-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WUfc04dfMMaA3Bt4zeOsJtREYa1VjV+PE/10ZLQp41676Xl2nZvuRNTB0xceH26p QHlOIX7qvmrpgGd8qPHaMA== 0000950144-00-005458.txt : 20000426 0000950144-00-005458.hdr.sgml : 20000426 ACCESSION NUMBER: 0000950144-00-005458 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 20000425 FILER: COMPANY DATA: COMPANY CONFORMED NAME: E COM VENTURES INC CENTRAL INDEX KEY: 0000880460 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-DRUG STORES AND PROPRIETARY STORES [5912] IRS NUMBER: 650026340 STATE OF INCORPORATION: FL FISCAL YEAR END: 0205 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-35580 FILM NUMBER: 608507 BUSINESS ADDRESS: STREET 1: 11701 N W 101 RD CITY: MIAMI STATE: FL ZIP: 33178 BUSINESS PHONE: 3058891600 MAIL ADDRESS: STREET 1: 11701 N W 101 RD CITY: MIAMI STATE: FL ZIP: 33178 FORMER COMPANY: FORMER CONFORMED NAME: PERFUMANIA INC DATE OF NAME CHANGE: 19930328 S-3 1 E COM VENTURES 1 THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER OR SALE IS NOT PERMITTED. AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 25, 2000 REGISTRATION STATEMENT NO. 333- =============================================================================== SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------- FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 -------------------- E COM VENTURES, INC. (Exact Name of Registrant as Specified in its Charter) FLORIDA 65-0977964 - ------------------------------- ---------------------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification Number) ILIA LEKACH CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER E COM VENTURES, INC. E COM VENTURES, INC. 11701 N.W. 101ST ROAD 11701 N.W. 101ST ROAD MIAMI, FLORIDA 33178 MIAMI, FLORIDA 33178 (305) 889-1600 (305) 889-1600 - ----------------------------------------------------------------- --------------------------------------------------------- (Address, Including Zip Code, and Telephone Number, (Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices) Include Area Code, of Agent for Service)
Copies of Communications to: KENNETH C. HOFFMAN, ESQ. GREENBERG TRAURIG, P.A. 1221 BRICKELL AVENUE, SUITE 2200 MIAMI, FLORIDA 33131 (305) 579-0500 (FACSIMILE) (305) 579-0717 -------------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to time after this Registration Statement becomes effective. -------------------- If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended (the "Securities Act"), other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] _______ If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] ________ If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] ------------------- CALCULATION OF REGISTRATION FEE
PROSPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF AMOUNT TO BE AGGREGATE OFFERING AGGREGATE OFFERING REGISTRATION TITLE OF SHARES TO BE REGISTERED REGISTERED(1) PRICE PER UNIT(2) PRICE(2) FEE(2) - -------------------------------- ------------ ------------------ ------------------ ------------ Common Stock, $.01 par value per share........ 8,641,120 $3.25 $28,083,640 $7,415
(1) Includes 200% of the number of shares of common stock that would have been received by the holders of all outstanding notes as follows were converted on the day before this date of filing: (i) 7,128,714 shares of common stock issuable upon the conversion of the Registrant's outstanding Series C Convertible Notes and Series D Convertible Notes and (ii) 1,512,406 shares of common stock. (2) Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457 under the Securities Act of 1933, as amended. Calculated pursuant to Rule 457(c) based on the average high and low sales price of the Common Stock as reported on the Nasdaq Stock Market on April 20, 2000. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. 2 PROSPECTUS 4,544,321 SHARES E COM VENTURES, INC. COMMON STOCK The selling shareholders are offering up to 4,544,321 shares of our common stock under this prospectus, 3,031,915 of which may be issued upon conversion of our Series C and Series D convertible notes. We will not receive proceeds from the sale of common stock under this prospectus. Some of the selling shareholders will acquire their shares of common stock upon conversion of our Series C convertible notes, dated March 9, 2000 and our Series D convertible notes, dated March 27, 2000. Parlux Fragrances obtained its shares of common stock in August 1999 pursuant to the terms of a Stock Purchase Agreement, dated August 13, 1999. Our common stock is listed for trading on the Nasdaq National Market under the symbol "ECMV." On April 19, 2000, the last reported sales price of our common stock on the Nasdaq National Market was $3.50 per share. ------------------- SEE "RISK FACTORS" BEGINNING ON PAGE 3 TO READ ABOUT THE FACTORS YOU SHOULD CONSIDER BEFORE BUYING SHARES OF OUR COMMON STOCK. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------- This prospectus is dated April __, 2000. 3 PROSPECTUS SUMMARY This summary highlights selected information and does not contain all of the information that is important to you. We urge you to read the entire prospectus carefully, including the financial statements and the notes thereto, before you decide whether to buy our common stock. You should pay special attention to the risks of investing in our common stock discussed under "Risk Factors." E COM VENTURES, INC. OUR BUSINESS We facilitate cross marketing and cross-promotional opportunities between our member companies, e-commerce investments and our wholly owned subsidiary, Perfumania, Inc. We support startups or existing B to B or B to C companies with development strategies and financial support necessary to introduce products and services into Internet businesses. Our Internet strategy includes the internal development and operation of majority-owned subsidiaries as well as taking strategic positions in other Internet related companies that have demonstrated synergies with our core business, Perfumania, Inc. Our strategy also envisions and promotes opportunities for synergistic business relationships among the Internet companies within our portfolio. OUR FRAGRANCE AND RELATED PRODUCT OPERATIONS Through Perfumania we are a leading specialty retailer and wholesale distributor of a wide range of brand name and designer fragrances. As of April 21, 2000, we operated a chain of 269 retail stores specializing in the sale of fragrances at discounted prices up to 60% below the manufacturer's suggested retail prices. Our wholesale division distributes approximately 1,100 stock keeping units of fragrances and related products to approximately 41 customers, including national and regional chains and other wholesale distributors throughout North America and overseas. We manage and own our wholesale business and our retail business is managed and owned by Magnifique Parfumes and Cosmetics, Inc., Perfumania's wholly owned subsidiary. RECENT DEVELOPMENTS We were incorporated in Florida and previously operated under the name Perfumania, Inc. In order to provide greater flexibility for expansion, broaden the alternatives available for future financing and generally provide for greater administrative and operational flexibility, on February 1, 2000, we reorganized into a holding company structure with E Com Ventures, Inc. ("ECOMV") as the holding company and Perfumania as a wholly owned subsidiary. On December 10, 1999, Perfumania entered into an Option Agreement with an investment firm granting the investment firm two options to acquire up to 2.5 million shares of common stock of perfumania.com, inc. On January 11, 2000, the investment firm exercised one of its options to purchase 2.0 million shares of perfumania.com for $6.00 per share. In connection with such exercise, and upon satisfaction of applicable SEC regulations, the investment firm obtained control of the board. In March 2000, we acquired more than 5% of the outstanding shares of common stock of The Sportsman's Guide, Inc., a marketer of value priced outdoor gear and general merchandising. Sportsman's Guide offers its products via various catalogues and the Internet. We also signed a letter of intent to acquire additional shares of common stock of Sportsman's Guide, representing approximately an additional 11% of its outstanding shares of common stock. In March 2000, we also signed a letter of intent to acquire a 30% interest in Cellpoint Corporation, an internet based distributor and retailer of wireless electronic equipment that sells its products both retail and wholesale, domestically and internationally. This transaction is subject to due diligence and to date has not been completed. Upon the completion of the transaction, we will own approximately 30% of Cellpoint's common stock. Additionally, in exchange for an interest bearing convertible notes, we invested $1 million in December 1999 and $1 million in March 2000 in TakeToAuction.com, Inc., an Internet, membership based community that lists and sells products at online auction sites. CORPORATE INFORMATION We are a Florida corporation with our principal executive offices located at 11701 N.W. 101st Road, Miami, Florida 33128. Our telephone number is (305) 889-1600. 1 4 RISK FACTORS You should carefully consider the following risks before making an investment decision. If any of the following risks occurs, our business, financial condition or results of operations could be adversely affected. In that case, the trading price of our common stock could decline, and you might lose all or part of your investment. WE MAY HAVE PROBLEMS RAISING THE MONEY NEEDED IN THE FUTURE. Our growth strategy includes investment in and acquisition of Internet related businesses. We may need to obtain funding to achieve our growth strategy. Additional financing may not be available on acceptable terms if at all. In order to obtain additional financing, we may be required to issue securities with greater rights than those currently possessed by holders of our common stock. We may also be required to take other actions which may lessen the value of our common stock, including borrowing money on terms that are not favorable to us. OUR SUCCESS DEPENDS SIGNIFICANTLY ON INCREASED USE OF THE INTERNET BY BUSINESSES AND INDIVIDUALS. Our success depends significantly on increased use of the Internet for advertising, marketing, providing services, and conducting business. Commercial use of the Internet is currently at an early stage of development and the future of the Internet is not clear. Our business strategy will suffer if commercial use of the Internet fails to grow in the future. OUR STRATEGY OF EXPANDING OUR BUSINESS THROUGH ACQUISITIONS AND INVESTMENTS IN OTHER BUSINESSES AND TECHNOLOGIES PRESENTS SPECIAL RISKS. We intend to expand through the acquisition of and investment in other businesses. Acquisitions involve a number of special problems, including: o difficulty integrating acquired technologies, operations, and personnel with our existing business; o diversion of management's attention in connection with both negotiating the acquisitions and integrating the assets; o the need to incur additional debt; o strain on managerial and operational resources as management tries to oversee larger operations; and o exposure to unforeseen liabilities of acquired companies. We may not be able to successfully address these problems. Moreover, our future operating results will depend to a significant degree on our ability to successfully manage growth and integrate acquisitions. In addition, many of our investments will be in early-stage companies with limited operating histories and limited or no revenues. We may not be able to successfully develop these young companies. IF THE UNITED STATES OR OTHER GOVERNMENTS REGULATE THE INTERNET MORE CLOSELY, OUR BUSINESS MAY BE HARMED. Because of the Internet's popularity and increasing use, new laws and regulations may be adopted. These laws and regulations may cover issues such as privacy, pricing, taxation and content. The enactment of any additional laws or regulations may impede the growth of the Internet and our Internet-related business and could place additional financial burdens on our business. TO SUCCEED, WE MUST RESPOND TO THE RAPID CHANGES IN TECHNOLOGY AND DISTRIBUTION CHANNELS RELATED TO THE INTERNET. The markets for our Internet products and services are characterized by: o rapidly changing technology; o evolving industry standards; o frequent new product and service introductions; 2 5 o shifting distribution channels; and o changing customer demands. Our success will depend on our ability to adapt to this rapidly evolving marketplace. We may not be able to adequately adapt our products and services or to acquire new products and services that can compete successfully. WE ARE SUBJECT TO INTENSE COMPETITION. The market for Internet products and services is highly competitive. Moreover, the market for Internet products and services lacks significant barriers to entry, enabling new businesses to enter this market relatively easily. Competition in the market for Internet products and services may intensify in the future. Numerous well-established companies and smaller entrepreneurial companies are focusing significant resources on developing and marketing products and services that will compete with our products and services. In addition, many of our current and potential competitors have greater financial, technical, operational, and marketing resources. We may not be able to compete successfully against these competitors in developing our services. Competitive pressures may also force prices for Internet goods and services down and such price reductions may affect our potential future revenue. FUTURE GROWTH MAY PLACE STRAINS ON OUR MANAGERIAL, OPERATIONAL AND FINANCIAL RESOURCES. If we grow as expected, a significant strain on our managerial, operational and financial resources may occur. Further, as the number of our users, advertisers and other business partners grows, we will be required to manage multiple relationships with various customers, strategic partners and other third parties. Future growth or increase in the number of our strategic relationships will strain our managerial, operational and financial resources, inhibiting our ability to achieve the rapid execution necessary to successfully implement our business plan. In addition, our future success will also depend on our ability to expand our sales and marketing organization and our support organization commensurate with the growth of our business and the Internet. PERFUMANIA'S BUSINESS IS SUBJECT TO SEASONAL FLUCTUATIONS, WHICH COULD LEAD TO FLUCTUATIONS IN OUR STOCK PRICE. The operation of Perfumania has historically experienced higher sales in the third and fourth fiscal quarters than in the first and second fiscal quarters. People increase their purchases of fragrances as gift items during the Christmas holiday season which results in significantly higher fourth fiscal quarter retail sales. If our quarterly operating results are below the expectations of stock market analysts, our stock price would likely decline. Our quarterly results may also vary as a result of the timing of new store openings, net sales contributed by new stores and fluctuations in comparable sales of existing stores. Sales levels of new and existing stores are affected by a variety of factors, including the retail sales environment, the level of competition, the effect of marketing and promotional programs, acceptance of new product introductions, adverse weather conditions and general economic conditions. PERFUMANIA MAY EXPERIENCE SHORTAGES OF THE SUPPLIES IT NEEDS BECAUSE IT DOES NOT HAVE LONG-TERM AGREEMENTS WITH SUPPLIERS. Perfumania's success depends to a large degree on our ability to provide an extensive assortment of brand name and designer fragrances. Perfumania has no long-term purchase contracts or other contractual assurance of continued supply, pricing or access to new products. While we believe that Perfumania has good relationships with its vendors, if Perfumania is unable to obtain merchandise from one or more key vendors on a timely basis, or if there is a material change in Perfumania's ability to obtain necessary merchandise, our results of operations could be seriously harmed. PERFUMANIA MAY NOT BE ABLE TO OBTAIN THE FUNDS NEEDED UNDER ITS LINE OF CREDIT TO OPERATE ITS BUSINESS. As discussed above, Perfumania's sales and operating results fluctuate by season, like many specialty retailers. Perfumania's line of credit funds inventory purchases and supports new retail store openings. Any future limitation on its borrowing ability and access to financing could limit the opening of new stores and obtaining 3 6 merchandise on satisfactory terms. Perfumania's current debt agreement expires May 31, 2000 and will automatically renew on a month to month basis thereafter, unless the lender makes demand for repayment or we terminate the agreement. While Perfumania has received formal loan approval for a three year $40 million line of credit with another lender which is expected to close prior to May 31, 2000, there can be no assurance that this closing will occur as currently expected. PERFUMANIA'S PRESIDENT AND KEY PERSONNEL ARE CRITICAL TO OUR BUSINESS, AND THESE KEY PERSONNEL MAY NOT REMAIN WITH PERFUMANIA IN THE FUTURE. Jerome Falic, Perfumania's President, is primarily responsible for its merchandise purchases. He has developed strong, reliable relationships with suppliers and customers of Perfumania's wholesale division in the United States, Europe, Asia and South America. The loss of his service or any of Perfumania's other current executive officers could seriously harm us. PERFUMANIA RECEIVED AN ACCOUNTANTS' REPORT WHICH INDICATES THERE ARE DOUBTS ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN. The report of our independent accountants in connection with Perfumania's audited consolidated financial statements as of January 31, 1998 and January 30, 1999 and for each of the three years in the period ended January 30, 1999, contains an explanatory paragraph indicating factors which create substantial doubt about Perfumania's ability to continue as a going concern. These factors included recurring net losses in fiscal 1998 and 1997 and Perfumania's default on our bank line of credit agreement as a result of our violation of some debt covenants. On July 14, 1999 Perfumania obtained a waiver of default from the bank through September 30, 1999 as of and for the year ending January 30, 1999. PERFUMANIA NEEDS TO SUCCESSFULLY MANAGE ITS GROWTH IN ORDER FOR THE ADDITION OF OUR NEW STORES TO BE PROFITABLE. Even though Perfumania has grown significantly in the past several years, it may not be able to sustain the growth in the number of retail stores and revenues that it has achieved historically. Perfumania's growth is dependent, in large part, upon opening and operating new retail stores on a profitable basis, which in turn is subject to, among other things, securing suitable store sites on satisfactory terms, hiring, training and retaining qualified management and other personnel, having adequate capital resources and successfully integrating new stores into existing operations. It is possible that Perfumania's new stores will not achieve sales and profitability comparable to existing stores, and it is possible that the opening of new locations will adversely effect sales at existing locations. PERFUMANIA COULD BE SUBJECT TO LITIGATION BECAUSE OF THE MERCHANDISING ASPECT OF ITS BUSINESS. Some of the merchandise Perfumania purchases from suppliers is manufactured by entities who are not the owners of the trademarks or copyrights for the merchandise. This practice is common in the fragrance and cosmetics business. The owner of a particular trademark or copyright may challenge Perfumania to demonstrate that the specific merchandise was produced and sold with the proper authority and if Perfumania is unable to demonstrate this, it could, among other things, be restricted from reselling the particular merchandise. This type of restriction could seriously harm Perfumania's business and results of operations. A COMPLAINT HAS BEEN FILED AGAINST PERFUMANIA IN CONNECTION WITH THE BANKRUPTCY OF A FORMER CUSTOMER WHICH COULD RESULT IN SUBSTANTIAL DAMAGES. Perfumania has been characterized as an insider as defined by the United States Bankruptcy Code, in the liquidating plan of reorganization filed on April 6, 1998 by L. Luria & Son, Inc. in the United States Bankruptcy Court, Southern District of Florida because our Chairman of the Board and Chief Executive Officer was the principal of the entity that controlled Luria's. In October 1998, the committee of unsecured creditors in Luria's bankruptcy proceedings filed a complaint with the United States Bankruptcy Court, Southern District of Florida. The complaint alleges that Luria's made preference payments, as defined by the Bankruptcy Court, to Perfumania. The complaint seeks recovery of the preference payments, and disallows any and all of our claims against Luria's 4 7 until Perfumania has made full payment of the preference payments. In July 1999, Perfumania agreed with the committee of unsecured creditors to settle all claims held by Luria's against us for the sum of $1.2 million, payable over the next nine months according to a repayment schedule. This settlement was approved by the Bankruptcy Court in November 1999. The full amount of the settlement was accrued for in Perfumania's financial statements for the year ended January 30, 1999. PERFUMANIA WAS INVOLVED IN A LAWSUIT THAT ALLEGES THAT IT INFRINGED ON PATENT RIGHTS. In December 1993, the patent holder and exclusive licensee in the U.S. of Boucheron filed a complaint against Perfumania in the United States District Court for the Southern District of New York alleging that Perfumania infringed upon their exclusive right to sell the Boucheron bottle and is seeking $1.5 million in damages. Their theory is that they have a valid patent for the bottles and that Perfumania's sales of such bottles infringes upon their patent rights. Perfumania believes that a patentee cannot control by resort to an infringement suit the resale of a patented article which it has sold. In December 1999, both parties entered into a settlement agreement whereby Perfumania paid the plaintiff $50,000 and agreed not to sell any product bearing the name "Boucheron", unless such product is obtained directly from Boucheron USA or another distributor authorized to sell to retail stores. FORWARD LOOKING STATEMENTS Some of the statements in this prospectus, including those that contain the words "anticipate," "believe," "plan," "estimate," "expect," "should," "intend" and other similar expressions, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Those forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of ECOMV or its industry to be materially different from any future results, performance or achievements expressed or implied by those forward-looking statements. Those factors include, among other things, those risks identified in "Risk Factors." You should carefully consider the risks described in this prospectus. USE OF PROCEEDS We will not receive any of the proceeds from the sale of any of the securities being offered by the selling shareholders under this prospectus. Expenses expected to be incurred by us in connection with this offering are estimated to be approximately $35,000. 5 8 SELLING SHAREHOLDERS The following table provides information regarding the beneficial ownership of the common stock by the selling shareholders as of the date of this prospectus and as adjusted to reflect the sale of all of their shares. The selling shareholders either (a) obtained their shares of common stock pursuant to the Stock Purchase Agreement, dated August 31, 1999, (b) obtained Series C Convertible Notes which are convertible into common stock pursuant to the terms of the Securities Purchase Agreement, dated March 9, 2000, or (c) Series D Convertible Notes which are convertible into common stock pursuant to the terms of the Securities Purchase Agreement, dated as of March 27, 2000. No selling shareholder has had any position, office or other material relationship with ECOMV within the past three years, other than as listed in the footnotes. The selling shareholders are participating in this offering pursuant to contractual registration rights granted to the selling shareholders in connection with the Stock Purchase Agreement and Securities Purchase Agreements. In connection with the Stock Purchase Agreement and the Securities Purchase Agreements, we have agreed to file and maintain the effectiveness of the registration statement of which this prospectus forms a part and to pay all fees and expenses incident to the registration of this offering, including all registration and filing fees, all fees and expenses of complying with state blue sky or securities laws, all costs of preparation of the registration statement and fees and disbursements of our counsel and independent public accountants.
