Exhibit 10.1
STOCK AND WARRANT PURCHASE AGREEMENT
STOCK AND WARRANT PURCHASE AGREEMENT ("Agreement") dated as of December 30,
1999, between SkyMall, Inc., a Nevada corporation (the "Company"), and each
person or entity who executes a counterpart signature page to this Agreement and
is listed as an investor on SCHEDULE I attached to this Agreement (each
individually an "Investor" and collectively the "Investors").
W I T N E S S E T H:
WHEREAS, the Company desires to sell and issue to the Investors listed on
SCHEDULE I, and the Investors listed on SCHEDULE I desire to purchase from the
Company, up to an aggregate of 80,000 shares of Series B Junior Convertible
Preferred Stock, par value $.001 per share (the "Preferred Stock"), having the
rights, designations and preferences set forth in the Certificate of Designation
of the Company (the "Designations") in the identical form and substance of
EXHIBIT A attached hereto on the terms and conditions set forth herein; and
WHEREAS, each Investor listed on SCHEDULE I will also receive five-year
warrants (the "Purchase Warrants"), in substantially the form and substance of
EXHIBIT B1 attached hereto, to purchase that number of shares of common stock,
par value $.001 per share ("Common Stock"), equal to the product of fifty
percent (50%) multiplied by the number of shares of Common Stock issuable upon
conversion of the Preferred Stock (as of the Closing Date) purchased by such
Investor at a per share exercise price equal to the closing bid price of the
Common Stock on the Nasdaq National Market as of the Closing Date;
WHEREAS, the Company has agreed to issue to Wand Partners Inc. ("Wand
Partners") a Warrant (the "Fee Warrant" and, together with the Purchase
Warrants, the "Warrants"), in substantially the form and substance of EXHIBIT B2
attached hereto, to purchase an aggregate of 250,000 shares of Common Stock as
an advisory fee in connection with the transactions contemplated by this
Agreement; and
WHEREAS, pursuant to the terms of the Registration Rights Agreement, dated
as of the date hereof (the "Registration Rights Agreement"), the Company has
granted the Investors registration rights with respect to the shares of Common
Stock issuable upon conversion of the Preferred Stock (the "Common Shares")
purchased hereunder and the shares of Common Stock issuable upon exercise of the
Warrants (the "Warrant Shares") pursuant to the terms thereof;
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
CERTAIN DEFINITIONS. As used in this Agreement, the following terms shall
have the following respective meanings:
"Closing" and "Closing Date" shall have the meanings ascribed to such terms
in Section 1.3 herein.
"Commission" shall mean the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Holder" and "Holders" shall include an Investor or Investors,
respectively, and any transferee of the shares of Preferred Stock, the Common
Shares, the Warrants or the Warrant Shares or Registrable Securities (as defined
in the Registration Rights Agreement) which have not been sold to the public to
whom the registration rights conferred by the Registration Rights Agreement have
been transferred in compliance thereof.
"Regulation D" shall mean Regulation D as promulgated pursuant to the
Securities Act, and as subsequently amended.
"Securities" shall mean the shares of Preferred Stock, the Common Shares,
the Warrants and the Warrant Shares, collectively.
"Securities Act" or "Act" shall mean the Securities Act of 1933, as
amended.
ARTICLE I
PURCHASE AND SALE OF THE STOCK AND WARRANTS
Section 1.1 PURCHASE AND SALE. Upon the following terms and conditions, the
Company shall issue and sell to each Investor listed on SCHEDULE I severally,
and each Investor listed on SCHEDULE I severally shall purchase from the
Company, the number of shares of Preferred Stock and the number of Warrants
indicated next to such Investor's name on SCHEDULE I attached hereto.
Section 1.2 PURCHASE PRICE. The per share purchase price for the shares of
Preferred Stock shall be $100.00 per share (the "Preferred Stock Purchase
Price"). Each Investor listed on SCHEDULE I will also receive Warrants to
purchase such number of shares of Common Stock equal to the product of fifty
percent (50%) multiplied by the number of shares of Common Stock issuable upon
conversion of the Preferred Stock as of the Closing Date.
Section 1.3 THE CLOSING. (a) The closing of the purchase and sale of the
Preferred Stock and Warrants (the "Closing"), shall take place by facsimile
transmission of signature pages to each of the documents contemplated by this
Agreement, following acceptance by the Company of subscriptions for shares of
Preferred Stock, which acceptance shall not occur until the conditions set forth
in Article V hereof shall be fulfilled or waived in accordance herewith. The
date on which the Closing occurs is referred to herein as the "Closing Date."
(b) On the Closing Date, the Company shall deliver to each Investor
certificates (with the number of and denomination of such certificates
reasonably requested by such Investor) representing the Warrants and the
Preferred Stock purchased hereunder by such Investor registered in the name of
such Investor or its nominee or deposit such Warrants and Preferred Stock into
accounts designated by such Investor, and such Investor shall deliver to the
Company the purchase price for the Warrants and Preferred Stock purchased by
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such Investor hereunder by wire transfer in immediately available funds ($80,000
of such payment to be withheld by mutual agreement of the parties hereto in
accordance with the expense reimbursement requirements of Section 7.17 hereof)
to an account designated in writing not less than two (2) business days prior to
the Closing Date by the Company. In addition, each party shall deliver all
documents, instruments and writings required to be delivered by such party
pursuant to this Agreement at or prior to the Closing Date.
