible
that Perfumania's new stores will not achieve sales and profitability comparable
to existing stores, and it is possible that the opening of new locations will
adversely effect sales at existing locations.
PERFUMANIA COULD BE SUBJECT TO LITIGATION BECAUSE OF THE MERCHANDISING ASPECT OF
ITS BUSINESS.
Some of the merchandise Perfumania purchases from suppliers is
manufactured by entities who are not the owners of the trademarks or copyrights
for the merchandise. This practice is common in the fragrance and cosmetics
business. The owner of a particular trademark or copyright may challenge
Perfumania to demonstrate that the specific merchandise was produced and sold
with the proper authority and if Perfumania is unable to demonstrate this, it
could, among other things, be restricted from reselling the particular
merchandise. This type of restriction could seriously harm Perfumania's business
and results of operations.
A COMPLAINT HAS BEEN FILED AGAINST PERFUMANIA IN CONNECTION WITH THE BANKRUPTCY
OF A FORMER CUSTOMER WHICH COULD RESULT IN SUBSTANTIAL DAMAGES.
Perfumania has been characterized as an insider as defined by the
United States Bankruptcy Code, in the liquidating plan of reorganization filed
on April 6, 1998 by L. Luria & Son, Inc. in the United States Bankruptcy Court,
Southern District of Florida because our Chairman of the Board and Chief
Executive Officer was the principal of the entity that controlled Luria's. In
October 1998, the committee of unsecured creditors in Luria's bankruptcy
proceedings filed a complaint with the United States Bankruptcy Court, Southern
District of Florida. The complaint alleges that Luria's made preference
payments, as defined by the Bankruptcy Court, to Perfumania. The complaint seeks
recovery of the preference payments, and disallows any and all of our claims
against Luria's
4
<PAGE> 7
until Perfumania has made full payment of the preference payments. In July 1999,
Perfumania agreed with the committee of unsecured creditors to settle all claims
held by Luria's against us for the sum of $1.2 million, payable over the next
nine months according to a repayment schedule. This settlement was approved by
the Bankruptcy Court in November 1999. The full amount of the settlement was
accrued for in Perfumania's financial statements for the year ended January 30,
1999.
PERFUMANIA WAS INVOLVED IN A LAWSUIT THAT ALLEGES THAT IT INFRINGED ON PATENT
RIGHTS.
In December 1993, the patent holder and exclusive licensee in the U.S.
of Boucheron filed a complaint against Perfumania in the United States District
Court for the Southern District of New York alleging that Perfumania infringed
upon their exclusive right to sell the Boucheron bottle and is seeking $1.5
million in damages. Their theory is that they have a valid patent for the
bottles and that Perfumania's sales of such bottles infringes upon their patent
rights. Perfumania believes that a patentee cannot control by resort to an
infringement suit the resale of a patented article which it has sold. In
December 1999, both parties entered into a settlement agreement whereby
Perfumania paid the plaintiff $50,000 and agreed not to sell any product bearing
the name "Boucheron", unless such product is obtained directly from Boucheron
USA or another distributor authorized to sell to retail stores.
FORWARD LOOKING STATEMENTS
Some of the statements in this prospectus, including those that contain
the words "anticipate," "believe," "plan," "estimate," "expect," "should,"
"intend" and other similar expressions, are "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. Those
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
ECOMV or its industry to be materially different from any future results,
performance or achievements expressed or implied by those forward-looking
statements. Those factors include, among other things, those risks identified in
"Risk Factors." You should carefully consider the risks described in this
prospectus.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of any of the
securities being offered by the selling shareholders under this prospectus.
Expenses expected to be incurred by us in connection with this offering
are estimated to be approximately $35,000.
5
<PAGE> 8
SELLING SHAREHOLDERS
The following table provides information regarding the beneficial
ownership of the common stock by the selling shareholders as of the date of this
prospectus and as adjusted to reflect the sale of all of their shares. The
selling shareholders either (a) obtained their shares of common stock pursuant
to the Stock Purchase Agreement, dated August 31, 1999, (b) obtained Series C
Convertible Notes which are convertible into common stock pursuant to the terms
of the Securities Purchase Agreement, dated March 9, 2000, or (c) Series D
Convertible Notes which are convertible into common stock pursuant to the terms
of the Securities Purchase Agreement, dated as of March 27, 2000. No selling
shareholder has had any position, office or other material relationship with
ECOMV within the past three years, other than as listed in the footnotes. The
selling shareholders are participating in this offering pursuant to contractual
registration rights granted to the selling shareholders in connection with the
Stock Purchase Agreement and Securities Purchase Agreements. In connection with
the Stock Purchase Agreement and the Securities Purchase Agreements, we have
agreed to file and maintain the effectiveness of the registration statement of
which this prospectus forms a part and to pay all fees and expenses incident to
the registration of this offering, including all registration and filing fees,
all fees and expenses of complying with state blue sky or securities laws, all
costs of preparation of the registration statement and fees and disbursements of
our counsel and independent public accountants.
<TABLE>
<CAPTION>
$ of
Series C $ of Series D
Convertible Number of Convertible
Notes shares Notes Number of
purchased assuming purchased shares
Shares under conversion under assuming
acquired in Securities of the Securities conversion
Purchase Purchase Series C Purchase of Series D Ownership
Agreement, Agreement, Convertible Agreement, Convertible of
dated dated Notes on dated Notes on Shares(2)
NAME AND ADDRESS OF August 31, March 9, April 19, March 27, April 19, ---------------------------
BENEFICIAL OWNER 1999 2000 2000(1) 2000 2000(1) Shares(3)(4) Percentage(5)
- ----------------------------------- ----------- ---------- ----------- ------------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
S. Robert Productions, LLC(9)...... 0 $ 250,000 99,010 $ 0 0 426,082 4.9
666 Dundee Road
Suite 1901
Northbrook, IL 60062
Cranshire Capital, L.P.(10)........ 0 1,750,000 693,069 2,000,000 792,079 426,082 4.9
c/o Downsview Capital, Inc.
666 Dundee Road
Suite 1901
Northbrook, IL 60062
EP Opportunity Fund, L.L.C(11)..... 0 0 0 469,000 185,743 427,635 4.9
77 West Wacker Drive
Chicago, IL 60601
EP Opportunity Fund
International, Ltd.(12)......... 0 0 0 31,000 12,277 224,158 2.7
77 West Wacker Drive
Chicago, IL 60601
The dotCom Fund, LLC(13)........... 0 1,250,000 495,050 2,000,000 792,079 416,815 4.9
c/o Minamax, LLC
666 Dundee Road
Suite 1901
Northbrook, IL 60062
EP.com Fund, LLC(14)............... 0 600,000 237,624 400,000 158,416 427,635 4.9
77 West Wacker Drive
Chicago, IL 60601
EP.com Fund International,
Ltd.(15)........................ 0 150,000 59,406 0 0 257,426 2.8
77 West Wacker Drive
Chicago, IL 60601
EURAM Cap Strat. "A" Fund
Limited(16)..................... 0 0 0 100,000 39,604 426,082 4.9
c/o JMJ Capital, Inc.
666 Dundee Road
Suite 1901
Northbrook, IL 60062
Parlux Fragrances(17).............. 1,512,406 0 0 0 0 1,512,406 18.2
3725 S.W. 30th Avenue
Ft. Lauderdale, FL 33312
--------- ---------- --------- ---------- --------- --------- ----
Total..................... 1,512,406 $4,000,000 1,584,159 $5,000,000 1,980,198 4,544,321
========= ========== ========= ========== ========= =========
</TABLE>
<TABLE>
<CAPTION>
Number
of
Shares of
Series C Ownership
and After
Series D Number of the
Assuming Shares Offering(8)
NAME AND ADDRESS OF Conversion Registered ---------------------
BENEFICIAL OWNER (6) (7) Shares Percentage
---------- ---------- ------- ----------
<S> <C> <C> <C> <C>
S. Robert Productions, LLC(9)....... 99,010 198,020 138,695 1.6%
666 Dundee Road
Suite 1901
Northbrook, IL 60062
Cranshire Capital, L.P.(10)......... 1,485,148 2,970,296 448,037 4.9
c/o Downsview Capital, Inc.
666 Dundee Road
Suite 1901
Northbrook, IL 60062
EP Opportunity Fund, L.L.C(11)...... 185,743 371,486 208,405 2.3
77 West Wacker Drive
Chicago, IL 60601
EP Opportunity Fund
International, Ltd.(12).......... 12,277 24,554 0 0
77 West Wacker Drive
Chicago, IL 60601
The dotCom Fund, LLC(13)............ 1,287,129 2,574,258 438,330 4.9
c/o Minamax, LLC
666 Dundee Road
Suite 1901
Northbrook, IL 60062
EP.com Fund, LLC(14)................ 396,040 792,080 177,514 2.0
77 West Wacker Drive
Chicago, IL 60601
EP.com Fund International,
Ltd.(15)......................... 59,406 118,812 0 0
77 West Wacker Drive
Chicago, IL 60601
EURAM Cap Strat. "A" Fund
Limited(16)...................... 39,604 79,208 0 0
c/o JMJ Capital, Inc.
666 Dundee Road
Suite 1901
Northbrook, IL 60062
Parlux Fragrances(17)............... 0 1,512,406 0 0
3725 S.W. 30th Avenue
Ft. Lauderdale, FL 33312
--------- --------- --------- --------
Total...................... 3,564,357 8,641,120 1,367,511
========= ========= =========
</TABLE>
6
<PAGE> 9
- -------------------
* Less than 1%.
(1) Assumes a conversion price of $2.525, determined as if conversion occurred
on April 19, 2000 pursuant to the terms of the convertible notes.
(2) Under the Series C and D Convertible Notes, no selling shareholder can
convert the Series C and D Convertible Notes to the extent such conversion
would cause such selling shareholder's beneficial ownership of our common
stock to exceed 4.9% of the outstanding shares of common stock.
(3) Total shares including shares acquired pursuant to the following
agreements, taking into account contractual restrictions (i) Stock Purchase
Agreement, dated August 31, 1999, with Parlux, (ii) Securities Purchase
Agreement, dated April 28, 1997, for the Series A convertible notes, (iii)
Securities Purchase Agreement, dated July 9, 1999, for the Series B
convertible notes, (iv) Securities Purchase Agreement, dated March 9, 2000,
for the Series C convertible notes, (v) Securities Purchase Agreement,
dated March 27, 2000 for the Series D convertible notes, (vi) stock
purchased in the open market or through prior private placements, and (vii)
shares deemed to be beneficially owned as part of a control group.
(4) Due to the affiliation of Mr. Kopin, S. Robert Productions, LLC, Cranshire
Capital, L.P. and EURAM Cap Strat. "A" Fund Limited are in the same control
group. Due to the affiliation of Jeffrey Eisenberg, EP Opportunity Fund,
L.L.C., EP Opportunity Fund International, Ltd., EP.com Fund L.L.C. and
EP.com Fund International, Ltd. are in the same control group.
(5) Based on 8,299,623 shares issued and outstanding on April 19, 2000, and for
each selling shareholder, if applicable, the shares of common stock issued
upon conversion of such shareholder's Series A, B, C and D Convertible
Notes, to the extent contractually permitted.
(6) Assumes no contractual restriction on conversion.
(7) Includes 200% (due to contractual obligations) of the common stock issuable
upon conversion of the Series C convertible notes and Series D convertible
notes despite any conversion restrictions.
(8) Assumes sale of all of the shares beneficially owned by such selling
shareholder and subsequent conversion of the remaining note at the April
19, 2000 conversion price, to the extent contractually permitted.
(9) S. Robert Productions, LLC is a limited liability company whose manager is
Mitchell P. Kopin.
(10) Cranshire Capital, L.P. is a limited partnership whose general partner is
Downsview Capital, Inc., a corporation whose president is Mitchell P.
Kopin.
(11) EP Opportunity Fund, L.L.C. is a limited liability company whose manager is
Eisenberg Partners, L.L.C., a limited liability company whose manager is
Jeffrey Eisenberg.
(12) EP Opportunity Fund International, Ltd., is a foreign company whose
investment manager is Eisenberg Partners, L.L.C. a limited liability
company whose manager is Jeffrey Eisenberg.
(13) The dotCom Fund, LLC is a limited liability company whose manager is
Minamax, LLC, a limited liability company whose manager is Mark Rice.
(14) EP.com Fund, L.L.C. is a limited liability company whose manager is
Eisenberg Partners, L.L.C., a limited liability company whose manager is
Jeffrey Eisenberg.
(15) EP.com Fund International, Ltd., is a foreign company whose investment
manager is Eisenberg Partners, L.L.C., a limited liability company whose
manager is Jeffrey Eisenberg.
(16) EURAM Cap Strat. "A" Fund Limited is a Cayman Island exempted company whose
investment manager is JMJ Capital, Inc., a corporation whose president is
Mitchell P. Kopin.
(17) Parlux Fragrances, Inc. is a public company engaged in the manufacture of
fragrances. Ilia Lekach, our Chairman of the Board and Chief Executive
Officer, and one of our principal shareholders, is the Chairman of the
Board of Parlux. During the fiscal year ended January 29, 2000 we purchased
approximately $30 million of merchandise from Parlux, representing
approximately 21.6% of our total purchases. We believe that our purchases
of merchandise from Parlux, were, except for credit terms, on terms no less
favorable to us than could reasonably be obtained in arm's length
transactions with independent third parties. On August 31, 1999 we entered
into a stock purchase agreement with Parlux. The agreement calls for the
transfer of 1,512,406 shares of our treasury stock to Parlux in
consideration for a partial reduction of our outstanding trade indebtedness
balance of approximately $4.5 million. The transfer price was based on a
per share price of $2.98, which approximates 90% of the closing price on
our common stock for the previous 20 business days. Pursuant to this
agreement the parties entered into a registration rights agreement dated
August 31, 1999, which grants Parlux demand registration rights.
7
<PAGE> 10
PLAN OF DISTRIBUTION
GENERAL
TRANSACTIONS. The selling shareholders may offer and sell their shares
of common stock in one or more of the following transactions:
o on the Nasdaq National Market,
o in the over-the-counter market,
o in negotiated transactions, or
o in a combination of any of these transactions.
PRICES. The selling shareholders may sell their shares of common stock
at any of the following prices:
o fixed prices which may be changed,
o market prices prevailing at the time of sale,
o prices related to prevailing market prices, or
o negotiated prices.
DIRECT SALES; AGENTS, DEALERS AND UNDERWRITERS. The selling
shareholders may effect transactions by selling the shares of common stock in
any of the following ways:
o directly to purchasers, or
o to or through agents, dealers or underwriters designated from
time to time.
Agents, dealers or underwriters may receive compensation in the form of
underwriting discounts, concessions or commissions from the selling shareholders
and/or the purchasers of shares for whom they act as agent or to whom they sell
as principals, or both. The selling shareholders and any agents, dealers or
underwriters that act in connection with the sale of shares might be deemed to
be "underwriters" within the meaning of Section 2(11) of the Securities Act, and
any discount or commission received by them and any profit on the resale of
shares as principal might be deemed to be underwriting discounts or commissions
under the Securities Act.
SUPPLEMENTS. To the extent required, we will set forth in a supplement
to this prospectus filed with the SEC the number of shares to be sold, the
purchase price and public offering price, the name or names of any agent, dealer
or underwriter, and any applicable commissions or discounts with respect to a
particular offering.
STATE SECURITIES LAW. Under the securities laws of some states, the
selling shareholders may only sell the shares in those states through registered
or licensed brokers or dealers. In addition, in some states the selling
shareholders may not sell the shares unless they have been registered or
qualified for sale in that state or an exemption from registration or
qualification is available and is satisfied.
EXPENSES; INDEMNIFICATION. We will not receive any of the proceeds from
the sale of the shares of common stock sold by the selling shareholders and will
bear all expenses related to the registration of this offering but will not pay
for any underwriting commissions, fees or discounts, if any. We will indemnify
the selling shareholders against some civil liabilities, including some
liabilities which may arise under the Securities Act.
8
<PAGE> 11
LEGAL MATTERS
Greenberg Traurig, P.A., of Miami, Florida, has passed upon the
validity of the issuance of our shares of common stock offered in this
prospectus.
EXPERTS
The consolidated financial statements incorporated in this Prospectus
by reference to the Annual Report on Form 10-K of Perfumania, Inc. for the year
ended January 30, 1999 have been so incorporated in reliance on the report
(which contains an explanatory paragraph relating to Perfumania's ability to
continue as a going concern as described in Note 2 to the consolidated financial
statements) of PricewaterhouseCoopers LLP, independent certified public
accountants, given on the authority of said firm as experts in auditing and
accounting.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and
other information with the SEC. You may read and copy any document that we file
at the Public Reference Room of the SEC at 450 Fifth Street, N.W., Washington,
D.C. 20549. You may also inspect our filings at the regional offices of the SEC
located at 7 World Trade Center, New York, New York 10048 and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Please call the
SEC at 1-800-SEC-0330 for further information on the operation of the public
reference rooms. Our SEC filings are also available to the public at the SEC's
web site at http://www.sec.gov. You can also inspect reports and other
information we file at the offices of The Nasdaq Stock Market, Inc., 1735 K
Street, Washington, D.C. 20006.
