As filed with the Securities and Exchange Commission on December ____, 1999.
Registration No.333-_______
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
---------------
CYBERSHOP.COM, INC.
(formerly known as Cybershop International, Inc.)
(Exact name of registrant as specified in its charter)
Delaware 13-3979226
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
116 Newark Avenue
Jersey City, New Jersey 07302
(201) 234-5000
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Jeffrey S. Tauber, Chairman and Chief Executive Officer
Cybershop.com, Inc.
116 Newark Avenue
Jersey City, New Jersey 07302
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
Walter M. Epstein, Esq.
Davis & Gilbert LLP
1740 Broadway
New York, New York 10019
(212) 468-4800
-----------------------
Approximate date of commencement of proposed sale to the public: On such date as
the selling stockholders shall elect to commence sales to the public following
the effective date of this registration statement.
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 plans, check the following box. |X|
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Title of each
class of Proposed Maximum Amount of
securities to be Amount to be Maximum Offering Aggregate Registration
registered registered Price per Share (1) Offering Price Fee
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par
value $.001 per
share 1,452,952 shares $9.0625 $13,167,378 $3,884
- ----------------------------------------------------------------------------------------
</TABLE>
(1) Based on the average of the high and low sale prices of the Common Stock
reported on the Nasdaq National Market on December 10, 1999 of $9.0625 per
share, solely for the purpose of calculating the registration fee pursuant
to Rule 457(c).
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.
<PAGE>
Prospectus
Cybershop.com, Inc.
Common Stock
1,452,952 Shares
This is an offering of up to 1,452,952 shares by selling stockholders. We
have issued to the selling stockholders 528,634 shares. The rest of the shares
covered by this offering are shares which are reserved for issuance upon the
exercise of warrants. We will not receive any of the sale proceeds from the sale
of shares by the selling stockholders.
Our shares currently trade on the Nasdaq National Market (Trading Symbol:
Nasdaq National Market - CYSP). On December 10, 1999 the last sale price was
$9.00 per share.
Investing in the company involves a high degree of risk. You should
purchase shares only if you can afford a complete loss. You should carefully
read and review this prospectus including the "Risk Factors" beginning on page 4
before deciding whether to buy shares in this offering.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
Prospectus dated December ___, 1999.
<PAGE>
Principal Executive Cybershop.com, Inc.
Offices: 116 Newark Avenue
Jersey City, New Jersey 07302
(201) 234-5000
There follows a summary of important information on our business.
Our Business: We are a leading online retailer of discounted, or
"off-price," quality brand-name apparel, electronics,
appliances and home accessories, toys and games, gifts,
and watches at our on-line stores located at
cybershop.com and electronics.net and through our newly
acquired store toolsforliving.com, which will be
integrated into our cybershop.com store later this year.
All of the products sold by us are manufactured by
others.
cybershop.com
Our flagship online store, accessed at cybershop.com,
sells well-known brand name apparel, home accessories
and toys at deep discounts of between 20% to 80%. Our
site provides high quality color pictures and detailed
information and recommendations that are conveniently
organized by brand and category. Shoppers can search and
browse throughout the store and place selected
merchandise in a virtual shopping cart that facilitates
the process of collecting items, subtotaling purchases
before reaching the purchase decision and having them
shipped within 24 hours of purchasing.
electronics.net
On June 14, 1998, we entered into a joint venture to
develop a new online store with TOPS Appliance City,
Inc., a retailer of electronic merchandise, appliances
and computers. The online store, electronics.net was
launched in October 1998 and offers a wide selection of
brand name electronic merchandise, including television
and video equipment, home and car audio equipment, home
appliances, home office equipment and related
accessories. Recently TOPS, which had been the sole
supplier of merchandise to electronics.net, announced
that it was discontinuing the sale of consumer
electronics products. As a result, TOPS no longer
supplies merchandise to electronics.net and we now
obtain merchandise from several other suppliers.
toolsforliving.com
On June 7, 1999, we acquired The Magellan Group, Inc. a
direct to consumer marketer of high quality merchandise
in the personal care, health and home accessories
categories, which merchandise is promoted on our
toolsforliving.com website and through print media
campaigns in national consumer magazines which direct
our customers to our web site or to order over the
phone.
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<PAGE>
Strategic Alliances: We have pursued and continue to pursue strategic
alliances in order to generate more visitors to our
online stores through referrals from other websites. Our
largest alliances are with Yahoo!, AOL and Microsoft's
MSN.com. We also have agreements with Inktomi,
Compare.Net, Inc., Pricebreak, Y-Path, Women.com and My
Simon. We use many online and offline marketing
techniques to increase brand awareness and site traffic.
Our offline print media advertising includes advertising
on Time, Fortune, TV Guide, USA Today, People, New York
Times, Parade, Newsweek, Better Homes & Gardens, Ladies
Home Journal, Popular Mechanics and U.S. News & World
Report. We continue to seek strategic partnerships that
better utilize the Internet and technology to generate
more visits to our online stores with higher order
conversion rates. Most recently, we have developed
alliances with online search engines focused on shopping
comparisons where we have built interfaces between our
product databases and the shopping engines, allowing our
products to be listed and compared with other products
on these shopping engines. We regularly evaluate the
return on investment on dollars spent by us on strategic
alliances versus increased customer traffic and
revenues.
We intend to negotiate additional marketing arrangements
with other leading internet search engines, shopping
guides and online communities. We believe that these
strategic alliances will increase the volume of our
shoppers and enhance our brand recognition.
We are also interested in developing joint ventures with
partners who can help us to enter new markets and offer
new products. Based on our traditional merchandising
background combined with our experience as online
merchants, we believe we are well positioned to partner
with other traditional brick and mortar retailers to
build an online presence. Our joint venture with TOPs,
electronics.net, is an example where we joined our
expertise in online commerce with the existing
operations capacity of a traditional consumer
electronics retailer seeking to sell its products
online.
With considerable experience in traditional and online
retailing, our management team has developed a core
knowledge in Internet technology and online
merchandising. We have, and intend to leverage this
knowledge base as well as its infrastructure to build
partnerships with successful and high quality
traditional retailers.
Recent Developments: On September 30, 1999 we completed a private placement
of equity securities raising $5.1 million. The financing
involved the issuance of 784,616 shares of common stock
at $6.50 per share and warrants to purchase an aggregate
of 156,922 shares of common stock at an exercise price
of $7.50 per share. The sale price of our common stock
and the exercise price of the warrants issued in the
private placement were both higher than the last
reported sale price of $5.81 on the Nasdaq National
Market on September 30, 1999. As part of the financing
another class of warrants was issued. These warrants
provided the investors with the right to receive
additional shares if the price of our stock traded below
certain levels. A total of 43,668 shares were issued
without further consideration under these warrants. No
further shares will be issued under these warrants which
have been cancelled. All of these shares issued and the
shares underlying the 156,922 warrants, are registered
under an effective S-3 Registration Statement. None of
the investors, together with any
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<PAGE>
affiliate thereof, may beneficially own shares in excess
of 4.999% of the outstanding shares of common stock
following such conversion. Such restrictions may be
waived by each selling stockholder as to itself upon not
less than 61 days' notice to the company. We are
obligated to use our best efforts to keep the S-3
effective for up to two years. We will incur substantial
penalties if we fail to meet these obligations.
On December 8, 1999 we completed another private
placement of equity securities raising gross proceeds of
$6.0 million. The financing involved the issuance of
528,634 shares of common stock at $11.35 per share and
warrants to purchase an aggregate of 237,886 shares of
common stock at an exercise price of $12.00 per share.