(c) On the Closing Date, the Company shall enter into a Registration Rights
Agreement with each Investor in the Form of EXHIBIT C attached hereto.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby makes the following representations and warranties to each of the
Investors from and as of the date hereof through the Closing Date:
(a) ORGANIZATION AND QUALIFICATION; MATERIAL ADVERSE EFFECT. The Company
owns 100% of the outstanding capital stock of each of Durham & Company, a Utah
corporation, Disc Publishing Inc., a Utah corporation, and ▇▇▇▇▇▇▇.▇▇▇, inc., a
Nevada corporation (collectively, the "Subsidiaries"), in each case free and
clear of all liens, pledges, charges, claims, security interests or other
encumbrances. Other than the Subsidiaries, there are no other corporations or
other entities (including partnerships, limited liability companies and joint
ventures) in which the Company directly or indirectly owns at least a majority
of the voting power represented by the outstanding capital stock or other voting
securities or interests having voting power under ordinary circumstances to
elect a majority of the directors or similar members of the governing body, or
otherwise to direct the management and policies, of such corporation or entity.
Each of the Company and its Subsidiaries is a corporation duly incorporated and
validly existing and in good standing under the laws of its respective
jurisdiction of incorporation and the Company and the Subsidiaries each have the
requisite corporate power to own its properties and to carry on its business as
now being conducted. Each of the Company and each Subsidiary is duly qualified
as a foreign corporation to do business and is in good standing in every
jurisdiction in which the nature of the business conducted or property owned by
it makes such qualification necessary other than those in which the failure so
to qualify would not, individually or in the aggregate, have a Material Adverse
Effect. "Material Adverse Effect" means any adverse effect on the business,
operations, properties, prospects, or financial condition of the entity with
respect to which such term is used and which is material to such entity and
other entities controlling or controlled by such entity, taken as a whole, and
any material adverse effect on the transactions contemplated under the Agreement
or any other agreement or document contemplated hereby.
(b) AUTHORIZATION; ENFORCEMENT. (i) The Company has the requisite corporate
power and authority to enter into and perform this Agreement and the
Registration Rights Agreement and to issue the Securities in accordance with the
terms hereof, the terms of the Designations and the terms of the Warrants, (ii)
the execution and delivery of this Agreement and the Registration Rights
Agreement by the Company and the consummation by it of the transactions
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contemplated hereby and thereby, including the issuance of the Preferred Stock
and the Warrants in accordance with the terms of this Agreement, the Common
Shares in accordance with the terms of the Designations and the Warrant Shares
in accordance with the terms of the Warrants, have been duly authorized by all
necessary corporate action, and no further consent or authorization of the
Company or its Board of Directors or stockholders is required, except for the
consent of the holders of the Series A Preferred Stock (as defined below) (which
consent is attached hereto as EXHIBIT D), (iii) each of this Agreement and the
Registration Rights Agreement has been duly executed and delivered by the
Company, and (iv) each of this Agreement and the Registration Rights Agreement
constitutes the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms.
(c) CAPITALIZATION. The authorized capital stock of the Company consists of
50,000,000 shares of Common Stock and 10,000,000 shares of preferred stock;
without giving effect to this offering, as of December 27, 1999, there are
10,533,997 shares of Common Stock and 91,320 shares of Series A Junior
Convertible Preferred Stock (the "Series A Preferred Stock") issued and
outstanding, respectively. All of the outstanding shares of the Common Stock and
Series A Preferred Stock have been validly issued and are fully paid and
non-assessable. Except as set forth on SCHEDULE 2.1(C), no shares of Common
Stock or preferred stock are entitled to preemptive rights or registration
rights; and without giving effect to this offering, as of December 27, 1999,
there are outstanding options for 1,007,838 shares of Common Stock and
outstanding warrants for 1,643,031 shares of Common Stock, in each case at the
exercise prices set forth on Schedule 2.1(c). Except as disclosed in the prior
sentence and as contemplated by this Agreement, and the Preferred Stock Purchase
Rights issued pursuant to the Rights Agreement, dated as of September 15, 1999,
between the Company and Continental Stock Transfer & Trust Company, as Rights
Agent, there are no other scrip, rights to subscribe for, calls or commitments
of any character whatsoever relating to, or securities or rights exchangeable or
convertible into, any shares of capital stock of the Company or any of the
Subsidiaries, or contracts, commitments, understandings or arrangements by which
the Company or any of the Subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of the Subsidiaries or
options, warrants, scrip, rights to subscribe for, or commitments to purchase or
acquire, any shares, or securities or rights convertible into shares, of capital
stock of the Company or any of the Subsidiaries. Except for the shares of Series
A Junior Convertible Preferred Stock to be issued to ▇▇▇▇ ▇▇▇▇ Capital Group,
Inc. (or its designated affiliate), the Company represents and warrants that,
other than as contemplated by this Agreement, it has no current plan or
intention to sell or otherwise issue any shares of Common Stock or securities
convertible into or exercisable for shares of Common Stock.