The SEC allows us to "incorporate by reference" some of the documents
that we file with it into this prospectus, which means:
o incorporated documents are considered part of this prospectus;
o we can disclose important information to you by referring you
to those documents; and
o information that we file with the SEC will automatically
update and supersede this incorporated information.
We incorporate by reference the documents listed below, which were
filed with the SEC under the Securities Exchange Act of 1934:
o our annual report on Form 10-K for the fiscal year ended
January 30, 1999;
o our quarterly reports on Form 10-Q for the periods ended May
1, 1999, July 31, 1999 and October 30, 1999; and
o our current reports on Form 8-K dated February 1, 2000 and
April 4, 2000, as amended, each as subsequently amended.
We also incorporate by reference each of the following documents that
we will file with the SEC after the date of this prospectus:
o any reports filed under Sections 13(a) and (c) of the
Securities Exchange Act;
o definitive proxy or information statements filed under Section
14 of the Securities Exchange Act in connection with any
subsequent stockholders' meetings; and
9
<PAGE> 12
o any reports filed under Section 15(d) of the Securities
Exchange Act.
You should assume that the information appearing in this prospectus is
accurate as of the date of this prospectus only. Our business, financial
position and results of operations may have changed since that date. You may
request a copy of any filings referred to above (excluding exhibits), at no
cost, by contacting us at the following address:
Judy Hilsenrath
Investor Relations
E Com Ventures, Inc.
11701 N.W. 101st Road
Miami, Florida 33178
(305) 889-1600
10
<PAGE> 13
===============================================================================
- -------------------------------------------------------------------------------
NO DEALER, SALES PERSON OR ANY OTHER PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY US. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, BY ANY
PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION. 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 TIME SUBSEQUENT TO THE DATE
HEREOF.
-----------------
TABLE OF CONTENTS
PAGE
Prospectus Summary..........................................................1
Risk Factors................................................................2
Forward Looking Statements..................................................5
Use of Proceeds.............................................................5
Selling Shareholders........................................................6
Plan of Distribution........................................................8
Legal Matters...............................................................9
Experts.....................................................................9
Where You Can Find More Information.........................................9
- -------------------------------------------------------------------------------
===============================================================================
===============================================================================
- -------------------------------------------------------------------------------
4,918,007 SHARES
E COM VENTURES, INC.
COMMON STOCK
-------------------
PROSPECTUS
-------------------
APRIL __, 2000
- -------------------------------------------------------------------------------
===============================================================================
<PAGE> 14
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION (1)
The following table sets forth the costs and expenses (subject to
future contingencies) incurred or expected to be incurred by the Registrant in
connection with the offering. The Registrant has agreed to pay all the costs
and expenses of this offering.
Securities and Exchange Commission Registration Fee............... $ 7,415
Accounting Fees and Expenses...................................... 10,000
Legal Fees and Expenses........................................... 15,000
Printing Expenses................................................. 1,500
Miscellaneous..................................................... 1,085
---------
Total.................................................... $ 35,000
=========
- ---------------------
(1) The amounts set forth above, except for the SEC fee, are in each case
estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant has authority under Section 607.0850 of the Florida
Business Corporation Act to indemnify its directors and officers to the extent
provided in such statute. The Registrant's Articles of Incorporation provide
that the Registrant may indemnify its executive officers and directors to the
fullest extent permitted by law whether now or hereafter.
The provisions of the Florida Business Corporation Act that authorize
indemnification do not eliminate the duty of care of a director, and in
appropriate circumstances equitable remedies such as injunctive or other forms
of nonmonetary relief will remain available under Florida law. In addition,
each director will continue to be subject to liability for (a) violations of
the criminal law, unless the director had reasonable cause to believe his
conduct was lawful or had no reasonable cause to believe his conduct was
unlawful; (b) deriving an improper personal benefit from a transaction; (c)
voting for or assenting to an unlawful distribution; and (d) willful misconduct
or a conscious disregard for the best interests of the Registrant in a
proceeding by or in the right of the Registrant to procure a judgment in its
favor or in a proceeding by or in the right of a shareholder. The statute does
not affect a director's responsibilities under any other law, such as the
federal securities laws or state or federal environmental laws.
ITEM 16. EXHIBITS
The following exhibits are included as part of this Registration
Statement:
EXHIBITS DESCRIPTION
5.1 Opinion of Greenberg Traurig, P.A.
10.14 Stock Purchase Agreement, dated as of August 31, 1999 by
and among Parlux Fragrances, Inc. and
Perfumania, Inc.
10.15 Securities Purchase Agreement, dated as of March 9, 2000,
between the Registrant and the investors set forth therein
II-1
<PAGE> 15
EXHIBITS DESCRIPTION
10.16 Securities Purchase Agreement, dated as of March 27, 2000,
between the Registrant and the investors set forth therein
23.1 Consent of Greenberg Traurig, P.A. (contained in
exhibit 5.1)
23.2 Consent of PricewaterhouseCoopers LLP
24.1 Power of Attorney (filed with the signature page)
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933;
(ii) 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. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation from the
low or high end of the estimated maximum offering range be reflected in the
form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than 20% change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) 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 (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the registration
statement.
(2) That, for the purposes of determining any liability
under the Securities Act of 1933, 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.
(3) 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.
(4) If the registrant is a foreign private issuer, to
file a post-effective amendment to the registration statement to include any
financial statements required by Rule 3-19 of this chapter at the start of any
delayed offering or throughout a continuous offering. Financial statements and
information otherwise required by Section 10(a)(3) of the Act need not be
furnished, provided, that the registrant includes in the prospectus, by means
of a post-effective amendment, financial statements required pursuant to this
paragraph (a)(4) and other information necessary to ensure that all other
information in the prospectus is at least as current as the date of those
financial statements. Notwithstanding the foregoing, with respect to
registration statements on Form F-3, a post-effective
II-2
<PAGE> 16
amendment need not be filed to include financial statements and information
required by Section 10(a)(3) of the Act or Rule 3-19 of this chapter if such
financial statements and information are contained in periodic reports filed
with or furnished to the Commission by the registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the Form F-3.
(b) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933, each
filing of the registrant's annual report pursuant to section 13(a) or section
15(d) of the Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to section 15(d) of
the Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement 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.
(c) 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> 17
SIGNATURES
Pursuant to the requirements of the Securities Act, 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 Miami, State of Florida, on the 24th day of April,
2000.
E COM VENTURES, INC.
By: /s/ Ilia Lekach
------------------------------------------
Ilia Lekach
Chairman and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Ilia Lekach and Donovan Chin, and each
of them, his true and lawful attorney-in-fact and agents, with full power of
substitution and resubstitution for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, including a
Registration Statement filed pursuant to Rule 462 under the Securities Act of
1933, as amended, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that each of said
attorneys-in-fact or his substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Ilia Lekach Chairman of the Board and Chief Executive April 24, 2000
- ---------------------------------------- Officer (Principal Executive Officer)
Ilia Lekach
/s/ Jerome Falic President and Vice Chairman of the Board April 24, 2000
- ----------------------------------------
Jerome Falic
/s/ Donovan Chin Chief Financial Officer and Director April 24, 2000
- ---------------------------------------- (Principal Financial and Accounting
Donovan Chin Officer)
/s/ Marc Finer Director April 24, 2000
- ----------------------------------------
Marc Finer
/s/ Robert Pliskin Director April 24, 2000
- ----------------------------------------
Robert Pliskin
Director
- ----------------------------------------
Carole Ann Taylor
/s/ Horatio Groisman, M.D. Director April 24, 2000
- ----------------------------------------
Horatio Groisman, M.D.
/s/ Zalman Lakach Director April 24, 2000
- ----------------------------------------
Zalman Lakach
</TABLE>
II-4
<PAGE> 1
EXHIBIT 5.1
GREENBERG TRAURIG, P.A.
APRIL 24, 2000
E Com Ventures, Inc.
11701 N.W. 101st Road
Miami, Florida 33178
Ladies and Gentlemen:
We have acted as counsel for E Com Ventures, Inc., a Florida
corporation (the "Company"), in connection with the Company's Registration
Statement on Form S-3 (the "Registration Statement") being filed by the Company
under the Securities Act of 1933, as amended, with respect to 8,641,120 shares
(the "Shares") of the Company's common stock, par value $.01 per share (the
"Common Stock"), which may be disposed of from time to time by the selling
shareholders (the "Selling Shareholders") named therein. Of the shares of Common
Stock offered thereby, 7,128,714 are issuable to the Selling Shareholders, or
their permitted assignees, upon the conversion of the Company's Series C and
Series D Convertible Notes (the "Notes") and 1,512,406 shares issued to Parlux
Fragrances, Inc.
In connection with the preparation of the Registration Statement and
this letter, we have examined, considered and relied upon the following
documents (collectively, the "Documents"): the Company's Articles of
Incorporation (as amended) as filed with the Secretary of State of the State of
Florida; the Company's bylaws and corporate minute book; and such other
documents and matters of law as we have considered necessary or appropriate for
the expression of the opinions contained herein.
In rendering the opinions set forth below, we have assumed without
investigation the genuineness of all signatures and the authenticity of all
documents submitted to us as originals, the conformity to authentic original
documents of all documents submitted to us as copies, and the veracity of the
Documents. As to questions of fact material to the opinions hereinafter
expressed, we have relied upon the representations and warranties of the Company
made in the Documents.
Based solely upon and subject to the Documents, and subject to the
qualifications set forth below, we are of the opinion that the Shares to be sold
by the Selling Shareholders pursuant to the Registration Statement have been
duly authorized and are, or when issued pursuant to the terms of the Notes, will
be, validly issued and are, or when issued in accordance with the terms thereof
will be, fully paid and nonassessable.
Although we have acted as counsel to the Company in connection with
certain other matters, our engagement is limited to certain matters about which
we have been consulted. Consequently, there may exist matters of a legal nature
involving the Company in connection with which we have not been consulted and
have not represented the Company. This opinion letter is limited to the matters
stated herein and no opinions may be implied or inferred beyond the matters
expressly stated herein. The opinions expressed herein are as of the date
hereof, and we assume no obligation to update or supplement such opinions to
reflect any facts or circumstances that may hereafter come to our attention or
any changes in law that may hereafter occur.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the caption "Legal
Matters" in the prospectus contained in the Registration Statement. In giving
such consent, we do not admit that we come within the category of persons whose
consent is required by Section 7 of the Securities Act of 1933, as amended, and
the rules and regulations thereunder.
Very truly yours,
GREENBERG TRAURIG, P.A.
<PAGE> 1
EXHIBIT 10.14
STOCK PURCHASE AGREEMENT
----------------------------------
STOCK PURCHASE AGREEMENT (the "Agreement") dated as of August 31, 1999,
by and among PARLUX FRAGRANCES, INC., a Delaware corporation (the "Purchaser"),
and PERFUMANIA, INC., a Florida corporation (the "Seller").
WHEREAS, the Purchaser, desires to acquire from the Seller 1,512,406
shares of the Seller's common stock, par value $.01 per share, (the "Stock"),
and the Seller desires to sell the Stock to the Purchaser in consideration for a
partial reduction of outstanding trade indebtedness due from the Seller to the
Purchaser in the amount of $4,506,970;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
Purchaser and the Seller agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1 The Purchase. (a) Upon satisfaction of all conditions precedent set
forth herein, on the Closing Date (as defined below), the Seller shall sell and
deliver the Stock to the Purchaser in consideration of a cancellation of the
amount of trade indebtedness owed by the Seller to the Purchaser in the amount
of $4,506,970.
(b) At the Closing, the Seller shall deliver to the Purchaser
a certificate representing the Stock which the Purchaser is purchasing and the
Purchaser shall deliver to the Seller an instrument executed by the Purchaser
canceling $4,506,970 of trade indebtedness owed by the Seller to the Purchaser.
The certificate representing the Stock shall bear the following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE
SECURITIES COMMISSION OF ANY STATE UNDER ANY STATE SECURITIES
LAW. THE SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE
DISTRIBUTED IN THE UNITED STATES OR TO ANY U.S. PERSONS UNLESS
THE SECURITIES ARE REGISTERED UNDER THE ACT AND APPLICABLE
STATE SECURITIES LAWS, OR SUCH OFFERS, SALES AND TRANSFERS ARE
MADE PURSUANT TO AVAILABLE EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND THOSE LAWS.
(c) The Seller acknowledges and agrees that the trade
indebtedness to be canceled shall be comprised of the indebtedness which has
been outstanding for the longest period.
1.2 Closing. The Closing of the transactions described in Section 1.1
shall take place at the offices of the Seller, on September 3, 1999 (the
"Closing Date") or such other date, time, and place as may be agreed upon by the
Purchaser and the Seller.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Purchaser that at the Closing
Date:
<PAGE> 2
2.1 Due Incorporation; Organization. The Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida. Each of the Seller's significant subsidiaries (within the meaning of
Regulation S-X under the Securities Exchange Act of 1934, as amended, (the
"Significant Subsidiaries")) is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation.
The Seller and each of the Significant Subsidiaries has the requisite corporate
power and authority to own, operate or lease its assets and properties and to
carry on its business as it is now being conducted, and is duly qualified or
licensed to do business, and is in good standing, in each jurisdiction in which
the nature of its business or the properties owned, operated or leased by it
makes such qualification, licensing or good standing necessary, except where the
failure to have such power or authority, or the failure to be so qualified,
licensed or in good standing, would not have a Material Adverse Effect. The term
"Material Adverse Effect" as used in this Agreement, means any change in or
effect on the business, operations or financial condition of the Seller or any
of its subsidiaries that is materially adverse to the Seller and its
subsidiaries taken as a whole except for (i) any change or effect resulting from
general economic, financial or market conditions or (ii) any change or effect
resulting from conditions or circumstances generally effecting the fragrance and
cosmetics industry.
2.2 Certificate of Incorporation and By-Laws. The Seller has heretofore
made available to Purchaser a complete and correct copy of the certificate of
incorporation and the by-laws, each as amended to the date hereof, of the Seller
and no action to amend or modify either thereof has been taken.
2.3 Capitalization; Shares. (a) The authorized capital stock of the
Seller consists of 25,000,000 common shares, par value $.01 per share. The
Seller has 7,644,028 shares of common stock outstanding and 1,512,406 shares of
common stock held as treasury stock as of July 31, 1999.
(b) The Stock when issued, sold and delivered in accordance
with the terms and for the consideration expressed in this Agreement, shall be
duly and validly issued, fully-paid and nonassessable.
2.4 Authority Relative to this Agreement. The Seller has all necessary
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by the Seller and the consummation by the Seller of the
transactions contemplated hereby have been duly and validly authorized and
approved by the Board of Directors of the Seller and no other corporate
proceedings on the part of the Seller are necessary to authorize or approve this
Agreement or to consummate the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by the Seller and constitutes a
valid and binding obligation of the Seller enforceable against the Seller in
accordance with its terms, except that such enforceability (i) may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting or relating
to the enforcement of creditor's rights generally and (ii) is subject to general
principles of equity.
2.5 No Conflict; Required Filings and Consents. (a) None of the
execution and delivery of this Agreement by the Seller, the consummation by the
Seller of the transactions contemplated hereby or compliance by the Seller with
any of the provisions hereof will (i) conflict with or violate the certificate
of incorporation or by-laws of the Seller or the comparable organizational
documents of any of its Significant Subsidiaries, (ii) conflict with or violate
any statute, ordinance, rule, regulation order, judgment or decree applicable to
the Seller or its Significant Subsidiaries, or by which any of them or any of
their respective properties or assets may be bound or affected, or (iii) result
in a violation or breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, or result
in any loss of any material benefit, or the creation of any lien on any of the
property or assets of the Seller or any of its Significant Subsidiaries (any of
the foregoing referred to in clause (ii) or this clause (iii) being a
"Violation") pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Seller or any of its Significant Subsidiaries is a party or by
which the Seller or any of its subsidiaries or any of their respective
properties may be bound or affected, except in the case of the foregoing clauses
(ii) or (iii) for any such Violations which would not have a Material Adverse
Effect.
(a) None of the execution and delivery of this Agreement by
the Seller, the consummation by the Seller of the transactions contemplated
hereby or compliance by the Seller with any of the provisions hereof will
require any consent, waiver, approval, authorization or permit of, or
registration or filing with or notification to (any of the foregoing being a
"Consent"), any government or subdivision thereof, or any administrative,
governmental or regulatory authority, agency, commission, tribunal or body,
domestic, foreign or supranational (a
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"Governmental Entity"), except for (i) compliance with any applicable
requirements of the Securities Act and the Securities Exchange Act of 1934, as
amended (the "Exchange Act") or (ii) consents the failure of which to obtain or
make would not have a Material Adverse Effect or materially adversely effect the
ability of the Seller to consummate the transactions contemplated hereby.