The sale price of our common stock and the exercise
price of the warrants issued in the private placement
were both higher than the last reported sale price of
$9.063 on the Nasdaq National Market on December 8,
1999. As part of the financing another class of warrants
was issued. These warrants provide the investors with
the right to receive additional shares if the price of
our stock trades below certain levels. During the 40
trading day period following the effective date of this
registration statement, a formula is applied to the
528,634 shares sold. That formula is based on
determining the average of the twenty lowest closing bid
prices in the 40 trading day period. This average lowest
bid price is divided into the number of the shares sold
(528,634 shares) and multiplied by the difference
between $11.35 and the average lowest bid price. If the
average lowest bid price is higher than $11.35 no
additional shares will be issued. If the average closing
bid price for any 20 consecutive trading days during the
40 trading day period exceeds $17.03, these warrants
will be cancelled and no additional shares will be
issued. As an example, if the average lowest bid price
for the period was $9.00 per share, an additional
138,033 shares would be issued. We agreed to register at
our expense on a Form S-3 the resale of the 528,634
shares sold as well as the shares underlying the
warrants. None of the investors, together with any
affiliate thereof, may beneficially own shares in excess
of 4.999% of the outstanding shares of common stock
following exercise of the warrants issued to it. Such
restriction may be waived by each selling stockholder as
to itself upon not less than 61 days' notice to the
company. We are obligated to use our best efforts to
keep the Form S-3 effective for up to two years. We will
incur substantial penalties if we fail to meet these
obligations.
RISK FACTORS
You should consider the following risk factors before deciding to invest in our
company.
We have a limited operating We began offering products for sale on our
history. website in September 1995 and are still in the
early stages of development. Accordingly, we
have a relatively short operating history upon
which you can evaluate our business and
prospects.
We have had significant losses We have incurred significant losses since we
and anticipate further began doing business. As of September 30, 1999,
significant losses. we have had cumulative losses of $16.9 million,
including a net loss of approximately $7.9
million for the fiscal year
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<PAGE>
ended December 31, 1998 and a net loss of
approximately $5.9 million for the nine months
ended September 30, 1999. We believe that we
will continue to incur significant losses for
the foreseeable future and these losses may be
higher than our current losses.
We recently refocused our We recently refocused the merchandising strategy
merchandising strategy and on our main website, cybershop.com, in order to
there can be no assurance that target the outlet store and off-price market
it will be successful. sector. We don't know whether this refocused
marketing strategy will be successful.
A significant percentage of The opportunistic nature of our merchandising
our revenues may at times be strategy can create opportunities to buy and
attributed to the sale of one sell large volumes of a particular product or
or a few products. products. Accordingly, a significant percentage
of our revenues may at times be attributed to
the sale of one or a few products.
Our recently completed Under the terms of our recently completed
December 1999 financing could December 1999 financing, we will have to issue
result in substantial dilution additional shares, without cost, to the extent
in the future. that the price of our common stock trades below
a certain price during the 40 trading day period
following the effective date. The dilution could
be substantial.
With the shift of TOPS' Our partner in electronics.net, TOPS, has
business strategy, the future discontinued the sale of most products sold by
operations of electronics.net electronics.net. We do not know whether
will be materially affected electronics.net can continue to operate after
the end of 1999.
Competition is intense in the The online retail business is new, rapidly
online retail business. There evolving and intensely competitive. We don't
can be no assurance that we know whether we will be able to compete
will be able to compete successfully. Barriers to entry into the online
successfully. retail business are minimal. Our current and
potential competition includes traditional
retailers and non-traditional retailers (such as
television retail and mail order) as well as
other online retailers. Our success as an online
retailer depends upon our ability to attract
customers to our websites. This requires
significant expenditure on promotion and
advertising costs. Many of our current and
potential competitors have longer operating
histories, larger customer bases, greater brand
recognition and significantly greater financial,
marketing and other resources than we have. They
may be able to secure merchandise from suppliers
on more favorable terms, and may be able to
devote greater resources to marketing and
promotional campaigns, and adopt more aggressive
pricing or inventory availability policies. They
can also devote substantially more resources to
website and systems development than we can. We
also expect to experience increased competition
from on-line commerce sites that provide goods
and services at or near cost, relying on
advertising revenues to achieve profitability.
As the on-line commerce market continues to
grow, other companies may enter into business
combinations or alliances that strengthen their
competitive positions. Competition in the
internet and online commerce market probably
will intensify. As various internet market
segments attain larger, loyal customer bases,
participants in those segments may use their
market power to expand into other markets.
Our inability to enter into Our ability to generate revenues from online
new strategic alliances or to commerce depends, among other things, upon the
maintain our existing increased store traffic in our online stores,
strategic alliances could harm that we generate through our strategic
our business. alliances. We can't be sure that our
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<PAGE>
existing relationships will be extended beyond
their initial terms or whether the financial or
other terms of any extensions will be favorable.
We also don't know if additional strategic
alliances will be available to us on acceptable
commercial terms. Our inability to enter into
new strategic alliances or to maintain our
existing strategic alliances could harm our
business.
We may need additional funds We believe that our current cash and cash
to maintain our operations at equivalents on hand and funds that may be
existing levels beyond the generated from operations will be sufficient to
next 12 months. There can be finance our continuing operations for the next
no assurance that such 12 months. We may require additional funds to
financing will be available. maintain our operations at existing levels after
this period. Adequate funds on terms acceptable
to us may not be available to us. Our inability
to obtain sufficient funds from operations and
external sources would hurt our business.
We do not manufacture any of We do not manufacture any merchandise.
the merchandise which we sell. Manufacturers and distributors supply our online
We are dependent on our stores and our direct-to-consumer marketing
relationships with our business. Our current suppliers may decide not
suppliers. Loss of these to sell to us on our current terms. We may not
relationships could harm our be able to establish new supplier relationships.
business. A change of terms or the loss of existing
supplier relationships could hurt our business.
Our online revenues and Our future online revenues and profits are
profits are dependent on the strongly dependent on the widespread acceptance
continuous growth of online and use of the Internet by consumers. We don't
commerce. know if acceptance and use will continue to
develop or that a sufficiently broad base of
consumers will use the Internet to shop. The
commercial use of the Internet depends on
improvements in ease of access, security,
reliability, cost and quality of service.
Security breaches would hurt We license technology from third parties to
our business. provide security for customers. Security
breaches could damage our reputation and expose
our business to customer claims.
Restrictive laws and Due to the increasing popularity and use of the
regulations would result in Internet, it is possible that laws and
additional costs for our regulations may be adopted in the future with
business. respect to Internet use covering issues such as
user privacy, pricing, content, copyrights,
distribution and quality of products and
services. New laws and regulations will probably
make it more expensive for us to operate.
We may be sued with respect to Claims may be made against us for negligence,
information retrieved from the copyright or trademark infringement based on
Internet. To the extent these material downloaded from our websites. Our
lawsuits are not covered by insurance may not adequately cover these
insurance they could, if potential claims and the costs incurred in
decided against us, harm our defending against these claims.
business.
We cannot guarantee that our We cannot guarantee that our systems will be
systems will be Year 2000 Year 2000 compliant or that the Year 2000
compliant or that the Year problem will not hurt our business. We have been
2000 problem will not working with our significant suppliers and
adversely affect our business. service providers to identify and resolve Year
2000 issues. Any failure of their systems could
disrupt our systems. Computers used by our
customers to access our online stores may not be
Year 2000 compliant, delaying our customers'
purchases of our products.
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<PAGE>
Systems interruptions will Customer access to our web sites directly
harm our business. affects the volume of our orders and our
revenues. We may experience system interruptions
that make our websites temporarily inaccessible
or prevent us from efficiently fulfilling
orders. Our systems and operations could be
damaged by fire, flood, power loss,
telecommunications failure, break-ins,
earthquake and similar events. We do not have
back-up systems or a formal disaster recovery
plan and we may not carry sufficient business
interruption insurance to compensate us for
losses from a major interruption.
Our servers are vulnerable to computer viruses,
physical or electronic break-ins and similar
disruptions, which could lead to additional
interruption and disruptions in our business.
We may be unable to prevent Regulations governing domain names may not
third parties from acquiring protect our servicemarks and similar proprietary
domain names that are similar rights. We may be unable to prevent third
to or infringe on our service parties from acquiring domain names that are
marks. similar to, infringe upon or diminish the value
of, our servicemarks and other proprietary
rights.
We may not be able to protect We have registered the service mark Cybershop(R)
our service marks or our in the United States and have applied for
proprietary rights. registration for other service marks.
Competitors may adopt product or service names
similar to our service marks, thereby hurting
our ability to build brand identity. We may not
be able to secure significant protection for
these service marks.