(d) ISSUANCE OF PREFERRED STOCK, COMMON SHARES AND WARRANT SHARES. The
Preferred Stock, Common Shares and the Warrant Shares are duly authorized and
the Common Shares and the Warrant Shares will be, as of the Closing Date,
reserved for issuance and, upon conversion or exercise in accordance with terms
of the Designations or Warrants, as the case may be, the Common Shares and
Warrant Shares will be validly issued, fully paid and non-assessable, free and
clear of any and all liens, claims and encumbrances, and the holders of such
Common Shares and Warrant Shares shall be entitled to all rights and preferences
accorded to a holder of Common Stock. The outstanding shares of Common Stock are
currently listed on the Nasdaq National Market ("Nasdaq").
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(e) NO CONFLICTS. The execution, delivery and performance of this Agreement
and the Registration Rights Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby do not and will not
(i) result in a violation of the charter or Bylaws of the Company or any
Subsidiary or (ii) conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture, patent, patent license or instrument to which the
Company or any Subsidiary is a party, or result in a violation of any Federal,
state, local or foreign law, rule, regulation, order, judgment or decree
(including Federal and state securities laws and regulations) applicable to the
Company or any Subsidiary or by which any property or asset of the Company or
any Subsidiary is bound or affected (except for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse Effect); provided
that, for purposes of such representation as to Federal, state, local or foreign
law, rule or regulation, no representation is made herein with respect to any of
the same applicable solely to the Investors and not to the Company or any
Subsidiary. Neither the business of the Company nor of any Subsidiary has been
or is being conducted in violation of any law, ordinance or regulation of any
governmental entity, except for violations which either singly or in the
aggregate do not and will not have a Material Adverse Effect. The Company is not
required under Federal, state, local or foreign law, rule or regulation to
obtain any consent, authorization or order of, or to make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under this Agreement, the Registration
Rights Agreement, the Designations or the Warrants or issue and sell the
Preferred Stock or the Warrants in accordance with the terms hereof, the Common
Shares issuable upon conversion of the Preferred Stock or the Warrant Shares
issuable upon exercise of the Warrants, except for the registration provisions
provided for in the Registration Rights Agreement, provided that, for purposes
of the representation made in this sentence, the Company is assuming and relying
upon the accuracy of the relevant representations and agreements of the
Investors herein.
(f) SEC DOCUMENTS; FINANCIAL STATEMENTS. The Common Stock of the Company is
registered pursuant to Section 12(g) of the Exchange Act and the Company has
timely filed all reports, schedules, forms, statements and other documents
required to be filed by it with the Commission pursuant to the reporting
requirements of the Exchange Act, including material filed pursuant to Section
13(a) or 15(d), in addition to one or more registration statements and
amendments thereto heretofore filed by the Company with the Commission (all of
the foregoing including filings incorporated by reference therein being referred
to herein as the "SEC Documents"). The Company has delivered or made available
to the Investors true and complete copies of all SEC Documents (including,
without limitation, proxy information and solicitation materials and
registration statements) filed with the Commission since September 30, 1998. As
of their respective dates, the SEC Documents (as amended by any amendments filed
prior to the date of this Agreement) complied or will comply in all material
respects with the requirements of the Securities Act or the Exchange Act, as
applicable, and the rules and regulations of the Commission promulgated
thereunder and other Federal, state and local laws, rules and regulations
applicable to such SEC Documents, and none of the SEC Documents contained or
will contain any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Company included in the SEC
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Documents comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the Commission or other
applicable rules and regulations with respect thereto. Such financial statements
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto or (ii) in
the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). The transactions contemplated by this Agreement will not and, to
the Company's knowledge, no event or circumstance has occurred or exists with
respect to the Company or any Subsidiary which would, require a change in the
Company's method of accounting for the acquisition by the Company of Disc
Publishing Inc.
(g) PRINCIPAL EXCHANGE/MARKET. The principal market on which the Common
Stock is currently traded is Nasdaq.
(h) NO MATERIAL ADVERSE CHANGE. Since September 30, 1999, the date through
which the most recent quarterly report of the Company on Form 10-Q has been
prepared and filed with the Commission, a copy of which is included in the SEC
Documents, no event which, individually or in the aggregate, when considered
with any other event, had or is likely to have a Material Adverse Effect has
occurred or exists with respect to the Company or any Subsidiary, except as
otherwise disclosed or reflected in press releases or other SEC Documents
prepared through or as of a date subsequent to September 30, 1999, and provided
to the Investors prior to the date hereof.
