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As filed with the Securities and Exchange Commission on May 25, 2000
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CYBERIAN OUTPOST, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 06-1419111
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
23 North Main Street
KENT, CT 06757
(860) 927-2050
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Robert A. Bowman
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CYBERIAN OUTPOST, INC.
23 North Main Street
KENT, CT 06757
(860) 927-2050
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
With a copy to:
MICHAEL L. FANTOZZI, ESQUIRE
MINTZ, LEVIN, COHN, FERRIS, GLOVSKY AND POPEO, P.C.
ONE FINANCIAL CENTER
BOSTON, MASSACHUSETTS 02111
(617) 542-6000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practical 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 other than securities offered only in connection with dividend or
interest reinvestment, 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
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PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED (1) OFFERING PRICE PER SHARE (2) PRICE (2) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock, $0.01 par value 4,702,900 $4.2969 $20,207,891 $5,335
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(1) Includes an indeterminate number of additional shares of common stock as may
from time to time be issued by reason of stock splits, stock dividends and
other similar transactions, which shares are registered hereunder pursuant
to Rule 416.
(2) The price of $4.2969 per share, which was the average of the high
and low prices of the common stock reported by the Nasdaq Stock Market on
May 24, 2000, is set forth solely for the purpose of calculating the
registration fee in accordance with Rule 457(c) of the Securities Act of
1933, as amended.
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 OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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The information in this prospectus is not complete and may be changed. The
selling stockholders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
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PROSPECTUS
SUBJECT TO COMPLETION, DATED MAY 25, 2000
4,702,900 SHARES
CYBERIAN OUTPOST, INC.
COMMON STOCK
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This prospectus covers the sale by the selling stockholders listed beginning
on page 14 of 4,702,900 shares of our common stock.
We will not receive any of the proceeds from the sale of common stock by the
selling stockholders.
Our common stock is listed on the Nasdaq National Market under the symbol
"COOL." On May 24, 2000, the closing sale price of our common stock on the
Nasdaq National Market was $4.125 per share.
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INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 4.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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____________, 2000
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TABLE OF CONTENTS
Outpost.com's Business................................................... 1
Risk Factors............................................................. 4
Special Note Regarding Forward-Looking Statements........................ 13
Selling Stockholders..................................................... 14
Plan of Distribution..................................................... 17
Legal Matters............................................................ 18
Experts.................................................................. 18
Where You Can Find More Information...................................... 19
Incorporation of Documents by Reference.................................. 19
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YOU MAY RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE INFORMATION DIFFERENT FROM THAT CONTAINED IN
THIS PROSPECTUS. THIS PROSPECTUS IS NOT AN OFFER TO SELL NOR IS IT SEEKING AN
OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF THE DELIVERY OF THIS
PROSPECTUS OR ANY SALE OF THESE SECURITIES.
"Cyberian Outpost," "Outpost.com," "TruePrice," "OutpostAuctions.com,"
"Cyberian Express," "Transparent Personalization" and other trademarks and
service marks of Cyberian Outpost, Inc. mentioned in this prospectus are the
property of Cyberian Outpost, Inc. All other trademarks, trade names or service
marks referred to in this prospectus are the property of their respective
owners.
The terms "Outpost.com," "Cyberian Outpost," "we" and "our" as used in
this prospectus refer to Cyberian Outpost, Inc.
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OUTPOST.COM'S BUSINESS
We are a leading global Internet-only retailer featuring over 170,000
consumer technology and related products for the home and office. As of February
29, 2000, we had approximately 630,000 customers world-wide, the majority of
which have shopped at Outpost.com during the last 24 months. We offer an online
"superstore" at www.Outpost.com that provides one-stop shopping for domestic and
international customers, 24 hours a day, seven days a week. Our superstore
features computer hardware, software and accessories from the computer
industry's foremost suppliers, and we are an authorized Internet reseller for
leading manufacturers, including IBM, Apple, Compaq, Sony, Hewlett Packard, Acer
and Toshiba. We also sell software for leading publishers including Microsoft,
Symantec, Adobe, Apple Software and Intuit. Additionally, we offer a full range
of consumer electronics in the Tweeter.Outpost.com store, unique and innovative
consumer products in the Brookstone.Outpost.com store and a wide selection of
photographic equipment and services offered via our unique partnership with Wolf
Camera. Our online store features;
o an easy to navigate, intuitive interface;
o outstanding twenty-four hour customer service seven days per week;
o free overnight delivery;
o extensive product information;
o powerful search capabilities;
o competitive pricing; and
o a flexible returns policy including pick-up from any location in the
U.S.
Since December 1998, our store has consistently received the top rating of
4.5 stars (out of 5) from Bizrate.com. Outpost.com has become one of the most
widely known and used e-commerce sites. We have the #1 ranking in the Computing
category of the Forrester PowerRankings, by Forrester Research. We were also
named Best of the Web by Fortune Magazine, Favorite Destination by PC Magazine,
and #1 Rated in Category by Fortune Magazine.
We have expanded our business beyond the online "superstore" targeted to
retail consumers to include our newly developed "Your Office at Outpost.com"
specifically to address the needs of small and medium size businesses. The B2b
sector of online retailing has distinct needs that diverge from the traditional
consumer in both the quantity and pricing of the selections that businesses need
to purchase. We have a dedicated team of sales and customer service
professionals to assist corporate buyers in making their selections, creating
accounts and managing payment and leasing terms. Additionally, our newly formed
eBusiness Services unit, allows us to further diversify our revenue stream and
create a new source of customers and products for our businesses.
Our business has grown rapidly since we started in 1995. Net sales
increased from $1.9 million for our fiscal year ended February 29, 1996 to $189
million for our fiscal year ended February 29, 2000. In addition, of the
approximately 630,000 individual customers in over 150 countries who have
purchased from us since we started, nearly 338,000 have become customers since
March 1, 1999.
We understand the key business challenges of the Internet retailing
industry and we use this unique environment to address those challenges. Our
online superstore was created to provide retail consumers, and now small and
medium size businesses, with a convenient, compelling and enjoyable shopping
experience in a Web-based retail environment. Key attributes of our business
include:
o Efficient economics of our "virtual" store. As an Internet-only
merchant, we enjoy structural economic advantages that we believe
will ultimately allow us to achieve greater operating margins
relative to traditional computer retailers. These advantages
include: low-cost unlimited "shelf space"; lower personnel
requirements; scaleable technology; and our ability to serve a
global customer base from a single, domestic location.
o Broad array of product offerings. Our unlimited, low-cost "shelf
space", allows us to offer more than 170,000 products.
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o The ability to reach a global customer base. The global reach of the
Internet allows us to deliver a broad selection of products to
customers in international, rural or other locations that cannot
support large scale physical stores or to which catalogs cannot be
easily or cost effectively distributed.
o The availability of value-added online content. To assist our
customers, valuable information, including extensive product
descriptions, is available on our Web site and through our free
e-mail newsletter.
o Convenient 24-hour shopping. Our online superstore which is
available 24 hours a day, seven days a week, may be reached from the
customer's home or office and features sophisticated browsing and
search technology.
Our goal is to become an e-commerce market leader for the Internet retail
sale of a broad array of consumer technology products for individual consumers
and small and medium size businesses, and to provide e-commerce solutions for a
large cross section of businesses that have the need to implement an e-commerce
strategy. Outpost.com has recently expanded its business model beyond Business
to Consumer (B2C) to target small and medium size businesses (B2b) and eBusiness
Services (eBS). We intend to build upon our current strengths by (a) expanding
our efforts in online and off-line brand development, (b) expanding our product
offerings with new, but related product categories, (c) developing a customized,
personalized and transparent one-to-one marketing approach, and (d) diversifying
into additional areas of Internet commerce. We believe that these steps support
our strategy, which is to build an internationally known Internet brand and
provide a unique and satisfying shopping experience for our domestic and
international customers.
Through eBusiness Services, Ouptost.com has been developing relationships
with some of the country's premier retailers as well as building alliances with
established Internet brands. We began our "Clicks & Mortar" partnership strategy
in 1999 by combining forces with Tweeter Home Entertainment Group, Inc. in a
joint venture company to sell consumer electronics on the Internet. This type of
relationship allows us to develop and provide either end to end co-branded or
private label sites. These partnerships include:
Tweeter.Outpost.com: This site combines the strengths of two companies
dedicated to providing unparalleled customer service and offers elite
brands of consumer electronics products to customers that shop on the Web.
Tweeter Home Entertainment Group, Inc. (Nasdaq: TWTR) operates 84 top
quality merchandise stores throughout the United States.
Innovations By Brookstone: Brookstone, Inc. (Nasdaq: BKST), with over 200
stores nationwide, is known for creating and marketing innovative products
that appeal to the strong demographic customer base we attract. Brookstone
is an eBS client for whom we are preparing a complete eCommerce solution
(www.brookstone.com).
Cameras by Wolf Camera: Wolf Camera appears on the Outpost.com site
providing a vast selection of digital and traditional cameras as well as
other photographic equipment and accessories that can be found in their
over 1,000 retail stores around the country.
We are also focusing our efforts on developing lasting e-commerce
extensions on-line with established Internet companies. These extensions give us
access to a broad audience. Our on-line relationships include Sandbox.com and
Computer.com where Outpost.com delivers shopping content for these popular
Websites. Finally, through eBusiness Services, we are always working to develop
additional stores within our site to provide exciting new products for our
customers.
Our marketing strategy is to promote and increase our brand awareness, cost
effectively acquire new customers, build customer loyalty, promote repeat
purchases and increase our market share. We are implementing this strategy
through the following channels:
Online and Traditional Advertising. We have implemented a broad-based,
multi-media advertising campaign that includes both online and traditional
advertising, designed to drive high-value traffic to our Web site. Our current
online advertising focuses on a variety of Web sites that have a proven ability
to drive buyers to our site. We optimize the performance of our online efforts
through the use of dynamic tools.
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Customer Relationship Marketing. Jupiter Communications, a market research
firm, projects that by 2002 consumer e-mail volume will rise by 58% to 576
million messages per day, up from 335 million per day in 1999. In order to
expand our customer retention and acquisition efforts, we have developed a
concentrated customer relationship marketing campaign. At Outpost.com, we
believe that e-mail direct marketing offers significant advantages over
traditional "snail" mail marketing including: ease of personalization; lower
cost; and more rapid delivery and response. We developed and implemented
technology-based systems that customize the content of targeted e-mails based on
order history, platform of choice and other buying criteria. In addition, we are
creating plans for increased loyalty programs beyond our current efforts to
maximize the lifetime value of our customers.
Outpost Affiliate Network Program. The Outpost affiliate program is an
established network of Web sites that post links to Outpost.com and receive a
commission on sales they generate on a direct click through to Outpost.com. We
partner with LinkShare Corporation, a leading provider of affiliate program
management. We believe this partnership has helped make the Outpost Affiliate
Network one of the leading programs in the industry today. The affiliate network
program was launched in December 1997 and since that time has experienced
substantial growth. By the close of fiscal 2000, our network membership had
grown to more than 85,000.
Strategic Online Advertising Relationships. We continue to forge strategic
relationships with selected Internet sites including CNET, MSN Shopper and
DEJA.com to increase market share and attract new customers. We are also a
founding member of ShopperConnection (www.shopperconnection.com), a network
connecting some of the Internet's leading online specialty retailers and
services.
Market Intelligence and Research. We have created a group to study the
productivity and behavior of our customer base in order to determine the
effectiveness of our marketing efforts. The market intelligence program works
with both our internal data, mining session behavior and retention programs as
well as with syndicated third party data provided by research firms such as
Forrester, Biz Rate.com and NetRatings. We have commissioned proprietary studies
to gain better understanding of our customers and use data produced from these
studies to help determine the likelihood that our customers will return to us to
purchase again and again and to determine what other product selections might
appeal to our established customers.
We were incorporated in Connecticut in 1995 and reincorporated in Delaware
in 1998. Our principal executive offices are located at 23 North Main Street,
Kent, Connecticut 06757. Our telephone number is (860) 927-2050. Our Web site is
located at http://www.Outpost.com. We do not intend the information found on our
Web site to be a part of this prospectus.
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RISK FACTORS
You should carefully consider the following risk factors and all other
information contained in this prospectus before purchasing our common stock.
Investing in our common stock involves a high degree of risk. If any of the
following risks actually occurs, we may not be able to conduct our business as
currently planned and our financial condition and operating results could be
seriously harmed. In that case, the market price of our common stock could
decline, and you could lose all or part of your investment. See "Special Note
Regarding Forward-Looking Statements."
RISKS RELATING TO OUR BUSINESS
WE HAVE A RELATIVELY SHORT OPERATING HISTORY SO THERE IS A LIMITED AMOUNT OF
INFORMATION THAT YOU CAN USE TO EVALUATE OUR BUSINESS AND PROSPECTS FOR SUCCESS.
We were founded in March 1995 and began selling computer products in May
1995. Accordingly, we have a limited operating history on which you can evaluate
our business and prospects for success. Since our inception, we have devoted our
efforts primarily to sales and marketing, financial planning, recruiting
management and technical staff, acquiring operating assets and raising capital.
You must consider the risks and uncertainties frequently encountered by
companies in new and rapidly evolving markets, such as the market for online
commerce. Some of these risks and uncertainties relate to our ability to:
o anticipate and adapt to changes in the rapidly evolving online
commerce market;
o retain current customers and attract new customers;
o implement and successfully execute our business strategy and sales and
marketing initiatives;
o attract, retain and motivate qualified personnel;
o respond effectively to competitive and technological developments;
o continue to develop and upgrade our technology and
transaction-processing systems; and
o effectively manage our anticipated growth.
If we are not successful in addressing these risks, our business, prospects,
financial condition and results of operations could be materially harmed.
WE HAD AN ACCUMULATED DEFICIT OF $70 MILLION AS OF FEBRUARY 29, 2000 AND EXPECT
TO CONTINUE TO INCUR SUBSTANTIAL OPERATING LOSSES AND NEGATIVE CASH FLOW FOR THE
FORESEEABLE FUTURE AND MAY NEVER ACHIEVE OR MAINTAIN PROFITABILITY.
We have had substantial operating losses and negative cash flow since our
inception and may never achieve or maintain profitability. We have an
accumulated deficit of $70 million as of February 29, 2000. We expect to
continue to incur significant expenses as we continue to invest heavily in
customer acquisition, retention and loyalty efforts, marketing and promotion,
Web site development and technology and operating infrastructure development. As
a result, we believe that we will continue to incur substantial operating losses
for the foreseeable future. Though we have been steadily increasing our product
gross margins, achieving profitability depends upon our ability to generate and
sustain increased revenue levels, acquire our customers more economically and
increase the life-time value of our customers. We believe that our success will
depend in large part on our ability to (i) extend our brand position, (ii)
provide our customers with outstanding value and a superior shopping experience,
(iii) achieve sufficient sales volume to realize economies of scale, (iv)
diversify our revenue stream by providing business to business services and
products, and (v) expand our product offering and further diversify our income
stream by adding eBS partners to whom we provide valuable e-Commerce solutions
and services. During the early stages of our development, we experienced a
significant revenue growth rate. As we mature, however, we expect our growth
rate to plateau. We cannot assure you that we will continue to increase revenues
or that we will ever achieve or maintain profitability or generate cash from
operations.
OUR OPERATING RESULTS MAY FLUCTUATE SUBSTANTIALLY WHICH MAY ADVERSELY AFFECT OUR
STOCK PRICE.
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Our results of operations have fluctuated in the past and we expect to
experience significant fluctuations in our future operating results due to a
variety of factors, many of which are outside our control. Factors that may
adversely affect our operating results include:
o our ability to retain existing customers, attract new customers at a
steady rate and maintain customer satisfaction;
o our ability to manage our fulfillment activities and maintain gross
margins;
o the announcement or introduction of new Web sites, services and
products by us or our vendors, strategic partners and competitors;
o the success of our strategic alliances;
o price competition or higher wholesale prices in the industry;
o our mix of product sales; o seasonality of sales typically experienced
by retailers;
o the level of use of the Internet and online services and consumer
acceptance of the Internet and other online services for the purchase
of consumer products such as those offered by us;
o our ability to upgrade and develop our systems and infrastructure and
attract new personnel in a timely and effective manner;
o the level of traffic to our Web site;
o technical difficulties, system downtime or Internet brownouts;
o the amount and timing of operating costs and capital expenditures
relating to expansion of our business, operations and infrastructure;
o the level of merchandise returns we experience;
o governmental regulation and taxation; and
o general economic conditions and economic conditions specific to the
Internet, online commerce and the industry.