$ of Series C $ of Series D Convertible Number of Convertible Notes shares Notes Number of purchased assuming purchased shares Shares under conversion under assuming acquired in Securities of the Securities conversion Purchase Purchase Series C Purchase of Series D Ownership Agreement, Agreement, Convertible Agreement, Convertible of dated dated Notes on dated Notes on Shares(2) NAME AND ADDRESS OF August 31, March 9, April 19, March 27, April 19, --------------------------- BENEFICIAL OWNER 1999 2000 2000(1) 2000 2000(1) Shares(3)(4) Percentage(5) - ----------------------------------- ----------- ---------- ----------- ------------- ----------- ------------ ------------- S. Robert Productions, LLC(9)...... 0 $ 250,000 99,010 $ 0 0 426,082 4.9 666 Dundee Road Suite 1901 Northbrook, IL 60062 Cranshire Capital, L.P.(10)........ 0 1,750,000 693,069 2,000,000 792,079 426,082 4.9 c/o Downsview Capital, Inc. 666 Dundee Road Suite 1901 Northbrook, IL 60062 EP Opportunity Fund, L.L.C(11)..... 0 0 0 469,000 185,743 427,635 4.9 77 West Wacker Drive Chicago, IL 60601 EP Opportunity Fund International, Ltd.(12)......... 0 0 0 31,000 12,277 224,158 2.7 77 West Wacker Drive Chicago, IL 60601 The dotCom Fund, LLC(13)........... 0 1,250,000 495,050 2,000,000 792,079 416,815 4.9 c/o Minamax, LLC 666 Dundee Road Suite 1901 Northbrook, IL 60062 EP.com Fund, LLC(14)............... 0 600,000 237,624 400,000 158,416 427,635 4.9 77 West Wacker Drive Chicago, IL 60601 EP.com Fund International, Ltd.(15)........................ 0 150,000 59,406 0 0 257,426 2.8 77 West Wacker Drive Chicago, IL 60601 EURAM Cap Strat. "A" Fund Limited(16)..................... 0 0 0 100,000 39,604 426,082 4.9 c/o JMJ Capital, Inc. 666 Dundee Road Suite 1901 Northbrook, IL 60062 Parlux Fragrances(17).............. 1,512,406 0 0 0 0 1,512,406 18.2 3725 S.W. 30th Avenue Ft. Lauderdale, FL 33312 --------- ---------- --------- ---------- --------- --------- ---- Total..................... 1,512,406 $4,000,000 1,584,159 $5,000,000 1,980,198 4,544,321 ========= ========== ========= ========== ========= =========
Number of Shares of Series C Ownership and After Series D Number of the Assuming Shares Offering(8) NAME AND ADDRESS OF Conversion Registered --------------------- BENEFICIAL OWNER (6) (7) Shares Percentage ---------- ---------- ------- ---------- S. Robert Productions, LLC(9)....... 99,010 198,020 138,695 1.6% 666 Dundee Road Suite 1901 Northbrook, IL 60062 Cranshire Capital, L.P.(10)......... 1,485,148 2,970,296 448,037 4.9 c/o Downsview Capital, Inc. 666 Dundee Road Suite 1901 Northbrook, IL 60062 EP Opportunity Fund, L.L.C(11)...... 185,743 371,486 208,405 2.3 77 West Wacker Drive Chicago, IL 60601 EP Opportunity Fund International, Ltd.(12).......... 12,277 24,554 0 0 77 West Wacker Drive Chicago, IL 60601 The dotCom Fund, LLC(13)............ 1,287,129 2,574,258 438,330 4.9 c/o Minamax, LLC 666 Dundee Road Suite 1901 Northbrook, IL 60062 EP.com Fund, LLC(14)................ 396,040 792,080 177,514 2.0 77 West Wacker Drive Chicago, IL 60601 EP.com Fund International, Ltd.(15)......................... 59,406 118,812 0 0 77 West Wacker Drive Chicago, IL 60601 EURAM Cap Strat. "A" Fund Limited(16)...................... 39,604 79,208 0 0 c/o JMJ Capital, Inc. 666 Dundee Road Suite 1901 Northbrook, IL 60062 Parlux Fragrances(17)............... 0 1,512,406 0 0 3725 S.W. 30th Avenue Ft. Lauderdale, FL 33312 --------- --------- --------- -------- Total...................... 3,564,357 8,641,120 1,367,511 ========= ========= =========
6 9 - ------------------- * Less than 1%. (1) Assumes a conversion price of $2.525, determined as if conversion occurred on April 19, 2000 pursuant to the terms of the convertible notes. (2) Under the Series C and D Convertible Notes, no selling shareholder can convert the Series C and D Convertible Notes to the extent such conversion would cause such selling shareholder's beneficial ownership of our common stock to exceed 4.9% of the outstanding shares of common stock. (3) Total shares including shares acquired pursuant to the following agreements, taking into account contractual restrictions (i) Stock Purchase Agreement, dated August 31, 1999, with Parlux, (ii) Securities Purchase Agreement, dated April 28, 1997, for the Series A convertible notes, (iii) Securities Purchase Agreement, dated July 9, 1999, for the Series B convertible notes, (iv) Securities Purchase Agreement, dated March 9, 2000, for the Series C convertible notes, (v) Securities Purchase Agreement, dated March 27, 2000 for the Series D convertible notes, (vi) stock purchased in the open market or through prior private placements, and (vii) shares deemed to be beneficially owned as part of a control group. (4) Due to the affiliation of Mr. Kopin, S. Robert Productions, LLC, Cranshire Capital, L.P. and EURAM Cap Strat. "A" Fund Limited are in the same control group. Due to the affiliation of Jeffrey Eisenberg, EP Opportunity Fund, L.L.C., EP Opportunity Fund International, Ltd., EP.com Fund L.L.C. and EP.com Fund International, Ltd. are in the same control group. (5) Based on 8,299,623 shares issued and outstanding on April 19, 2000, and for each selling shareholder, if applicable, the shares of common stock issued upon conversion of such shareholder's Series A, B, C and D Convertible Notes, to the extent contractually permitted. (6) Assumes no contractual restriction on conversion. (7) Includes 200% (due to contractual obligations) of the common stock issuable upon conversion of the Series C convertible notes and Series D convertible notes despite any conversion restrictions. (8) Assumes sale of all of the shares beneficially owned by such selling shareholder and subsequent conversion of the remaining note at the April 19, 2000 conversion price, to the extent contractually permitted. (9) S. Robert Productions, LLC is a limited liability company whose manager is Mitchell P. Kopin. (10) Cranshire Capital, L.P. is a limited partnership whose general partner is Downsview Capital, Inc., a corporation whose president is Mitchell P. Kopin. (11) EP Opportunity Fund, L.L.C. is a limited liability company whose manager is Eisenberg Partners, L.L.C., a limited liability company whose manager is Jeffrey Eisenberg. (12) EP Opportunity Fund International, Ltd., is a foreign company whose investment manager is Eisenberg Partners, L.L.C. a limited liability company whose manager is Jeffrey Eisenberg. (13) The dotCom Fund, LLC is a limited liability company whose manager is Minamax, LLC, a limited liability company whose manager is Mark Rice. (14) EP.com Fund, L.L.C. is a limited liability company whose manager is Eisenberg Partners, L.L.C., a limited liability company whose manager is Jeffrey Eisenberg. (15) EP.com Fund International, Ltd., is a foreign company whose investment manager is Eisenberg Partners, L.L.C., a limited liability company whose manager is Jeffrey Eisenberg. (16) EURAM Cap Strat. "A" Fund Limited is a Cayman Island exempted company whose investment manager is JMJ Capital, Inc., a corporation whose president is Mitchell P. Kopin. (17) Parlux Fragrances, Inc. is a public company engaged in the manufacture of fragrances. Ilia Lekach, our Chairman of the Board and Chief Executive Officer, and one of our principal shareholders, is the Chairman of the Board of Parlux. During the fiscal year ended January 29, 2000 we purchased approximately $30 million of merchandise from Parlux, representing approximately 21.6% of our total purchases. We believe that our purchases of merchandise from Parlux, were, except for credit terms, on terms no less favorable to us than could reasonably be obtained in arm's length transactions with independent third parties. On August 31, 1999 we entered into a stock purchase agreement with Parlux. The agreement calls for the transfer of 1,512,406 shares of our treasury stock to Parlux in consideration for a partial reduction of our outstanding trade indebtedness balance of approximately $4.5 million. The transfer price was based on a per share price of $2.98, which approximates 90% of the closing price on our common stock for the previous 20 business days. Pursuant to this agreement the parties entered into a registration rights agreement dated August 31, 1999, which grants Parlux demand registration rights. 7 10 PLAN OF DISTRIBUTION GENERAL TRANSACTIONS. The selling shareholders may offer and sell their shares of common stock in one or more of the following transactions: o on the Nasdaq National Market, o in the over-the-counter market, o in negotiated transactions, or o in a combination of any of these transactions. PRICES. The selling shareholders may sell their shares of common stock at any of the following prices: o fixed prices which may be changed, o market prices prevailing at the time of sale, o prices related to prevailing market prices, or o negotiated prices. DIRECT SALES; AGENTS, DEALERS AND UNDERWRITERS. The selling shareholders may effect transactions by selling the shares of common stock in any of the following ways: o directly to purchasers, or o to or through agents, dealers or underwriters designated from time to time. Agents, dealers or underwriters may receive compensation in the form of underwriting discounts, concessions or commissions from the selling shareholders and/or the purchasers of shares for whom they act as agent or to whom they sell as principals, or both. The selling shareholders and any agents, dealers or underwriters that act in connection with the sale of shares might be deemed to be "underwriters" within the meaning of Section 2(11) of the Securities Act, and any discount or commission received by them and any profit on the resale of shares as principal might be deemed to be underwriting discounts or commissions under the Securities Act. SUPPLEMENTS. To the extent required, we will set forth in a supplement to this prospectus filed with the SEC the number of shares to be sold, the purchase price and public offering price, the name or names of any agent, dealer or underwriter, and any applicable commissions or discounts with respect to a particular offering. STATE SECURITIES LAW. Under the securities laws of some states, the selling shareholders may only sell the shares in those states through registered or licensed brokers or dealers. In addition, in some states the selling shareholders may not sell the shares unless they have been registered or qualified for sale in that state or an exemption from registration or qualification is available and is satisfied. EXPENSES; INDEMNIFICATION. We will not receive any of the proceeds from the sale of the shares of common stock sold by the selling shareholders and will bear all expenses related to the registration of this offering but will not pay for any underwriting commissions, fees or discounts, if any. We will indemnify the selling shareholders against some civil liabilities, including some liabilities which may arise under the Securities Act. 8 11 LEGAL MATTERS Greenberg Traurig, P.A., of Miami, Florida, has passed upon the validity of the issuance of our shares of common stock offered in this prospectus. EXPERTS The consolidated financial statements incorporated in this Prospectus by reference to the Annual Report on Form 10-K of Perfumania, Inc. for the year ended January 30, 1999 have been so incorporated in reliance on the report (which contains an explanatory paragraph relating to Perfumania's ability to continue as a going concern as described in Note 2 to the consolidated financial statements) of PricewaterhouseCoopers LLP, independent certified public accountants, given on the authority of said firm as experts in auditing and accounting. WHERE YOU CAN FIND MORE INFORMATION We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any document that we file at the Public Reference Room of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. You may also inspect our filings at the regional offices of the SEC located at 7 World Trade Center, New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference rooms. Our SEC filings are also available to the public at the SEC's web site at http://www.sec.gov. You can also inspect reports and other information we file at the offices of The Nasdaq Stock Market, Inc., 1735 K Street, Washington, D.C. 20006. The SEC allows us to "incorporate by reference" some of the documents that we file with it into this prospectus, which means: o incorporated documents are considered part of this prospectus; o we can disclose important information to you by referring you to those documents; and o information that we file with the SEC will automatically update and supersede this incorporated information. We incorporate by reference the documents listed below, which were filed with the SEC under the Securities Exchange Act of 1934: o our annual report on Form 10-K for the fiscal year ended January 30, 1999; o our quarterly reports on Form 10-Q for the periods ended May 1, 1999, July 31, 1999 and October 30, 1999; and o our current reports on Form 8-K dated February 1, 2000 and April 4, 2000, as amended, each as subsequently amended. We also incorporate by reference each of the following documents that we will file with the SEC after the date of this prospectus: o any reports filed under Sections 13(a) and (c) of the Securities Exchange Act; o definitive proxy or information statements filed under Section 14 of the Securities Exchange Act in connection with any subsequent stockholders' meetings; and 9 12 o any reports filed under Section 15(d) of the Securities Exchange Act. You should assume that the information appearing in this prospectus is accurate as of the date of this prospectus only. Our business, financial position and results of operations may have changed since that date. You may request a copy of any filings referred to above (excluding exhibits), at no cost, by contacting us at the following address: Judy Hilsenrath Investor Relations E Com Ventures, Inc. 11701 N.W. 101st Road Miami, Florida 33178 (305) 889-1600 10 13 =============================================================================== - ------------------------------------------------------------------------------- NO DEALER, SALES PERSON OR ANY OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY US. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. ----------------- TABLE OF CONTENTS PAGE Prospectus Summary..........................................................1 Risk Factors................................................................2 Forward Looking Statements..................................................5 Use of Proceeds.............................................................5 Selling Shareholders........................................................6 Plan of Distribution........................................................8 Legal Matters...............................................................9 Experts.....................................................................9 Where You Can Find More Information.........................................9 - ------------------------------------------------------------------------------- =============================================================================== =============================================================================== - ------------------------------------------------------------------------------- 4,918,007 SHARES E COM VENTURES, INC. COMMON STOCK ------------------- PROSPECTUS ------------------- APRIL __, 2000 - ------------------------------------------------------------------------------- =============================================================================== 14 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION (1) The following table sets forth the costs and expenses (subject to future contingencies) incurred or expected to be incurred by the Registrant in connection with the offering. The Registrant has agreed to pay all the costs and expenses of this offering. Securities and Exchange Commission Registration Fee............... $ 7,415 Accounting Fees and Expenses...................................... 10,000 Legal Fees and Expenses........................................... 15,000 Printing Expenses................................................. 1,500 Miscellaneous..................................................... 1,085 --------- Total.................................................... $ 35,000 ========= - --------------------- (1) The amounts set forth above, except for the SEC fee, are in each case estimated. ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS The Registrant has authority under Section 607.0850 of the Florida Business Corporation Act to indemnify its directors and officers to the extent provided in such statute. The Registrant's Articles of Incorporation provide that the Registrant may indemnify its executive officers and directors to the fullest extent permitted by law whether now or hereafter. The provisions of the Florida Business Corporation Act that authorize indemnification do not eliminate the duty of care of a director, and in appropriate circumstances equitable remedies such as injunctive or other forms of nonmonetary relief will remain available under Florida law. In addition, each director will continue to be subject to liability for (a) violations of the criminal law, unless the director had reasonable cause to believe his conduct was lawful or had no reasonable cause to believe his conduct was unlawful; (b) deriving an improper personal benefit from a transaction; (c) voting for or assenting to an unlawful distribution; and (d) willful misconduct or a conscious disregard for the best interests of the Registrant in a proceeding by or in the right of the Registrant to procure a judgment in its favor or in a proceeding by or in the right of a shareholder. The statute does not affect a director's responsibilities under any other law, such as the federal securities laws or state or federal environmental laws. ITEM 16. EXHIBITS The following exhibits are included as part of this Registration Statement: EXHIBITS DESCRIPTION 5.1 Opinion of Greenberg Traurig, P.A. 10.14 Stock Purchase Agreement, dated as of August 31, 1999 by and among Parlux Fragrances, Inc. and Perfumania, Inc. 10.15 Securities Purchase Agreement, dated as of March 9, 2000, between the Registrant and the investors set forth therein II-1 15 EXHIBITS DESCRIPTION 10.16 Securities Purchase Agreement, dated as of March 27, 2000, between the Registrant and the investors set forth therein 23.1 Consent of Greenberg Traurig, P.A. (contained in exhibit 5.1) 23.2 Consent of PricewaterhouseCoopers LLP 24.1 Power of Attorney (filed with the signature page) ITEM 17. UNDERTAKINGS (a) The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;" provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the registration statement is on Form S-3, Form S-8 or Form F-3, and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement. (2) That, for the purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (4) If the registrant is a foreign private issuer, to file a post-effective amendment to the registration statement to include any financial statements required by Rule 3-19 of this chapter at the start of any delayed offering or throughout a continuous offering. Financial statements and information otherwise required by Section 10(a)(3) of the Act need not be furnished, provided, that the registrant includes in the prospectus, by means of a post-effective amendment, financial statements required pursuant to this paragraph (a)(4) and other information necessary to ensure that all other information in the prospectus is at least as current as the date of those financial statements. Notwithstanding the foregoing, with respect to registration statements on Form F-3, a post-effective II-2 16 amendment need not be filed to include financial statements and information required by Section 10(a)(3) of the Act or Rule 3-19 of this chapter if such financial statements and information are contained in periodic reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the Form F-3. (b) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. II-3 17 SIGNATURES Pursuant to the requirements of the Securities Act, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Miami, State of Florida, on the 24th day of April, 2000. E COM VENTURES, INC. By: /s/ Ilia Lekach ------------------------------------------ Ilia Lekach Chairman and Chief Executive Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Ilia Lekach and Donovan Chin, and each of them, his true and lawful attorney-in-fact and agents, with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, including a Registration Statement filed pursuant to Rule 462 under the Securities Act of 1933, as amended, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-fact or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ Ilia Lekach Chairman of the Board and Chief Executive April 24, 2000 - ---------------------------------------- Officer (Principal Executive Officer) Ilia Lekach /s/ Jerome Falic President and Vice Chairman of the Board April 24, 2000 - ---------------------------------------- Jerome Falic /s/ Donovan Chin Chief Financial Officer and Director April 24, 2000 - ---------------------------------------- (Principal Financial and Accounting Donovan Chin Officer) /s/ Marc Finer Director April 24, 2000 - ---------------------------------------- Marc Finer /s/ Robert Pliskin Director April 24, 2000 - ---------------------------------------- Robert Pliskin Director - ---------------------------------------- Carole Ann Taylor /s/ Horatio Groisman, M.D. Director April 24, 2000 - ---------------------------------------- Horatio Groisman, M.D. /s/ Zalman Lakach Director April 24, 2000 - ---------------------------------------- Zalman Lakach