We usually have agreements containing
confidentiality and non-disclosure provisions
with our employees and consultants covering
access to and distribution of our software,
documentation and other proprietary information.
These agreements may not prevent theft or
misuse. Third parties may copy or use our
software or other proprietary information
without permission. It is difficult for us to
prevent unauthorized use.
We do not collect sales taxes We do not collect sales or other similar taxes
for shipments into most for shipments of merchandise into states other
states. Imposition of sales than shipments into New Jersey, Missouri and
taxes could harm our business. Connecticut. Such taxes may be imposed in the
future. However, the Federal government or one
or more states may seek to impose sales tax
collection obligations on out-of-state
companies, such as us, which engage in online
commerce. A successful assertion that we should
collect sales or other taxes on the sale of
merchandise into such states could harm our
business.
We have never paid dividends We have never declared or paid a cash dividend
and we do not expect to have available cash with
which to pay cash dividends in the foreseeable
future.
Issuance of authorized We have authorized 5,000,000 shares of
preferred stock in the future preferred stock which may be issued by the
may prevent a change of Board. Issuance of such preferred stock could
control, making the company delay, deter or prevent a change in control,
less attractive as an making the company less attractive as an
acquisition candidate. acquisition candidate.
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Special Note Regarding Forward-looking Statements
Some of the statements contained in this prospectus, including information
incorporated by reference, discuss future expectations, contain projections of
future results of operations or financial condition or provide other
"forward-looking" information. Those statements are subject to known and unknown
risks, uncertainties and other factors that could cause the actual results to
differ materially from those contemplated by the statements. The forward-looking
information is based on various factors and was derived using numerous
assumptions. Important factors that may cause actual results to differ from
projections include the risk factors set forth above.
WE HAVE INCORPORATED INFORMATION BY
REFERENCE TO OUR OTHER SEC FILINGS;
YOU CAN OBTAIN MORE INFORMATION
FROM US OR FROM THE SEC
The Securities and Exchange Commission allows us to "incorporate by
reference" the information we file with them, which means that we can disclose
important information to you by referring to those documents. The information
incorporated by reference is an important part of this prospectus, and
information that we file later with the Commission will automatically update and
supersede this information.
We incorporate by reference the following documents filed by us with the
SEC:
o Our Annual Report on Form 10-K for the year ended December 31, 1998
filed with the SEC on March 19, 1999;
o Our Quarterly Report on Form 10-Q for the quarter ended March 31, 1999
filed with the SEC on May 17, 1999;
o Our Quarterly Report on Form 10-Q for the quarter ended June 30, 1999
filed with the SEC on August 13, 1999;
o Our Quarterly Report on Form 10-Q for the quarter ended September 30,
1999 filed with the SEC on November 12, 1999;
o All other reports and other documents filed by us pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934, or the Exchange Act,
since December 31, 1998;
o Our registration statement on Form 8-A filed on March 11, 1998
registering the common stock under Section 12(g) of the Exchange Act; and
o All documents and reports subsequently filed by us pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this prospectus
and prior to the filing of a post-effective amendment which indicates that all
securities which may be offered hereby have been sold or which deregisters all
securities then remaining unsold.
At your request, we will provide you, without charge, with a copy of any
information incorporated by reference in this prospectus. If you want more
information, write or call us at:
Cybershop.com, Inc.
116 Newark Avenue
Jersey City, New Jersey 07302
(201) 234-5000
Attn: Stephen Del Vecchia
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We have filed a registration statement which includes this prospectus
covering this offering with the Securities and Exchange Commission ("SEC"). This
prospectus does not contain all the information included in the registration
statement. You can request a copy of the registration statement and the exhibits
from us to get a more complete description of our company and this offering. We
have provided our address and telephone number above if you wish to obtain free
copies of the registration statement and exhibits.
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy any reports, statements or other
information we file at the SEC's public reference room in Washington D.C., New
York, New York and Chicago, Illinois. You can also request copies of these
documents, upon payment of a duplicating fee, by writing to the SEC. Please call
the SEC at 1-800-SEC-0330 for further information on the operation of the public
reference rooms. Our SEC filings are also available to the public on the SEC
Internet site at http\\www.sec.gov. The registration statement, of which this
prospectus forms a part, including all exhibits, has been filed in electronic
form with the SEC through EDGAR.
SELLING STOCKHOLDERS
The following table sets forth the number of shares of common stock
o currently beneficially owned by each selling stockholder,
o the number of shares owned by each of them included in this prospectus,
and
o the amount and percentage of shares to be owned by each selling
stockholder after the sale of all of the shares offered by this prospectus.
None of the selling stockholders has had any position, office or other
material relationship with the company within the past three years other than as
a result of the ownership of shares or other securities of the company. The
information included below is based on information provided by the selling
stockholders. The table has been prepared on the assumption that all shares of
common stock offered hereby will be sold and is based on 9,492,101 shares of
common stock outstanding on December 10, 1999.
Strong River Investments, Inc. and Montrose Investments, Ltd., the selling
stockholders, purchased an aggregate of $6.0 million of common stock from us in
a private placement transaction which closed on December 8, 1999. As part of
that private placement, each of Strong River and Montrose were issued warrants
to acquire shares of our common stock. The private placement and the warrants
are described in more detail in this Prospectus under the heading "Recent
Developments." Holders of the warrants are prohibited from exercising the
warrants to acquire common stock to the extent that the exercise would result in
the holder, together with any affiliate of the holder, beneficially owning in
excess of 4.999% of the outstanding shares following the exercise. This
restriction may be waived by the holder on not less than 61 days' notice to us.
Since, 40 trading days after the effective date, the number of shares issuable
upon exercise of one of the warrants issued to each holder would change based
upon a change in the market price of our common stock during that trading day
period, the actual number of shares that will be issued, and consequently the
number of shares that will be beneficially owned by Strong River and Montrose,
will fluctuate daily and cannot be determined at this time. Because of this
fluctuating characteristic, we agreed to register a number of shares that
exceeds the number of shares beneficially owned by Strong River and Montrose.
Accordingly, the number of shares shown for Strong River and Montrose in the
table below under the column "Shares Offered" exceeds the number of shares shown
as beneficially owned by them. However, the 4.999% limitation would not prevent
Strong River and Montrose from purchasing and selling in excess of 4.999% of our
common stock through a series of acquisitions and sales under their respective
warrants.
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Shares
Shares Owned Percentage of
Beneficially Shares After Shares Owned
Name Owned Offered Offering After Offering
- ---- ----- ------- -------- --------------
Strong River
Investments, Inc. 477,255(1) 726,476 0(3) 0(3)
--------- --------
Montrose Investments,
Ltd. 483,555(2) 726,476 0(3) 0(3)
--------- --------
- ----------
(1) Includes: (i) 264,317 shares of Common Stock issued in the December 8, 1999
private placement, (ii) 118,943 shares of Common Stock issuable upon exercise of
a warrant issued pursuant to the December 8, 1999 private placement, (iii)
15,534 shares of Common Stock issued in the September 30, 1999 private
placement, and (iv) 78,461 shares of Common Stock issuable upon exercise of a
warrant issued in the September 30, 1999 private placement.
(2) Includes: (i) 264,317 shares of Common Stock issued in the December 8, 1999
private placement, (ii) 118,943 shares of Common Stock issuable upon exercise of
a warrant issued pursuant to the December 8, 1999 private placement, (iii)
21,834 shares of Common Stock issued in the September 30, 1999 private
placement, and (iv) 78,461 shares of Common Stock issuable upon exercise of a
warrant issued in the September 30, 1999 private placement.
(3) Assumes sale of all shares offered hereunder or otherwise beneficially
owned.
PLAN OF DISTRIBUTION
The selling stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of Common Stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The selling stockholders may use any one or more of the
following methods when selling shares:
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block
as principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o short sales;
o broker-dealers may agree with the selling stockholders to sell a
specified number of such shares at a stipulated price per share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
The selling stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
The selling stockholders may also engage in short sales against the box,
puts and calls and other transactions in securities of the company or
derivatives of company securities and may sell or deliver shares in connection
with these trades. The selling stockholders may pledge their shares to their
brokers under the margin provisions of customer agreements. If a selling
stockholder defaults on a margin loan, the broker may, from time to time, offer
and sell the pledged shares.