If the results of our operations, the businesses of our partners, or our other
business results do not meet analysts' predictions or the market's expectations,
then our stock price may decline. As a result, you could lose part or all of
your investment.
OUR FINANCIAL RESULTS MAY FLUCTUATE SEASONALLY WHICH MAY NEGATIVELY IMPACT OUR
FINANCIAL RESULTS AND OUR STOCK PRICE.
We expect to experience seasonality in our revenues and sales and gross
margins as a result of seasonal fluctuations in Internet usage and traditional
retail seasonality patterns. Sales in the traditional retail computer, consumer
technology and photography industries are typically higher in the fourth
calendar quarter of each year than in the preceding three quarters. To date, our
limited operating history and rapid growth make it difficult to ascertain the
effects of seasonality on our business. If we do not accurately predict our
sales and revenues, we may not appropriately adjust our spending which could
have a negative impact on our financial results and stock price. In addition, if
our business results do not meet analysts' predictions or the market's
expectations, then our stock price may decline. As a result, you could lose part
or all of your investment.
WE ANTICIPATE THAT WE MAY NEED TO RAISE ADDITIONAL FUNDING WHICH MAY NOT BE
AVAILABLE ON TERMS ACCEPTABLE TO US, IF AT ALL.
To date, our operations have consumed substantial amounts of capital. We
expect our capital and operating expenditures to increase over the next several
years as our sales volume increases and we expand our business through
investments in marketing and promotion, Web site development and technology and
operating infrastructure development. We may have to raise additional capital to
support our business operations, including obligations to strategic partners and
third-party manufacturers. In the event that such additional financing is
necessary, we may seek to raise such funds through public or private equity or
debt financing or other means. We may not be able to raise additional financing
when we need it, or we may not be able to raise financing on terms acceptable
us. In the event that adequate funds are not available, our business, prospects,
financial condition and results of operations may be materially adversely
affected.
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IF WE ARE UNABLE TO SUCCESSFULLY COMPETE IN THE RETAIL TECHNOLOGY PRODUCTS
INDUSTRY, OUR BUSINESS COULD BE MATERIALLY ADVERSELY EFFECTED.
The retail technology products industry as a whole is intensely
competitive. Many of our competitors have longer operating histories, larger
customer bases, greater brand recognition, and significantly greater financial,
marketing and other resources than we do. Our current or potential competitors
include:
o traditional electronics retailers such as CompUSA and Circuit City;
o mail-order retailers such as CDW, Micro Warehouse, and PC Connection;
o Internet-only retailers including Amazon.com, Buy.com and
Crutchfield.com;
o manufacturers that sell directly over the Internet or by telephone
such as Dell and Gateway and many software companies;
o a number of online service providers including America Online and the
Microsoft Network that offer products directly or in partnership with
other retailers; and
o electronics manufacturers that may develop direct channels to the
consumer market.
WE MAY BE UNABLE TO EFFECTIVELY MARKET OUR SERVICES AND ATTRACT NEW CUSTOMERS TO
OUR STORE IN A REASONABLY COST EFFECTIVE MANNER. OUR EBS CUSTOMERS MAY CHOOSE
NOT TO RENEW OR EXTEND THE TERM OF THEIR RELATIONSHIPS WITH US.
The online commerce market is new, rapidly evolving and intensely
competitive. Current and new competitors can launch new sites quickly and
inexpensively. In addition, online retailers may be acquired by, receive
investments from, or enter into other commercial relationships with, larger,
well-established and well-financed companies as use of the Internet and other
online services increases. Certain of our online competitors have and may
continue to adopt aggressive pricing or inventory availability policies and
devote substantially more resources to Web site and systems development than we
do. Moreover, companies that control access to Internet commerce transactions
through network access or Web browsers currently promote, and will likely
continue to promote, our competitors. New technologies and the expansion of
existing technologies may increase competition.
Increased competition may negatively impact our operating margins, market
share and brand franchise, any of which would have a material adverse effect on
our business, prospects, financial condition and results of operations. In
addition, we may respond to competitive pressures by establishing pricing,
marketing and other programs or seeking out additional strategic alliances or
acquisitions that may be less favorable to us than we would otherwise establish
or obtain, and thus could have a material adverse effect on our business,
prospects, financial condition and results of operations.
IF WE DO NOT ADAPT TO RAPID TECHNOLOGICAL CHANGE, WE WILL NOT BE COMPETITIVE IN
THE MARKETPLACE.
To remain competitive, we must continue to enhance and improve the
responsiveness, functionality and features of our Web site. The online commerce
industry in which we operate, is characterized by:
o rapid technological change;
o changes in user and customer requirements and preferences;
o frequent new product and service introductions embodying new
technologies; and
o the emergence of new industry standards and practices that could
render our existing Web site and proprietary technology and systems
obsolete.
Our success depends, in part, on our ability to license leading technologies
useful in our business, enhance our existing services, develop new services and
technology that address the increasingly sophisticated and varied needs of our
customers, and respond to technological advances and emerging industry standards
and practices on a cost-effective and timely basis. The development of Web site
and other proprietary technology entails significant technical and business
risks. We may not successfully adapt to new technologies or effectively adapt
our Web site, proprietary technology and transaction processing systems to
customer requirements or emerging industry standards. If we are unable, for
technical, legal, financial or other reasons, to adapt in a timely manner in
response to changing market conditions or customer requirements, our business,
prospects, financial condition and results of operations would be materially
adversely affected.
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WE DEPEND ON DIGITAL ISLAND, INC. TO MANAGE OUR COMMUNICATIONS HARDWARE, AND A
DELAY OR INTERRUPTION IN DIGITAL ISLAND'S SERVICE COULD RESULT IN OUR INABILITY
TO RECEIVE CUSTOMER ORDERS OR PROVIDE HIGH-QUALITY CUSTOMER SERVICE.
Our ability to successfully receive and fulfill customer orders and provide
high-quality customer service, largely depends on the efficient and
uninterrupted operation of our computer and communications hardware systems.
Substantially all of our computer and communications hardware required for Web
access is managed by Digital Island Inc., a third-party provider located in
Staten Island, NY. We are dependent on the services of this provider, and its
systems and operations are vulnerable to damage or interruption from fire,
flood, power loss, telecommunications failure, break-ins, earthquake and similar
events. Our disaster recovery plan may not be adequate to protect us against
loss and we do not carry sufficient business interruption insurance to
compensate us for losses that may occur. Despite our implementation of network
security measures, our servers are vulnerable to computer viruses, physical or
electronic break-ins and similar disruptions, which could lead to interruption,
delays, loss of data or the inability to accept and fulfill customer orders. The
occurrence of any of the foregoing events could have a material adverse effect
on our business, prospects, financial condition and results of operation.
WE DEPEND ON AIRBORNE LOGISTICS SERVICES FOR TIMELY AND ACCURATE ORDER
FULFILLMENT, AND A DELAY OR INTERRUPTION IN AIRBORNE'S SERVICE COULD RESULT IN
OUR INABILITY TO PROCESS CUSTOMER ORDERS OR PROVIDE HIGH-QUALITY CUSTOMER
SERVICES.
We house our inventory in a leased warehouse located in Wilmington,
Ohio. In addition to warehousing services, Airborne Logistics Services Inc. also
provides our order fulfillment services. We are dependent on Airborne Logistics
Services for timely, accurate order fulfillment. Although Airborne operates a
secure facility, its systems and operations are vulnerable to damage or
interruption from fire, flood, power loss, telecommunications failure,
break-ins, earthquake and similar events. We do not presently have redundant
systems. Our disaster recovery plan may not be adequate to protect us against
loss and we do not carry sufficient business interruption insurance to
compensate us for losses that may occur. The occurrence of any of the foregoing
events could have a material adverse effect on our business, prospects,
financial condition and results of operations.
WE RELY ON CERTAIN VENDORS, THE LOSS OF WHICH COULD LIMIT OUR ABILITY TO SOURCE
SUFFICIENT QUANTITIES OF MERCHANDISE WHICH WOULD ADVERSELY AFFECT OUR REVENUES.
While we purchase our merchandise from many different vendors, during
fiscal 2000 a majority of our products were purchased through two vendors, Tech
Data and Ingram Micro. If we fail to develop and maintain relationships with
these and other vendors, we may not be able to source sufficient quantities of
merchandise on acceptable commercial terms which would have a material adverse
effect on our revenues and results of operations.
IF WE FAIL TO CONTINUALLY DEVELOP AND UPGRADE OUR SYSTEMS, WE MAY EXPERIENCE
DECREASED PERFORMANCE ON OUR WEB SITE WHICH WOULD ADVERSELY AFFECT OUR
REPUTATION AND BUSINESS.
A key element of our strategy is to generate a high volume of traffic on
our Web site. Accordingly, the satisfactory performance, reliability and
availability of our Web site, transaction-processing systems and network
infrastructure are critical to our reputation and our ability to attract and
retain customers and maintain adequate customer service levels. Our revenues
depend on the number of visitors who shop on our Web site, the size of their
orders and the volume of orders we fulfill. We use a variety of internally and
externally developed software for our Web site, search engine, customer and
product databases, and transaction processing and order management systems. If
we do not continue to develop and upgrade our existing technology or network
infrastructure to accommodate increased traffic on our Web site or increased
sales volume through our transaction processing and order management systems, we
may experience:
o unanticipated system disruptions;
o degradation in levels of customer service;
o impaired quality and speed of order fulfillment; and
o delays in reporting accurate financial information.
7
<PAGE>
Any system interruptions that result in the unavailability of our Web site
or reduced order fulfillment performance would reduce the volume of products
sold and the attractiveness of our product and service offerings. While we
continually review and seek to upgrade and expand our transaction processing and
order management systems in a timely and effective manner, we could experience
future systems overloads or failures. In addition, we can not assure you that we
will be able to smoothly integrate any newly developed or purchased modules with
our existing systems or prevent unauthorized access to our data. Any inability
to do so could have a material adverse effect on our business, prospects,
financial condition and results of operations.
WE MAY NOT BE ABLE TO SUCCESSFULLY MANAGE OUR GROWTH, WHICH COULD ADVERSELY
AFFECT OUR BUSINESS.
We have rapidly and significantly expanded our operations in recent years.
We expect to continue to experience significant growth in our customer base and
market opportunities. Our growth has placed, and is expected to continue to
place, a significant strain on our management and our operating systems. Our
success will partly depend on the ability of our officers and key employees to
continue to:
o implement and improve our operational, management information and
financial control systems;
o expand, train and manage our work force;
o improve existing transaction processing, operational and financial
systems, procedures and controls; and
o maintain and expand our relationships with various distributors, other
Web site operators and Web service providers, and other third parties
necessary to our business.
We can not assure you that our current and planned personnel, systems,
procedures and controls will be adequate to support our future operations. If we
are unable to manage our growth effectively, our business, prospects, financial
condition and results of operations will be materially adversely affected.
WE MAY CHOOSE TO EXPAND OUR OPERATIONS BY ENTERING NEW BUSINESS AREAS, BUT WE
MAY NOT BE SUCCESSFUL.
We may choose to expand our operations by developing new Web sites,
promoting new or complementary products or sales formats, expanding the breadth
and depth of products and services offered or expanding our market presence
through relationships with third parties. In addition, we may pursue the
acquisition of new or complementary businesses, or technologies. Any new
business or Web site that we launch may not be favorably received by consumers
and could damage our reputation or the Outpost.com brand. Additionally, if we
expand our operations in this manner, we would require significant additional
expenses and resources which could strain our management, financial and
operational resources. The lack of market acceptance of such efforts could have
a material adverse effect on our business.
IF WE FAIL TO RETAIN KEY PERSONNEL, OR HIRE, TRAIN AND RETAIN QUALIFIED
EMPLOYEES, WE MAY NOT BE ABLE TO MANAGE OUR BUSINESS EFFECTIVELY.
Our performance is substantially dependent on the continued services and
performance of our senior management, particularly Robert A. Bowman, President
and Chief Executive Officer. We maintain key person life insurance on the life
of Mr. Bowman in the amount of $1,000,000. We have also entered into employment
agreements with Mr. Bowman, as well as our Executive Vice President for Business
Development and Chief Financial Officer. The loss of the services of any of our
executive officers or other key employees could have a material adverse effect
on our business.
Our future success also depends on our ability to identify, attract, hire,
train, retain and motivate other highly skilled technical, managerial,
editorial, merchandising, marketing and customer service personnel. From March
1995 to February 29, 2000 we expanded from two full-time employees to 234
full-time and 5 part-time employees. Our new employees include a number of key
managerial, technical and operations personnel and we expect to add additional
key personnel in the future. Competition for such personnel is intense, and we
may not be able to successfully attract, integrate or retain sufficiently
qualified personnel. The failure to attract and retain the necessary technical,
managerial, editorial, merchandising, marketing and customer service personnel
could have a material adverse effect on our business.
8
<PAGE>
IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY, OUR BUSINESS MAY BE
ADVERSELY AFFECTED.
We regard our service marks, trademarks, trade secrets and similar
intellectual property as instrumental to our success, and we rely on trademark
and copyright law, trade secret protection and confidentiality and/or license
agreements with our employees, customers, strategic partners and others to
protect our proprietary rights. We have registered our trademarks and service
marks in the United States and internationally, and have applied for the
registration of certain of our other trademarks and service marks. Effective
trademark, service mark, copyright and trade secret protection may not be
available in every country in which our products and services are available
online.
We are not aware of any material infringements of our trademarks and
proprietary rights. However, our proprietary rights may not be adequate or third
parties may infringe or misappropriate our copyrights, trademarks and similar
proprietary rights. If we are unable to protect our intellectual property, our
business may be adversely affected.
WE MAY INADVERTENTLY INFRINGE UPON OTHER'S INTELLECTUAL PROPERTY RIGHTS EXPOSING
US TO LITIGATION THAT COULD ADVERSELY AFFECT OUR BUSINESS.
We believe that our success to date and our future success will depend in
part upon our ability to provide information about the consumer technology
products that we sell. We may face potential liability for copyright, trademark
or patent infringement, defamation or other claims based on the nature and
content of materials that we publish or distribute. Defending such claims, or
liability arising out of such claims, could have a material adverse effect on
our business. Moreover, because of the interconnectivity currently provided on
our Web site, we could be exposed to liability with respect to content that we
do not control. The insurance we carry may not be sufficient to offset the risks
arising from these types of liabilities, and any liability in excess of such
coverage could have a material adverse effect on our business.
LICENSEES OF OUR INTELLECTUAL PROPERTY MAY TAKE ACTIONS OR FAIL TO TAKE ACTIONS
THAT COULD DIMINISH THE VALUE OF OUR INTELLECTUAL PROPERTY RIGHTS OR REPUTATION.
We have licensed in the past, and expect to license in the future, certain
proprietary rights, such as trademarks or copyrighted material, to third
parties. While we attempt to ensure that the quality of our brand is maintained
by such licensees, it is possible that such licensees will not take or will omit
to take actions that might materially adversely affect the value of our
proprietary rights or reputation, which could have a material adverse effect on
our business.
RISKS RELATING TO THE ONLINE COMMERCE INDUSTRY
WE DEPEND ON THE CONTINUED GROWTH OF ONLINE COMMERCE FOR OUR OWN GROWTH AND
SUCCESS.
Substantially all of our business is generated from our Web site.
Therefore, our future revenues and any future profits depend on the willingness
of consumers to accept the Internet as an effective medium of commerce. We are
especially dependent upon the long-term acceptance of online commerce. Rapid
growth in the use of and interest in online services is a recent phenomenon, and
we can not assure you a sufficiently broad base of consumers will adopt and
continue to use the Internet and other online services as a medium of commerce.
We rely on consumers who have historically used traditional means of commerce to
purchase merchandise. For us to be successful, these consumers must accept and
utilize novel ways of conducting business and obtaining information.
9
<PAGE>
EFFORTS TO REGULATE OR ELIMINATE THE USE OF MECHANISMS WHICH AUTOMATICALLY
COLLECT INFORMATION ON USERS OF OUR WEB SITE MAY INTERFERE WITH OUR ABILITY TO
TARGET OUR MARKETING EFFORTS AND TAILOR OUR WEB SITE OFFERINGS TO THE TASTES OF
OUR USERS.
Web sites typically place a tracking program on a user's hard drive. These
programs automatically collect data on anyone visiting a Web site. Web site
operators use these mechanisms for a variety of purposes, including the
collection of data derived from users' Internet activity. Most currently
available Web browsers allow users to elect to remove these mechanisms at any
time or to prevent this information from being stored on their hard drive. In
addition, some commentators, privacy advocates and governmental bodies have
suggested limiting or eliminating the use of these tracking mechanisms. Any
reduction or limitation in the use of this software could limit the
effectiveness of our sales and marketing efforts.