(i) NO UNDISCLOSED LIABILITIES. Neither the Company nor any Subsidiary has
any liabilities or obligations not disclosed in the SEC Documents, other than
those liabilities incurred in the ordinary course of its respective business
since September 30, 1999, or liabilities or obligations, individually or in the
aggregate, which do not or would not have a Material Adverse Effect on the
Company or the Subsidiaries, taken as a whole.
(k) NO GENERAL SOLICITATION. None of the Company, the Subsidiaries or, to
the Company's knowledge, any of their respective affiliates or any person acting
on its or their behalf has engaged in any form of general solicitation or
general advertising (within the meaning of Regulation D) in connection with the
offer or sale of the Securities.
(l) NO INTEGRATED OFFERING. None of the Company, the Subsidiaries, or, to
the Company's knowledge, any of their respective affiliates, or any person
acting on its or their behalf has, directly or indirectly, made any offers or
sales of any security or solicited any offers to buy any security, under
circumstances that would require registration of any of the Securities.
(m) INTELLECTUAL PROPERTY. Each of the Company and the Subsidiaries owns,
or has legal and valid rights by license, lease, or other agreement to use, all
trademarks, trade names, service marks, Internet domain names, logos, assumed
names, copyrights, patents, trade secrets, software, databases and names,
likenesses and other information concerning real persons, and all registrations
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and applications therefor (collectively, the "Intellectual Property Rights")
which are used or are needed to conduct its respective business as it is now
being conducted or as proposed to be conducted as disclosed in the SEC
Documents. The Company has no reason to believe that the Intellectual Property
Rights owned or used by the Company or any of its Subsidiaries are invalid or
unenforceable or that the use of such Intellectual Property Rights by the
Company or the Subsidiaries infringes upon or conflicts with any right of any
third party, and neither the Company nor any Subsidiary has any knowledge of a
basis for such claim or has received notice of any such infringement or
conflict. The Company has no knowledge of any infringement or other violation of
the Company's or any Subsidiary's Intellectual Property Rights by any third
party. All registrations and applications for material Intellectual Property
Rights owned by the Company or its Subsidiaries are valid and subsisting, and
standing in the record ownership of the Company or its Subsidiaries. There are
no settlements, consents, agreements to forebear or other similar agreements or
arrangements to which the Company or any of its Subsidiaries is bound which
materially affects its rights to own, use or enforce any Intellectual Property
Rights.
(n) NO LITIGATION. Except as set forth in the SEC Documents delivered to
the Investors and in SCHEDULE 2.1(N), no litigation or claim (including those
for unpaid taxes) against the Company or any Subsidiary is pending or, to the
Company's knowledge, threatened, and no other event has occurred, which if
determined adversely would have a Material Adverse Effect on the Company or any
Subsidiary, taken as a whole, or would materially adversely effect the
transactions contemplated hereby. The legal proceedings described in the SEC
Documents will not have an effect on the transactions contemplated hereby, and
will not have a Material Adverse Effect on the Company or the Subsidiaries,
taken as a whole.
(o) BROKERS. The Company has taken no action which would give rise to any
claim by any person, other than ▇▇▇▇, ▇▇▇▇ & Co., Inc., for brokerage
commissions, finder's fees or similar payments by the Company relating to this
Agreement, the Registration Rights Agreement or the transactions contemplated
hereby or thereby. The fee to be paid to ▇▇▇▇, ▇▇▇▇ & Co., Inc. consists of
$240,000 and a warrant to purchase 34,285 shares of Common Stock. The Company
has taken no action which would give rise to any claim by any person for
brokerage commissions, finder's fees or similar payments by any Investor
relating to this Agreement, the Registration Rights Agreement or the
transactions contemplated hereby or thereby.
(p) FORMS S-3. The Company is eligible to file a Registration Statement on
Form S-3 under the Act and the rules promulgated thereunder, and Form S-3 is
permitted to be used for the transactions contemplated hereby and by the
Registration Rights Agreement under the Act and the rules promulgated
thereunder.
(q) YEAR 2000 COMPLIANCE. To the Company's knowledge, each system which
includes software, hardware, databases or embedded control systems
(microcompressor controlled, robotic or other device) (collectively, a
"System"), that constitutes any part of, or is used in connection with the use,
operation or enjoyment of, any asset, property or leased premises of the Company
or any Subsidiary (i) is designed (or has been modified) to be used prior to and
after January 1, 2000, (ii) to the Company's knowledge, will operate without
error arising from the creation, recognition, acceptance, calculation, display,
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storage, retrieval, accessing, comparison, sorting, manipulation, processing or
other use of dates or date-based, date-dependent or date-related data, including
but not limited to century recognition, day-of-the-week recognition, leap years,
date values and interfaces of date functionalities, and (iii) to the Company's
knowledge, will not be adversely affected by the advent of the year 2000, the
advent of the twenty-first century or the transition from the twentieth century
through the year 2000 and into the twenty-first century (collectively, items (i)
through (iii) are referred to herein as "Year 2000 Compliant"). No System that
is material to the business, finances or operations of the business of the
Company or any Subsidiary receives data from or communicates with any component
or system external to itself (whether or not such external component or system
is the Company's or any Subsidiary's or any third party's) that is not itself
Year 2000 Compliant. To the Company's knowledge, all licenses for the use of any
system-related software, hardware, databases or embedded control systems permit
the Company or the Subsidiaries to make all modifications, bypasses, debugging,
work-arounds, repairs, replacements, conversions or corrections necessary to
permit the System to operate compatibly, in conformance with their respective
specifications, and to be Year 2000 Compliant. None of the Company nor any of
the Subsidiaries has incurred, and none of the Company nor any of the
Subsidiaries has any reason to believe that it may in the future incur, any
expenses arising from or related to the failure of any of its Systems as a
result of not being Year 2000 Compliant.
