<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO 13d-1(a)
AND AMENDMENTS THERETO FILED PURSUANT TO 13d-2(a) /1/
iMALL, Inc.
-----------
(Name of Issuer)
Common Stock
------------
(Title of Class of Securities)
45244X207
---------
(CUSIP Number)
Michael T. Whealy
Executive Vice President
and General Counsel
First Data Corporation
5660 New Northside Drive
Atlanta, Georgia 30328
(770) 690-4201
--------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
October 30, 1998
----------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(b)(3) or (4), check the following box [_].
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
(Continued on following pages)
(Page 1 of 14 Pages)
-----------------------
/1/ The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
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CUSIP NO. 45244X207 13D Page 2 of 12 Pages
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- ------------------------------------------------------------------------------
NAME OF REPORTING PERSONS
1 I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
First Data Merchant Services Corporation IRS No. 59-2126793
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [_]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS*
4 WC
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6 Florida
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF 2,000,000
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
0
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 2,000,000
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
0
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11 2,000,000
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13 21.5%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14 CO
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
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CUSIP NO. 45244X207 13D Page 3 of 12 Pages
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- ------------------------------------------------------------------------------
NAME OF REPORTING PERSONS
1 I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
First Data Corporation IRS No. 47-0731996
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [_]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS*
4 WC
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6 Delaware
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF 2,000,000
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
0
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 2,000,000
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
0
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11 2,000,000
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13 21.5%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14 CO
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
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CUSIP NO. 45244X207 13D Page 4 of 12 Pages
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ITEM 1. SECURITY AND ISSUER.
This Statement on Schedule 13D (this "Statement") relates to the Common
Stock, par value $.008 per share (the "Stock"), of iMALL, Inc., a Nevada
corporation ("iMall"). The principal executive office of iMall is located at
233 Wilshire Boulevard, Suite 820, Santa Monica, California 90401.
ITEM 2. IDENTITY AND BACKGROUND.
The persons filing this Statement, the persons enumerated in Instruction C
of Schedule 13D and, where applicable, their respective places of organization,
general partners, directors, executive officers and controlling persons, and
certain information regarding each of them, are as follows:
(a)-(c) This statement is being filed by First Data Corporation, a Delaware
corporation ("First Data"), and First Data Merchant Services Corporation, a
Florida corporation and a wholly owned subsidiary of First Data ("FDMS"). First
Data is a global leader in payment systems, electronic commerce and information
management products and services. The principal business and office address of
First Data is 5660 New Northside Drive, Suite 1400, Atlanta, GA 30328. FDMS is
one of the nation's leading providers of electronic commerce solutions for
hundreds of financial institutions and two million businesses. The principal
business and office address of FDMS is 6200 South Quebec Street, Englewood,
Colorado 80111.
The following individuals are the executive officers and directors of First
Data (with asterisks indicating the directors):
<TABLE>
<CAPTION>
Name Present Principal Occupation Name and Business Address
---- or Employment -------------------------
-------------
<S> <C> <C>
Henry C. Duques* Chairman of the Board and First Data Corporation
Chief Executive Officer of One Mack Center Drive
First Data Paramus, NJ 07652
Charles T. Fote President and Chief First Data Corporation
Operating Officer of First 6200 South Quebec Street
Data Englewood, CO 80111
Lee Adrean Executive Vice President First Data Corporation
and 5660 New Northside Drive
Chief Financial Officer of Suite 1400
First Data Atlanta, GA 30328
</TABLE>
<PAGE>
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CUSIP NO. 45244X207 13D Page 5 of 12 Pages
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<TABLE>
<S> <C> <C>
Eula L. Adams Executive Vice President of First Data Corporation
First Data 6200 South Quebec Street
Englewood, CO 80111
David P. Bailis Executive Vice President of First Data Corporation
First Data 10825 Farnam Drive
Omaha, NE 68154
Henry T. De Nero Executive Vice President of First Data Corporation
First Data 6200 South Quebec Street
Englewood, CO 80111
Robert J. Levenson* Executive Vice President of First Data Corporation
First Data One Mack Center Drive
Paramus, NJ 07652
Michael T. Whealy Executive Vice President First Data Corporation
and General Counsel of 5660 New Northside Drive
First Data Suite 1400
Atlanta, GA 30328
Ben Burdetsky* Professor Emeritus, George 4619 N. Dittmar Road
Washington University Arlington, VA 22207
Courtney F. Jones* Managing Director, New Bankers Trust
World Banking Group of 130 Liberty Street
Bankers Trust New York, NY 10006
James D. Robinson, III* Chairman of the Board and RRE Investors, LLC
Chief Executive Officer of 126 E. 56th Street
RRE Investors, LLC (private 26th Floor
venture investment firm) New York, NY 10022
Charles T. Russell* Retired 812 Lamont Avenue
Novato, CA 94945
Bernard L. Schwartz* Chairman of the Board and Loral Space &
Chief Executive Officer of Communications, Ltd.
Loral Space & 600 Third Avenue
Communications, Ltd. 36th Floor
(diversified electronic New York, NY 10016
systems)
</TABLE>
<PAGE>
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CUSIP NO. 45244X207 13D Page 6 of 12 Pages
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<TABLE>
<S> <C> <C>
Joan E. Spero* President of Doris Duke Doris Duke Charitable
Charitable Foundation Foundation
650 Fifth Avenue
19th Floor
New York, NY 10019
Garen K. Staglin* Chairman of the Board of P.O. Box 680
Safelite Glass Corporation Rutherford, CA 94573
</TABLE>
The following individuals are the executive officers and directors of FDMS
(with asterisks indicating the directors):
<TABLE>
<CAPTION>
Name Present Principal Name and Business Address
---- Occupation -------------------------
or Employment
-------------
<S> <C> <C>
Charles T. Fote* President of First Data First Data Corporation
Corporation 6200 South Quebec Street
Englewood, CO 80111
Michael T. Whealy* Executive Vice President First Data Corporation
and General Counsel of 5660 New Northside Drive
First Data Suite 1400
Atlanta, GA 30328
Eula L. Adams President of FDMS First Data Corporation
6200 South Quebec Street
Englewood, CO 80111
Robert F. McNamara Executive Vice President of First Data Corporation
FDMS 265 Broad Hollow Road
Melville, NY 11747
Kimberly S. Patmore Executive Vice President of First Data Corporation
FDMS 6200 South Quebec Street
Englewood, CO 80111
John S. Zieser Executive Vice President of First Data Corporation
FDMS 5660 New Northside Drive
Suite 1400
Atlanta, GA 30328
</TABLE>
(d) During the last five years, none of such persons has been convicted in
a criminal proceeding (excluding traffic violations and similar misdemeanors).
<PAGE>
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CUSIP NO. 45244X207 13D Page 7 of 12 Pages
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(e) During the last five years, none of such persons was a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and as
a result of such proceeding was or is subject to a judgment, decree or final
order enjoining future violations of, or prohibiting or mandating activities
subject to, Federal or State securities laws or finding any violation with
respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
In connection with the first closing (the "First Closing") on October 30,
1998 of the transactions contemplated by the Investment Agreement dated as of
October 30, 1998 (the "Investment Agreement") between iMall and FDMS, iMall
issued 1,540,000 shares of Stock to FDMS and FDMS paid $10,780,000 in cash,
which amount was paid by First Data out of working capital available from
operations. In connection with the second closing (the "Second Closing"), to be
held when certain conditions set forth in the Investment Agreement have been
fulfilled or waived (if permissible), of the transactions contemplated by the
Investment Agreement, iMall will issue 460,000 shares of Stock to FDMS and FDMS
will pay $3,220,000 in cash, which amount will be paid by First Data out of
working capital available from operations. A copy of the Investment Agreement
is included as Exhibit 1, and incorporated herein by reference.
ITEM 4. PURPOSE OF TRANSACTIONS.
The information contained in Item 3 is incorporated herein by reference.
FDMS acquired at the First Closing 1,540,000 shares of Stock from iMall, and
will acquire an additional 460,000 shares of Stock at the Second Closing,
subject to the fulfillment or waiver (if permissible) of certain conditions set
forth in the Investment Agreement.
Pursuant to the Investment Agreement, iMall has agreed to issue to FDMS,
subject to the satisfaction of certain performance objectives set forth in the
Investment Agreement, a warrant that will entitle the holder thereof to purchase
5,000,000 shares of Stock at an exercise price of $17.00 per share, subject to
adjustment (the "Warrant").
The Investment Agreement limits the ability of FDMS to acquire additional
securities of iMall. From the First Closing until the earlier of (a) the fifth
anniversary of the First Closing or (b) the third anniversary of the date as of
which FDMS and its Subsidiaries (as defined in the Investment Agreement)
beneficially own less than 5% of the Total Voting Power (as defined in the
Investment Agreement), subject to certain limitations and without the prior
approval of a majority of the members of the Board of Directors of iMall who are
not employees or officers of iMall, FDMS or either of their subsidiaries, FDMS
and its Subsidiaries and Affiliates (other than Alliances) (each as defined in
the Investment Agreement) will not acquire additional Voting Securities such
that the total number of Voting Securities beneficially owned by FDMS, its
Subsidiaries and Affiliates (other than Alliances)
<PAGE>
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CUSIP NO. 45244X207 13D Page 8 of 12 Pages
- ----------------------- ---------------------
and the Voting Securities owned by an Alliance which have been transferred to
such Alliance by Investor or any of its Affiliates represents more than 39.9% of
the Total Voting Power (as defined in the Investment Agreement).
Subject to certain limited exceptions, the Investment Agreement provides
that until the date of the stockholders meeting contemplated by Investment
Agreement, iMall will not, directly or indirectly, solicit, initiate or
encourage any competing offers, investments or transactions similar to the
transactions contemplated by the Investment Agreement, which offers, investments
or transactions would reasonably be considered inconsistent with or would
materially delay the consummation of the transactions contemplated by the
Investment Agreement, nor engage in or continue discussions or negotiations
relating to any such offers, investments or transactions.
At the First Closing, FDMS, iMall, Richard Rosenblatt, Mark R. Comer and
Craig R. Pickering entered into a Stockholders Agreement (the "Stockholders
Agreement") which obligates the parties to use their respective best efforts to
cause the Board of Directors of iMall to consist of not less than seven and not
more than ten members, with a number of members designated by FDMS proportional
to its, combined with its Affiliates' and Alliances' (as defined in the
Stockholders Agreement), ownership of the Stock. The Stockholders Agreement
obligates the parties thereto to vote for the approval of an amendment to
iMall's by-laws containing this and related provisions. The Stockholders
Agreement contains other provisions related to the management of iMall and the
Board of Directors.
In addition, the Stockholders Agreement limits the ability of FDMS to
transfer its Stock (and certain other iMall securities). Generally, FDMS and the
other parties to the Stockholders Agreement may sell shares of Stock only by
giving notice and complying with a right of first refusal held by the other
parties. FDMS may transfer shares of Stock to any Alliance, which must agree to
be bound by the terms of the Stockholders Agreement, and such Alliance may
transfer such shares to its Affiliates, provided they agree to vote such shares
as provided in the Stockholders Agreement. Any party may transfer up to 25,000
shares of Stock each calendar quarter subject only to restrictions under the
Securities Act of 1933, as amended (the "Securities Act").
The Stockholders Agreement shall terminate (a) in respect of any party,
when such party no longer owns any shares of Stock (or certain other iMall
securities), and (b) in any event, upon dissolution of iMall. The limitations on
transfer contained in the Stockholders Agreement shall terminate (a) if FDMS and
its Affiliates own in the aggregate less than 500,000 shares of Stock or (b) in
any event, on October 30, 2008.
At the First Closing, FDMS and iMall also entered into a Registration
Rights Agreement (the "Registration Rights Agreement"), pursuant to which FDMS
has certain rights to cause iMall to register under the Securities Act the
Registrable Shares (as defined in the
<PAGE>
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CUSIP NO. 45244X207 13D Page 9 of 12 Pages
- ----------------------- ---------------------
Registration Rights Agreement, including but not limited to the shares of Stock
issued at the First Closing, the shares of Stock to be issued at the Second
Closing and shares to be issued upon exercise of the Warrant).
The Warrant, the Shareholders Agreement and the Registration Rights
Agreement are included as Exhibits 2, 3 and 4, respectively, and incorporated
herein by this reference, and the foregoing description of such agreements is
qualified in its entirety by reference to such Exhibits.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) At the First Closing, FDMS received from iMall 1,540,000 shares of
Stock, representing 16.6% of the outstanding shares of Stock (such percentage
being calculated based on the representation of iMall in its Quarterly Report on
Form 10-QSB for the quarter ended September 30, 1998, that on November 6, 1998
there were 9,291,145 shares of Stock outstanding). At the Second Closing,
subject to the fulfillment or waiver (if permissible) of certain conditions set
forth in the Investment Agreement, FDMS will receive from iMall 460,000 shares
of Stock, which, together with the shares received at the First Closing, will
represent 21.5% of the outstanding shares of Stock (such percentage being
calculated based on the representation of iMall in its Quarterly Report on Form
10-QSB for the quarter ended September 30, 1998, that on November 6, 1998 there
were 9,291,145 shares of Stock outstanding). Since FDMS is a wholly owned
subsidiary of First Data, First Data may be deemed the beneficial owner of all
of the shares of Stock set forth in this Item 5(a). Except as set forth in this
Item 5(a), none of First Data, FDMS or, to the knowledge of either of them, any
executive officer or director of First Data or FDMS identified in Item 2 above
beneficially owns any shares of Stock.
(b) FDMS has the sole voting power and sole dispositive power over the
1,540,000 shares of Stock delivered to it at the First Closing, and will have
sole voting power and sole dispositive power over the 460,000 shares of Stock to
be delivered to it at the Second Closing. Since FDMS is a wholly owned
subsidiary of First Data, First Data may be deemed to have sole voting power and
sole dispositive power over the shares of Stock set forth in this Item 5(b). The
information contained in Item 5(a) is incorporated herein by reference.
(c) The information contained in Item 5(a) is incorporated herein by
reference. Except as set forth in this Item 5(c), none of First Data, FDMS or,
to the knowledge of either of them, any of the executive officers or directors
of First Data or FDMS identified in Item 2 above have effected transactions in
Stock in the last 60 days.
(d) Not applicable.
(e) Not applicable.
<PAGE>
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CUSIP NO. 45244X207 13D Page 10 of 12 Pages
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ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR
RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER.
The information set forth under Items 3, 4 and 5 of this statement is
incorporated herein by reference.
ITEM 7. MATERIAL TO BE HELD AS EXHIBITS.
Exhibit Number Description
- -------------- -----------
1 Investment Agreement dated as of October 30, 1998, between
iMall, Inc. and First Data Merchant Services Corporation
(Exhibits and Schedules omitted).
2 Form of Warrant, included as Exhibit A to the Investment
Agreement dated as of October 30, 1998, between iMall, Inc.
and First Data Merchant Services Corporation.
3 Stockholders Agreement dated as of October 30, 1998, among
iMall, Inc., First Data Merchant Services Corporation,
Richard Rosenblatt, Mark R. Comer and Craig R. Pickering.
4 Registration Rights Agreement, dated as of October 30,
1998, between iMall, Inc. and First Data Merchant Services
Corporation.
<PAGE>
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CUSIP NO. 45244X207 13D Page 11 of 12 Pages
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After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: November 30, 1998
-----------------
FIRST DATA MERCHANT SERVICES CORPORATION
By: /s/ Michael T. Whealy
-------------------------
Name: Michael T. Whealy
Title: Secretary
FIRST DATA CORPORATION
By: /s/ Michael T. Whealy
-------------------------
Name: Michael T. Whealy
Title: Executive Vice President and General Counsel
<PAGE>
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CUSIP NO. 45244X207 13D Page 12 of 12 Pages
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Exhibit Index
-------------
Exhibit Number Description
- -------------- -----------
1 Investment Agreement dated as of October 30, 1998, between
iMall, Inc. and First Data Merchant Services Corporation
(Exhibits and Schedules omitted).
2 Form of Warrant, included as Exhibit A to the Investment
Agreement dated as of October 30 1998, between iMall, Inc.
and First Data Merchant Services Corporation.
3 Stockholders Agreement dated as of October 30, 1998, among
iMall, Inc., First Data Merchant Services Corporation,
Richard Rosenblatt, Mark R. Comer and Craig R. Pickering.
4 Registration Rights Agreement, dated as of October 30,
1998, between iMall, Inc. and First Data Merchant Services
Corporation.
<PAGE>
EXHIBIT 1
Execution Copy
_________________________________________________________________
____________________
Investment Agreement
dated as of
October 30, 1998
_________________________________________________________________
<PAGE>
INVESTMENT AGREEMENT
--------------------
This Investment Agreement (this "Agreement") dated as of October 30,
1998 is made by and between iMall, Inc., a Nevada corporation (the
"Corporation"), and First Data Merchant Services Corporation, a Florida
corporation ("Investor").
RECITALS
--------
WHEREAS, the Corporation is in the business of developing Internet
commerce concepts;
WHEREAS, in order to finance the Corporation's continued growth, the
Corporation desires to issue and sell to Investor, and Investor desires to
purchase from the Corporation, an aggregate of two million (2,000,000) shares of
the authorized and unissued shares of common stock of the Corporation, par value
$.008 per share (the "Common Stock"); and
WHEREAS, in order to provide additional incentive for the future
cooperation of the Corporation and Investor, the Corporation desires to commit
to the issuance to Investor and Investor desires to receive from the Corporation
a warrant (the "Warrant") in the form set forth in Exhibit A to purchase an
additional five million (5,000,000) shares of Common Stock subject to the
satisfaction of certain performance objectives.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I
Sale of Common Shares
---------------------
1.1. Sale of Common Shares. Subject to the terms and conditions
herein set forth and in reliance upon the representations and warranties of the
Corporation set forth herein or in certificates delivered pursuant hereto, the
Corporation agrees to issue, sell and deliver to Investor, free and clear of any
liens, claims, charges and encumbrances whatsoever, except as set forth in the
Stockholders Agreement (as defined below), and Investor agrees to purchase from
the Corporation, the Common Shares (as defined below) for $7.00 per share in
cash.
1.2. Closing. (a) The closing of the sale and purchase (the "First
Closing") of 1,540,000 shares of Common Stock (the "First Common Shares") shall
be held at the offices of Sidley & Austin, One First National Plaza, Chicago,
Illinois, at 3:30 p.m. local time, on October 30, 1998 or such other time, date
and place as may be agreed to in writing by the Corporation and Investor (such
time and date are herein called the "First Closing Date").
<PAGE>
(b) The closing of the sale and purchase (the "Second Closing") of
460,000 shares of Common Stock (the "Second Common Shares" and, together with
the First Common Shares, the "Common Shares") shall be held at the offices of
Sidley & Austin, One First National Plaza, Chicago, Illinois, at 10:00 a.m.,
local time, on the second business day following the day on which the last of
the conditions set forth in Sections 4.3 and 4.4 shall have been fulfilled or
waived (if permissible) or such other time, date and place as may be agreed to
in writing by the Corporation and Investor (such time and date are herein called
the "Second Closing Date").
1.3. Delivery. (a) At the First Closing, the Corporation will issue
and deliver to Investor, against the payment by such Investor of the aggregate
purchase price of $10,780,000 by wire transfer of immediately available funds to
an account which has been designated in writing by the Corporation, the First
Common Shares, duly executed by the Corporation and registered in the name of
Investor.
(b) At the Second Closing, the Corporation will issue and deliver to
Investor, against the payment by such Investor of the aggregate purchase price
of $3,220,000 by wire transfer of immediately available funds to an account
which has been designated in writing by the Corporation, the Second Common
Shares, duly executed by the Corporation and registered in the name of Investor.
(c) Unless otherwise specified by Investor, all of the First Common
Shares shall be represented by a single certificate and all the Second Common
Shares shall be represented by a single certificate.
ARTICLE II
Representations and Warranties of the Corporation
-------------------------------------------------
The Corporation hereby represents and warrants to Investor as follows:
Section 2.1. Organization, Qualifications and Corporate Power. The
Corporation is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Nevada, and is duly licensed or
qualified to transact business as a foreign corporation and is in good standing
in each jurisdiction in which the nature of the business transacted by it or the
character of the properties owned or leased by it requires such licensing or
qualification, except where the failure to be so licensed or qualified or in
good standing would not in the aggregate have a Material Adverse Effect (as
defined herein). The Corporation has the power and authority to own and hold its
properties and to carry on its business as now conducted and as proposed to be
conducted. The Corporation has the corporate power and authority to execute,
deliver and perform this Agreement, the Registration Rights Agreement between
the Corporation and
-2-
<PAGE>
Investor in the form of Exhibit B attached hereto (the "Registration Rights
Agreement"), the Stockholders Agreement in the form of Exhibit C attached hereto
(the "Stockholders Agreement"), and the Marketing Agreement in the form of
Exhibit D attached hereto (the "Marketing Agreement"), and to issue, sell and
deliver the First Common Shares and, subject to the approval of the stockholders
contemplated by Section 8.3, to issue, sell and deliver the Second Common Shares
and to issue, sell, perform and deliver the Warrant and the Warrant Shares (as
defined in the Warrant). The Corporation is in compliance in all material
respects with all of the terms and provisions of the Corporation's Articles of
Incorporation, as amended (the "Charter"), and the Corporation's By-laws (the
"By-laws").
Section 2.2. Authorization of Agreements, Etc. (a) The execution,
delivery and performance by the Corporation of this Agreement, the Registration
Rights Agreement, the Stockholders Agreement and the Marketing Agreement, and
the issuance, sale, delivery and performance of the First Common Shares and,
assuming the approval of the stockholders contemplated by Section 8.3, the
Second Common Shares, the Warrant and the Warrant Shares, (i) have been duly
authorized by all requisite corporate action, (ii) will not violate (v) any
provision of law, (w) the rules of the Nasdaq Stock Market, (x) any order of any
court or other agency of government, (y) the Charter or the By-laws, or (z) any
provision of any indenture, agreement or other instrument to which the
Corporation or any of its respective properties or assets is bound, (iii) will
not conflict with, result in a breach of or constitute (with due notice or lapse
of time or both) a default under any such order, indenture, agreement or other
instrument, and (iv) will not result in the creation or imposition of any lien,
charge, restriction, claim or encumbrance of any nature whatsoever upon any of
the properties or assets of the Corporation except for such exceptions to
clauses (ii)(z), (iii) and (iv) which, individually and in the aggregate, could
not reasonably be expected to have a material adverse effect on the condition
(financial or otherwise), results of operations or business, prospects or
property of the Corporation and its subsidiaries, taken as a whole (a "Material
Adverse Effect"), and which, individually and in the aggregate, could not
reasonably be expected to have any adverse effect on the rights of Investor
under this Agreement, the Stockholders Agreement, the Registration Rights
Agreement, the Marketing Agreement and the Warrant.