WE COULD FACE ADDITIONAL BURDENS ASSOCIATED WITH GOVERNMENT REGULATION OF AND
LEGAL UNCERTAINTIES SURROUNDING THE INTERNET.
Any new law or regulation pertaining to the Internet, or the application or
interpretation of existing laws, could increase our cost of doing business or
otherwise have a material and adverse effect on our business, results of
operations and financial condition. Laws and regulations directly applicable to
Internet communications, commerce and advertising are becoming more prevalent.
The law governing the Internet, however, remains largely unsettled, even in
areas where there has been some legislative action. It may take years to
determine whether and how existing laws governing intellectual property,
copyright, privacy, obscenity, libel and taxation apply to the Internet. In
addition, the growth and development of online commerce may prompt calls for
more stringent consumer protection laws, both in the United States and abroad.
IF CONSUMERS DO NOT PURCHASE GOODS ONLINE DUE TO CONCERNS ABOUT ONLINE SECURITY
RISKS, INCLUDING CREDIT CARD FRAUD, OUR REVENUES WILL BE ADVERSELY AFFECTED.
The need to securely transmit confidential information (such as credit card
and other personal information) over the Internet has been a significant barrier
to online commerce and communications over the Web. Any well-publicized
compromise of security could deter more people from using the Web or from using
it to conduct transactions that involve transmitting confidential information,
such as purchases of goods or services. Furthermore, decreased traffic and
online sales as a result of general security concerns could cause consumers to
reduce their amount of online spending. To the extent that our activities or the
activities of third-party contractors involve the storage and transmission of
information, such as credit card numbers, security breaches could disrupt our
business, damage our reputation and expose us to a risk of loss or litigation
and possible liability. We could be liable for claims based on unauthorized
purchases with credit card information, impersonation or other similar fraud
claims. Claims could also be based on other misuses of personal information,
such as for unauthorized marketing purposes. To date, our losses due to credit
card fraud have not been material. However, we can not assure you that we will
not suffer significant losses as a result of fraudulent use of credit card
information in the future, which could have a material adverse effect on our
business. We may need to spend a great deal of money and use other resources to
protect against the threat of security breaches or to alleviate problems caused
by security breaches.
WE ARE VULNERABLE TO NEW TAX OBLIGATIONS THAT COULD BE IMPOSED ON ONLINE
COMMERCE TRANSACTIONS.
We do not currently collect sales or other similar taxes in respect of
shipments of goods into states other than Connecticut and Ohio. The United
States Congress has passed legislation limiting for three years the ability of
the states to impose taxes on Internet-based transactions. Failure to renew this
legislation could result in the imposition by various states of taxes on online
commerce. Nevertheless, various states or foreign countries may seek to impose
sales tax obligations on us and other online commerce companies. A number of
proposals have been made at the state and local levels that would impose
additional taxes on the sale of goods and services through the Internet. These
proposals, if adopted, could substantially impair the growth of online commerce
and cause purchasing through our Web site to be less attractive to customers as
compared to traditional retail purchasing. A successful assertion by one or more
states or any foreign country that we should have collected or be collecting
sales or other taxes on the sale of merchandise could have a material adverse
effect on our revenues and results of operations.
10
<PAGE>
RISKS RELATING TO THIS OFFERING
WE HAVE VARIOUS MECHANISMS IN PLACE TO DISCOURAGE A TAKEOVER OF THE COMPANY THAT
MAY ALSO BE ADVERSE TO SHAREHOLDERS.
Our certificate of incorporation authorizes our Board of Directors to
issue, without stockholder approval, 10,000,000 shares of preferred stock with
voting, conversion and other rights and preferences that could adversely affect
the voting power or other rights of the holders of common stock. The issuance of
Preferred Stock or of rights to purchase preferred stock could be used to
discourage an unsolicited acquisition proposal. In addition, the possible
issuance of preferred stock could discourage a proxy contest, make more
difficult the acquisition of a substantial block of our common stock or limit
the price that investors might be willing to pay in the future for shares of
common stock. Our certificate of incorporation also provides that:
o the affirmative vote of the holders of at least 70% of the voting
power of all of the then outstanding shares of our capital stock,
voting together as a single class, shall be required for the
stockholders to adopt, amend or repeal any provision of our bylaws;
o stockholders may not take any action by written consent without a
meeting;
o the board of directors will be classified into three classes with
staggered terms of three years each; and
o members of the board of directors may be removed only for cause and
after reasonable notice and an opportunity to be heard before the body
proposing to remove such director.
These provisions of the certificate of incorporation could have the effect of
delaying, deterring or preventing a change in control of our company. Delaware
law also contains provisions that may have the effect of delaying, deterring or
preventing a non-negotiated merger or other business combination involving us.
These provisions are intended to encourage any person interested in acquiring us
to negotiate with and obtain the approval of our board of directors in
connection with the transaction. Certain of these provisions may, however,
discourage a future acquisition of Outpost.com that is not approved by the board
of directors in which stockholders might receive an attractive value for their
shares or that a substantial number or even a majority of our stockholders might
believe to be in their best interest. As a result, stockholders who desire to
participate in such a transaction may not have the opportunity to do so.
WE EXPECT THE MARKET PRICE OF OUR COMMON STOCK TO BE VOLATILE AND THE MARKET
PRICE COULD FALL BELOW THE PRICE YOU PAID FOR YOUR SHARES. AS A RESULT, YOU MAY
LOSE ALL OR PART OF YOUR INVESTMENT.
The trading price of our common stock has been highly volatile and subject
to wide fluctuations in response to many factors, many of which are beyond our
control, such as:
o actual or anticipated variations in quarterly operating results;
o announcements of technological innovations;
o new sales formats or new products or services by us or our
competitors;
o changes in financial estimates and forecasts by securities analysts;
o conditions or trends in the Internet and online commerce industries;
o changes in the market valuations of other Internet online service or
retail companies;
o announcements that we will make significant acquisitions;
o strategic partnerships;
o joint ventures or capital commitments;
o additions or departures of key personnel; and o sales of common stock.
In addition, the stock market in general, and the Nasdaq National Market and the
market for Internet-related and technology companies in particular, has
experienced extreme price and volume fluctuations that have often been unrelated
or disproportionate to the operating performance of such companies. The trading
prices of many technology companies' stocks have been at or near historical
highs and reflect price to earnings ratios substantially above historical
levels. We cannot assure you that these trading prices, patterns and price
earnings ratios will be sustained. These broad market and industry factors may
materially and adversely affect the market price of our common stock, regardless
of our operating performance. In the past, following periods of volatility in
the market price of a company's securities, securities class-action litigation
has often been instituted against the company. Such litigation, if instituted,
could result in substantial costs and a diversion of management's attention and
resources, which would have a material adverse effect on our business,
prospects, financial condition and results of operations.
11
<PAGE>
WE DO NOT INTEND TO PAY DIVIDENDS IN THE FORESEEABLE FUTURE.
We have not paid cash dividends on our common stock to date and we do not
anticipate paying cash dividends on the common stock in the foreseeable future.
12
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference contain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and within the meaning of Section 21E of the Securities Exchange Act
of 1934. We have based these forward-looking statements on our current
expectations and projections about future events. These forward-looking
statements include, but are not limited to, statements regarding:
o the structural benefits of electronic commerce;
o the expected benefits of our systems in development that will
customize our shopping experience;
o our intention to pursue more branding and advertising campaigns;
o our diversification into additional areas of Internet commerce;
o our expectation that we will continue to incur substantial operating
losses for the foreseeable future;
o our expectation that we will experience significant fluctuations in
future operating results and that our financial results will fluctuate
seasonally; and
o our expectation that our capital and operating expenditures will
increase over the next several years.
In some cases, you can identify forward-looking statements by terminology
such as "may," "will," "should," "expects," "anticipates," "believes,"
"estimates," "predicts," "potential" or "continue" or the negative of such terms
or other comparable terminology. These statements are only predictions and
involve known and unknown risks, uncertainties and other factors, including the
risks outlined under "Risk Factors" that may cause our or our industry's actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements. Before
deciding to purchase our common stock you should carefully consider the risks
described in the "Risk Factors" section in addition to the other information set
forth in this prospectus and the documents incorporated by reference herein.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other person
assumes responsibility for the accuracy and completeness of such statements. We
are under no duty to update any of the forward-looking statements after the date
of this prospectus to conform such statement to actual results.
13
<PAGE>
SELLING STOCKHOLDERS
The common stock was originally issued by us and sold by C.E. Unterberg,
Towbin, as the initial purchaser, in a transaction exempt from the registration
requirements of the Securities Act to persons reasonably believed by the initial
purchaser to be qualified institutional buyers or other institutional accredited
investors. Selling stockholders, including their transferees, pledgees or donees
or their successors, may from time to time offer and sell any or all of the
common stock.
The selling stockholders have represented to us that they purchased the
common stock for their own account for investment only and not with a view
toward selling or distributing the shares, except through sales registered under
the Securities Act or exemptions. We agreed with the selling stockholders to
file this registration statement to register the resale of the common stock. We
agreed to prepare and file all necessary amendments and supplements to the
registration statement to keep it effective until March 10, 2002.
The following table shows information, as of May 1, 2000, with respect to
the selling stockholders and the principal amounts of our common stock they
beneficially own and the number of shares that may be offered under this
prospectus. The information is based on information provided by or on behalf of
the selling stockholders.
The selling stockholders may offer all, some or none of the common stock.
Thus, we cannot estimate the amount of the common stock that will be held by the
selling stockholders upon termination of any sales. None of the selling
stockholders has had any material relationship with us or our affiliates within
the past three years, except that C.E. Unterberg, Towbin acted as the initial
purchaser of the common stock.
<TABLE>
<CAPTION>
SHARES OWNED AFTER
SHARES OWNED PRIOR TO MAXIMUM NUMBER OF COMPLETION OF THE
OFFERING SHARES OFFERED OFFERING (2)
----------------------- ----------------- ----------------------
NAME OF SELLING STOCKHOLDER NUMBER PERCENT (1) NUMBER PERCENT (1)
--------------------------- ------ ----------- ------ -----------
<S> <C> <C> <C> <C> <C>
Ardent Research Partners, Ltd. 65,000 * 65,000 0 -
Ardent Research Partners, L.P. 60,000 * 60,000 0 -
Elliot Broidy, IRA 100,000 * 100,000 0 -
Camelot Capital, LP 318,500 1.1% 318,500 0 -
Camelot Offshore Fund Ltd. 167,300 * 167,300 0 -
Camelot Capital II, LP 14,200 * 14,200 0 -
Hathaway Partners Investment L.P. 150,000 * 60,000 90,000 *
Duck Partners 125,000 * 125,000 0 -
Kensington Partners L.P. 155,000 * 155,000 0 -
Kensington Partners II L.P. 9,000 * 9,000 0 -
Bald Eagle Fund, Ltd. 36,000 * 36,000 0 -
Essex Performance Fund, LP 100,000 * 100,000 0 -
PAW Partners LP 280,000 1.0% 280,000 0 -
PAW Partners Offshore Fund Ltd. 280,000 1.0% 280,000 0 -
FNY Securities Associates L.P. 70,000 * 70,000 0 -
Alfred University 14,100 * 12,000 2,100 *
Core Technology Fund 47,100 * 36,700 10,400 *
Walt Disney Company Retirement Plan 114,900 * 88,100 26,800 *
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
SHARES OWNED AFTER
SHARES OWNED PRIOR TO MAXIMUM NUMBER OF COMPLETION OF THE
OFFERING SHARES OFFERED OFFERING (2)
----------------------- ----------------- ----------------------
NAME OF SELLING STOCKHOLDER NUMBER PERCENT (1) NUMBER PERCENT (1)
--------------------------- ------ ----------- ------ -----------
<S> <C> <C> <C> <C> <C>
Executive Technology LP 19,200 * 15,500 3,700 *
Foundation Partners Fund GP 9,500 * 7,300 2,200 *
Matrix Technology Group NV 10,700 * 8,300 2,400 *
Rochester Institute of Technology 45,200 * 35,500 9,700 *
Sci-Tech Investment Partners L.P. 35,300 * 27,300 8,000 *
SG Partners LP 74,800 * 59,700 15,100 *
Tampsco II Partnership 4,100 * 3,200 900 *
Yale University 90,000 * 76,000 14,000 *
Yale University Retirement Plan for
Staff Employees 15,000 * 11,600 3,400 *
Special Situations Private Equity
Fund, L.P. 190,597 * 190,597 0 -
Special Situations Fund III, L.P. 190,597 * 190,597 0 -
Special Situations Cayman Fund, L.P. 63,532 * 63,532 0 -
Straus Partners, LP 105,000 * 105,000 0 -
Straus-Spelman Partners, LP 15,000 * 15,000 0 -
Straus-GEPT 30,000 * 30,000 0 -
Trellus Offshore Fund Limited 25,000 * 25,000 0 -
Trellus Partners, LP 100,000 * 100,000 0 -
Maple Row Partners, LP 250,000 * 250,000 0 -
Maple Row Partners (Bermuda) 131,200 * 131,200 0 -
Catalyst Partners 300,000 1.1% 300,000 0 -
Edmund H. Shea, Jr. 250,000 * 250,000 0 -
Valor Fund Ltd. 100,000 * 100,000 0 -
Russell Saracheck 35,000 * 35,000 0 -
Wellport Corp. NV 15,000 * 15,000 0 -
Morton Collins 50,000 * 50,000 0 -
C.E. Unterberg, Towbin Capital
Partners 450,000 1.6% 250,000 200,000 *
UT Technology Partners, LDC 157,000 * 100,000 57,000 *
UT Capital Partners International,
LDC 38,000 * 25,000 13,000 *
Thomas I. Unterberg 85,000 * 50,000 35,000 *
Elli Unterberg Celli 25,000 * 25,000 0 -
Emily Unterberg Satloff 25,000 * 25,000 0 -
Andrew Arno & Janis Koopersmith Arno 55,000 * 50,000 5,000 *
JT WROS
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
SHARES OWNED AFTER
SHARES OWNED PRIOR TO MAXIMUM NUMBER OF COMPLETION OF THE
OFFERING SHARES OFFERED OFFERING (2)
----------------------- ----------------- ----------------------
NAME OF SELLING STOCKHOLDER NUMBER PERCENT (1) NUMBER PERCENT (1)
--------------------------- ------ ----------- ------ -----------
<S> <C> <C> <C> <C> <C>
Daniel Ries 2,500 * 2,500 0 -
Daniel Ries Escrow Account 10,000 * 10,000 0 -
Adam S. Frankfort-IRA 1,875 * 1,875 0 -
Andrew M. Blum 500 * 500 0 -
O. Lee Tawes 25,000 * 25,000 0 -
Estelle Konvisor 10,000 * 10,000 0 -
C.E. Unterberg, Towbin 401K Profit
Sharing Plan DTD 10/26/90 FBO Robert
M. Matluck; R. Matluck & T.
Unterberg, TTEES 10,000 * 10,000 0 -
Jeffrey Moskowitz 10,000 * 10,000 0 -
A. Robert Towbin 35,899 * 35,899 0 -
</TABLE>
- ----------
* Less than one percent.
(1) Percentage of ownership prior to the offering is based on 28,474,710 shares
of common stock outstanding on May 1, 2000.
(2) Number of shares and percentage after completion of the offering assumes
that all of the shares held by the selling stockholders and being offered
under this prospectus are sold, that the shares are sold to unaffiliated
third parties and that the selling stockholders acquire no additional
shares of common stock before completion of this offering.
16
<PAGE>
PLAN OF DISTRIBUTION
We are registering the shares of common stock on behalf of the selling
stockholders. The shares of common stock may be sold in one or more transactions
at fixed prices, at prevailing market prices at the time of sale, at prices
related to the prevailing market prices, at varying prices determined at the
time of sale, or at negotiated prices. These sales may be effected at various
times in one or more of the following transactions, or in other kinds of
transactions:
o transactions on the Nasdaq National Market or on any national
securities exchange or U.S. inter-dealer system of a registered
national securities association on which our common stock may be
listed or quoted at the time of sale;
o in the over-the-counter market;
o in private transactions and transactions otherwise than on these
exchanges or systems or in the over-the-counter market;
o in connection with short sales of the shares;
o by pledge to secure debt and other obligations;
o through the writing of options, whether the options are listed on an
options exchange or otherwise;
o in connection with the writing of non-traded and exchange-traded call
options, in hedge transactions and in settlement of other transactions
in standardized or over-the-counter options; or
o through a combination of any of the above transactions.