2.6 SEC Reports and Financial Statements. (a) The Seller has filed with
the SEC all forms, reports, schedules, registration statements and definitive
proxy statements (the "SEC Reports") required to be filed by the Seller with the
Securities and Exchange Commission (the "SEC"). As of their respective dates,
the SEC Reports complied in all material respects with the requirements of the
Exchange Act or the Securities Act and the rules and regulations of the SEC
promulgated thereunder applicable, as the case may be, to such SEC Reports, and
none of the SEC Reports contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances under which they
were made, not misleading.
(b) The consolidated balance sheets as of January 30, 1999 and
the related consolidated statements of operations, common shareholders' equity
and cash flows for each of the three fiscal years in the period ended January
30, 1999 (including the related notes and schedules thereto) of the Seller
contained in the Seller's Form 10-K for the year ended January 30, 1999 included
in the SEC Reports present fairly, in all material respects, the consolidated
financial position and the consolidated results of operations and cash flows of
the Seller and its consolidated subsidiaries as of the dates or for the periods
presented therein in conformity with United States generally accepted accounting
principles applied on a consistent basis ("GAAP") during the periods involved
except as otherwise noted therein, including the related notes.
(c) The consolidated balance sheets and the related statements
of operations and cash flows (including in each case the related notes thereto)
of the Seller contained in the Form 10-Q for the period ended May 1, 1999
included in the SEC Reports (collectively, the "Quarterly Financial Statement")
have been prepared in accordance with the requirements for interim financial
statements contained in Regulation S-X. The Quarterly Financial Statement
reflects all adjustments, which include only normal recurring adjustments,
necessary to present fairly, in all material respects, the consolidated
financial position, results of operations and cash flows of the Seller for the
period presented therein in conformity with GAAP except as otherwise noted
therein, including the related notes.
2.7 Litigation. As of the date hereof, there is no suit, action or
proceeding pending or, to the knowledge of the Seller, threatened against or
affecting the Seller or any of its subsidiaries that, individually or in the
aggregate, would have a Material Adverse Effect, nor is there any judgment,
decree, injunction or order of any Governmental Entity or arbitrator outstanding
against the Seller or any of its subsidiaries that would have, individually or
in the aggregate, a Material Adverse Effect.
2.8 Compliance with Applicable Laws. To the knowledge of the Seller,
the Seller and its subsidiaries are in substantial compliance with all laws,
regulations and orders of any Governmental Entity applicable to it or such
subsidiaries, except for such failures so to comply which would not have a
Material Adverse Effect. To the knowledge of the Seller, the business operations
of the Seller and its subsidiaries are not being conducted in violation of any
law, ordinance or regulation of any Governmental Entity, except for possible
violations which, individually or in the aggregate, would not have a Material
Adverse Effect on the Seller.
2.9 Material Adverse Change. Between May 1, 1999 and the date hereof,
there has not been any change in the business, operations or financial condition
of the Seller or any of its subsidiaries that is materially adverse to the
Seller and its subsidiaries taken as a whole, except for (i) any change
resulting from general economic, financial or market conditions or (ii) any
change resulting from conditions or circumstances generally affecting the
perfume industry.
2.10 Solvency. As of the date of this Agreement the Seller is Solvent.
For the purposes of this Agreement, "Solvent" means with respect to the Seller
on a particular date, that on such date (i) the fair value of the property of
the Seller is greater than the total amount of liabilities, including, without
limitation, contingent liabilities, of the Seller, (ii) the present fair
saleable value of the assets of the Seller is not less than the amount that will
be required to pay the probable liability of the Seller on its debts as they
become absolute and matured, (iii) the Seller is able to realize upon its assets
and pay its debts and other liabilities, contingent obligations and other
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commitments as they mature in the normal course of business, (iv) the Seller
does not intend to, and does not believe that it will, incur debts or
liabilities beyond the Seller's ability to pay as such debts and liabilities
mature, and (v) the Seller is not engaged in business or a transaction, and is
not about to engage in business or a transaction, for which the Seller's
property would constitute unreasonably small capital after giving due
consideration to the prevailing practice in the industry in which the Seller is
engaged. In computing the amount of contingent liabilities at any time, it is
intended that such liabilities will be computed at the amount which, in light of
all the facts and circumstances existing at such time, represents the amount
that can reasonably be expected to become an actual or matured liability taking
into account any subrogation and contribution rights.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
3.1 Due Organization. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
with all requisite power and authority to own and operate its assets and
properties as they are now being owned and operated.
3.2 Due Authorization. (a) Purchaser has duly and validly executed and
delivered this Agreement. This Agreement constitutes the legal, valid and
binding obligation of the Purchaser, enforceable against the Purchaser in
accordance with its terms.
(b) The Purchaser has full power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby.
3.3 Consents and Approvals; Authority Relative to This Agreement.
Neither the execution and delivery of this Agreement, nor the consummation of
the transactions contemplated hereby will (a) violate any provisions of the
certificate of incorporation or by-laws of the Purchaser, (b) with or without
the giving of notice or passage , or both, violate , or be in conflict with, or
constitute a default, or permit the termination of, or cause the acceleration of
the maturity of, any agreement, instrument, contract, debt or obligation of the
Purchaser, (c) require the consent of any party to any agreement or commitment
to which the Purchaser is a party, or by which the Purchaser or its properties
or assets is bound, or (d) violate any regulation or any judgment or decree of
any court or authority to which the Purchaser is subject. No consent, approval
or authorization of, or declaration, filing or registration with, any
Governmental Entity is required to be made or obtained by the Purchaser in
connection with the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby or thereby.
3.4 No Registration, Etc. The Purchaser acknowledges that the offering
and sale of the Stock pursuant to this Agreement (i) has not been registered
under the Securities Act, or under the securities or "blue sky" laws, rules or
regulations of any State (collectively, the "Securities Laws") and (ii) is
intended to be exempt from registration under the Securities Act, by virtue of
Section 4(2) of the Act and the provisions of Rule 506 of Regulation D
promulgated thereunder by the SEC. In furtherance thereof, the Purchaser
represents and warrants to the Seller that it is an "accredited investor", as
defined in Rule 501 of Regulation D promulgated under the Securities Act. The
Purchaser has been afforded, prior to the execution of this Agreement, the
opportunity to ask questions of, and to receive answers from, the Seller and its
management, and it has had access to all documents and information which is
deemed material to an investment decision with respect to the purchase of the
Stock hereunder. The Stock is being purchased for its own account, for
investment and not for distribution or resale to others. The Purchaser agrees
that it will not transfer the Stock unless the Stock is registered under any
applicable Securities Laws or the transfer is otherwise exempt therefrom. The
Purchaser further acknowledges that it is aware that it may be considered an
"affiliate" of the Seller for purposes of the Securities Act and, accordingly,
that any public sales of the Securities by the Purchaser will be subject to Rule
144 promulgated under the Securities Act.
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ARTICLE IV
CONDITIONS PRECEDENT TO OBLIGATIONS
OF PURCHASER
The obligations of the Purchaser to purchase the Stock and to
consummate at Closing the transactions contemplated hereby is subject to the
satisfaction or waiver by the Purchaser of the following conditions precedent on
or before the Closing Date:
4.1 Representations and Warranties. The representations and warranties
of the Seller contained in this Agreement shall be accurate, true and correct on
and as of the Closing Date.
4.2 Compliance with Agreements and Covenants. The Seller shall have
performed and complied in all material respects with all of the covenants,
obligations and agreements contained in this Agreement to be performed and
complied with by the Seller on or prior to the Closing Date.
4.3 Required Consents. All material consents, authorizations and
approvals from, and all material declarations, filings and registrations with,
Governmental Entities or third parties required to consummate the transactions
contemplated by this Agreement or permit the Seller to continue its business
consistent with its prior practice without a Material Adverse Effect shall have
been obtained or made and delivered to the Purchaser, in form and substance to
the reasonable satisfaction of the Purchaser.
4.4 No Prohibition. No action or proceeding by any Authority shall have
been instituted or threatened that would enjoin, restrain, or prohibit the
consummation of the transactions as contemplated by this Agreement, or that
would, in the reasonable judgment of the Purchaser, make it inadvisable to
consummate such transactions, and no court order shall have been entered in any
action or proceeding instituted by any party that enjoins, restrains or
prohibits this Agreement or the complete consummation of the transactions
contemplated by this Agreement.
4.5 No Material Adverse Change. There shall not have occurred any
material adverse change (taken together with all other developments) since the
date of this Agreement that would have a Material Adverse Effect.
4.6 Documents. The Purchaser shall receive in form and substance
satisfactory to it:
(a) A certificate, dated the Closing Date, of the Seller
substantially to the effect set forth in Sections 4.1 and 4.2 with respect to
the representations, warranties and covenants of the Seller; and
(b) A legal opinion from counsel to the Seller, dated the
Closing Date, in substantially the form of Exhibit A hereto.
4.7 Registration Rights. The Purchaser and the Seller shall have
executed and delivered a Registration Rights Agreement in form and substance
satisfactory to the Purchaser.
ARTICLE V
CONDITIONS PRECEDENT TO OBLIGATIONS OF
THE SELLER
The obligations of the Seller at the Closing Date under this Agreement
are subject to the satisfaction or waiver by the Seller of the following
conditions precedent on or before the Closing Date:
5.1 Representations and Warranties. The representations and warranties
of the Purchaser contained in this Agreement shall have been accurate, true and
correct in all material respects on and as of the date of this Agreement and
shall also be accurate, true and correct in all material respects on as of the
Closing Date with the same force and effect as though made on and as of the
Closing Date.
5.2 Compliance with Agreements and Covenants. The Purchaser shall have
performed and complied in all material respects with all of the covenants,
obligations and agreements contained in this Agreement to be performed and
complied with by the Purchaser on or prior to the Closing Date.
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5.3 Required Consents. All material consents, authorizations and
approvals from, and all material declarations, filings and registrations with,
Governmental Entities or third parties required to consummate the transactions
contemplated by this Agreement shall have been obtained or made and delivered to
the Seller, in form and substance to the reasonable satisfaction of the Seller.
5.4 No Prohibition. No action or proceeding by any authority shall have
been instituted or threatened that would enjoin, restrain, or prohibit the
consummation of the transactions as contemplated by this Agreement, or that
would, in the reasonable judgment of the Seller, make it inadvisable to
consummate such transactions, and no court order shall have entered in any
action or proceeding instituted by any party that enjoins, restrains or
prohibits this Agreement or the complete consummation of the transactions as
contemplated by this Agreement.
5.5 Documents. The Seller shall receive, in form and substance
satisfactory to them a certificate, dated the Closing Date, of Purchaser
substantially to the effect set forth in Sections 5.1 and 5.2.
ARTICLE VI
MISCELLANEOUS
6.1 Termination. This Agreement may be terminated at any time on or
prior to the Closing Date:
(a) With the mutual consent of the Seller and the Purchaser;
(b) By written notice from the Seller or the Purchaser to the
other, if the Closing shall not have taken place on or before September 30,
1999; provided, however, that the right to terminate this Agreement under this
Section 6.1 shall not be available to any party whose failure to perform any
obligation under this Agreement has been the cause of or resulted in the failure
of the Closing to occur on or before such date;
(c) By the Purchaser, if there shall have been a material
breach of any covenant, representation or warranty of the Seller hereunder, and
such breach shall not have been remedied within thirty (30) business days after
receipt by the Seller of a notice in writing from the Purchaser specifying the
breach and requesting such be remedied;
(d) By the Seller, if there shall have been a material breach
of any covenant, representation or warranty of the Purchaser hereunder, and such
breach shall not have been remedied within thirty (30) business days after
receipt by the Purchaser of notice in writing from the Seller specifying the
breach and requesting such be remedied;
(e) By written notice from the Seller or the Purchaser to the
other, if any court of competent jurisdiction or other governmental body shall
have issued an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated by
this Agreement and such order, decree, ruling or other action shall have become
final and nonappealable; or
(f) Effect of Termination. If this Agreement is terminated
pursuant to Section 6.1(a), or (e) all obligations of the parties hereunder
shall terminate without liability of any party (or any stockholder, affiliate,
director, officer, employee, agent, consultant or representative of any party).
No termination pursuant to Section 6.1(b), or (d) shall relieve any party from
liability for any willful breach of this Agreement prior to such termination,
and the willfully breaching party shall be fully liable for any and all losses
sustained or incurred by any other party from such breach.
6.2 Public Announcements. So long as this Agreement is in effect, the
Purchaser and the Seller agree to use reasonable efforts to consult with each
other before issuing any press release or otherwise making any public statement
with respect to the transactions contemplated by this Agreement.
6.3 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF FLORIDA
WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
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6.4 Amendment; Effective Date. This Agreement may be amended, modified
or supplemented but only in writing signed by the Seller and the Purchaser.
6.5 Notices. Any notice, request, instruction or other document to be
given hereunder by a party hereto shall be in writing and shall be deemed to
have been given, (a) when received if given in person or by courier or a courier
service, or (b) on the business day after deposit with a reputable overnight
delivery service for next business day delivery.
6.6 Waivers. The failure of a party hereto at any time or times to
require performance of any provision hereof shall in no manner affect its right
at a later time to enforce the same. No waiver by a party of any condition or
any breach of any term, covenant, representation or warranty contained in this
Agreement shall be effective unless in writing, and no waiver in any one or more
instances shall be deemed to be a further or continuing waiver of any such
condition or breach in other instances or a waiver of any other condition or
breach of any other term, covenant, representation or warranty.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
PARLUX FRAGRANCES, INC.
By: /s/ Frank A. Buttacavoli
--------------------------------
Name: Frank A. Buttacavoli
Title: Executive VP and CFO
PERFUMANIA, INC.
By: /s/ Jerome Falic
--------------------------------
Name: Jerome Falic
Title: President
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EXHIBIT 10.15
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of March
9, 2000, is entered into by and among E Com Ventures, Inc., a Florida
corporation, with headquarters located at 11701 N.W. 101st Road, Miami, Florida
33178 (the "Company"), and the investors listed on Schedule 1 attached hereto
(individually, a "Buyer" and collectively, the "Buyers").
WHEREAS:
A. The Company and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 of Regulation D ("Regulation D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 Act");
B. The Company has authorized the following new series of convertible
notes: the Company's Series C Convertible Notes (the "Convertible Notes"), which
shall be convertible into shares of the Company's Common Stock, par value $.01
per share (the "Common Stock") (as converted, the "Conversion Shares"), in
accordance with the terms of the Company's Series C Convertible Notes,
substantially in the form attached hereto as Exhibit A;
C. The Buyers wish to purchase, upon the terms and conditions stated in
this Agreement, an aggregate of $4,000,000 worth of Convertible Notes in the
respective amounts set forth opposite each Buyer's name on Schedule 1; and
D. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
substantially in the form attached hereto as Exhibit B (the "Registration Rights
Agreement") pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.