Broker-dealers engaged by the selling stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the selling stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The selling stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
10
<PAGE>
The selling stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
The company is required to pay all fees and expenses incident to the
registration of the shares, including fees and disbursements of counsel to the
selling stockholders. The company has agreed to indemnify the selling
stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Section 145 of the General Corporation Law of Delaware grants each
Delaware corporation the power to indemnify its officers, directors, employees
and agents against liabilities arising out of any action or proceeding to which
any of them is a party by reason of being such officer, director, employee or
agent. Our certificate of incorporation provides for the indemnification of the
company's officers, directors, employees and agents, to the fullest extent
permitted by the General Corporation Law of Delaware. Insofar as indemnification
for liabilities arising under the Securities Act, may be permitted to directors,
officers or persons controlling the company pursuant to the provisions of
Delaware law and our certificate of incorporation, we have been informed that in
the opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
LEGAL MATTERS
The validity of the shares being offered in this prospectus is being
passed upon for us by Davis & Gilbert LLP, 1740 Broadway, New York, New York,
10019.
EXPERTS
The consolidated financial statements and schedule incorporated by
reference in this prospectus and elsewhere in the registration statement have
been audited by Arthur Andersen LLP, independent public accountants as indicated
in their reports and are included here in reliance on their authority as experts
in giving these reports.
11
<PAGE>
================================================================================
Until ______________, all dealers that effect transactions in these securities
may be required to deliver a prospectus.
We have not authorized any person to give any information or to make any
representations other than those contained in this prospectus. You must not rely
upon any information or representation not contained or incorporated by
reference in this prospectus as if we had authorized it. If any person does make
a statement that differs from what is in this prospectus, you should not rely on
it. This prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any securities other than the securities to which they relate nor
does this prospectus constitute an offer to sell or the solicitation of an offer
to buy securities in any state or other jurisdiction to any person to whom it is
unlawful to make such offer or solicitation in such jurisdiction. The
information contained in this prospectus is accurate as of the date of its
cover. When we deliver this prospectus or make a sale pursuant to this
prospectus, we are not implying that the information is current as of the date
of the delivery of the sale.
____________________________
TABLE OF CONTENTS
Page
----
Prospectus Summary ....................2
Risk Factors ..........................4
Selling Stockholders ..................9
Plan of Distribution ..................10
Disclosure of Commission Position on
Indemnification For Securities Act
Liabilities..........................11
Legal Matters .........................11
Experts................................11
================================================================================
================================================================================
1,452,952 Shares
CYBERSHOP.COM,
INC.
Common Stock
_______________
PROSPECTUS
_______________
December ___, 1999
================================================================================
<PAGE>
INFORMATION NOT REQUIRED IN THE PROSPECTUS
The company will bear no expenses in connection with any sale or other
distribution by the selling stockholders of the shares being registered other
than the expenses of preparation and distribution of this registration statement
and the prospectus included in this registration statement. Such expenses are
set forth in the following table. All of the amounts are estimates except the
Securities and Exchange Commission filing fee.
Item 14. Other Expenses of Issuance and Distribution.
SEC registration fee .....................$3,884
Accounting fees and expenses..............$2,500
Legal fees and expenses..................$25,000
Printing expenses.........................$3,000
Miscellaneous.............................$5,616
Total.................................$40,000
- -----------
Item 15. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law (the "DGCL") provides
that a corporation may indemnify its directors and officers, as well as other
employees and individuals, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement in connection with specified
actions, suits or proceedings, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation - a
"derivative action"), if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful. A similar standard is
applicable in the case of derivative actions, except that indemnification only
extends to expenses (including attorneys' fees) incurred in connection with the
defense or settlement of such actions, and the statute requires court approval
before there can be any indemnification in which the person seeking
indemnification has been found liable to the corporation. The statute provides
that it is not exclusive of other indemnification that may be granted by a
corporation's charter, bylaws, disinterested director vote, stockholder vote,
agreement or otherwise.
The Registrant's Bylaws requires indemnification to the full extent
permitted under Delaware law. Subject to any restrictions imposed by Delaware
law, the Bylaws provide an unconditional right to indemnification for all
expense, liability and loss (including attorneys' fees, judgments, fines, ERISA
excise taxes or penalties and amounts paid in settlement) actually and
reasonably incurred or suffered by any person in connection with any actual or
threatened action, suit or proceeding, whether civil, criminal, administrative
or investigative (including, to the extent permitted by law, any derivative
action) by reason of the fact that such person is or was serving as a director
or officer of the Registrant or that, being or having been a director or officer
of the Registrant, such person is or was serving at the request of the
Registrant as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise. The Bylaws also provide
indemnification to its employees and agents with the same scope and effect as
the foregoing indemnification of directors and officers.
Section 102(b)(7) of the DGCL permits a corporation to provide in its
certificate of incorporation that a director of the corporation shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability for (1) any
breach of the director's duty of loyalty to the corporation or its stockholders,
(2) acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (3) payments of unlawful dividends or unlawful
stock repurchases or redemptions, or (4) any transaction from which the director
derived an improper personal benefit.
II-1
<PAGE>
The Registrant's certificate of incorporation provides that to the full
extent of the DGCL, as it now exists or may hereafter be amended, a director of
the Registrant shall not be liable to the Registrant or its stockholders for
monetary damages for breach of fiduciary duty as a director. Any amendment to or
repeal of such provision shall not adversely affect any right or protection of a
director of the Registrant existing at the time of such repeal or modification.
Insurance for the Registrant's directors and officers, against expenses
and liabilities in connection with the defense of actions, suits or proceedings
to which they may be parties by reason of having been directors or officers of
the Registrant, is provided by the Registrant.
Item 16. Exhibits.
Exhibit Description
- ------- -----------
1 Not Applicable
2 Not Applicable
4 Instruments defining the rights of security holders, including
indentures:
(A) Certificate of incorporation, as amended (Incorporated by
reference to the company's registration statement on Form S-1
(File No: 333-42707) effective March 23, 1998) and the
Company's quarterly report on Form 10-Q for quarter ended June
30, 1999).
(B) By-Laws (Incorporated by reference to the company's
registration statement on Form S-1 (File No: 333-42707)
effective March 23, 1998).
(C) Specimen Common Stock Certificate (Incorporated by reference
to the company's registration statement on Form S-1 (File No:
333-42707) effective March 23, 1998.
(D) Form of Warrant dated December 8, 1999 issued to Montrose
Investments Ltd. and Strong River Investments, Inc., filed
herewith.
(E) Form of Adjustable Warrant dated December 8, 1999 issued to
Montrose Investments Ltd. and Strong River Investments, Inc.,
filed herewith.
5 Opinion of Davis & Gilbert LLP, filed herewith.
8 Not Applicable
12 Not Applicable
15 Not Applicable
23.1 Consent of Arthur Andersen LLP, filed herewith
23.2 Consent of Davis & Gilbert LLP (included in the opinion filed as
Exhibit No. 5)
24 Not Applicable
25 Not Applicable
II-2
<PAGE>
26 Not Applicable
27 Not Applicable
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which it offers or sells securities, 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, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information set
forth in the registration statement;
(iii) To include any additional or changed material information with
respect to the plan of distribution:
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required in a post-effective amendment is incorporated by reference
from periodic reports filed with the Commission by the registrant pursuant to
section 13 or section 15(d) of the Securities Exchange Act of 1934 (the
"Exchange Act").
(2) That, for the purpose of determining any liability under the
Securities Act, the undersigned will treat each such post-effective amendment as
a new registration statement of the securities offered, and the offering of the
securities at that time to be the initial bona fide offering thereof.
(3) To file a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the company's
annual report pursuant to section 13(a) or section 15(d) of the Exchange Act
(and, where applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Exchange Act) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the company, pursuant to the provisions described in Item 15 above, or
otherwise, the company has been advised that in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the company of expenses incurred or paid by a director, officer or
controlling person of the company in the successful defense of any action, suit
or proceeding) is asserted by any such director, officer or controlling person
in connection with the securities being registered, the company 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 of whether or not
such indemnification is against public policy as expressed in the Securities Act
and will be governed by the final adjudication of such issue.