The selling stockholders and their successors, including their transferees,
pledgees or donees or their successors, may sell the common stock directly to
purchasers or through underwriters, broker-dealers or agents, who may receive
compensation in the form of discounts, concessions or commissions from the
selling stockholders or the purchasers. These discounts, concessions or
commissions as to any particular underwriter, broker-dealer or agent may be in
excess of those customary in the types of transactions involved.
In addition, any securities covered by this prospectus which qualify for
sale pursuant to Rule 144 or Regulation S of the Securities Act may be sold
under Rule 144 or Regulation S rather than pursuant to this prospectus.
We entered into a registration rights agreement for the benefit of the
selling stockholders to register our common stock under applicable federal and
state securities laws. The registration rights agreement provides for
cross-indemnification of the selling stockholders and us and our respective
directors, officers and controlling persons against specific liabilities in
connection with the offer and sale of the common stock, including liabilities
under the Securities Act. We will pay substantially all of the expenses incurred
by the selling stockholders incident to the offering and sale of the common
stock.
17
<PAGE>
LEGAL MATTERS
The validity of the shares of common stock offered in this prospectus will
be passed upon for Cyberian Outpost, Inc. by Mintz, Levin, Cohn, Ferris, Glovsky
and Popeo, P.C. of Boston, Massachusetts. Certain attorneys at Mintz, Levin,
Cohn, Ferris, Glovsky and Popeo, P.C. beneficially own an aggregate of 8,500
shares of our common stock.
EXPERTS
The financial statements of Cyberian Outpost, Inc. as of February 29, 2000
and February 28, 1999, and for each of the years in the three-year period ended
February 29, 2000 have been incorporated by reference in this registration
statement in reliance on the report of KPMG LLP, independent certified public
accountants, incorporated by reference in this registration statement, and upon
the authority of said firm as experts in accounting and auditing.
18
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may inspect and copy such material at the public
reference facilities maintained by the SEC at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, as well as at the SEC's regional offices at 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center,
Suite 1300, New York, New York 10048. You may also obtain copies of such
material from the SEC at prescribed rates by wiring to the Public Reference
Section of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549. Please call
the SEC at 1-800-SEC-0330 for further information on the public reference rooms.
Our filings are also available to the public from the SEC's web site at
www.sec.gov.
Our common stock is quoted on the Nasdaq National Market. You may inspect
reports and other information concerning us at the offices of the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C.
20006.
This prospectus is only part of a Registration Statement on Form S-3 that
we have filed with the SEC under the Securities Act and therefore omits certain
information contained in the Registration Statement. We have also filed exhibits
and schedules with the Registration Statement that are excluded from this
prospectus, and you should refer to the applicable exhibit or schedule for a
complete description of any statement referring to any contract or other
document. You may inspect a copy of the Registration Statement, including the
exhibits and schedules, without charge at the public reference room, or obtain a
copy from the SEC upon payment of the fee prescribed by the SEC. You may also
view the Registration Statement, including the exhibits and schedules, on the
SEC's web site at www.sec.gov.
INCORPORATION OF DOCUMENTS BY REFERENCE
The SEC permits us to "incorporate by reference" the information that we
file with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and information that we file with the
SEC after the date of this prospectus will automatically update and supersede
this information. We incorporate by reference the documents listed below and any
future filings made with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934:
1. Definitive Proxy Statement, filed on June 28, 1999;
2. Annual Report on Form 10-K for the year ended February 29, 2000, filed
on May 18, 2000; and
3. The description of the common stock contained in our Registration
Statement on Form S-1 filed with the SEC on June 2, 1998, including
any amendments or reports filed for the purpose of updating such
description.
You may request a copy of these documents, which will be provided to you at
no cost by contacting is in writing at:
Investor Relations
Cyberian Outpost, Inc.
23 North Main Street, P.O. Box 636
Kent, Connecticut 06757
or by contacting us via email at [email protected]. or by telephone at
(860) 927-2050.
19
<PAGE>
CYBERIAN OUTPOST, INC.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the Company's estimates (other than the SEC
registration fee) of the expenses in connection with the issuance and
distribution of the shares of common stock being registered. None of the
following expenses are being paid by the selling stockholders.
ITEM AMOUNT
---- ------
SEC registration fee............................ $ 5,335
Legal fees and expenses......................... 25,000
Accounting fees and expenses.................... 4,500
Printing fees................................... 2,500
Miscellaneous fees and expenses................. 2,665
-------
Total......................................... $40,000
=======
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Restated Certificate of Incorporation (the "Certificate of
Incorporation") provides that the Company shall indemnify to the fullest extent
authorized by the Delaware General Corporation Law ("DGCL"), each person who is
involved in any litigation or other proceeding because such person is or was a
director or officer of the Company or is or was serving as an officer or
director of another entity at the request of the Company, against all expense,
loss or liability reasonably incurred or suffered in connection therewith. The
Certificate of Incorporation provides that the right to indemnification includes
the right to be paid expenses incurred in defending any proceeding in advance of
its final disposition, provided, however, that such advance payment will only be
made upon delivery to the Company of an undertaking, by or on behalf of the
director or officer, to repay all amounts so advanced if it is ultimately
determined that such director is not entitled to indemnification. If the Company
does not pay a proper claim for indemnification in full within 60 days after a
written claim for such indemnification is received by the Company, the
Certificate of Incorporation and the Company's Bylaws authorize the claimant to
bring an action against the Company and prescribe what constitutes a defense to
such action.
Section 145 of the DGCL permits a corporation to indemnify any director or
officer of the corporation against expenses (including attorney's fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
in connection with any action, suit or proceeding brought by reason of the fact
that such person is or was a director or officer of the corporation, if such
person acted in good faith and in a manner that he reasonably believed to be in,
or not opposed to, the best interests of the corporation, and, with respect to
any criminal action or proceeding, if he or she had no reason to believe his or
her conduct was unlawful. In a derivative action, (i.e., one brought by or on
behalf of the corporation), indemnification may be provided only for expenses
actually and reasonably incurred by any director or officer in connection with
the defense or settlement of such an action or suit if such person acted in good
faith and in a manner that he or she reasonably believed to be in, or not
opposed to, the best interests of the corporation, except that no
indemnification shall be provided if such person shall have been adjudged to be
liable to the corporation, unless and only to the extent that the court in which
the action or suit was brought shall determine that the defendant is fairly and
reasonably entitled to indemnity for such expenses despite such adjudication of
liability.
Pursuant to Section 102(b)(7) of the DGCL, Article Tenth of the Certificate
of Incorporation eliminates the liability of a director to the Company or its
stockholders for monetary damages for such a breach of fiduciary duty as a
director, except for liabilities arising (i) from any breach of the director's
duty of loyalty to the Company or its stockholders, (ii) from acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the DGCL, or (iv) from any transaction from
which the director derived an improper personal benefit.
The Company has obtained insurance policies insuring the directors and
officers of the Company against certain liabilities that they may incur in their
capacity as directors and officers. Under such policies, the insurers, on behalf
of the Company, may also pay amounts for which the Company has granted
indemnification to the directors or officers.
II-1
<PAGE>
ITEM 16. EXHIBITS.
Exhibit
Number Description
- ------ -----------
*4.1 Restated Certificate of Incorporation of the Registrant.
**4.2 Restated By-laws of the Registrant.
+4.3 Form of Common Stock Certificate.
4.4 Form of Subscription Agreement dated as of March 10, 2000 among
the Registrant and the investors named therein.
4.5 Registration Rights Agreement dated as of March 10, 2000 among the
Registrant and the investors named therein.
5.1 Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
regarding legality.
23.1 Consent of KPMG LLP.
23.2 Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
(included in Exhibit 5.1).
24.1 Power of Attorney (included on signature page).
- -------------
* Previously filed with the SEC as exhibit 4.2 to, and incorporated herein by
reference from, our Registration Statement filed on Form S-8, File No.
333-64403.
** Previously filed with the SEC as exhibit 3.1 to, and incorporated herein by
reference from, our Quarterly report on Form 10-Q for the quarter ended
November 30, 1999.
+ Previously filed with the SEC as exhibit 4.1 to, and incorporated herein by
reference from, our Registration Statement filed on Form S-1, File No.
333-55819.
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 any decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any derivation from the low end or high end of the
estimated maximum offering range may 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 the
"Calculation of Registration Fee" table in the effective registration
statement; and
(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 or Form S-8, 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 Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the registration
statement.
II-2
<PAGE>
(2) That, for the purpose 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.
(b) Insofar as indemnification for liabilities arising under the 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 Securities and Exchange Commission such
indemnification is against public policy as expressed in the 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 Act and will be governed by the final adjudication of
such issue.
(c) 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 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.
(d) The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, 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 Kent, State of Connecticut on May 24, 2000.
CYBERIAN OUTPOST, INC.
By: /s/ Robert A. Bowman
-------------------------------------
Robert A. Bowman
President and Chief Executive Officer
POWER OF ATTORNEY
The registrant and each person whose signature appears below constitutes
and appoints Robert A. Bowman and Katherine N. Vick and each of them singly,
his, her or its true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him, her or it and in his, her or its name,
place and stead, in any and all capacities, to sign and file (i) any and all
amendments (including post-effective amendments) to this Registration Statement,
with all exhibits thereto, and other documents in connection therewith, and (ii)
a registration statement, and any and all amendments thereto, relating to the
offering covered hereby filed pursuant to Rule 462(b) under the Securities Act
of 1933, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he, she, or it
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title(s) Date
--------- -------- ----
/s/ Robert A. Bowman President, Chief Executive May 24, 2000
- ------------------------------ Officer and Director
Robert A. Bowman (principal executive officer)
/s/ Katherine N. Vick Executive Vice President and May 24, 2000
- ------------------------------ Chief Financial Officer
Katherine N. Vick (principal financial and
accounting officer)
/s/ Darryl Peck Chairman of the Board May 24, 2000
- ------------------------------
Darryl Peck
/s/ Charles H. Jackson, IV Director May 24, 2000
- ------------------------------
Charles H. Jackson, IV
/s/ William H. Lane, III Director May 24, 2000
- ------------------------------
William H. Lane, III
/s/ Michael Murray Director May 24, 2000
- ------------------------------
Michael Murray
/s/ James E. Preston Director May 24, 2000
- ------------------------------
James E. Preston
II-4
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
4.1 Restated Certificate of Incorporation of the Registrant
(Previously filed with the SEC as exhibit 4.2 to, and incorporated
herein by reference from, our Registration Statement filed on Form
S-8, File No. 333-64403)
4.2 Restated By-laws of the Registrant (Previously filed with the SEC
as exhibit 3.1 to, and incorporated herein by reference from, our
Quarterly report on Form 10-Q for the quarter ended November 30,
1999)
4.3 Form of Common Stock Certificate (Previously filed with the SEC as
exhibit 4.1 to, and incorporated herein by reference from, our
Registration Statement filed on Form S-1, File No. 333-55819)
4.4 Form of Subscription Agreement dated as of March 10, 2000 among
the Registrant and the investors named therein.
4.5 Registration Rights Agreement dated as of March 10, 2000 among the
Registrant and the investors named therein.
5.1 Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
regarding legality.
23.1 Consent of KPMG LLP.
23.2 Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
(included in Exhibit 5.1).
24.1 Power of Attorney (included on signature page).
<PAGE>
EXHIBIT 4.4
FORM OF SUBSCRIPTION AGREEMENT
Cyberian Outpost, Inc.
27 North Main Street
P.O. Box 636
Kent, CT 06757
Gentlemen:
1. Subscription. (a) The undersigned, intending to be legally bound,
hereby irrevocably subscribes to purchase from Cyberian Outpost, Inc., a
Delaware corporation (the "Company"), the number of shares of Common Stock of
the Company, par value $.01, (the "Common Stock") set forth on the signature
page hereof, at a purchase price equal to the lesser of (i) 95% of the trailing
ten day average closing price of the Common Stock on NASDAQ ending two business
days prior to February 28, 2000 (the "Pricing Date"), or (ii) 95% of the closing
price of the Common Stock on the Pricing Date (the "Purchase Price"). This
subscription is submitted to you in accordance with and subject to the terms and
conditions described in this Agreement and the Registration Rights Agreement,
dated as of March 10, 2000 (the "Registration Rights Agreement"), relating to an
offering (the "Offering") of up to 4,702,900 shares of common stock of the
Company (the aggregate number of shares sold pursuant to this Agreement is
herein referred to as the "Shares").
(b) Subscription payments should be made payable to "Cyberian Outpost,
Inc., Escrow Account" and should be delivered, together with two executed and
properly completed copies of this Agreement (and, if requested by the Company or
C.E. Unterberg, Towbin ("CEUT"), an executed and properly completed copy of the
appropriate Investor Questionnaire in the form supplied by CEUT), to C.E.
Unterberg, Towbin, 10 East 50th Street, 20th Floor, New York, New York 10022,
Attention: Michael Marrus. If the subscription is not accepted in whole or in
part by the Company, the full or ratable amount, as the case may be, of any
subscription payment received will be promptly refunded to the subscriber
without deduction therefrom or interest thereon.
(c) If this subscription is accepted by the Company, in whole or in part,
and subject to the conditions set forth in Section 2 of this Agreement, the
Company shall deliver to the undersigned the Shares subscribed for hereby, dated
the date of closing of the Offering of the Shares (the "Closing"), and a fully
executed copy of this Agreement. The Closing shall occur when all documents
reasonably acceptable by the Company and CEUT are executed and delivered to
CEUT.
(d) The Company has engaged CEUT to introduce the Company to persons who
may be interested in purchasing Shares and to advise the Company in connection
with the structure, terms and conditions of the Offering. As consideration for
its services, CEUT will receive, among other things, on the Closing date (i)
cash commission equal to 4 1/2% of the aggregate capital raised from the sale of
Common Stock, plus $25,000 to cover counsel fees and other expenses. CEUT did
not prepare any of the information to be delivered to prospective investors in
connection with the Offering and does not make any representation or warranty
concerning the accuracy or completeness of such information. Prospective
investors are advised to conduct their own review of the business, properties
and affairs of the Company before subscribing to purchase Shares.
<PAGE>
(e) The undersigned may not withdraw this subscription or any amount paid
pursuant thereto except as otherwise provided below.
2. Conditions. It is understood and agreed that this subscription is made
subject to the following terms and conditions:
(a) The Company shall have the right to accept or reject this
subscription in whole or in part. Unless this subscription is accepted in whole
or in part by the Company prior to the Closing, this subscription shall be
deemed rejected in whole. The Company and CEUT may agree to extend the Closing
for a period not to exceed 60 days or to close on such earlier date as may be
mutually agreed.
(b) At the Closing, CEUT shall have received a usual and customary legal
opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., counsel to the
Company, addressed to CEUT on behalf of the purchasers and the undersigned in
care of CEUT and dated the date of the Closing, in form and substance reasonably
satisfactory to CEUT and its counsel. The Company hereby instructs such counsel
to deliver such opinion to each of CEUT and each subscriber for Shares.
(c) At the date of the Closing, CEUT shall have been furnished an
officer's closing certificate and a secretary closing certificate, and any other
such information, documents, certificates, and opinions as it may reasonably
require to evidence the accuracy, completeness, or satisfaction of the
representations, warranties, covenants, agreements, and conditions herein
contained or as it otherwise may reasonably request.
3. Representations and Warranties of the Company. The Company represents
and warrants to, and agrees with the undersigned as follows, in each case as of
the date hereof and in all material respects as of the date of the Closing
except for any changes resulting solely from the Offering:
(a) The Company is duly organized, validly existing and in good standing
under the laws of its state of incorporation with full power and authority to
own, lease, license and use its properties and assets and to carry out the
business in which it is engaged, as described in the most recent Form 10-K and
Form 10-Q filings by the Company (the "SEC Documents"). The Company is duly
qualified to transact the business in which it is engaged as described in the
SEC Documents and is in good standing as a foreign corporation in every
jurisdiction in which its ownership, leasing, licensing or use of property or
assets or the conduct of its business makes such qualification necessary, except
where the failure to be so qualified would not have a material adverse effect on
the Company. The Company shall use the net proceeds from this Offering to expand
its existing business, accelerate the implementation of its business plan and to
consummate acquisitions, if any, and for working capital and other general
corporate expenses.