NOW THEREFORE, the Company and the Buyers hereby agree as follows:
1. PURCHASE AND SALE OF CONVERTIBLE NOTES.
a. Purchase of Convertible Notes. Subject to the satisfaction
(or waiver) of the conditions set forth in Sections 6 and 7 below, the Company
shall issue and sell (the "Offering") to each Buyer and each Buyer severally
agrees to purchase from the Company the amount of Convertible Notes set forth
opposite such Buyer's name on Schedule 1 (the "Closing"). The aggregate purchase
price (the "Purchase Price") of all the Convertible Notes offered and sold
pursuant to the Offering at the Closing shall be $4,000,000.
b. Closing Date. The date and time of the Closing (the
"Closing Date") shall be 10:00 a.m. Central Time, within two (2) business days
following the date hereof, subject to notification of satisfaction (or waiver)
of the conditions to the Closing set forth in Sections 6 and 7 below (or such
later date as is mutually agreed to by the Company and the Buyers). The Closing
shall occur on the Closing Date at the offices of Katten Muchin & Zavis, 525
West Monroe Street, Suite 1600, Chicago, Illinois 60661-3693.
c. Form of Payment. On the Closing Date, (i) each Buyer shall
pay the Purchase Price to the Company for the Convertible Notes to be issued and
sold to such Buyer at the Closing, by wire transfer of immediately available
funds in accordance with the Company's written wire instructions, and (ii) the
Company shall deliver to each Buyer, the Convertible Notes (in the denominations
as such Buyer shall request) which such Buyer is then purchasing (as indicated
opposite such Buyer's name on Schedule 1) hereunder, duly executed on behalf of
the Company and registered in the name of such Buyer or its designee.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants with respect to only itself that:
<PAGE> 2
a. Investment Purpose. Such Buyer is acquiring the Convertible
Notes (the Convertible Notes may also be referred to herein as the
"Securities"), for its own account for investment only and not with a view
towards, or for resale in connection with, the public sale or distribution
thereof, except pursuant to sales registered or exempt from registration under
the 1933 Act; provided, however, that by making the representations herein, such
Buyer does not agree to hold any of the Securities for any minimum or other
specific term and reserves the right to dispose of the Securities at any time in
accordance with or pursuant to a registration statement or an exemption from
registration under the 1933 Act.
b. Accredited Investor Status. Such Buyer is an "accredited
investor" as that term is defined in Rule 501(a)(3) of Regulation D.
c. Reliance on Exemptions. Such Buyer understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy of, and
such Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire such Securities.
d. Information. Such Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
which have been requested by such Buyer. Such Buyer and its advisors, if any,
have been afforded the opportunity to ask questions of the Company. Neither such
inquiries nor any other due diligence investigations conducted by such Buyer or
its advisors, if any, or its representatives shall modify, amend or affect such
Buyer's right to rely on the Company's representations and warranties contained
in Section 3 below. Such Buyer understands that its investment in the Securities
involves a high degree of risk. Such Buyer has sought such accounting, legal and
tax advice as it has considered necessary to make an informed investment
decision with respect to its acquisition of the Securities.
e. No Governmental Review. Such Buyer understands that no
United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the Securities
or the fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
f. Transfer or Resale. Such Buyer understands that except as
provided in the Registration Rights Agreement: (i) the Securities have not been
and are not being registered under the 1933 Act or any state securities laws,
and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, (B) such Buyer shall have delivered to the
Company an opinion of counsel, in a generally acceptable form, to the effect
that such Securities to be sold, assigned or transferred may be sold, assigned
or transferred pursuant to an exemption from such registration, or (C) such
Buyer provides the Company with reasonable assurance that such Securities can be
sold, assigned or transferred pursuant to Rule 144 promulgated under the 1933
Act, as amended, (or a successor rule thereto) ("Rule 144"); (ii) any sale of
the Securities made in reliance on Rule 144 may be made only in accordance with
the terms of Rule 144 and further, if such Buyer intends to utilize Rule 144 but
Rule 144 is not applicable to such resale, any resale of the Securities under
circumstances in which such Buyer (or the person through whom the sale is made)
may be deemed to be an underwriter (as that term is defined in the 1933 Act) may
require compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register such Securities under the 1933 Act or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder.
g. Legends. Such Buyer understands that the certificates or
other instruments representing the Convertible Notes and, until such time as the
sale of the Conversion Shares has been registered under the 1933 Act as
contemplated by the Registration Rights Agreement, the stock certificates
representing the Conversion Shares, except as set forth below, shall bear a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of such stock certificates):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"),
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OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (1) IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE 1933 ACT,
AND APPLICABLE STATE SECURITIES LAWS, OR (2) IN THE ABSENCE OF
AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER THE 1933 ACT OR (3) UNLESS
SOLD, TRANSFERRED OR ASSIGNED PURSUANT TO RULE 144 UNDER THE
1933 ACT.
The legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of the Securities upon which it
is stamped, if, unless otherwise required by state securities laws, (i) such
Securities are registered for sale under the 1933 Act, (ii) in connection with a
sale transaction, such holder provides the Company with an opinion of counsel,
in a generally acceptable form, to the effect that a public sale, assignment or
transfer of the Securities may be made without registration under the 1933 Act,
or (iii) such holder provides the Company with reasonable assurances that the
Securities can be sold pursuant to Rule 144 without any restriction as to the
number of securities acquired as of a particular date that can then be
immediately sold.
h. Validity; Enforcement. This Agreement has been duly and
validly authorized, executed and delivered on behalf of such Buyer and is a
valid and binding agreement of such Buyer enforceable against such Buyer in
accordance with its terms, subject as to enforceability to general principles of
equity and to applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and remedies.
i. Residency. Such Buyer is a resident of that state and
country specified in its address on Schedule 1.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers that:
a. Organization and Qualification. The Company and its
"Subsidiaries" (which for purposes of this Agreement means any entity in which
the Company, directly or indirectly, owns a majority of the capital stock or
holds a majority equity or similar interest) are corporations duly organized and
validly existing in good standing under the laws of the jurisdiction in which
they are incorporated, and have the requisite corporate power and authorization
to own their properties and to carry on their business as now being conducted.
Each of the Company and its Subsidiaries is duly qualified as a foreign
corporation to do business and is in good standing in every jurisdiction in
which its ownership of property or the nature of the business conducted by it
makes such qualification necessary, except to the extent that the failure to be
so qualified or be in good standing would not have a Material Adverse Effect. As
used in this Agreement, "Material Adverse Effect" means any material adverse
effect on the business, properties, assets, operations, results or operations,
or financial condition of the Company and its Subsidiaries, if any, taken as a
whole.
b. Authorization; Enforcement; Validity. (i) The Company has
the requisite corporate power and authority to enter into and perform this
Agreement, the Registration Rights Agreement, the Irrevocable Transfer Agent
Instructions (as defined in Section 5) and each of the other agreements entered
into by the parties hereto in connection with the transactions contemplated by
this Agreement (collectively, the "Transaction Documents"), the Convertible
Notes, and to issue the Securities in accordance with the terms hereof and
thereof, (ii) the execution and delivery of the Transaction Documents and the
Convertible Notes by the Company and the consummation by it of the transactions
contemplated hereby and thereby, including without limitation the issuance of
the Convertible Notes and the reservation for issuance and the issuance of the
Conversion Shares issuable upon conversion thereof, have been duly authorized by
the Company's Board of Directors and no further consent or authorization is
required by the Company, its Board of Directors or its stockholders, (iii) the
Transaction Documents have been duly executed and delivered by the Company, and
(iv) the Transaction Documents constitute the valid and binding obligations of
the Company enforceable against the Company in accordance with their terms,
except as
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such enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of creditors' rights and
remedies.
c. Issuance of Securities. The Convertible Notes are duly
authorized and, upon issuance in accordance with the terms hereof, shall be (i)
validly issued, fully paid and non-assessable, (ii) free from all taxes, liens
and charges with respect to the issue thereof and (iii) entitled to the rights
and preferences as set forth in the Convertible Notes. 705,218 shares of Common
Stock (subject to adjustment pursuant to the Company's covenant set forth in
Section 4(d) below) have been duly authorized and reserved for issuance upon
conversion of the Convertible Notes. Upon conversion in accordance with the
Convertible Notes, the Conversion Shares will be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof, with the holders being entitled to all rights accorded to a
holder of Common Stock. Assuming the accuracy of the representations and
warranties of the Buyers set forth herein, and in reliance thereon, the issuance
by the Company of the Securities is exempt from registration under the 1933 Act.
d. No Conflicts. The execution, delivery and performance of
the Transaction Documents by the Company, the performance by the Company of its
obligations under the Convertible Notes and the consummation by the Company of
the transactions contemplated hereby and thereby (including, without limitation,
the reservation for issuance and issuance of the Conversion Shares) will not (i)
result in a violation of the Company's Articles of Incorporation, any
outstanding series of notes or preferred stock of the Company or the Company's
By-laws or (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
material agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party, or result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations and the rules and regulations of the Principal Market (as defined
below)) applicable to the Company or any of its Subsidiaries or by which any
property or asset of the Company or any of its Subsidiaries is bound or
affected, except in the case of (ii) above, where such conflict or default would
not have a Material Adverse Effect. Neither the Company nor its Subsidiaries is
in violation of any term of or in default under its Articles of Incorporation,
any outstanding series of notes or preferred stock of the Company or By-laws or
their organizational charter or by-laws, respectively. Neither the Company nor
any of its Subsidiaries is in violation of any term of or in default under any
contract, agreement, mortgage, indebtedness, indenture, instrument, judgment,
decree or order or any statute, rule or regulation applicable to the Company or
its Subsidiaries, except for possible violations or defaults which would not
have a Material Adverse Effect. The business of the Company and its Subsidiaries
is not being conducted, and shall not be conducted, in violation of any law,
ordinance, regulation of any governmental entity, except for possible violations
the sanctions for which either individually or in the aggregate would not have a
Material Adverse Effect. Except as specifically contemplated by this Agreement
and as required under the 1933 Act, the Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency or any regulatory or self-regulatory agency in
order for it to execute, deliver or perform any of its obligations under or
contemplated by the Transaction Documents or to perform its obligations under
the Convertible Notes, in each case in accordance with the terms hereof or
thereof. All consents, authorizations, orders, filings and registrations which
the Company is required to obtain pursuant to the preceding sentence have been
obtained or effected on or prior to the date hereof. The Company and its
Subsidiaries are unaware of any facts or circumstances which might give rise to
any of the foregoing. The Company is not in violation of the listing
requirements of the Principal Market (as defined below).
e. SEC Documents; Financial Statements. Since December 16,
1998, the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934 Act")
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as the "SEC
Documents"). The Company has delivered to the Buyers or their respective
representatives true and complete copies of the SEC Documents. As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. As of their
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<PAGE> 5
respective dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to the Buyers which is not
included in the SEC Documents, including, without limitation, information
referred to in Section 2(d) of this Agreement, contains any untrue statement of
a material fact or omits to state any material fact necessary in order to make
the statements therein, in the light of the circumstance under which they are or
were made, not misleading. Neither the Company nor any of its Subsidiaries or
any of their officers, directors, employees or agents have provided the Buyers
with any material, nonpublic information.
f. Absence of Certain Changes. Since the filing of the most
recent SEC Document, there has been no material adverse change and no material
adverse development in the business, properties, operations, financial
condition, or results of operations of the Company or its Subsidiaries. The
Company has not taken any steps, and does not currently expect to take any
steps, to seek protection pursuant to any bankruptcy law nor does the Company or
any of its Subsidiaries have any knowledge that its creditors intend to initiate
involuntary bankruptcy proceedings.
g. Absence of Litigation. Except as set forth in the SEC
Documents, there is no action, suit, proceeding, inquiry or investigation before
or by any court, public board, government agency, self-regulatory organization
or body pending or, to the knowledge of the Company or any of its Subsidiaries,
threatened against or affecting the Company, the Common Stock or any of the
Company's Subsidiaries or any of the Company's or the Company's Subsidiaries'
officers or directors in their capacities as such, except as to which an adverse
outcome would not have a Material Adverse Effect.
h. Acknowledgment Regarding Buyers' Purchase of Convertible
Notes. The Company acknowledges and agrees that each of the Buyers is acting
solely in the capacity of arm's length purchaser with respect to the Transaction
Documents and the transactions contemplated hereby and thereby. The Company
further acknowledges that each Buyer is not acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated hereby and thereby and
any advice given by any of the Buyers or any of their respective representatives
or agents in connection with the Transaction Documents and the transactions
contemplated hereby and thereby is merely incidental to such Buyer's purchase of
the Securities. The Company further represents to each Buyer that the Company's
decision to enter into the Transaction Documents has been based solely on the
independent evaluation by the Company and its representatives.
i. No Undisclosed Events, Liabilities, Developments or
Circumstances. No event, liability, development or circumstance has occurred or
exists, or is contemplated to occur, with respect to the Company or its
Subsidiaries or their respective business, properties, prospects, operations or
financial condition, that would be required to be disclosed by the Company under
applicable securities laws on a registration statement filed with the SEC
relating to an issuance and sale by the Company of its Common Stock and which
has not been publicly announced.
j. No General Solicitation. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the 1933 Act) in connection with the offer or sale of the
Securities.
k. No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act or cause this offering of the Securities to be
integrated with prior offerings by the Company to third parties other than the
Buyers for purposes of the 1933 Act so as to render invalid the exemption from
registration provided under Rule 506 or any applicable stockholder approval
provisions, including, without limitation, under the rules and
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<PAGE> 6
regulations of any exchange or automated quotation system on which any of the
securities of the Company are listed or designated, nor will the Company or any
of its Subsidiaries take any action or steps that would require registration of
any of the Securities under the 1933 Act or cause the offering of the Securities
to be integrated with other offerings so as to render invalid the exemption from
registration provided under Rule 506.
l. Dilutive Effect. The Company understands and acknowledges
that the number of Conversion Shares issuable upon conversion of the Convertible
Notes will increase in certain circumstances. The Company further acknowledges
that its obligation to issue Conversion Shares upon conversion of the
Convertible Notes in accordance with this Agreement and the Convertible Notes is
absolute and unconditional regardless of the dilutive effect that such issuance
may have on the ownership interests of other stockholders of the Company.
m. Employee Relations. Neither the Company nor any of its
Subsidiaries is involved in any union labor dispute nor, to the knowledge of the
Company or any of its Subsidiaries, is any such dispute threatened. None of the
Company's or its Subsidiaries' employees is a member of a union, neither the
Company nor any of its Subsidiaries is a party to a collective bargaining
agreement, and the Company and its Subsidiaries believe that their relations
with their employees are good.
n. Intellectual Property Rights. The Company and its
Subsidiaries own or possess adequate rights or licenses to use all trademarks,
trade names, service marks, service mark registrations, service names, patents,
patent rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. The Company and its Subsidiaries do not have any
knowledge of any infringement by the Company or its Subsidiaries of trademark,
trade name rights, patents, patent rights, copyrights, inventions, licenses,
service names, service marks, service mark registrations, trade secret or other
similar rights of others, and there is no claim, action or proceeding which has
been brought against, or to the Company's knowledge, being threatened against,
the Company or its Subsidiaries regarding trademark, trade name, patents, patent
rights, invention, copyright, license, service names, service marks, service
mark registrations, trade secret or other infringement. To the extent deemed
necessary by the Company, the Company and its Subsidiaries have taken reasonable
security measures to protect the secrecy, confidentiality and value of all of
their intellectual properties.
o. Environmental Laws. The Company and its Subsidiaries (i)
are in compliance with any and all applicable foreign, federal, state and local
laws and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"_tc \l1 "("Environmental Laws"_), (ii) have
received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and (iii)
are in compliance with all terms and conditions of any such permit, license or
approval, except, in the case of any of the foregoing where non-compliance or
non-receipt would not have a Material Adverse Effect.
p. Title. The Company and its Subsidiaries have good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects, except for such liens, encumbrances and defects which
do not materially affect the value of such property and do not interfere with
the use made of such property by the Company and any of its Subsidiaries. Any
real property and facilities held under lease by the Company and any of its
Subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
of such property and buildings by the Company and its Subsidiaries.
q. Regulatory Permits. The Company and its Subsidiaries
possess all certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, except where such non-possession would not have a
Material Adverse Effect, and neither the Company nor any such Subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit.
r. [Reserved]
s. Tax Status. The Company and each of its Subsidiaries has
made or filed all federal and state income and all other tax returns, reports
and declarations required by any jurisdiction to which it is subject
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<PAGE> 7
(unless and only to the extent that the Company and each of its Subsidiaries has
set aside on its books provisions reasonably adequate for the payment of all
unpaid and unreported taxes) and has paid all taxes and other governmental
assessments and charges that are material in amount, shown or determined to be
due on such returns, reports and declarations, except those being contested in
good faith and has set aside on its books provision reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction.
t. Transactions With Affiliates. Except as set forth in the
SEC Documents, none of the officers, directors, or employees of the Company is
presently a party to any material transaction with the Company or any of its
Subsidiaries (other than for services as employees, officers and directors),
including any material contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
4. COVENANTS.
a. Best Efforts. Each party shall use its best efforts timely
to satisfy each of the conditions to be satisfied by it as provided in Sections
6 and 7 of this Agreement.
b. Form D and Blue Sky. The Company agrees to file a Form D
with respect to the Securities as required under Regulation D and to provide a
copy thereof to each Buyer promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for or to qualify the
Securities for sale to the Buyers at the Closing pursuant to this Agreement
under applicable securities or "Blue Sky" laws of the states of the United
States, and shall provide evidence of any such action so taken to the Buyers on
or prior to the Closing Date. The Company shall make all filings and reports
relating the offer and sale of the Securities required under applicable
securities or "Blue Sky" laws of the states of the United States following the
Closing Date.
c. Reporting Status. Until the earlier of (i) the date which
is one year after the date as of which the Investors (as that term is defined in
the Registration Rights Agreement) may sell all of the Conversion Shares without
restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or successor
thereto), or (ii) the date on which (A) the Investors shall have sold all the
Conversion Shares and (B) none of the Convertible Notes is outstanding (the
"Registration Period"), the Company shall file all reports required to be filed
with the SEC pursuant to the 1934 Act, and the Company shall not terminate its
status as an issuer required to file reports under the 1934 Act even if the 1934
Act or the rules and regulations thereunder would otherwise permit such
termination.
d. Reservation of Shares. The Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance, no less than 200% of the number of shares of Common Stock needed to
provide for the issuance of the shares of Common Stock upon conversion of all
outstanding Convertible Notes; provided that after the Registration Statement
(as defined in the Registration Rights Agreement) which covers the Conversion
Shares for resale, has been declared effective, this Section 4(d) shall not be
violated if the Company reserves greater than 185% of the number of shares of
the Common Stock required to be issued upon conversion of the outstanding
Convertible Notes, provided, further, however, that the Company utilizes its
best efforts to reserve no less than 200% as soon as possible of the number of
shares of Common Stock required to be issued upon conversion of the outstanding
Convertible Notes.
e. Limitation on Beneficial Ownership. The Company shall not
effect any conversion of Convertible Notes and no Buyer of Convertible Notes
shall have the right to convert any Convertible Notes pursuant to Section 2(b)
of such Convertible Note to the extent that after giving effect to such
conversion such Buyer (together with such Buyer's affiliates) (A) would
beneficially own in excess of 4.9% of the outstanding shares of the Company's
Common Stock following such conversion and (B) would have acquired, through
conversion of Convertible Notes or otherwise, in excess of 4.9% of the
outstanding shares of the Company's Common Stock following such conversion
during the 60-day period ending on and including such date of conversion. For
purposes of the foregoing sentence, the number of shares of Common Stock
beneficially owned by a Buyer and its affiliates or acquired by a Buyer and its
affiliates, as the case may be, shall include the number of shares of Common
Stock
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<PAGE> 8
issuable upon conversion of the Convertible Notes with respect to which the
determination of such sentence is being made, but shall exclude the number of
shares of Common Stock which would be issuable upon (i) conversion of the
remaining, nonconverted Convertible Notes beneficially owned by such Buyer and
its affiliates and (ii) exercise or conversion of the unexercised or unconverted
portion of any other securities of the Company (including, without limitation,
any warrants) subject to a limitation on conversion or exercise analogous to the
limitation contained herein beneficially owned by such Person and its
affiliates. Except as set forth in the preceding sentence, for purposes of this
Section 4(e), beneficial ownership shall be calculated in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended.