(b) The First Common Shares and, assuming the approval of the
stockholders contemplated by Section 8.3, the Second Common Shares, the Warrant
and the Warrant Shares, have been duly authorized and the Common Shares and the
Warrant Shares, when issued in accordance with this Agreement or the Warrant, as
applicable, will be validly issued, fully paid and nonassessable with no
personal liability attaching to the ownership thereof and will be free and clear
of all liens, charges, restrictions, claims and encumbrances, except as set
forth in the Stockholders Agreement. The issuance, sale and delivery of the
Common Shares, the Warrant and the Warrant Shares are not subject to any
preemptive right of stockholders of the Corporation or to any right of first
refusal or other right in favor of any Person.
-3-
<PAGE>
Section 2.3. Validity. This Agreement has been duly executed and
delivered by the Corporation and, assuming the due authorization, execution and
delivery thereof by Investor, constitutes its legal, valid and binding
obligation, enforceable in accordance with its terms, except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and (ii) rights of acceleration and the
availability of equitable remedies may be limited by equitable principles of
general applicability. Each of the Registration Rights Agreement, the
Stockholders Agreement, the Marketing Agreement and the Warrant, when executed
and delivered in accordance with this Agreement and assuming the due
authorization, execution and delivery thereof by the other parties thereto, will
constitute a legal, valid and binding obligation of the Corporation, enforceable
in accordance with their respective terms, except as (i) the enforceability
thereof may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and (ii) rights of acceleration and the availability
of equitable remedies may be limited by equitable principles of general
applicability.
Section 2.4. Authorized Capital Stock. (a) The authorized capital
stock of the Corporation consists of 37,500,000 shares of Common Stock and
10,000,000 shares of Preferred Stock, par value $.001 per share, of which
5,250,000 shares have been designated Series A 9% Convertible Preferred Stock
(the "Series A Preferred Stock"). On October 30, 1998, 7,756,006 shares of
Common Stock and 5,000,000 shares of Series A Preferred Stock will be validly
issued and outstanding, fully paid and nonassessable with no personal liability
attaching to the ownership thereof. The Series A Preferred Stock is the only
series of Preferred Stock of the Corporation issued and outstanding. The
designations, powers, preferences, rights, qualifications, limitations and
restrictions in respect of each class and series of authorized capital stock of
the Corporation are as set forth in the Charter and the Certificate of
Designation of the Series A Preferred Stock and amendments thereto (the
"Certificate of Designation"), and all such designations, powers, preferences,
rights, qualifications, limitations and restrictions are valid, binding and
enforceable and in accordance with all applicable laws. Except as set forth in
the Charter, Certificate of Designation or SEC Documents (as defined herein),
(i) no subscription, warrant, option, convertible security, or other right
(contingent or otherwise) to purchase or otherwise acquire equity securities of
the Corporation from the Corporation or any of its subsidiaries is authorized or
outstanding and (ii) there is no commitment by the Corporation to issue shares,
subscriptions, warrants, options, convertible securities, or other such rights
or to distribute to holders of any of its equity securities any evidence of
indebtedness or asset. Except as provided for in the Charter or the Certificate
of Designation or as set forth in the SEC Documents, the Corporation has no
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of its equity securities or any interest therein or to pay any dividend or
make any other distribution in respect thereof. The Corporation does not know of
any voting trusts or agreements, stockholders agreements, pledge agreements,
buy-sell agreements, rights of first refusal, preemptive rights or proxies
relating to any securities of the Corporation or any of its subsidiaries
(whether or not any of them is a party thereto), except for this Agreement and
the Stockholders Agreement. All of the outstanding securities of the Corporation
have been issued in compliance in all material respects
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with all applicable Federal and state securities laws. Except for the
Registration Rights Agreement, or as set forth in the SEC Documents or as set
forth in Schedule 2.4 hereof, there are no agreements or understandings granting
to any Person any right to cause the Corporation to effect the registration
under the Securities Act of 1933, as amended (the "Securities Act"), of any
shares of its capital stock.
(b) The Corporation has reserved, and at all times from and after the
date hereof will keep reserved, free from preemptive rights, out of its
authorized but unissued shares of Common Stock, solely for the purpose of
effecting the exercise of the Warrant, sufficient shares of Common Stock to
provide for the full exercise of the Warrant. The foregoing reservation of
shares of Common Stock shall at all times assume that the Warrant will be
exercisable into the maximum number of shares of Common Stock issuable upon such
exercise.
Section 2.5. SEC Documents. Except as set forth in Schedule 2.5(a)
hereof, the Corporation has filed all documents required to be filed by it with
the Securities and Exchange Commission (the "SEC") since January 1, 1996. As of
their respective dates, all documents filed by the Corporation with the SEC
since January 1, 1996 (the "SEC Documents") complied in all material respects
with the requirements of the Securities Act or the Exchange Act, as the case may
be, and none of the SEC Documents included an untrue statement of a material
fact or omitted to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The consolidated financial statements of the Corporation
included in the SEC Documents complied as to form in all material respects with
the applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles (except, in the case of the unaudited statements,
as permitted by Form 10-QSB of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated therein or in the notes thereto)
and fairly present the consolidated financial position of the Corporation and
its consolidated subsidiaries as of the respective dates thereof and the
consolidated results of their operations and their consolidated cash flows for
the respective periods then ended (subject, in the case of the unaudited
statements, to normal year-end audit adjustments and to any other adjustments
described therein). Except as set forth in the SEC Documents and Schedule 2.5(b)
hereof, since January 1, 1998, (i) there has been no change in the assets,
liabilities or financial condition of the Corporation, except for changes in the
ordinary course of business which individually or in the aggregate have not been
materially adverse, and (ii) the condition (financial or otherwise), results of
operations or business, prospects or property of the Corporation has not been
materially adversely affected by any occurrence, state of facts or development,
individually or in the aggregate, whether or not insured against.
Section 2.6. Events Subsequent to January 1, 1998. Except as set
forth in the SEC Documents and in Schedule 2.6, since January 1, 1998, the
Corporation has not (i) issued any stock, bond or other security (except shares
issued in connection with the exercise of
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employee stock options), (ii) borrowed any amount or incurred or become subject
to any liability (absolute, accrued or contingent), except current liabilities
incurred in the ordinary course of business and liabilities under contracts
entered into in the ordinary course of business, (iii) declared or made any
payment or distribution to equity holders or purchased or redeemed any share of
its capital stock or other security, (iv) mortgaged, pledged or subjected to
lien any of its assets, tangible or intangible, other than liens for current
taxes not yet due and payable, except for mortgages, pledges or liens that do
not exceed $50,000 in the aggregate, (v) sold, assigned or transferred any of
its assets except in the ordinary course of business, or canceled any debt or
claim, (vi) suffered any material loss of property or waived any right of
substantial value whether or not in the ordinary course of business, (vii) made
any material change to the Corporation's employee benefit plans, (viii) made any
change in the Corporation's accounting principles and practices, (ix) made any
material change in the manner of business or operations, (x) entered into any
material transaction except in the ordinary course of business or as otherwise
contemplated hereby or (xi) entered into any commitment (contingent or
otherwise) to do any of the foregoing.
Section 2.7. Litigation; Compliance with Law. Except as set forth in
the SEC Documents and in Schedule 2.7, there is no (i) action, suit, claim,
proceeding or investigation pending or, to the knowledge of the Corporation,
threatened against the Corporation or its assets, at law or in equity, or before
or by any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, (ii)
arbitration proceeding relating to the Corporation or (iii) governmental inquiry
pending or, to the knowledge of the Corporation, threatened against or affecting
the Corporation (including, without limitation, any inquiry as to the
qualification of the Corporation to hold or receive any license or permit), and
there is no basis for any of the foregoing which, in each case, could reasonably
be expected to have a Material Adverse Effect. The Corporation is not in default
with respect to any order, writ, injunction or decree known to or served upon
the Corporation of any court or of any Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign. There is no action or suit by the Corporation pending or
threatened against others. The Corporation has complied with all laws, rules,
regulations and orders applicable to its business, operations, properties,
assets, products and services, except for such failures to comply which,
individually and in the aggregate, would not have a Material Adverse Effect, and
the Corporation has all necessary permits, licenses and other authorizations
required to conduct its business in all material respects as conducted. To the
knowledge of the Corporation, there is no existing rule, regulation or order,
whether Federal or state, which would prohibit or restrict the Corporation from,
or otherwise materially adversely affect the Corporation in, conducting its
business in any jurisdiction in which it is now conducting business or in which
it proposes to conduct business.
Section 2.8. Proprietary Information of Third Parties; Intellectual
Property. (a) No third party has claimed in writing or, to the knowledge of the
Corporation, has a valid basis to claim that any Person employed by or
affiliated with the Corporation has (i) violated or is
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violating any of the terms or conditions of such Person's employment, non-
competition or nondisclosure agreement with such third party, (ii) disclosed or
is disclosing or utilized or is utilizing any trade secret or proprietary
information or documentation of such third party or (iii) interfered or is
interfering in the employment relationship between such third party and any of
its present or former employees. No third party has requested in writing
information from the Corporation which could reasonably be interpreted to
suggest that such a claim might be contemplated. To the knowledge of the
Corporation, no Person employed by or affiliated with the Corporation has
employed or proposes to employ, any trade secret or any information or
documentation in violation of the proprietary rights of any former employer,
and, to the knowledge of the Corporation, no Person employed by or affiliated
with the Corporation has violated any confidential relationship which such
Person may have had with any third party, in connection with the development,
manufacture or sale of any product or proposed product or the development or
sale of any service or proposed service of the Corporation and there is no
reason to believe there will be any such employment or violation. To the
knowledge of the Corporation, none of the execution, delivery or performance of
this Agreement, or the carrying on of the business of the Corporation as
officers, employees or agents by any officer, director or key employee of the
Corporation or the conduct or proposed conduct of the business of the
Corporation will conflict with or result in a breach of the terms, conditions or
provisions of or constitute a default under any contract, covenant or instrument
under which any such Person is obligated.
(b) The Corporation owns or possesses all licenses or other rights to
use all patents, patent applications, trademarks, trademark applications,
service marks, service mark applications, Internet domain names, trade names,
software, copyrights, manufacturing processes, formulae, trade secrets and know
how (collectively, "Intellectual Property") necessary to the conduct of its
business as conducted and, to the knowledge of the Corporation, as proposed to
be conducted, and no claim is pending or, to the knowledge of the Corporation,
threatened to the effect that the operations of the Corporation infringe upon,
misappropriate, violate or conflict with the asserted rights of any other Person
under any Intellectual Property. To the knowledge of the Corporation there is
no valid basis for any such claim (whether or not pending or threatened). No
claim is pending or, to the knowledge of the Corporation, threatened to the
effect that any such Intellectual Property owned or licensed by the Corporation,
or which the Corporation otherwise has the right to use, is invalid or
unenforceable by the Corporation, and, to the knowledge of the Corporation,
there is no basis for any such claim (whether or not pending or threatened).
Except as set forth in Schedule 2.8 hereof, the Corporation has not granted or
assigned to any other Person or entity any right to license or sell the software
of the Corporation.
Section 2.9. Title to Properties. The Corporation has good title to
its properties and assets reflected on the balance sheet included in the
Corporation's 10-QSB for the quarter ended June 30, 1998 (the "Balance Sheet")
or acquired since the date of the Balance Sheet (other than properties and
assets disposed of in the ordinary course of business since the date of the
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Balance Sheet), and all such properties and assets of the Corporation are, and
at each of the First Closing and Second Closing will be, free and clear of
mortgages, pledges, security interests, liens, charges, claims, restrictions and
other encumbrances, except for liens for or current taxes not yet due and
payable and minor imperfections of title, if any, not material in nature or
amount and not materially detracting from the value or impairing the use of the
property subject thereto or impairing the operations or proposed operations of
the Corporation.
Section 2.10. Taxes. (i) The Corporation has timely filed all
Federal, state, county, local and foreign tax returns required to be filed by it
except where failures to file such tax returns would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Corporation; (ii) all such tax returns are complete and accurate except where
failures of such tax returns to be complete and accurate would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect on
the Corporation; (iii) the Corporation has paid all taxes shown to be due by
such returns as well as all other taxes, assessments and governmental charges
that have become due or payable except where failures to pay such taxes would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Corporation; (iv) the Corporation has withheld and
collected all amounts required to be withheld from amounts owing to employees,
creditors and third parties except where failures to withhold and collect such
taxes would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on the Corporation; (v) adequate reserves have
been established for all taxes accrued but not yet payable except where failures
to establish such reserves would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Corporation;
(vi) no deficiency or adjustment of the Corporation's Federal, state, county,
local or foreign taxes has been asserted or proposed, or is pending or
threatened except where such deficiencies or adjustments did not or would not
reasonably be expected to, individually or in the aggregate, have a Material
Adverse Effect on the Corporation; (vii) there are no tax liens outstanding
against the assets, properties or business of the Corporation other than liens
for current taxes not yet due and payable except where such liens would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Corporation; and (viii) the Corporation has never been a
member of any "affiliated group" for federal income tax purposes, or any similar
group for tax purposes, other than the group of which it is currently a member.
Section 2.11. Status of Contracts. The Corporation and, to the
knowledge of the Corporation, each other party thereto have in all material
respects performed all the obligations required to be performed by them to date,
have received no notice of default and are not in default (with due notice or
lapse of time or both) under any lease, agreement or contract now in effect to
which the Corporation is a party or by which it or its property may be bound nor
is there or is there alleged to be any basis for termination thereof, other than
for such exceptions to the foregoing, which, individually and in the aggregate,
would not have a Material Adverse Effect.
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Section 2.12. Governmental Approvals. Subject to the accuracy of the
representations and warranties of Investor set forth in Section 3.3, no
registration or filing with, or consent or approval of or other action by, any
Federal, state or other governmental agency or instrumentality is or will be
necessary for the valid execution, delivery and performance by the Corporation
of this Agreement, the Registration Rights Agreement, the Stockholders
Agreement, the Marketing Agreement or the issuance, sale and delivery of the
Common Shares, the Warrant and the Warrant Shares, other than filings to be made
with the SEC in connection with the stockholders meeting contemplated by Section
8.3 and with respect to the Registration Rights Agreement, the registration of
the shares covered thereby with the SEC and filings pursuant to state securities
laws provided therein and those filings that may be required under any
applicable state securities laws which filings shall be made in a timely
fashion.
Section 2.13. Disclosure. This Agreement does not contain any untrue
statement of a material fact. The statements, documents, certificates or other
items prepared and supplied by the Corporation with respect to the transactions
contemplated hereby, taken together with the SEC Documents, do not contain any
untrue statement of a material fact or omit any material fact necessary to make
the statements contained therein not misleading.
Section 2.14. Brokers. Except as set forth in Schedule 2.14, the
Corporation has no contract, arrangement or understanding with any broker,
finder or similar agent with respect to the transactions contemplated by this
Agreement for which the Corporation shall have any liability or responsibility.
Section 2.15. Transactions With Affiliates. Except as disclosed in
the SEC Documents and Schedule 2.15, no director, officer, employee or
stockholder owning more than 5% of the outstanding capital stock of the
Corporation, or member of the family of any such Person, or any corporation,
partnership, trust or other entity in which any such Person, or any member of
the family of any such Person, has a substantial interest or is an officer,
director, trustee, partner or holder of more than 5% of the outstanding capital
stock thereof, is a party to any transaction with the Corporation, including any
contract, agreement or other arrangement providing for the employment of,
furnishing of services by, rental of real or personal property from or otherwise
requiring payments to any such Person, if in each case such transaction was
required to be disclosed in such SEC Documents. The Corporation has terminated
its relationship with Sierra Advertising and has no obligation to make any
further payments in excess of $10,000 in the aggregate to, or obtain services
from, Sierra Advertising.
Section 2.16. Employees. To the knowledge of the Corporation, other
than in connection with the closing of the seminar division, no officer or key
employee of the Corporation has advised the Corporation, orally or in writing,
that he or she intends to terminate employment with the Corporation during the
24 months succeeding the date hereof. The Corporation has complied in all
material respects with all applicable laws relating to the employment of labor,
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including provisions relating to wages, hours, equal opportunity and collective
bargaining, and with the Employee Retirement Income Security Act of 1974, as
amended, except for such failures to comply which, individually and in the
aggregate, would not have a Material Adverse Effect.
Section 2.17. Significant Customers and Suppliers. No customer or
supplier which was significant to the Corporation during the last 12 months or
is significant to its projected future results for the next 12 months, has
terminated, materially reduced or threatened to terminate or materially reduce
its purchases from or provision of products or services to it.
ARTICLE III
Representations and Warranties of Investor
------------------------------------------
Investor represents and warrants to the Corporation as follows:
Section 3.1. Organization, Qualifications and Corporate Power.
Investor is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Florida. The Corporation has the
corporate power and authority to execute, deliver and perform this Agreement,
the Registration Rights Agreement, the Stockholders Agreement, and the Marketing
Agreement, and to purchase and receive the Common Shares and the Warrant.
Section 3.2. Authorization of Agreements, Etc. Investor has taken
all corporate action necessary to authorize its execution and delivery of this
Agreement, the Registration Rights Agreement, the Stockholders Agreement and the
Marketing Agreement, its performance of the obligations thereunder, and its
consummation of the transactions contemplated thereby. This Agreement has been
executed and delivered by an authorized representative of Investor in accordance
with such authorization. Assuming the due authorization, execution and delivery
hereof by the Corporation, this Agreement constitutes the legal, valid and
binding obligation of Investor, enforceable in accordance with its terms. Each
of the Registration Rights Agreement, the Stockholders Agreement and the
Marketing Agreement, when executed and delivered in accordance with this
Agreement and assuming the due authorization, execution and delivery thereof by
the other parties thereto, will constitute a legal, valid and binding obligation
of Investor, enforceable in accordance with their respective terms, except as
(i) the enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (ii) rights of
acceleration and the availability of equitable remedies may be limited by
equitable principles of general applicability.
Section 3.3. Investment Representation. Investor is acquiring the
Common Shares and will acquire the Warrant and Warrant Shares for Investor's own
account and not with a view to reselling or distributing such securities in any
transaction which would constitute a "distribution" within the meaning of the
Securities Act. Investor has such knowledge and
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experience in financial and business matters that Investor is capable of
evaluating the merits and risks of the investment in the Common Shares and the
Warrant. Investor understands that the Common Shares and, when issued, the
Warrant and the Warrant Shares have not been registered under the Securities Act
or any applicable state securities laws (collectively, the "Acts") and that the
Corporation is relying upon exemptions from registration under the Acts based in
part on Investor's representations under this Agreement, and that the Common
Shares and, when issued, the Warrant and the Warrant Shares may not be resold
without registration under the Acts or an exemption therefrom. Investor has had
the opportunity to ask questions of, and receive answers from, the Corporation
concerning the terms and conditions of the offering of the Common Shares and the
Warrant and the Warrant Shares and to obtain additional information (including,
without limitation, documents) about the Corporation and it has obtained such
information. Investor is not an entity formed solely to make this investment.
Investor is an "accredited investor" as defined in Rule 501 promulgated under
the Securities Act.
Section 3.4. Brokers and Finders. No Person or entity acting on
behalf or under the authority of Investor is or will be entitled to any
broker's, finder's or similar fee or commission in connection with the
transaction contemplated hereby.
ARTICLE IV
Conditions to First Closing and Second Closing
----------------------------------------------
Section 4.1. Conditions to First Closing by Investor. The obligation
of Investor to purchase the First Common Shares at the First Closing is subject
to the fulfillment to the reasonable satisfaction of Investor at or prior to the
First Closing of each of the following conditions:
(a) Accuracy of Representations and Warranties. The representations
and warranties of the Corporation contained in this Agreement or any agreement,
instrument or certificate delivered pursuant hereto which are qualified as to
materiality shall be true, correct and complete, and those representation and
warranties which are not so qualified shall be true, correct and complete in all
material respects, in each case, on and as of the First Closing Date, and the
Corporation, with respect to the representations and warranties of the
Corporation, shall have delivered to Investor a certificate of the President and
Chief Financial Officer of the Corporation, dated the First Closing Date, to
that effect.
(b) Performance. All covenants, agreements and conditions contained
in this Agreement to be performed or complied with by the Corporation on or
prior to the First Closing Date shall have been performed or complied with in
all material respects and the Corporation shall
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have delivered to Investor a certificate of the President and Chief Financial
Officer of the Corporation, dated the First Closing Date, to that effect.
(c) Qualifications. On or prior to the First Closing Date, all
authorizations, approvals or permits of, or filings with, any governmental
authority that are required prior to the First Closing in connection with the
issuance of the First Common Shares and the consummation of the transactions
contemplated by this Agreement shall have been duly obtained and shall be
effective on and as of the First Closing Date.
(d) Secretary's Certificate. At the First Closing, the Corporation
shall have delivered to Investor copies of the Charter, certified by the
Secretary of State of the State of Nevada, and copies of each of the following,
in each case certified as of the First Closing Date by the Secretary of the
Corporation:
(i) the By-laws;
(ii) resolutions of the Board of Directors of the Corporation,
authorizing and approving, as appropriate, this Agreement and the
transactions contemplated hereby, the execution, issuance, sale and
delivery of the Common Shares and execution, issuance, sale, delivery
and performance of the Warrant, and the execution, delivery and
performance of the Registration Rights Agreement, the Stockholders
Agreement, the Marketing Agreement and the transactions contemplated
hereby and thereby; and
(iii) the signatures and incumbency of the officers of the
Corporation authorized to execute and deliver the documents to which
the Corporation is a party.
(e) Good Standing Certificates. At the First Closing, the
Corporation shall have delivered to Investor a good standing certificate dated
not more than five business days prior to the First Closing Date relating to the
Corporation from the State of Nevada.
(f) Consents. At the First Closing, the Corporation shall have
delivered to Investor copies of all consents and approvals of third parties
required under any licenses or agreements or otherwise in connection with the
execution, delivery or performance by the Corporation of this Agreement or any
of the other agreements or documents contemplated hereby.
(g) Registration Rights Agreement. At the First Closing, the
Corporation shall have executed and delivered to Investor the Registration
Rights Agreement.
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(h) Stockholders Agreement. At the First Closing, the Corporation
and the other parties thereto (other than Investor) shall have executed and
delivered to Investor the Stockholders Agreement.
(i) Marketing Agreement. At the First Closing, the Corporation shall
have executed and delivered to Investor the Marketing Agreement.
(j) Legal Opinion. At the First Closing, Latham & Watkins shall have
delivered to Investor an opinion, dated the First Closing Date, addressed to the
Investor and in the form attached hereto as Exhibit E.