- 2 -
<PAGE>
(b) At the date of the Closing, the authorized capital stock of the
Company will consist of 50,000,000 shares of Common Stock, par value $0.01 per
share, 10,000,000 shares of Preferred Stock, par value $.01. As of February 29,
2000, without taking into account the shares of Common Stock to be issued at the
Closing, there will be outstanding no shares of Preferred Stock and 23,761,810
shares of Common Stock, excluding shares issuable upon exercise or conversion of
options, warrants or other rights outstanding as of the date hereof. Each
outstanding share of Common Stock and Preferred Stock is validly authorized,
validly issued, fully paid and nonassessable, without any personal liability
attaching to the ownership thereof and has not been issued and is not owned or
held in violation of any preemptive rights of stockholders. There is no
commitment, plan or arrangement to issue, and no outstanding option, warrant or
other right calling for the issuance of, any share of capital stock of the
Company or any security or other instrument which by its terms is convertible
into, exercisable for or exchangeable for capital stock of the Company, except
as may be described properly in the SEC Documents. There is outstanding no
security or other instrument which by its terms is convertible or exchangeable
for capital stock of the Company, except as may be described completely and
properly in the SEC Documents. The Shares and the Additional Shares (as defined
below) when issued in accordance with the terms and conditions hereof will be
validly issued, fully paid and non-assessable.
(c) The financial statements included in the SEC Documents fairly present
in all material respects, the financial position, the results of operations, and
the other information purported to be shown therein of the Company at the
respective dates and for the respective periods to which they apply. Such
financial statements have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved, and
are in accordance with the books and records of the Company covered therein.
(d) There is no litigation, arbitration, claim, governmental or other
proceeding (formal or informal), or investigation pending or, to the best
knowledge, after due inquiry, of the officers of the Company, threatened with
respect to the Company, or any of its operations, businesses, prospects,
properties or assets except as may be described in the SEC Documents or such as
individually or in the aggregate do not now have and could not reasonably be
expected in the future have a material adverse effect upon the operations,
business, prospects, properties, or assets of the Company. The Company is not in
violation of, or in default with respect to, any law, rule, regulation, order,
judgment or decree except as may be described in the SEC Documents or such as in
the aggregate do not now have and will not in the future have a material adverse
effect upon the operations, business, prospects, properties or assets of the
Company; nor is the Company required to take any action in order to avoid any
such violation or default.
(e) The Company has all requisite power and authority to (i) execute,
deliver and perform its obligations under each of (A) this Agreement and (B) the
Registration Rights Agreement (collectively, the "Documents") and (ii) to issue
and sell the Shares and the Additional Shares. All necessary corporate
proceedings of the Company have been duly taken to authorize the execution,
delivery, and performance of the Documents, the issuance and sale of the Shares
and the Additional Shares, and the filing of any documents requiring filing by
any federal or state securities or other regulatory authority. Each Document has
been duly authorized by the Company and, when executed and delivered by the
Company will constitute the legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms (assuming due
authorization and execution of the Documents by any other necessary parties
thereto).
- 3 -
<PAGE>
(f) No consent, authorization, approval, order, license, certificate or
permit of or from, or declaration or filing with, any federal, state, local or
other governmental authority, or any court or any other tribunal, is required by
the Company for the execution, delivery or performance by the Company of the
Documents or the issuance and sale of the Shares and the Additional Shares
(except such filings and consents as may be required and have been or at the
Closing will have been made or obtained under federal and state securities
laws).
(g) No consent of any party to any contract, agreement, instrument,
lease, license, arrangement or understanding to which the Company is a party or
to which any of properties or assets are subject (the "Contracts") is required
for the execution, delivery or performance by the Company of any of the
Documents or the issuance and sale of the Shares or the Additional Shares. The
execution, delivery and performance of the Documents and the issuance and sale
of the Shares or the Additional Shares will not trigger anti-dilution
adjustments to any of the Company's outstanding securities under the Company's
Certificate of Incorporation or any agreement to which the Company is a party or
otherwise.
(h) The execution, delivery and performance of the Documents and the
issuance and sale of the Shares or the Additional Shares will not violate or
result in a breach of, or entitle any party (with or without the giving of
notice or the passage of time or both) to terminate or call a default under any
Contract or violate or result in a breach of any term of the Certificate of
Incorporation or by-laws of, or violate any law, rule, regulation, order,
judgment or decree binding upon, the Company or to which any of its operations,
businesses, properties or assets are subject, the breach, termination or
violation of which, or default under which, would have a material adverse effect
on the operations, business, properties or assets of the Company.
(i) The Company shall effect a shelf registration statement for the
Shares on Form S-3 (if available, otherwise on Form S-1) (the "Registration
Statement"). This Registration Statement shall be filed with the Securities and
Exchange Commission as soon as practicable, and the Company shall use its best
efforts to have the Registration Statement declared effective within 180 days
after the Closing. Such Registration Statement shall be continuously maintained
in effect for a period of not less than two years from the Closing Date. Should
the Registration Statement not be declared effective within the 180 day period,
the Company shall pay on each of the 181st day after the Closing and, if the
Registration Statement is still not effective, on the 211th day after the
Closing, pay the undersigned an amount equal to 5% of the purchase price for the
shares purchased hereby, payable, at the option of the Company, in either cash
or additional shares Common Stock of the Company (the "Additional Shares"),
which shares shall be valued at the lower of (i) the Purchase Price or (ii) the
trailing ten day average closing price of the Common Stock of the Company on the
NASDAQ ending two business days prior to the date such payment is due. If the
Company is required to issue any Additional Shares of Common Stock, the Company
shall include those Additional Shares in the Registration Statement.
(j) The Company has filed all documents and other reports, including
Current Reports on Form 8K, required to be filed by it pursuant to the U.S.
securities laws.
- 4 -
<PAGE>
(k) The SEC Documents and this Agreement do not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.
Without limiting the generality of the foregoing, there has been no material
adverse change in the financial condition, results of operations, business,
properties, assets, liabilities or future prospects of the Company from the
latest information set forth in the SEC Documents.
(l) The Company and CEUT shall maintain the confidentiality of the terms
of this Agreement and planned financings.
4. Representations, Warranties and Covenants of the Subscriber. The
undersigned hereby represents and warrants to, and agrees with, the Company as
follows:
(a) The undersigned is an "Accredited Investor" as that term is defined
in Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as
amended (the "Act"). Specifically the undersigned is (check appropriate
items(s)):
[ ] (i) A bank as defined in Section 3(a)(2) of the Act, or a
savings and loan association or other institution as defined in Section
3(a)(5)(A) of the Act, whether acting in its individual or fiduciary
capacity; a broker or dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934; an insurance company as defined in
Section 2(13) of the Act; an investment company registered under the
Investment Company Act of 1940 (the "Investment Company Act") or a
business development company as defined in Section 2(a)(48) of the
Investment Company Act; a Small Business Investment Company licensed by
the U.S. Small Business Administration under Section 301(c) or (d) of the
Small Business Investment Act of 1958; a plan established and maintained
by a state, its political subdivisions or any agency or instrumentality
of a state or its political subdivisions for the benefit of its
employees, if such plan has total assets in excess of $5,000,000; an
employee benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974 ("ERISA"), if the investment decision is made
by a plan fiduciary, as defined in Section 3(21) of ERISA, which is
either a bank, savings and loan association, insurance company, or
registered investment advisor, or if the employee benefit plan has total
assets in excess of $5,000,000 or, if a self-directed plan, with
investment decisions made solely by persons that are accredited
investors.
[ ] (ii) A private business development company as defined in
Section 202(a)(22) of the Investment Advisers Act of 1940.
[ ] (iii) An organization described in Section 501(c)(3) of the
Internal Revenue Code, corporation, Massachusetts or similar business
trust, or partnership, not formed for the specific purpose of acquiring
the securities offered, with total assets in excess of $5,000,000.
[ ] (iv) A director or executive officer of the Company.
[ ] (v) A natural person whose individual net worth, or joint net
worth with that person's spouse, at the time of his or her purchase
exceeds $1,000,000. (California and Massachusetts residents: please see
Section 4(b) below.)
- 5 -
<PAGE>
[ ] (vi) A natural person who had an individual income in excess
of $200,000 in each of the two most recent years or joint income with
that person's spouse in excess of $300,000 in each of those years and has
a reasonable expectation of reaching the same income level in the current
year. (California and Massachusetts residents: please see Section 4(b)
below.)
[ ] (vii) A trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities offered,
whose purchase is directed by a sophisticated person as described in Rule
506(b)(2)(ii) (i.e., a person who has such knowledge and experience in
financial and business matters that he is capable of evaluating the
merits and risks of the prospective investment).
[ ] (viii) An entity in which all of the equity owners are
accredited investors. (If this alternative is checked, the undersigned
must identify each equity owner and provide statements signed by each
demonstrating how each is qualified as an accredited investor.)
(b) For California and Massachusetts individuals: If the subscriber is a
California resident, such subscriber's investment in the Company will not exceed
10% of such subscriber's net worth (or joint net worth with his spouse). If the
subscriber is a Massachusetts resident, such subscriber's investment in the
Company will not exceed 25% of such subscriber's joint net worth with his spouse
(exclusive of principal residence and its furnishings).
(c) If a natural person, the undersigned is: a bona fide resident of the
State contained in the address set forth on the signature page of this Agreement
as the under-signed's home address; at least 21 years of age; and legally
competent to execute this Subscription Agreement. If an entity, the undersigned
is duly authorized to execute this Agreement and this Agreement constitutes the
legal, valid and binding obligation of the undersigned enforceable against the
undersigned in accordance with its terms.
(d) The undersigned has received, read carefully and is familiar with
this Agreement, the Registration Rights Agreement and the SEC Documents.
Respecting the Company, the undersigned is familiar with the Company's business,
plans and financial condition, the terms of the Offering and any other matters
relating to the Offering; the undersigned has received all materials which have
been requested by the undersigned; has had a reasonable opportunity to ask
questions of the Company and its representatives; and the Company has answered
all inquiries that the undersigned or the undersigned's representatives have put
to it. The undersigned has had access to all additional information necessary to
verify the accuracy of the information set forth in this Agreement and the SEC
Documents and any other materials furnished herewith, and has taken all the
steps necessary to evaluate the merits and risks of an investment as proposed
hereunder.
(e) The undersigned or the undersigned's purchaser representative has
such knowledge and experience in finance, securities, investments and other
business matters so as to be able to protect the interests of the undersigned in
connection with this transaction, and the undersigned's investment in the
Company hereunder is not material when compared to the undersigned's total
financial capacity.
- 6 -
<PAGE>
(f) The undersigned understands the various risks of an investment in the
Company as proposed herein and can afford to bear such risks, including, without
limitation, the risks of losing the entire investment.
(g) The undersigned has been advised by the Company that none of the
Shares or the Additional Shares have been registered under the Act, that the
Shares and the Additional Shares will be issued on the basis of the statutory
exemption provided by Section 4(2) of the Act or Regulation D promulgated
thereunder, or both, relating to transactions by an issuer not involving any
public offering and under similar exemptions under certain state securities
laws, that this transaction has not been reviewed by, passed on or submitted to
any Federal or state agency or self-regulatory organization where an exemption
is being relied upon, and that the Company's reliance thereon is based in part
upon the representations made by the undersigned in this Agreement. The
undersigned acknowledges that the undersigned has been informed by the Company
of, or is otherwise familiar with, the nature of the limitations imposed by the
Act and the rules and regulations thereunder on the transfer of the Shares and
the Additional Shares. In particular, the undersigned agrees that no sale,
assignment or transfer of any of the Shares and the Additional Shares shall be
valid or effective, and the Company shall not be required to give any effect to
such a sale, assignment or transfer, unless (i) the sale, assignment or transfer
of such Shares or Additional Shares is registered under the Act, it being
understood that the Shares and the Additional Shares are not currently
registered for sale although the Company has agreed to so register the Shares
and the Additional Shares as provided in this Agreement and the Registration
Rights Agreement, or (ii) such Shares or Additional Shares are sold, assigned or
transferred in accordance with all the requirements and limitations of Rule 144
under the Act, it being understood that Rule 144 is not available at the present
time for the sale of the Shares or the Additional Shares, or (iii) such sale,
assignment or transfer is otherwise exempt from registration under the Act. The
undersigned further understands that an opinion of counsel and other documents
may be required to transfer the Shares and the Additional Shares. The
undersigned acknowledges that the Shares and the Additional Shares shall be
subject to a stop transfer order and the certificate or certificates evidencing
any Shares or any Additional Shares shall bear the following or a substantially
similar legend or such other legend as may appear on the forms of Shares or the
Additional Shares and such other legends as may be required by state blue sky
laws:
"The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Act"), or any state
securities laws and neither such securities nor any interest therein may
be offered, sold, pledged, assigned or otherwise transferred unless (1) a
registration statement with respect thereto is effective under the Act
and any applicable state securities laws or (2) the Company receives an
opinion of counsel to the holder of such securities, which counsel and
opinion are reasonably satisfactory to the Company, that such securities
may be offered, sold, pledged, assigned or transferred in the manner
contemplated without an effective registration statement under the Act or
applicable state securities laws."
- 7 -
<PAGE>
(h) The undersigned will acquire the Shares and the Additional Shares for
the undersigned's own account (or for the joint account of the undersigned and
the undersigned's spouse either in joint tenancy, tenancy by the entirety or
tenancy in common) for investment and not with a view to the sale or
distribution thereof or the granting of any participation therein, and has no
present intention of distributing or selling to others any of such interest or
granting any participation therein.
(i) It never has been represented, guaranteed or warranted by any broker,
the Company, CEUT, any of the officers, directors, stockholders, partners,
employees or agents of either, or any other persons, whether expressly or by
implication, that:
(i) the Company or the undersigned will realize any given
percentage of profits and/or amount or type of consideration, profit or
loss as a result of the Company's activities or the undersigned's
investment in the Company; or
(ii) the past performance or experience of the management of the
Company, or of any other person, will in any way indicate the predictable
results of the ownership of the Shares or the Additional Shares or of the
Company's activities.
(j) No oral or written representations have been made other than as
stated in the SEC Documents, and no oral or written information furnished to the
undersigned or the undersigned's advisor(s) in connection with the Offering were
in any way inconsistent with the information stated in the SEC Documents.
(k) The undersigned is not subscribing for Shares as a result of or
subsequent to any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media or broadcast over
television or radio, or presented at any seminar or meeting, or any solicitation
of a subscription by a person other than a representative of CEUT or the Company
with which the undersigned had a pre-existing relationship in connection with
investments in Shares generally.
(l) The undersigned is not relying on the Company with respect to the tax
and other economic considerations of an investment.
(m) The undersigned understands that the net proceeds from all
subscriptions paid and accepted pursuant to the Offering (after deduction for
expenses of the Offering, including the fees and expenses payable to CEUT) will
be used in all material respects for the purposes set forth in this Agreement.
(n) Without limiting any of the undersigned's other representations and
warranties hereunder, the undersigned acknowledges that the undersigned has
reviewed and is aware of the risk factors described in the SEC Documents.
(o) The undersigned acknowledges that the representations, warranties and
agreements made by the undersigned herein shall survive the execution and
delivery of this Agreement and the purchase of the Shares.
- 8 -
<PAGE>
(p) The undersigned understands that CEUT does not make any
representation or warranty concerning the accuracy or completeness of any
information, relating to the Company or its operations, to be delivered to
prospective investors in connection with the Offering.
(q) The undersigned has consulted his own financial, legal and tax
advisors with respect to the economic, legal and tax consequences of an
investment in the Shares and has not relied on the SEC Documents or the Company,
its officers, directors or professional advisors for advice as to such
consequences.
5. Indemnification. The undersigned acknowledges that the undersigned
understands the meaning and legal consequences of the representations and
warranties contained in Section 4 hereof, and agrees to indemnify and hold
harmless the Company, CEUT, its partners, and each incorporator, officer,
director, partner, employee, agent and controlling person of each thereof, past,
present or future, from and against any and all loss, damage or liability due to
or arising out of a breach of any such representation or warranty.
6. Transferability. Neither this Agreement, nor any interest of the
undersigned herein, shall be assignable or transferable by the undersigned in
whole or in part except by operation of law. Any attempt to assign or transfer
this Agreement or any interest therein other than by operation of law shall be
void.
7. Miscellaneous.
(a) This Agreement sets forth the entire understanding of the parties
with respect to the subject matter hereof, supersedes all existing agreements
among them concerning such subject matter, and may be modified only by a written
instrument duly executed by the party to be charged.