Notwithstanding anything to the contrary contained herein, each conversion
notice shall constitute a representation by the Buyer submitting such conversion
notice that, after giving effect to such conversion notice, (A) the holder will
not beneficially own (as determined in accordance with this Section 4(e)) and
(B) during the 60-day period ending on and including such conversion date, the
holder will not have acquired, through conversion of Convertible Notes or
otherwise, a number of shares of Common Stock in excess of 4.9% of the
outstanding shares of Common Stock as reflected in the Company's most recent
Form 10-Q or Form 10-K, as the case may be, or more recent public press release
or other public notice by the Company setting forth the number of shares of
Common Stock outstanding, but after giving effect to conversions of Convertible
Notes by such holder since the date as of which such number of outstanding
shares of Common Stock was reported.
f. Listing. The Company shall promptly secure the listing of
all of the Registrable Securities (as that term is defined in the Registration
Rights Agreement) upon each national securities exchange and automated quotation
system, if any, upon which shares of Common Stock are then listed (subject to
official notice of issuance) and shall maintain, so long as any other shares of
Common Stock shall be so listed, such listing of all Registrable Securities from
time to time issuable under the terms of the Transaction Documents and the
Convertible Notes. The Company shall maintain the Common Stock's authorization
for quotation on the Nasdaq National Market, The New York Stock Exchange, Inc.
or The American Stock Exchange, Inc. (collectively, the "Principal Market").
Neither the Company nor any of its Subsidiaries shall take any action which
would be reasonably expected to result in the delisting or suspension of the
Common Stock on the Principal Market. The Company shall promptly, and in no
event later than the following business day, provide to each Buyer copies of any
notices it receives from the Principal Market regarding the continued
eligibility of the Common Stock for listing on such automated quotation system
or securities exchange. The Company shall pay all fees and expenses in
connection with satisfying its obligations under this Section 4(f).
g. Transactions With Affiliates. So long as (i) any
Convertible Notes are outstanding or (ii) any Buyer owns Conversion Shares with
a market value equal to or greater than $500,000, the Company shall not, and
shall cause each of its Subsidiaries not to, enter into, amend, modify or
supplement, or permit any Subsidiary to enter into, amend, modify or supplement,
any agreement, transaction, commitment or arrangement with any of its or any
Subsidiary's officers, directors, person who were officers or directors at any
time during the previous two years, stockholders who beneficially own 5% or more
of the Common Stock, or affiliates or with any individual related by blood,
marriage or adoption to any such individual or with any entity in which any such
entity or individual owns a 5% or more beneficial interest (each a "Related
Party"), except for (a) customary employment arrangements and benefit programs
on reasonable terms, (b) any agreement, transaction, commitment or arrangement
on an arms-length basis on terms no less favorable than terms which would have
been obtainable from a person other than such Related Party, or (c) any
agreement, transaction, commitment or arrangement which is approved by a
majority of the disinterested directors of the Company. For purposes hereof, any
director who is also an officer of the Company or any Subsidiary of the Company
shall not be a disinterested director with respect to any such agreement,
transaction, commitment or arrangement. "Affiliate" for purposes hereof means,
with respect to any person or entity, another person or entity that, directly or
indirectly, (i) has a 5% or more equity interest in that person or entity, (i)
has 5% or more common ownership with that person or entity, (iii) controls that
person or entity, or (iv) shares common control with that person or entity.
"Control" or "controls" for purposes hereof means that a person or entity has
the power, direct or indirect, to conduct or govern the policies of another
person or entity.
h. Limitation on Filing Registration Statements. Except in the
event that Parlux Fragrances, Inc. invokes its demand registration rights, the
Company shall not file a registration statement (other than the Registration
Statement (as defined in the Registration Rights Agreement) or a registration
statement on Form S-8) covering the sale or resale of shares of Common Stock
with the SEC during the period beginning on the date hereof and ending on the
date which is 180 days after the Registration Statement has been declared
effective by the SEC.
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<PAGE> 9
i. Independent Auditors. The Company shall, until at least
three (3) years after the Closing Date, maintain as its independent auditors an
accounting firm authorized to practice before the SEC.
j. Corporate Existence and Taxes. The Company shall, until at
least the later of (i) the date that is three (3) years after the Closing Date
or (ii) the conversion or redemption of all of the Convertible Notes purchased
pursuant to this Agreement, maintain its corporate existence in good standing
(provided, however, that the foregoing covenant shall not prevent the Company
from entering into any merger or corporate reorganization as long as the
surviving entity in such transaction, if not the Company, assumes the Company's
obligations with respect to the Convertible Notes and has Common Stock listed
for trading on the Principal Market) and shall pay all its taxes when due except
for taxes which the Company disputes.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its transfer agent,
and any subsequent transfer agent, to issue certificates, registered in the name
of each Buyer or its respective nominee(s), for the Conversion Shares in such
amounts as specified from time to time by each Buyer to the Company upon
conversion of the Convertible Notes (the "Irrevocable Transfer Agent
Instructions"). Prior to registration of the Conversion Shares under the 1933
Act, all such certificates shall bear the restrictive legend specified in
Section 2(g) of this Agreement. The Company warrants that no instruction other
than the Irrevocable Transfer Agent Instructions referred to in this Section 5,
and stop transfer instructions to give effect to Section 2(f) hereof (in the
case of the Conversion Shares, prior to registration of the Conversion Shares
under the 1933 Act) will be given by the Company to its transfer agent and that
the Securities shall otherwise be freely transferable on the books and records
of the Company as and to the extent provided in this Agreement and the
Registration Rights Agreement. Nothing in this Section 5 shall affect in any way
each Buyer's obligations and agreements set forth in Section 2(g) to comply with
all applicable prospectus delivery requirements, if any, upon resale of the
Securities. If a Buyer provides the Company with an opinion of counsel, in a
generally acceptable form, to the effect that a public sale, assignment or
transfer of the Securities may be made without registration under the 1933 Act
or the Buyer provides the Company with reasonable assurances that the Securities
can be sold pursuant to Rule 144 without any restriction as to the number of
securities acquired as of a particular date that can then be immediately sold,
the Company shall permit the transfer, and, in the case of the Conversion
Shares, promptly instruct its transfer agent to issue one or more certificates
in such name and in such denominations as specified by such Buyer and without
any restrictive legend. In the event that the Company appoints a different
transfer agent (other than the Company's transfer agent in service as of the
Closing) to serve as the Company's transfer agent, the Company shall
immediately, but in no event later than five (5) days from such appointment
issue irrevocable instructions to such transfer agent in substantially the same
form as the Irrevocable Transfer Agent Instructions issued to the Company's
transfer agent in service as of the Closing. The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to the
Buyers by vitiating the intent and purpose of the transaction contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section 5 will be inadequate and agrees, in
the event of a breach or threatened breach by the Company of the provisions of
this Section 5, that the Buyers shall be entitled, in addition to all other
available remedies, to seek an order and/or injunction restraining any breach
and requiring immediate issuance and transfer, without the necessity of showing
economic loss and without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the
Convertible Notes to each Buyer at the Closing is subject to the satisfaction,
at or before the Closing Date, of each of the following conditions, provided
that these conditions are for the Company's sole benefit and may be waived by
the Company at any time in its sole discretion by providing each Buyer with
prior written notice thereof:
a. Such Buyer shall have executed each of the Transaction
Documents to which it is a party and delivered the same to Katten Muchin &
Zavis, care of Anthony J. Ribaudo, Esq., as escrow agent (the "Escrow Agent")
for the transactions contemplated by this Agreement.
b. The representations and warranties of such Buyer shall be
true and correct in all material respects as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and such Buyer shall have
performed, satisfied and complied in all
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<PAGE> 10
material respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by such Buyer at or prior
to the Closing Date.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
The obligation of each Buyer hereunder to purchase the Convertible
Notes at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions, provided that these conditions are
for each Buyer's sole benefit and may be waived by such Buyer at any time in its
sole discretion by providing the Company with prior written notice thereof:
a. The Company shall have executed each of the Transaction
Documents and delivered the same to the Escrow Agent.
b. The Company's common stock shall be authorized for
quotation on the Principal Market and trading in Company common stock shall not
have been suspended by the SEC or the Principal Market.
c. The representations and warranties of the Company shall be
true and correct as of the date when made and as of the Closing Date as though
made at that time (except for representations and warranties that speak as of a
specific date) and the Company shall have performed, satisfied and complied with
the covenants, agreements and conditions required by the Transaction Documents
to be performed, satisfied or complied with by the Company at or prior to the
Closing Date. The Company shall have delivered to the Escrow Agent a
certificate, executed by the Chief Executive Officer of the Company, dated as of
the Closing Date, to the foregoing effect.
d. The Company shall have delivered to the Escrow Agent the
opinion of the Company's counsel dated as of the Closing Date, in form, scope
and substance reasonably satisfactory to such Buyer and in substantially the
form of Exhibit C attached hereto.
e. The Company shall have executed and delivered to the Escrow
Agent the Convertible Notes (in such denominations as such Buyer shall request)
being purchased by such Buyer at the Closing.
f. The Board of Directors of the Company shall have adopted
resolutions consistent with Section 3(b)(ii) above and in a form reasonably
acceptable to such Buyer.
g. As of the Closing Date, the Company shall have reserved out
of its authorized and unissued Common Stock, solely for the purpose of effecting
the conversion of the Convertible Notes, no less than 200% of the number of
shares of Common Stock needed to provide for the issuance of the shares of
Common Stock upon conversion of all outstanding Convertible Notes.
h. The Irrevocable Transfer Agent Instructions, substantially
in the form of Exhibit D attached hereto, shall have been delivered to and
acknowledged in writing by the Company's transfer agent and a copy of the
executed Irrevocable Transfer Agent Instructions shall have been delivered to
the Escrow Agent.
i. The Company shall have delivered to the Escrow Agent a
certified copy of the Articles of Incorporation as certified by the Secretary of
State of the State of Florida within ten (10) days of the Closing Date.
j. The Company shall have delivered to the Escrow Agent a
secretary's certificate, dated as the Closing Date, as to (i) the resolutions
described in Section 7(f), (ii) the Certificate of Incorporation and (iii) the
Bylaws, each as in effect at the Closing.
k. The Company shall have made all filings under all
applicable federal and state securities laws necessary to consummate the
issuance of the Securities pursuant to this Agreement in compliance with such
laws.
l. The Company shall have delivered to the Escrow Agent such
other documents relating to the transactions contemplated by this Agreement as
the Escrow Agent or its counsel may reasonably request.
10
<PAGE> 11
m. Expenses. Subject to Section 9(k) below, at the Closing,
the Company shall reimburse the Buyers for one-half (1/2) of the Buyers'
expenses (including attorneys' fees and expenses) in due diligence and
negotiating and preparing the Transaction Documents and consummating the
transactions contemplated thereby up to an aggregate of $8,000.
8. INDEMNIFICATION.
a. Indemnification by Company. In consideration of each
Buyer's execution and delivery of the Transaction Documents and acquiring the
Securities thereunder and in addition to all of the Company's other obligations
under the Transaction Documents and the Convertible Notes, the Company shall
defend, protect, indemnify and hold harmless each Buyer and each other holder of
the Securities and all of their stockholders, partners, officers, directors,
employees and direct or indirect investors and any of the foregoing person's
agents or other representatives (including, without limitation, those retained
in connection with the transactions contemplated by this Agreement)
(collectively, the "Indemnitees") from and against any and all actions, causes
of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses in connection therewith (irrespective of whether any such
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys' fees and disbursements (the
"Indemnified Liabilities"), incurred by any Indemnitee as a result of, or
arising out of, or relating to (a) any material misrepresentation or breach of
any representation or warranty made by the Company in the Transaction Documents
or any other certificate, instrument or document contemplated hereby or thereby,
or (b) any material breach of any covenant, agreement or obligation of the
Company contained in the Transaction Documents or the Convertible Notes or any
other certificate, instrument or document contemplated hereby or thereby. To the
extent that the foregoing undertaking by the Company may be unenforceable for
any reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law.
b. Indemnification by Buyer. In consideration of the Company's
execution and delivery of the Transaction Documents and the Company's
performance of the transactions contemplated thereunder, each Buyer shall
severally but not jointly defend, protect, indemnify and hold harmless the
Company, its officers and directors (collectively, the "Company Indemnitees")
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection
therewith and including reasonable attorneys' fees and disbursements (the
"Company Indemnified Liabilities"), incurred by any Company Indemnitee as a
result of, or arising out of, or relating to (a) any material representation or
breach of any representation or warranty made by such Buyer in the Transaction
Documents or any other certificate, instrument or document contemplated hereby
or thereby, or (b) any material breach of any covenant, agreement or obligation
of such Buyer contained in the Transaction Documents or any other certificate,
instrument or document contemplated hereby or thereby; provided, however, that
any Buyer shall not be jointly liable for the indemnification obligations of any
other Buyer or investor and the Buyer subject to an indemnification obligation
shall be liable under this Section 8(b) for only that amount of Company
Indemnified Liabilities as does not exceed the net proceeds to such Buyer as a
result of the sale of Securities and Conversion Shares held by such Buyer. To
the extent that the foregoing undertaking by a Buyer may be unenforceable for
any reason, such Buyer shall make the maximum contribution to the payment and
satisfaction of each of the Company Indemnified Liabilities which is permissible
under applicable law; provided, however, that any Buyer shall not be jointly
liable for the indemnification obligations of any other Buyer or investor and
the Buyer subject to an indemnification obligation shall be liable under this
Section 8(b) for only that amount of Company Indemnified Liabilities as does not
exceed the net proceeds to such Buyer as a result of the sale of Securities and
Conversion Shares held by such Buyer.
9. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law; Jurisdiction; Jury Trial. The corporate laws
of the State of Florida shall govern all issues concerning the relative rights
of the Company and its stockholders. All other questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by the internal laws of the State of Florida, without giving effect
to any choice of law or conflict of law provision or rule (whether of the State
of Florida or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of Florida. Each party hereby
irrevocably submits to the non-exclusive jurisdiction of the state and federal
courts sitting in the City of Miami, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such
11
<PAGE> 12
court, that such suit, action or proceeding is brought in an inconvenient forum
or that the venue of such suit, action or proceeding is improper. Each party
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof to
such party at the address for such notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of process and
notice thereof. Nothing contained herein shall be deemed to limit in any way any
right to serve process in any manner permitted by law. EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR
ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
b. Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
c. Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
d. Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement supersedes all
other prior oral or written agreements between the Buyers, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be amended other than by an instrument in writing signed by the
Company and the holders of at least two-thirds (2/3) of the Convertible Notes
(determined by reference to principal amount) then outstanding, and no provision
hereof may be waived other than by an instrument in writing signed by the party
against whom enforcement is sought. No such amendment shall be effective to the
extent that it applies to less than all of the holders of the Convertible Notes
then outstanding. No consideration shall be offered or paid to any person to
amend or consent to a waiver or modification of any provision of any of the
Transaction Documents or the Convertible Notes unless the same consideration
also is offered to all of the parties to the Transaction Documents or holders of
Convertible Notes, as the case may be.
f. Notices. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered: (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile
(provided confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party); or (iii) one business day
after deposit with a nationally recognized overnight delivery service, in each
case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
If to the Company: E Com Ventures, Inc.
11701 N.W. 101st Road
Miami, Florida 33178
Telephone: (305) 889-1600
Facsimile: (305) 888-7825
Attention: Ilia Lekach
12
<PAGE> 13
With a copy to: Greenberg Traurig, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Telephone: (305) 579-0809
Facsimile: (305) 579-0717
Attention: Ken Hoffman, Esq.