(k) Additional Documents. Investor shall have received such other
documents, instruments, approvals or opinions as Investor may reasonably
request.
Section 4.2. Conditions to First Closing by the Corporation. The
obligation of the Corporation to issue the First Common Shares at the First
Closing is subject to the fulfillment to the reasonable satisfaction of
Corporation at or prior to the First Closing of each of the following
conditions:
(a) Stockholders Agreement. At the First Closing, the Investor shall
have executed and delivered to the Corporation the Stockholders Agreement.
(b) Marketing Agreement. At the First Closing, the Investor shall
have executed and delivered to the Corporation the Marketing Agreement.
Section 4.3. Conditions to Second Closing by Investor. The
obligation of Investor to purchase the Second Common Shares at the Second
Closing is subject to the fulfillment to the reasonable satisfaction of Investor
at or prior to the Second Closing of each of the following conditions:
(a) Accuracy of Representations and Warranties. The representations
and warranties of the Corporation contained in this Agreement or any agreement,
instrument or certificate delivered pursuant hereto which are qualified as to
materiality shall be true, correct and complete, and those representation and
warranties which are not so qualified shall be true, correct and complete in all
material respects, in each case, on and as of the Second Closing Date, and the
Corporation, with respect to the representations and warranties of the
Corporation, shall have delivered to Investor a certificate of the President
and Chief Financial Officer of the Corporation, dated the Second Closing Date,
to that effect.
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(b) Stockholder Approval. The issuance of the Second Common Shares,
the Warrant and the Warrant Shares shall have been approved by the requisite
vote of stockholders of the Corporation in accordance with the applicable Nasdaq
Marketplace Rules.
(c) Performance. All covenants, agreements and conditions contained
in this Agreement to be performed or complied with by the Corporation on or
prior to the Second Closing Date shall have been performed or complied with in
all material respects and the Corporation shall have delivered to Investor a
certificate of the President and Chief Financial Officer of the Corporation,
dated the Second Closing Date, to that effect.
(d) Qualifications. On or prior to the Second Closing Date, all
authorizations, approvals or permits of, or filings with, any governmental
authority that are required prior to the Second Closing in connection with the
issuance of the Second Common Shares and the consummation of the transactions
contemplated by this Agreement shall have been duly obtained and shall be
effective on and as of the Second Closing Date.
(e) Secretary's Certificate. At the Second Closing, the Corporation
shall have delivered to Investor copies of the Charter, certified by the
Secretary of State of the State of Nevada, and copies of each of the following,
in each case certified as of the Second Closing Date by the Secretary of the
Corporation:
(i) the By-laws;
(ii) resolutions of the Board of Directors of the Corporation,
authorizing and approving, as appropriate, this Agreement and the
transactions contemplated hereby and the execution, issuance, sale and
delivery of the Second Common Shares; and
(iii) the signatures and incumbency of the officers of the
Corporation authorized to execute and deliver the documents to which
the Corporation is a party.
(f) Good Standing Certificates. At the Second Closing, the
Corporation shall have delivered to Investor a good standing certificate dated
not more than five business days prior to the Second Closing Date relating to
the Corporation from the State of Nevada.
(g) Consents. At the Second Closing, the Corporation shall have
delivered to Investor copies of all consents and approvals of third parties
required under any licenses or agreements or otherwise in connection with the
execution, delivery or performance by the Corporation of this Agreement or any
of the other agreements or documents contemplated hereby.
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(h) Legal Opinion. At the Second Closing, Latham & Watkins shall
have delivered to Investor an opinion, dated the Second Closing Date, addressed
to the Investor and in the form attached hereto as Exhibit E.
(i) Additional Documents. Investor shall have received such other
documents, instruments, approvals or opinions as Investor may reasonably
request.
Section 4.4. Conditions to Second Closing by the Corporation. The
obligation of the Corporation to issue the Second Common Shares at the Second
Closing is subject to the fulfillment to the reasonable satisfaction of
Corporation at or prior to the Second Closing of the following condition:
(a) Stockholder Approval. The issuance of the Second Common Shares,
the Warrant and the Warrant Shares shall have been approved by the requisite
vote of stockholders of the Corporation in accordance with the applicable Nasdaq
Marketplace Rules.
ARTICLE V
Reporting and Inspection
------------------------
The Corporation hereby covenants and agrees:
5.1. Confidential Information. Each party hereto agrees that it will
keep (and will cause each of its affiliates and its and their respective
directors, officers, employees, representatives, agents, advisors, consultants,
counsel, external or internal auditors and independent contractors to whom
disclosure may be made in connection with the negotiation and performance of
this Agreement or any agreement entered into in connection with this Agreement
to keep) in confidence all documents, materials and other information which it
shall have obtained or will obtain regarding the other parties during the course
of the negotiations leading to the execution of this Agreement (whether obtained
before or after the date of this Agreement) or at any time at which Investor or
any of its affiliates own Common Stock. Such documents, information and
materials shall not be communicated to any third person (other than counsel,
accountants or financial advisors of Investor, the Corporation, employees of
Investor and the Corporation and their affiliates who have a need to know and
any Alliance that has agreed to bound by the provision of this Section 5.1).
Investor shall not use such documents, materials and other information in any
manner competitive with the Corporation. The obligation of each party to treat
such documents, materials and other information in confidence shall not apply to
any information which (i) is or becomes available to such party from a source
other than another party, which source was not itself known to such party after
due inquiry to be bound by a
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confidentiality agreement and was not known by such party after due inquiry to
have received such information, directly or indirectly, from a person or entity
so bound, (ii) is or becomes available to the public other than as a result of
disclosure by such party or its agents, (iii) is required to be disclosed under
applicable requirements of law or judicial or administrative process, but only
to the extent it must be disclosed or (iv) such party reasonably deems necessary
to disclose in connection with any judicial or arbitral proceeding to enforce
any rights of such party under this Agreement or any agreement entered into in
connection herewith or otherwise relating to the transactions contemplated
hereby or thereby, but subject to cooperation with the other party to maintain
the confidentiality of such disclosed information.
Section 5.2. Certain Information. The Corporation will provide to
Investor by telephone communication to a representative of Investor designated
for this purpose (or, at the election of the Corporation, in writing):
(a) promptly upon the occurrence thereof, notice of any material
disputes with any significant customer or supplier or the occurrence of any
other event which has had, or could reasonably be expected to have, a
Material Adverse Effect;
(b) promptly upon the Corporation's receipt of written notice
thereof, written notice of (i) any material pending litigation affecting
the Corporation or any of its subsidiaries, whether or not the claim is
considered by the Corporation to be covered by insurance, and (ii) any
material pending administrative or arbitration proceeding or investigation,
or the receipt by the Corporation or any of its subsidiaries of any
material notice or order from any regulatory body or agency having
jurisdiction over the Corporation or any of its subsidiaries;
(c) promptly upon the Corporation obtaining knowledge thereof,
notice of (i) any change in the business or affairs of the Corporation or
any of its subsidiaries which has had, or could have, a Material Adverse
Effect; (ii) any breach of any of its covenants, representations or
warranties set forth in this Agreement; and (iii) a default by the
Corporation or any of its subsidiaries under any note, indenture, loan
agreement, mortgage, lease, deed or other material agreement to which the
Corporation or such subsidiary is a party or by which the Corporation or
any such subsidiary is bound, which default constitutes a payment default
or a default that entitles, or with notice or lapse of time or both would
entitle, the holder of such note, indenture, loan agreement, mortgage,
lease, deed or other agreement to accelerate the payment or other
obligations of the Corporation or such subsidiary thereunder provided such
acceleration would constitute a Material Adverse Effect; and
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(d) with reasonable promptness, such other data, reports and
information as from time to time Investor may reasonably request and such
data, press releases, reports and information as the Corporation or any of
its subsidiaries may from time to time furnish to holders of its
securities.
ARTICLE VI
Additional Covenants
--------------------
Section 6.1. Directors' Expenses. The Corporation shall reimburse
each of its directors for the reasonable out-of-pocket expenses incurred by such
director in attending meetings of the Board of Directors or any committee
thereof and for otherwise fulfilling his fiduciary obligations as a director of
the Corporation.
Section 6.2. Directors' Meetings. The Corporation shall use its
reasonable best efforts to cause meetings of its Board of Directors periodically
but not less often than quarterly.
Section 6.3. Indemnification. (a) The Corporation shall indemnify,
defend and hold Investor and its directors, officers, employees, affiliates and
agents (collectively, the "Indemnified Persons") harmless from and against and
in respect of any and all claims, demands, losses, costs, expenses, obligations,
liabilities, damages, recoveries and deficiencies, including, without
limitation, interest, penalties, court costs and attorneys' fees (collectively,
"Losses"), that any Indemnified Person shall incur or suffer, which arise,
result from, or relate to (i) any breach or alleged breach of, or failure or
alleged failure by the Corporation to perform, any of its representations,
warranties, covenants or agreements in this Agreement the Warrant, the
Registration Rights Agreement, the Stockholders Agreement, or in any other
agreement or any schedule, certificate, exhibit or instrument furnished or to be
furnished by the Corporation hereunder or thereunder (other than the Marketing
Agreement), or (ii) any claim, litigation, investigation or proceeding (whether
or not such Indemnified Person is a party thereto) relating to the performance
of this Agreement or any instrument, document or agreement executed or delivered
in connection herewith (other than the Marketing Agreement); provided, however,
that the indemnity under clause (ii) of this Section 6.3(a) shall not apply to
any such Losses finally determined by a court of competent jurisdiction to have
arisen from the recklessness or willful misconduct of such Indemnified Person.
If the Corporation breaches any representation and warranty contained in Section
2.8 based upon the Corporation's infringement upon, misappropriation, violation
or conflict with a third party's Intellectual Property, which Intellectual
Property is used in the performance of the Corporation's obligations under the
Marketing Agreement, the Indemnified Person shall have the right to require the
Corporation to either (i) promptly license the right to use such Intellectual
Property or (ii) promptly create Intellectual Property with substantially the
same functionality.
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(b) If any indemnifiable claim by a third party is made against any
Indemnified Person, such Indemnified Person shall promptly provide written
notice to the Corporation of such claim; provided that the failure to give such
notice shall not affect any rights of such Indemnified Person hereunder except
to the extent the Corporation is materially prejudiced by such failure to give
notice. By delivering written notice to such Indemnified Person within 15 days
after receipt of such Indemnified Person's notice, the Corporation may, or upon
written request of such Indemnified Person shall, assume the defense of such
claim at its sole expense through counsel reasonably satisfactory to such
Indemnified Person, provided that (i) the Corporation shall not permit any lien,
encumbrance or other adverse charge upon any asset of such Indemnified Person,
(ii) the Corporation shall permit such Indemnified Person to participate in such
settlement or defense through counsel selected by such Indemnified Person at
such Indemnified Person's expense, and (iii) the Corporation shall agree to
promptly reimburse such Indemnified Person for the full amount of its liability
to the third party claimant provided such liability is indemnifiable under
Section 6.3(a). If the Corporation shall not have employed counsel to defend
such claim or if such Indemnified Person shall have reasonably concluded (with
the written advice of counsel) that the position of such Indemnified Person and
the Corporation may be in conflict, the Corporation shall not have the right to
direct the defense of any such claim on behalf of such Indemnified Person and
the reasonable legal and other expenses incurred by such Indemnified Person
shall be borne by the Corporation. Notwithstanding the foregoing, each
Indemnified Person shall have the right to pay or settle any such claim provided
in such event it shall waive its right to indemnity therefor by the Corporation.
Section 6.4. No Solicitation. From and after the date hereof and
through the date of the stockholders meeting contemplated by Section 8.3, the
Corporation shall not, and shall use its reasonable best efforts to ensure that
any of its directors, officers, employees, attorneys, financial advisors, agents
or other representatives or those of any of its subsidiaries do not, directly or
indirectly, solicit, initiate or encourage any competing offers, investments or
transactions similar to the transactions contemplated hereby, which offers,
investments or transactions would reasonably be considered inconsistent with or
would materially delay the consummation of the transactions contemplated hereby,
nor engage in or continue discussions or negotiations relating to any such
offers, investments or transactions; provided, however, that the Corporation may
engage in discussions or negotiations with, or furnish information concerning
the Corporation and its properties, assets and business to (without, in each
case, directly or indirectly soliciting, initiating or encouraging discussions
or negotiations) any Person if the Board of Directors of the Corporation
reasonably concludes in good faith after consultation with its outside counsel
that the failure to take such action would be inconsistent with the fiduciary
obligations of such Board of Directors under applicable law.
Section 6.5. Use of Proceeds. The Corporation shall use the net
proceeds received by the Corporation from the sale of the Common Shares solely
for activities directly related to (i) the Stuff Site and the Mall Site (as such
terms are defined in the Marketing
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Agreement), (ii) the Corporation's electronic commerce solutions, designed so as
to benefit Investor, and (iii) such other purposes to which the Corporation and
Investor agree in writing.
Section 6.6. Sale of Common Stock. Without limiting the effect of
Section 8.4, Investor shall use reasonable best efforts to ensure that it shall
not transfer any of the Common Shares, the Warrant Shares or the Warrant to any
Person or group which, to the knowledge of Investor, after due inquiry, owns, or
as a result of such transfer would own, more than 5% of the outstanding Voting
Securities or more than 5% of the Total Voting Power (as each is defined below)
of the Corporation; provided that, the foregoing shall not prohibit Investor
from making any transfer to: (i) any Significant Stockholder (as defined in the
Stockholders Agreement) pursuant to the exercise by such Significant Stockholder
of an Option (as defined in the Stockholders Agreement); (ii) any affiliate of
Investor that agrees to be bound by the terms and provisions of Section 6.6,
Article VII and Section 8.4 of this Agreement and the Stockholders Agreement as
though a party to such provisions or agreement, respectively; (iii) any Alliance
that agrees to be bound by the terms and provisions of Section 6.6, Article VII
and Section 8.4 of this Agreement and the Stockholders Agreement as though a
party to such provisions or agreement, respectively; provided, however, that,
subject to Section 3.1(a) of the Stockholders Agreement, such Alliance shall not
be required to bind any of its affiliates to any of the provisions of this
Agreement or the Stockholders Agreement; (iv) at any time after December 31,
1999, an offeror under any tender or exchange offer made pursuant to Section
14(d) of the Securities Exchange Act of 1934, as amended; or (v) at any time on
or before December 31, 1999, an offeror under any tender or exchange offer made
pursuant to Section 14(d) of the Securities Exchange Act of 1934, as amended,
whose tender offer or exchange offer is recommended by the Board of Directors.
Section 6.7. Exchange of Certificates. Upon surrender by any holder
to the Corporation of any certificate or certificates evidencing any securities
(including the Common Shares, the Warrant Shares and the Warrant), the
Corporation at its expense will issue in exchange therefor, and deliver to such
holder, new certificates, as the case may be, in such denomination or
denominations as may be requested by such holder. Upon receipt of evidence
reasonably satisfactory to the Corporation of the loss, theft, destruction or
mutilation of any security issued by it and in case of any such loss, theft or
destruction, upon delivery of an indemnity agreement reasonably satisfactory to
the Corporation, and in the case of any such mutilation, upon surrender and
cancellation of such security, the Corporation at its expense will issue and
deliver to any such holder a new security of like tenor, in lieu of such lost,
stolen, destroyed or mutilated certificate.
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ARTICLE VII
Standstill
----------
Section 7.1. Certain Definitions. For purposes of this Agreement:
(i) the term "beneficially own" (or any similar phrase) has the meaning set
forth in Rule 13d-3 under the Securities Exchange Act of 1934, as amended; (ii)
the term "Voting Securities" shall mean any securities entitled to vote
generally in the election of directors of the Corporation or its successors,
securities convertible or exchangeable into or exchangeable for such securities
and any rights or options to acquire any of the foregoing securities; (iii) the
term "Voting Power" shall mean the power to vote generally in the election of
directors (or Persons serving similar functions) of the Corporation or its
successors; (iv) the term "Total Voting Power" shall mean the total combined
Voting Power of all Voting Securities then outstanding plus the prospective
Voting Power of all Voting Securities issuable upon exercise of any options or
warrants beneficially owned by the Investor or any of its Subsidiaries; (v) the
term "Subsidiary", with respect to any Person, shall mean any corporation or
other entity (a) of which a majority of the securities or other ownership
interests generally having Voting Power to elect a majority of the board of
directors or other individuals performing similar functions are at the time
directly or indirectly owned by such Person or (b) as to which such Person
directly or indirectly has the power to elect or designate such majority of the
board of directors or such other individuals; provided, however, such term shall
not include the Alliances (as defined in the Stockholders Agreement); (vi) the
term "Person" shall mean an individual, a corporation, a limited liability
company, a partnership, an association, a trust or any other entity or
organization; and (vii) "Acquisition Proposal" means any proposed acquisition of
Voting Securities representing more than 20% of the Total Voting Power, whether
by business combination, tender or exchange offer, or otherwise, or the proposed
acquisition of all or substantially all the assets of the Corporation and its
Subsidiaries, taken as a whole. A Person shall not be deemed to beneficially
own securities held in a pension fund controlled by the Person. For the purpose
of calculating the Total Voting Power during the Warrant Term (as defined
below), the Investor shall be deemed to beneficially own the Warrant. For
purposes of this Article VII, the term "Affiliate" shall mean First Data
Corporation and its Subsidiaries.
Section 7.2. Acquisitions. Subject to Section 7.3, from the First
Closing until the earlier of (i) the fifth anniversary of the First Closing or
(ii) the third anniversary of the first date as of which the Investor and its
Subsidiaries beneficially own Voting Securities representing less than 5% of the
Total Voting Power, without the prior approval of a majority of the members of
the Board of Directors of the Corporation who are not employees or officers of
the Corporation or the Investor or any of their Subsidiaries or otherwise
designated by Investor pursuant to the Stockholders Agreement, the Investor will
not, and will cause each of its Subsidiaries and Affiliates (other than
Alliances) not to, acquire any Voting Securities such that, after giving effect
to such acquisition, the sum of (i) the Voting Securities beneficially owned by
Investor, its
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Subsidiaries and its Affiliates (other than Alliances) and (ii) the Voting
Securities owned by any Alliance which have been transferred to such Alliance by
Investor or any of its Affiliates in compliance with Section 3.1(a) of the
Stockholders Agreement represents more than 39.9% of Total Voting Power;
provided, however, that the provisions of this Section 7.2 shall not require the
Investor, any of its Subsidiaries or Affiliates or any Alliance to sell or
otherwise dispose of Voting Securities representing more than 39.9% of Total
Voting Power (such Voting Securities representing Voting Power in excess of
39.9% of Total Voting Power, "Excess Voting Securities") to the extent that such
Voting Securities constitute Excess Voting Securities as a result of a
repurchase or other retirement of Voting Securities by the Corporation or any of
its Subsidiaries or as a result of purchases made by the Investor, its
Subsidiaries and Affiliates or any Alliance during any period in which the
restrictions contained in this Section 7.2 were suspended pursuant to Section
7.3(b) (irrespective of any subsequent reinstatement thereunder).
Section 7.3. Suspension; Termination. (a) In the event that the
Corporation enters into a written agreement pursuant to which an Acquisition
Proposal is to be effected, then the restrictions set forth in Section 7.2 shall
thereupon terminate.
(b) In the event that any Person (other than the Investor or any of
its Subsidiaries or Affiliates or any Person acting on behalf of or in
participation with any of the foregoing) commences a tender or exchange offer
that, if fully consummated, would result in such Person, together with such
Person's Subsidiaries, or any other Person acting on behalf of or in
participation with such Person or its Subsidiaries, becoming the beneficial
owner of Voting Securities representing more than 20% of the Total Voting Power,
then the restrictions set forth in Section 7.2 shall thereupon be suspended (and
during such period of suspension be of no force and effect). If, upon the
expiration of such tender or exchange offer, the Person making such tender or
exchange offer does not acquire an amount of Voting Securities sufficient to
make the provisions of paragraph (c) of this Section 7.3 applicable, then such
restrictions shall thereupon be reinstated, subject to further suspension or
reinstatement in the event of the occurrence of further events described in the
preceding sentence or this sentence, respectively.
(c) In the event that it is publicly announced or the Investor or the
Corporation shall become aware (in which case it shall promptly notify the
other) that any Person (other than the Investor or any of its Subsidiaries or
Affiliates or any Person acting on behalf of or in participation with any of the
foregoing), together with such Person's Subsidiaries, or any other Person acting
on behalf of or in participation with such Person or its Subsidiaries, has
become the beneficial owner of Voting Securities representing more than 20% of
the Total Voting Power, then the restrictions set forth in Section 7.2 shall
thereupon terminate.
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ARTICLE VIII
Warrant
-------
Section 8.1. Issuance of Warrant. As additional consideration for
entering into this Agreement, subject to Section 8.3, the Corporation shall
issue the Warrant to Investor on the terms and subject to the conditions
provided herein.
(a) Certain Definitions. For purposes of this Agreement: (i) "Beta
Test" shall mean the successful testing of the systems and technologies provided
by the Corporation to logistically support the Mall (as defined in the Marketing
Agreement) as reasonably determined by Investor; (ii) "Electronic Commerce
Tools" shall have the meaning set forth in the Marketing Agreement; (iii) "Mall
Tenant" shall have the meaning set forth in the Marketing Agreement; (iv)
"Subscribers" shall mean all Mall Tenants that Investor and any of its
affiliates or Alliances participated in soliciting; and (iv) "Warrant Term"
shall mean the term beginning on the Closing Date and ending on the earlier of
(A) the second anniversary of the date of completion of the Beta Test and (B)
the date of issuance of the Warrant.
(b) If, at any time during the Warrant Term, the Corporation has
either (i) 25,000 Subscribers using Electronic Commerce Tools or (ii) 50,000
Subscribers for any product, then the Investor shall be entitled to issuance of
the Warrant. Within five business days after the number Subscribers shall have
been determined and such determination shall have become final and binding
pursuant to Section 8.2, if the Investor is entitled to issuance of the Warrant
pursuant to the preceding sentence, the Corporation shall deliver the Warrant to
Investor duly executed by the Corporation and registered in the name of
Investor.
(c) At the time of issuance, the Warrant shall entitle the holder
thereof to purchase 5,000,000 shares of Common Stock at an exercise price of
$17.00 per share; provided, however, that if the Warrant had been issued on the
First Closing Date with such terms and prior to the time at which it is actually
issued pursuant to Section 8.1(b) the number of shares of Common Stock covered
by the Warrant, the exercise price per share or the type of securities
deliverable upon exercise of the Warrant would have been adjusted or changed
pursuant to the terms of the Warrant, then the Warrant shall be issued with such
adjusted or changed terms.