(b) Except as otherwise specifically provided herein, any notice or other
communication required or permitted to be given hereunder shall be in writing
and shall be mailed by certified mail, return receipt requested, or by Federal
Express, Express Mail or similar overnight delivery or courier service or
delivered (in person or by telecopy, telex or similar telecommunications
equipment) against receipt to the party to whom it is to be given, (i) if to the
Company, at the address set forth on the first page hereof, (ii) if to the
undersigned, at the address set forth on the signature page hereof, or (iii) in
either case, to such other address as the party shall have furnished in writing
in accordance with the provisions of this Section 7(b). Notice to the estate of
any party shall be sufficient if addressed to the party as provided in this
Section 7(b). Any notice or other communication given by certified mail shall be
deemed given at the time of receipt thereof. Any notice given by other means
permitted by this Section 7(b) shall be deemed given at the time of receipt
thereof.
(c) This Agreement shall be binding upon and inure to the benefit of the
parties hereto, the successors and assigns of the Company, and the permitted
successors, assigns, heirs and personal representatives of the undersigned
(including permitted transferees of the Shares).
- 9 -
<PAGE>
(d) The headings in this Agreement are solely for convenience of
reference and shall be given no effect in the construction or interpretation of
this Agreement.
(e) This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(f) This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, without giving effect to principles governing
conflicts of law.
(g) This Agreement does not create, and shall not be construed as
creating, any rights enforceable by any person not a party to this Agreement
(except as provided in Sections 5, 6, and 7(c) and 7(g)); provided, that CEUT
shall be entitled to rely on, and shall be a third party beneficiary of, the
representations, warranties and agreements contained in this Agreement.
(h) The parties hereto irrevocably consent to the jurisdiction of the
courts of the State of New York and of any federal court located in such State
in connection with any action or proceeding arising out of or relating to this
Agreement, any document or instrument delivered pursuant to, in connection with
or simultaneously with this Agreement, or a breach of this Agreement or any such
document or instrument. In any such action or proceeding, each party hereto
waives personal service of any summons, complaint or other process and agrees
that service thereof may be made in accordance with Section 7(b). Within 30 days
after such service, or such other time as may be mutually agreed upon in writing
by the attorneys for the parties to such action or proceeding, the party so
served shall appear or answer such summons, complaint or other process.
- 10 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year this subscription has been accepted by the Company as set forth
below.
Number of Shares
Being Purchased Print Name of Subscriber
- ---------------
By: _______________________________
(Signature of Subscriber or
Authorized Signatory)
Social Security Number or other
Taxpayer Identification Number:
----------------------------
Address:
--------------------
----------------------------
----------------------------
----------------------------
If the Shares will be held as
joint tenants, tenants in
common, or community property,
please complete the following:
-----------------------------
Print name of spouse or other co-subscriber
-----------------------------
Signature of spouse or other co-subscriber
-----------------------------
Print manner in which Shares will be held
------------------------------
Social Security Number
[Please complete Section 4 for each subscriber. Each subscriber's signature
should be notarized on the appropriate following page.]
- 11 -
<PAGE>
ACCEPTED BY:
CYBERIAN OUTPOST, INC.
By:____________________________
Name:
Title:
Date: March __, 2000
- 12 -
<PAGE>
[Individuals]
STATE OF )
) ss.:
COUNTY OF )
On the ______ day of March 2000, before me personally came
______________________________ and ________________, to me known, and known to
me to be the person(s) described in and who executed the foregoing instrument,
and s/he/they acknowledged to me that s/he/they executed the same.
----------------------------
Notary Public
[Corporations]
STATE OF )
) ss.:
COUNTY OF )
On the ______ day of March, 2000, before me personally came
___________, to me known, who, being by me duly sworn, did depose and say that
s/he resides in _____________________________ that s/he is the _____________ of
________________________________________, the corporation described in and which
executed the above instrument; and that s/he signed his/her name thereto by
order of the board of directors of said corporation.
----------------------------
Notary Public
- 13 -
<PAGE>
[Partnerships]
STATE OF )
) ss.:
COUNTY OF )
On the ______ day of March, 2000, before me personally came
____________________________________________, to me known, and known to me to be
the person who executed the foregoing instrument, and who, being duly sworn by
me, did depose and say that s/he is a general partner of _____________________,
that s/he executed the foregoing instrument in such partnership's name, and that
s/he had authority to sign the same, and s/he acknowledged to me that s/he
executed the same as the act and deed of said partnership for the uses and
purposes therein mentioned.
----------------------------
Notary Public
- 14 -
<PAGE>
EXHIBIT 4.5
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is entered into as of
March 10, 2000 by and among CYBERIAN OUTPOST, INC., a Delaware corporation (the
"Corporation"), and the persons and the entities listed below (each, an
"Investor" and collectively, the "Investors"). The Corporation and the Investors
are sometimes referred to herein collectively as the "Parties" or each
individually as a "Party."
WHEREAS, in connection with the Subscription Agreement of even date
herewith by and among the Parties hereto (the "Subscription Agreement"), the
Corporation has agreed, upon the terms and subject to the conditions of the
Subscription Agreement, to issue and sell to the Investors up to 4,702,900
shares of Common Stock of the Corporation, par value $.01 per share (the
"Shares"); and
WHEREAS, to induce the Investors to execute and deliver the Subscription
Agreement, the Corporation agreed to provide certain registration rights under
the Securities Act (as defined below) and applicable state securities laws.
NOW, THEREFORE, in considerations of the premises and mutual covenants and
obligations hereafter set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties, intending
to be legally bound, hereby agree as follows:
1. Registration Rights.
1.1 Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
(a) "Additional Issuance Event" shall mean the obligation of the
Corporation, in the event that the shelf registration statement for the
Shares on Form S-3 (if available, otherwise on Form S-1), is not effective
within 180 days after the Closing, on the 181st day following the Closing
and, if such registration statement is still not effective, on the 211th
day following the Closing, to pay to the Investors, pro rata on the basis
of the number of Shares held by an Investor, an amount equal to 5% of the
aggregate purchase price for the Shares, payable, at the option of the
Corporation, in either cash or additional shares of Common Stock. Such
additional shares of Common Stock shall be valued at the lower of (i) the
price at which the Shares were sold to the Investors or (ii) the Current
Market Price.
(b) "Closing" shall mean the date of closing of the offering of the
Shares.
(c) "Commission" shall mean the United States Securities and Exchange
Commission or any other federal agency at the time administering the
Securities Act and the Exchange Act.
(d) "Common Stock" shall mean the Corporation's common stock, $.01 par
value per share.
<PAGE>
(e) "Current Market Price" shall mean the trailing ten day average
Closing Price of the Common Stock on the NASDAQ ending two business days
prior to the relevant measurement date.
(f) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at the time.
(g) "Holder" shall mean any Investor who holds Registrable Securities
and any holder of Registrable Securities to whom the registration rights
conferred by this Agreement have been transferred in compliance with
Section 1.10 hereof.
(h) "Initiating Holders" shall mean any Holder or Holders of at least
(i) thirty percent (30%) of the Registrable Securities, in the aggregate,
and (ii) 500,000 Registrable Securities, in the aggregate; provided however
that if there are outstanding fewer than 1,600,000 Registrable Securities,
in the aggregate, Holders holding 500,000 Registrable Securities, in the
aggregate, shall, for all purposes of this Agreement, be Initiating
Holders.
(i) "Other Stockholders" shall mean persons other than Holders who, by
virtue of agreements with the Corporation, are entitled to include their
securities in certain registrations hereunder.
(j) "Person" means a corporation, a limited liability company, an
association, a partnership, an organization, a business, a trust, an
individual, a governmental or political subdivision thereof or a
governmental agency.
(k) The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a Registration Statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such Registration Statement by the Commission.
(l) "Registrable Securities" shall mean (i) all of the Shares, if the
Shelf Registration is not declared effective or its effectiveness lapses,
and (ii) all of the shares of Common Stock delivered by the Corporation to
any Investors by way of any Additional Issuance Event. Registrable
Securities shall cease to be Registrable Securities when they (i) are
freely salable without restriction pursuant to the volume limitation
restriction of Rule 144, (ii) have ceased to be outstanding (whether as a
result of redemption, repurchase and cancellation, conversion or otherwise)
or (iii) have been sold under a Registration Statement.
(m) Registration Expenses" shall mean all expenses, except as
otherwise stated below, incurred by the Corporation in complying with
Sections 1.2 and 1.3 hereof, including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow
fees, fees and disbursements of counsel for the Corporation, reasonable
fees and disbursements of the Holders' Counsel (as hereinafter defined),
"blue sky" fees and expenses and the expense of any special audits incident
to or required by any such registration (but excluding the compensation of
regular employees of the Corporation which shall be paid in any event by
the Corporation). Registration Expenses shall not include Selling Expenses.
- 2 -
<PAGE>
(n) "Registration Rights" shall mean the usual and customary
registration rights, including two demand registration rights if called by
Investors holding more than 30% of the Shares, and unlimited piggyback
registration rights, in the event that the Shelf Registration is not
declared effective or its effectiveness lapses.
(o) "Registration Statement" shall mean any registration statement
which covers any of the Registrable Securities pursuant to the provisions
of this Agreement, including the prospectus included therein, all
amendments and supplements to such Registration Statement, including
post-effective amendments, all exhibits and all material incorporated by
reference in such Registration Statement.
(p) "Restricted Shares" shall mean the Shares which are held by the
Investors which have not theretofore been sold to the public pursuant to a
registration statement under the Securities Act or pursuant to Rule 144.
(q) "Rule 144" shall mean Rule 144 promulgated under the Securities
Act or any successor rule thereto or any complementary rule thereto (such
as Rule 144A).
(r) "Rule 145" shall mean Rule 145 promulgated under the Securities
Act or any successor rule thereto or any complementary rule thereto.
(s) "Rule 415" shall mean Rule 415 promulgated under the Securities
Act or any successor rule thereto or any complementary rule thereto.
(t) "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at the time.
(u) "Selling Expenses" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities
registered by the Holders and all reasonable fees and disbursements of
counsel for the selling Holders (other than those included in Registration
Expenses).
(v) "Shelf Registration" shall mean the shelf registration statement
for the Shares on Form S-3 (if available, otherwise on Form S-1), which
shall be filed by the Corporation with the Commission as soon as
practicable and shall be declared effective within 180 days after the
Closing.
1.2 Registration on Form S-3.
(a) Shelf Registration. The Corporation shall effect the Shelf
Registration for the Shares. This Shelf Registration shall be filed with
the Commission as soon as practicable, and shall be declared effective
within 180 days after the Closing. Subject to Sections 1.2(d) and 1.3
hereof, such Shelf Registration shall be continuously maintained in effect
for a period not less than two years from the Closing. If necessary, the
Corporation shall cause to be filed, and shall use its best efforts to have
declared effective as soon as practicable following filing, additional
registration statements or amendments as necessary to maintain such
effectiveness for such two-year period.
- 3 -
<PAGE>
(b) Excluded Shares. No Holder may include any of its Shares in the
Shelf Registration unless such Holder furnishes to the Corporation, in
writing, prior to or on the 20th business day after receipt of a request
therefor (the "Questionnaire Deadline") which request shall be made within
15 business days after the date hereof, such information as the Corporation
may reasonably request for use in connection with the Shelf Registration
and in any application to be filed with or under state securities laws. In
connection with all such requests for information from Holders, the
Corporation shall notify such Holders of the requirements set forth in the
preceding sentence. Each Holder as to which the Shelf Registration is being
effected agrees to furnish promptly to the Corporation all information
reasonably required to be disclosed in order to make information previously
furnished to the Corporation by such Holder not materially misleading.
(c) Additional Issuance Event. Should the Shelf Registration not be
declared effective within the 180 day period, the Corporation shall, after
such 180 days, and on the 181st day after the Closing and, if the Shelf
Registration is still not effective, on the 211th day after the Closing,
pay each Investor an amount equal to 5% of the purchase price for the
Shares paid by such Investor, payable, at the option of the Corporation, in
either cash or additional shares of Common Stock of the Corporation. Such
shares of Common Stock shall be valued at the lower of (i) the price the
Shares were sold to the Investor or (ii) the Current Market Price. No
Investor shall be entitled to additional amounts of shares or cash pursuant
to this Section 1.2 (c) unless such Investor (or the Holder of its shares,
if such Investor transferred its Shares) shall have provided all such
reasonably requested information prior to or on the Questionnaire Deadline;
provided that the Corporation has requested such information within 15
business days of the date hereof. If the Corporation is required to issue
any additional shares of Common Stock, the Corporation shall include those
additional shares of Common Stock in the Shelf Registration Statement.
(d) Suspension of Registration. Notwithstanding the foregoing, if the
Corporation shall furnish to the Holders requesting registration, a
certificate signed by the President and Chief Executive Officer of the
Corporation stating that in the good faith judgement of the Board of
Directors of the Corporation, it would be seriously detrimental to the
Corporation and its stockholders for such registration statement to be
filed or to remain effective and it is therefore, essential to defer the
filing of such registration statement or suspend the effectiveness of such
registration statement, the Corporation shall have the right to defer
taking action with respect to such filing or suspend an existing filing for
a period of not more than 45 days (in the aggregate) during any one year
period. The two year period set forth in Section 1.2(a) shall be extended
for an additional number of days equal to the number of days during which
the Holder's right to sell the Shares was suspended pursuant to this
paragraph.
1.3 Additional Registration Rights. Should the Shelf Registration not be
declared effective within 180 days of the Closing or should the Shelf
Registration's effectiveness lapse for any reason while the Corporation has any
obligation to maintain such Shelf Registration other than pursuant to Section
1.2(d), the Investors (other than Investors or Holders excluded from the Shelf
Registration under Section 1.2(b)) shall have Registration Rights, at the
Corporation's expense, which shall include:
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<PAGE>
(a) Demand Registration.
(i) Request for Registration. Subject to the terms hereof, the
Initiating Holders may make a demand in writing for registration under
the Securities Act of all or part of their Registrable Securities (the
"Demand Registration"). If the Corporation receives from the
Initiating Holders a written request that the Corporation effect a
registration under the Securities Act of Registrable Securities, the
Corporation will:
(A) promptly give written notice of the proposed
registration to all of the other Holders; and
(B) as soon as reasonably practicable, use its best efforts
to effect such registration (including, without limitation,
appropriate qualification under applicable "blue sky" or other
state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act and any other
governmental requirements or regulations) as would permit or
facilitate the sale and distribution of all of such Registrable
Securities as are specified in such request, together with all or
such portion of the Registrable Securities of any Holder joining
in such request as are specified in a written request received by
the Corporation within 20 business days after such written notice
from the Corporation is mailed or delivered; provided, however,
that the Corporation shall not be obligated to take any action to
effect any such registration pursuant to this Section 1.3(a)(i):
(i) any particular jurisdiction in which the
Corporation would be required to execute a general consent
to service of process in effecting such registration,
qualification or compliance unless the Corporation is
already subject to service in such jurisdiction and except
as may be required by the Securities Act; and
(ii) after the Corporation has effected two (2) such
registrations pursuant to this Section 1.3(a)(i), and such
registrations have been declared or ordered effective.
In the event that a request for registration is made pursuant to this
Section1.3(a)(i) but the Corporation is not obligated to effect such
requested registration by virtue of the foregoing clause (B)(i), such
request shall not be deemed to be a demand for registration for purposes of
this Section 1.3(a)(i). Subject to the foregoing clauses (B)(i) through
(B)(ii), the Corporation shall prepare and file a Registration Statement
covering the Registrable Securities so requested to be registered
immediately after receipt of the request or requests of the Initiating
Holders. The Registration Statement filed pursuant to the request of the
Initiating Holders may, subject to the provisions of Section 1.11 hereof,
include other securities of the Corporation with respect to which
registration rights have been granted.
(iii) Underwriting. If the Initiating Holders intend to
distribute the Registrable Securities covered by their
request by means of an underwriting, they shall so advise
the Corporation as a part of their request made pursuant to
Section 1.3(a)(i) hereof and the Corporation shall include
such information in the written notice referred to in
Section 1.3(a)(i) hereof. In such event, the right of any
Holder to participate in such registration shall be
conditioned upon such Holder's participation in the
underwriting arrangements required by this Section
1.3(a)(i), and the inclusion of such Holder's Registrable
Securities in the underwriting to the extent requested shall
be limited to the extent provided herein.
- 5 -
<PAGE>
If other persons shall request inclusion in any registration pursuant
to Section 1.3(a), the Initiating Holders shall, on behalf of all Holders,
offer to include such securities in the underwriting and may condition such
offer on their acceptance of the further applicable provisions of this
Section 1. The Corporation shall (together with all Holders and other
persons proposing to distribute their securities through such underwriting)
enter into an underwriting agreement in customary form (but subject to the
reasonable approval of the Holders holding a majority of the Registrable
Securities to be included in such underwriting) with the managing
underwriter selected for such underwriting by the Holders holding a
majority of the Registrable Securities to be included in such underwriting,
which managing underwriter shall be reasonably acceptable to the
Corporation. The Corporation and the Holders participating in such
underwriting shall reasonably cooperate with any such underwriter.