If to the Transfer Agent: Continental Stock Transfer and Trust
2 Broadway, 19th Floor
New York, New York 10004
Telephone: (212) 509-4000
Facsimile: (212) 509-5150
Attention: Steve Nelson
If to a Buyer, to it at the address and facsimile number set forth on
Schedule 1 with copies to such Buyer's representatives as set forth on Schedule
1, or at such other address and/or facsimile number and/or to the attention of
such other person as the recipient party has specified by written notice given
to each other party five days prior to the effectiveness of such change. Written
confirmation of receipt (A) given by the recipient of such notice, consent,
waiver or other communication, (B) mechanically or electronically generated by
the sender's facsimile machine containing the time, date, recipient facsimile
number and an image of the first page of such transmission or (C) provided by a
nationally recognized overnight delivery service shall be rebuttable evidence of
personal service, receipt by facsimile or receipt from a nationally recognized
overnight delivery service in accordance with clause (i), (ii) or (iii) above,
respectively.
g. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
assigns, including any purchasers of the Convertible Notes. The Company shall
not assign this Agreement or any rights or obligations hereunder without the
prior written consent of the holders of at least two-thirds (2/3) of the
Convertible Notes (determined by reference to principal amount) then
outstanding. A Buyer may assign some or all of its rights hereunder without the
consent of the Company, provided, however, that any such assignment shall not
release such Buyer from its obligations hereunder unless such obligations are
assumed by such assignee and the Company has consented to such assignment and
assumption. Notwithstanding anything to the contrary contained in the
Transaction Documents, the Buyers shall be entitled to pledge the Securities in
connection with a bona fide margin account.
h. No Third Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
i. Survival. Unless this Agreement is terminated under Section
9(k), the agreements and covenants set forth in Sections 4, 5 and 9, and the
indemnification provisions set forth in Section 8, shall survive the Closing.
Each Buyer shall be responsible only for its own agreements and covenants
hereunder.
j. Further Assurances. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
k. Termination. In the event that the Closing shall not have
occurred with respect to a Buyer on or before three (3) business days from the
date hereof due to the Company's or such Buyer's failure to satisfy the
conditions set forth in Sections 6 and 7 above (and the nonbreaching party's
failure to waive such unsatisfied condition(s)), the nonbreaching party shall
have the option to terminate this Agreement with respect to such breaching party
at the close of business on such date without liability of any party to any
other party; provided, however, that if this Agreement is terminated pursuant to
this Section 9(k), the Company shall remain obligated to reimburse the
nonbreaching Buyers for the expenses described in Section 7(m) above.
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<PAGE> 14
l. Placement Agent. The Company acknowledges that it has not
engaged a placement agent in connection with the sale of the Convertible Notes.
m. No Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
n. Remedies. Each Buyer and each holder of the Securities
shall have all rights and remedies set forth in the Transaction Documents and
the Convertible Notes and all rights and remedies which such holders have been
granted at any time under any other agreement or contract and all of the rights
which such holders have under any law. Any person having any rights under any
provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law.
o. Payment Set Aside. To the extent that the Company makes a
payment or payments to the Buyers hereunder or pursuant to the Convertible Notes
or the Buyers enforce or exercise their rights hereunder or thereunder, and such
payment or payments or the proceeds of such enforcement or exercise or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside, recovered from, disgorged by or are required to be refunded, repaid
or otherwise restored to the Company, a trustee, receiver or any other person
under any law (including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the extent of any
such restoration the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.
[SIGNATURE PAGE FOLLOWS]
14
<PAGE> 15
IN WITNESS WHEREOF, the Buyers and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYERS:
E COM VENTURES, INC. CRANSHIRE CAPITAL, L.P.
By: /s/ Donovan Chin By: /s/ Mitchell P. Kopin
----------------------------------- -------------------------------
Name: Donovan Chin Name: Mitchell P. Kopin
--------------------------------- ------------------------------
Title: Chief Financial Officer Title: President, Downsview Capital
-------------------------------- -----------------------------
The General Partner
-----------------------------
S. ROBERT PRODUCTIONS, LLC
By: /s/ Mitchell P. Kopin
-----------------------------------
Name: Mitchell P. Kopin
---------------------------------
Title: President
--------------------------------
THE DOTCOM FUND, LLC
By: /s/ Mark Rice
-----------------------------------
Name: Mark Rice
---------------------------------
Title: Managing Member
--------------------------------
EP .COM FUND, L.L.C.
By: /s/ Jeffrey Eisenberg
-----------------------------------
Name: Jeffrey Eisenberg
---------------------------------
Title: Manager of Eisenberg
Partners, L.L.C.
Manager of EP.com Fund, L.L.C.
--------------------------------
EP .COM FUND INTERNATIONAL, LTD.
By: /s/ Jeffrey Eisenberg
-----------------------------------
Name: Jeffrey Eisenberg
---------------------------------
Title: Manager of Eisenberg
Partners, L.L.C.
Investment Manager of EP.com
Fund International, Ltd.
--------------------------------
15
<PAGE> 16
SCHEDULE 1: LIST OF INVESTORS
<TABLE>
<CAPTION>
Amount of
Investor Address and Convertible Notes Investor's Legal Representatives'
Investor's Name Facsimile Number Address and Facsimile Number
--------------- -------------------- ----------------- ----------------------------------
<S> <C> <C> <C>
Cranshire Capital, L.P. 666 Dundee Rd., Ste. 1901 $1,750,000.00 Katten Muchin & Zavis
Northbrook, IL 60062 525 W. Monroe Street
Attention: Mitchell Kopin Chicago, Illinois 60661-3693
Telephone: (847) 562-9030 Attention: Anthony J. Ribaudo, Esq.
Facsimile: (847) 562-9031 Facsimile: (312) 577-8763
Telephone: (312) 902-5521
S. Robert Productions, LLC 666 Dundee Rd., Ste. 1901 $250,000.00
Northbrook, IL 60062
Attention: Mitchell Kopin
Telephone: (847) 562-9030
Facsimile: (847) 562-9031
The dotCom Fund, LLC 666 Dundee Road., Ste. 1901 $1,250,000.00
Northbrook, Illinois 60062
Attention: Mark Rice
Telephone: (847) 509-2290
Facsimile: (847) 509-2295
EP.com Fund, L.L.C. 77 W. Wacker Drive $600,000.00
Chicago, Illinois 60601
Attention: Jeffrey Eisenberg
Telephone: (312) 456-9500
Facsimile: (312) 456-9501
EP.com Fund International, 77 W. Wacker Drive $150,000.00
Ltd. Chicago, Illinois 60601
Attention: Jeffrey Eisenberg
Telephone: (312) 456-9500
Facsimile: (312) 456-9501
</TABLE>
16
<PAGE> 1
EXHIBIT 10.16
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of March
27, 2000, is entered into by and among E Com Ventures, Inc., a Florida
corporation, with headquarters located at 11701 N.W. 101st Road, Miami, Florida
33178 (the "Company"), and the investors listed on Schedule 1 attached hereto
(individually, a "Buyer" and collectively, the "Buyers").
WHEREAS:
A. The Company and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 of Regulation D ("Regulation D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 Act");
B. The Company has authorized the following new series of convertible
notes: the Company's Series D Convertible Notes (the "Convertible Notes"), which
shall be convertible into shares of the Company's Common Stock, par value $.01
per share (the "Common Stock") (as converted, the "Conversion Shares"), in
accordance with the terms of the Company's Series D Convertible Notes,
substantially in the form attached hereto as Exhibit A;
C. The Buyers wish to purchase, upon the terms and conditions stated in
this Agreement, an aggregate of $5,000,000 worth of Convertible Notes in the
respective amounts set forth opposite each Buyer's name on Schedule 1; and
D. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
substantially in the form attached hereto as Exhibit B (the "Registration Rights
Agreement") pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.
NOW, THEREFORE, the Company and the Buyers hereby agree as follows:
1. PURCHASE AND SALE OF CONVERTIBLE NOTES.
a. Purchase of Convertible Notes. Subject to the satisfaction (or
waiver) of the conditions set forth in Sections 6 and 7 below, the Company shall
issue and sell (the "Offering") to each Buyer and each Buyer severally agrees to
purchase from the Company the amount of Convertible Notes set forth opposite
such Buyer's name on Schedule 1 (the "Closing"). The aggregate purchase price
(the "Purchase Price") of all the Convertible Notes offered and sold pursuant to
the Offering at the Closing shall be $5,000,000.
b. Closing Date. The date and time of the Closing (the "Closing Date")
shall be 10:00 a.m. Central Time, within two (2) business days following the
date hereof, subject to notification of satisfaction (or waiver) of the
conditions to the Closing set forth in Sections 6 and 7 below (or such later
date as is mutually agreed to by the Company and the Buyers). The Closing shall
occur on the Closing Date at the offices of Katten Muchin & Zavis, 525 West
Monroe Street, Suite 1600, Chicago, Illinois 60661-3693.
c. Form of Payment. On the Closing Date, (i) each Buyer shall pay the
Purchase Price to the Company for the Convertible Notes to be issued and sold to
such Buyer at the Closing, by wire transfer of immediately available funds in
accordance with the Company's written wire instructions, and (ii) the Company
shall deliver to each Buyer, the Convertible Notes (in the denominations as such
Buyer shall request) which such Buyer is then purchasing (as indicated opposite
such Buyer's name on Schedule 1) hereunder, duly executed on behalf of the
Company and registered in the name of such Buyer or its designee.
3
<PAGE> 2
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants with respect to only itself that:
a. Investment Purpose. Such Buyer is acquiring the Convertible Notes
(the Convertible Notes may also be referred to herein as the "Securities"), for
its own account for investment only and not with a view towards, or for resale
in connection with, the public sale or distribution thereof, except pursuant to
sales registered or exempt from registration under the 1933 Act; provided,
however, that by making the representations herein, such Buyer does not agree to
hold any of the Securities for any minimum or other specific term and reserves
the right to dispose of the Securities at any time in accordance with or
pursuant to a registration statement or an exemption from registration under the
1933 Act.
b. Accredited Investor Status. Such Buyer is an "accredited investor"
as that term is defined in Rule 501(a)(3) of Regulation D.
c. Reliance on Exemptions. Such Buyer understands that the Securities
are being offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying in part upon the truth and accuracy of, and such
Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire such Securities.
d. Information. Such Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
which have been requested by such Buyer. Such Buyer and its advisors, if any,
have been afforded the opportunity to ask questions of the Company. Neither such
inquiries nor any other due diligence investigations conducted by such Buyer or
its advisors, if any, or its representatives shall modify, amend or affect such
Buyer's right to rely on the Company's representations and warranties contained
in Section 3 below. Such Buyer understands that its investment in the Securities
involves a high degree of risk. Such Buyer has sought such accounting, legal and
tax advice as it has considered necessary to make an informed investment
decision with respect to its acquisition of the Securities.
e. No Governmental Review. Such Buyer understands that no United States
federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
f. Transfer or Resale. Such Buyer understands that except as provided
in the Registration Rights Agreement: (i) the Securities have not been and are
not being registered under the 1933 Act or any state securities laws, and may
not be offered for sale, sold, assigned or transferred unless (A) subsequently
registered thereunder, (B) such Buyer shall have delivered to the Company an
opinion of counsel, in a generally acceptable form, to the effect that such
Securities to be sold, assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from such registration, or (C) such Buyer
provides the Company with reasonable assurance that such Securities can be sold,
assigned or transferred pursuant to Rule 144 promulgated under the 1933 Act, as
amended, (or a successor rule thereto) ("Rule 144"); (ii) any sale of the
Securities made in reliance on Rule 144 may be made only in accordance with the
terms of Rule 144 and further, if such Buyer intends to utilize Rule 144 but
Rule 144 is not applicable to such resale, any resale of the Securities under
circumstances in which such Buyer (or the person through whom the sale is made)
may be deemed to be an underwriter (as that term is defined in the 1933 Act) may
require compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register such Securities under the 1933 Act or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder.
g. Legends. Such Buyer understands that the certificates or other
instruments representing the Convertible Notes and, until such time as the sale
of the Conversion Shares has been registered under the 1933 Act as contemplated
by the Registration Rights Agreement, the stock certificates representing the
Conversion Shares, except as set forth below, shall bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of such stock certificates):
2
<PAGE> 3
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"),
OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (1) IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE 1933 ACT,
AND APPLICABLE STATE SECURITIES LAWS, OR (2) IN THE ABSENCE OF
AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER THE 1933 ACT OR (3) UNLESS
SOLD, TRANSFERRED OR ASSIGNED PURSUANT TO RULE 144 UNDER THE
1933 ACT.
The legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of the Securities upon which it
is stamped, if, unless otherwise required by state securities laws, (i) such
Securities are registered for sale under the 1933 Act, (ii) in connection with a
sale transaction, such holder provides the Company with an opinion of counsel,
in a generally acceptable form, to the effect that a public sale, assignment or
transfer of the Securities may be made without registration under the 1933 Act,
or (iii) such holder provides the Company with reasonable assurances that the
Securities can be sold pursuant to Rule 144 without any restriction as to the
number of securities acquired as of a particular date that can then be
immediately sold.
h. Validity; Enforcement. This Agreement has been duly and validly
authorized, executed and delivered on behalf of such Buyer and is a valid and
binding agreement of such Buyer enforceable against such Buyer in accordance
with its terms, subject as to enforceability to general principles of equity and
to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
and other similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies.
i. Residency. Such Buyer is a resident of that state and country
specified in its address on Schedule 1.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers that:
a. Organization and Qualification. The Company and its "Subsidiaries"
(which for purposes of this Agreement means any entity in which the Company,
directly or indirectly, owns a majority of the capital stock or holds a majority
equity or similar interest) are corporations duly organized and validly existing
in good standing under the laws of the jurisdiction in which they are
incorporated, and have the requisite corporate power and authorization to own
their properties and to carry on their business as now being conducted. Each of
the Company and its Subsidiaries is duly qualified as a foreign corporation to
do business and is in good standing in every jurisdiction in which its ownership
of property or the nature of the business conducted by it makes such
qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not have a Material Adverse Effect. As
used in this Agreement, "Material Adverse Effect" means any material adverse
effect on the business, properties, assets, operations, results or operations,
or financial condition of the Company and its Subsidiaries, if any, taken as a
whole.
b. Authorization; Enforcement; Validity. (i) The Company has the
requisite corporate power and authority to enter into and perform this
Agreement, the Registration Rights Agreement, the Irrevocable Transfer Agent
Instructions (as defined in Section 5) and each of the other agreements entered
into by the parties hereto in connection with the transactions contemplated by
this Agreement (collectively, the "Transaction Documents"), the Convertible
Notes, and to issue the Securities in accordance with the terms hereof and
thereof, (ii) the execution and delivery of the Transaction Documents and the
Convertible Notes by the Company and the consummation by it of the transactions
contemplated hereby and thereby, including without limitation the issuance of
the Convertible Notes and the reservation for issuance and the issuance of the
Conversion Shares issuable upon conversion thereof, have been duly authorized by
the Company's Board of Directors and no further consent or authorization is
required by the Company, its Board of Directors or its stockholders, (iii) the
Transaction Documents have been duly
3
<PAGE> 4
executed and delivered by the Company, and (iv) the Transaction Documents
constitute the valid and binding obligations of the Company enforceable against
the Company in accordance with their terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies.
c. Issuance of Securities. The Convertible Notes are duly authorized
and, upon issuance in accordance with the terms hereof, shall be (i) validly
issued, fully paid and non-assessable, (ii) free from all taxes, liens and
charges with respect to the issue thereof and (iii) entitled to the rights and
preferences as set forth in the Convertible Notes. 1,100,000 shares of Common
Stock (subject to adjustment pursuant to the Company's covenant set forth in
Section 4(d) below) have been duly authorized and reserved for issuance upon
conversion of the Convertible Notes. Upon conversion in accordance with the
Convertible Notes, the Conversion Shares will be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof, with the holders being entitled to all rights accorded to a
holder of Common Stock. Assuming the accuracy of the representations and
warranties of the Buyers set forth herein, and in reliance thereon, the issuance
by the Company of the Securities is exempt from registration under the 1933 Act.
d. No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company, the performance by the Company of its
obligations under the Convertible Notes and the consummation by the Company of
the transactions contemplated hereby and thereby (including, without limitation,
the reservation for issuance and issuance of the Conversion Shares) will not (i)
result in a violation of the Company's Articles of Incorporation, any
outstanding series of notes or preferred stock of the Company or the Company's
By-laws or (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
material agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party, or result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations and the rules and regulations of the Principal Market (as defined
below)) applicable to the Company or any of its Subsidiaries or by which any
property or asset of the Company or any of its Subsidiaries is bound or
affected, except in the case of (ii) above, where such conflict or default would
not have a Material Adverse Effect. Neither the Company nor its Subsidiaries is
in violation of any term of or in default under its Articles of Incorporation,
any outstanding series of notes or preferred stock of the Company or By-laws or
their organizational charter or by-laws, respectively. Neither the Company nor
any of its Subsidiaries is in violation of any term of or in default under any
contract, agreement, mortgage, indebtedness, indenture, instrument, judgment,
decree or order or any statute, rule or regulation applicable to the Company or
its Subsidiaries, except for possible violations or defaults which would not
have a Material Adverse Effect. The business of the Company and its Subsidiaries
is not being conducted, and shall not be conducted, in violation of any law,
ordinance, regulation of any governmental entity, except for possible violations
the sanctions for which either individually or in the aggregate would not have a
Material Adverse Effect. Except as specifically contemplated by this Agreement
and as required under the 1933 Act, the Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency or any regulatory or self-regulatory agency in
order for it to execute, deliver or perform any of its obligations under or
contemplated by the Transaction Documents or to perform its obligations under
the Convertible Notes, in each case in accordance with the terms hereof or
thereof. All consents, authorizations, orders, filings and registrations which
the Company is required to obtain pursuant to the preceding sentence have been
obtained or effected on or prior to the date hereof. The Company and its
Subsidiaries are unaware of any facts or circumstances which might give rise to
any of the foregoing. The Company is not in violation of the listing
requirements of the Principal Market (as defined below).