Section 2.2 REPRESENTATIONS AND WARRANTIES OF THE INVESTORS. Each of the
Investors, severally and not jointly, hereby makes the following representations
and warranties to the Company as of the date hereof and on the Closing Date:
(a) AUTHORIZATION; ENFORCEMENT. (i) Such Investor has the requisite power
and authority, or the legal capacity, as the case may be, to enter into and
perform this Agreement and to purchase the Securities being sold to such
Investor hereunder, (ii) the execution and delivery of this Agreement by such
Investor and the consummation by it of the transactions contemplated hereby have
been duly authorized by all necessary corporate or partnership action, as
required, and (iii) this Agreement constitutes the valid and binding obligation
of such Investor enforceable against such Investor in accordance its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally the enforcement of creditors' rights and remedies or by
other equitable principles of general application.
(b) NO CONFLICTS. The execution, delivery and performance of this Agreement
and the consummation by such Investor of the transactions contemplated hereby do
not and will not (i) result in a violation of such Investor's organizational
documents, or (ii) conflict with any agreement, indenture, or instrument to
which such Investor is a party, or (iii) result in a violation of any law, rule,
or regulation or any order, judgment or decree of any court or governmental
agency applicable to such Investor. Such Investor is not required to obtain any
consent or authorization of any governmental agency in order for it to perform
its obligations under this Agreement.
(c) INVESTMENT REPRESENTATION. Such Investor is purchasing the securities
purchased hereunder for its own account and not with a view to distribution in
violation of any securities laws. Such Investor has no present intention to sell
the securities purchased hereunder and such Investor has no present arrangement
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(whether or not legally binding) to sell the Securities purchased hereunder to
or through any person or entity; provided, however, that by the representations
herein, such Investor does not agree to hold any of the Securities for any
minimum or other specific term and reserves the right to dispose of any of the
Securities at any time in accordance with Federal and state securities laws
applicable to such disposition.
(d) ACCREDITED INVESTOR. Such Investor is an "accredited investor" as
defined in Rule 501 promulgated under the Act. The Investor has such knowledge
and experience in financial and business matters in general and investments in
particular, so that such Investor is able to evaluate the merits and risks of an
investment in the securities purchased hereunder and to protect its own
interests in connection with such investment. In addition (but without limiting
the effect of the Company's representations and warranties contained herein),
such Investor has received such information as it considers necessary or
appropriate for deciding whether to purchase the Securities purchased hereunder.
(e) RULE 144. Such Investor understands that there is no public trading
market for the Preferred Stock or the Warrants, that none is expected to
develop, and that the Preferred Stock and the Warrants must be held indefinitely
unless converted or exercised, as applicable, or unless such securities are
registered under the Act or an exemption from registration is available. Such
Investor understands that the Common Shares and the Warrant Shares must be held
indefinitely unless such securities are registered under the Act or an exemption
from registration is available. Such Investor has been advised or is aware of
the provisions of Rule 144 promulgated under the Act.
(f) BROKERS. Such Investor has taken no action which would give rise to any
claim by any person for brokerage commissions, finder's fees or similar payments
by the Company relating to this Agreement or the transactions contemplated
hereby.
(g) RELIANCE BY THE COMPANY. Such Investor understands that the Preferred
Stock and Warrants are being offered and sold in reliance on a transactional
exemption from the registration requirements of Federal and state securities
laws and that the Company is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and understandings of
such Investor set forth herein in order to determine the applicability of such
exemptions and the suitability of such Investor to acquire the Securities.
ARTICLE III
COVENANTS
Section 3.1 CERTIFICATES ON CONVERSION OR EXERCISE. Upon (i) any conversion
of the shares of Preferred Stock pursuant to the Designations, or (ii) the
exercise of any Warrants in accordance with the terms of the Warrants, the
Company shall issue and deliver to such Investor (or the then holder) within
three (3) business days of the conversion or the exercise date, as the case may
be, (x) a Certificate or Certificates for the Common Shares or Warrant Shares
issuable upon conversion or exercise, as the case may be, and (y) a new
certificate or certificates for the shares of Preferred Stock or Warrants, as
the case may be, of such Investor (or holder) which have not yet been converted
or exercised, as the case may be, but which are evidenced in part by the
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certificate(s) submitted to the Company in connection with such conversion or
exercise (with the number of and denomination of such new certificate(s)
designated by such Investor or holder).