Section 8.2. Determination of Subscribers. (a) Not later than 45
days following the end of each calendar quarter during the Warrant Term and at
the end of the Warrant Term, the Corporation shall deliver to Investor a
certificate (each such certificate being referred to as a "Preliminary Report")
setting forth the Corporation's determination, with respect to such quarter (or,
as applicable, as of the final date of the Warrant Term), the number of
Subscribers using the Electronic Commerce Tools and the number of Subscribers
for any product. Such certificate shall
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be accompanied by a system generated report, if available, and such other
documentation reasonably available and necessary to establish the basis for the
calculation thereof.
(b) Following receipt of the Preliminary Report, Investor may review
the same and, within 30 business days after the date of such receipt, may
deliver to the Corporation a certificate setting forth any objections to the
determinations set forth in the Preliminary Report, together with a summary of
the reasons therefor and calculations which, in its view, are necessary to
eliminate such objections. If Investor does not object within such 30 business
day period, the determinations set forth in the Preliminary Report shall be
final and binding on the Corporation and Investor.
(c) If Investor timely objects within such 30-day period, the
Corporation and Investor shall use their respective reasonable best efforts to
resolve within 60 days after such timely objection by written agreement (the
"Agreed Changes") any differences as to the determinations set forth in the
Preliminary Report. If Investor and the Corporation so resolve any such
differences, the determinations set forth in the Preliminary Report, as adjusted
by the Agreed Changes, shall be final and binding on the Corporation and
Investor.
(d) If any objections timely raised by Investor are not resolved by
the Agreed Changes within the 60-day period contemplated in Section 2.7(c), then
the Corporation and Investor shall submit the objections that are then
unresolved to Ernst & Young LLP or any independent accountants of nationally
recognized standing in the United States reasonably satisfactory to Investor and
the Corporation (the "Accounting Firm"). The Accounting Firm shall be directed
by the Corporation and Investor to seek to resolve the unresolved objections as
promptly as reasonably practicable and to deliver written notice to each of the
Corporation and Investor setting forth its resolution of the disputed matters,
and the determinations set forth in the Preliminary Report as adjusted by the
Agreed Changes and such party's resolution of such objections shall be final and
binding on the Corporation and Investor.
(e) The parties hereto shall make available to the Corporation and
Investor, and, if applicable, the Accounting Firm, as the case may be, such
books, records and other information (including work papers) as any of the
foregoing may reasonably request to prepare or review any Preliminary Report or
any matters submitted to the Accounting Firm or system auditor, as the case may
be.
(f) The reasonable fees and expenses of the Accounting Firm shall be
divided equally between the Corporation and Investor.
Section 8.3. Stockholder Meeting; Termination Fee. (a) The
Corporation shall call a meeting of its the stockholders for the purpose of
voting upon approval of the issuance of the Second Common Shares, the Warrant
and the Warrant Shares (the "Share Issuance") to
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Investor pursuant to the terms of this Agreement in accordance with the Nasdaq
Marketplace Rules. Such stockholders meeting shall be held no later than the
later of (a) January 31, 1999 or (b) 45 days after the Corporation has cleared
all comments made by the SEC on the proxy statement (the "Proxy Statement")
filed by the Corporation with the SEC in connection with the vote contemplated
by this Section 8.3 (the "Termination Date"). The Corporation shall, through
its Board of Directors, recommend to the stockholders of the Corporation
approval of issuance of the Warrant and shall not withdraw such recommendation.
(b) The Corporation shall promptly prepare and file with the SEC the
Proxy Statement; provided, however, the Corporation agrees to file a preliminary
copy of the Proxy Statement with the SEC no later than December 11, 1998. The
Corporation shall use its reasonable best efforts to have the Proxy Statement
cleared by the SEC as promptly as practicable after such filing. As promptly as
practicable after all of the SEC's comments on the Proxy Statement have been
cleared, the Corporation shall mail the Proxy Statement to its stockholders.
(c) If the stockholders of the Corporation fail to approve the Share
Issuance prior to the Termination Date, then the Corporation shall pay to
Investor, within five business days after written demand by Investor, the sum of
(i) $1,000,000 and (ii) the Spread Amount (as defined below) by wire transfer of
immediately available funds. "Spread Amount" shall mean the product of (i)
460,000 and (ii) the difference, if positive, between (A) the Closing Price (as
defined in the Warrant) on the last trading day prior to the Termination Date
and (B) $7.00. The Spread Amount shall be equitably adjusted in the event of
any reclassification, stock split or stock dividend with respect to the Common
Stock, any change or conversion of the Common Stock into other securities of the
Corporation or any other dividend or distribution with respect to the Common
Stock prior to the Termination Date. Nothing contained in this Section 8.3(c)
shall be deemed to limit any remedies available to Investor for any breach of
this Agreement by the Corporation which such remedies shall be in addition to
any amounts received by Investor pursuant to this Section 8.3(c); provided,
however, Investor's damages for failure of the stockholders to approve the Share
Issuance shall be limited to the amount provided for in the first sentence of
this Section 8.3(c).
Section 8.4. Non-Transferable Right. During the Warrant Term,
Investor shall not transfer its rights pursuant to this Article VIII other than
to an affiliate of Investor or to an Alliance.
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ARTICLE IX
Miscellaneous
-------------
Section 9.1. Confidentiality. Neither the Corporation nor Investor
shall make, nor allow their respective financial consultants, accountants or
lawyers to make, without the prior written consent of the other, any release to
the press or any other public disclosure concerning this Agreement, the
Registration Rights Agreement, the Stockholders Agreement, the Marketing
Agreement or the transactions contemplated hereby or thereby, except for
disclosures made by the Corporation or Investor to their financial consultants,
accountants or lawyers or such public disclosure as may be required under any
applicable law, regulation or government order.
Section 9.2. Amendments. Except as otherwise expressly provided
herein, the provisions of this Agreement may be amended only by a waiver of any
rights of any such holders.
Section 9.3. Survival of Representations and Warranties. All
representations and warranties contained herein or made in writing by any party
in connection herewith will survive the execution and delivery of this
Agreement, the consummation of any closing, and any investigation made at any
time by or on behalf of Investor.
Section 9.4. Successors and Assigns. Except as otherwise expressly
provided herein, all covenants and agreements contained in this Agreement by or
on behalf of any of the parties hereto will bind and inure to the benefit of the
respective successors and assigns of the parties hereto, whether so expressed or
not. In addition, and whether or not any express assignment has been made, the
provisions of this Agreement which are for the benefit of Investor or holders of
the Common Shares or the Warrant are also for the benefit of, and enforceable
by, any subsequent holders.
Section 9.5. Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
Section 9.6. Descriptive Headings. The descriptive headings of this
Agreement are inserted for convenience of reference only and do not constitute a
part of this Agreement.
Section 9.7. Notices. Any notices required, desired or permitted to
be given hereunder, shall be delivered personally, sent by overnight courier or
mailed, registered or certified mail, return receipt requested, to the following
addresses (or to such other address as each party may specify in a notice given
hereunder) or transmitted by facsimile transmission (with
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such transmission promptly confirmed by writing delivered personally, by
overnight courier or mailed as provided in this Section 9.7) and shall be deemed
to have been received on the day of personal delivery, one business day after
delivery to the overnight courier service, three business days after such
mailing or, in the case of facsimile transmission, when received:
If to Investor:
First Data Merchant Services Corporation
6200 South Quebec Street
Englewood, Colorado 80111
Attention: President
Facsimile: (303) 488-8705
-and-
First Data Merchant Services Corporation
6200 South Quebec Street
Englewood, Colorado 80111
Attention: General Counsel
Facsimile: (303) 889-6566
with a copy in the case of a notice to Investor to:
Sidley & Austin
One First National Plaza
Chicago, IL 60603
Attention: Frederick C. Lowinger, Esq.
Facsimile: (312) 853-7036
If to the Corporation:
iMall, Inc.
233 Wilshire Boulevard
Santa Monica, California 90401
Attention: Richard M. Rosenblatt
Facsimile: (310) 309-4100
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with a copy in the case of a notice to the Corporation to:
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, CA 90071
Attention: Brian G. Cartwright, Esq.
Facsimile: (213) 891-8763
Section 9.8. Governing Law. THE VALIDITY, MEANING AND EFFECT OF THIS
AGREEMENT SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS OF NEW YORK APPLICABLE
TO CONTRACTS MADE AND TO BE PERFORMED IN THAT STATE.
Section 9.9. Final Agreement. This Agreement, together with those
documents which are exhibits hereto, constitute the final agreement of the
parties concerning the matters referred to herein and therein, and supersedes
all prior and contemporaneous agreements and understandings.
Section 9.10. Delays or Omissions. No delay or omission to exercise
any right, power or remedy accruing to any holder of Common Shares or the
Warrant upon any breach or default of the Corporation under this Agreement, the
Common Shares, the Warrant, the Registration Rights Agreement, the Stockholders
Agreement, the Marketing Agreement, the Charter or the By-laws, or any other
agreement contemplated hereby or thereby shall impair any such right, power or
remedy of any such holder nor shall it be construed to be a waiver of any such
breach or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any such holder of any provisions or conditions of this
Agreement, the Common Shares, the Warrant, the Registration Rights Agreement,
the Stockholders Agreement, the Marketing Agreement, the Charter, or the By-laws
must be made in writing and shall be effective only to the extent specifically
set forth in such writing. All remedies, under either this Agreement, the
Common Shares, the Warrant, the Registration Rights Agreement, the Stockholders
Agreement, the Marketing Agreement, the Charter or the By-laws or otherwise
afforded to any holder of Common Shares or Warrant shall be cumulative and not
alternative.
Section 9.11. Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which when so executed and
delivered shall be deemed an original and such counterparts together shall
constitute one instrument.
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Section 9.12. Attorneys' Fees. In the event of any action or suit
based upon or arising out of any actual or alleged breach by any party of any
representation, warranty or agreement in this Agreement, the prevailing party
shall be entitled to recover its reasonable attorneys' fees and expenses of such
action or suit from the other party, in addition to any other relief ordered by
the court.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the 30th day of October, 1998.
iMall, Inc.
/s/ Richard M. Rosenblatt
--------------------------------------
By: Richard M. Rosenblatt
Title: Chairman and Chief Executive Officer
First Data Merchant Services Corporation
/s/ Richard E. Aiello
--------------------------------------
By: Richard E. Aiello
Title: Senior Vice President
<PAGE>
EXHIBIT 2
iMALL, INC.
WARRANT FOR THE PURCHASE OF SHARES OF
COMMON STOCK OF iMALL, INC.
ISSUE DATE ______________ _____, ___
WARRANT NO. W-1 [5,000,000]* WARRANT SHARES
THIS WARRANT AND THE SHARES OF COMMON STOCK PURCHASABLE HEREUNDER HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE
SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION AND MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED OR DISPOSED OF UNLESS REGISTERED OR QUALIFIED UNDER SAID
ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS THE COMPANY HAS RECEIVED AN
OPINION OF COUNSEL THAT SUCH REGISTRATION, QUALIFICATION OR OTHER SUCH ACTIONS
ARE NOT REQUIRED UNDER ANY SUCH LAWS.
FOR VALUE RECEIVED, iMALL, INC., a Nevada corporation (the "Company"),
hereby certifies that First Data Merchant Services Corporation, a Florida
corporation, its successor or permitted assigns (collectively, the "Holder"), is
entitled, subject to the provisions of this Warrant, to purchase from the
Company, at the times specified herein, a number of the fully paid and non-
assessable shares of Common Stock of the Company, par value $.008 per share (the
"Common Stock"), equal to the Warrant Share Amount (as hereinafter defined) at a
purchase price per share equal to the Exercise Price (as hereinafter defined).
SECTION 1. Definitions. (a) The following terms, as used herein,
have the following meanings:
"Affiliate" shall have the meaning given to such term in Rule 12b-2
promulgated under the Securities Exchange Act of 1934, as amended.
"Articles of Incorporation" means the Articles of Incorporation, as
amended, of the Company.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in The City of New York are authorized by law to close.
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* The actual number shall be subject to anti-dilution adjustment as provided in
Section 8.1(c) of the Investment Agreement.
<PAGE>
"Closing Price" on any day means: (1) if the shares of Common Stock
then are listed and traded on a national securities exchange, the closing price
on such day as reported by such national securities exchange on which the shares
of Common Stock are listed and traded; (2) if the shares of Common Stock then
are not listed and traded on any such securities exchange, the last reported
sale price on such day on the National Market of The National Association of
Securities Dealers, Inc. Automated Quotation System ("NASDAQ"); or (3) if the
shares of Common Stock then are not traded on the NASDAQ National Market, the
average of the highest reported bid and the lowest reported asked price on such
day as reported by NASDAQ.
"Common Share Equivalent" means, with respect to any security of the
Company and as of a given date, a number which is, (i) in the case of a share of
Common Stock, one, (ii) in the case of all or a portion of any right, warrant or
other security which may be exercised for a share or shares of Common Stock, the
number of shares of Common Stock receivable upon exercise of such security (or
such portion of such security), and (iii) in the case of any security
convertible or exchangeable into a share or shares of Common Stock, the number
of shares of Common Stock that would be received if such security were converted
or exchanged on such date.
"Common Stock" shall have the meaning set forth in the first paragraph
hereof.
"Company" shall have the meaning set forth in the first paragraph
hereof.
"Convertible Securities" shall have the meaning set forth in Section
7(d).
"Determination Date" shall have the meaning set forth in Section 7(f).
"Exercise Price" means a price per Warrant Share equal to $[17.00]**.
"Expiration Date" means 5:00 p.m., New York City time on October 30,
2003.
"Fair Market Value" as at any date of determination means, as to
shares of the Common Stock, if the Common Stock is publicly traded at such time,
the average of the daily Closing Prices of a share of Common Stock for the ten
(10) consecutive trading days ending on the most recent trading day prior to the
date of determination. If the shares of Common Stock are not publicly traded at
such time, and as to all things other than the Common Stock, Fair Market Value
shall be determined in good faith by an independent nationally recognized
investment banking firm selected by the Company and acceptable to the Holder and
which shall have no other substantial relationship with the Company.
"Holder" shall have the meaning set forth in the first paragraph
hereof.
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** Subject to anti-dilution adjustment as provided in Section 8.1(c) of the
Investment Agreement.
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<PAGE>
"Options" shall have the meaning set forth in Section 7(d).
"Person" means an individual, partnership, corporation, limited
liability company, trust, joint stock company, association, joint venture, or
any other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiary" means, with respect to any Person, any corporation or
other entity of which a majority of the capital stock or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are at the time directly
or indirectly owned by such Person.
"Warrant Share Amount" means [5,000,000 (Five Million)]*** shares of
Common Stock as such number may be adjusted pursuant to Sections 7 and 9.
"Warrant Shares" means the shares of Common Stock deliverable upon
exercise of this Warrant, as adjusted from time to time.
SECTION 2. Exercise of Warrant. (a) Subject to the terms of Section
8, the Holder is entitled to exercise this Warrant in whole or in part at any
time, or from time to time, until the Expiration Date or, if such day is not a
Business Day, then on the next succeeding day that shall be a Business Day. To
exercise this Warrant, the Holder shall deliver to the Company this Warrant,
including the Warrant Exercise Subscription Form forming a part hereof duly
executed by the Holder, together with payment of the applicable Exercise Price.
Upon such delivery and payment, the Holder shall be deemed to be the holder of
record of the number of Warrant Shares equal to the Warrant Share Amount (or, in
the case of a partial exercise of this Warrant, a ratable number of such
shares), notwithstanding that the stock transfer books of the Company shall then
be closed or that certificates representing such shares shall not then be
actually delivered to the Holder.
(b) At the option of the Holder, the Exercise Price may be paid in
cash (including by wire transfer of immediately available funds) or by certified
or official bank check or bank cashier's check payable to the order of the
Company or by any combination of such cash or check. If the Holder requests the
Company to permit a cashless exercise of the Warrant as provided for below in
this paragraph (b) and the Company consents to such cashless exercise, then the
Exercise Price may be paid in whole or in part by reducing the number of shares
of Common Stock issuable to the Holder by a number of shares of Common Stock
that have a Fair Market Value equal to the Exercise Price which otherwise would
have been paid (so that the net number of shares of Common Stock issued in
respect of such exercise shall equal the number of shares of Common
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*** The actual number shall be subject to anti-dilution adjustment as provided
in Section 8.1(c) of the Investment Agreement.
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<PAGE>
Stock that would have been issuable had the Exercise Price been paid entirely in
cash, less a number of shares of Common Stock with a Fair Market Value equal to
the portion of the Exercise Price paid in kind). The Company shall pay any and
all documentary, or similar issue or transfer taxes payable in respect of the
issue or delivery of the Warrant Shares. The Company shall not, however, be
required to pay any transfer tax which may be payable in respect of any transfer
involved in the issue or delivery of Warrants or Warrant Shares (or other
securities or assets) in a name other than that in which the Warrants so
exercised were registered, and no such issue or delivery shall be made unless
and until the person requesting such issue has paid to the Company the amount of
such transfer tax or has established, to the satisfaction of the Company, that
such transfer tax has been paid.
(c) If the Holder exercises this Warrant in part, this Warrant shall
be surrendered by the Holder to the Company and a new Warrant of the same tenor
and for the unexercised number of Warrant Shares shall be executed by the
Company. The Company shall register the new Warrant in the name of the Holder
or in such name or names of its transferee pursuant to Section 6 as may be
directed in writing by the Holder and deliver the new Warrant to the Person or
Persons entitled to receive the same.
(d) Upon surrender of this Warrant in conformity with the foregoing
provisions, the Company shall, subject to the expiration of any applicable
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act, transfer
to the Holder of this Warrant appropriate evidence of ownership of the shares of
Common Stock or other securities or property (including any money) to which the
Holder is entitled, registered or otherwise placed in, or payable to the order
of, the name or names of the Holder or such transferee as may be directed in
writing by the Holder, and shall deliver such evidence of ownership and any
other securities or property (including any money) to the Person or Persons
entitled to receive the same, together with an amount in cash in lieu of any
fraction of a share as provided in Section 5, subject to any required
withholding.
SECTION 3. Restrictive Legend. Each certificate representing shares
of Common Stock issued pursuant to this Warrant, unless at the time of exercise
such shares are registered under the Securities Act, shall bear a legend
substantially in the form of the legend set forth on the first page of this
Warrant.
SECTION 4. Reservation of Shares. The Company hereby agrees that at
all times there shall be reserved for issuance and delivery upon exercise of
this Warrant such number of its authorized but unissued shares of Common Stock
or other securities of the Company from time to time issuable upon exercise of
this Warrant as will be sufficient to permit the exercise in full of this
Warrant. The Company hereby represents and agrees that all such shares shall be
duly authorized and, when issued upon such exercise, shall be validly issued,
fully paid and non-assessable, free and clear of all liens, security interests,
charges and other encumbrances or restrictions on sale and free and clear of all
preemptive or similar rights, except to the extent imposed by or as a result of
the status, act or omission of, the Holder.
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<PAGE>
SECTION 5. Fractional Shares. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this Warrant
and in lieu of delivery of any such fractional share upon any exercise hereof,
the Company shall pay to the Holder an amount in cash equal to such fraction
multiplied by the Fair Market Value thereof; provided, however, that, in the
event that the Company combines or reclassifies the outstanding shares of its
Common Stock into a smaller number of shares, it shall be required to issue
fractional shares to the Holder if the Holder exercises all or any part of this
Warrant, unless the Holder has consented in writing to such reduction and
provided the Company with a written waiver of its right to receive fractional
shares in accordance with this Section 5.
SECTION 6. Transfer, Exchange or Assignment of Warrant. (a) Each
taker and holder of this Warrant by taking or holding the same, consents and
agrees that the registered holder hereof may be treated by the Company and all
other persons dealing with this Warrant as the absolute owner hereof for any
purpose and as the person entitled to exercise the rights represented hereby.
(b) Subject to the terms of the Investment Agreement, dated as of
October 30, 1998, between the Company and First Data Merchant Services
Corporation, the Stockholders Agreement, dated as of October 30, 1998, among the
Company, First Data Merchant Services Corporation, Richard M. Rosenblatt, Mark
R. Comer and Craig R. Pickering, and the requirements of state and federal
securities laws, the Holder shall be entitled, without obtaining the consent of
the Company, to assign and transfer this Warrant, at any time in whole or from
time to time in part, to any Person or Persons; provided, however, that unless
such transfer is pursuant to an effective registration statement under the
Securities Act, as a condition to any such transfer the Company shall be
entitled to receive an opinion of counsel that such transfer is exempt from the
registration and prospectus delivery requirements of the Securities Act and any
applicable qualification requirements of any state securities laws. Purported
transfers in violation hereof shall be void. Subject to the first sentence of
this Section 6(b), upon surrender of this Warrant to the Company, together with
the attached Warrant Assignment Form duly executed, the Company shall, without
charge, execute and deliver a new Warrant in the name of the assignee or
assignees named in such instrument of assignment and, if the Holder's entire
interest is not being assigned, in the name of the Holder and this Warrant shall
promptly be canceled.
(c) Upon receipt by the Company of evidence satisfactory to it (in
the exercise of its reasonable discretion) of the loss, theft, destruction or
mutilation of this Warrant, and (in the case of loss, theft or destruction) of
indemnification or security reasonably required by the Company, and upon
surrender and cancellation of this Warrant, if mutilated, the Company shall
execute and deliver a new Warrant of like tenor and date.
(d) The Company shall pay all expenses, documentary or similar issue
taxes (other than transfer taxes) and other charges payable in connection with
the preparation, issuance and delivery of Warrants hereunder.
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<PAGE>
SECTION 7. Anti-Dilution Provisions. So long as any Warrants are
outstanding, the Warrant Share Amount shall be subject to change or adjustment
as follows:
(a) Common Stock Dividends, Subdivisions, Combinations. In case the
Company shall (i) pay or make a dividend or other distribution to all holders of
its Common Stock in shares of Common Stock, (ii) subdivide or split the
outstanding shares of its Common Stock into a larger number of shares, or (iii)
combine the outstanding shares of its Common Stock into a smaller number of
shares (which in the case of this clause (iii) shall not in any event be done
without the express written approval of Holders of a majority of the outstanding
Warrants, which approval shall not be unreasonably withheld), then in each such
case the Warrant Share Amount shall be adjusted to equal the number of such
shares to which the holder of this Warrant would have been entitled upon the
occurrence of such event had this Warrant been exercised immediately prior to
the happening of such event or, in the case of a stock dividend or other
distribution, prior to the record date for determination of shareholders
entitled thereto. An adjustment made pursuant to this Section 7(a) shall become
effective immediately after the effective date of such event retroactive to the
record date, if any, for such event.