II-4 EX-5.1 2 OPINION OF GREENBERG TRAURIG 1 EXHIBIT 5.1 GREENBERG TRAURIG, P.A. APRIL 24, 2000 E Com Ventures, Inc. 11701 N.W. 101st Road Miami, Florida 33178 Ladies and Gentlemen: We have acted as counsel for E Com Ventures, Inc., a Florida corporation (the "Company"), in connection with the Company's Registration Statement on Form S-3 (the "Registration Statement") being filed by the Company under the Securities Act of 1933, as amended, with respect to 8,641,120 shares (the "Shares") of the Company's common stock, par value $.01 per share (the "Common Stock"), which may be disposed of from time to time by the selling shareholders (the "Selling Shareholders") named therein. Of the shares of Common Stock offered thereby, 7,128,714 are issuable to the Selling Shareholders, or their permitted assignees, upon the conversion of the Company's Series C and Series D Convertible Notes (the "Notes") and 1,512,406 shares issued to Parlux Fragrances, Inc. In connection with the preparation of the Registration Statement and this letter, we have examined, considered and relied upon the following documents (collectively, the "Documents"): the Company's Articles of Incorporation (as amended) as filed with the Secretary of State of the State of Florida; the Company's bylaws and corporate minute book; and such other documents and matters of law as we have considered necessary or appropriate for the expression of the opinions contained herein. In rendering the opinions set forth below, we have assumed without investigation the genuineness of all signatures and the authenticity of all documents submitted to us as originals, the conformity to authentic original documents of all documents submitted to us as copies, and the veracity of the Documents. As to questions of fact material to the opinions hereinafter expressed, we have relied upon the representations and warranties of the Company made in the Documents. Based solely upon and subject to the Documents, and subject to the qualifications set forth below, we are of the opinion that the Shares to be sold by the Selling Shareholders pursuant to the Registration Statement have been duly authorized and are, or when issued pursuant to the terms of the Notes, will be, validly issued and are, or when issued in accordance with the terms thereof will be, fully paid and nonassessable. Although we have acted as counsel to the Company in connection with certain other matters, our engagement is limited to certain matters about which we have been consulted. Consequently, there may exist matters of a legal nature involving the Company in connection with which we have not been consulted and have not represented the Company. This opinion letter is limited to the matters stated herein and no opinions may be implied or inferred beyond the matters expressly stated herein. The opinions expressed herein are as of the date hereof, and we assume no obligation to update or supplement such opinions to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to us under the caption "Legal Matters" in the prospectus contained in the Registration Statement. In giving such consent, we do not admit that we come within the category of persons whose consent is required by Section 7 of the Securities Act of 1933, as amended, and the rules and regulations thereunder. Very truly yours, GREENBERG TRAURIG, P.A. EX-10.14 3 STOCK PURCHASE AGREEMENT 7/31/99 1 EXHIBIT 10.14 STOCK PURCHASE AGREEMENT ---------------------------------- STOCK PURCHASE AGREEMENT (the "Agreement") dated as of August 31, 1999, by and among PARLUX FRAGRANCES, INC., a Delaware corporation (the "Purchaser"), and PERFUMANIA, INC., a Florida corporation (the "Seller"). WHEREAS, the Purchaser, desires to acquire from the Seller 1,512,406 shares of the Seller's common stock, par value $.01 per share, (the "Stock"), and the Seller desires to sell the Stock to the Purchaser in consideration for a partial reduction of outstanding trade indebtedness due from the Seller to the Purchaser in the amount of $4,506,970; NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, the Purchaser and the Seller agree as follows: ARTICLE I PURCHASE AND SALE 1.1 The Purchase. (a) Upon satisfaction of all conditions precedent set forth herein, on the Closing Date (as defined below), the Seller shall sell and deliver the Stock to the Purchaser in consideration of a cancellation of the amount of trade indebtedness owed by the Seller to the Purchaser in the amount of $4,506,970. (b) At the Closing, the Seller shall deliver to the Purchaser a certificate representing the Stock which the Purchaser is purchasing and the Purchaser shall deliver to the Seller an instrument executed by the Purchaser canceling $4,506,970 of trade indebtedness owed by the Seller to the Purchaser. The certificate representing the Stock shall bear the following legend: THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES COMMISSION OF ANY STATE UNDER ANY STATE SECURITIES LAW. THE SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE DISTRIBUTED IN THE UNITED STATES OR TO ANY U.S. PERSONS UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, OR SUCH OFFERS, SALES AND TRANSFERS ARE MADE PURSUANT TO AVAILABLE EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND THOSE LAWS. (c) The Seller acknowledges and agrees that the trade indebtedness to be canceled shall be comprised of the indebtedness which has been outstanding for the longest period. 1.2 Closing. The Closing of the transactions described in Section 1.1 shall take place at the offices of the Seller, on September 3, 1999 (the "Closing Date") or such other date, time, and place as may be agreed upon by the Purchaser and the Seller. ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SELLER The Seller represents and warrants to the Purchaser that at the Closing Date: 2 2.1 Due Incorporation; Organization. The Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Florida. Each of the Seller's significant subsidiaries (within the meaning of Regulation S-X under the Securities Exchange Act of 1934, as amended, (the "Significant Subsidiaries")) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation. The Seller and each of the Significant Subsidiaries has the requisite corporate power and authority to own, operate or lease its assets and properties and to carry on its business as it is now being conducted, and is duly qualified or licensed to do business, and is in good standing, in each jurisdiction in which the nature of its business or the properties owned, operated or leased by it makes such qualification, licensing or good standing necessary, except where the failure to have such power or authority, or the failure to be so qualified, licensed or in good standing, would not have a Material Adverse Effect. The term "Material Adverse Effect" as used in this Agreement, means any change in or effect on the business, operations or financial condition of the Seller or any of its subsidiaries that is materially adverse to the Seller and its subsidiaries taken as a whole except for (i) any change or effect resulting from general economic, financial or market conditions or (ii) any change or effect resulting from conditions or circumstances generally effecting the fragrance and cosmetics industry. 2.2 Certificate of Incorporation and By-Laws. The Seller has heretofore made available to Purchaser a complete and correct copy of the certificate of incorporation and the by-laws, each as amended to the date hereof, of the Seller and no action to amend or modify either thereof has been taken. 2.3 Capitalization; Shares. (a) The authorized capital stock of the Seller consists of 25,000,000 common shares, par value $.01 per share. The Seller has 7,644,028 shares of common stock outstanding and 1,512,406 shares of common stock held as treasury stock as of July 31, 1999. (b) The Stock when issued, sold and delivered in accordance with the terms and for the consideration expressed in this Agreement, shall be duly and validly issued, fully-paid and nonassessable. 2.4 Authority Relative to this Agreement. The Seller has all necessary corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by the Seller and the consummation by the Seller of the transactions contemplated hereby have been duly and validly authorized and approved by the Board of Directors of the Seller and no other corporate proceedings on the part of the Seller are necessary to authorize or approve this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by the Seller and constitutes a valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms, except that such enforceability (i) may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting or relating to the enforcement of creditor's rights generally and (ii) is subject to general principles of equity. 2.5 No Conflict; Required Filings and Consents. (a) None of the execution and delivery of this Agreement by the Seller, the consummation by the Seller of the transactions contemplated hereby or compliance by the Seller with any of the provisions hereof will (i) conflict with or violate the certificate of incorporation or by-laws of the Seller or the comparable organizational documents of any of its Significant Subsidiaries, (ii) conflict with or violate any statute, ordinance, rule, regulation order, judgment or decree applicable to the Seller or its Significant Subsidiaries, or by which any of them or any of their respective properties or assets may be bound or affected, or (iii) result in a violation or breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in any loss of any material benefit, or the creation of any lien on any of the property or assets of the Seller or any of its Significant Subsidiaries (any of the foregoing referred to in clause (ii) or this clause (iii) being a "Violation") pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Seller or any of its Significant Subsidiaries is a party or by which the Seller or any of its subsidiaries or any of their respective properties may be bound or affected, except in the case of the foregoing clauses (ii) or (iii) for any such Violations which would not have a Material Adverse Effect. (a) None of the execution and delivery of this Agreement by the Seller, the consummation by the Seller of the transactions contemplated hereby or compliance by the Seller with any of the provisions hereof will require any consent, waiver, approval, authorization or permit of, or registration or filing with or notification to (any of the foregoing being a "Consent"), any government or subdivision thereof, or any administrative, governmental or regulatory authority, agency, commission, tribunal or body, domestic, foreign or supranational (a 2 3 "Governmental Entity"), except for (i) compliance with any applicable requirements of the Securities Act and the Securities Exchange Act of 1934, as amended (the "Exchange Act") or (ii) consents the failure of which to obtain or make would not have a Material Adverse Effect or materially adversely effect the ability of the Seller to consummate the transactions contemplated hereby. 2.6 SEC Reports and Financial Statements. (a) The Seller has filed with the SEC all forms, reports, schedules, registration statements and definitive proxy statements (the "SEC Reports") required to be filed by the Seller with the Securities and Exchange Commission (the "SEC"). As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Exchange Act or the Securities Act and the rules and regulations of the SEC promulgated thereunder applicable, as the case may be, to such SEC Reports, and none of the SEC Reports contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading. (b) The consolidated balance sheets as of January 30, 1999 and the related consolidated statements of operations, common shareholders' equity and cash flows for each of the three fiscal years in the period ended January 30, 1999 (including the related notes and schedules thereto) of the Seller contained in the Seller's Form 10-K for the year ended January 30, 1999 included in the SEC Reports present fairly, in all material respects, the consolidated financial position and the consolidated results of operations and cash flows of the Seller and its consolidated subsidiaries as of the dates or for the periods presented therein in conformity with United States generally accepted accounting principles applied on a consistent basis ("GAAP") during the periods involved except as otherwise noted therein, including the related notes. (c) The consolidated balance sheets and the related statements of operations and cash flows (including in each case the related notes thereto) of the Seller contained in the Form 10-Q for the period ended May 1, 1999 included in the SEC Reports (collectively, the "Quarterly Financial Statement") have been prepared in accordance with the requirements for interim financial statements contained in Regulation S-X. The Quarterly Financial Statement reflects all adjustments, which include only normal recurring adjustments, necessary to present fairly, in all material respects, the consolidated financial position, results of operations and cash flows of the Seller for the period presented therein in conformity with GAAP except as otherwise noted therein, including the related notes. 2.7 Litigation. As of the date hereof, there is no suit, action or proceeding pending or, to the knowledge of the Seller, threatened against or affecting the Seller or any of its subsidiaries that, individually or in the aggregate, would have a Material Adverse Effect, nor is there any judgment, decree, injunction or order of any Governmental Entity or arbitrator outstanding against the Seller or any of its subsidiaries that would have, individually or in the aggregate, a Material Adverse Effect. 2.8 Compliance with Applicable Laws. To the knowledge of the Seller, the Seller and its subsidiaries are in substantial compliance with all laws, regulations and orders of any Governmental Entity applicable to it or such subsidiaries, except for such failures so to comply which would not have a Material Adverse Effect. To the knowledge of the Seller, the business operations of the Seller and its subsidiaries are not being conducted in violation of any law, ordinance or regulation of any Governmental Entity, except for possible violations which, individually or in the aggregate, would not have a Material Adverse Effect on the Seller. 2.9 Material Adverse Change. Between May 1, 1999 and the date hereof, there has not been any change in the business, operations or financial condition of the Seller or any of its subsidiaries that is materially adverse to the Seller and its subsidiaries taken as a whole, except for (i) any change resulting from general economic, financial or market conditions or (ii) any change resulting from conditions or circumstances generally affecting the perfume industry. 2.10 Solvency. As of the date of this Agreement the Seller is Solvent. For the purposes of this Agreement, "Solvent" means with respect to the Seller on a particular date, that on such date (i) the fair value of the property of the Seller is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of the Seller, (ii) the present fair saleable value of the assets of the Seller is not less than the amount that will be required to pay the probable liability of the Seller on its debts as they become absolute and matured, (iii) the Seller is able to realize upon its assets and pay its debts and other liabilities, contingent obligations and other 3 4 commitments as they mature in the normal course of business, (iv) the Seller does not intend to, and does not believe that it will, incur debts or liabilities beyond the Seller's ability to pay as such debts and liabilities mature, and (v) the Seller is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which the Seller's property would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which the Seller is engaged. In computing the amount of contingent liabilities at any time, it is intended that such liabilities will be computed at the amount which, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability taking into account any subrogation and contribution rights. ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER 3.1 Due Organization. Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware with all requisite power and authority to own and operate its assets and properties as they are now being owned and operated. 3.2 Due Authorization. (a) Purchaser has duly and validly executed and delivered this Agreement. This Agreement constitutes the legal, valid and binding obligation of the Purchaser, enforceable against the Purchaser in accordance with its terms. (b) The Purchaser has full power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. 3.3 Consents and Approvals; Authority Relative to This Agreement. Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby will (a) violate any provisions of the certificate of incorporation or by-laws of the Purchaser, (b) with or without the giving of notice or passage , or both, violate , or be in conflict with, or constitute a default, or permit the termination of, or cause the acceleration of the maturity of, any agreement, instrument, contract, debt or obligation of the Purchaser, (c) require the consent of any party to any agreement or commitment to which the Purchaser is a party, or by which the Purchaser or its properties or assets is bound, or (d) violate any regulation or any judgment or decree of any court or authority to which the Purchaser is subject. No consent, approval or authorization of, or declaration, filing or registration with, any Governmental Entity is required to be made or obtained by the Purchaser in connection with the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby or thereby. 3.4 No Registration, Etc. The Purchaser acknowledges that the offering and sale of the Stock pursuant to this Agreement (i) has not been registered under the Securities Act, or under the securities or "blue sky" laws, rules or regulations of any State (collectively, the "Securities Laws") and (ii) is intended to be exempt from registration under the Securities Act, by virtue of Section 4(2) of the Act and the provisions of Rule 506 of Regulation D promulgated thereunder by the SEC. In furtherance thereof, the Purchaser represents and warrants to the Seller that it is an "accredited investor", as defined in Rule 501 of Regulation D promulgated under the Securities Act. The Purchaser has been afforded, prior to the execution of this Agreement, the opportunity to ask questions of, and to receive answers from, the Seller and its management, and it has had access to all documents and information which is deemed material to an investment decision with respect to the purchase of the Stock hereunder. The Stock is being purchased for its own account, for investment and not for distribution or resale to others. The Purchaser agrees that it will not transfer the Stock unless the Stock is registered under any applicable Securities Laws or the transfer is otherwise exempt therefrom. The Purchaser further acknowledges that it is aware that it may be considered an "affiliate" of the Seller for purposes of the Securities Act and, accordingly, that any public sales of the Securities by the Purchaser will be subject to Rule 144 promulgated under the Securities Act. 4 5 ARTICLE IV CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER The obligations of the Purchaser to purchase the Stock and to consummate at Closing the transactions contemplated hereby is subject to the satisfaction or waiver by the Purchaser of the following conditions precedent on or before the Closing Date: 4.1 Representations and Warranties. The representations and warranties of the Seller contained in this Agreement shall be accurate, true and correct on and as of the Closing Date. 4.2 Compliance with Agreements and Covenants. The Seller shall have performed and complied in all material respects with all of the covenants, obligations and agreements contained in this Agreement to be performed and complied with by the Seller on or prior to the Closing Date. 4.3 Required Consents. All material consents, authorizations and approvals from, and all material declarations, filings and registrations with, Governmental Entities or third parties required to consummate the transactions contemplated by this Agreement or permit the Seller to continue its business consistent with its prior practice without a Material Adverse Effect shall have been obtained or made and delivered to the Purchaser, in form and substance to the reasonable satisfaction of the Purchaser. 4.4 No Prohibition. No action or proceeding by any Authority shall have been instituted or threatened that would enjoin, restrain, or prohibit the consummation of the transactions as contemplated by this Agreement, or that would, in the reasonable judgment of the Purchaser, make it inadvisable to consummate such transactions, and no court order shall have been entered in any action or proceeding instituted by any party that enjoins, restrains or prohibits this Agreement or the complete consummation of the transactions contemplated by this Agreement. 4.5 No Material Adverse Change. There shall not have occurred any material adverse change (taken together with all other developments) since the date of this Agreement that would have a Material Adverse Effect. 4.6 Documents. The Purchaser shall receive in form and substance satisfactory to it: (a) A certificate, dated the Closing Date, of the Seller substantially to the effect set forth in Sections 4.1 and 4.2 with respect to the representations, warranties and covenants of the Seller; and (b) A legal opinion from counsel to the Seller, dated the Closing Date, in substantially the form of Exhibit A hereto. 4.7 Registration Rights. The Purchaser and the Seller shall have executed and delivered a Registration Rights Agreement in form and substance satisfactory to the Purchaser. ARTICLE V CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLER The obligations of the Seller at the Closing Date under this Agreement are subject to the satisfaction or waiver by the Seller of the following conditions precedent on or before the Closing Date: 5.1 Representations and Warranties. The representations and warranties of the Purchaser contained in this Agreement shall have been accurate, true and correct in all material respects on and as of the date of this Agreement and shall also be accurate, true and correct in all material respects on as of the Closing Date with the same force and effect as though made on and as of the Closing Date. 5.2 Compliance with Agreements and Covenants. The Purchaser shall have performed and complied in all material respects with all of the covenants, obligations and agreements contained in this Agreement to be performed and complied with by the Purchaser on or prior to the Closing Date. 5 6 5.3 Required Consents. All material consents, authorizations and approvals from, and all material declarations, filings and registrations with, Governmental Entities or third parties required to consummate the transactions contemplated by this Agreement shall have been obtained or made and delivered to the Seller, in form and substance to the reasonable satisfaction of the Seller. 