Section 3.2 REPLACEMENT CERTIFICATES. The certificate(s) representing the
shares of Preferred Stock, Common Shares, Warrant Shares or the Warrants held by
any Investor (or then holder) may be exchanged by such Investor (or such holder)
at any time and from time to time for certificates with different denominations
representing an equal number of shares of Preferred Stock, Common Shares,
Warrant Shares or Warrants, as the case may be, as reasonably requested by such
Investor (or such holder) upon surrendering the same. No service charge will be
made for such registration, transfer or exchange.
Section 3.3 SECURITIES COMPLIANCE. The Company shall notify the Commission
and Nasdaq, in accordance with their requirements, of the transactions
contemplated by this Agreement and the Designations and shall take all other
necessary action and proceedings as may be required and permitted by applicable
law, rule and regulation, for the legal and valid issuance of the Securities.
Section 3.4 NOTICES. The Company agrees to provide all holders of Preferred
Stock and all holders of Warrants with copies of all notices and information,
including, without limitation, notices and proxy statements in connection with
any meetings, that are provided to the holders of shares of Common Stock,
contemporaneously with the delivery of such notices or information to such
Common Stock holders.
Section 3.5 RESERVATION OF STOCK ISSUABLE UPON EXERCISE. The Company shall
at all times reserve and keep available out of its authorized but unissued
Common Stock, solely for the purpose of affecting the conversion or exercise of
the Preferred Stock or Warrants, as the case may be, such number of shares of
Common Stock as shall from time to time be sufficient to effect the conversion
or exercise of all outstanding Preferred Stock or Warrants, as the case may be.
Section 3.6 NO IMPAIRMENT. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities, or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed by it under this Agreement, the
Registration Rights Agreement, the Designations and the Warrants, but will at
all times in good faith assist in the carrying out of all the provisions of such
agreements and instruments.
Section 3.7 SERIES A CONVERTIBLE PREFERRED STOCK. The Company shall not
issue any shares of its Series A Convertible Preferred Stock , par value $.001
per share, and shall promptly take such action as is necessary to decrease such
number of authorized shares of Series A Convertible Preferred Stock from 8,000
to zero.
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ARTICLE IV
CONDITIONS
Section 4.1 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO ISSUE
AND SELL THE STOCK AND WARRANTS. The obligation hereunder of the Company to
issue and sell the Preferred Stock and Warrants to the Investors is subject to
the satisfaction, at or before the Closing Date, of each of the conditions set
forth below. These conditions are for the Company's sole benefit and may be
waived by the Company at any time in its sole discretion.
(a) ACCURACY OF THE INVESTORS' REPRESENTATIONS AND WARRANTIES. The
representations and warranties of each Investor shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made at that time (except for representations and warranties that speak as of a
particular date, which shall be true and correct in all material respects as of
such other date).
(b) PERFORMANCE BY THE INVESTORS. Each Investor shall have performed all
agreements and satisfied all conditions required hereby to be performed or
satisfied by such Investor at or prior to the Closing Date.
(c) NO INJUNCTION. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement.
Section 4.2 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE INVESTORS TO
PURCHASE THE STOCK AND THE WARRANTS. The obligation hereunder of each Investor
to acquire and pay for the Preferred Stock and Warrants is subject to the
satisfaction, at or before the Closing Date, of each of the conditions set forth
below. These conditions are for each Investor's sole benefit and may be waived
by each Investor at any time in its sole discretion.
(a) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES. The
representation and warranties of the Company shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made at that time (except for representations and warranties that speak as of a
particular date which shall be true and correct in all material respects as of
such other date), and except that all representations and warranties that by
their terms are qualified by reference to "materiality" or to a "Material
Adverse Effect" shall be, or have been, true and correct in all respects.
(b) PERFORMANCE BY THE COMPANY. The Company shall have performed all
agreements and satisfied all conditions required to be performed or satisfied by
the Company at or prior to the Closing Date.
(c) NASDAQ. From the date hereof to the Closing Date, trading in the
Company's Common Stock shall not have been suspended by the Commission or Nasdaq
(except for one day suspensions relating to material business announcements by
the Company) and trading in securities generally as reported by Nasdaq, shall
not have been suspended or limited, and the Common Stock shall not have been
delisted from any exchange or market where it is currently listed.
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(d) NO INJUNCTION. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority or competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement.
(e) OPINION OF COUNSEL. At the Closing Date the Investors shall have
received an opinion of counsel to the Company in substantially the form attached
hereto as EXHIBIT E and such other opinions, certificates and documents as the
Investors or their counsel shall reasonably require incident to the Closing.
(f) SECRETARY'S CERTIFICATE. The Company shall have delivered to the
Investors a certificate in form and substance reasonably satisfactory to the
Investors, executed by the Secretary or an Assistant Secretary of the Company on
behalf of the Company, certifying as to the satisfaction of all closing
conditions, incumbency of signing officers, charter, Bylaws, good standing and
authorizing resolutions of the Company.