(b) Reorganization or Reclassification. In case of any capital
reorganization or any reclassification or similar transaction affecting the
capital stock of the Company pursuant to a transaction not the subject of
Section 9 below, this Warrant shall thereafter be exercisable for the number of
shares of capital stock or other securities or property receivable upon such
capital reorganization or reclassification of capital stock or other
transaction, as the case may be, by a holder of the number of shares of Common
Stock into which this Warrant was exercisable immediately prior to such capital
reorganization or reclassification of capital stock; and, in any case,
appropriate adjustment (as determined in good faith by the Board of Directors of
the Company) shall be made for the application of the provisions herein set
forth with respect to the rights and interests thereafter of the Holder to the
end that the provisions set forth herein shall thereafter be applicable, as
nearly as reasonably practicable, in relation to any shares of capital stock or
other securities or property thereafter deliverable upon the exercise of this
Warrant. An adjustment made pursuant to this Section 7(b) shall become
effective immediately after the effective date of such event retroactive to the
record date, if any, for such event.
(c) Distributions of Assets or Securities Other than Common Stock.
In case the Company shall, by dividend or otherwise, distribute to all holders
of its Common Stock shares of any class of its capital stock (other than Common
Stock), or other debt or equity securities or evidences of indebtedness of the
Company, or options, rights or warrants to purchase any of such securities, cash
or other assets, then in each such case the Warrant Share Amount shall be
adjusted by multiplying the Warrant Share Amount immediately prior to the date
of such dividend or distribution by a fraction, of which the numerator shall be
the Fair Market Value per share of Common Stock at the record date for
determining shareholders entitled to such dividend or distribution, and of which
the denominator shall be such Fair Market Value per share less the Fair Market
Value of the portion of the securities, cash, other assets or evidences of
indebtedness so distributed applicable to one share of Common Stock. An
adjustment made pursuant to this
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<PAGE>
Section 7(c) shall become effective immediately after the effective date of such
event retroactive to the record date, if any, for such event.
(d) Below Market Issuances of Common Stock and Convertible
Securities. In case the Company shall issue Common Stock (or options, rights or
warrants to purchase shares of Common Stock (collectively, "Options") or other
securities convertible into or exchangeable or exercisable for shares of Common
Stock (such other securities, collectively, "Convertible Securities")) at a
price per share (or having an effective exercise, exchange or conversion price
per share together with the purchase price thereof) less than the Fair Market
Value per share of Common Stock on the date such Common Stock (or Options or
Convertible Securities), is sold or issued (provided that no sale of securities
pursuant to an underwritten public offering shall be deemed to be for less than
Fair Market Value), then in each such case the Warrant Share Amount shall
thereafter be adjusted by multiplying the Warrant Share Amount immediately prior
to the date of issuance of such Common Stock (or Options or Convertible
Securities) by a fraction, the numerator of which shall be (x) the sum of (i)
the number of Common Share Equivalents represented by all securities outstanding
immediately prior to such issuance and (ii) the number of additional Common
Share Equivalents represented by all securities so issued multiplied by (y) the
Fair Market Value of a share of Common Stock immediately prior to the date of
such issuance, and the denominator of which shall be (x) the product of (A) the
Fair Market Value of a share of Common Stock immediately prior to the date of
such issuance and (B) the number of Common Share Equivalents represented by all
securities outstanding immediately prior to such issuance plus (y) the aggregate
consideration received by the Company for the total number of securities so
issued plus, (z) in the case of Options or Convertible Securities, the
additional consideration required to be received by the Company upon the
exercise, exchange or conversion of such securities; provided, however, that no
adjustment shall be required in respect of issuances of Common Stock (or options
to purchase Common Stock) pursuant to stock option or other employee benefit
plans in effect on the date hereof, or approved by the Board of Directors of the
Company after the date hereof. Notwithstanding anything herein to the contrary,
(1) no further adjustment to the Warrant Share Amount shall be made upon the
issuance or sale of Common Stock pursuant to (x) the exercise of any Options or
(y) the conversion or exchange of any Convertible Securities, if in each case
the adjustment in the Warrant Share Amount was made as required hereby upon the
issuance or sale of such Options or Convertible Securities or no adjustment was
required hereby at the time such Option or Convertible Security was issued, and
(2) no adjustment to the Warrant Share Amount shall be made upon the issuance or
sale of Common Stock upon the exercise of any Options existing on the original
issue date hereof, without regard to the exercise price thereof. An adjustment
made pursuant to this Section 7(d) shall become effective immediately after such
Common Stock, Options or Convertible Securities are sold. This Warrant and all
Warrants of like tenor shall be deemed not to be Options or Convertible
Securities.
(e) Below Market Distributions or Issuances of Preferred Stock or
Other Securities. In case the Company shall issue non-convertible and non-
exchangeable preferred stock (or other debt or equity securities or evidences of
indebtedness of the Company (other than
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<PAGE>
Common Stock or Options or Convertible Securities) or options, rights or
warrants to purchase any of such securities) at a price per share (or other
similar unit) less than the Fair Market Value per share (or other similar unit)
of such preferred stock (or other security) on the date such preferred stock (or
other security) is sold (provided that no sale of preferred stock or other
security pursuant to an underwritten public offering shall be deemed to be for
less than its Fair Market Value), then in each such case the Warrant Share
Amount shall thereafter be adjusted by multiplying the Warrant Share Amount
immediately prior to the date of issuance of such preferred stock (or other
security) by a fraction, the numerator of which shall be the product of (i) the
number of Common Share Equivalents represented by all securities outstanding
immediately prior to such issuance and (ii) the Fair Market Value of a share of
Common Stock immediately prior to the date of such issuance, and the denominator
of which shall be (x) the product of (A) the number of Common Share Equivalents
represented by all securities outstanding immediately prior to such issuance and
(B) the Fair Market Value of a share of the Common Stock immediately prior to
the date of such issuance minus (y) the difference between (1) the aggregate
Fair Market Value of such preferred stock (or other security) and (2) the
aggregate consideration received by the Company for such preferred stock (or
other security). An adjustment made pursuant to this Section 7(e) shall become
effective immediately after such preferred stock (or other security) is sold.
(f) Above Market Repurchases of Common Stock. If at any time or from
time to time the Company or any Subsidiary thereof shall repurchase, by self-
tender offer, private purchase or otherwise, any shares of Common Stock (or any
Options or Convertible Securities) at a purchase price in excess of the Fair
Market Value thereof, on the Business Day immediately prior to the earliest of
(i) the date of such repurchase, (ii) the commencement of an offer to
repurchase, or (iii) the public announcement of either (such date being referred
to as the "Determination Date"), the Warrant Share Amount shall be determined by
multiplying the Warrant Share Amount immediately prior to such Determination
Date by a fraction, the numerator of which shall be the product of (1) the
number of Common Share Equivalents represented by all securities outstanding
immediately prior to such Determination Date minus the number of Common Share
Equivalents represented by the securities repurchased or to be purchased by the
Company or any Subsidiary thereof in such repurchase and (2) the Fair Market
Value of a share of Common Stock immediately prior to such Determination Date,
and the denominator of which shall be (x) the product of (A) the number of
Common Share Equivalents represented by all securities outstanding immediately
prior to the Determination Date and (B) the Fair Market Value of a share of
Common Stock immediately prior to such Determination Date minus (y) the sum of
(1) the aggregate consideration paid by the Company in connection with such
repurchase and (2) in the case of Options or Convertible Securities, the
additional consideration required to be received by the Company upon the
exercise, exchange or conversion of such securities.
(g) Above Market Repurchases of Preferred Stock or Other Securities.
If at any time or from time to time the Company or any Subsidiary thereof shall
repurchase, by self-tender offer, private purchase or otherwise, any shares of
non-convertible and non-exchangeable
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<PAGE>
preferred stock (or other debt or equity securities or evidences of indebtedness
of the Company (other than Common Stock or Options or Convertible Securities) or
options, rights or warrants to purchase any of such securities), at a purchase
price in excess of the Fair Market Value thereof, on the Business Day
immediately prior to the Determination Date, the Warrant Share Amount shall be
determined by multiplying the Warrant Share Amount immediately prior to the
Determination Date by a fraction, the numerator of which shall be the product of
(i) the number of Common Share Equivalents represented by all securities
outstanding immediately prior to such Determination Date and (ii) the Fair
Market Value of a share of Common Stock immediately prior to such Determination
Date, and the denominator of which shall be (x) the product of (A) the number of
Common Share Equivalents represented by all securities outstanding immediately
prior to such Determination Date and (B) the Fair Market Value of a share of
Common Stock immediately prior to such Determination Date minus (y) the
difference between (1) the aggregate consideration paid by the Company in
connection with such repurchase and (2) the aggregate Fair Market Value of such
preferred stock (or other security).
(h) Other Dilutive Events. In case any event shall occur as to
which the other provisions of this Section 7 are not strictly applicable but as
to which the failure to make any adjustment would not fairly protect the
purchase rights represented by this Warrant in accordance with the essential
intent and principles hereof, then, upon the written request of the Holder, the
Company shall determine what adjustments, if any, are required to be made to the
Exercise Price and/or the Warrant Share Amount on a basis consistent with the
essential intent and principles established herein as a result of such event in
order to preserve the purchase rights represented by this Warrant, which
determination shall be made in good faith by the Board of Directors of the
Company.
(i) Readjustment of Warrant Share Amount. If (i) the purchase price
provided for in any Option or the additional consideration, if any, payable upon
the conversion or exchange of any Convertible Securities or the rate at which
any Convertible Securities are convertible into or exchangeable for Common Stock
shall change at any time (other than under or by reason of provisions designed
to protect against dilution upon an event which results in a related adjustment
pursuant to this Section 7), or (ii) any Options or Convertible Securities shall
have irrevocably terminated, lapsed or expired, the Warrant Share Amount then in
effect shall forthwith be readjusted (effective only with respect to any
exercise of this Warrant after such readjustment) to the Warrant Share Amount
which would then be in effect had the adjustment made upon the issuance, sale,
distribution or grant of such Options or Convertible Securities been made based
upon such changed purchase price, additional consideration or conversion rate,
as the case may be (in the case of any event referred to in clause (i) of this
paragraph (i)) or had such adjustment not been made (in the case of any event
referred to in clause (ii) of this paragraph i)).
(j) Exercise Price Adjustment. Upon each adjustment of the Warrant
Share Amount pursuant to this Section 7, the Exercise Price shall thereafter be
equal to an adjusted Exercise Price determined (to the nearest cent) by
multiplying the Exercise Price immediately prior to such adjustment by a
fraction, the numerator of which shall be the Warrant Share Amount
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<PAGE>
in effect immediately prior to such adjustment and the denominator of which
shall be the Warrant Share Amount in effect immediately after such adjustment.
(k) Consideration. If any shares of Common Stock, Options or
Convertible Securities shall be issued, sold or distributed for cash, the
consideration received in respect thereof shall be deemed to be the amount
received by the Company therefor, before deduction therefrom of any reasonable,
customary and adequately documented expenses incurred in connection therewith.
If any shares of Common Stock, Options or Convertible Securities shall be
issued, sold or distributed for a consideration other than cash, the amount of
the consideration other than cash received by the Company shall be deemed to be
the Fair Market Value of such consideration, before deduction of any reasonable,
customary and adequately documented expenses incurred in connection therewith.
If any shares of Common Stock, Options or Convertible Securities shall be issued
in connection with any merger in which the Company is the surviving corporation,
the amount of consideration therefor shall be deemed to be the Fair Market Value
of such portion of the assets and business of the non-surviving corporation as
shall be attributable to such Common Stock, Options or Convertible Securities,
as the case may be. If any Options shall be issued in connection with the
issuance and sale of other securities of the Company, together comprising one
integral transaction in which no specific consideration is allocated to such
Options by the parties thereto, such Options shall be deemed to have been issued
without consideration.
(l) No Impairment. The Company will not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company, but will at all
times in good faith assist in the carrying out of all the provisions of this
Section 7 and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights of the Holder against
impairment. Without limiting the generality of the foregoing, the Company will
not increase the par value of any shares of Common Stock receivable on the
exercise of the Warrants above the amount payable therefor on such exercise.
(m) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Warrant Share Amount pursuant to this Section
7, the Company at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to the Holder a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The Company
shall, upon the written request at any time of the Holder, furnish or cause to
be furnished to the Holder a like certificate setting forth (1) such adjustments
and readjustments and (2) the number of shares of Common Stock and the amount,
if any, of other property which at the time would be received upon the exercise
of this Warrant.
(n) Proceedings Prior to Any Action Requiring Adjustment. As a
condition precedent to the taking of any action which would require an
adjustment pursuant to this
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<PAGE>
Section 7, the Company shall take any action which may be necessary, including
obtaining regulatory approvals or exemptions, in order that the Company may
thereafter validly and legally issue as fully paid and nonassessable all shares
of Common Stock which the Holder is entitled to receive upon exercise thereof.
(o) Notice of Adjustment. Upon the record date or effective date, as
the case may be, of any action which requires or might require an adjustment or
readjustment pursuant to this Section 7, the Company shall forthwith file in the
custody of its Secretary or an Assistant Secretary at its principal executive
office and with its stock transfer agent or its warrant agent, if any, an
officers' certificate showing the adjusted Warrant Share Amount determined as
herein provided, setting forth in reasonable detail the facts requiring such
adjustment and the manner of computing such adjustment. Each such officers'
certificate shall be signed by the chairman, president, chief financial officer
or secretary of the Company. Each such officers' certificate shall be made
available at all reasonable times for inspection by the Holder or any Holder of
a Warrant executed and delivered pursuant to Section 6(b) and the Company shall,
forthwith after each such adjustment, mail a copy, by first-class mail, of such
certificate to the Holder or any such Holder.
(p) Payments in Lieu of Adjustment. The Holder shall, at its option,
be entitled to receive, in lieu of the adjustment pursuant to Section 7(c)
otherwise required thereof, on (but not prior to) the date of exercise of the
Warrants, the evidences of indebtedness, other securities, cash, property or
other assets which such Holder would have been entitled to receive if it had
exercised its Warrants for shares of Common Stock immediately prior to the
record date with respect to such distribution. The Holder may exercise its
option under this Section 7(p) by delivering to the Company a written notice of
such exercise simultaneously with its notice of exercise of this Warrant.
SECTION 8. Redemption. (a) Subject to the other provisions of this
Section 8, the Warrant may be redeemed, at the option of the Company, at any
time at a redemption price equal to 0.266 shares of Common Stock (subject to
adjustment as provided in paragraph (f) of this Section 8) per Warrant Share if,
and only if, the Closing Price of a share of Common Stock for at least twenty
(20) out of thirty (30) consecutive trading days ending not more than thirty
(30) calendar days preceding the date on which notice of redemption is first
given to the Holder shall have been at least $25.50 (subject to adjustment as
provided in paragraph (f) of this Section 8; such amount, as so adjusted, being
hereinafter referred to as the "Target Price").
(b) If the Company is entitled to redeem this Warrant pursuant to
paragraph (a) of this Section 8 and desires to effect such redemption, it shall
furnish (in accordance with Section 11) a notice of redemption to the Holder at
least ninety (90) calendar days before the date fixed for redemption.
(c) The notice of redemption shall specify (i) the redemption price,
(ii) the date fixed for redemption, (iii) the place where this Warrant shall be
delivered and the redemption price
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paid and (iv) that the right to exercise the Warrant shall terminate at 5:00
p.m. (New York time) on the Business Day immediately preceding the date fixed
for redemption.
(d) Any right to exercise the Warrant shall terminate at 5:00 p.m.
(New York time) on the Business Day immediately preceding the date fixed for
redemption.
(e) If the Warrant has not been exercised prior to the date fixed for
redemption, then on such date the Company shall deliver or cause to be delivered
to or upon the written order of the Holder the shares of Common Stock
constituting the redemption price. No surrender of this Warrant shall be
required, which on and after the date fixed for redemption shall confer on the
Holder no rights except the right to receive the redemption price.
(f) If the shares of Common Stock are subdivided or combined into a
greater or smaller number of shares of Common Stock by one or more stock
dividends or a stock split or a reverse stock split, the Target Price and the
redemption price per Warrant Share shall be proportionately adjusted to reflect
such event.
(g) If, prior to the termination of exercisability of this Warrant
pursuant to paragraph (d) of this Section, the Holder is not entitled to
exercise all or any portion of this Warrant due to its failure to receive any
third party approval or the existence of any injunction or regulatory restraint
prohibiting such exercise (including, without limitation, any required clearance
under the Hart-Scott-Rodino Antitrust Improvements Act), the date fixed for
redemption shall automatically be deemed to be extended to a date that is the
later of (i) the date fixed for redemption in the notice of redemption and (ii)
the fifteenth business day following the receipt of such approval or the lifting
or elimination of such injunction or restraint. The Holder and the Company
shall use reasonable best efforts to obtain all such approvals and to cause any
such injunctions or restraints to be lifted or eliminated as soon as
practicable.
(h) In the event the Holder exercises this Warrant after receipt of a
notice of redemption sent pursuant to Section 8(b), then the Company shall make
a payment (the "Lost Interest Payment") to compensate the Holder on an after-tax
basis for the loss of the time value of money with respect to the aggregate
income tax payable by the Holder as a result of the exercise of this Warrant
prior to the Expiration Date. The Lost Interest Payment (including, without
limitation, the amount needed to compensate the Holder on an after-tax basis)
shall be calculated based on the following terms and assumptions (as well as any
others upon which the Holder and the Company shall reasonably agree):
(i) it shall be assumed that all income realized by the Holder is
subject to federal, and all applicable state, local and other, taxation at
the highest marginal rates in effect for the taxable year or period during
which the exercise occurs;
(ii) a 7% per annum interest rate (compounded quarterly) shall be
used;
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(iii) the calculation shall be based on the period from and
including the date of exercise of this Warrant through and including the
Expiration Date; and
(iv) the same amount of income would have been recognized if this
Warrant had been exercised on the Expiration Date rather than on the date
of exercise after receipt of a notice of redemption sent pursuant to
Section 8(b).
If, prior to the Expiration Date, the Holder shall sell or otherwise dispose of
(in a taxable transaction) all or a portion of the shares of Common Stock
received upon an exercise after receipt of a notice of redemption sent pursuant
to Section 8(b), then the Holder shall refund to the Company the allocable
portion of the Lost Interest Payment.
SECTION 9. Consolidation, Merger or Sale or Assets. In case of any
consolidation of the Company with, or merger of the Company into, any other
Person, any merger of another Person into the Company (other than a merger which
does not result in any reclassification, conversion, exchange or cancellation of
outstanding shares of Common Stock) or any sale or transfer of all or
substantially all of the assets of the Company to the Person formed by such
consolidation or resulting from such merger or which acquires such assets, as
the case may be, the Holder shall have the right thereafter to exercise this
Warrant for the kind and amount of securities, cash and other property
receivable upon such consolidation, merger, sale or transfer by a holder of the
number of shares of Common Stock for which this Warrant may have been exercised
immediately prior to such consolidation, merger, sale or transfer. Adjustments
for events subsequent to the effective date of such a consolidation, merger,
sale or transfer of assets shall be as nearly equivalent as may be practicable
to the adjustments provided for in this Warrant. In any such event, effective
provisions shall be made in the certificate or articles of incorporation of the
resulting or surviving corporation, in any contract of sale, merger, conveyance,
lease, transfer or otherwise so that the provisions set forth herein for the
protection of the rights of the Holder shall thereafter continue to be
applicable; and any such resulting or surviving corporation shall expressly
assume the obligation to deliver, upon exercise, such securities, cash and other
property. The provisions of this Section 9 shall similarly apply to successive
consolidations, mergers, sales, leases or transfers.
SECTION 10. Notices. Any notice, demand or delivery required or
permitted by this Warrant shall be in writing and shall be given to the Holder
or to the Company, as the case may be, at its address (or facsimile number) set
forth below, or such other address (or facsimile number) as shall have been
furnished to the party giving or making such notice, demand or delivery:
If to the Company: iMall, Inc.
233 Wilshire Boulevard
Santa Monica, California 90401
Attention: Richard M. Rosenblatt
Facsimile: (310) 309-4100
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with a copy to: Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, CA 90071
Attention: Brian G. Cartwright, Esq.
Facsimile: (213) 891-8763
If to the Holder: First Data Merchant Services Corporation
6200 South Quebec Street
Englewood, Colorado 80111
Attention: President
Facsimile: (303) 488-8705
-and-
First Data Merchant Services Corporation
6200 South Quebec Street
Englewood, Colorado 80111
Attention: General Counsel
Facsimile: (303) 889-6566
with a copy to: Sidley & Austin
One First National Plaza
Chicago, IL 60603
Attention: Frederick C. Lowinger, Esq.
Facsimile: (312) 853-7036
Each such notice, demand or delivery shall be effective (i) if given by
telecopy, when such telecopy is transmitted to the telecopy number specified
herein and the intended recipient confirms the receipt of such telecopy, or (ii)
if given by any other means, when received at the address specified herein.
SECTION 11. Rights of the Holder. Prior to the exercise of any
Warrant, the Holder shall not, by virtue hereof, be entitled to any rights of a
stockholder of the Company, including, without limitation, the right to vote, to
receive dividends or other distributions, to exercise any preemptive right or to
receive any notice of meetings of shareholders or any notice of any proceedings
of the Company, except as may be specifically provided for herein.
SECTION 12. Governing Law. This Warrant and all rights arising
hereunder shall be construed and determined in accordance with the internal laws
of the State of Nevada and the performance thereof shall be governed and
enforced in accordance with such laws.
SECTION 13. Amendments; Waivers. Any provision of this Warrant may
be amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case
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of an amendment, by the Holder and the Company, or in the case of a waiver, by
the party against whom the waiver is to be effective. No failure or delay by
either party in exercising any right, power or privilege hereunder shall operate
as a waiver thereof nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. The rights and remedies herein provided shall be cumulative and
not exclusive of any rights or remedies provided by law.
SECTION 14. Interpretation. When a reference is made in this Warrant
to a Section, such reference shall be to a Section of this Warrant unless
otherwise indicated. Whenever the words "include", "includes" or "including" are
used in this Warrant, they shall be deemed to be followed by the words "without
limitation". The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Warrant shall refer to this Warrant as a whole and not
to any particular provision of this Warrant. The definitions contained in this
Warrant are applicable to the singular as well as the plural forms of such terms
and to the masculine as well as to the feminine and neuter genders of such term.
References to a person are also to its permitted successors and assigns and, in
the case of an individual, to his heirs and estate, as applicable. If the
Holder represents more than one Person, then wherever in this Warrant there is
contemplated any authorization, direction or other action by the Holder such
authorization, direction or other action shall be deemed to have been effected
if the holders of Warrants (or portions of this Warrant) covering a majority of
the Warrant Shares approve in writing such authorization, direction or other
action.