5.4 No Prohibition. No action or proceeding by any authority shall have been instituted or threatened that would enjoin, restrain, or prohibit the consummation of the transactions as contemplated by this Agreement, or that would, in the reasonable judgment of the Seller, make it inadvisable to consummate such transactions, and no court order shall have entered in any action or proceeding instituted by any party that enjoins, restrains or prohibits this Agreement or the complete consummation of the transactions as contemplated by this Agreement. 5.5 Documents. The Seller shall receive, in form and substance satisfactory to them a certificate, dated the Closing Date, of Purchaser substantially to the effect set forth in Sections 5.1 and 5.2. ARTICLE VI MISCELLANEOUS 6.1 Termination. This Agreement may be terminated at any time on or prior to the Closing Date: (a) With the mutual consent of the Seller and the Purchaser; (b) By written notice from the Seller or the Purchaser to the other, if the Closing shall not have taken place on or before September 30, 1999; provided, however, that the right to terminate this Agreement under this Section 6.1 shall not be available to any party whose failure to perform any obligation under this Agreement has been the cause of or resulted in the failure of the Closing to occur on or before such date; (c) By the Purchaser, if there shall have been a material breach of any covenant, representation or warranty of the Seller hereunder, and such breach shall not have been remedied within thirty (30) business days after receipt by the Seller of a notice in writing from the Purchaser specifying the breach and requesting such be remedied; (d) By the Seller, if there shall have been a material breach of any covenant, representation or warranty of the Purchaser hereunder, and such breach shall not have been remedied within thirty (30) business days after receipt by the Purchaser of notice in writing from the Seller specifying the breach and requesting such be remedied; (e) By written notice from the Seller or the Purchaser to the other, if any court of competent jurisdiction or other governmental body shall have issued an order, decree or ruling or taken any other action permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement and such order, decree, ruling or other action shall have become final and nonappealable; or (f) Effect of Termination. If this Agreement is terminated pursuant to Section 6.1(a), or (e) all obligations of the parties hereunder shall terminate without liability of any party (or any stockholder, affiliate, director, officer, employee, agent, consultant or representative of any party). No termination pursuant to Section 6.1(b), or (d) shall relieve any party from liability for any willful breach of this Agreement prior to such termination, and the willfully breaching party shall be fully liable for any and all losses sustained or incurred by any other party from such breach. 6.2 Public Announcements. So long as this Agreement is in effect, the Purchaser and the Seller agree to use reasonable efforts to consult with each other before issuing any press release or otherwise making any public statement with respect to the transactions contemplated by this Agreement. 6.3 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF FLORIDA WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF. 6 7 6.4 Amendment; Effective Date. This Agreement may be amended, modified or supplemented but only in writing signed by the Seller and the Purchaser. 6.5 Notices. Any notice, request, instruction or other document to be given hereunder by a party hereto shall be in writing and shall be deemed to have been given, (a) when received if given in person or by courier or a courier service, or (b) on the business day after deposit with a reputable overnight delivery service for next business day delivery. 6.6 Waivers. The failure of a party hereto at any time or times to require performance of any provision hereof shall in no manner affect its right at a later time to enforce the same. No waiver by a party of any condition or any breach of any term, covenant, representation or warranty contained in this Agreement shall be effective unless in writing, and no waiver in any one or more instances shall be deemed to be a further or continuing waiver of any such condition or breach in other instances or a waiver of any other condition or breach of any other term, covenant, representation or warranty. 7 8 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written. PARLUX FRAGRANCES, INC. By: /s/ Frank A. Buttacavoli -------------------------------- Name: Frank A. Buttacavoli Title: Executive VP and CFO PERFUMANIA, INC. By: /s/ Jerome Falic -------------------------------- Name: Jerome Falic Title: President 8 EX-10.15 4 SECURITIES PURCHASE AGREEMENT 3/9/00 1 EXHIBIT 10.15 SECURITIES PURCHASE AGREEMENT This SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of March 9, 2000, is entered into by and among E Com Ventures, Inc., a Florida corporation, with headquarters located at 11701 N.W. 101st Road, Miami, Florida 33178 (the "Company"), and the investors listed on Schedule 1 attached hereto (individually, a "Buyer" and collectively, the "Buyers"). WHEREAS: A. The Company and the Buyers are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Rule 506 of Regulation D ("Regulation D") as promulgated by the United States Securities and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended (the "1933 Act"); B. The Company has authorized the following new series of convertible notes: the Company's Series C Convertible Notes (the "Convertible Notes"), which shall be convertible into shares of the Company's Common Stock, par value $.01 per share (the "Common Stock") (as converted, the "Conversion Shares"), in accordance with the terms of the Company's Series C Convertible Notes, substantially in the form attached hereto as Exhibit A; C. The Buyers wish to purchase, upon the terms and conditions stated in this Agreement, an aggregate of $4,000,000 worth of Convertible Notes in the respective amounts set forth opposite each Buyer's name on Schedule 1; and D. Contemporaneously with the execution and delivery of this Agreement, the parties hereto are executing and delivering a Registration Rights Agreement substantially in the form attached hereto as Exhibit B (the "Registration Rights Agreement") pursuant to which the Company has agreed to provide certain registration rights under the 1933 Act and the rules and regulations promulgated thereunder, and applicable state securities laws. NOW THEREFORE, the Company and the Buyers hereby agree as follows: 1. PURCHASE AND SALE OF CONVERTIBLE NOTES. a. Purchase of Convertible Notes. Subject to the satisfaction (or waiver) of the conditions set forth in Sections 6 and 7 below, the Company shall issue and sell (the "Offering") to each Buyer and each Buyer severally agrees to purchase from the Company the amount of Convertible Notes set forth opposite such Buyer's name on Schedule 1 (the "Closing"). The aggregate purchase price (the "Purchase Price") of all the Convertible Notes offered and sold pursuant to the Offering at the Closing shall be $4,000,000. b. Closing Date. The date and time of the Closing (the "Closing Date") shall be 10:00 a.m. Central Time, within two (2) business days following the date hereof, subject to notification of satisfaction (or waiver) of the conditions to the Closing set forth in Sections 6 and 7 below (or such later date as is mutually agreed to by the Company and the Buyers). The Closing shall occur on the Closing Date at the offices of Katten Muchin & Zavis, 525 West Monroe Street, Suite 1600, Chicago, Illinois 60661-3693. c. Form of Payment. On the Closing Date, (i) each Buyer shall pay the Purchase Price to the Company for the Convertible Notes to be issued and sold to such Buyer at the Closing, by wire transfer of immediately available funds in accordance with the Company's written wire instructions, and (ii) the Company shall deliver to each Buyer, the Convertible Notes (in the denominations as such Buyer shall request) which such Buyer is then purchasing (as indicated opposite such Buyer's name on Schedule 1) hereunder, duly executed on behalf of the Company and registered in the name of such Buyer or its designee. 2. BUYER'S REPRESENTATIONS AND WARRANTIES. Each Buyer represents and warrants with respect to only itself that: 2 a. Investment Purpose. Such Buyer is acquiring the Convertible Notes (the Convertible Notes may also be referred to herein as the "Securities"), for its own account for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof, except pursuant to sales registered or exempt from registration under the 1933 Act; provided, however, that by making the representations herein, such Buyer does not agree to hold any of the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement or an exemption from registration under the 1933 Act. b. Accredited Investor Status. Such Buyer is an "accredited investor" as that term is defined in Rule 501(a)(3) of Regulation D. c. Reliance on Exemptions. Such Buyer understands that the Securities are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and such Buyer's compliance with, the representations, warranties, agreements, acknowledgments and understandings of such Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of such Buyer to acquire such Securities. d. Information. Such Buyer and its advisors, if any, have been furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities which have been requested by such Buyer. Such Buyer and its advisors, if any, have been afforded the opportunity to ask questions of the Company. Neither such inquiries nor any other due diligence investigations conducted by such Buyer or its advisors, if any, or its representatives shall modify, amend or affect such Buyer's right to rely on the Company's representations and warranties contained in Section 3 below. Such Buyer understands that its investment in the Securities involves a high degree of risk. Such Buyer has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Securities. e. No Governmental Review. Such Buyer understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Securities or the fairness or suitability of the investment in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities. f. Transfer or Resale. Such Buyer understands that except as provided in the Registration Rights Agreement: (i) the Securities have not been and are not being registered under the 1933 Act or any state securities laws, and may not be offered for sale, sold, assigned or transferred unless (A) subsequently registered thereunder, (B) such Buyer shall have delivered to the Company an opinion of counsel, in a generally acceptable form, to the effect that such Securities to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration, or (C) such Buyer provides the Company with reasonable assurance that such Securities can be sold, assigned or transferred pursuant to Rule 144 promulgated under the 1933 Act, as amended, (or a successor rule thereto) ("Rule 144"); (ii) any sale of the Securities made in reliance on Rule 144 may be made only in accordance with the terms of Rule 144 and further, if such Buyer intends to utilize Rule 144 but Rule 144 is not applicable to such resale, any resale of the Securities under circumstances in which such Buyer (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii) neither the Company nor any other person is under any obligation to register such Securities under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder. g. Legends. Such Buyer understands that the certificates or other instruments representing the Convertible Notes and, until such time as the sale of the Conversion Shares has been registered under the 1933 Act as contemplated by the Registration Rights Agreement, the stock certificates representing the Conversion Shares, except as set forth below, shall bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of such stock certificates): THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), 2 3 OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (1) IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE 1933 ACT, AND APPLICABLE STATE SECURITIES LAWS, OR (2) IN THE ABSENCE OF AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER THE 1933 ACT OR (3) UNLESS SOLD, TRANSFERRED OR ASSIGNED PURSUANT TO RULE 144 UNDER THE 1933 ACT. The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of the Securities upon which it is stamped, if, unless otherwise required by state securities laws, (i) such Securities are registered for sale under the 1933 Act, (ii) in connection with a sale transaction, such holder provides the Company with an opinion of counsel, in a generally acceptable form, to the effect that a public sale, assignment or transfer of the Securities may be made without registration under the 1933 Act, or (iii) such holder provides the Company with reasonable assurances that the Securities can be sold pursuant to Rule 144 without any restriction as to the number of securities acquired as of a particular date that can then be immediately sold. h. Validity; Enforcement. This Agreement has been duly and validly authorized, executed and delivered on behalf of such Buyer and is a valid and binding agreement of such Buyer enforceable against such Buyer in accordance with its terms, subject as to enforceability to general principles of equity and to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors' rights and remedies. i. Residency. Such Buyer is a resident of that state and country specified in its address on Schedule 1. 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to each of the Buyers that: a. Organization and Qualification. The Company and its "Subsidiaries" (which for purposes of this Agreement means any entity in which the Company, directly or indirectly, owns a majority of the capital stock or holds a majority equity or similar interest) are corporations duly organized and validly existing in good standing under the laws of the jurisdiction in which they are incorporated, and have the requisite corporate power and authorization to own their properties and to carry on their business as now being conducted. Each of the Company and its Subsidiaries is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which its ownership of property or the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect. As used in this Agreement, "Material Adverse Effect" means any material adverse effect on the business, properties, assets, operations, results or operations, or financial condition of the Company and its Subsidiaries, if any, taken as a whole. b. Authorization; Enforcement; Validity. (i) The Company has the requisite corporate power and authority to enter into and perform this Agreement, the Registration Rights Agreement, the Irrevocable Transfer Agent Instructions (as defined in Section 5) and each of the other agreements entered into by the parties hereto in connection with the transactions contemplated by this Agreement (collectively, the "Transaction Documents"), the Convertible Notes, and to issue the Securities in accordance with the terms hereof and thereof, (ii) the execution and delivery of the Transaction Documents and the Convertible Notes by the Company and the consummation by it of the transactions contemplated hereby and thereby, including without limitation the issuance of the Convertible Notes and the reservation for issuance and the issuance of the Conversion Shares issuable upon conversion thereof, have been duly authorized by the Company's Board of Directors and no further consent or authorization is required by the Company, its Board of Directors or its stockholders, (iii) the Transaction Documents have been duly executed and delivered by the Company, and (iv) the Transaction Documents constitute the valid and binding obligations of the Company enforceable against the Company in accordance with their terms, except as 3 4 such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of creditors' rights and remedies. c. Issuance of Securities. The Convertible Notes are duly authorized and, upon issuance in accordance with the terms hereof, shall be (i) validly issued, fully paid and non-assessable, (ii) free from all taxes, liens and charges with respect to the issue thereof and (iii) entitled to the rights and preferences as set forth in the Convertible Notes. 705,218 shares of Common Stock (subject to adjustment pursuant to the Company's covenant set forth in Section 4(d) below) have been duly authorized and reserved for issuance upon conversion of the Convertible Notes. Upon conversion in accordance with the Convertible Notes, the Conversion Shares will be validly issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue thereof, with the holders being entitled to all rights accorded to a holder of Common Stock. Assuming the accuracy of the representations and warranties of the Buyers set forth herein, and in reliance thereon, the issuance by the Company of the Securities is exempt from registration under the 1933 Act. d. No Conflicts. The execution, delivery and performance of the Transaction Documents by the Company, the performance by the Company of its obligations under the Convertible Notes and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the reservation for issuance and issuance of the Conversion Shares) will not (i) result in a violation of the Company's Articles of Incorporation, any outstanding series of notes or preferred stock of the Company or the Company's By-laws or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any material agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party, or result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and the rules and regulations of the Principal Market (as defined below)) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected, except in the case of (ii) above, where such conflict or default would not have a Material Adverse Effect. Neither the Company nor its Subsidiaries is in violation of any term of or in default under its Articles of Incorporation, any outstanding series of notes or preferred stock of the Company or By-laws or their organizational charter or by-laws, respectively. Neither the Company nor any of its Subsidiaries is in violation of any term of or in default under any contract, agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or order or any statute, rule or regulation applicable to the Company or its Subsidiaries, except for possible violations or defaults which would not have a Material Adverse Effect. The business of the Company and its Subsidiaries is not being conducted, and shall not be conducted, in violation of any law, ordinance, regulation of any governmental entity, except for possible violations the sanctions for which either individually or in the aggregate would not have a Material Adverse Effect. Except as specifically contemplated by this Agreement and as required under the 1933 Act, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency or any regulatory or self-regulatory agency in order for it to execute, deliver or perform any of its obligations under or contemplated by the Transaction Documents or to perform its obligations under the Convertible Notes, in each case in accordance with the terms hereof or thereof. All consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof. The Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing. The Company is not in violation of the listing requirements of the Principal Market (as defined below). e. SEC Documents; Financial Statements. Since December 16, 1998, the Company has filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the "1934 Act") (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein being hereinafter referred to as the "SEC Documents"). The Company has delivered to the Buyers or their respective representatives true and complete copies of the SEC Documents. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. As of their 4 5 respective dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). No other information provided by or on behalf of the Company to the Buyers which is not included in the SEC Documents, including, without limitation, information referred to in Section 2(d) of this Agreement, contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein, in the light of the circumstance under which they are or were made, not misleading. Neither the Company nor any of its Subsidiaries or any of their officers, directors, employees or agents have provided the Buyers with any material, nonpublic information. f. Absence of Certain Changes. Since the filing of the most recent SEC Document, there has been no material adverse change and no material adverse development in the business, properties, operations, financial condition, or results of operations of the Company or its Subsidiaries. The Company has not taken any steps, and does not currently expect to take any steps, to seek protection pursuant to any bankruptcy law nor does the Company or any of its Subsidiaries have any knowledge that its creditors intend to initiate involuntary bankruptcy proceedings. g. Absence of Litigation. Except as set forth in the SEC Documents, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company or any of its Subsidiaries, threatened against or affecting the Company, the Common Stock or any of the Company's Subsidiaries or any of the Company's or the Company's Subsidiaries' officers or directors in their capacities as such, except as to which an adverse outcome would not have a Material Adverse Effect. h. Acknowledgment Regarding Buyers' Purchase of Convertible Notes. The Company acknowledges and agrees that each of the Buyers is acting solely in the capacity of arm's length purchaser with respect to the Transaction Documents and the transactions contemplated hereby and thereby. The Company further acknowledges that each Buyer is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated hereby and thereby and any advice given by any of the Buyers or any of their respective representatives or agents in connection with the Transaction Documents and the transactions contemplated hereby and thereby is merely incidental to such Buyer's purchase of the Securities. The Company further represents to each Buyer that the Company's decision to enter into the Transaction Documents has been based solely on the independent evaluation by the Company and its representatives. i. No Undisclosed Events, Liabilities, Developments or Circumstances. No event, liability, development or circumstance has occurred or exists, or is contemplated to occur, with respect to the Company or its Subsidiaries or their respective business, properties, prospects, operations or financial condition, that would be required to be disclosed by the Company under applicable securities laws on a registration statement filed with the SEC relating to an issuance and sale by the Company of its Common Stock and which has not been publicly announced. j. No General Solicitation. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the 1933 Act) in connection with the offer or sale of the Securities. k. No Integrated Offering. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would require registration of any of the Securities under the 1933 Act or cause this offering of the Securities to be integrated with prior offerings by the Company to third parties other than the Buyers for purposes of the 1933 Act so as to render invalid the exemption from registration provided under Rule 506 or any applicable stockholder approval provisions, including, without limitation, under the rules and 5 6 regulations of any exchange or automated quotation system on which any of the securities of the Company are listed or designated, nor will the Company or any of its Subsidiaries take any action or steps that would require registration of any of the Securities under the 1933 Act or cause the offering of the Securities to be integrated with other offerings so as to render invalid the exemption from registration provided under Rule 506. l. Dilutive Effect. The Company understands and acknowledges that the number of Conversion Shares issuable upon conversion of the Convertible Notes will increase in certain circumstances. The Company further acknowledges that its obligation to issue Conversion Shares upon conversion of the Convertible Notes in accordance with this Agreement and the Convertible Notes is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other stockholders of the Company. m. Employee Relations. Neither the Company nor any of its Subsidiaries is involved in any union labor dispute nor, to the knowledge of the Company or any of its Subsidiaries, is any such dispute threatened. None of the Company's or its Subsidiaries' employees is a member of a union, neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe that their relations with their employees are good. n. Intellectual Property Rights. The Company and its Subsidiaries own or possess adequate rights or licenses to use all trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and rights necessary to conduct their respective businesses as now conducted. The Company and its Subsidiaries do not have any knowledge of any infringement by the Company or its Subsidiaries of trademark, trade name rights, patents, patent rights, copyrights, inventions, licenses, service names, service marks, service mark registrations, trade secret or other similar rights of others, and there is no claim, action or proceeding which has been brought against, or to the Company's knowledge, being threatened against, the Company or its Subsidiaries regarding trademark, trade name, patents, patent rights, invention, copyright, license, service names, service marks, service mark registrations, trade secret or other infringement. To the extent deemed necessary by the Company, the Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties. o. Environmental Laws. The Company and its Subsidiaries (i) are in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("Environmental Laws"_tc \l1 "("Environmental Laws"_), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval, except, in the case of any of the foregoing where non-compliance or non-receipt would not have a Material Adverse Effect. p. Title. The Company and its Subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which is material to the business of the Company and its Subsidiaries, in each case free and clear of all liens, encumbrances and defects, except for such liens, encumbrances and defects which do not materially affect the value of such property and do not interfere with the use made of such property by the Company and any of its Subsidiaries. Any real property and facilities held under lease by the Company and any of its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made of such property and buildings by the Company and its Subsidiaries. q. Regulatory Permits. The Company and its Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses, except where such non-possession would not have a Material Adverse Effect, and neither the Company nor any such Subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit. r. [Reserved] s. Tax Status. The Company and each of its Subsidiaries has made or filed all federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject 6 7 (unless and only to the extent that the Company and each of its Subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) and has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction. t. Transactions With Affiliates. Except as set forth in the SEC Documents, none of the officers, directors, or employees of the Company is presently a party to any material transaction with the Company or any of its Subsidiaries (other than for services as employees, officers and directors), including any material contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any corporation, partnership, trust or other entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner. 4. COVENANTS. a. Best Efforts. Each party shall use its best efforts timely to satisfy each of the conditions to be satisfied by it as provided in Sections 6 and 7 of this Agreement. b. Form D and Blue Sky. The Company agrees to file a Form D with respect to the Securities as required under Regulation D and to provide a copy thereof to each Buyer promptly after such filing. The Company shall, on or before the Closing Date, take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for or to qualify the Securities for sale to the Buyers at the Closing pursuant to this Agreement under applicable securities or "Blue Sky" laws of the states of the United States, and shall provide evidence of any such action so taken to the Buyers on or prior to the Closing Date. The Company shall make all filings and reports relating the offer and sale of the Securities required under applicable securities or "Blue Sky" laws of the states of the United States following the Closing Date. c. Reporting Status. Until the earlier of (i) the date which is one year after the date as of which the Investors (as that term is defined in the Registration Rights Agreement) may sell all of the Conversion Shares without restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or successor thereto), or (ii) the date on which (A) the Investors shall have sold all the Conversion Shares and (B) none of the Convertible Notes is outstanding (the "Registration Period"), the Company shall file all reports required to be filed with the SEC pursuant to the 1934 Act, and the Company shall not terminate its status as an issuer required to file reports under the 1934 Act even if the 1934 Act or the rules and regulations thereunder would otherwise permit such termination. d. Reservation of Shares. The Company shall take all action necessary to at all times have authorized, and reserved for the purpose of issuance, no less than 200% of the number of shares of Common Stock needed to provide for the issuance of the shares of Common Stock upon conversion of all outstanding Convertible Notes; provided that after the Registration Statement (as defined in the Registration Rights Agreement) which covers the Conversion Shares for resale, has been declared effective, this Section 4(d) shall not be violated if the Company reserves greater than 185% of the number of shares of the Common Stock required to be issued upon conversion of the outstanding Convertible Notes, provided, further, however, that the Company utilizes its best efforts to reserve no less than 200% as soon as possible of the number of shares of Common Stock required to be issued upon conversion of the outstanding Convertible Notes. e. Limitation on Beneficial Ownership. The Company shall not effect any conversion of Convertible Notes and no Buyer of Convertible Notes shall have the right to convert any Convertible Notes pursuant to Section 2(b) of such Convertible Note to the extent that after giving effect to such conversion such Buyer (together with such Buyer's affiliates) (A) would beneficially own in excess of 4.9% of the outstanding shares of the Company's Common Stock following such conversion and (B) would have acquired, through conversion of Convertible Notes or otherwise, in excess of 4.9% of the outstanding shares of the Company's Common Stock following such conversion during the 60-day period ending on and including such date of conversion. For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by a Buyer and its affiliates or acquired by a Buyer and its affiliates, as the case may be, shall include the number of shares of Common Stock 7 8 issuable upon conversion of the Convertible Notes with respect to which the determination of such sentence is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) conversion of the remaining, nonconverted Convertible Notes beneficially owned by such Buyer and its affiliates and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company (including, without limitation, any warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by such Person and its affiliates. Except as set forth in the preceding sentence, for purposes of this Section 4(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended. Notwithstanding anything to the contrary contained herein, each conversion notice shall constitute a representation by the Buyer submitting such conversion notice that, after giving effect to such conversion notice, (A) the holder will not beneficially own (as determined in accordance with this Section 4(e)) and (B) during the 60-day period ending on and including such conversion date, the holder will not have acquired, through conversion of Convertible Notes or otherwise, a number of shares of Common Stock in excess of 4.9% of the outstanding shares of Common Stock as reflected in the Company's most recent Form 10-Q or Form 10-K, as the case may be, or more recent public press release or other public notice by the Company setting forth the number of shares of Common Stock outstanding, but after giving effect to conversions of Convertible Notes by such holder since the date as of which such number of outstanding shares of Common Stock was reported. f. Listing. The Company shall promptly secure the listing of all of the Registrable Securities (as that term is defined in the Registration Rights Agreement) upon each national securities exchange and automated quotation system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance) and shall maintain, so long as any other shares of Common Stock shall be so listed, such listing of all Registrable Securities from time to time issuable under the terms of the Transaction Documents and the Convertible Notes. The Company shall maintain the Common Stock's authorization for quotation on the Nasdaq National Market, The New York Stock Exchange, Inc. or The American Stock Exchange, Inc. (collectively, the "Principal Market"). Neither the Company nor any of its Subsidiaries shall take any action which would be reasonably expected to result in the delisting or suspension of the Common Stock on the Principal Market. The Company shall promptly, and in no event later than the following business day, provide to each Buyer copies of any notices it receives from the Principal Market regarding the continued eligibility of the Common Stock for listing on such automated quotation system or securities exchange. The Company shall pay all fees and expenses in connection with satisfying its obligations under this Section 4(f). g. Transactions With Affiliates. So long as (i) any Convertible Notes are outstanding or (ii) any Buyer owns Conversion Shares with a market value equal to or greater than $500,000, the Company shall not, and shall cause each of its Subsidiaries not to, enter into, amend, modify or supplement, or permit any Subsidiary to enter into, amend, modify or supplement, any agreement, transaction, commitment or arrangement with any of its or any Subsidiary's officers, directors, person who were officers or directors at any time during the previous two years, stockholders who beneficially own 5% or more of the Common Stock, or affiliates or with any individual related by blood, marriage or adoption to any such individual or with any entity in which any such entity or individual owns a 5% or more beneficial interest (each a "Related Party"), except for (a) customary employment arrangements and benefit programs on reasonable terms, (b) any agreement, transaction, commitment or arrangement on an arms-length basis on terms no less favorable than terms which would have been obtainable from a person other than such Related Party, or (c) any agreement, transaction, commitment or arrangement which is approved by a majority of the disinterested directors of the Company. For purposes hereof, any director who is also an officer of the Company or any Subsidiary of the Company shall not be a disinterested director with respect to any such agreement, transaction, commitment or arrangement. "Affiliate" for purposes hereof means, with respect to any person or entity, another person or entity that, directly or indirectly, (i) has a 5% or more equity interest in that person or entity, (i) has 5% or more common ownership with that person or entity, (iii) controls that person or entity, or (iv) shares common control with that person or entity. "Control" or "controls" for purposes hereof means that a person or entity has the power, direct or indirect, to conduct or govern the policies of another person or entity. h. Limitation on Filing Registration Statements. Except in the event that Parlux Fragrances, Inc. invokes its demand registration rights, the Company shall not file a registration statement (other than the Registration Statement (as defined in the Registration Rights Agreement) or a registration statement on Form S-8) covering the sale or resale of shares of Common Stock with the SEC during the period beginning on the date hereof and ending on the date which is 180 days after the Registration Statement has been declared effective by the SEC. 8 9 i. Independent Auditors. The Company shall, until at least three (3) years after the Closing Date, maintain as its independent auditors an accounting firm authorized to practice before the SEC. j. Corporate Existence and Taxes. The Company shall, until at least the later of (i) the date that is three (3) years after the Closing Date or (ii) the conversion or redemption of all of the Convertible Notes purchased pursuant to this Agreement, maintain its corporate existence in good standing (provided, however, that the foregoing covenant shall not prevent the Company from entering into any merger or corporate reorganization as long as the surviving entity in such transaction, if not the Company, assumes the Company's obligations with respect to the Convertible Notes and has Common Stock listed for trading on the Principal Market) and shall pay all its taxes when due except for taxes which the Company disputes. 5. TRANSFER AGENT INSTRUCTIONS. The Company shall issue irrevocable instructions to its transfer agent, and any subsequent transfer agent, to issue certificates, registered in the name of each Buyer or its respective nominee(s), for the Conversion Shares in such amounts as specified from time to time by each Buyer to the Company upon conversion of the Convertible Notes (the "Irrevocable Transfer Agent Instructions"). Prior to registration of the Conversion Shares under the 1933 Act, all such certificates shall bear the restrictive legend specified in Section 2(g) of this Agreement. The Company warrants that no instruction other than the Irrevocable Transfer Agent Instructions referred to in this Section 5, and stop transfer instructions to give effect to Section 2(f) hereof (in the case of the Conversion Shares, prior to registration of the Conversion Shares under the 1933 Act) will be given by the Company to its transfer agent and that the Securities shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement and the Registration Rights Agreement. Nothing in this Section 5 shall affect in any way each Buyer's obligations and agreements set forth in Section 2(g) to comply with all applicable prospectus delivery requirements, if any, upon resale of the Securities. If a Buyer provides the Company with an opinion of counsel, in a generally acceptable form, to the effect that a public sale, assignment or transfer of the Securities may be made without registration under the 1933 Act or the Buyer provides the Company with reasonable assurances that the Securities can be sold pursuant to Rule 144 without any restriction as to the number of securities acquired as of a particular date that can then be immediately sold, the Company shall permit the transfer, and, in the case of the Conversion Shares, promptly instruct its transfer agent to issue one or more certificates in such name and in such denominations as specified by such Buyer and without any restrictive legend. In the event that the Company appoints a different transfer agent (other than the Company's transfer agent in service as of the Closing) to serve as the Company's transfer agent, the Company shall immediately, but in no event later than five (5) days from such appointment issue irrevocable instructions to such transfer agent in substantially the same form as the Irrevocable Transfer Agent Instructions issued to the Company's transfer agent in service as of the Closing. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyers by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 5 will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section 5, that the Buyers shall be entitled, in addition to all other available remedies, to seek an order and/or injunction restraining any breach and requiring immediate issuance and transfer, without the necessity of showing economic loss and without any bond or other security being required. 6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. The obligation of the Company hereunder to issue and sell the Convertible Notes to each Buyer at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for the Company's sole benefit and may be waived by the Company at any time in its sole discretion by providing each Buyer with prior written notice thereof: a. Such Buyer shall have executed each of the Transaction Documents to which it is a party and delivered the same to Katten Muchin & Zavis, care of Anthony J. Ribaudo, Esq., as escrow agent (the "Escrow Agent") for the transactions contemplated by this Agreement. b. The representations and warranties of such Buyer shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date), and such Buyer shall have performed, satisfied and complied in all 9 10 material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by such Buyer at or prior to the Closing Date. 7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE. The obligation of each Buyer hereunder to purchase the Convertible Notes at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for each Buyer's sole benefit and may be waived by such Buyer at any time in its sole discretion by providing the Company with prior written notice thereof: a. The Company shall have executed each of the Transaction Documents and delivered the same to the Escrow Agent. b. The Company's common stock shall be authorized for quotation on the Principal Market and trading in Company common stock shall not have been suspended by the SEC or the Principal Market. c. The representations and warranties of the Company shall be true and correct as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date) and the Company shall have performed, satisfied and complied with the covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by the Company at or prior to the Closing Date. The Company shall have delivered to the Escrow Agent a certificate, executed by the Chief Executive Officer of the Company, dated as of the Closing Date, to the foregoing effect. d. The Company shall have delivered to the Escrow Agent the opinion of the Company's counsel dated as of the Closing Date, in form, scope and substance reasonably satisfactory to such Buyer and in substantially the form of Exhibit C attached hereto. e. The Company shall have executed and delivered to the Escrow Agent the Convertible Notes (in such denominations as such Buyer shall request) being purchased by such Buyer at the Closing. f. The Board of Directors of the Company shall have adopted resolutions consistent with Section 3(b)(ii) above and in a form reasonably acceptable to such Buyer. g. As of the Closing Date, the Company shall have reserved out of its authorized and unissued Common Stock, solely for the purpose of effecting the conversion of the Convertible Notes, no less than 200% of the number of shares of Common Stock needed to provide for the issuance of the shares of Common Stock upon conversion of all outstanding Convertible Notes. h. The Irrevocable Transfer Agent Instructions, substantially in the form of Exhibit D attached hereto, shall have been delivered to and acknowledged in writing by the Company's transfer agent and a copy of the executed Irrevocable Transfer Agent Instructions shall have been delivered to the Escrow Agent. i. The Company shall have delivered to the Escrow Agent a certified copy of the Articles of Incorporation as certified by the Secretary of State of the State of Florida within ten (10) days of the Closing Date. j. The Company shall have delivered to the Escrow Agent a secretary's certificate, dated as the Closing Date, as to (i) the resolutions described in Section 7(f), (ii) the Certificate of Incorporation and (iii) the Bylaws, each as in effect at the Closing. k. The Company shall have made all filings under all applicable federal and state securities laws necessary to consummate the issuance of the Securities pursuant to this Agreement in compliance with such laws. l. The Company shall have delivered to the Escrow Agent such other documents relating to the transactions contemplated by this Agreement as the Escrow Agent or its counsel may reasonably request. 