Notwithstanding any other provision of this Section 1.3, if the managing
underwriter advises the Initiating Holders in writing that, in its good
faith judgment, marketing factors require a limitation of the number of
shares to be underwritten, then the Corporation shall so advise all
participating Holders and the number of shares of Registrable Securities
that may be included in the registration and underwriting shall be
allocated as set forth in Section 1.11. If a person who has requested
inclusion in such registration as provided above does not agree to the
terms of any such underwriting, such person shall be excluded therefrom by
written notice from the Corporation, the underwriter or the Initiating
Holders. Any Registrable Securities or other securities excluded shall also
be withdrawn from such registration. If shares are so withdrawn from the
registration and if the number of shares to be included in such
registration was previously reduced as a result of marketing factors
pursuant to this Section 1.3(a)(ii), then the Corporation shall offer to
all persons who have retained rights to include securities in the
registration the right to include additional securities in the registration
in an aggregate amount equal to the number of shares so withdrawn, with
such shares to be allocated among such persons requesting additional
inclusion in accordance with Section 1.11.
If the underwriter has not limited the number of Registrable
Securities to be underwritten, the Corporation may include securities for
its own account (or for the account of other shareholders in accordance
with the terms of this Agreement) in such registration if the underwriter
so agrees and if the number of Registrable Securities that would otherwise
have been included in such registration and underwriting will not thereby
be limited.
If the number of Registrable Securities excluded from the underwriting
exceeds fifty percent (50%) of the total Registrable Securities requested
to be included in such underwriting by the Holders, then Holders of a
majority of the Registrable Securities requested to be included in such
underwriting may elect to terminate the registration. If such election to
terminate is elected, such registration shall not count as a demand
registration.
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(b) Unlimited Piggyback Registration Rights.
(i) Notice of Registration. For a period of two years following
the Closing, if the Corporation at any time proposes to file a
registration statement with respect to any class of equity securities,
whether for its own account (other than in connection with the
Registration Statement contemplated by Section 1.3(a) hereof or a
registration statement on Form S-8 (or any successor or substantially
similar form) relating to an employee stock option, stock purchase or
compensation plan or securities issued or issuable pursuant to any
such plan or a registration statement on Form S-4 (or any successor or
substantially similar form)) or for the account of a holder of
securities of the Corporation, then the Corporation will:
(A) promptly give to each Holder written notice thereof at
least twenty (20) days before the anticipated initial filing date
of any such registration statement, and such notice shall offer
to all Holders the opportunity to have any or all of the
Registrable Securities held by such Holders included in such
registration statement; and
(B) subject to the underwriter limitations, if any,
described in Section 1.3(b)(iii) below, include in such
registration statement (and any related qualification under "blue
sky" laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written
request or requests to be included therein, made by any Holder
and received by the Corporation within twenty (20) days after the
written notice from the Corporation described in clause (A) above
is mailed or delivered by the Corporation. Such written request
may specify all or a part of a Holder's Registrable Securities.
No right to registration of Registrable Securities under this Section
1.3(b)(i) shall be construed to limit any registration required under
Section 1.3(a).
(ii) Holdback by the Corporation. Subject to the rights of other
stockholders who have registration rights as of the date hereof, if
the Corporation has previously filed a Registration Statement with
respect to Registrable Securities pursuant to Section 1.3(a), and if
such previous registration has not been withdrawn or abandoned, the
Corporation will not file or cause to be effected any other
registration of any of its equity securities or securities convertible
or exchangeable into or exercisable for its equity securities under
the Securities Act (except for a registration relating solely to
employee benefits plans or to a transaction under Rule 145), whether
on its own behalf or at the request of any holder or holders of such
securities, until a period of ninety (90) days has elapsed from the
effective date of such a previous registration.
(iii) Underwriting. If the registration of which the Corporation
gives notice is for a registered public offering involving an
underwriting, the Corporation shall so advise the Holders as a part of
the written notice given pursuant to Section 1.3(b)(i)(A). In such
event the right of any Holder to registration pursuant to this Section
1.3(b) shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities
in the underwriting to the extent provided herein. All Holders
proposing to distribute their securities through such underwriting
shall (together with the Corporation and the other holders of
securities of the Corporation with registration rights to participate
therein distributing their securities through such underwriting) enter
into an underwriting agreement in customary form with the managing
underwriter selected for such underwriting by the Corporation.
Notwithstanding any other provision of this Section 1.3(b), if the
managing underwriter determines in its good faith judgment that
marketing factors require limitation of the number of shares to be
underwritten, the managing underwriter may limit the Registrable
Securities to be included in such registration. The Corporation shall
so advise all holders of securities requesting registration, and the
number of shares of securities that may be included in the
registration and underwriting shall be allocated first to the Company
for securities being sold for its own account and thereafter as set
forth in Section 1.11. No securities of the Corporation held by
parties other than the Holders or the Corporation shall be included in
any registration and underwriting to which this section applies if the
number of Registrable Securities that would otherwise have been
included in such registration and underwriting will thereby be
limited. If any Holder disapproves of the terms of any such
underwriting, he may elect to withdraw therefrom by written notice to
the Corporation and the managing underwriter.
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1.4 Limitations on Subsequent Registration Rights. From and after the date
hereof, without the approval of the Holders of a majority of the Registrable
Securities, the Corporation shall not enter into any agreement granting any
holder or prospective holder of any securities of the Corporation registration
rights with respect to such securities unless: (a) the agreement does not allow
the holder to include the securities in a registration filed under Section
1.3(a) hereof unless it would not thereby limit the number of Registrable
Securities of the Holders included in the registration; and (b) the agreement
does not grant rights which would delay the ability of the Holders to obligate
the Corporation to file a registration statement on the Holders' behalf pursuant
to Sections 1.2 or 1.3. The Corporation has not previously and shall not in the
future enter into any agreement, arrangement or understanding with respect to
its securities which is inconsistent with the rights granted to the Holders of
Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof. As of the date hereof, Schedule 1.1 hereof sets forth all
persons who by virtue of agreements with the Corporation are entitled to include
their securities in certain registrations hereunder.
1.5 Expenses of Registration. All Registration Expenses shall be borne by
the Corporation. All Selling Expenses relating to securities registered on
behalf of the Holders shall be borne by the Holders of such securities pro rata
on the basis of the number of shares so registered.
1.6 Registration Procedures. In the case of each registration, effected by
the Corporation pursuant to this Section 1, the Corporation will keep each
Holder advised in writing as to the initiation of each registration and such
amendment thereof and as to the completion thereof. At its expense the
Corporation will:
(a) Promptly prepare and file with the Commission a Registration
Statement with respect to such securities and with respect to registrations
under Sections 1.3, use its best efforts to cause such Registration
Statement to become effective as promptly as possible and remain effective
until the earlier of (i) the date which is one hundred and eighty (180)
days after the effective date of such Registration Statement and (ii) the
date on which all Registrable Securities covered by such Registration
Statement have been sold and the distribution contemplated thereby has been
completed (the "Registration Period"); provided, however, that if, after
such Registration Statement has become effective, the offering of the
Registrable Securities pursuant to such registration is interfered with by
any stop order, injunction or similar order of the Commission or other
governmental agency or court (other than by reason of any untrue statement
of a material fact or any omission of a material fact required to be stated
in the Registration Statement or necessary to make the statements therein
not misleading, to the extent, but only to the extent, that such untrue
statement or omission is contained in any information or affidavit
furnished in writing by a Holder to the Corporation specifically for
inclusion therein), such registration will be deemed not to have been
effected. Notwithstanding the foregoing, if within sixty (60) days after
the effective date of the stop order, injunction or similar order of the
Commission or other governmental agency or court, the same is lifted and
the effectiveness of the registration is restored, the registration shall
be deemed to have been effected, provided, that the Registration Period (i)
will be tolled during the period the stop order, injunction or similar
order is in effect, (ii) shall resume upon the lifting thereof and (iii)
shall be extended one day for each day during the period that the stop
order, injunction or similar order is in effect.
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<PAGE>
(b) Furnish, at least five (5) business days before filing a
Registration Statement that registers such Registrable Securities, a
prospectus relating thereto and any amendments or supplements relating to
such a Registration Statement or prospectus, to one counsel selected by the
Holders (the "Holders' Counsel"), copies of all such documents proposed to
be filed (it being understood that such five-business-day period need not
apply to successive drafts of the same document proposed to be filed so
long as such successive drafts are supplied to the Holders' Counsel in
advance of the proposed filing by a period of time that is customary and
reasonable under the circumstances).
(c) Prepare and file with the Commission such amendments and
supplements to such Registration Statement and the prospectus used in
connection with such Registration Statement as may be necessary to keep
such Registration Statement effective for the Registration Period, and to
comply with the provisions of the Securities Act with respect to the sale
and other disposition of all securities covered by such Registration
Statement.
(d) Notify in writing to the Holders' Counsel promptly (i) of the
receipt by the Corporation of any notification with respect to any comments
by the Commission with respect to such Registration Statement or prospectus
or any amendment or supplement thereto or any request by the Commission for
the amending or supplementing thereof or for additional information with
respect thereto, (ii) of the receipt by the Corporation of any notification
with respect to the issuance by the Commission of any stop order suspending
the effectiveness of such Registration Statement or prospectus or any
amendment or supplement thereto or the initiation or threatening of any
proceeding for that purpose and (iii) of the receipt by the Corporation of
any notification with respect to the suspension of the qualification of
such Registrable Securities for sale in any jurisdiction or the initiation
or threatening of any proceeding for such purposes.
(e) Use its best efforts to register and qualify the securities
covered by such Registration Statement under such other securities or "blue
sky" laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Corporation shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions.
(f) Furnish to the Holders participating in such registration and to
the underwriters of the securities being registered such number of copies
of the Registration Statement, preliminary prospectus, final prospectus and
such other documents incident thereto as such Holders or underwriters may
reasonably request in order to facilitate the public offering of such
securities.
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<PAGE>
(g) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(h) Notify each Holder of Registrable Securities covered by such
Registration Statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any
event as a result of which the prospectus included in such Registration
Statement, as then in effect, includes an untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing.
(i) Use its best efforts to furnish, at the request of any Holder
requesting registration of Registrable Securities pursuant to Section 1, on
the date that such Registrable Securities are delivered to the underwriters
for sale in connection with a registration pursuant to Section 1, if such
securities are being sold through underwriters, or, if such securities are
not being sold through underwriters, on the date that the Registration
Statement with respect to such securities becomes effective, (i) a copy
addressed to Holders of the opinion, dated such date, of the counsel
representing the Corporation for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten
public offering, addressed to the underwriters, if any, and (in a non-
underwritten offering) to the Holders requesting registration of
Registrable Securities and (ii) a copy addressed to Holders of the letter
dated such date, from the independent certified public accountants of the
Corporation, in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and (in a non-underwritten
offering) to the Holders requesting registration of Registrable Securities.
(j) Cause all such Registrable Securities registered pursuant
hereunder to be listed on the the NASDAQ or such other automated quotation
system or securities exchange on which Common Stock is listed.
(k) Otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission and the securities commission or other
regulatory authority of any relevant state or other jurisdiction and make
available to its securityholders, as soon as reasonably practicable,
earnings statements (which need not be audited) covering a period of 12
months beginning within three months after the effective date of the
Registration Statement, which earnings statements shall satisfy the
provisions of Section 11(a) of the Securities Act.
(l) Use its best efforts to take all other steps reasonably necessary
to effect the registration of such Registrable Securities contemplated
hereby. Notwithstanding the foregoing, the Corporation shall not be
obligated to register the Registrable Securities of any Holder who fails
within a reasonable time to provide to the Corporation such information as
the Corporation may reasonably request at the time to enable the
Corporation to comply with applicable laws or regulations or to facilitate
the preparation of the Registration Statement.
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<PAGE>
1.7 Indemnification.
(a) The Corporation will indemnify each Holder; each Holder's officers,
directors, employees, principals, equity holders and partners; each underwriter,
broker or any other Person (other than the Corporation) acting on behalf of such
Holder, and each Person (other than the Corporation) controlling such Person
within the meaning of Section 15 of the Securities Act, with respect to which
registration, qualification or that compliance has been effected pursuant to
this Section 1, against all expenses, claims, losses, damages or liabilities,
joint or several (or actions in respect thereof) (collectively, "Losses"),
including any of the foregoing incurred in settlement of any litigation,
commenced or threatened, arising out of or (i) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any Registration Statement, preliminary or final prospectus, offering circular
or other document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or (ii) arising out of or based on
any omission (or alleged omission) to state therein a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, or (iii) any violation by
the Corporation of the Securities Act, state securities or "blue sky" laws or
any rule or regulation promulgated thereunder applicable to the Corporation in
connection with any such registration, qualification or compliance (each
statement, omission or violation referred to in clauses (i), (ii) and (iii) of
this Section 1.7(a) being referred to as a "Violation"), and the Corporation
will reimburse each such Holder, each of its officers and directors, each such
underwriter, broker or other Person (other than the Corporation) acting on
behalf of such Holder, and each such controlling Person (other than the
Corporation) for any legal and any other expenses reasonably incurred in
connection with investigating, preparing or defending any such Loss, provided
that the Corporation will not be liable to any such Person in any such case to
the extent that any such Loss arises out of or is based on any untrue statement
or omission (or alleged untrue statement or omission), made in conformity with
written information furnished to the Corporation and stated to be specifically
for use therein. It is agreed that the indemnity agreement contained in this
Section 1.7(a) shall not apply to amounts paid in settlement of any such claims,
losses, damages, or liabilities (or actions in respect thereof) if such
settlement is effected without the consent of the Corporation (which consent
shall not be unreasonably withheld).
(b) Each Holder will, if Registrable Securities held by such Holder are
included, in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Corporation, each of its directors
and officers, each underwriter, broker or other Person acting on behalf of the
Holders, and each Person who controls any of the foregoing Persons within the
meaning of Section 15 of the Securities Act, and each other such Holder and
Other Stockholder, each of their officers and directors and each person
controlling such Holder or Other Stockholder within the meaning of Section 15 of
the Securities Act, against all Losses arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any such
Registration Statement, preliminary or final prospectus, offering circular or
other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Corporation, such Holders, Other
Stockholders, such directors, officers, underwriters, brokers, other Persons
acting on behalf of the Holders or control Persons for any legal or any other
expenses reasonably incurred in connection with investigating, preparing or
defending any such Loss, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such Registration Statement, preliminary or final
prospectus, offering circular or other document in conformity with written
information furnished to the Corporation by such Holder and stated to be
specifically for use therein, provided, however, that the obligations of such
Holder hereunder shall not apply to amounts paid in settlement of and such
claims, losses, damages, or liabilities (or actions in respect thereof) if such
settlement is effected without the consent of such Holder (which consent shall
not be unreasonably withheld). Notwithstanding the foregoing, the liability of
each Holder under this subsection (b) shall be limited to an amount equal to the
aggregate net proceeds received by such Holder from the sale of Registrable
Securities in such registration.
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<PAGE>
(c) Each Person entitled to indemnification under this Section 1.7 (the
"Indemnified Party") shall give notice to the Party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
Indemnified Party's expense, and provided further, that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 1.7 unless the failure
to give such notice is materially prejudicial to an Indemnifying Party's ability
to defend such action and provided further, that the Indemnifying Party shall
not assume the defense for matters as to which there is a conflict of interest
or separate and different defenses. If (i) the Indemnifying Party shall have
failed to assume the defense of such claim and to employ counsel reasonably
satisfactory to the Indemnified Party in a timely manner or (ii) in the
reasonable judgment of any Indemnified Party a conflict of interest may exist
between such Indemnified Party and the Indemnifying Party with respect to such
claim, the fees and expenses of any counsel employed by the Indemnified Party
shall be at the expense of the Indemnifying Party; provided that, if the
Indemnifying Party is obligated to pay the fees and expenses of counsel for
other Indemnified Parties, such Indemnifying Party shall be obligated to pay
only the fees and expenses associated with one attorney or law firm for the
Indemnified Parties, unless there exists a conflict of interest or separate and
different defenses among the Indemnified Parties. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation. Each Indemnified Party shall furnish
such information regarding itself or the claim in question as an Indemnifying
Party may reasonably request in writing and as shall be reasonably required in
connection with the defense of such claim and litigation resulting therefrom.