(d) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and Rule 424(b)(1) or
II-3
<PAGE>
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus 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 the initial bona fide
offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
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 on Form S-3 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Jersey City in the State
of New Jersey on December 15, 1999.
CYBERSHOP.COM, INC.
By /s/ Jeffrey S. Tauber
--------------------------------------
Jeffrey S. Tauber
Chairman and Chief Executive Officer
President and Director
Pursuant to the requirements of the Securities Act of 1933, this
registration statement on Form S-3 has been signed by the following persons in
the capacities and on the dates indicated.
Signature Date
/s/ Jeffrey S. Tauber December 15, 1999
- ---------------------------------------
Jeffrey S. Tauber
Chairman and Chief Executive Officer
President (Principal Executive Officer)
and Director
/s/ Jeffrey Leist December 15, 1999
- ---------------------------------------
Jeffrey Leist
Chief Operating Officer and Chief
Financial Officer (Principal Accounting
and Financial Officer)
/s/ Warren Struhl December 15, 1999
- ---------------------------------------
Warren Struhl
Director
/s/ Robert Matluck December 15, 1999
- ---------------------------------------
Robert Matluck
Director
/s/ Michael Kempner December 15, 1999
- ---------------------------------------
Michael Kempner
Director
/s/ Ian S. Phillips December 15, 1999
- ---------------------------------------
Ian S. Phillips
Director
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
CYBERSHOP.COM, INC.
WARRANT
Warrant No. C-2 Dated: December 8, 1999
Cybershop.com, Inc., a Delaware corporation (the "Company"), hereby
certifies that, for value received, Montrose Investments Ltd.. or its registered
assigns ("Holder"), is entitled, subject to the terms set forth below, to
purchase from the Company up to a total of 118,942 shares of common stock, $.001
par value per share (the "Common Stock"), of the Company (each such share, a
"Warrant Share" and all such shares, the "Warrant Shares") at an exercise price
equal to$12.00 per share (as adjusted from time to time as provided in Section
9, the "Exercise Price"), at any time and from time to time from and after the
date hereof and through and including December 8, 2004 (the "Expiration Date"),
and subject to the following terms and conditions:
1. Registration of Warrant. The Company shall register this Warrant,
upon records to be maintained by the Company for that purpose (the "Warrant
Register"), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, and the Company shall not be affected by
notice to the contrary.
2. Registration of Transfers and Exchanges.
(a) The Company shall register the transfer of any portion of
this Warrant in the Warrant Register, upon surrender of this Warrant, with the
Form of Assignment attached hereto duly completed and signed, to the Transfer
Agent or to the Company at the office specified in or pursuant to Section 3(b).
Upon any such registration or transfer, a new warrant to purchase Common Stock,
in substantially the form of this Warrant (any such new warrant, a "New
Warrant"),
<PAGE>
evidencing the portion of this Warrant so transferred shall be issued to the
transferee and a New Warrant evidencing the remaining portion of this Warrant
not so transferred, if any, shall be issued to the transferring Holder. The
acceptance of the New Warrant by the transferee thereof shall be deemed the
acceptance of such transferee of all of the rights and obligations of a holder
of a Warrant.
(b) This Warrant is exchangeable, upon the surrender hereof by
the Holder to the office of the Company specified in or pursuant to Section 3(b)
for one or more New Warrants, evidencing in the aggregate the right to purchase
the number of Warrant Shares which may then be purchased hereunder. Any such New
Warrant will be dated the date of such exchange.
3. Duration and Exercise of Warrants.
(a) This Warrant shall be exercisable by the registered Holder
on any business day before 8:00 P.M., New York City time, at any time and from
time to time on or after the date hereof to and including the Expiration Date.
At 8:00 P.M., New York City time on the Expiration Date, the portion of this
Warrant not exercised prior thereto shall be and become void and of no value.
Prior to the Expiration Date, the Company may not call or otherwise redeem this
Warrant without the prior written consent of the Holder.
(b) Subject to Sections 2(b), 6 and 10, upon surrender of this
Warrant, with the Form of Election to Purchase attached hereto duly completed
and signed, to the Company at its address for notice set forth in Section 13 and
upon payment of the Exercise Price multiplied by the number of Warrant Shares
that the Holder intends to purchase hereunder, in the manner provided hereunder,
all as specified by the Holder in the Form of Election to Purchase, the Company
shall promptly (but in no event later than 3 business days after the Date of
Exercise (as defined herein)) issue or cause to be issued and cause to be
delivered to or upon the written order of the Holder and in such name or names
as the Holder may designate, a certificate for the Warrant Shares issuable upon
such exercise, free of restrictive legends except (i) either in the event that a
registration statement covering the resale of the Warrant Shares and naming the
Holder as a selling stockholder thereunder is not then effective or the Warrant
Shares are not freely transferable without volume restrictions pursuant to Rule
144(k) promulgated under the Securities Act of 1933, as amended (the "Securities
Act"), or (ii) if this Warrant shall have been issued pursuant to a written
agreement between the original Holder and the Company, as required by such
agreement. Any person so designated by the Holder to receive Warrant Shares
shall be deemed to have become holder of record of such Warrant Shares as of the
Date of Exercise of this Warrant.
A "Date of Exercise" means the date on which the Company shall
have received (i) this Warrant (or any New Warrant, as applicable), with the
Form of Election to Purchase attached hereto (or attached to such New Warrant)
appropriately completed and duly signed, and (ii) payment of the Exercise Price
for the number of Warrant Shares so indicated by the holder hereof to be
purchased.
(c) This Warrant shall be exercisable, either in its entirety
or, from time to time, for a portion of the number of Warrant Shares. If less
than all of the Warrant Shares which
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<PAGE>
may be purchased under this Warrant are exercised at any time, the Company shall
issue or cause to be issued, at its expense, a New Warrant evidencing the right
to purchase the remaining number of Warrant Shares for which no exercise has
been evidenced by this Warrant.
4. Piggyback Registration Rights. During the Effectiveness Period
(as defined in the Registration Rights Agreement, of even date herewith, between
the Company and the original Holder), the Company may not file any registration
statement with the Securities and Exchange Commission (other than registration
statements of the Company filed on Form S-8 or Form S-4, each as promulgated
under the Securities Act, pursuant to which the Company is registering
securities pursuant to a Company employee benefit plan or pursuant to a merger,
acquisition or similar transaction including supplements thereto, but not
additionally filed registration statements in respect of such securities) at any
time when there is not an effective registration statement covering the resale
of the Warrant Shares and naming the Holder as a selling stockholder thereunder,
unless the Company provides the Holder with not less than 20 days notice of its
intention to file such registration statement and provides the Holder the option
to include any or all of the applicable Warrant Shares therein. The piggyback
registration rights granted to the Holder pursuant to this Section shall
continue until all of the Holder's Warrant Shares have been sold in accordance
with an effective registration statement or upon the Expiration Date. The
Company will pay all registration expenses in connection therewith.
5. Demand Registration Rights. During the Effectiveness Period if
the Warrant Shares are not registered pursuant to an effective registration
statement, the Holder may make a written request for the registration under the
Securities Act (a "Demand Registration"), of all of the Warrant Shares (the
"Registrable Securities"), and the Company shall use its best efforts to effect
such Demand Registration as promptly as possible, but in any case within 90 days
thereafter. Any request for a Demand Registration shall specify the aggregate
number of Registrable Securities proposed to be sold and shall also specify the
intended method of disposition thereof. The right to cause a registration of the
Registrable Securities under this Section 5 shall be limited to one such
registration. In any registration initiated as a Demand Registration, the
Company will pay all of its registration expenses in connection therewith. A
Demand Registration shall not be counted as a Demand Registration hereunder
until the registration statement filed pursuant to the Demand Registration has
been declared effective by the Securities and Exchange Commission and maintained
continuously effective for a period of at least 360 days or such shorter period
when all Registrable Securities included therein have been sold in accordance
with such registration statement, provided, however that any days on which such
registration statement is not effective or on which the Holder is not permitted
by the Company or any governmental authority to sell Warrant Shares under such
registration statement shall not count towards such 360 day period.