10 11 m. Expenses. Subject to Section 9(k) below, at the Closing, the Company shall reimburse the Buyers for one-half (1/2) of the Buyers' expenses (including attorneys' fees and expenses) in due diligence and negotiating and preparing the Transaction Documents and consummating the transactions contemplated thereby up to an aggregate of $8,000. 8. INDEMNIFICATION. a. Indemnification by Company. In consideration of each Buyer's execution and delivery of the Transaction Documents and acquiring the Securities thereunder and in addition to all of the Company's other obligations under the Transaction Documents and the Convertible Notes, the Company shall defend, protect, indemnify and hold harmless each Buyer and each other holder of the Securities and all of their stockholders, partners, officers, directors, employees and direct or indirect investors and any of the foregoing person's agents or other representatives (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the "Indemnitees") from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys' fees and disbursements (the "Indemnified Liabilities"), incurred by any Indemnitee as a result of, or arising out of, or relating to (a) any material misrepresentation or breach of any representation or warranty made by the Company in the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby, or (b) any material breach of any covenant, agreement or obligation of the Company contained in the Transaction Documents or the Convertible Notes or any other certificate, instrument or document contemplated hereby or thereby. To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. b. Indemnification by Buyer. In consideration of the Company's execution and delivery of the Transaction Documents and the Company's performance of the transactions contemplated thereunder, each Buyer shall severally but not jointly defend, protect, indemnify and hold harmless the Company, its officers and directors (collectively, the "Company Indemnitees") from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith and including reasonable attorneys' fees and disbursements (the "Company Indemnified Liabilities"), incurred by any Company Indemnitee as a result of, or arising out of, or relating to (a) any material representation or breach of any representation or warranty made by such Buyer in the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby, or (b) any material breach of any covenant, agreement or obligation of such Buyer contained in the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby; provided, however, that any Buyer shall not be jointly liable for the indemnification obligations of any other Buyer or investor and the Buyer subject to an indemnification obligation shall be liable under this Section 8(b) for only that amount of Company Indemnified Liabilities as does not exceed the net proceeds to such Buyer as a result of the sale of Securities and Conversion Shares held by such Buyer. To the extent that the foregoing undertaking by a Buyer may be unenforceable for any reason, such Buyer shall make the maximum contribution to the payment and satisfaction of each of the Company Indemnified Liabilities which is permissible under applicable law; provided, however, that any Buyer shall not be jointly liable for the indemnification obligations of any other Buyer or investor and the Buyer subject to an indemnification obligation shall be liable under this Section 8(b) for only that amount of Company Indemnified Liabilities as does not exceed the net proceeds to such Buyer as a result of the sale of Securities and Conversion Shares held by such Buyer. 9. GOVERNING LAW; MISCELLANEOUS. a. Governing Law; Jurisdiction; Jury Trial. The corporate laws of the State of Florida shall govern all issues concerning the relative rights of the Company and its stockholders. All other questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of Florida, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Florida or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Florida. Each party hereby irrevocably submits to the non-exclusive jurisdiction of the state and federal courts sitting in the City of Miami, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such 11 12 court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY. b. Counterparts. This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party; provided that a facsimile signature shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as if the signature were an original, not a facsimile signature. c. Headings. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement. d. Severability. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction. e. Entire Agreement; Amendments. This Agreement supersedes all other prior oral or written agreements between the Buyers, the Company, their affiliates and persons acting on their behalf with respect to the matters discussed herein, and this Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor any Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be amended other than by an instrument in writing signed by the Company and the holders of at least two-thirds (2/3) of the Convertible Notes (determined by reference to principal amount) then outstanding, and no provision hereof may be waived other than by an instrument in writing signed by the party against whom enforcement is sought. No such amendment shall be effective to the extent that it applies to less than all of the holders of the Convertible Notes then outstanding. No consideration shall be offered or paid to any person to amend or consent to a waiver or modification of any provision of any of the Transaction Documents or the Convertible Notes unless the same consideration also is offered to all of the parties to the Transaction Documents or holders of Convertible Notes, as the case may be. f. Notices. Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one business day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be: If to the Company: E Com Ventures, Inc. 11701 N.W. 101st Road Miami, Florida 33178 Telephone: (305) 889-1600 Facsimile: (305) 888-7825 Attention: Ilia Lekach 12 13 With a copy to: Greenberg Traurig, P.A. 1221 Brickell Avenue Miami, Florida 33131 Telephone: (305) 579-0809 Facsimile: (305) 579-0717 Attention: Ken Hoffman, Esq. If to the Transfer Agent: Continental Stock Transfer and Trust 2 Broadway, 19th Floor New York, New York 10004 Telephone: (212) 509-4000 Facsimile: (212) 509-5150 Attention: Steve Nelson If to a Buyer, to it at the address and facsimile number set forth on Schedule 1 with copies to such Buyer's representatives as set forth on Schedule 1, or at such other address and/or facsimile number and/or to the attention of such other person as the recipient party has specified by written notice given to each other party five days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender's facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C) provided by a nationally recognized overnight delivery service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively. g. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns, including any purchasers of the Convertible Notes. The Company shall not assign this Agreement or any rights or obligations hereunder without the prior written consent of the holders of at least two-thirds (2/3) of the Convertible Notes (determined by reference to principal amount) then outstanding. A Buyer may assign some or all of its rights hereunder without the consent of the Company, provided, however, that any such assignment shall not release such Buyer from its obligations hereunder unless such obligations are assumed by such assignee and the Company has consented to such assignment and assumption. Notwithstanding anything to the contrary contained in the Transaction Documents, the Buyers shall be entitled to pledge the Securities in connection with a bona fide margin account. h. No Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person. i. Survival. Unless this Agreement is terminated under Section 9(k), the agreements and covenants set forth in Sections 4, 5 and 9, and the indemnification provisions set forth in Section 8, shall survive the Closing. Each Buyer shall be responsible only for its own agreements and covenants hereunder. j. Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby. k. Termination. In the event that the Closing shall not have occurred with respect to a Buyer on or before three (3) business days from the date hereof due to the Company's or such Buyer's failure to satisfy the conditions set forth in Sections 6 and 7 above (and the nonbreaching party's failure to waive such unsatisfied condition(s)), the nonbreaching party shall have the option to terminate this Agreement with respect to such breaching party at the close of business on such date without liability of any party to any other party; provided, however, that if this Agreement is terminated pursuant to this Section 9(k), the Company shall remain obligated to reimburse the nonbreaching Buyers for the expenses described in Section 7(m) above. 13 14 l. Placement Agent. The Company acknowledges that it has not engaged a placement agent in connection with the sale of the Convertible Notes. m. No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party. n. Remedies. Each Buyer and each holder of the Securities shall have all rights and remedies set forth in the Transaction Documents and the Convertible Notes and all rights and remedies which such holders have been granted at any time under any other agreement or contract and all of the rights which such holders have under any law. Any person having any rights under any provision of this Agreement shall be entitled to enforce such rights specifically (without posting a bond or other security), to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. o. Payment Set Aside. To the extent that the Company makes a payment or payments to the Buyers hereunder or pursuant to the Convertible Notes or the Buyers enforce or exercise their rights hereunder or thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred. [SIGNATURE PAGE FOLLOWS] 14 15 IN WITNESS WHEREOF, the Buyers and the Company have caused this Securities Purchase Agreement to be duly executed as of the date first written above. COMPANY: BUYERS: E COM VENTURES, INC. CRANSHIRE CAPITAL, L.P. By: /s/ Donovan Chin By: /s/ Mitchell P. Kopin ----------------------------------- ------------------------------- Name: Donovan Chin Name: Mitchell P. Kopin --------------------------------- ------------------------------ Title: Chief Financial Officer Title: President, Downsview Capital -------------------------------- ----------------------------- The General Partner ----------------------------- S. ROBERT PRODUCTIONS, LLC By: /s/ Mitchell P. Kopin ----------------------------------- Name: Mitchell P. Kopin --------------------------------- Title: President -------------------------------- THE DOTCOM FUND, LLC By: /s/ Mark Rice ----------------------------------- Name: Mark Rice --------------------------------- Title: Managing Member -------------------------------- EP .COM FUND, L.L.C. By: /s/ Jeffrey Eisenberg ----------------------------------- Name: Jeffrey Eisenberg --------------------------------- Title: Manager of Eisenberg Partners, L.L.C. Manager of EP.com Fund, L.L.C. -------------------------------- EP .COM FUND INTERNATIONAL, LTD. By: /s/ Jeffrey Eisenberg ----------------------------------- Name: Jeffrey Eisenberg --------------------------------- Title: Manager of Eisenberg Partners, L.L.C. Investment Manager of EP.com Fund International, Ltd. -------------------------------- 15 16 SCHEDULE 1: LIST OF INVESTORS
Amount of Investor Address and Convertible Notes Investor's Legal Representatives' Investor's Name Facsimile Number Address and Facsimile Number --------------- -------------------- ----------------- ---------------------------------- Cranshire Capital, L.P. 666 Dundee Rd., Ste. 1901 $1,750,000.00 Katten Muchin & Zavis Northbrook, IL 60062 525 W. Monroe Street Attention: Mitchell Kopin Chicago, Illinois 60661-3693 Telephone: (847) 562-9030 Attention: Anthony J. Ribaudo, Esq. Facsimile: (847) 562-9031 Facsimile: (312) 577-8763 Telephone: (312) 902-5521 S. Robert Productions, LLC 666 Dundee Rd., Ste. 1901 $250,000.00 Northbrook, IL 60062 Attention: Mitchell Kopin Telephone: (847) 562-9030 Facsimile: (847) 562-9031 The dotCom Fund, LLC 666 Dundee Road., Ste. 1901 $1,250,000.00 Northbrook, Illinois 60062 Attention: Mark Rice Telephone: (847) 509-2290 Facsimile: (847) 509-2295 EP.com Fund, L.L.C. 77 W. Wacker Drive $600,000.00 Chicago, Illinois 60601 Attention: Jeffrey Eisenberg Telephone: (312) 456-9500 Facsimile: (312) 456-9501 EP.com Fund International, 77 W. Wacker Drive $150,000.00 Ltd. Chicago, Illinois 60601 Attention: Jeffrey Eisenberg Telephone: (312) 456-9500 Facsimile: (312) 456-9501
16 EX-10.16 5 SECURITIES PURCHASE AGREEMENT 3/27/00 1 EXHIBIT 10.16 SECURITIES PURCHASE AGREEMENT This SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of March 27, 2000, is entered into by and among E Com Ventures, Inc., a Florida corporation, with headquarters located at 11701 N.W. 101st Road, Miami, Florida 33178 (the "Company"), and the investors listed on Schedule 1 attached hereto (individually, a "Buyer" and collectively, the "Buyers"). WHEREAS: A. The Company and the Buyers are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Rule 506 of Regulation D ("Regulation D") as promulgated by the United States Securities and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended (the "1933 Act"); B. The Company has authorized the following new series of convertible notes: the Company's Series D Convertible Notes (the "Convertible Notes"), which shall be convertible into shares of the Company's Common Stock, par value $.01 per share (the "Common Stock") (as converted, the "Conversion Shares"), in accordance with the terms of the Company's Series D Convertible Notes, substantially in the form attached hereto as Exhibit A; C. The Buyers wish to purchase, upon the terms and conditions stated in this Agreement, an aggregate of $5,000,000 worth of Convertible Notes in the respective amounts set forth opposite each Buyer's name on Schedule 1; and D. Contemporaneously with the execution and delivery of this Agreement, the parties hereto are executing and delivering a Registration Rights Agreement substantially in the form attached hereto as Exhibit B (the "Registration Rights Agreement") pursuant to which the Company has agreed to provide certain registration rights under the 1933 Act and the rules and regulations promulgated thereunder, and applicable state securities laws. NOW, THEREFORE, the Company and the Buyers hereby agree as follows: 1. PURCHASE AND SALE OF CONVERTIBLE NOTES. a. Purchase of Convertible Notes. Subject to the satisfaction (or waiver) of the conditions set forth in Sections 6 and 7 below, the Company shall issue and sell (the "Offering") to each Buyer and each Buyer severally agrees to purchase from the Company the amount of Convertible Notes set forth opposite such Buyer's name on Schedule 1 (the "Closing"). The aggregate purchase price (the "Purchase Price") of all the Convertible Notes offered and sold pursuant to the Offering at the Closing shall be $5,000,000. b. Closing Date. The date and time of the Closing (the "Closing Date") shall be 10:00 a.m. Central Time, within two (2) business days following the date hereof, subject to notification of satisfaction (or waiver) of the conditions to the Closing set forth in Sections 6 and 7 below (or such later date as is mutually agreed to by the Company and the Buyers). The Closing shall occur on the Closing Date at the offices of Katten Muchin & Zavis, 525 West Monroe Street, Suite 1600, Chicago, Illinois 60661-3693. c. Form of Payment. On the Closing Date, (i) each Buyer shall pay the Purchase Price to the Company for the Convertible Notes to be issued and sold to such Buyer at the Closing, by wire transfer of immediately available funds in accordance with the Company's written wire instructions, and (ii) the Company shall deliver to each Buyer, the Convertible Notes (in the denominations as such Buyer shall request) which such Buyer is then purchasing (as indicated opposite such Buyer's name on Schedule 1) hereunder, duly executed on behalf of the Company and registered in the name of such Buyer or its designee. 3 2 2. BUYER'S REPRESENTATIONS AND WARRANTIES. Each Buyer represents and warrants with respect to only itself that: a. Investment Purpose. Such Buyer is acquiring the Convertible Notes (the Convertible Notes may also be referred to herein as the "Securities"), for its own account for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof, except pursuant to sales registered or exempt from registration under the 1933 Act; provided, however, that by making the representations herein, such Buyer does not agree to hold any of the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement or an exemption from registration under the 1933 Act. b. Accredited Investor Status. Such Buyer is an "accredited investor" as that term is defined in Rule 501(a)(3) of Regulation D. c. Reliance on Exemptions. Such Buyer understands that the Securities are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and such Buyer's compliance with, the representations, warranties, agreements, acknowledgments and understandings of such Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of such Buyer to acquire such Securities. d. Information. Such Buyer and its advisors, if any, have been furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities which have been requested by such Buyer. Such Buyer and its advisors, if any, have been afforded the opportunity to ask questions of the Company. Neither such inquiries nor any other due diligence investigations conducted by such Buyer or its advisors, if any, or its representatives shall modify, amend or affect such Buyer's right to rely on the Company's representations and warranties contained in Section 3 below. Such Buyer understands that its investment in the Securities involves a high degree of risk. Such Buyer has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Securities. e. No Governmental Review. Such Buyer understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Securities or the fairness or suitability of the investment in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities. f. Transfer or Resale. Such Buyer understands that except as provided in the Registration Rights Agreement: (i) the Securities have not been and are not being registered under the 1933 Act or any state securities laws, and may not be offered for sale, sold, assigned or transferred unless (A) subsequently registered thereunder, (B) such Buyer shall have delivered to the Company an opinion of counsel, in a generally acceptable form, to the effect that such Securities to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration, or (C) such Buyer provides the Company with reasonable assurance that such Securities can be sold, assigned or transferred pursuant to Rule 144 promulgated under the 1933 Act, as amended, (or a successor rule thereto) ("Rule 144"); (ii) any sale of the Securities made in reliance on Rule 144 may be made only in accordance with the terms of Rule 144 and further, if such Buyer intends to utilize Rule 144 but Rule 144 is not applicable to such resale, any resale of the Securities under circumstances in which such Buyer (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii) neither the Company nor any other person is under any obligation to register such Securities under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder. g. Legends. Such Buyer understands that the certificates or other instruments representing the Convertible Notes and, until such time as the sale of the Conversion Shares has been registered under the 1933 Act as contemplated by the Registration Rights Agreement, the stock certificates representing the Conversion Shares, except as set forth below, shall bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of such stock certificates): 2 3 THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (1) IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE 1933 ACT, AND APPLICABLE STATE SECURITIES LAWS, OR (2) IN THE ABSENCE OF AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER THE 1933 ACT OR (3) UNLESS SOLD, TRANSFERRED OR ASSIGNED PURSUANT TO RULE 144 UNDER THE 1933 ACT. The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of the Securities upon which it is stamped, if, unless otherwise required by state securities laws, (i) such Securities are registered for sale under the 1933 Act, (ii) in connection with a sale transaction, such holder provides the Company with an opinion of counsel, in a generally acceptable form, to the effect that a public sale, assignment or transfer of the Securities may be made without registration under the 1933 Act, or (iii) such holder provides the Company with reasonable assurances that the Securities can be sold pursuant to Rule 144 without any restriction as to the number of securities acquired as of a particular date that can then be immediately sold. h. Validity; Enforcement. This Agreement has been duly and validly authorized, executed and delivered on behalf of such Buyer and is a valid and binding agreement of such Buyer enforceable against such Buyer in accordance with its terms, subject as to enforceability to general principles of equity and to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors' rights and remedies. i. Residency. Such Buyer is a resident of that state and country specified in its address on Schedule 1. 