(d) If the indemnification provided for in this Section 1.7 is held by a
court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any loss, claim, damage, liability or action referred to herein, then
the Indemnifying Party, in lieu of indemnifying such Indemnified Party
hereunder, shall contribute to the amounts paid or payable by such Indemnified
Party as a result of such loss, claim, damage, liability or action in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other in connection
with the statements or omissions which resulted in such loss, claim, damage,
liability or action as well as any other relevant equitable considerations. The
relative fault of the Indemnifying Party and of the Indemnified Party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Indemnifying Party or by
the Indemnified Party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
Notwithstanding the foregoing, the maximum amount which any Holder shall be
required to contribute pursuant to this Section 1.7(d) shall be limited to an
amount equal to the net proceeds received by such Holder from the sale of
Registrable Securities effected pursuant to such registration.
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1.8 Information by Holder. The Holders of securities included in any
registration shall furnish to the Corporation in writing such information
regarding such Holders, the Registrable Securities held by such Holders and the
distribution proposed by such Holders as the Corporation may reasonably request
in writing and as shall be required in connection with any registration,
qualification or compliance referred to in this Section 1.
1.9 Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Registrable Securities to the public without registration, the
Corporation agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144, at all times after the effective date
that the Corporation becomes subject to the reporting requirements of the
Securities Act or the Exchange Act.
(b) File with the Commission in a timely manner all reports and other
documents required of the Corporation under the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements);
(c) So long as a Holder owns any Registrable Securities to furnish to
the Holder forthwith upon request a written statement by the Corporation as
to its compliance with the reporting requirements of said Rule 144, and of
the Securities Act and the Exchange Act, a copy of the most recent annual
or quarterly report of the Corporation, and such other reports and
documents of the Corporation so filed as a Holder may reasonably request in
availing itself of any rule or regulation of the Commission allowing a
Holder to sell any such securities without registration. The Corporation
will take action reasonably requested by a Holder to facilitate the
transfer of Registrable Securities pursuant to Rule 144.
1.10 Transfer of Registration Rights. The rights to cause the Corporation
to register securities granted to a Holder by the Corporation under this
Agreement may be transferred or assigned by a Holder only to a transferee or
assignee of not less than 50,000 shares of Registrable Securities (as presently
constituted and subject to subsequent adjustments for stock splits, stock
dividends, reverse stock splits and the like), provided that the Corporation is
given written notice at the time of or within a reasonable time after said
transfer or assignment, stating the name and address of the transferee or
assignee and identifying the securities with respect to which such registration
rights are being transferred or assigned, and, provided further, that the
transferee or the assignee of such rights assumes in writing the obligations of
such Holder under this Agreement.
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1.11 Priority in Registration. In the event of any registration of
securities of the Corporation under the Securities Act, (other than on Forms
S-4, S-8 or their successor forms) holders of securities not enjoying demand
registration rights shall be first reduced pro rata to zero and, if necessary,
all holders of securities enjoying demand registration rights (including the
Holders) shall be cut back, with it being understood that (i) the Corporation
shall include in such registration the number of securities requested to be
included therein which are held by such holders (including the Holders) enjoying
demand registration rights which in the opinion of such underwriters can be sold
without materially and adversely affecting the success of such offering, pro
rata among such holders based on the number of securities (on an as-converted or
as-exercised basis) owned by each such holder, and (ii) in connection with an
underwritten primary registration on behalf of the Corporation pursuant to
Section 1.3(b) above, such holders enjoying demand registration rights shall be
entitled to include not less than 25% of the total number of shares to be
included in such offering.
2. Miscellaneous.
2.1 Governing Law; Submission to Jurisdiction. a) This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
applicable to contracts made and to be performed wholly therein, without regard
to principles of the conflict of laws thereof.
(b) Each Party hereto hereby agrees that any suit or judgment entered by
any court in respect thereof may be brought to the extent permitted by
applicable law in the State of New York, County of Manhattan or in any United
States District Court for the District of the State of New York, as the Party
commencing such suit, action or proceeding may elect in its sole discretion; and
each Party hereto hereby irrevocably submits to the jurisdiction of such courts
and any appellate court or body thereof for the purpose of any suit, action,
proceeding or judgment (and waives for such purpose any other preferential
jurisdiction by reason of its present of future domicile or otherwise).
(c) Each Party hereby irrevocably waives any objection which it may now or
hereafter have to the laying of the venue of any suit, action or proceeding
arising out of or relating to this Agreement brought in the State of New York,
County of Manhattan or in any United States District Court for the District of
the State of New York and hereby further irrevocably waives any claim that any
such suit, action or proceeding brought in any such court has been brought in an
inconvenient forum.
2.2 Survival. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by any Holder, and the closing
of the transactions contemplated hereby.
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2.3 Successors and Assigns. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the Parties hereto.
2.4 Entire Agreement. This Agreement and the Subscription Agreement contain
the entire understanding and agreement of the Parties with respect to the
subject matter hereof and thereof. This Agreement and the Subscription Agreement
supersede all prior agreements and understandings among the Parties hereto with
respect to the subject matter hereof. Neither this Agreement nor any term hereof
may be amended, waived, discharged or terminated except by a written instrument
signed by the Corporation and the Holders of at least 50% of the Registrable
Securities then outstanding and any such amendment, waiver, discharge or
termination shall be binding on all the Holders, but in no event shall the
obligation of any Holder hereunder be materially increased, except upon the
written consent of such Holder.
2.5 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be delivered personally,
mailed by certified or registered mail, postage prepaid, return receipt
requested, by courier or a recognized overnight delivery service or by facsimile
(provided confirmation of transmission is mechanically generated and kept on
file by the sending party), addressed (a) if to any Holder, at such Holder's
address as set forth in the Corporation's records, or at such other address as
such Holder shall have furnished to the Corporation in writing with copies to C.
E. Unterberg, Towbin at 10 East 50th Street, 20th Floor, New York, NY 10022,
Attention: Michael Marrus, (b) if to the Corporation, at 23 North Main Street,
P.O.B. 636, Kent, CT 06757, Attention: Robert Bowman, or at such other address
as the Corporation shall have furnished to such Holders in writing. Notices that
are mailed shall be deemed to have been given five days after deposit in the
United States mail and notices delivered personally, by facsimile, courier or an
overnight delivery service shall be deemed to have been given upon delivery to
recipient's address.
2.6 Delays or Omissions. No failure or delay by any Holder in exercising
any right, power or privilege hereunder and no course of dealing between the
Corporation, on the one hand, and any Holder, on the other hand, shall operate
as a waiver thereof; nor shall any single or partial exercise of any right,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, power or privilege hereunder. Any Person having
rights under any provision of this Agreement shall be entitled to enforce such
rights specifically or to recover damages or to exercise any other remedy
available to it at law or in equity. The foregoing rights and remedies shall be
cumulative and the exercise of any right or remedy provided herein shall not
preclude any Person from exercising any other right or remedy provided herein.
The Corporation agrees that monetary damages would not be adequate compensation
for any loss incurred by reason of a breach by it of any of the provisions of
this Agreement and hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate. No notice to or demand on
the Corporation in any case shall entitle the Corporation to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of the rights of any Holder to any other or further action in any
circumstances without notice or demand. Each covenant contained herein shall
operate independently of any other covenant contained herein.
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2.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
2.8 Severability. If any provision of this Agreement, or the application
thereof, shall for any reason and to any extent be invalid or unenforceable the
remainder of this Agreement and application of such provision to Persons or
circumstances shall be interpreted so as best to reasonably effect the intent of
the parties hereto, the parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
which will achieve to the extent possible, the economic, business and other
purposes of the void or unenforceable provision.
2.9 Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
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COUNTERPART SIGNATURE PAGE TO
REGISTRATION RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this
Registration Rights Agreement as of the date first written above.
CORPORATION:
CYBERIAN OUTPOST, INC.
By: /s/ Robert A. Bowman
----------------------
Name:
Title:
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<PAGE>
COUNTERPART SIGNATURE PAGE TO
REGISTRATION RIGHTS AGREEMENT
INVESTORS:
Ardent Research Partners, Ltd.
By: /s/ Francis J. Sardutti
-------------------------------------
Ardent Research Partners, L.P.
By: /s/ Francis J. Sardutti
-------------------------------------
Elliot Broidy, IRA
By: /s/ Elliott Broidy
-------------------------------------
Camelot Capital, LP
By: /s/ signature illegible
-------------------------------------
Camelot Offshore Fund Ltd.
By: /s/ signature illegible
-------------------------------------
Camelot Capital II, LP
By: /s/ signature illegible
-------------------------------------
Hathaway Partners Investment L.P.
By: /s/ C. Nichols Hathaway
-------------------------------------
Duck Partners
By: /s/ J. Mitchell Hull
-------------------------------------
Kensington Partners L.P.
By: /s/ signature illegible
-------------------------------------
Kensington Partners II L.P.
By: /s/ signature illegible
-------------------------------------
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<PAGE>
Bald Eagle Fund, Ltd.
By: /s/ signature illegible
-------------------------------------
Essex Performance Fund, LP
By: /s/ signature illegible
-------------------------------------
PAW Partners LP
By: /s/ signature illegible
-------------------------------------
PAW Partners Offshore Fund Ltd.
By: /s/ signature illegible
-------------------------------------
FNY Securities Associates L.P.
By: /s/ signature illegible
-------------------------------------
Alfred University
By: /s/ signature illegible
-------------------------------------
Core Technology Fund
By: /s/ signature illegible
-------------------------------------
Walt Disney Company Retirement Plan
By: /s/ signature illegible
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Executive Technology LP
By: /s/ signature illegible
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Foundation Partners Fund GP
By: /s/ signature illegible
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Matrix Technology Group NV
By: /s/ signature illegible
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<PAGE>
Rochester Institute of Technology
By: /s/ signature illegible
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Sci-Tech Investment Partners L.P.
By: /s/ signature illegible
-------------------------------------
SG Partners LP
By: /s/ signature illegible
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Tampsco II Partnership
By: /s/ signature illegible
-------------------------------------
Yale University
By: /s/ signature illegible
-------------------------------------
Yale University Retirement Plan for
Staff Employees
By: /s/ signature illegible
-------------------------------------
Special Situations Private
Equity Fund, L.P.
By: /s/ signature illegible
-------------------------------------
Special Situations Fund III, L.P.
By: /s/ signature illegible
-------------------------------------
Special Situations Cayman Fund, L.P.
By: /s/ signature illegible
-------------------------------------
Straus Partners, LP
By: /s/ Melville Straus
-------------------------------------
Straus-Spelman Partners, LP
By: /s/ Melville Straus
-------------------------------------
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<PAGE>
Straus-GEPT
By: /s/ Melville Straus
-------------------------------------
Trellus Offshore Fund Limited
By: /s/ Adam Usdan
-------------------------------------
Trellus Partners, LP
By: /s/ Adam Usdan
-------------------------------------
Maple Row Partners, LP
By: /s/ Eric Blattman
-------------------------------------
Maple Row Partners (Bermuda)
By: /s/ Eric Blattman
-------------------------------------
Catalyst Partners
By: /s/ signature illegible
-------------------------------------
Edmund H. Shea, Jr.
/s/ Edmund H. Shea, Jr.
-----------------------------------------
Valor Fund Ltd.
By: /s/ Russell Sarachek
-------------------------------------
Russell Saracheck
/s/ Russell Sarachek
-----------------------------------------
Wellport Corp. NV
By: /s/ Russell Sarachek
-------------------------------------
Morton Collins
/s/ Morton Collins
-----------------------------------------
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<PAGE>
C.E. Unterberg, Towbin Capital Partners
By: /s/ signature illegible
-------------------------------------
UT Technology Partners, LDC
By: /s/ signature illegible
-------------------------------------
UT Capital Partners International, LDC
By: /s/ signature illegible
-------------------------------------
Thomas I. Unterberg
/s/ Thomas I. Unterberg
-----------------------------------------
Ellen Unterberg Celli
/s/ Ellen Celli
-----------------------------------------
Emily Unterberg Satloff
/s/ Emily Satloff
-----------------------------------------
Andrew Arno &
Janis Koopersmith Arno JT WROS
/s/ Andrew Arno /s/ Janis Arno
-----------------------------------------
Daniel Ries
/s/ Daniel Ries
-----------------------------------------
Daniel Ries Escrow Account
By: /s/ Daniel Ries
-------------------------------------
Adam S. Frankfort-IRA
By: /s/ Adam S. Frankfort
-------------------------------------
Andrew M. Blum
/s/ Andrew M. Blum
-----------------------------------------
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<PAGE>
O. Lee Tawes
/s/ O. L. Tawes
-----------------------------------------
Estelle Konvisor
/s/ Estell Konvisor
-----------------------------------------
C.E. Unterberg, Towbin 401K Profit Sharing
Plan DTD 10/26/90 FBO Robert M. Matluck; R.
Matluck & T. Unterberg, TTEES
By: /s/ Robert M. Matluck
-------------------------------------
Jeffrey Moskowitz
/s/ Jeffrey Moskowitz
-----------------------------------------
A. Robert Towbin
/s/ A. Robert Towbin
-----------------------------------------
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EXHIBIT 5.1
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, Massachusetts 02111
May 25, 2000
Cyberian Outpost, Inc.
23 North Main Street
Kent, CT 06757
Ladies and Gentlemen:
We have acted as counsel to Cyberian Outpost, Inc., a Delaware
corporation (the "Company"), in connection with the preparation and filing with
the Securities and Exchange Commission (the "Commission") of a Registration
Statement on Form S-3 (the "Registration Statement"), pursuant to which the
Company is registering under the Securities Act of 1933, as amended, 4,702,900
shares of the Company's common stock, $.01 par value per share (the "Shares"),
for resale to the public. The Shares, if and when sold, will be sold by certain
security holders of the Company. This opinion is being rendered in connection
with the filing of the Registration Statement. All capitalized terms used herein
and not otherwise defined shall have the respective meanings given to them in
the Registration Statement.
In connection with this opinion, we have examined the Company's
Restated Certificate of Incorporation and Restated By-laws, both as currently in
effect, such other records of the corporate proceedings of the Company and
certificates of the Company's officers as we have deemed relevant, and the
Registration Statement and the exhibits thereto.
In our examination, we have assumed the genuineness of all signatures,
the legal capacity of natural persons, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified, photostatic or facsimile copies and the
authenticity of the originals of such copies.
Our opinion is limited to the General Corporation Law of the State of
Delaware (including the applicable provisions of the Delaware Constitution and
the reported judicial decisions interpreting the laws) and the federal laws of
the United States of America, and we express no opinion with respect to the laws
of any other jurisdiction. No opinion is expressed herein with respect to the
qualification of the Shares under the securities or blue sky laws of any state
or any foreign jurisdiction.
<PAGE>
MINTZ, LEVIN, COHN, FERRIS, GLOVSKY AND POPEO, P.C.
May 25, 2000
Page 2
Based upon and subject to the foregoing assumptions, limitations and
qualifications, we are of the opinion that (i) the Shares have been duly and
validly authorized by the Company and (ii) the Shares, when sold, will have been
duly and validly issued, fully paid and non-assessable shares of the Common
Stock, free of preemptive rights.
It is understood that this opinion is to be used only in connection with
the offer and sale of the Shares while the Registration Statement is in effect.
The foregoing opinion is rendered as of the date hereof. We assume no
obligation to update such opinion to reflect any facts or circumstances which
may hereafter come to our attention or changes in the law which may hereafter
occur. We hereby consent to (i) the reference to this firm under the under the
caption "Legal Matters" in the Prospectus forming a part of the Registration
Statement and (ii) the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
/s/ Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
MINTZ, LEVIN, COHN, FERRIS,
GLOVSKY AND POPEO, P.C.
<PAGE>
EXHIBIT 23.1
The Board of Directors
Cyberian Outpost, Inc.:
We consent to incorporation by reference in the registration statement on Form
S-3 of Cyberian Outpost, Inc. of our reports dated March 17, 2000, relating to
the balance sheets of Cyberian Outpost, Inc. as of February 29, 2000 and
February 28, 1999, and the related statements of operations, redeemable
preferred stock and changes in stockholders' equity, and cash flows for each of
the years in the three-year period ended February 29, 2000, and related
schedule, which reports appear in the February 29, 2000 annual report on Form
10-K of Cyberian Outpost, Inc.
We consent to the reference to our firm under the heading "Experts" in this
registration statement.
/s/ KPMG LLP
Providence, Rhode Island
May 25, 2000