6. Payment of Taxes. The Company will pay all documentary stamp
taxes attributable to the issuance of Warrant Shares upon the exercise of this
Warrant; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the registration
of any certificates for Warrant Shares or Warrants in a name other than that of
the Holder. The Holder shall be responsible for all other tax liability that may
arise as a result of holding or transferring this Warrant or receiving Warrant
Shares upon exercise hereof.
-3-
<PAGE>
7. Replacement of Warrant. If this Warrant is mutilated, lost,
stolen or destroyed, the Company shall issue or cause to be issued in exchange
and substitution for and upon cancellation hereof, or in lieu of and
substitution for this Warrant, a New Warrant, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction and
indemnity, if requested, satisfactory to it. Applicants for a New Warrant under
such circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable charges as the Company may prescribe.
8. Reservation of Warrant Shares. The Company covenants that it will
at all times reserve and keep available out of the aggregate of its authorized
but unissued Common Stock, solely for the purpose of enabling it to issue
Warrant Shares upon exercise of this Warrant as herein provided, the number of
Warrant Shares which are then issuable and deliverable upon the exercise of this
entire Warrant, free from preemptive rights or any other actual contingent
purchase rights of persons other than the Holder (taking into account the
adjustments and restrictions of Section 9). The Company covenants that all
Warrant Shares that shall be so issuable and deliverable shall, upon issuance
and the payment of the applicable Exercise Price in accordance with the terms
hereof, be duly and validly authorized, issued and fully paid and nonassessable.
9. Certain Adjustments. The Exercise Price and number of Warrant
Shares issuable upon exercise of this Warrant are subject to adjustment from
time to time as set forth in this Section 9. Upon each such adjustment of the
Exercise Price pursuant to this Section 9, the Holder shall thereafter prior to
the Expiration Date be entitled to purchase, at the Exercise Price resulting
from such adjustment, the number of Warrant Shares obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
Warrant Shares issuable upon exercise of this Warrant immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(a) If the Company, at any time while this Warrant is
outstanding, (i) shall pay a stock dividend (except scheduled dividends paid on
outstanding preferred stock as of the date hereof which contain a stated
dividend rate) or otherwise make a distribution or distributions on shares of
its Common Stock or on any other class of capital stock payable in shares of
Common Stock, (ii) subdivide outstanding shares of Common Stock into a larger
number of shares, or (iii) combine outstanding shares of Common Stock into a
smaller number of shares, the Exercise Price shall be multiplied by a fraction
of which the numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding before such event and of which the
denominator shall be the number of shares of Common Stock (excluding treasury
shares, if any) outstanding after such event. Any adjustment made pursuant to
this Section shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a
subdivision or combination, and shall apply to successive subdivisions and
combinations.
(b) In case of any reclassification of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities,
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<PAGE>
cash or property, then the Holder shall have the right thereafter to exercise
this Warrant only into the shares of stock and other securities and property
receivable upon or deemed to be held by holders of Common Stock following such
reclassification or share exchange, and the Holder shall be entitled upon such
event to receive such amount of securities or property equal to the amount of
Warrant Shares such Holder would have been entitled to had such Holder exercised
this Warrant immediately prior to such reclassification or share exchange. The
terms of any such reclassification or share exchange shall include such terms so
as to continue to give to the Holder the right to receive the securities or
property set forth in this Section 9(b) upon any exercise following any such
reclassification or share exchange.
(c) If the Company, at any time while this Warrant is
outstanding, shall distribute to all holders of Common Stock (and not to holders
of this Warrant) evidences of its indebtedness or assets or rights or warrants
to subscribe for or purchase any security (excluding those referred to in
Sections 9(a), (b) and (d)), then in each such case the Exercise Price shall be
determined by multiplying the Exercise Price in effect immediately prior to the
record date fixed for determination of stockholders entitled to receive such
distribution by a fraction of which the denominator shall be the Exercise Price
determined as of the record date mentioned above, and of which the numerator
shall be such Exercise Price on such record date less the then fair market value
at such record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of Common Stock as determined by
the Company's independent certified public accountants that regularly examines
the financial statements of the Company (an "Appraiser").
(d) If at any time the Company or any subsidiary thereof, as
applicable with respect to Common Stock Equivalents (as defined below), shall
issue shares of Common Stock or rights, warrants, options or other securities or
debt that is convertible into or exchangeable for shares of Common Stock
("Common Stock Equivalents"), entitling any person or entity to acquire shares
of Common Stock at a price per share less than both the market price of the
Common Stock at the time of issuance and the Exercise Price then in effect (if
the holder of the Common Stock or Common Stock Equivalent so issued shall at any
time, whether by operation of purchase price adjustments, reset provisions,
floating conversion, exercise or exchange prices or otherwise, or due to
warrants, options or rights issued in connection with such issuance at a price
less than the prevailing Exercise Price or market price, such issuance shall be
deemed to have occurred for less than such Exercise Price or market price),
then, forthwith upon such issue or sale, the Exercise Price shall be reduced to
the price (calculated to the nearest cent) determined by multiplying the
Exercise Price in effect immediately prior thereto by a fraction, the numerator
of which shall be the sum of (i) the number of shares of Common Stock
outstanding immediately prior to such issuance, and (ii) the number of shares of
Common Stock which the aggregate consideration received (or to be received,
assuming exercise or conversion in full of such Common Stock Equivalents) for
the issuance of such additional shares of Common Stock would purchase at the
Exercise Price, and the denominator of which shall be the sum of the number of
shares of Common Stock outstanding immediately after the issuance of such
additional shares. For purposes hereof, all shares of Common Stock that are
issuable upon conversion, exercise or exchange of Common Stock Equivalents shall
be deemed outstanding immediately after the issuance of such Common Stock
Equivalents. Such adjustment shall be made whenever such Common Stock or Common
Stock Equivalents are issued. However, upon the
-5-
<PAGE>
expiration of any Common Stock Equivalents the issuance of which resulted in an
adjustment in the Exercise Price pursuant to this Section, if any such Common
Stock Equivalents shall expire and shall not have been exercised, the Exercise
Price shall immediately upon such expiration be recomputed and effective
immediately upon such expiration be increased to the price which it would have
been (but reflecting any other adjustments in the Exercise Price made pursuant
to the provisions of this Section after the issuance of such Common Stock
Equivalents) had the adjustment of the Exercise Price made upon the issuance of
such Common Stock Equivalents been made on the basis of offering for
subscription or purchase only that number of shares of the Common Stock actually
purchased upon the exercise of such Common Stock Equivalents actually exercised.
The foregoing shall not be applicable to any options issued under existing
option plans as of the date hereof.
(e) In case of any (1) merger or consolidation of the Company
with or into another Person, or (2) sale by the Company of more than one-half of
the assets of the Company (on a book value basis) in one or a series of related
transactions, or (3) tender or other offer or exchange (whether by the Company
or another Person) pursuant to which holders of Common Stock are permitted to
tender or exchange their shares for other securities, stock, cash or property of
the Company or another Person; then the Holder shall have the right thereafter
to (A) exercise this Warrant for the shares of stock and other securities, cash
and property receivable upon or deemed to be held by holders of Common Stock
following such merger, consolidation or sale, and the Holder shall be entitled
upon such event or series of related events to receive such amount of
securities, cash and property as the Common Stock for which this Warrant could
have been exercised immediately prior to such merger, consolidation or sales
would have been entitled, (B) in the case of a merger or consolidation, (x)
require the surviving entity to issue to the Holder a warrant entitling the
Holder to acquire shares of such entity's common stock, which warrant shall have
terms identical (including with respect to exercise) to the terms of this
Warrant and shall be entitled to all of the rights and privileges set forth
herein and the agreements pursuant to which this Warrant was issued (including,
without limitation, as such rights relate to the acquisition, transferability,
registration and listing of such shares of stock other securities issuable upon
exercise thereof), or (C) in the event of an exchange or tender offer or other
transaction contemplated by clause (3) of this Section, tender or exchange this
Warrant for such securities, stock, cash and other property receivable upon or
deemed to be held by holders of Common Stock that have tendered or exchanged
their shares of Common Stock following such tender or exchange, and the Holder
shall be entitled upon such exchange or tender to receive such amount of
securities, cash and property as the shares of Common Stock for which this
Warrant could have been exercised immediately prior to such tender or exchange
would have been entitled as would have been issued. In the case of clause (B),
the exercise price applicable for the newly issued warrant shall be based upon
the amount of securities, cash and property that each shares of Common Stock
would receive in such transaction and the Exercise Price immediately prior to
the effectiveness or closing date for such transaction. The terms of any such
merger, sale, consolidation, tender or exchange shall include such terms so as
continue to give the Holder the right to receive the securities, cash and
property set forth in this Section upon any conversion or redemption following
such event. This provision shall similarly apply to successive such events.