(g) PROXIES. The shareholders listed on SCHEDULE II (the "Shareholders")
shall have executed and delivered Irrevocable Proxies in the form of EXHIBIT F
attached hereto.
(h) FEE WARRANT. The Fee Warrant shall have been simultaneously issued to
Wand Partners.
Section 4.3 POST-CLOSING OBLIGATIONS.
(a) STOCKHOLDERS AGREEMENT. Promptly following the Closing, the Company,
Wand Partners and shareholders of the Company that beneficially own at least
50.01% of the outstanding shares of Common Stock of the Company shall enter into
a Stockholders Agreement in a form and substance mutually acceptable to such
parties agreeing, following conversion of the Preferred Stock into Common Stock,
to vote such shares for the designee of Wand Partners to the Company's Board of
Directors, PROVIDED, HOWEVER, that such obligation shall cease at such time as
the Investors cease to own less than fifty percent (50%) of the number of shares
of Common Stock issuable upon conversion of the Preferred Stock as of the
Closing Date.
(b) PROXIES. Promptly following the Closing, the Company shall obtain and
deliver executed Irrevocable Proxies in the form of EXHIBIT F attached hereto
from shareholders of the Company that beneficially own at least 50.01% of the
outstanding shares of Common Stock of the Company.
ARTICLE V
LEGEND AND STOCK
Each certificate representing the Preferred Stock, Common Shares, the
Warrants and the Warrant Shares shall be stamped or otherwise imprinted with a
legend substantially in the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND THEY MAY NOT BE OFFERED, SOLD, PLEDGED,
HYPOTHECATED, ASSIGNED OR TRANSFERRED EXCEPT (I) PURSUANT TO A REGISTRATION
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STATEMENT UNDER THE SECURITIES ACT WHICH HAS BECOME EFFECTIVE AND IS CURRENT
WITH RESPECT TO THESE SECURITIES OR (II) PURSUANT TO A SPECIFIC EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT, BUT ONLY UPON A HOLDER HEREOF FIRST
HAVING OBTAINED THE WRITTEN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE
ISSUER THAT THE PROPOSED DISPOSITION IS CONSISTENT WITH ALL APPLICABLE
PROVISIONS OF THE SECURITIES ACT AS WELL AS ANY APPLICABLE "BLUE SKY" OR SIMILAR
SECURITIES LAW.
The appropriate portions of the legend will be removed from the
certificates representing the Preferred Stock, Common Shares, the Warrants and
the Warrant Shares promptly upon delivery to the Company of such satisfactory
evidence as may be reasonably required by the Company that such legend is not
required to ensure compliance with the Securities Act.
ARTICLE VI
TERMINATION
Section 6.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be terminated
at any time prior to the Closing Date by the mutual written consent of the
Company and the Investors.
Section 6.2 OTHER TERMINATION. This Agreement may be terminated by action
of the Board of Directors of the Company or by any of the Investors at any time
if the Closing Date shall not have occurred by the fifth business day following
the date of this Agreement; provided, however, that the right to terminate this
Agreement under Section 6.2 shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the cause of, or resulted
in, the failure of the Closing Date to have occurred on or prior to such date.
ARTICLE VII
MISCELLANEOUS
Section 7.1 STAMP TAXES; AGENT FEES. The Company shall pay all stamp and
other taxes and duties levied in connection with the issuance of the Preferred
Stock and the Warrants pursuant hereto, the Common Shares issued upon conversion
of the Preferred Stock and the Warrant Shares issued upon exercise of the
Warrants.
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Section 7.2 SPECIFIC ENFORCEMENT; CONSENT TO JURISDICTION.
(a) The Company and the Investors acknowledge and agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent or cure breaches of the provisions of this
Agreement and to enforce specifically the terms and provisions hereof, this
being in addition to any other remedy to which any of them may be entitled by
law or equity.
(b) The Company and each of the Investors (i) hereby irrevocably submits to
the exclusive jurisdiction of the United States District Court, the New York
State courts and other courts of the United States sitting in New York County,
New York for the purposes of any suit, action or proceeding arising out of or
relating to this Agreement and (ii) hereby waives, and agrees not to assert in
any such suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of such court, that the suit, action or proceeding is
brought in an inconvenient forum or that the venue of the suit, action or
proceeding is improper. The Company and each of the Investors consents to
process being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing in this paragraph shall affect or
limit any right to serve process in any other manner permitted by law.
Section 7.3 ENTIRE AGREEMENT; AMENDMENT. This Agreement together with the
agreements and documents executed in connection herewith, contains the entire
understanding of the parties with respect to the matters covered hereby and,
except as specifically set forth herein, neither the Company nor any Investor
makes any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived or amended other than by a
written instrument signed by the party against whom enforcement of any such
amendment or waiver is sought.
Section 7.4 NOTICES. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one business day after deposit with
a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:
to the Company: SkyMall, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chief Executive Officer
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with copies to: Squire, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.
Two Renaissance Square
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
to the Investors: To each Investor with a copy to its counsel
at the addresses set forth on SCHEDULE I of
this Agreement.