e. SEC Documents; Financial Statements. Since December 16, 1998, the
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements
of the Securities Exchange Act of 1934, as amended (the "1934 Act") (all of the
foregoing filed prior to the date hereof and all exhibits included therein and
financial statements and schedules thereto and documents incorporated by
reference therein being hereinafter referred to as the "SEC Documents"). The
Company has delivered to the Buyers or their respective representatives true and
complete copies of the SEC Documents. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the 1934
Act and the rules and regulations of the SEC promulgated thereunder applicable
to the SEC Documents, and none of the SEC Documents, at the time they were filed
with the SEC, contained any untrue statement of a material fact or
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<PAGE> 5
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. As of their respective dates, the financial
statements of the Company included in the SEC Documents complied as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto. Such financial statements
have been prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of the Company to
the Buyers which is not included in the SEC Documents, including, without
limitation, information referred to in Section 2(d) of this Agreement, contains
any untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements therein, in the light of the
circumstance under which they are or were made, not misleading. Neither the
Company nor any of its Subsidiaries or any of their officers, directors,
employees or agents have provided the Buyers with any material, nonpublic
information.
f. Absence of Certain Changes. Since the filing of the most recent SEC
Document, there has been no material adverse change and no material adverse
development in the business, properties, operations, financial condition, or
results of operations of the Company or its Subsidiaries. The Company has not
taken any steps, and does not currently expect to take any steps, to seek
protection pursuant to any bankruptcy law nor does the Company or any of its
Subsidiaries have any knowledge that its creditors intend to initiate
involuntary bankruptcy proceedings.
g. Absence of Litigation. Except as set forth in the SEC Documents,
there is no action, suit, proceeding, inquiry or investigation before or by any
court, public board, government agency, self-regulatory organization or body
pending or, to the knowledge of the Company or any of its Subsidiaries,
threatened against or affecting the Company, the Common Stock or any of the
Company's Subsidiaries or any of the Company's or the Company's Subsidiaries'
officers or directors in their capacities as such, except as to which an adverse
outcome would not have a Material Adverse Effect.
h. Acknowledgment Regarding Buyers' Purchase of Convertible Notes. The
Company acknowledges and agrees that each of the Buyers is acting solely in the
capacity of arm's length purchaser with respect to the Transaction Documents and
the transactions contemplated hereby and thereby. The Company further
acknowledges that each Buyer is not acting as a financial advisor or fiduciary
of the Company (or in any similar capacity) with respect to the Transaction
Documents and the transactions contemplated hereby and thereby and any advice
given by any of the Buyers or any of their respective representatives or agents
in connection with the Transaction Documents and the transactions contemplated
hereby and thereby is merely incidental to such Buyer's purchase of the
Securities. The Company further represents to each Buyer that the Company's
decision to enter into the Transaction Documents has been based solely on the
independent evaluation by the Company and its representatives.
i. No Undisclosed Events, Liabilities, Developments or Circumstances.
No event, liability, development or circumstance has occurred or exists, or is
contemplated to occur, with respect to the Company or its Subsidiaries or their
respective business, properties, prospects, operations or financial condition,
that would be required to be disclosed by the Company under applicable
securities laws on a registration statement filed with the SEC relating to an
issuance and sale by the Company of its Common Stock and which has not been
publicly announced.
j. No General Solicitation. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the 1933 Act) in connection with the offer or sale of the
Securities.
k. No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act or cause this offering of the Securities to be
integrated with prior offerings by the Company to third parties other than the
Buyers for purposes of the 1933 Act so as to render invalid the exemption from
registration provided under Rule
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<PAGE> 6
506 or any applicable stockholder approval provisions, including, without
limitation, under the rules and regulations of any exchange or automated
quotation system on which any of the securities of the Company are listed or
designated, nor will the Company or any of its Subsidiaries take any action or
steps that would require registration of any of the Securities under the 1933
Act or cause the offering of the Securities to be integrated with other
offerings so as to render invalid the exemption from registration provided under
Rule 506.
l. Dilutive Effect. The Company understands and acknowledges that the
number of Conversion Shares issuable upon conversion of the Convertible Notes
will increase in certain circumstances. The Company further acknowledges that
its obligation to issue Conversion Shares upon conversion of the Convertible
Notes in accordance with this Agreement and the Convertible Notes is absolute
and unconditional regardless of the dilutive effect that such issuance may have
on the ownership interests of other stockholders of the Company.
m. Employee Relations. Neither the Company nor any of its Subsidiaries
is involved in any union labor dispute nor, to the knowledge of the Company or
any of its Subsidiaries, is any such dispute threatened. None of the Company's
or its Subsidiaries' employees is a member of a union, neither the Company nor
any of its Subsidiaries is a party to a collective bargaining agreement, and the
Company and its Subsidiaries believe that their relations with their employees
are good.
n. Intellectual Property Rights. The Company and its Subsidiaries own
or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service mark registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. The Company and its Subsidiaries do not have any
knowledge of any infringement by the Company or its Subsidiaries of trademark,
trade name rights, patents, patent rights, copyrights, inventions, licenses,
service names, service marks, service mark registrations, trade secret or other
similar rights of others, and there is no claim, action or proceeding which has
been brought against, or to the Company's knowledge, being threatened against,
the Company or its Subsidiaries regarding trademark, trade name, patents, patent
rights, invention, copyright, license, service names, service marks, service
mark registrations, trade secret or other infringement. To the extent deemed
necessary by the Company, the Company and its Subsidiaries have taken reasonable
security measures to protect the secrecy, confidentiality and value of all of
their intellectual properties.
o. Environmental Laws. The Company and its Subsidiaries (i) are in
compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"_tc \l1 "("Environmental Laws"_), (ii) have
received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and (iii)
are in compliance with all terms and conditions of any such permit, license or
approval, except, in the case of any of the foregoing where non-compliance or
non-receipt would not have a Material Adverse Effect.
p. Title. The Company and its Subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the Company
and its Subsidiaries, in each case free and clear of all liens, encumbrances and
defects, except for such liens, encumbrances and defects which do not materially
affect the value of such property and do not interfere with the use made of such
property by the Company and any of its Subsidiaries. Any real property and
facilities held under lease by the Company and any of its Subsidiaries are held
by them under valid, subsisting and enforceable leases with such exceptions as
are not material and do not interfere with the use made of such property and
buildings by the Company and its Subsidiaries.
q. Regulatory Permits. The Company and its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses, except where such non-possession would not have a Material Adverse
Effect, and neither the Company nor any such Subsidiary has received any notice
of proceedings relating to the revocation or modification of any such
certificate, authorization or permit.
r. [Reserved]
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<PAGE> 7
s. Tax Status. The Company and each of its Subsidiaries has made or
filed all federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its Subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provision reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction.
t. Transactions With Affiliates. Except as set forth in the SEC
Documents, none of the officers, directors, or employees of the Company is
presently a party to any material transaction with the Company or any of its
Subsidiaries (other than for services as employees, officers and directors),
including any material contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
4. COVENANTS.
a. Best Efforts. Each party shall use its best efforts timely to
satisfy each of the conditions to be satisfied by it as provided in Sections 6
and 7 of this Agreement.
b. Form D and Blue Sky. The Company agrees to file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof to each Buyer promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for or to qualify the
Securities for sale to the Buyers at the Closing pursuant to this Agreement
under applicable securities or "Blue Sky" laws of the states of the United
States, and shall provide evidence of any such action so taken to the Buyers on
or prior to the Closing Date. The Company shall make all filings and reports
relating the offer and sale of the Securities required under applicable
securities or "Blue Sky" laws of the states of the United States following the
Closing Date.
c. Reporting Status. Until the earlier of (i) the date which is one
year after the date as of which the Investors (as that term is defined in the
Registration Rights Agreement) may sell all of the Conversion Shares without
restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or successor
thereto), or (ii) the date on which (A) the Investors shall have sold all the
Conversion Shares and (B) none of the Convertible Notes is outstanding (the
"Registration Period"), the Company shall file all reports required to be filed
with the SEC pursuant to the 1934 Act, and the Company shall not terminate its
status as an issuer required to file reports under the 1934 Act even if the 1934
Act or the rules and regulations thereunder would otherwise permit such
termination.
d. Reservation of Shares. The Company shall take all action necessary
to at all times have authorized, and reserved for the purpose of issuance, no
less than 200% of the number of shares of Common Stock needed to provide for the
issuance of the shares of Common Stock upon conversion of all outstanding
Convertible Notes; provided that after the Registration Statement (as defined in
the Registration Rights Agreement) which covers the Conversion Shares for
resale, has been declared effective, this Section 4(d) shall not be violated if
the Company reserves greater than 185% of the number of shares of the Common
Stock required to be issued upon conversion of the outstanding Convertible
Notes, provided, further, however, that the Company utilizes its best efforts to
reserve no less than 200% as soon as possible of the number of shares of Common
Stock required to be issued upon conversion of the outstanding Convertible
Notes.
e. Limitation on Beneficial Ownership. The Company shall not effect any
conversion of Convertible Notes and no Buyer of Convertible Notes shall have the
right to convert any Convertible Notes pursuant to Section 2(b) of such
Convertible Note to the extent that after giving effect to such conversion such
Buyer (together with such Buyer's affiliates) (A) would beneficially own in
excess of 4.9% of the outstanding shares of the Company's Common Stock following
such conversion and (B) would have acquired, through conversion of Convertible
Notes or otherwise, in excess of 4.9% of the outstanding shares of the Company's
Common Stock following such conversion during the 60-day period ending on and
including such date of conversion. For purposes
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<PAGE> 8
of the foregoing sentence, the number of shares of Common Stock beneficially
owned by a Buyer and its affiliates or acquired by a Buyer and its affiliates,
as the case may be, shall include the number of shares of Common Stock issuable
upon conversion of the Convertible Notes with respect to which the determination
of such sentence is being made, but shall exclude the number of shares of Common
Stock which would be issuable upon (i) conversion of the remaining, nonconverted
Convertible Notes beneficially owned by such Buyer and its affiliates and (ii)
exercise or conversion of the unexercised or unconverted portion of any other
securities of the Company (including, without limitation, any warrants) subject
to a limitation on conversion or exercise analogous to the limitation contained
herein beneficially owned by such Person and its affiliates. Except as set forth
in the preceding sentence, for purposes of this Section 4(e), beneficial
ownership shall be calculated in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended. Notwithstanding anything to the contrary
contained herein, each conversion notice shall constitute a representation by
the Buyer submitting such conversion notice that, after giving effect to such
conversion notice, (A) the holder will not beneficially own (as determined in
accordance with this Section 4(e)) and (B) during the 60-day period ending on
and including such conversion date, the holder will not have acquired, through
conversion of Convertible Notes or otherwise, a number of shares of Common Stock
in excess of 4.9% of the outstanding shares of Common Stock as reflected in the
Company's most recent Form 10-Q or Form 10-K, as the case may be, or more recent
public press release or other public notice by the Company setting forth the
number of shares of Common Stock outstanding, but after giving effect to
conversions of Convertible Notes by such holder since the date as of which such
number of outstanding shares of Common Stock was reported.
f. Listing. The Company shall promptly secure the listing of all of the
Registrable Securities (as that term is defined in the Registration Rights
Agreement) upon each national securities exchange and automated quotation
system, if any, upon which shares of Common Stock are then listed (subject to
official notice of issuance) and shall maintain, so long as any other shares of
Common Stock shall be so listed, such listing of all Registrable Securities from
time to time issuable under the terms of the Transaction Documents and the
Convertible Notes. The Company shall maintain the Common Stock's authorization
for quotation on the Nasdaq National Market, The New York Stock Exchange, Inc.
or The American Stock Exchange, Inc. (collectively, the "Principal Market").
Neither the Company nor any of its Subsidiaries shall take any action which
would be reasonably expected to result in the delisting or suspension of the
Common Stock on the Principal Market. The Company shall promptly, and in no
event later than the following business day, provide to each Buyer copies of any
notices it receives from the Principal Market regarding the continued
eligibility of the Common Stock for listing on such automated quotation system
or securities exchange. The Company shall pay all fees and expenses in
connection with satisfying its obligations under this Section 4(f).
g. Transactions With Affiliates. So long as (i) any Convertible Notes
are outstanding or (ii) any Buyer owns Conversion Shares with a market value
equal to or greater than $500,000, the Company shall not, and shall cause each
of its Subsidiaries not to, enter into, amend, modify or supplement, or permit
any Subsidiary to enter into, amend, modify or supplement, any agreement,
transaction, commitment or arrangement with any of its or any Subsidiary's
officers, directors, person who were officers or directors at any time during
the previous two years, stockholders who beneficially own 5% or more of the
Common Stock, or affiliates or with any individual related by blood, marriage or
adoption to any such individual or with any entity in which any such entity or
individual owns a 5% or more beneficial interest (each a "Related Party"),
except for (a) customary employment arrangements and benefit programs on
reasonable terms, (b) any agreement, transaction, commitment or arrangement on
an arms-length basis on terms no less favorable than terms which would have been
obtainable from a person other than such Related Party, or (c) any agreement,
transaction, commitment or arrangement which is approved by a majority of the
disinterested directors of the Company. For purposes hereof, any director who is
also an officer of the Company or any Subsidiary of the Company shall not be a
disinterested director with respect to any such agreement, transaction,
commitment or arrangement. "Affiliate" for purposes hereof means, with respect
to any person or entity, another person or entity that, directly or indirectly,
(i) has a 5% or more equity interest in that person or entity, (i) has 5% or
more common ownership with that person or entity, (iii) controls that person or
entity, or (iv) shares common control with that person or entity. "Control" or
"controls" for purposes hereof means that a person or entity has the power,
direct or indirect, to conduct or govern the policies of another person or
entity.
h. Limitation on Filing Registration Statements. Except in the event
that Parlux Fragrances, Inc. invokes its demand registration rights or with
respect to the Company's Series C Convertible Notes, the Company shall not file
a registration statement (other than the Registration Statement (as defined in
the Registration Rights Agreement) or a registration statement on Form S-8)
covering the sale or resale of shares of Common Stock with
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<PAGE> 9
the SEC during the period beginning on the date hereof and ending on the date
which is 180 days after the Registration Statement has been declared effective
by the SEC.
i. Independent Auditors. The Company shall, until at least three (3)
years after the Closing Date, maintain as its independent auditors an accounting
firm authorized to practice before the SEC.
j. Corporate Existence and Taxes. The Company shall, until at least the
later of (i) the date that is three (3) years after the Closing Date or (ii) the
conversion or redemption of all of the Convertible Notes purchased pursuant to
this Agreement, maintain its corporate existence in good standing (provided,
however, that the foregoing covenant shall not prevent the Company from entering
into any merger or corporate reorganization as long as the surviving entity in
such transaction, if not the Company, assumes the Company's obligations with
respect to the Convertible Notes and has Common Stock listed for trading on the
Principal Market) and shall pay all its taxes when due except for taxes which
the Company disputes.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its transfer agent,
and any subsequent transfer agent, to issue certificates, registered in the name
of each Buyer or its respective nominee(s), for the Conversion Shares in such
amounts as specified from time to time by each Buyer to the Company upon
conversion of the Convertible Notes (the "Irrevocable Transfer Agent
Instructions"). Prior to registration of the Conversion Shares under the 1933
Act, all such certificates shall bear the restrictive legend specified in
Section 2(g) of this Agreement. The Company warrants that no instruction other
than the Irrevocable Transfer Agent Instructions referred to in this Section 5,
and stop transfer instructions to give effect to Section 2(f) hereof (in the
case of the Conversion Shares, prior to registration of the Conversion Shares
under the 1933 Act) will be given by the Company to its transfer agent and that
the Securities shall otherwise be freely transferable on the books and records
of the Company as and to the extent provided in this Agreement and the
Registration Rights Agreement. Nothing in this Section 5 shall affect in any way
each Buyer's obligations and agreements set forth in Section 2(g) to comply with
all applicable prospectus delivery requirements, if any, upon resale of the
Securities. If a Buyer provides the Company with an opinion of counsel, in a
generally acceptable form, to the effect that a public sale, assignment or
transfer of the Securities may be made without registration under the 1933 Act
or the Buyer provides the Company with reasonable assurances that the Securities
can be sold pursuant to Rule 144 without any restriction as to the number of
securities acquired as of a particular date that can then be immediately sold,
the Company shall permit the transfer, and, in the case of the Conversion
Shares, promptly instruct its transfer agent to issue one or more certificates
in such name and in such denominations as specified by such Buyer and without
any restrictive legend. In the event that the Company appoints a different
transfer agent (other than the Company's transfer agent in service as of the
Closing) to serve as the Company's transfer agent, the Company shall
immediately, but in no event later than five (5) days from such appointment
issue irrevocable instructions to such transfer agent in substantially the same
form as the Irrevocable Transfer Agent Instructions issued to the Company's
transfer agent in service as of the Closing. The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to the
Buyers by vitiating the intent and purpose of the transaction contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section 5 will be inadequate and agrees, in
the event of a breach or threatened breach by the Company of the provisions of
this Section 5, that the Buyers shall be entitled, in addition to all other
available remedies, to seek an order and/or injunction restraining any breach
and requiring immediate issuance and transfer, without the necessity of showing
economic loss and without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the
Convertible Notes to each Buyer at the Closing is subject to the satisfaction,
at or before the Closing Date, of each of the following conditions, provided
that these conditions are for the Company's sole benefit and may be waived by
the Company at any time in its sole discretion by providing each Buyer with
prior written notice thereof:
a. Such Buyer shall have executed each of the Transaction Documents to
which it is a party and delivered the same to Katten Muchin & Zavis, care of
Anthony J. Ribaudo, Esq., as escrow agent (the "Escrow Agent") for the
transactions contemplated by this Agreement.