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to each of the Buyers that: a. Organization and Qualification. The Company and its "Subsidiaries" (which for purposes of this Agreement means any entity in which the Company, directly or indirectly, owns a majority of the capital stock or holds a majority equity or similar interest) are corporations duly organized and validly existing in good standing under the laws of the jurisdiction in which they are incorporated, and have the requisite corporate power and authorization to own their properties and to carry on their business as now being conducted. Each of the Company and its Subsidiaries is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which its ownership of property or the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect. As used in this Agreement, "Material Adverse Effect" means any material adverse effect on the business, properties, assets, operations, results or operations, or financial condition of the Company and its Subsidiaries, if any, taken as a whole. b. Authorization; Enforcement; Validity. (i) The Company has the requisite corporate power and authority to enter into and perform this Agreement, the Registration Rights Agreement, the Irrevocable Transfer Agent Instructions (as defined in Section 5) and each of the other agreements entered into by the parties hereto in connection with the transactions contemplated by this Agreement (collectively, the "Transaction Documents"), the Convertible Notes, and to issue the Securities in accordance with the terms hereof and thereof, (ii) the execution and delivery of the Transaction Documents and the Convertible Notes by the Company and the consummation by it of the transactions contemplated hereby and thereby, including without limitation the issuance of the Convertible Notes and the reservation for issuance and the issuance of the Conversion Shares issuable upon conversion thereof, have been duly authorized by the Company's Board of Directors and no further consent or authorization is required by the Company, its Board of Directors or its stockholders, (iii) the Transaction Documents have been duly 3 4 executed and delivered by the Company, and (iv) the Transaction Documents constitute the valid and binding obligations of the Company enforceable against the Company in accordance with their terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of creditors' rights and remedies. c. Issuance of Securities. The Convertible Notes are duly authorized and, upon issuance in accordance with the terms hereof, shall be (i) validly issued, fully paid and non-assessable, (ii) free from all taxes, liens and charges with respect to the issue thereof and (iii) entitled to the rights and preferences as set forth in the Convertible Notes. 1,100,000 shares of Common Stock (subject to adjustment pursuant to the Company's covenant set forth in Section 4(d) below) have been duly authorized and reserved for issuance upon conversion of the Convertible Notes. Upon conversion in accordance with the Convertible Notes, the Conversion Shares will be validly issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue thereof, with the holders being entitled to all rights accorded to a holder of Common Stock. Assuming the accuracy of the representations and warranties of the Buyers set forth herein, and in reliance thereon, the issuance by the Company of the Securities is exempt from registration under the 1933 Act. d. No Conflicts. The execution, delivery and performance of the Transaction Documents by the Company, the performance by the Company of its obligations under the Convertible Notes and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the reservation for issuance and issuance of the Conversion Shares) will not (i) result in a violation of the Company's Articles of Incorporation, any outstanding series of notes or preferred stock of the Company or the Company's By-laws or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any material agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party, or result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and the rules and regulations of the Principal Market (as defined below)) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected, except in the case of (ii) above, where such conflict or default would not have a Material Adverse Effect. Neither the Company nor its Subsidiaries is in violation of any term of or in default under its Articles of Incorporation, any outstanding series of notes or preferred stock of the Company or By-laws or their organizational charter or by-laws, respectively. Neither the Company nor any of its Subsidiaries is in violation of any term of or in default under any contract, agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or order or any statute, rule or regulation applicable to the Company or its Subsidiaries, except for possible violations or defaults which would not have a Material Adverse Effect. The business of the Company and its Subsidiaries is not being conducted, and shall not be conducted, in violation of any law, ordinance, regulation of any governmental entity, except for possible violations the sanctions for which either individually or in the aggregate would not have a Material Adverse Effect. Except as specifically contemplated by this Agreement and as required under the 1933 Act, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency or any regulatory or self-regulatory agency in order for it to execute, deliver or perform any of its obligations under or contemplated by the Transaction Documents or to perform its obligations under the Convertible Notes, in each case in accordance with the terms hereof or thereof. All consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof. The Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing. The Company is not in violation of the listing requirements of the Principal Market (as defined below). e. SEC Documents; Financial Statements. Since December 16, 1998, the Company has filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the "1934 Act") (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein being hereinafter referred to as the "SEC Documents"). The Company has delivered to the Buyers or their respective representatives true and complete copies of the SEC Documents. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or 4 5 omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. As of their respective dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). No other information provided by or on behalf of the Company to the Buyers which is not included in the SEC Documents, including, without limitation, information referred to in Section 2(d) of this Agreement, contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein, in the light of the circumstance under which they are or were made, not misleading. Neither the Company nor any of its Subsidiaries or any of their officers, directors, employees or agents have provided the Buyers with any material, nonpublic information. f. Absence of Certain Changes. Since the filing of the most recent SEC Document, there has been no material adverse change and no material adverse development in the business, properties, operations, financial condition, or results of operations of the Company or its Subsidiaries. The Company has not taken any steps, and does not currently expect to take any steps, to seek protection pursuant to any bankruptcy law nor does the Company or any of its Subsidiaries have any knowledge that its creditors intend to initiate involuntary bankruptcy proceedings. g. Absence of Litigation. Except as set forth in the SEC Documents, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company or any of its Subsidiaries, threatened against or affecting the Company, the Common Stock or any of the Company's Subsidiaries or any of the Company's or the Company's Subsidiaries' officers or directors in their capacities as such, except as to which an adverse outcome would not have a Material Adverse Effect. h. Acknowledgment Regarding Buyers' Purchase of Convertible Notes. The Company acknowledges and agrees that each of the Buyers is acting solely in the capacity of arm's length purchaser with respect to the Transaction Documents and the transactions contemplated hereby and thereby. The Company further acknowledges that each Buyer is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated hereby and thereby and any advice given by any of the Buyers or any of their respective representatives or agents in connection with the Transaction Documents and the transactions contemplated hereby and thereby is merely incidental to such Buyer's purchase of the Securities. The Company further represents to each Buyer that the Company's decision to enter into the Transaction Documents has been based solely on the independent evaluation by the Company and its representatives. i. No Undisclosed Events, Liabilities, Developments or Circumstances. No event, liability, development or circumstance has occurred or exists, or is contemplated to occur, with respect to the Company or its Subsidiaries or their respective business, properties, prospects, operations or financial condition, that would be required to be disclosed by the Company under applicable securities laws on a registration statement filed with the SEC relating to an issuance and sale by the Company of its Common Stock and which has not been publicly announced. j. No General Solicitation. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the 1933 Act) in connection with the offer or sale of the Securities. k. No Integrated Offering. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would require registration of any of the Securities under the 1933 Act or cause this offering of the Securities to be integrated with prior offerings by the Company to third parties other than the Buyers for purposes of the 1933 Act so as to render invalid the exemption from registration provided under Rule 5 6 506 or any applicable stockholder approval provisions, including, without limitation, under the rules and regulations of any exchange or automated quotation system on which any of the securities of the Company are listed or designated, nor will the Company or any of its Subsidiaries take any action or steps that would require registration of any of the Securities under the 1933 Act or cause the offering of the Securities to be integrated with other offerings so as to render invalid the exemption from registration provided under Rule 506. l. Dilutive Effect. The Company understands and acknowledges that the number of Conversion Shares issuable upon conversion of the Convertible Notes will increase in certain circumstances. The Company further acknowledges that its obligation to issue Conversion Shares upon conversion of the Convertible Notes in accordance with this Agreement and the Convertible Notes is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other stockholders of the Company. m. Employee Relations. Neither the Company nor any of its Subsidiaries is involved in any union labor dispute nor, to the knowledge of the Company or any of its Subsidiaries, is any such dispute threatened. None of the Company's or its Subsidiaries' employees is a member of a union, neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe that their relations with their employees are good. n. Intellectual Property Rights. The Company and its Subsidiaries own or possess adequate rights or licenses to use all trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and rights necessary to conduct their respective businesses as now conducted. The Company and its Subsidiaries do not have any knowledge of any infringement by the Company or its Subsidiaries of trademark, trade name rights, patents, patent rights, copyrights, inventions, licenses, service names, service marks, service mark registrations, trade secret or other similar rights of others, and there is no claim, action or proceeding which has been brought against, or to the Company's knowledge, being threatened against, the Company or its Subsidiaries regarding trademark, trade name, patents, patent rights, invention, copyright, license, service names, service marks, service mark registrations, trade secret or other infringement. To the extent deemed necessary by the Company, the Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties. o. Environmental Laws. The Company and its Subsidiaries (i) are in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("Environmental Laws"_tc \l1 "("Environmental Laws"_), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval, except, in the case of any of the foregoing where non-compliance or non-receipt would not have a Material Adverse Effect. p. Title. The Company and its Subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which is material to the business of the Company and its Subsidiaries, in each case free and clear of all liens, encumbrances and defects, except for such liens, encumbrances and defects which do not materially affect the value of such property and do not interfere with the use made of such property by the Company and any of its Subsidiaries. Any real property and facilities held under lease by the Company and any of its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made of such property and buildings by the Company and its Subsidiaries. q. Regulatory Permits. The Company and its Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses, except where such non-possession would not have a Material Adverse Effect, and neither the Company nor any such Subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit. r. [Reserved] 6 7 s. Tax Status. The Company and each of its Subsidiaries has made or filed all federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject (unless and only to the extent that the Company and each of its Subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) and has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction. t. Transactions With Affiliates. Except as set forth in the SEC Documents, none of the officers, directors, or employees of the Company is presently a party to any material transaction with the Company or any of its Subsidiaries (other than for services as employees, officers and directors), including any material contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any corporation, partnership, trust or other entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner. 4. COVENANTS. a. Best Efforts. Each party shall use its best efforts timely to satisfy each of the conditions to be satisfied by it as provided in Sections 6 and 7 of this Agreement. b. Form D and Blue Sky. The Company agrees to file a Form D with respect to the Securities as required under Regulation D and to provide a copy thereof to each Buyer promptly after such filing. The Company shall, on or before the Closing Date, take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for or to qualify the Securities for sale to the Buyers at the Closing pursuant to this Agreement under applicable securities or "Blue Sky" laws of the states of the United States, and shall provide evidence of any such action so taken to the Buyers on or prior to the Closing Date. The Company shall make all filings and reports relating the offer and sale of the Securities required under applicable securities or "Blue Sky" laws of the states of the United States following the Closing Date. c. Reporting Status. Until the earlier of (i) the date which is one year after the date as of which the Investors (as that term is defined in the Registration Rights Agreement) may sell all of the Conversion Shares without restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or successor thereto), or (ii) the date on which (A) the Investors shall have sold all the Conversion Shares and (B) none of the Convertible Notes is outstanding (the "Registration Period"), the Company shall file all reports required to be filed with the SEC pursuant to the 1934 Act, and the Company shall not terminate its status as an issuer required to file reports under the 1934 Act even if the 1934 Act or the rules and regulations thereunder would otherwise permit such termination. d. Reservation of Shares. The Company shall take all action necessary to at all times have authorized, and reserved for the purpose of issuance, no less than 200% of the number of shares of Common Stock needed to provide for the issuance of the shares of Common Stock upon conversion of all outstanding Convertible Notes; provided that after the Registration Statement (as defined in the Registration Rights Agreement) which covers the Conversion Shares for resale, has been declared effective, this Section 4(d) shall not be violated if the Company reserves greater than 185% of the number of shares of the Common Stock required to be issued upon conversion of the outstanding Convertible Notes, provided, further, however, that the Company utilizes its best efforts to reserve no less than 200% as soon as possible of the number of shares of Common Stock required to be issued upon conversion of the outstanding Convertible Notes. e. Limitation on Beneficial Ownership. The Company shall not effect any conversion of Convertible Notes and no Buyer of Convertible Notes shall have the right to convert any Convertible Notes pursuant to Section 2(b) of such Convertible Note to the extent that after giving effect to such conversion such Buyer (together with such Buyer's affiliates) (A) would beneficially own in excess of 4.9% of the outstanding shares of the Company's Common Stock following such conversion and (B) would have acquired, through conversion of Convertible Notes or otherwise, in excess of 4.9% of the outstanding shares of the Company's Common Stock following such conversion during the 60-day period ending on and including such date of conversion. For purposes 7 8 of the foregoing sentence, the number of shares of Common Stock beneficially owned by a Buyer and its affiliates or acquired by a Buyer and its affiliates, as the case may be, shall include the number of shares of Common Stock issuable upon conversion of the Convertible Notes with respect to which the determination of such sentence is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) conversion of the remaining, nonconverted Convertible Notes beneficially owned by such Buyer and its affiliates and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company (including, without limitation, any warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by such Person and its affiliates. Except as set forth in the preceding sentence, for purposes of this Section 4(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended. Notwithstanding anything to the contrary contained herein, each conversion notice shall constitute a representation by the Buyer submitting such conversion notice that, after giving effect to such conversion notice, (A) the holder will not beneficially own (as determined in accordance with this Section 4(e)) and (B) during the 60-day period ending on and including such conversion date, the holder will not have acquired, through conversion of Convertible Notes or otherwise, a number of shares of Common Stock in excess of 4.9% of the outstanding shares of Common Stock as reflected in the Company's most recent Form 10-Q or Form 10-K, as the case may be, or more recent public press release or other public notice by the Company setting forth the number of shares of Common Stock outstanding, but after giving effect to conversions of Convertible Notes by such holder since the date as of which such number of outstanding shares of Common Stock was reported. f. Listing. The Company shall promptly secure the listing of all of the Registrable Securities (as that term is defined in the Registration Rights Agreement) upon each national securities exchange and automated quotation system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance) and shall maintain, so long as any other shares of Common Stock shall be so listed, such listing of all Registrable Securities from time to time issuable under the terms of the Transaction Documents and the Convertible Notes. The Company shall maintain the Common Stock's authorization for quotation on the Nasdaq National Market, The New York Stock Exchange, Inc. or The American Stock Exchange, Inc. (collectively, the "Principal Market"). Neither the Company nor any of its Subsidiaries shall take any action which would be reasonably expected to result in the delisting or suspension of the Common Stock on the Principal Market. The Company shall promptly, and in no event later than the following business day, provide to each Buyer copies of any notices it receives from the Principal Market regarding the continued eligibility of the Common Stock for listing on such automated quotation system or securities exchange. The Company shall pay all fees and expenses in connection with satisfying its obligations under this Section 4(f). g. Transactions With Affiliates. So long as (i) any Convertible Notes are outstanding or (ii) any Buyer owns Conversion Shares with a market value equal to or greater than $500,000, the Company shall not, and shall cause each of its Subsidiaries not to, enter into, amend, modify or supplement, or permit any Subsidiary to enter into, amend, modify or supplement, any agreement, transaction, commitment or arrangement with any of its or any Subsidiary's officers, directors, person who were officers or directors at any time during the previous two years, stockholders who beneficially own 5% or more of the Common Stock, or affiliates or with any individual related by blood, marriage or adoption to any such individual or with any entity in which any such entity or individual owns a 5% or more beneficial interest (each a "Related Party"), except for (a) customary employment arrangements and benefit programs on reasonable terms, (b) any agreement, transaction, commitment or arrangement on an arms-length basis on terms no less favorable than terms which would have been obtainable from a person other than such Related Party, or (c) any agreement, transaction, commitment or arrangement which is approved by a majority of the disinterested directors of the Company. For purposes hereof, any director who is also an officer of the Company or any Subsidiary of the Company shall not be a disinterested director with respect to any such agreement, transaction, commitment or arrangement. "Affiliate" for purposes hereof means, with respect to any person or entity, another person or entity that, directly or indirectly, (i) has a 5% or more equity interest in that person or entity, (i) has 5% or more common ownership with that person or entity, (iii) controls that person or entity, or (iv) shares common control with that person or entity. "Control" or "controls" for purposes hereof means that a person or entity has the power, direct or indirect, to conduct or govern the policies of another person or entity. h. Limitation on Filing Registration Statements. Except in the event that Parlux Fragrances, Inc. invokes its demand registration rights or with respect to the Company's Series C Convertible Notes, the Company shall not file a registration statement (other than the Registration Statement (as defined in the Registration Rights Agreement) or a registration statement on Form S-8) covering the sale or resale of shares of Common Stock with 8 9 the SEC during the period beginning on the date hereof and ending on the date which is 180 days after the Registration Statement has been declared effective by the SEC. i. Independent Auditors. The Company shall, until at least three (3) years after the Closing Date, maintain as its independent auditors an accounting firm authorized to practice before the SEC. j. Corporate Existence and Taxes. The Company shall, until at least the later of (i) the date that is three (3) years after the Closing Date or (ii) the conversion or redemption of all of the Convertible Notes purchased pursuant to this Agreement, maintain its corporate existence in good standing (provided, however, that the foregoing covenant shall not prevent the Company from entering into any merger or corporate reorganization as long as the surviving entity in such transaction, if not the Company, assumes the Company's obligations with respect to the Convertible Notes and has Common Stock listed for trading on the Principal Market) and shall pay all its taxes when due except for taxes which the Company disputes. 