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<PAGE>
IN WITNESS WHEREOF, the Company has duly caused this Warrant to be
signed by its duly authorized officer and to be dated as of the date first above
written.
iMALL, INC.
By:___________________________________
Name: Richard M. Rosenblatt
Title: Chairman and Chief Executive Officer
ATTEST:
By:___________________________________
Name: Anthony P. Mazzarella
Title: Executive Vice President, Secretary/Treasurer
and Chief Financial Officer
ACKNOWLEDGED AND AGREED:
FIRST DATA MERCHANT SERVICES CORPORATION
By:_________________________________
Name: Richard E. Aiello
Title: Senior Vice President
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<PAGE>
WARRANT EXERCISE SUBSCRIPTION FORM
(To be executed only upon exercise of the Warrant
after delivery of the Warrant Exercise Notice)
To: iMall, Inc.
The undersigned irrevocably exercises the Warrant for the purchase of
__________ shares (the "Shares") of Common Stock, par value $.008 per share
("Common Stock"), of iMall, Inc. (the "Company") at an exercise price of
$_______ per Share and herewith makes payment of $__________ (such payment being
made in cash or by certified or official bank or bank cashier's check payable to
the order of the Company or by any permitted combination of such cash or check
or, if permitted by the terms of paragraph (b) of Section 2 of the Warrant, by
the reduction of the number of shares of Common Stock that otherwise would be
issued upon this exercise by the number of shares of Common Stock that have a
value equal to such exercise price), all on the terms and conditions specified
in this Warrant, surrenders this Warrant and all right, title and interest
therein to the Company and directs that the Shares deliverable upon the exercise
of this Warrant be registered or placed in the name and at the address specified
below and delivered thereto.
Date: _______ __, ____.
______________________________________
(Name - Please Print)
______________________________________
(Signature of Owner)
______________________________________
(Street Address)
______________________________________
(City) (State) (Zip Code)
<PAGE>
Securities and/or check to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
Any unexercised portion of the Warrant evidenced by the within Warrant to be
issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
<PAGE>
WARRANT ASSIGNMENT FORM
FOR VALUE RECEIVED, _______________________ hereby sells, assigns and transfers
unto _____________________________________________________ (the "Assignee"),
(please type or print in block letters)
________________________________________________________________________________
(insert address)
its right to purchase up to _____ shares of Common Stock represented by this
Warrant and does hereby irrevocably constitute and appoint _____________________
Attorney, to transfer the same on the books of the Company, with full power of
substitution in the premises.
Signature: _____________________________________
<PAGE>
EXHIBIT 3
STOCKHOLDERS AGREEMENT
This Stockholders Agreement (this "Agreement") dated as of October 30,
1998 is made by and among Richard M. Rosenblatt, Mark R. Comer and Craig R.
Pickering (collectively, the "Significant Stockholders"), First Data Merchant
Services Corporation, a Florida corporation ("Investor") (each Significant
Stockholder and Investor and each other person that may become a party hereto as
contemplated hereby are hereinafter collectively referred to as the "Parties"
and individually a "Party"), and iMall, Inc., a Nevada corporation (the
"Corporation").
RECITALS
--------
WHEREAS, the Corporation has authorized capital stock consisting of
37,500,000 shares of Common Stock, and 10,000,000 shares of Preferred Stock,
having the respective rights and powers set forth in the articles of
incorporation of the Corporation (as amended from time to time, the "Charter");
WHEREAS, the Significant Stockholders in the aggregate are, on the
date hereof, the legal and beneficial owners of approximately 58% of the issued
and outstanding shares of Common Stock of the Corporation, none of the issued
and outstanding shares of the Series A Preferred Stock of the Corporation and 7%
of certain rights to purchase Common Stock calculated on a Fully Diluted Basis
(as defined below);
WHEREAS, Investor has agreed to purchase 2,000,000 shares of Common
Stock of the Corporation pursuant to the Investment Agreement dated October 30,
1998 between Investor and the Corporation;
WHEREAS, Investor and the Corporation have entered into a marketing
agreement as of the date hereof; and
WHEREAS, the Parties have agreed, among other things, to make certain
provisions for the management of the Corporation and its subsidiaries, and to
restrict the transfer of their Capital Stock.
NOW, THEREFORE, in consideration of the covenants and agreements made
herein, the Parties and the Corporation agree as follows:
<PAGE>
ARTICLE 1
CERTAIN DEFINED TERMS
---------------------
1.1 Certain Terms. In addition to terms defined elsewhere in this
Agreement, for purposes of this Agreement, except as otherwise set forth herein
or the context otherwise requires, the following terms shall have the following
meanings:
"Affiliate" of a Party means, in the case of a Party who is a natural
person, such Party's spouse, siblings, parents, descendants (including the issue
of such Party or such Party's spouse, including any by adoption), such Party's
estate and any trust entirely for the benefit of any one or more of such Party,
such Party's estate, such Party's spouse, siblings, parents or descendants, and,
with respect to any Party which is not a natural person, any other person which
directly or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with such person.
"Alliance" means any venture (in any form, including in corporate,
partnership or limited liability company form) or contractual alliance now or
hereafter entered into between Investor (or any of its Affiliates) and one or
more third parties for the provision of any Merchant Acquiring Business services
pursuant to an arrangement whereby Investor (or any of its Affiliates) shares
the economic benefits of ownership of merchant contracts through profit sharing,
revenue sharing, a royalty interest or otherwise.
"Board of Directors" means the board of directors of the Corporation.
"Capital Stock" means the Common Stock, the Preferred Stock
(including, without limitation, the Series A Preferred Stock) and any other
class of capital stock of the Corporation that may be outstanding from time to
time.
"Common Stock" means the Common Stock of the Corporation, par value
$.008 per share.
"Common Stock Equivalents" means (without duplication with any other
Common Stock or Common Stock Equivalents) rights, warrants, options (including,
without limitation, employee stock options), convertible securities or
indebtedness, exchangeable securities or indebtedness, or other rights,
exercisable for or convertible or exchangeable into, directly or indirectly,
Common Stock and securities convertible or exchangeable into Common Stock,
whether at the time of issuance or upon the passage of time or the occurrence of
some future event. For purposes of this Agreement, the number of Common Stock
Equivalents shall be (i) in the case of all or a portion of any right, warrant
or other security which may be exercised for a share or shares of Common Stock,
the number of shares of Common Stock receivable upon exercise of such security
(or such portion of such security), and (ii) in the case of any security
convertible or exchangeable into a share or shares of Common Stock, the number
of shares of
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<PAGE>
Common Stock that would be received if such security were converted or exchanged
on such date.
"Fully Diluted Basis" means, at any time, the then outstanding Common
Stock owned by such person plus (without duplication) all shares of Common Stock
issuable, whether at such time or upon the passage of time or the occurrence of
future events, upon the exercise, conversion or exchange of all then outstanding
Common Stock Equivalents owned by such person.
"Fully Diluted Common Stock" means, at any time, the then outstanding
Common Stock of the Corporation plus (without duplication) all shares of Common
Stock issuable, whether at such time or upon the passage of time or the
occurrence of future events, upon the exercise, conversion or exchange of all
then outstanding Common Stock Equivalents.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Investment Agreement" means the Investment Agreement dated as of
October 30, 1998 between the Corporation and the Investor.
"Market Price" means the average of the daily per share closing prices
of a security for the 20 consecutive trading days immediately prior to the date
of determination. The closing price for each day shall be the last sale price
of such security on the national securities exchange on which such security is
listed and principally traded or, if such security is not listed on any national
securities exchange, as reported by The Nasdaq Stock Market, or, if not so
reported by The Nasdaq Stock Market, the average of the high bid and low asked
quotations for such security as reported by the National Quotations Bureau
Incorporated or similar organization, or, if on any such date such security is
not quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in such
security selected in good faith by a majority of the members of the Board of
Directors, excluding therefrom any directors designated by the Transferor (or
any Affiliate thereof).
"Market Sale" means a proposed transfer of shares of Common Stock
pursuant to which the shares are to be sold in the public market at the
prevailing market price so that the price cannot be determined at the time of
the Transferor's Notice. The date of determination for the Market Price shall
be the date of the Transferor's Notice for such Market Sale.
"Merchant Acquiring Business" means a business providing any of the
following services or products to merchants with respect to Transaction Cards
(as hereinafter defined): (i) the authorization and capture of transactions;
(ii) the submission of such transactions for interchange settlement or other
settlement; (iii) the preparation of statements or reports based on such
transactions, chargebacks and other exception items (including by electronic
access); (iv) the provision of customer service or other back office services in
respect of any of such transactions;
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<PAGE>
(v) clearing and settlement services; (vi) enhancements or modifications to any
of the foregoing services; and (vii) new services or products developed in
support of merchants to allow such merchants to remain competitive in the
Transaction Card industry.
"Preferred Stock" means the Preferred Stock of the Corporation, par
value $.001 per share, in such series as may be designated by the Corporation
from time to time.
"SEC" means the Securities and Exchange Commission or any successor
governmental agency.
"Securities Act" means the Securities Act of 1933, as amended.
"Series A Preferred Stock" means the Series A 9% Convertible Preferred
Stock of the Corporation, designated as a series of the Preferred Stock.
.
"Subsidiary" means any corporation or other entity, a majority of
whose capital stock or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions is at the time held by the Corporation or any subsidiary thereof.
"Transaction Card" means (a) a card used for credit or debit
transactions, (b) a private label or retail debit or credit card, (c) a stored
value or other prepayment service card, or (d) an electronic coupon, electronic
benefit card, or signature/security card used in connection with electronic
financial transactions or other similar services.
"Transfer Restricted Equivalents" means any Common Stock Equivalent
other than the Warrant. For purposes of this Agreement, the number of Transfer
Restricted Equivalents shall be (i) in the case of all or a portion of any
right, warrant or other security which may be exercised for a share or shares of
Common Stock, the number of shares of Common Stock receivable upon exercise of
such security (or such portion of such security), and (ii) in the case of any
security convertible or exchangeable into a share or shares of Common Stock, the
number of shares of Common Stock that would be received if such security were
converted or exchanged on such date.
"Voting Stock" means any class of Capital Stock entitled to cast a
vote in the election of directors of the Corporation. For purposes of this
Agreement, the number of shares of Voting Stock outstanding shall be equal to
the total number of votes which any outstanding share of Capital Stock is
entitled to cast in the election of directors.
"Warrant" means the Warrant to be issued to Investor pursuant to the
Investment Agreement.
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<PAGE>
ARTICLE 2
MANAGEMENT OF THE CORPORATION AND CERTAIN ACTIVITIES
----------------------------------------------------
2.1 Board of Directors.
(a) The Parties and the Corporation hereby acknowledge and agree
that, during the term of this Agreement, they shall use their respective
reasonable best efforts to cause the Board of Directors to consist of (i) not
less than seven and (ii) not more than ten members, with the following
composition:
(i) not less than (A) the Agreed Representative Number (as hereinafter
defined) of directors designated in writing by Investor and (B) two
directors who are current or former officers of the Corporation or any of
its Subsidiaries and who are designated by a majority of the members of the
Board of Directors (excluding members who are Affiliates of Investor or
were otherwise designated by Investor); and
(ii) not more than (A) the Agreed Representative Number of directors
who are Affiliates of Investor and (B) two directors who are current or
former officers of the Corporation or any Subsidiary.
The "Agreed Representative Number" shall be equal to the product, rounded to the
nearest whole number, of (A) the total number of members of the Board of
Directors and (B) a fraction with a numerator equal to the number of shares of
Common Stock that Investor, its Affiliates and the Alliances ("Investor Group")
own, on a primary basis, and a denominator equal to the number of shares of
Voting Stock then outstanding; provided, however, that, so long as the Investor
Group owns in the aggregate at least 1,000,000 shares of Common Stock or Common
Stock Equivalents (the "Amount of Owned Equity"), the Agreed Representative
Number shall be not less than one. The Amount of Owned Equity shall be equitably
adjusted in the event of any reclassification, stock split or stock dividend
with respect to the Common Stock, any change or conversion of the Common Stock
into other securities of the Corporation or any dividend or distribution with
respect to the Common Stock. Accordingly, immediately following the Closing of
the Investment Agreement, the Board of Directors shall use its reasonable best
efforts to amend the by-laws of the Corporation, take all necessary actions to
increase the size of the Board of Directors, if necessary, cause two members of
the Board of Directors who are current or former officers to resign and fill any
vacancies created thereby with the Agreed Representative Number of persons
designated in writing by Investor. The Parties and the Corporation thereafter
agree to use their respective reasonable best efforts, including, but not
limited to, the voting of Voting Stock of the Corporation owned by them or as to
which they otherwise possess the power (directly or indirectly) to vote,
required to cause the Board of Directors to at all times include the persons
designated pursuant to Section 2.1(a). Unless otherwise agreed upon in writing
by the Investor and the Corporation, the Corporation agrees that it shall cause
the board of directors of all Subsidiaries of the Corporation to consist of the
same members as of the Board of Directors.
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<PAGE>
For purposes of this Agreement, only shares transferred to Alliances in
accordance with Sections 6.6 and 8.4 of the Investment Agreement and Section
3.1(a) of this Agreement shall be deemed to be owned by any such Alliances.
(b) In the event that any director (a "Withdrawing Director")
designated pursuant to Section 2.1(a)(i) is unable or unwilling to serve, or
once having commenced to serve, is removed or withdraws from the Board of
Directors, such Withdrawing Director's replacement (the "Substitute Director")
on the Board of Directors will be designated by the person entitled to designate
such director pursuant to Section 2.1(a)(i); provided, however, that a director
designated pursuant to Section 2.1(a)(i) may only be removed by the persons
entitled to designate such director pursuant to Section 2.1(a)(i). The
Corporation and each of the Parties agree to use their reasonable best efforts,
including, but not limited to, the voting of Voting Stock of the Corporation, to
cause the election of such Substitute Director as soon as practicable following
such designation.
(c) In the event Investor ceases to be entitled to designate a
director or directors pursuant to this Agreement, the vacancy or vacancies
resulting therefrom shall be filled by the directors or by the stockholders in
the manner provided by applicable law. In the event Investor chooses not to
designate any director or directors, such directorship or directorships shall
not otherwise be filled and the size of the Board of Directors shall be
correspondingly reduced until such time as Investor elects to designate a
director or directors in accordance with this Agreement.
(d) The Corporation and the Parties agree that no action shall be
taken at any meeting of the Board of Directors unless each director shall
receive at least one business day's notice of such meeting or shall waive such
notice. The Corporation and each of the Parties agree to use their reasonable
best efforts, including, but not limited to, the voting of Voting Stock of the
Corporation, to prevent action from being taken without such notice unless such
notice is waived by all of the members of the Board of Directors.
(e) The Corporation and the Parties shall vote to approve and adopt
amendments to the by-laws set forth in Exhibit A attached hereto and to take
such other actions in furtherance of, and to give effect to, the agreements and
provisions set forth in this Agreement and the Investment Agreement, and shall
not vote to repeal or adopt any by-law or amendment to the Charter if such
repeal or adoption is in violation of, or inconsistent with, such agreements or
provisions, or take any other action in violation of, or inconsistent with, such
agreements and provisions.
(f) Upon the request of the person entitled to designate a director
pursuant to Section 2.1(a)(i) to remove a director designated by such person,
the Parties shall vote all of their Voting Stock (and all Voting Stock that they
otherwise possess the power, directly or indirectly, to vote) in favor of the
removal of such director. Except as contemplated by the immediately preceding
sentence, no Party shall vote its Voting Stock (or any Voting Stock that it
otherwise
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<PAGE>
possesses the power, directly or indirectly, to vote) in favor of the removal of
a director nominated pursuant to Section 2.1(a)(i).
(g) Prior to December 31, 1999, Investor shall vote all of its Voting
Stock together with Voting Stock held by any Affiliate of Investor (and all
Voting Stock that it otherwise possesses the power, directly or indirectly, to
vote) in favor of the nominees to the Board of Directors designated by a
majority of the members of the Board of Directors (excluding members who are
Affiliates of Investor or who were designated by Investor pursuant to Section
2.1(a)(i)).
2.2 Other Activities of the Parties; Fiduciary Duties. It is
understood and accepted that the Parties and their Affiliates have interests in
other business ventures which may be in conflict with the activities of the
Corporation and its Subsidiaries and that, subject to applicable law, nothing in
this Agreement shall limit the current or future business activities of the
Parties, whether or not such activities are competitive with those of the
Corporation and its Subsidiaries; provided, however, that the foregoing shall
not limit Investor's obligation under Section 5.1 of the Investment Agreement.
Nothing in this Agreement, express or implied, shall relieve any officer or
director of the Corporation or any of its Subsidiaries, or any Party, of any
fiduciary or other duties or obligations they may have to the Corporation's
stockholders.
2.3 Issuance of the Warrant. Each of the Significant Stockholders
hereby agrees to attend each shareholder meeting of the Corporation, in person
or by proxy, and to vote (or cause to be voted) all shares of Voting Stock,
whether issued heretofore or hereafter, that such Party owns or has the right to
vote, for approval of the issuance of the Second Common Shares (as defined in
the Investment Agreement), the Warrant and the Warrant Shares (as defined in the
Investment Agreement) to Investor. Each of the Significant Stockholders agrees
not to grant any proxies or enter into any voting agreement or arrangement
inconsistent with this Agreement.
2.4 No Adverse Actions. The Corporation will not adopt any
amendment to its Charter or by-laws or enter into or adopt any plans,
agreements, arrangements or understandings which have the effect of materially
impeding, preventing or prohibiting the Investor Group from beneficially owning,
in the aggregate, 39.9% of the outstanding Voting Stock, such percentage to be
calculated by dividing (i) the number of shares of Common Stock beneficially
owned, on a Fully Diluted Basis, by the Investor Group, by (ii) the sum of the
number of outstanding shares of Voting Stock plus the number of Common Stock
Equivalents beneficially owned by the Investor Group. For the purpose of the
preceding sentence only, during the Warrant Term (as defined in the Investment
Agreement), Investor shall be deemed to beneficially own the Warrant. Each of
the Parties agree to use their reasonable best efforts, including, but not
limited to, the voting of Voting Stock of the Corporation, to prevent any such
action from being taken by the Corporation.
-7-
<PAGE>
2.5 Preservation of Corporate Existence and Property. During the
Warrant Term (as defined in the Investment Agreement), the Corporation shall
preserve and maintain its corporate existence and its rights franchises and
privileges.
2.6 Increase in Employee Stock Options. Investor and each
Significant Stockholder agree to vote in favor of a one-time 1,500,000 share
increase in the number of options available under the Corporation's employee
stock option plan.
ARTICLE 3
TRANSFER OF SECURITIES
----------------------
3.1 Transfers. During the term hereof, no Party shall sell, transfer
or otherwise dispose of, hypothecate or otherwise encumber (voluntarily or
involuntarily) (any such sale, transfer, disposition, hypothecation or
encumbrance being referred to as a "transfer") any Common Stock or Transfer
Restricted Equivalents except as expressly permitted in this Section 3.1.
(a) Investor or its permitted assigns may transfer shares of Common
Stock or Transfer Restricted Equivalents and its rights hereunder to any
subsidiary of First Data Corporation or to any Alliance; provided, however,
that Investor shall first deliver to the Corporation the written agreement of
such subsidiary or Alliance to be bound by the terms and provisions of this
Agreement as though a Party; provided, further, that such Alliance shall not be
required to bind any of its Affiliates to any of the provisions of this
Agreement; provided, further, that any such Alliance shall be allowed to
transfer to any of its Affiliates shares of Common Stock and Transfer Restricted
Equivalents received from Investor or its Affiliates, if such Affiliate shall
deliver to the Corporation the written agreement of such Affiliate to vote any
such shares transferred in accordance with the provisions of Section 2.1 of this
Agreement.
(b) A Party may transfer up to 25,000 shares of Common Stock or
Transfer Restricted Equivalents during each calendar quarter, subject to
compliance with the requirements of the Securities Act.
(c) Any Significant Stockholder may transfer Common Stock or Transfer
Restricted Equivalents to any member of such Significant Stockholder's immediate
family (including any spouse, parent grandparent, child or grandchild, whether
by blood, marriage or adoption), any trust or trustee for the benefit of such
person or any entity substantially all of the equity of which is directly or
indirectly owned by the transferor and/or one or more of the foregoing persons;
provided, however, that such Significant Stockholder shall first deliver to the
Corporation a written agreement of such person to be bound by the terms and
provisions of this Agreement as though a Party. Any Significant Stockholder may
also pledge to a lender in connection with a bona fide personal loan one-third
of such Significant Stockholder's Common
-8-
<PAGE>
Stock; provided, however, such Significant Stockholder shall not pledge Common
Stock with a market value in excess of $5,000,000 based on the Market Price of
the Common Stock on the date of such pledge; provided, further, that so long as
any such shares of Common Stock are pledged, such Significant Stockholder shall
own at least twice as many shares of Common Stock as have been pledged.
(d) No Party may transfer any shares of Common Stock or Transfer
Restricted Equivalents except as provided in Section 3.1(a), (b), (c), (d) or
(f). If a Party (the "Transferor") proposes to transfer any shares or Transfer
Restricted Equivalents pursuant to this Section 3.1(d), the Transferor shall
give written notice (the "Transferor's Notice") to the Corporation and the other
Parties (the "Other Parties") that either it proposes to complete a Market Sale
of any or all shares of such Party's Common Stock or it has received a bona fide
written offer to purchase any or all shares of such Party's Common Stock or
Transfer Restricted Equivalents and that such Party desires to transfer any or
all of such shares or Transfer Restricted Equivalents. In the case of a Market
Sale, the Transferor's Notice shall specify the number of shares of Common Stock
to be transferred and the Market Price. In the case of all other proposed
transfers pursuant to Section 3.1(d), the Transferor's Notice shall specify the
proposed transferee thereof, all material terms of the proposed transaction,
including the number of shares of Common Stock or Transfer Restricted
Equivalents to be transferred and the amount and type of consideration to be
received therefor and shall be accompanied by a copy of such bona fide offer.