Any party hereto may from time to time change its address for notices by giving
at least five (5) days written notice of such changed address to the other
parties hereto. Written confirmation of receipt (A) given by the recipient of
such notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by a nationally recognized overnight delivery
service shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above.
Section 7.5 INDEMNITY. Each party shall indemnify, defend and hold harmless
each other party against any loss, cost or damages (including reasonable
attorney's fees) incurred as a result of such parties' breach of any
representation, warranty, covenant or agreement in this Agreement. The
procedures for such indemnification shall be as set forth in Section 5(c) of the
Registration Rights Agreement.
Section 7.6 WAIVERS. No waiver by any party of any default with respect to
any provision, condition or requirement of this Agreement shall be deemed to be
a continuing waiver in the future or a waiver of any other provision, condition
or requirement hereof, nor shall any delay or omission of any party to exercise
any right hereunder in any manner impair the exercise of any such right accruing
to it thereafter.
Section 7.7 HEADINGS. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
Section 7.8 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
this Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The parties hereto may amend this
Agreement without notice to or the consent of any third party. The Company may
not assign this Agreement or any rights or obligations hereunder without the
prior written consent of all Investors (which consent may be withheld for any
reason in their sole discretion), except that the Company may assign this
Agreement in connection with a merger, consolidation, business combination or
the sale of all or substantially all of its assets provided that the Company is
not released from any of its obligations hereunder, such successor in interest
or assignee assumes all obligations of the Company hereunder, and appropriate
adjustment of the provisions contained in this Agreement, the Designations and
the Warrant is made, in form and substance satisfactory to the Investors, to
15
place the Investors in substantially the same position as they would have been
but for such assignment. Any Investor may assign this Agreement (in whole or in
part) or any rights or obligations hereunder without the consent of the Company
in connection with any sale or transfer of all or any portion of the Securities
held by such Investor, provided that no Investor may assign this Agreement prior
to the Closing Date without the Company's prior consent except to an affiliate
or affiliates of such Investor.
Section 7.9 NO THIRD PARTY BENEFICIARIES. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
Section 7.10 GOVERNING LAW. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York without regard to such state's principles of conflict of laws.
Section 7.11 SURVIVAL. The representations and warranties and the
agreements and covenants of the Company and each Investor contained herein shall
survive the Closing.
Section 7.12 EXECUTION. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement, it
being understood that all parties need not sign the same counterpart.
Section 7.13 PUBLICITY. The Company agrees that it will not disclose, and
will not include in any public announcement, the name of any Investor without
its consent, unless and until such disclosure is required by law or applicable
regulation, and then only to the extent of such requirement.
Section 7.14 SEVERABILITY. The parties acknowledge and agree that all
representations, warranties, covenants and agreements of the Investors hereunder
are several and not joint, that no Investor shall have any responsibility or
liability for the representations, warrants, agreements, acts or omissions of
any other Investor, and that any rights granted to "Investors" hereunder shall
be enforceable by each Investor hereunder.
Section 7.15 LIKE TREATMENT OF HOLDERS. Neither the Company nor any of its
affiliates shall, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee, payment for the redemption or
exchange of Securities, or otherwise, to any holder of Securities, for or as an
inducement to, or in connection with the solicitation of, any consent, waiver or
amendment of any terms or provisions of the Securities or this Agreement, unless
such consideration is required to be paid to all holders of Securities bound by
such consent, waiver or amendment whether or not such holders so consent, waive
or agree to amend and whether or not such holders tender their Securities for
redemption or exchange. The Company shall not, directly or indirectly, redeem
any Securities unless such offer of redemption is made pro rata to all holders
of Securities on identical terms.
Section 7.16 INSPECTION RIGHTS. In addition to inspection and visitation
rights granted pursuant to Nevada law, the Investors (for so long as they hold
Registrable Securities) and their authorized representatives shall be entitled
to visit the premises of the Company and its Subsidiaries, meet with the
Company's and its Subsidiaries' officers and directors and inspect the books and
16
records of the Company and its Subsidiaries during normal business hours and
upon reasonable notice, PROVIDED, HOWEVER, that, other than with respect to the
rights granted pursuant to Nevada law, such Investors shall have entered into a
confidentiality agreement in form and substance reasonably acceptable to the
Company and shall have otherwise agreed not to engage in any trading of the
Company's securities while in possession of material nonpublic information
regarding the Company.
Section 7.17 EXPENSES. Except as otherwise provided herein, each party
shall pay its own expenses incident to the preparation and performance of this
Agreement and the documents provided for herein. The Company shall pay the
reasonable legal and accounting fees and expenses and travel expenses incurred
by or on behalf of the Investors, subject to a maximum amount of $80,000.00.
17
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
SKYMALL, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
INVESTOR:
By: /s/
---------------------------------------
Name:
Title:
INVESTOR:
By: /s/
---------------------------------------
Name:
Title:
INVESTOR:
By: /s/
---------------------------------------
Name:
Title:
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