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<PAGE>
(f) For the purposes of this Section 9, the following clauses
shall also be applicable:
(i) Record Date. In case the Company shall take a record
of the holders of its Common Stock for the purpose of entitling them (A) to
receive a dividend or other distribution payable in Common Stock or in
securities convertible or exchangeable into shares of Common Stock, or (B) to
subscribe for or purchase Common Stock or securities convertible or exchangeable
into shares of Common Stock, then such record date shall be deemed to be the
date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
(ii) Treasury Shares. The number of shares of Common
Stock outstanding at any given time shall not include shares owned or held by or
for the account of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock.
(g) All calculations under this Section 9 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be.
(h) Whenever the Exercise Price is adjusted pursuant to
Section 9(c) above, the Holder, after receipt of the determination by the
Appraiser, shall have the right to select an additional appraiser (which shall
be a nationally recognized accounting firm), in which case the adjustment shall
be equal to the average of the adjustments recommended by each of the Appraiser
and such appraiser. The Holder shall promptly mail or cause to be mailed to the
Company, a notice setting forth the Exercise Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment. Such
adjustment shall become effective immediately after the record date mentioned
above.
(i) If:
(i) the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
(ii) the Company shall declare a special nonrecurring
cash dividend on or a redemption of its Common
Stock; or
(iii) the Company shall authorize the granting to all
holders of the Common Stock rights or warrants to
subscribe for or purchase any shares of capital
stock of any class or of any rights; or
(iv) the approval of any stockholders of the Company
shall be required in connection with any
reclassification of the Common Stock, any
consolidation or merger to
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<PAGE>
which the Company is a party, any sale or transfer
of all or substantially all of the assets of the
Company, or any compulsory share exchange whereby
the Common Stock is converted into other
securities, cash or property; or
(v) the Company shall authorize the voluntary
dissolution, liquidation or winding up of the
affairs of the Company,
then the Company shall cause to be mailed to each Holder at their last addresses
as they shall appear upon the Warrant Register, at least 30 calendar days prior
to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up; provided, however, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice.
10. Payment of Exercise Price. The Holder shall pay the Exercise
Price in one of the following manners:
(a) Cash Exercise. The Holder may deliver immediately
available funds; or
(b) Cashless Exercise. The Holder may surrender this Warrant
to the Company together with a notice of cashless exercise, in which event the
Company shall issue to the Holder the number of Warrant Shares determined as
follows:
X = Y (A-B)/A
where:
X = the number of Warrant Shares to be issued to the
Holder.
Y = the number of Warrant Shares with respect to which
this Warrant is being exercised.
A = the average of the closing sale prices of the Common
Stock for the five (5) trading days immediately prior to
(but not including) the Date of Exercise.
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<PAGE>
B = the Exercise Price.
For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have been
commenced, on the issue date.
11. Certain Exercise Restrictions.
(a) A Holder may not exercise this Warrant to the extent such
exercise would result in the Holder, together with any affiliate thereof,
beneficially owning (as determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and the rules
promulgated thereunder) in excess of 4.999% of the then issued and outstanding
shares of Common Stock, including shares of Common Stock issuable upon such
exercise and held by such Holder after application of this Section. Since the
Holder will not be obligated to report to the Company the number of shares of
Common Stock it may hold at the time of an exercise hereunder, unless the
exercise at issue would result in the issuance of shares of Common Stock in
excess of 4.999% of the then outstanding shares of Common Stock without regard
to any other shares of Common Stock which may be beneficially owned by the
Holder or an affiliate thereof, the Holder shall have the authority and
obligation to determine whether the restriction contained in this Section will
limit any particular exercise hereunder and to the extent that the Holder
determines that the limitation contained in this Section applies, the
determination of which portion of this Warrant is exercisable shall be the
responsibility and obligation of the Holder. If the Holder has delivered a Form
of Election to Purchase for a number of Warrant Shares that would result in the
issuance in excess of the permitted amount hereunder, the Company shall notify
the Holder of this fact and shall honor the exercise for the maximum portion of
this Warrant permitted to be exercised on such Date of Exercise in accordance
with the periods described herein and disregard the balance of such Form of
Election to Purchase, as if never delivered The provisions of this Section may
be waived by a Holder (but only as to itself and not to any other Holder) upon
not less than 61 days prior notice to the Company. Other Holders shall be
unaffected by any such waiver.
(b) A Holder may not exercise this Warrant to the extent such
exercise would result in the Holder, together with any affiliate thereof,
beneficially owning (as determined in accordance with Section 13(d) of the
Exchange Act and the rules promulgated thereunder) in excess of 9.999% of the
then issued and outstanding shares of Common Stock, including shares of Common
Stock issuable upon such exercise and held by such Holder after application of
this Section. Since the Holder will not be obligated to report to the Company
the number of shares of Common Stock it may hold at the time of an exercise
hereunder, unless the exercise at issue would result in the issuance of shares
of Common Stock in excess of 9.999% of the then outstanding shares of Common
Stock without regard to any other shares of Common Stock which may be
beneficially owned by the Holder or an affiliate thereof, the Holder shall have
the authority and obligation to determine whether the restriction contained in
this Section will limit any particular exercise hereunder and to the extent that
the Holder determines that the limitation contained in this Section applies, the
determination of which portion of this Warrant is exercisable shall be the
responsibility and obligation of the Holder.
-9-
<PAGE>
If the Holder has delivered a Form of Election to Purchase for a number of
Warrant Shares that would result in the issuance in excess of the permitted
amount hereunder, the Company shall notify the Holder of this fact and shall
honor the exercise for the maximum portion of this Warrant permitted to be
exercised on such Date of Exercise in accordance with the periods described
herein and disregard the balance of such Form of Election to Purchase, as if
never delivered The provisions of this Section may be waived by a Holder (but
only as to itself and not to any other Holder) upon not less than 61 days prior
notice to the Company. Other Holders shall be unaffected by any such waiver.
12. Fractional Shares. The Company shall not be required to issue or
cause to be issued fractional Warrant Shares on the exercise of this Warrant.
The number of full Warrant Shares which shall be issuable upon the exercise of
this Warrant shall be computed on the basis of the aggregate number of Warrant
Shares purchasable on exercise of this Warrant so presented. If any fraction of
a Warrant Share would, except for the provisions of this Section, be issuable on
the exercise of this Warrant, the Company shall pay an amount in cash equal to
the Exercise Price multiplied by such fraction.
13. Notices. Any and all notices or other communications or
deliveries hereunder shall be in writing and shall be deemed given and effective
on the earliest of (i) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile telephone number specified in this
Section prior to 8:00 p.m. (New York City time) on a business day, (ii) the
business day after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section later than 8:00 p.m. (New York City time) on any date and earlier than
11:59 p.m. (New York City time) on such date, (iii) the business day following
the date of mailing, if sent by nationally recognized overnight courier service,
or (iv) upon actual receipt by the party to whom such notice is required to be
given. The addresses for such communications shall be: (i) if to the Company, to
116 Newark Avenue, Jersey City, New Jersey 07302, Attention: President, or to
Facsimile No. (201) 234-5052, or (ii) if to the Holder, to the Holder at the
address or facsimile number appearing on the Warrant Register or such other
address or facsimile number as the Holder may provide to the Company in
accordance with this Section.