The shares or Transfer Restricted Equivalents proposed to be transferred as set
forth in the Transferor's Notice (the "Transfer Securities") shall be subject to
the following options:
(i) The Transferor shall offer to sell (the "First Option") all such
Transfer Securities to the Other Parties at the Market Price, in the case
of a Market Sale, and at the same price per Transfer Security as to be paid
by the proposed transferee (or at the cash equivalent as determined
pursuant to this Section 3.1(d)(i)), in all other cases. To the extent the
consideration to be paid by the proposed transferee consists of assets
other than cash, the cash equivalent of such consideration shall be
determined reasonably and in good faith by the Corporation. The cash
equivalent determination required by the preceding sentence, in any
particular instance, shall be made in good faith by the Board of Directors,
excluding therefrom any directors designated by the Transferor or the
proposed transferee (or any Affiliate thereof), who may be counted for
quorum purposes but shall abstain from any such decision, utilizing any
method and/or advisory assistance the Board of Directors deems appropriate,
and the Corporation shall give the Transferor and the Other Parties written
notice of such determination within twenty days after receipt of the
Transferor's Notice. Each Other Party may purchase the number of Transfer
Securities equal to the product of (A) the aggregate number of Transfer
Securities and (B) a fraction with a numerator equal to the number of
shares of Common Stock that such Other Party owns on a Fully Diluted Basis
and a denominator equal to the number of shares of Common Stock owned in
the aggregate, on a Fully Diluted Basis, by the Other Parties.
-9-
<PAGE>
(ii) If any of the Other Parties (A) fails to notify the Transferor
within ten days after (i) receipt of the Transferor's Notice, if the
consideration to be paid by the proposed transferee is solely cash; or (ii)
receipt of notice of the determination by the Board of Directors of the
cash equivalent of the consideration to be paid by the proposed transferee
that it elects to accept the First Option or (B) by written notice rejects
the First Option, in whole or in part, the Transferor shall offer to sell
(the "Second Option") the Transfer Securities not so purchased by the Other
Parties to the Corporation for cash at the same price as the First Option,
and the Transferor shall promptly provide written notice thereof (the
"Second Notice") to the Corporation and the Other Parties. The Second
Option may be accepted by the Corporation by written notice delivered to
the Transferor within the ten days after receipt of the Second Notice.
(iii) If the Corporation (A) fails to notify the Transferor within
ten days after receipt of the Second Notice that it elects to exercise the
Second Option or (B) by written notice rejects the Second Option, in whole
or in part, the Transferor shall offer to sell (the "Third Option") the
Transfer Securities not purchased pursuant to the First Option or the
Second Option for cash at the same price as the First Option to the Other
Parties which exercised the First Option in full, and the Transferor shall
promptly provide written notice thereof (the "Third Notice") to the
Corporation and the Other Parties. Such Other Parties may purchase the
number of Transfer Securities as they shall mutually agree, or, in absence
of such agreement, that number equal to the product of (A) the aggregate
number of Transfer Securities remaining following the First Option and the
Second Option and (B) a fraction with a numerator equal to the number of
shares of Common Stock that such Other Party owns on a Fully Diluted Basis
and a denominator equal to the number of shares of Common Stock owned in
the aggregate, on a Fully Diluted Basis, by each Other Party which elects
to exercise the Third Option, without reference to the number of shares of
Common Stock owned by any Other Party not eligible or declining to exercise
the Third Option. Each Other Party eligible to participate in the Third
Option shall have ten days to provide written notice to the Transferor of
its election to exercise the Third Option.
Unless, through exercise of the First Option, the Second Option or the Third
Option (collectively, the "Options"), all the Transfer Securities proposed to be
transferred in the Transferor's Notice are to be acquired by the Corporation and
Other Parties, the Transferor may transfer any Transfer Securities covered by
the Transferor's Notice which are not purchased by the Corporation or the Other
Parties in the market, in the case of a Market Sale, and to the proposed
transferee upon the terms of such transfer set forth in the Transferor's Notice,
in all other cases; provided, however, that such transfer must occur no later
than 60 days after the date the Transferor's Notice was received by the
Corporation or five days after the expiration or termination of any waiting
period applicable to such transfer pursuant to the HSR Act, whichever is later.
If any of the Options is exercised, the Transferor shall transfer any such
shares or Transfer Restricted Equivalents (free of all liens and encumbrances
except this Agreement) to the respective purchasers thereof within 20 days after
the date such offer is accepted by the Corporation and/or Other Parties, as
applicable,
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<PAGE>
against delivery by the purchasers of the consideration for such shares;
provided, however, that, if the HSR Act is applicable to the Options, such date
shall be extended to the date which is five days after the date the applicable
waiting period expires or is terminated.
(e) Other than transfers pursuant to Section 3.1(b), (c), or (f),
or Market Sales pursuant to Section 3.1(d), no transfers of shares of Common
Stock or Transfer Restricted Equivalents shall be made unless prior to the
consummation thereof, the Party transferring such shares delivers to the
Corporation in form reasonably acceptable to the Corporation a written agreement
of the proposed transferee to become a Party and be bound by the terms hereof.
(f) In the case of any tender or exchange offer made pursuant to
Section 14(d) of the Securities Exchange Act of 1934, as amended, any Party
shall be permitted (i) on or before December 31, 1999, to tender shares of
Common Stock to the offeror if such tender offer or exchange offer is
recommended by the Board of Directors and (ii) after December 31, 1999 to tender
shares of Common Stock to the offeror whether or not the tender or exchange
offer is recommended by the Board of Directors, provided that such Party
complies with Section 3.1(d), as modified as follows:
(i) a Party may transfer its shares or Common Stock Equivalents only
if the Transferor has delivered the Transferor's Notice not later than ten
business days prior to expiration of such tender or exchange offer;
(ii) in an exchange offer, when the Board of Directors is required to
determine the cash equivalent of the consideration being offered, the value
of securities which are publicly traded shall be deemed to be the Market
Price of such securities on the date of the Transferor's Notice and the
Board of Directors shall make such determination within two business days
of receipt of the Transferor's Notice; and
(iii) the time periods during which the Options may be exercised
shall be reduced as follows: the First Option must be exercised within two
business days of receipt of the Transferor's Notice, the Second Option must
be exercised within two business days of receipt of the Second Notice, and
the Third Option must be exercised not later than one business day prior to
the date the tender or exchange offer is to expire.
(g) Transfers pursuant to Sections 3.1(a) and 3.1(b) shall not be
subject to Section 3.1(d). Any purported transfer of Common Stock or Transfer
Restricted Equivalents by a Party which is not permitted by the foregoing
provisions of this Section, or which is in violation of such provisions, shall
be void and of no force and effect whatsoever.
3.2 Certain Events Not Deemed Transfers. In no event shall any of
the following constitute a transfer of shares or Transfer Restricted Equivalents
for purposes of Section 3.1: an exchange, reclassification or other conversion
of shares into any cash, securities or other property pursuant to (i) the terms
of such security providing for exchange or conversion
-11-
<PAGE>
thereof, (ii) a merger, consolidation or recapitalization of the Corporation or
any Subsidiary with any person or entity, or (iii) a sale or transfer by the
Corporation or any Subsidiary of all or substantially all its assets to any
person or entity.
ARTICLE 4
TERMINATION
-----------
4.1 Termination. All provisions of this Agreement shall terminate
(a) in respect of any Party, when such Party (and its Affiliates who acquired
shares of Common Stock from such Party) no longer owns any Common Stock or
Common Stock Equivalents following compliance with Section 3.1; and (b) in any
event, upon the dissolution of the Corporation. The provisions contained in
Article 3 of the Agreement shall terminate (a) if Investor and its Affiliates
own in the aggregate less than 500,000 shares of Common Stock (which number
shall be equitably adjusted in the event of any reclassification, stock split or
stock dividend with respect to the Common Stock, any change or conversion of the
Common Stock into other securities of the Corporation or any dividend or
distribution with respect to the Common Stock) or (b) in any event, on October
30, 2008.
ARTICLE 5
MISCELLANEOUS
-------------
5.1 Amendment. This Agreement shall not be amended, modified or
supplemented except by a written instrument signed by an authorized
representative of the Corporation, Investor and the holders of a majority of
shares of Common Stock owned, on a Fully Diluted Basis, by the Significant
Stockholders.
5.2 Equitable Relief. The Parties and the Corporation recognize that
the obligations imposed on them in this Agreement are special, unique, and of
extraordinary character, and that in the event of breach by any party, damages
will be an insufficient remedy; consequently, it is agreed that the Parties
hereto and the Corporation may have specific performance, injunction, injunctive
or other equitable relief (in addition to damages) as a remedy for the
enforcement hereof, without proving damages.
5.3 Assignment. Except as otherwise expressly provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and permitted assigns of the Parties and
the Corporation. No such assignment shall relieve the assignor from any
liability hereunder. No assignment hereof shall be effective until the Party
making an assignment hereof delivers to the Corporation an executed counterpart
of this
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<PAGE>
Agreement by the transferee or an agreement in writing executed by the
transferee to be bound by the terms hereof to the same extent as if such
transferee was a Party hereto.
5.4 Shares Subject to this Agreement. All shares of Common Stock or
Common Stock Equivalents now owned or hereafter acquired by any of the Parties
shall be subject to the terms of this Agreement.
5.5 Legend. (a) Certificates evidencing shares of Common Stock or
Transfer Restricted Equivalents owned by the Parties shall bear a legend in
substantially the following form:
THIS SECURITY IS SUBJECT TO RESTRICTIONS ON TRANSFER, VOTING
RESTRICTIONS AND OTHER TERMS AND CONDITIONS SET FORTH IN THE
STOCKHOLDERS AGREEMENT, DATED AS OF OCTOBER 30, 1998, AS AMENDED FROM
TIME TO TIME, AND THE INVESTMENT AGREEMENT, DATED OCTOBER 30, 1998, AS
AMENDED FROM TIME TO TIME, A COPY OF EACH OF WHICH MAY BE OBTAINED
FROM THE CORPORATION AT ITS PRINCIPAL EXECUTIVE OFFICES AND MAY NOT BE
SOLD, ASSIGNED, PLEDGED OR OTHERWISE DISPOSED OF WITHOUT COMPLIANCE
WITH THE TERMS AND CONDITIONS OF SUCH AGREEMENTS.
5.6 Notices. Any notice, demand or delivery required or permitted by
this Agreement shall be in writing and shall be given to the specified party at
its address (or facsimile number) set forth below, or such other address (or
facsimile number) as shall have been furnished to the party giving or making
such notice, demand or delivery:
If to the Corporation: iMall, Inc.
233 Wilshire Boulevard
Santa Monica, California 90401
Attention: Richard Rosenblatt
Facsimile: (310) 309-4100
with a copy to: Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, CA 90071
Attention: Brian G. Cartwright, Esq.
Facsimile: (213) 891-8763
If to Investor: First Data Merchant Services Corporation
6200 South Quebec Street
Englewood, Colorado 80111
Attention: President
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<PAGE>
Facsimile: (303) 488-8705
-and-
First Data Merchant Services Corporation
6200 South Quebec Street
Englewood, Colorado 80111
Attention: General Counsel
Facsimile: (303) 889-6566
with copies to: Sidley & Austin
One First National Plaza
Chicago, IL 60603
Attention: Frederick C. Lowinger, Esq.
Facsimile: (312) 853-7036
If to Richard M. Rosenblatt, to: Richard M. Rosenblatt
549 El Medio
Pacific Palisades, California 90272
If to Mark R. Comer, to: Mark R. Comer
1736 North Cherapple Drive
Orem, Utah 84057
If to Craig R. Pickering, to: Craig R. Pickering
1208 E. Hobble Creek Drive
Springville, Utah 84633
5.7 Counterparts. This Agreement may be executed in two or more
counterparts and each counterpart shall be deemed to be an original and which
counterparts together shall constitute one and the same agreement of the parties
hereto.
5.8 Section Headings. Headings contained in this Agreement are
inserted only as a matter of convenience and in no way define, limit or extend
the scope or intent of this Agreement or any provisions hereof.
5.9 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF
THE STATE OF NEVADA, WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS PRINCIPLES
THEREOF.
5.10 Entire Agreement. This Agreement contains the entire
understanding of the parties hereto respecting the subject matter hereof, and
supersedes all prior agreements, discussions and understandings.
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<PAGE>
5.11 Cumulative Rights. The rights of the Parties and the
Corporation under this Agreement are cumulative and in addition to all similar
and other rights of the parties under other agreements, including the Investment
Agreement.
5.12 Severability. Should any particular provision of this Agreement
be adjudicated to be invalid or unenforceable, such provision shall be deemed
deleted and the remainder of the Agreement, nevertheless, shall remain
unaffected and fully enforceable; further, to the extent any provision herewith
is deemed unenforceable by virtue of its scope but may be made enforceable by
limitation thereof, the parties hereto agree the same shall, nevertheless, be
enforceable to the fullest extent permissible.
5.13 No Waiver. No delay on the part of any party hereunder in
exercising any right, power or privilege under this Agreement shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, power or
privilege hereunder or thereunder preclude other or further exercise thereof, or
the exercise of any other right, power of privilege.
5.14 Headings. The headings in this Agreement are intended solely
for convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
5.15 Attorneys Fees. In the event of any action or suit based upon
or arising out of any actual or alleged breach by any party of any
representation, warranty or agreement in this Agreement, the prevailing party
shall be entitled to recover its reasonable attorneys' fees and expenses of such
action or suit from the other party, in addition to any other relief ordered by
the court.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the date first above written.
iMALL, INC.
By: /s/ Richard Rosenblatt
_________________________
Name: Richard Rosenblatt
Title: Chairman and Chief
Executive Officer
FIRST DATA MERCHANT SERVICES CORPORATION
By: /s/ Richard E. Aiello
_________________________
Name: Richard E. Aiello
Title: Senior Vice President
/s/ Richard Rosenblatt
_________________________
Richard Rosenblatt
/s/ Mark R. Comer
_________________________
Mark R. Comer
STATE OF _____________ )
| ss.
COUNTY OF ___________ )
On this 30th day of October, 1998, personally appeared before me Mark
R. Comer, personally known to me or proved to me on the basis of satisfactory
evidence to be the person whose name is signed above, and acknowledged to me
that he signed it voluntarily and for its stated purpose.
_________________________
NOTARY PUBLIC
STAMP
<PAGE>
/s/ Craig R. Pickering
--------------------------
Craig R. Pickering
STATE OF _____________ )
| ss.
COUNTY OF ___________ )
On this __ day of October, 1998, personally appeared before me Craig
R. Pickering, personally known to me or proved to me on the basis of
satisfactory evidence to be the person whose name is signed above, and
acknowledged to me that he signed it voluntarily and for its stated purpose.
_________________________
NOTARY PUBLIC
STAMP
<PAGE>
EXHIBIT 4
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Registration Rights Agreement (this "Agreement") dated as of
October 30, 1998, is made by and between iMall, Inc., a Nevada corporation (the
"Corporation"), and First Data Merchant Services Corporation, a Florida
corporation (the "Investor") .
RECITALS
--------
WHEREAS, the Investor is acquiring, on the date hereof from the
Corporation 1,540,000 shares of the authorized but unissued shares of Common
Stock, $.008 par value per share, of the Corporation (the "Common Stock"), has
agreed to acquire an additional 460,000 shares of Common Stock (the "Second
Closing Shares") and may in the future be issued a warrant (the "Warrant") to
acquire 5,000,000 shares of the Common Stock (subject to adjustment under
certain circumstances), in each case as contemplated by that certain Investment
Agreement dated as of October 30, 1998 (the "Investment Agreement"), between the
Corporation and the Investor, provided that certain registration rights are
granted to the Investor; and
WHEREAS, the Corporation deems it desirable for the Corporation to
grant certain registration rights to the Investor in order to induce the
Investor to consummate the transactions contemplated by the Investment
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Definitions. As used in this Agreement:
(a) "Commission" means the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
(b) "Exchange Registrable Securities" means the securities of the
Corporation that are covered by the Exchange Registration Agreements.
(c) "Exchange Registration Agreements" means the agreement of the
Corporation to register under the Securities Act under certain limited
circumstances the Common Stock of the Corporation contained in the Share
Exchange Agreement between the Corporation and Madison York Associates dated
January 15, 1996, the Share Exchange Agreement between the Corporation and
Cabot, Richards & Reed, Inc. dated January 15, 1996, the Share Exchange
Agreement between the Corporation and R&R Advertising, Inc. dated January 15,
1996, the Share Exchange Agreement between the Corporation and Physicomp
Corporation dated April 26, 1996 (including the Registration Rights Agreement
attached thereto) and the Share Exchange Agreement between the Corporation and
Interactive Marketing Group, Inc. dated March 5, 1996.
<PAGE>
(d) "Other Registrable Securities" means the securities of the
Corporation that are covered by the Other Registration Agreements and any
securities of the Corporation that the Corporation grants "piggyback
registration" rights in the future that have a priority in primary and secondary
registrations comparable to those of the Registrable Shares.
(e) "Other Registration Agreements" means the agreements of the
Corporation to register under the Securities Act certain securities of the
Corporation contained in the Common Stock Purchase Agreements (the "Common Stock
Purchase Agreement"), dated August/September 1997, among the Corporation and
various parties, the Warrants to purchase shares of Common Stock of the
Corporation issued in connection with the Subscription Agreement (as defined
below) and/or related bridge loan as part of the December 1997 private
placement, the Warrants issued in connection with the Common Stock Purchase
Agreement as part of the October 1997 private placement, the Warrant Agreement,
dated December 5, 1997, among the Corporation, Signature Stock Transfer, Inc.
and Commonwealth Associates and the Subscription Agreements (the "Subscription
Agreement") by and among the Corporation and the subscribers identified therein
pursuant to which the Corporation issued Series A 9% Convertible Preferred Stock
and the Warrants issued in December 1997.
(f) "Person" means an individual, partnership, corporation,
limited liability company, trust, joint stock company, association, joint
venture, or any other entity or organization, including a government or
political subdivision or any agency or instrumentality thereof.
(g) "Registrable Shares" means at any time (i) the shares of the
Common Stock being acquired by the Investor on the date hereof from the
Corporation; (ii) the Second Closing Shares; (iii) any shares of the Common
Stock then issued or issuable upon exercise of the Warrant; (iv) any shares of
the Common Stock then outstanding which were issued as, or were issued directly
or indirectly upon the conversion or exercise of other securities issued as, a
dividend or other distribution with respect to or in replacement of other
Registrable Shares; and (v) any shares of the Common Stock then issuable
directly or indirectly upon the conversion or exercise of other securities which
were issued as a dividend or other distribution with respect to or in
replacement of other Registrable Shares; provided, however, that Registrable
Shares shall not include any shares (i) the sale of which has been registered
pursuant to the Securities Act and which shares have been sold pursuant to such
registration or (ii) which have been sold to the public pursuant to Rule 144 of
the Commission under the Securities Act. For purposes of this Agreement, a
Person will be deemed to be a holder of Registrable Shares whenever such Person
has the then existing right to acquire such Registrable Shares (by exercise,
conversion or otherwise), whether or not such acquisition has actually been
effected.
(h) "Registration Expenses" has the meaning ascribed to it in
Section 6 of this Agreement.
(i) "Securities Act" means the Securities Act of 1933, as
amended.
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<PAGE>
(j) "Securities Exchange Act" means the Securities Exchange Act
of 1934, as amended.
(k) "Stockholders Agreement" means the Stockholders Agreement
dated as of the date hereof relating to the Corporation and among Investor and
the other parties named therein as such agreement may be amended from time to
time.
2. Demand Registrations.
(a) Requests for Registration. Investor or the holders of at least 50%
of the then outstanding Registrable Shares at any time may request registration
under the Securities Act of all or part of their Registrable Shares for sale in
the manner specified in such request. Within ten days after receipt of any
request pursuant to this paragraph 2(a), the Corporation will give written
notice of such request to all other holders of Registrable Shares and will
include in such registration all Registrable Shares with respect to which the
Corporation has received written requests for inclusion therein within 15 days
after the receipt of the Corporation's notice. All registrations requested
pursuant to this paragraph 2(a) are referred to herein as "Demand
Registrations."
(b) Number of Demand Registrations. The Corporation shall be obligated
to register Registrable Shares pursuant to a Demand Registration on two
occasions only; provided, however, that a registration will not count as a
Demand Registration until it has become effective and unless the holders of
Registrable Shares requesting such Registration are able to register and sell at
least 90% of the Registrable Shares requested to be included in such
registration; provided, further, that a registration that is withdrawn at the
request of the holders of Registrable Shares who demanded such Demand
Registration will count as a Demand Registration unless the Company is
reimbursed by holders of Registrable Shares for all reasonable out-of-pocket
expenses incurred by the Company in connection with such registration.
(c) Priority on Demand Registrations. If a Demand Registration is an
underwritten public offering, the holders of a majority of the Registrable
Shares to be sold pursuant to such offering may designate the managing
underwriter(s) for such offering, subject to the approval of the Corporation,
which approval may not be unreasonably withheld. If in such an underwritten
public offering the managing underwriter(s) advise the Corporation in writing
that in their opinion the number of Registrable Shares and other securities
requested to be included (x) creates a substantial risk that the price per share
in such registration will be materially and adversely affected or (y) exceeds
the number of Registrable Shares and other securities which can be sold in such
offering, except to the extent the Other Registration Agreements provide
otherwise, the Corporation will include in such registration, prior to the
inclusion of any securities which are not Registrable Shares, the number of
Registrable Shares requested to be included which in the opinion of such
underwriters can be sold, pro rata among the respective holders on the basis of
the number of Registrable Shares owned by such holders, with further successive
pro
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<PAGE>
rata allocations among the holders of Registrable Shares if any such holder of
Registrable Shares has requested the registration of less than all such
Registrable Shares it is entitled to register.
(d) Restrictions on Registrations. The Corporation may postpone for up
to three months the filing or the effectiveness of a registration statement for
a Demand Registration (but no more than once in any twelve-month period or twice
in total) if the Corporation's board of directors determines in good faith that
such Demand Registration is reasonably likely to have a material adverse effect
on any proposal or plan by the Corporation or any of its subsidiaries to engage
in any acquisition of assets (other than in the ordinary course of business) or
any merger, consolidation, tender offer, material financing or similar
transaction. In the event of any such postponement, the holders of Registrable
Shares requesting such Demand Registration will be entitled to withdraw such
request and, if such request is so withdrawn, such Demand Registration will not
count as a Demand Registration.
3. Piggyback Registrations.
(a) Right to Piggyback. Whenever the Corporation proposes to register
any of its securities under the Securities Act (other than a Demand
Registration) and the registration form to be used may be used for the
registration of Registrable Shares (a "Piggyback Registration"), the Corporation
will give prompt written notice to all holders of Registrable Shares of its
intention to effect such a registration (which notice shall be given not less
than 30 days prior to the date the registration statement is to be filed) and
subject to the terms hereof will include in such registration all Registrable
Shares with respect to which the Corporation has received written requests for
inclusion therein within 15 days after the receipt of the Corporation's notice.