5. TRANSFER AGENT INSTRUCTIONS. The Company shall issue irrevocable instructions to its transfer agent, and any subsequent transfer agent, to issue certificates, registered in the name of each Buyer or its respective nominee(s), for the Conversion Shares in such amounts as specified from time to time by each Buyer to the Company upon conversion of the Convertible Notes (the "Irrevocable Transfer Agent Instructions"). Prior to registration of the Conversion Shares under the 1933 Act, all such certificates shall bear the restrictive legend specified in Section 2(g) of this Agreement. The Company warrants that no instruction other than the Irrevocable Transfer Agent Instructions referred to in this Section 5, and stop transfer instructions to give effect to Section 2(f) hereof (in the case of the Conversion Shares, prior to registration of the Conversion Shares under the 1933 Act) will be given by the Company to its transfer agent and that the Securities shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement and the Registration Rights Agreement. Nothing in this Section 5 shall affect in any way each Buyer's obligations and agreements set forth in Section 2(g) to comply with all applicable prospectus delivery requirements, if any, upon resale of the Securities. If a Buyer provides the Company with an opinion of counsel, in a generally acceptable form, to the effect that a public sale, assignment or transfer of the Securities may be made without registration under the 1933 Act or the Buyer provides the Company with reasonable assurances that the Securities can be sold pursuant to Rule 144 without any restriction as to the number of securities acquired as of a particular date that can then be immediately sold, the Company shall permit the transfer, and, in the case of the Conversion Shares, promptly instruct its transfer agent to issue one or more certificates in such name and in such denominations as specified by such Buyer and without any restrictive legend. In the event that the Company appoints a different transfer agent (other than the Company's transfer agent in service as of the Closing) to serve as the Company's transfer agent, the Company shall immediately, but in no event later than five (5) days from such appointment issue irrevocable instructions to such transfer agent in substantially the same form as the Irrevocable Transfer Agent Instructions issued to the Company's transfer agent in service as of the Closing. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyers by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 5 will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section 5, that the Buyers shall be entitled, in addition to all other available remedies, to seek an order and/or injunction restraining any breach and requiring immediate issuance and transfer, without the necessity of showing economic loss and without any bond or other security being required. 6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. The obligation of the Company hereunder to issue and sell the Convertible Notes to each Buyer at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for the Company's sole benefit and may be waived by the Company at any time in its sole discretion by providing each Buyer with prior written notice thereof: a. Such Buyer shall have executed each of the Transaction Documents to which it is a party and delivered the same to Katten Muchin & Zavis, care of Anthony J. Ribaudo, Esq., as escrow agent (the "Escrow Agent") for the transactions contemplated by this Agreement. 9 10 b. The representations and warranties of such Buyer shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date), and such Buyer shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by such Buyer at or prior to the Closing Date. 7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE. The obligation of each Buyer hereunder to purchase the Convertible Notes at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for each Buyer's sole benefit and may be waived by such Buyer at any time in its sole discretion by providing the Company with prior written notice thereof: a. The Company shall have executed each of the Transaction Documents and delivered the same to the Escrow Agent. b. The Company's common stock shall be authorized for quotation on the Principal Market and trading in Company common stock shall not have been suspended by the SEC or the Principal Market. c. The representations and warranties of the Company shall be true and correct as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date) and the Company shall have performed, satisfied and complied with the covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by the Company at or prior to the Closing Date. The Company shall have delivered to the Escrow Agent a certificate, executed by the Chief Executive Officer of the Company, dated as of the Closing Date, to the foregoing effect. d. The Company shall have delivered to the Escrow Agent the opinion of the Company's counsel dated as of the Closing Date, in form, scope and substance reasonably satisfactory to such Buyer and in substantially the form of Exhibit C attached hereto. e. The Company shall have executed and delivered to the Escrow Agent the Convertible Notes (in such denominations as such Buyer shall request) being purchased by such Buyer at the Closing. f. The Board of Directors of the Company shall have adopted resolutions consistent with Section 3(b)(ii) above and in a form reasonably acceptable to such Buyer. g. As of the Closing Date, the Company shall have reserved out of its authorized and unissued Common Stock, solely for the purpose of effecting the conversion of the Convertible Notes, no less than 200% of the number of shares of Common Stock needed to provide for the issuance of the shares of Common Stock upon conversion of all outstanding Convertible Notes. h. The Irrevocable Transfer Agent Instructions, substantially in the form of Exhibit D attached hereto, shall have been delivered to and acknowledged in writing by the Company's transfer agent and a copy of the executed Irrevocable Transfer Agent Instructions shall have been delivered to the Escrow Agent. i. The Company shall have delivered to the Escrow Agent a certified copy of the Articles of Incorporation as certified by the Secretary of State of the State of Florida within ten (10) days of the Closing Date. j. The Company shall have delivered to the Escrow Agent a secretary's certificate, dated as the Closing Date, as to (i) the resolutions described in Section 7(f), (ii) the Certificate of Incorporation and (iii) the Bylaws, each as in effect at the Closing. k. The Company shall have made all filings under all applicable federal and state securities laws necessary to consummate the issuance of the Securities pursuant to this Agreement in compliance with such laws. l. The Company shall have delivered to the Escrow Agent such other documents relating to the transactions contemplated by this Agreement as the Escrow Agent or its counsel may reasonably request. 10 11 m. Subject to Section 9(k) below, at the Closing, the Company shall reimburse the Buyers for one-half (1/2) of the Buyers' expenses (including attorneys' fees and expenses) in due diligence and negotiating and preparing the Transaction Documents and consummating the transactions contemplated thereby up to an aggregate of $8,000. 8. INDEMNIFICATION. a. Indemnification by Company. In consideration of each Buyer's execution and delivery of the Transaction Documents and acquiring the Securities thereunder and in addition to all of the Company's other obligations under the Transaction Documents and the Convertible Notes, the Company shall defend, protect, indemnify and hold harmless each Buyer and each other holder of the Securities and all of their stockholders, partners, officers, directors, employees and direct or indirect investors and any of the foregoing person's agents or other representatives (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the "Indemnitees") from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys' fees and disbursements (the "Indemnified Liabilities"), incurred by any Indemnitee as a result of, or arising out of, or relating to (a) any material misrepresentation or breach of any representation or warranty made by the Company in the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby, or (b) any material breach of any covenant, agreement or obligation of the Company contained in the Transaction Documents or the Convertible Notes or any other certificate, instrument or document contemplated hereby or thereby. To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. b. Indemnification by Buyer. In consideration of the Company's execution and delivery of the Transaction Documents and the Company's performance of the transactions contemplated thereunder, each Buyer shall severally but not jointly defend, protect, indemnify and hold harmless the Company, its officers and directors (collectively, the "Company Indemnitees") from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith and including reasonable attorneys' fees and disbursements (the "Company Indemnified Liabilities"), incurred by any Company Indemnitee as a result of, or arising out of, or relating to (a) any material representation or breach of any representation or warranty made by such Buyer in the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby, or (b) any material breach of any covenant, agreement or obligation of such Buyer contained in the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby; provided, however, that any Buyer shall not be jointly liable for the indemnification obligations of any other Buyer or investor and the Buyer subject to an indemnification obligation shall be liable under this Section 8(b) for only that amount of Company Indemnified Liabilities as does not exceed the net proceeds to such Buyer as a result of the sale of Securities and Conversion Shares held by such Buyer. To the extent that the foregoing undertaking by a Buyer may be unenforceable for any reason, such Buyer shall make the maximum contribution to the payment and satisfaction of each of the Company Indemnified Liabilities which is permissible under applicable law; provided, however, that any Buyer shall not be jointly liable for the indemnification obligations of any other Buyer or investor and the Buyer subject to an indemnification obligation shall be liable under this Section 8(b) for only that amount of Company Indemnified Liabilities as does not exceed the net proceeds to such Buyer as a result of the sale of Securities and Conversion Shares held by such Buyer. 9. GOVERNING LAW; MISCELLANEOUS. a. Governing Law; Jurisdiction; Jury Trial. The corporate laws of the State of Florida shall govern all issues concerning the relative rights of the Company and its stockholders. All other questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of Florida, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Florida or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Florida. Each party hereby irrevocably submits to the non-exclusive jurisdiction of the state and federal courts sitting in the City of Miami, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such 11 12 court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY. b. Counterparts. This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party; provided that a facsimile signature shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as if the signature were an original, not a facsimile signature. c. Headings. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement. d. Severability. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction. e. Entire Agreement; Amendments. This Agreement supersedes all other prior oral or written agreements between the Buyers, the Company, their affiliates and persons acting on their behalf with respect to the matters discussed herein, and this Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor any Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be amended other than by an instrument in writing signed by the Company and the holders of at least two-thirds (2/3) of the Convertible Notes (determined by reference to principal amount) then outstanding, and no provision hereof may be waived other than by an instrument in writing signed by the party against whom enforcement is sought. No such amendment shall be effective to the extent that it applies to less than all of the holders of the Convertible Notes then outstanding. No consideration shall be offered or paid to any person to amend or consent to a waiver or modification of any provision of any of the Transaction Documents or the Convertible Notes unless the same consideration also is offered to all of the parties to the Transaction Documents or holders of Convertible Notes, as the case may be. f. Notices. Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one business day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be: If to the Company: E Com Ventures, Inc. 11701 N.W. 101st Road Miami, Florida 33178 Telephone: (305) 889-1600 Facsimile: (305) 888-7825 Attention: Ilia Lekach 12 13 With a copy to: Greenberg Traurig, P.A. 1221 Brickell Avenue Miami, Florida 33131 Telephone: (305) 579-0809 Facsimile: (305) 579-0717 Attention: Ken Hoffman, Esq. If to the Transfer Agent: Continental Stock Transfer and Trust 2 Broadway, 19th Floor New York, New York 10004 Telephone: (212) 509-4000 Facsimile: (212) 509-5150 Attention: Steve Nelson If to a Buyer, to it at the address and facsimile number set forth on Schedule 1 with copies to such Buyer's representatives as set forth on Schedule 1, or at such other address and/or facsimile number and/or to the attention of such other person as the recipient party has specified by written notice given to each other party five days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender's facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C) provided by a nationally recognized overnight delivery service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively. g. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns, including any purchasers of the Convertible Notes. The Company shall not assign this Agreement or any rights or obligations hereunder without the prior written consent of the holders of at least two-thirds (2/3) of the Convertible Notes (determined by reference to principal amount) then outstanding. A Buyer may assign some or all of its rights hereunder without the consent of the Company, provided, however, that any such assignment shall not release such Buyer from its obligations hereunder unless such obligations are assumed by such assignee and the Company has consented to such assignment and assumption. Notwithstanding anything to the contrary contained in the Transaction Documents, the Buyers shall be entitled to pledge the Securities in connection with a bona fide margin account. h. No Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person. i. Survival. Unless this Agreement is terminated under Section 9(k), the agreements and covenants set forth in Sections 4, 5 and 9, and the indemnification provisions set forth in Section 8, shall survive the Closing. Each Buyer shall be responsible only for its own agreements and covenants hereunder. j. Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby. k. Termination. In the event that the Closing shall not have occurred with respect to a Buyer on or before three (3) business days from the date hereof due to the Company's or such Buyer's failure to satisfy the conditions set forth in Sections 6 and 7 above (and the nonbreaching party's failure to waive such unsatisfied condition(s)), the nonbreaching party shall have the option to terminate this Agreement with respect to such breaching party at the close of business on such date without liability of any party to any other party; provided, however, that if this Agreement is terminated pursuant to this Section 9(k), the Company shall remain obligated to reimburse the nonbreaching Buyers for the expenses described in Section 7(m) above. 13 14 l. Placement Agent. The Company acknowledges that it has not engaged a placement agent in connection with the sale of the Convertible Notes. m. No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party. n. Remedies. Each Buyer and each holder of the Securities shall have all rights and remedies set forth in the Transaction Documents and the Convertible Notes and all rights and remedies which such holders have been granted at any time under any other agreement or contract and all of the rights which such holders have under any law. Any person having any rights under any provision of this Agreement shall be entitled to enforce such rights specifically (without posting a bond or other security), to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. o. Payment Set Aside. To the extent that the Company makes a payment or payments to the Buyers hereunder or pursuant to the Convertible Notes or the Buyers enforce or exercise their rights hereunder or thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred. [SIGNATURE PAGE FOLLOWS] 14 15 IN WITNESS WHEREOF, the Buyers and the Company have caused this Securities Purchase Agreement to be duly executed as of the date first written above. COMPANY: BUYERS: E COM VENTURES, INC. CRANSHIRE CAPITAL, L.P. By: /s/ Ilia Lekach By: /s/ Mitchell P. Kopin ------------------------------- ------------------------------- Name: Ilia Lekach Name: Mitchell P. Kopin ----------------------------- ------------------------------ Title: Chief Executive Officer Title: President - Downview Capital --------------------------- The General Partner ----------------------------- THE DOTCOM FUND, LLC By: /s/ Mark Rice ----------------------------------- Name: Mark Rice --------------------------------- Title: Manager - Minamax LLC The Managing Member -------------------------------- EP .COM FUND, L.L.C. By: /s/ Jeffrey Eisenberg ----------------------------------- Name: Jeffrey Eisenberg --------------------------------- Title: Manager of Eisenberg Partners, L.L.C. Manager of EP.com Fund, L.L.C. -------------------------------- EP .COM FUND INTERNATIONAL, LTD. By: /s/ Jeffrey Eisenberg ----------------------------------- Name: Jeffrey Eisenberg --------------------------------- Title: Manager of Eisenberg Partners, L.L.C. Investment Manager of EP.com Funds International, Ltd. -------------------------------- EP OPPORTUNITY FUND, L.L.C. By: /s/ Jeffrey Eisenberg ----------------------------------- Name: Jeffrey Eisenberg --------------------------------- Title: Manager of Eisenberg Partners, L.L.C. Manager of EP Opportunity Fund, L.L.C. -------------------------------- EP OPPORTUNITY FUND INTERNATIONAL, LTD. By: /s/ Jeffrey Eisenberg ----------------------------------- Name: Jeffrey Eisenberg --------------------------------- Title: Manager of Eisenberg Partners, L.L.C. Investment Manager of EP Opportunity Fund International, Ltd. -------------------------------- 15 16 SCHEDULE 1: LIST OF INVESTORS
Amount of Investor Address and Convertible Notes Investor's Legal Representatives' Investor's Name Facsimile Number Address and Facsimile Number --------------- --------------------- ----------------- --------------------------------- Cranshire Capital, L.P. 666 Dundee Rd., Ste. 1901 $2,000,000.00 Katten Muchin & Zavis Northbrook, IL 60062 525 W. Monroe Street Attention: Mitchell Kopin Chicago, Illinois 60661-3693 Telephone: (847) 562-9030 Attention: Anthony J. Ribaudo, Esq. Facsimile: (847) 562-9031 Facsimile: (312) 577-8763 Telephone: (312) 902-5521 The dotCom Fund, LLC 666 Dundee Road., Ste. 1901 $2,000,000.00 Northbrook, Illinois 60062 Attention: Mark Rice Telephone: (847) 509-2290 Facsimile: (847) 509-2295 EP .com Fund, L.L.C. 77 W. Wacker Drive $400,000.00 Chicago, Illinois 60601 Attention: Jeffrey Eisenberg Telephone: (312) 456-9500 Facsimile: (312) 456-9501 EP .com Fund 77 W. Wacker Drive $100,000.00 International, Ltd. Chicago, Illinois 60601 Attention: Jeffrey Eisenberg Telephone: (312) 456-9500 Facsimile: (312) 456-9501 EP Opportunity Fund, L.L.C. 77 W. Wacker Drive $469,000.00 Chicago, Illinois 60601 Attention: Jeffrey Eisenberg Telephone: (312) 456-9500 Facsimile: (312) 456-9501 EP Opportunity Fund 77 W. Wacker Drive $31,000.00 International, Ltd. Chicago, Illinois 60601 Attention: Jeffrey Eisenberg Telephone: (312) 456-9500 Facsimile: (312) 456-9501
16 EX-23.2 6 CONSENT OF PRICEWATERHOUSECOOPERS 1 EXHIBIT 23.2 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS We hereby consent to the incorporation by reference in this Registration Statement on Form S-3 of our report (which contains an explanatory paragraph relating to the Company's ability to continue as a going concern as described in Note 2 to the consolidated financial statements) dated April 29, 1999, except for the fourth paragraph of Note 2 and the second paragraph of Note 8 as to which the date is July 14, 1999, relating to the consolidated financial statements, which appears in Perfumania, Inc.'s Annual Report on Form 10-K for the year ended January 30, 1999. We also consent to the reference to us under the heading "Experts" in such Registration Statement. PricewaterhouseCoopers LLP Miami, Florida April 25, 2000 ` -----END PRIVACY-ENHANCED MESSAGE-----