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b. The representations and warranties of such Buyer shall be true and
correct in all material respects as of the date when made and as of the Closing
Date as though made at that time (except for representations and warranties that
speak as of a specific date), and such Buyer shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by such
Buyer at or prior to the Closing Date.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
The obligation of each Buyer hereunder to purchase the Convertible
Notes at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions, provided that these conditions are
for each Buyer's sole benefit and may be waived by such Buyer at any time in its
sole discretion by providing the Company with prior written notice thereof:
a. The Company shall have executed each of the Transaction Documents
and delivered the same to the Escrow Agent.
b. The Company's common stock shall be authorized for quotation on the
Principal Market and trading in Company common stock shall not have been
suspended by the SEC or the Principal Market.
c. The representations and warranties of the Company shall be true and
correct as of the date when made and as of the Closing Date as though made at
that time (except for representations and warranties that speak as of a specific
date) and the Company shall have performed, satisfied and complied with the
covenants, agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by the Company at or prior to the Closing
Date. The Company shall have delivered to the Escrow Agent a certificate,
executed by the Chief Executive Officer of the Company, dated as of the Closing
Date, to the foregoing effect.
d. The Company shall have delivered to the Escrow Agent the opinion of
the Company's counsel dated as of the Closing Date, in form, scope and substance
reasonably satisfactory to such Buyer and in substantially the form of Exhibit C
attached hereto.
e. The Company shall have executed and delivered to the Escrow Agent
the Convertible Notes (in such denominations as such Buyer shall request) being
purchased by such Buyer at the Closing.
f. The Board of Directors of the Company shall have adopted resolutions
consistent with Section 3(b)(ii) above and in a form reasonably acceptable to
such Buyer.
g. As of the Closing Date, the Company shall have reserved out of its
authorized and unissued Common Stock, solely for the purpose of effecting the
conversion of the Convertible Notes, no less than 200% of the number of shares
of Common Stock needed to provide for the issuance of the shares of Common Stock
upon conversion of all outstanding Convertible Notes.
h. The Irrevocable Transfer Agent Instructions, substantially in the
form of Exhibit D attached hereto, shall have been delivered to and acknowledged
in writing by the Company's transfer agent and a copy of the executed
Irrevocable Transfer Agent Instructions shall have been delivered to the Escrow
Agent.
i. The Company shall have delivered to the Escrow Agent a certified
copy of the Articles of Incorporation as certified by the Secretary of State of
the State of Florida within ten (10) days of the Closing Date.
j. The Company shall have delivered to the Escrow Agent a secretary's
certificate, dated as the Closing Date, as to (i) the resolutions described in
Section 7(f), (ii) the Certificate of Incorporation and (iii) the Bylaws, each
as in effect at the Closing.
k. The Company shall have made all filings under all applicable federal
and state securities laws necessary to consummate the issuance of the Securities
pursuant to this Agreement in compliance with such laws.
l. The Company shall have delivered to the Escrow Agent such other
documents relating to the transactions contemplated by this Agreement as the
Escrow Agent or its counsel may reasonably request.
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m. Subject to Section 9(k) below, at the Closing, the Company shall
reimburse the Buyers for one-half (1/2) of the Buyers' expenses (including
attorneys' fees and expenses) in due diligence and negotiating and preparing the
Transaction Documents and consummating the transactions contemplated thereby up
to an aggregate of $8,000.
8. INDEMNIFICATION.
a. Indemnification by Company. In consideration of each Buyer's
execution and delivery of the Transaction Documents and acquiring the Securities
thereunder and in addition to all of the Company's other obligations under the
Transaction Documents and the Convertible Notes, the Company shall defend,
protect, indemnify and hold harmless each Buyer and each other holder of the
Securities and all of their stockholders, partners, officers, directors,
employees and direct or indirect investors and any of the foregoing person's
agents or other representatives (including, without limitation, those retained
in connection with the transactions contemplated by this Agreement)
(collectively, the "Indemnitees") from and against any and all actions, causes
of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses in connection therewith (irrespective of whether any such
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys' fees and disbursements (the
"Indemnified Liabilities"), incurred by any Indemnitee as a result of, or
arising out of, or relating to (a) any material misrepresentation or breach of
any representation or warranty made by the Company in the Transaction Documents
or any other certificate, instrument or document contemplated hereby or thereby,
or (b) any material breach of any covenant, agreement or obligation of the
Company contained in the Transaction Documents or the Convertible Notes or any
other certificate, instrument or document contemplated hereby or thereby. To the
extent that the foregoing undertaking by the Company may be unenforceable for
any reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law.
b. Indemnification by Buyer. In consideration of the Company's
execution and delivery of the Transaction Documents and the Company's
performance of the transactions contemplated thereunder, each Buyer shall
severally but not jointly defend, protect, indemnify and hold harmless the
Company, its officers and directors (collectively, the "Company Indemnitees")
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection
therewith and including reasonable attorneys' fees and disbursements (the
"Company Indemnified Liabilities"), incurred by any Company Indemnitee as a
result of, or arising out of, or relating to (a) any material representation or
breach of any representation or warranty made by such Buyer in the Transaction
Documents or any other certificate, instrument or document contemplated hereby
or thereby, or (b) any material breach of any covenant, agreement or obligation
of such Buyer contained in the Transaction Documents or any other certificate,
instrument or document contemplated hereby or thereby; provided, however, that
any Buyer shall not be jointly liable for the indemnification obligations of any
other Buyer or investor and the Buyer subject to an indemnification obligation
shall be liable under this Section 8(b) for only that amount of Company
Indemnified Liabilities as does not exceed the net proceeds to such Buyer as a
result of the sale of Securities and Conversion Shares held by such Buyer. To
the extent that the foregoing undertaking by a Buyer may be unenforceable for
any reason, such Buyer shall make the maximum contribution to the payment and
satisfaction of each of the Company Indemnified Liabilities which is permissible
under applicable law; provided, however, that any Buyer shall not be jointly
liable for the indemnification obligations of any other Buyer or investor and
the Buyer subject to an indemnification obligation shall be liable under this
Section 8(b) for only that amount of Company Indemnified Liabilities as does not
exceed the net proceeds to such Buyer as a result of the sale of Securities and
Conversion Shares held by such Buyer.
9. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law; Jurisdiction; Jury Trial. The corporate laws of the
State of Florida shall govern all issues concerning the relative rights of the
Company and its stockholders. All other questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
the internal laws of the State of Florida, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of Florida or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of Florida. Each party hereby irrevocably
submits to the non-exclusive jurisdiction of the state and federal courts
sitting in the City of Miami, for the adjudication of any dispute hereunder or
in connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such
11
<PAGE> 12
court, that such suit, action or proceeding is brought in an inconvenient forum
or that the venue of such suit, action or proceeding is improper. Each party
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof to
such party at the address for such notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of process and
notice thereof. Nothing contained herein shall be deemed to limit in any way any
right to serve process in any manner permitted by law. EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR
ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
b. Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
c. Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement supersedes all other
prior oral or written agreements between the Buyers, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be amended other than by an instrument in writing signed by the
Company and the holders of at least two-thirds (2/3) of the Convertible Notes
(determined by reference to principal amount) then outstanding, and no provision
hereof may be waived other than by an instrument in writing signed by the party
against whom enforcement is sought. No such amendment shall be effective to the
extent that it applies to less than all of the holders of the Convertible Notes
then outstanding. No consideration shall be offered or paid to any person to
amend or consent to a waiver or modification of any provision of any of the
Transaction Documents or the Convertible Notes unless the same consideration
also is offered to all of the parties to the Transaction Documents or holders of
Convertible Notes, as the case may be.
f. Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one business day after deposit with
a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:
If to the Company: E Com Ventures, Inc.
11701 N.W. 101st Road
Miami, Florida 33178
Telephone: (305) 889-1600
Facsimile: (305) 888-7825
Attention: Ilia Lekach
12
<PAGE> 13
With a copy to: Greenberg Traurig, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Telephone: (305) 579-0809
Facsimile: (305) 579-0717
Attention: Ken Hoffman, Esq.
If to the Transfer Agent: Continental Stock Transfer and Trust
2 Broadway, 19th Floor
New York, New York 10004
Telephone: (212) 509-4000
Facsimile: (212) 509-5150
Attention: Steve Nelson
If to a Buyer, to it at the address and facsimile number set forth on
Schedule 1 with copies to such Buyer's representatives as set forth on Schedule
1, or at such other address and/or facsimile number and/or to the attention of
such other person as the recipient party has specified by written notice given
to each other party five days prior to the effectiveness of such change. Written
confirmation of receipt (A) given by the recipient of such notice, consent,
waiver or other communication, (B) mechanically or electronically generated by
the sender's facsimile machine containing the time, date, recipient facsimile
number and an image of the first page of such transmission or (C) provided by a
nationally recognized overnight delivery service shall be rebuttable evidence of
personal service, receipt by facsimile or receipt from a nationally recognized
overnight delivery service in accordance with clause (i), (ii) or (iii) above,
respectively.
g. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns,
including any purchasers of the Convertible Notes. The Company shall not assign
this Agreement or any rights or obligations hereunder without the prior written
consent of the holders of at least two-thirds (2/3) of the Convertible Notes
(determined by reference to principal amount) then outstanding. A Buyer may
assign some or all of its rights hereunder without the consent of the Company,
provided, however, that any such assignment shall not release such Buyer from
its obligations hereunder unless such obligations are assumed by such assignee
and the Company has consented to such assignment and assumption. Notwithstanding
anything to the contrary contained in the Transaction Documents, the Buyers
shall be entitled to pledge the Securities in connection with a bona fide margin
account.
h. No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
i. Survival. Unless this Agreement is terminated under Section 9(k),
the agreements and covenants set forth in Sections 4, 5 and 9, and the
indemnification provisions set forth in Section 8, shall survive the Closing.
Each Buyer shall be responsible only for its own agreements and covenants
hereunder.
j. Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
k. Termination. In the event that the Closing shall not have occurred
with respect to a Buyer on or before three (3) business days from the date
hereof due to the Company's or such Buyer's failure to satisfy the conditions
set forth in Sections 6 and 7 above (and the nonbreaching party's failure to
waive such unsatisfied condition(s)), the nonbreaching party shall have the
option to terminate this Agreement with respect to such breaching party at the
close of business on such date without liability of any party to any other
party; provided, however, that if this Agreement is terminated pursuant to this
Section 9(k), the Company shall remain obligated to reimburse the nonbreaching
Buyers for the expenses described in Section 7(m) above.
13
<PAGE> 14
l. Placement Agent. The Company acknowledges that it has not engaged a
placement agent in connection with the sale of the Convertible Notes.
m. No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.
n. Remedies. Each Buyer and each holder of the Securities shall have
all rights and remedies set forth in the Transaction Documents and the
Convertible Notes and all rights and remedies which such holders have been
granted at any time under any other agreement or contract and all of the rights
which such holders have under any law. Any person having any rights under any
provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law.
o. Payment Set Aside. To the extent that the Company makes a payment or
payments to the Buyers hereunder or pursuant to the Convertible Notes or the
Buyers enforce or exercise their rights hereunder or thereunder, and such
payment or payments or the proceeds of such enforcement or exercise or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside, recovered from, disgorged by or are required to be refunded, repaid
or otherwise restored to the Company, a trustee, receiver or any other person
under any law (including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the extent of any
such restoration the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.
[SIGNATURE PAGE FOLLOWS]
14
<PAGE> 15
IN WITNESS WHEREOF, the Buyers and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYERS:
E COM VENTURES, INC. CRANSHIRE CAPITAL, L.P.
By: /s/ Ilia Lekach By: /s/ Mitchell P. Kopin
------------------------------- -------------------------------
Name: Ilia Lekach Name: Mitchell P. Kopin
----------------------------- ------------------------------
Title: Chief Executive Officer Title: President - Downview Capital
--------------------------- The General Partner
-----------------------------
THE DOTCOM FUND, LLC
By: /s/ Mark Rice
-----------------------------------
Name: Mark Rice
---------------------------------
Title: Manager - Minamax LLC
The Managing Member
--------------------------------
EP .COM FUND, L.L.C.
By: /s/ Jeffrey Eisenberg
-----------------------------------
Name: Jeffrey Eisenberg
---------------------------------
Title: Manager of Eisenberg
Partners, L.L.C.
Manager of EP.com
Fund, L.L.C.
--------------------------------
EP .COM FUND INTERNATIONAL, LTD.
By: /s/ Jeffrey Eisenberg
-----------------------------------
Name: Jeffrey Eisenberg
---------------------------------
Title: Manager of Eisenberg
Partners, L.L.C.
Investment Manager of EP.com
Funds International, Ltd.
--------------------------------
EP OPPORTUNITY FUND, L.L.C.
By: /s/ Jeffrey Eisenberg
-----------------------------------
Name: Jeffrey Eisenberg
---------------------------------
Title: Manager of Eisenberg
Partners, L.L.C.
Manager of EP Opportunity
Fund, L.L.C.
--------------------------------
EP OPPORTUNITY FUND INTERNATIONAL, LTD.
By: /s/ Jeffrey Eisenberg
-----------------------------------
Name: Jeffrey Eisenberg
---------------------------------
Title: Manager of Eisenberg
Partners, L.L.C.
Investment Manager of EP
Opportunity Fund International,
Ltd.
--------------------------------
15
<PAGE> 16
SCHEDULE 1: LIST OF INVESTORS
<TABLE>
<CAPTION>
Amount of
Investor Address and Convertible Notes Investor's Legal Representatives'
Investor's Name Facsimile Number Address and Facsimile Number
--------------- --------------------- ----------------- ---------------------------------
<S> <C> <C> <C>
Cranshire Capital, L.P. 666 Dundee Rd., Ste. 1901 $2,000,000.00 Katten Muchin & Zavis
Northbrook, IL 60062 525 W. Monroe Street
Attention: Mitchell Kopin Chicago, Illinois 60661-3693
Telephone: (847) 562-9030 Attention: Anthony J. Ribaudo, Esq.
Facsimile: (847) 562-9031 Facsimile: (312) 577-8763
Telephone: (312) 902-5521
The dotCom Fund, LLC 666 Dundee Road., Ste. 1901 $2,000,000.00
Northbrook, Illinois 60062
Attention: Mark Rice
Telephone: (847) 509-2290
Facsimile: (847) 509-2295
EP .com Fund, L.L.C. 77 W. Wacker Drive $400,000.00
Chicago, Illinois 60601
Attention: Jeffrey Eisenberg
Telephone: (312) 456-9500
Facsimile: (312) 456-9501
EP .com Fund 77 W. Wacker Drive $100,000.00
International, Ltd. Chicago, Illinois 60601
Attention: Jeffrey Eisenberg
Telephone: (312) 456-9500
Facsimile: (312) 456-9501
EP Opportunity Fund, L.L.C. 77 W. Wacker Drive $469,000.00
Chicago, Illinois 60601
Attention: Jeffrey Eisenberg
Telephone: (312) 456-9500
Facsimile: (312) 456-9501
EP Opportunity Fund 77 W. Wacker Drive $31,000.00
International, Ltd. Chicago, Illinois 60601
Attention: Jeffrey Eisenberg
Telephone: (312) 456-9500
Facsimile: (312) 456-9501
</TABLE>
16
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in this
Registration Statement on Form S-3 of our report (which contains an explanatory
paragraph relating to the Company's ability to continue as a going concern as
described in Note 2 to the consolidated financial statements) dated April 29,
1999, except for the fourth paragraph of Note 2 and the second paragraph of Note
8 as to which the date is July 14, 1999, relating to the consolidated financial
statements, which appears in Perfumania, Inc.'s Annual Report on Form 10-K for
the year ended January 30, 1999. We also consent to the reference to us under
the heading "Experts" in such Registration Statement.
PricewaterhouseCoopers LLP
Miami, Florida
April 25, 2000
`