Notwithstanding the pendency of any Piggyback Registration, the Corporation
shall have the right in its sole discretion to terminate such registration and
any related offering at any time without any liability to any person pursuant to
this Agreement, it being understood that any Registrable Shares previously
included in such withdrawn registration statement shall not cease to be
Registrable Shares by reason of such inclusion or withdrawals; provided,
however, that if such registration is withdrawn, the Corporation will reimburse
the holders of Registrable Shares requesting inclusion in such registration
statement for all reasonable out-of-pocket expenses incurred by the Company in
connection with such registration.
(b) Priority on Primary Registrations. If a Piggyback Registration is
an underwritten primary registration on behalf of the Corporation, and the
managing underwriter(s) advise the Corporation in writing that in their opinion
the number of securities requested to be included in such registration (i)
creates a substantial risk that the price per share in such registration will be
materially and adversely affected, or (ii) exceeds the number which can be
reasonably sold in such offering, except to the extent the Other Registration
Agreements provide otherwise, the Corporation will include in such registration
(x) first, the securities the Corporation proposes to sell, (y) second, the
Registrable Shares, Other Registrable Securities and Exchange Registrable
Securities requested to be included in such registration which in such opinion
of such underwriter(s) can be sold, pro rata among the holders of such
Registrable Shares, Other
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<PAGE>
Registrable Securities and Exchange Registrable Securities on the basis of the
number of Registrable Shares, Registrable Securities and Exchange Registrable
Securities owned by such holders, with further successive pro rata allocations
among the holders of Registrable Shares, Other Registrable Securities if any
such holder of Registrable Shares, Other Registrable Securities or Exchange
Registrable Securities had requested the registration of less than all such
Registrable Shares, Other Registrable Securities or Exchange Registrable
Securities it is entitled to register, and (z) third, other securities requested
to be included in such registration.
(c) Priority on Secondary Registrations. If a Piggyback Registration
is an underwritten secondary registration on behalf of holders of the
Corporation's securities, and the managing underwriter(s) advise the Corporation
in writing that in their opinion the number of securities requested to be
included in such registration (i) creates a substantial risk that the price per
share in such registration will be materially and adversely affected, or (ii)
exceeds the number which can reasonably be sold in such offering, except to the
extent the Other Registration Agreements provide otherwise, the Corporation will
include in such registration (x) first, the securities requested to be included
therein by the holders requesting such registration, (y) second, the Registrable
Shares and Other Registrable Securities requested to be included in such
registration which in such opinion of such underwriter(s) can be sold, pro rata
among the holders of such Registrable Shares and Other Registrable Securities on
the basis of the number of Registrable Shares and Other Registrable Securities
owned or deemed to be owned by such holders, with further successive pro rata
allocations among the holders of Registrable Shares and Other Registrable
Securities if any such holder of Registrable Shares or Other Registrable
Securities has requested the registration of less than all such Registrable
Shares or Other Registrable Securities it is entitled to register, and (z)
third, other securities requested to be included in such registration.
(d) Other Registrations. Except to the extent the Other Registration
Agreements provide otherwise, if the Corporation has previously received a
request for a Demand Registration pursuant to paragraph 2 or has previously
filed a registration statement with respect to Registrable Securities pursuant
to this paragraph 3, and if such previous request or registration has not been
withdrawn or abandoned, the Corporation will not file or cause to be effected
any other registration of any of its equity securities or securities convertible
or exchangeable into or exercisable for its equity securities under the
Securities Act (except on Form S-8 or any successor form), whether on its own
behalf or at the request of any holder or holders of such securities, until a
period of 90 days has elapsed from the effective date of such Demand
Registration or previous registration, as the case may be.
4. Holdback Agreements.
(a) Each of the holders of Registrable Shares agrees not to effect any
public sale or distribution of equity securities of the Corporation, or any
securities convertible into or exchangeable or exercisable for such securities,
during the seven days prior to and the 90-day period beginning on the effective
date of any underwritten registration (except as part of such
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underwritten registration), unless the underwriter(s) managing the registered
public offering otherwise agree.
(b) The Corporation agrees (i) not to effect any public sale or
distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days prior to
and during the 90-day period beginning on the effective date of any underwritten
Demand Registration or any underwritten Piggyback Registration (except as part
of such underwritten registration or pursuant to registrations on Form S-4 or S-
8 or any successor form), unless the underwriters managing the registered public
offering otherwise agree, and (ii) to use its reasonable best efforts to cause
each holder of at least 5% (on a fully-diluted basis) of its equity securities
(other than equity securities acquired in a public trading market), or any
securities convertible into or exchangeable or exercisable for such securities,
purchased from the Corporation at any time after the date of this Agreement
(other than in a registered public offering) to agree not to effect any public
sale or distribution of any such securities during such period (except as part
of such underwritten registration, if otherwise permitted), unless the
underwriters managing the registered public offering otherwise agree.
5. Registration Procedures.
(a) Whenever the holders of Registrable Shares have requested that any
Registrable Shares be registered pursuant to this Agreement, the Corporation
will use its reasonable best efforts to effect the registration and the sale of
such Registrable Shares in accordance with the intended method of disposition
thereof, and pursuant thereto the Corporation will as expeditiously as possible:
(i) prepare and file with the Commission a registration
statement with respect to such Registrable Shares and use its
reasonable best efforts to cause such registration statement to become
effective;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for a period of, in the case of any registration
not constituting a shelf registration, not less than nine months (or
such longer period as is necessary for the underwriters in an
underwritten offering to sell unsold allotments), or, in the case of a
shelf registration, two years (or, in the case of any registration
statement, such shorter period which will terminate when all
Registrable shares covered by such registration statement have been
sold or withdrawn, but not prior to the expiration of any applicable
period referred to in Section 4(3) of the Securities Act or Rule 174
thereunder) and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such
registration statement during such period in accordance with the
intended methods of disposition by the sellers thereof set forth in
such registration statement;
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<PAGE>
(iii) furnish to each seller of Registrable Shares and the
underwriters of the securities being registered such number of copies
of such registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller or
underwriters may reasonably request in order to facilitate the
disposition of the Registrable Shares owned by such seller or the sale
of such securities by such underwriters;
(iv) use its reasonable best efforts to register or qualify such
Registrable Shares under such other securities or blue sky laws of
such jurisdictions as any seller reasonably requests and do any and
all other acts and things which may be reasonably necessary or
advisable to enable such seller to consummate the disposition in such
jurisdictions of the Registrable Shares owned by such seller;
provided, however, that the Corporation will not be required to (A)
qualify generally to do business in any jurisdiction where it would
not otherwise be required to qualify but for this subparagraph or (B)
consent to general service of process in any such jurisdiction;
(v) cause all such Registrable Shares to be listed or authorized
for quotation on each securities exchange or automated quotation
system on which similar securities issued by the Corporation are then
listed or quoted;
(vi) provide a transfer agent and registrar for all such
Registrable Shares not later than the effective date of such
registration statement;
(vii) enter into such customary agreements (including
underwriting agreements in customary form) and take all such other
actions as the holders of a majority of the Registrable Shares being
sold or the underwriters, if any, reasonably request in order to
expedite or facilitate the disposition of such Registrable Shares
(including, without limitation, making members of the Corporation's
management available for customary participation in any "road show" in
connection with an underwritten public offering);
(viii) make available for inspection by the seller of
Registrable Shares, any underwriter participating in any disposition
pursuant to such registration statement, and any attorney, accountant
or other agent retained by any such seller or underwriter, all
financial and other records, pertinent corporate documents and
properties of the Corporation, and cause the Corporation's officers,
directors, employees and independent accountants to supply all
information reasonably requested by any such seller, underwriter,
attorney, accountant or agent, in each case for the sole purpose of
establishing a "due diligence" defense in connection with such
registration statement;
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<PAGE>
(ix) notify each seller of such Registrable Shares, promptly
after it shall receive notice thereof, of the time when such
registration statement has become effective or a supplement to any
prospectus forming a part of such registration statement has been
filed;
(x) notify each seller of such Registrable Shares of any request
by the Commission for the amending or supplementing of such
registration statement or prospectus or for additional information;
(xi) prepare and file with the Commission, promptly upon the
request of any seller of such Registrable Shares, any amendments or
supplements to such registration statement or prospectus which, in the
opinion of counsel selected by the holders of a majority of the
Registrable Shares being registered, is required under the Securities
Act or the rules and regulations thereunder in connection with the
distribution of Registrable Shares by such seller;
(xii) prepare and promptly file with the Commission and promptly
notify each seller of such Registrable Shares of the filing of such
amendment or supplement to such registration statement or prospectus
as may be necessary to correct any statements or omissions if, at the
time when a prospectus relating to such securities is required to be
delivered under the Securities Act, any event shall have occurred as
the result of which any such prospectus or any other prospectus as
then in effect would include an untrue statement of a material fact or
omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;
(xiii) advise each seller of such Registrable Shares, promptly
after it shall receive notice or obtain knowledge thereof, of the
issuance of any stop order by the Commission suspending the
effectiveness of such registration statement or the initiation or
threatening of any proceeding for such purpose and promptly use its
reasonable best efforts to prevent the issuance of any stop order or
to obtain its withdrawal if such stop order should be issued;
(xiv) at least forty-eight hours prior to the filing of any
registration statement or prospectus or any amendment or supplement to
such registration statement or prospectus, furnish a copy thereof to
each seller of such Registrable Shares and refrain from filing any
such registration statement, prospectus, amendment or supplement to
which counsel selected by the holders of a majority of the Registrable
Shares being registered shall have objected on the grounds that such
amendment or supplement does not comply in all material respects with
the requirements of the Securities Act or the rules and regulations
thereunder, unless, in the case of an amendment or supplement, in the
opinion of counsel for the Corporation, the filing of such amendment
or supplement is reasonably necessary
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<PAGE>
to protect the Corporation from any liabilities under any applicable
federal or state law and such filing will not violate applicable laws;
(xv) at the request of any seller of such Registrable Shares in
connection with an underwritten offering, furnish on the date or dates
provided for in the underwriting agreement: (i) an opinion of counsel,
addressed to the underwriters and the sellers of Registrable Shares,
covering such matters as such underwriters and sellers may reasonably
request and as are customarily covered by the issuer's counsel in an
underwritten offering; and (ii) a letter or letters from the
independent certified public accountants of the Corporation addressed
to the underwriters and the sellers of Registrable Shares, covering
such matters as such underwriters and sellers may reasonably request
and as are customarily covered in accountant's letters in connection
with an underwritten offering; and
(xvi) otherwise use its reasonable best efforts to comply with
the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement in accordance
with the intended method of disposition and to make generally
available to its security holders, as soon as reasonably practicable,
an earnings statement satisfying the provisions of Section 11(a) of
the Securities Act and Rule 158 thereunder.
(b) Each holder of Registrable Shares that sells Registrable Shares
pursuant to a registration under this Agreement agrees that in connection with
registration as follows:
(i) Such seller shall cooperate as reasonably requested by the
Corporation with the Corporation in connection with the preparation of
the registration statement, and for so long as the Corporation is
obligated to file and keep effective the registration statement, shall
provide to the Corporation, in writing, for use in the registration
statement, all such information regarding such seller and its plan of
distribution of the Registrable Shares as may be reasonably necessary
to enable the Corporation to prepare the registration statement and
prospectus covering the Registrable Shares, to maintain the currency
and effectiveness thereof and otherwise to comply with all applicable
requirements of law in connection therewith.
(ii) During such time as such seller may be engaged in a
distribution of the Registrable Shares, such seller shall comply with
Regulation M promulgated under the Securities Exchange Act and
pursuant thereto it shall, among other things: (x) not engage in any
stabilization activity in connection with the securities of the
Corporation in contravention of such regulation; (y) distribute the
Registrable Shares under the registration statement solely in the
manner described in the registration statement; (z) cease distribution
of such Registrable Shares pursuant to such registration statement
upon receipt of written notice from the Corporation
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<PAGE>
that the prospectus covering the Registrable Shares contains any
untrue statement of a material fact or omits a material fact required
to be stated therein or necessary to make the statements therein not
misleading.
6. Registration Expenses.
All expenses incident to the Corporation's performance of or
compliance with this Agreement, including, without limitation, all registration
and filing fees, fees of transfer agents and registrars, fees and expenses of
compliance with securities or blue sky laws, fees of the National Association of
Securities Dealers, Inc., printing expenses, messenger and delivery expenses,
and fees and disbursements of counsel for the Corporation and its independent
certified public accountants, underwriters (excluding discounts and commissions
attributable to the Registrable Shares included in such registration) and other
Persons retained by the Corporation (all such expenses being herein called
"Registration Expenses"), will be borne by the Corporation. In addition, the
Corporation will pay its internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit or quarterly review, the
expense of any liability insurance obtained by the Corporation and the expenses
and fees for listing or authorizing for quotation the securities to be
registered on each securities exchange on which any shares of common stock are
then listed or quoted.
7. Indemnification.
(a) The Corporation agrees to indemnify, to the fullest extent
permitted by law, each seller of Registrable Shares, its officers and directors
and each Person who controls such seller (within the meaning of the Securities
Act or the Exchange Act) against all losses, claims, damages, liabilities and
expenses (including, without limitation, attorneys' fees except as limited by
paragraph 7(c)) caused by any untrue or alleged untrue statement of a material
fact contained in any registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, except insofar as the same are
caused by or contained in any information furnished in writing to the
Corporation by such seller expressly for use therein or by such seller's failure
to deliver a copy of the most recently dated version of such registration
statement or prospectus or any amendments or supplements thereto after the
Corporation has furnished such seller with at least the number of copies of the
same reasonably requested by such seller. In connection with an underwritten
offering, the Corporation will indemnify such underwriters, their officers and
directors and each Person who controls such underwriters (within the meaning of
the Securities Act or the Exchange Act) to the same extent as provided above
with respect to the indemnification of the sellers of Registrable Shares and in
connection therewith the Corporation shall enter into an underwriting agreement
in customary form containing such provisions for indemnification and
contribution as shall be reasonably requested by the underwriters. The
reimbursements required by this paragraph
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<PAGE>
7(a) will be made by periodic payments during the course of the investigation or
defense, as and when bills are received or expenses incurred.
(b) In connection with any registration statement in which a seller of
Registrable Shares is participating, each such seller will furnish to the
Corporation in writing such information and affidavits as the Corporation
reasonably requests for use in connection with any such registration statement
or prospectus and, to the fullest extent permitted by law, will indemnify the
Corporation, its directors and officers and each Person who controls the
Corporation (within the meaning of the Securities Act) against any losses,
claims, damages, liabilities and expenses (including, without limitation,
attorneys' fees except as limited by paragraph 7(c)) resulting from any untrue
statement of a material fact contained in the registration statement, prospectus
or preliminary prospectus or any amendment thereof or supplement thereto or any
omission of a material fact required to be stated therein or necessary to make
the statements therein not misleading, but only to the extent that such untrue
statement or omission is contained in any information or affidavit so furnished
in writing by such seller; provided, however, that the obligation to indemnify
will be several, not joint and several, among such sellers of Registrable
Shares, and the liability of each such seller of Registrable Shares will be in
proportion to, and provided further that such liability will be limited to, the
net amount received by such seller from the sale of Registrable Shares pursuant
to such registration statement.
(c) Any Person entitled to indemnification hereunder will (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification (provided that the failure to give such notice
shall not limit the rights of such Person except to the extent such failure to
give notice shall materially prejudice the rights of the indemnifying party) and
(ii) unless in such indemnified party's reasonable judgment (with written advice
of counsel) a conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim, permit such indemnifying party to
assume the defense of such claim with counsel reasonably satisfactory to the
indemnified party. If such defense is assumed, the indemnifying party will not
be subject to any liability for any settlement made by the indemnified party
without its consent (but such consent will not be unreasonably withheld). An
indemnifying party who is not entitled to, or elects not to, assume the defense
of a claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim.
(d) Each party hereto agrees that, if for any reason the
indemnification provisions contemplated by Section 7(a) or Section 7(b) are
unavailable to or insufficient to hold harmless an indemnified party in respect
of any losses, claims, damages, liabilities or expenses (or actions in respect
thereof) referred to therein, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and the indemnified party as well as any other relevant equitable
considerations. The relative fault of such indemnifying party and indemnified
party shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of
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<PAGE>
a material fact or omission or alleged omission to state a material fact relates
to information supplied by such indemnifying party or indemnified party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The parties hereto agree that it
would not be just and equitable if contribution pursuant to this Section 7(d)
were determined by pro rata allocation (even if the holders or any underwriters
or all of them were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable considerations
referred to in this Section 7(d). The amount paid or payable by an indemnified
party as a result of the losses, claims, damages, liabilities or expenses (or
actions in respect thereof) referred to above shall be deemed to include any
legal or other fees or expenses reasonably incurred by such indemnified party in
connection with investigating or, except as provided in Section 7(c), defending
any such action or claim. Notwithstanding the provisions of this Section 7(d),
no holder shall be required to contribute an amount greater than the dollar
amount of the proceeds received by such holder with respect to the sale of any
Registrable Shares. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The holders' obligations in this Section 7(d) to contribute
shall be several in proportion to the amount of Registrable Shares registered by
them and not joint.
(e) The indemnification and contribution provided for under this
Agreement will remain in full force and effect regardless of any investigation
made by or on behalf of the indemnified party or any officer, director or
controlling Person of such indemnified party and will survive for such
indemnified party and such officers, directors or controlling Persons of such
indemnified party the transfer of securities.
8. Compliance with Rule 144. The Corporation shall (i) make and
keep public information available, as those terms are understood and defined in
Rule 144 of the Commission, (ii) file with the Commission in a timely manner all
reports and other documents required of the Corporation under the Securities Act
and the Exchange Act and (iii) at the request of any holder who proposes to sell
securities in compliance with Rule 144, forthwith furnish to such holder a
written statement of compliance with the reporting requirements of the
Commission as set forth in Rule 144 as such rule may be amended from time to
time and make available to the public and such holders such information as will
enable the holders to make sales pursuant to Rule 144.
9. Other Securities. In the event the Registrable Shares shall be
changed into any other securities of the Corporation or any other Person or
other securities of the Corporation or any other Person are issued in lieu of or
in connection with Registrable Shares, then the holders of such other securities
shall be entitled, pursuant to this Agreement, to registration rights with
respect to such other securities that are substantially identical to those
expressly provided herein with respect to the Registrable Shares.
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10. No Inconsistent Agreements. The Corporation will not hereafter
enter into any agreement with respect to its securities which is inconsistent
with the rights granted to the holders of the Registrable Shares in this
Agreement.
11. Adjustments Affecting Registrable Shares. The Corporation will
not take any action, or permit any change to occur, with respect to its
securities which would adversely affect the ability of the holders of
Registrable Shares to include such Registrable Shares in a registration
undertaken pursuant to this Agreement or which would adversely affect the
marketability of such Registrable Shares in any such registration (including,
without limitation, effecting a stock split or a combination of shares).
12. Remedies. Any Person having rights under any provision of this
Agreement will be entitled to enforce such rights specifically, to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law.
13. Amendments and Waivers. Except as otherwise expressly provided
herein, the provisions of this Agreement may be amended or waived at any time
only by the written agreement of the Corporation and the holders of a majority
of the Registrable Shares provided that any such amendment or waiver shall apply
equally to all holders of Registrable Shares except to the extent a holder of
Registrable Shares adversely affected by unequal treatment otherwise consents.
Any waiver, permit, consent or approval of any kind or character on the part of
any such holders of any provision or condition of this Agreement must be made in
writing and shall be effective only to the extent specifically set forth in
writing.
14. Successors and Assigns. Except as otherwise expressly provided
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto will bind and inure to the benefit of the
respective successors and assigns of the parties hereto (other than an assign to
which assignment would violate the terms of the Stockholders Agreement if such
agreement shall remain in effect), whether so expressed or not. In addition and
whether or not any express assignment has been made, the provisions of this
Agreement which are for the benefit of purchasers or holders of Registrable
Shares are also for the benefit of, and enforceable by, any subsequent holder of
Registrable Shares who consents in writing to be bound by this Agreement.
15. Final Agreement. This Agreement constitutes the final agreement
of the parties concerning the matters referred to herein, and supersedes all
prior agreements and understandings.
16. Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will
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<PAGE>
be ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
17. Descriptive Heading. The descriptive headings of this Agreement
are inserted for convenience of reference only and do not constitute a part of
and shall not be utilized in interpreting this Agreement.
18. Notices. Any notice, demand or delivery required or permitted by
this Agreement shall be in writing and shall be given to the specified party at
its address (or facsimile number) set forth below, or such other address (or
facsimile number) as shall have been furnished to the party giving or making
such notice, demand or delivery:
If to the Corporation: iMall, Inc.
233 Wilshire Boulevard
Santa Monica, California 90401
Attention: Richard M. Rosenblatt
Facsimile: (310) 309-4100
with a copy to: Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, CA 90071
Attention: Brian G. Cartwright, Esq.
Facsimile: (213) 891-8763
If to the Investor: First Data Merchant Services Corporation
6200 South Quebec Street
Englewood, Colorado 80111
Attention: President
Facsimile: (303) 488-8705
-and-
First Data Merchant Services Corporation
6200 South Quebec Street
Englewood, Colorado 80111
Attention: General Counsel
Facsimile: (303) 889-6566
with a copy to: Sidley & Austin
One First National Plaza
Chicago, IL 60603
Attention: Frederick C. Lowinger, Esq.
Facsimile: (312) 853-7036
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If to any other holder of
Registrable Shares: Address set forth on the stock record books
of the Corporation.
Each such notice, demand or delivery shall be effective (i) if given by
telecopy, when such telecopy is transmitted to the telecopy number specified
herein and the intended recipient confirms the receipt of such telecopy, or (ii)
if given by any other means, when received at the address specified herein.
19. GOVERNING LAW. THE VALIDITY, MEANING AND EFFECT OF THIS
AGREEMENT SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THAT STATE.
20. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, and such counterparts together shall constitute one instrument. Each
party shall receive a duplicate original of the counterpart copy or copies
executed by it and the Corporation.
21. Attorneys Fees. In the event of any action or suit based upon or
arising out of any actual or alleged breach by any party of any representation,
warranty or agreement in this Agreement, the prevailing party shall be entitled
to recover its reasonable attorneys' fees and expenses of such action or suit
from the other party, in addition to any other relief ordered by the court.
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This Registration Agreement was executed on the date first set forth
above.
iMALL, INC.
By: /s/ Richard M. Rosenblatt
_____________________________________
Name: Richard M. Rosenblatt
Title: Chairman and Chief Executive Officer
FIRST DATA MERCHANT SERVICES CORPORATION
By: /s/ Richard E. Aiello
_____________________________________
Name: Richard E. Aiello
Title: Senior Vice President