14. Warrant Agent. The Company shall serve as warrant agent under
this Warrant. Upon thirty (30) days' notice to the Holder, the Company may
appoint a new warrant agent. Any corporation into which the Company or any new
warrant agent may be merged or any corporation resulting from any consolidation
to which the Company or any new warrant agent shall be a party or any
corporation to which the Company or any new warrant agent transfers
substantially all of its corporate trust or shareholders services business shall
be a successor warrant agent under this Warrant without any further act. Any
such successor warrant agent shall promptly cause notice of its succession as
warrant agent to be mailed (by first class mail, postage prepaid) to the Holder
at the Holder's last address as shown on the Warrant Register.
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<PAGE>
15. Miscellaneous.
(a) This Warrant shall be binding on and inure to the benefit
of the parties hereto and their respective successors and assigns. This Warrant
may be amended only in writing signed by the Company and the Holder and their
successors and assigns.
(b) Subject to Section 15(a), above, nothing in this Warrant
shall be construed to give to any person or corporation other than the Company
and the Holder any legal or equitable right, remedy or cause under this Warrant.
This Warrant shall inure to the sole and exclusive benefit of the Company and
the Holder.
(c) The corporate laws of the State of Washington shall govern
all issues concerning the relative rights of the Company and its stockholders.
All other questions concerning the construction, validity, enforcement and
interpretation of this Warrant shall be governed by and construed and enforced
in accordance with the internal laws of the State of New York, without regard to
the principles of conflicts of law thereof. The Company and the Holder hereby
irrevocably submit to the exclusive jurisdiction of the state and federal courts
sitting in the City of New York, borough of Manhattan, for the adjudication of
any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, or that such suit,
action or proceeding is improper. Each of the Company and the Holder hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by receiving a copy thereof sent
to the Company at the address in effect for notices to it under this instrument
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any manner permitted by law.
(d) The headings herein are for convenience only, do not
constitute a part of this Warrant and shall not be deemed to limit or affect any
of the provisions hereof.
(e) In case any one or more of the provisions of this Warrant
shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Warrant shall not
in any way be affected or impaired thereby and the parties will attempt in good
faith to agree upon a valid and enforceable provision which shall be a
commercially reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Warrant.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its authorized officer as of the date first indicated above.
CYBERSHOP.COM, INC.
By:_____________________________________
Name:___________________________________
Title:__________________________________
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)
To Cybershop.Com, Inc.:
In accordance with the Warrant enclosed with this Form of Election to
Purchase, the undersigned hereby irrevocably elects to purchase _____________
shares of common stock, $.001 par value per share, of Cybershop.com, Inc. (the
"Common Stock") and , if such Holder is not utilizing the cashless exercise
provisions set forth in this Warrant, encloses herewith $________ in cash,
certified or official bank check or checks, which sum represents the aggregate
Exercise Price (as defined in the Warrant) for the number of shares of Common
Stock to which this Form of Election to Purchase relates, together with any
applicable taxes payable by the undersigned pursuant to the Warrant.
The undersigned requests that certificates for the shares of Common Stock
issuable upon this exercise be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
----------------------------------------
- --------------------------------------------------------------------------------
(Please print name and address)
If the number of shares of Common Stock issuable upon this exercise shall
not be all of the shares of Common Stock which the undersigned is entitled to
purchase in accordance with the enclosed Warrant, the undersigned requests that
a New Warrant (as defined in the Warrant) evidencing the right to purchase the
shares of Common Stock not issuable pursuant to the exercise evidenced hereby be
issued in the name of and delivered to:
- --------------------------------------------------------------------------------
(Please print name and address)
Dated:____________, ____ Name of Holder:
(Print)_________________________________
(By:)___________________________________
(Name:)
(Title:)
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant)
<PAGE>
FORM OF ASSIGNMENT
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Warrant to purchase ____________ shares of Common Stock of Cybershop.com, Inc.
to which the within Warrant relates and appoints ________________ attorney to
transfer said right on the books of Cybershop.com, Inc. with full power of
substitution in the premises.
Dated:
_______________, ____
________________________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant)
________________________________________
Address of Transferee
________________________________________
________________________________________
In the presence of:
__________________________
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN
COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
CYBERSHOP.COM, INC.
WARRANT
Warrant No. A-2 Dated: December 8, 1999
Cybershop.com, Inc., a Delaware corporation (the "Company"), hereby
certifies that, for value received, Montrose Investments Ltd. or its registered
assigns ("Holder"), is entitled, subject to the terms set forth below, to
purchase from the Company the total number of shares of Common Stock, $.001 par
value per share (the "Common Stock"), of the Company (each such share, a
"Warrant Share" and all such shares, the "Warrant Shares") calculated pursuant
to Section 3 of this Warrant (subject to adjustment for certain events as set
forth herein) at an exercise price equal to $.001 per share (as adjusted from
time to time as provided in Section 8, the "Exercise Price"), during the period
set forth herein through and including the 10th Business Day immediately
following the Vesting Period (as defined in Section 3(a) hereof) (the
"Expiration Date"), and subject to the following terms and conditions:
1. Registration of Warrant. The Company shall register this Warrant, upon
records to be maintained by the Company for that purpose (the "Warrant
Register"), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, and the Company shall not be affected by
notice to the contrary.
2. Registration of Transfers and Exchanges.
(a) The Company shall register the transfer of any portion of this
Warrant in the Warrant Register, upon surrender of this Warrant, with the Form
of Assignment attached hereto duly
<PAGE>
completed and signed, to the Transfer Agent or to the Company at the address
specified in Section 13. Upon any such registration or transfer, a new warrant
to purchase Common Stock, in substantially the form of this Warrant (any such
new warrant, a "New Warrant"), evidencing the portion of this Warrant so
transferred shall be issued to the transferee and a New Warrant evidencing the
remaining portion of this Warrant not so transferred, if any, shall be issued to
the transferring Holder. The acceptance of the New Warrant by the transferee
thereof shall be deemed the acceptance of such transferee of all of the rights
and obligations of a holder of a Warrant.
(b) This Warrant is exchangeable, upon the surrender hereof by the
Holder to the office of the Company at the address specified in Section 13 for
one or more New Warrants, evidencing in the aggregate the right to purchase the
number of Warrant Shares which may then be purchased hereunder. Any such New
Warrant will be dated the date of such exchange.
3. Duration, Exercise and Redemption of Warrants.
(a) The vesting of the Warrant Shares which the Holder is permitted
to acquire pursuant to this Warrant shall commence on the Effectiveness Date (as
defined herein) and end on the 40th Trading Day following the Effectiveness Date
(the "Vesting Period"). Only the Warrant Shares that have vested may be acquired
upon exercise of this Warrant.
(b) Except as otherwise set forth in this Warrant, this Warrant
shall vest and become exercisable during the Vesting Period with respect to the
number of Warrant Shares calculated in accordance with the following formula:
(Applicable Share Number) x (Purchase Price - Adjustment Period Price)
Adjustment Period Price
If the number calculated in accordance with the foregoing
formula is zero or a negative number, no Warrant Shares shall vest hereunder for
the Vesting Period and the Holder shall not be obligated to transfer any shares
of Common Stock to the Company.
(c) Notwithstanding anything herein to the contrary, if, at any time
after the Effectiveness Date and during the Vesting Period, the average of the
Per Share Market Values during (20) consecutive Trading Days exceeds 150% of the
Purchase Price (as defined herein), then no Warrant Shares shall vest with
respect to this Warrant.
(d) The vesting of the Warrant Shares in accordance with this
Section 3 shall not be affected by any failure by the Company to maintain the
effectiveness of the Underlying Shares Registration Statement after it has been
declared effective by the Commission.
(e) Notwithstanding the foregoing provisions of this Section 3, at
any time within ten (10) Trading Days following the occurrence of any of the
following events (each, an "Event"), the Holder shall have the option to elect
by notice ("Vesting Notice") to the Company to have this Warrant vest with
respect to those Warrant Shares that have not yet already vested:
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<PAGE>
(i) upon the occurrence of any of (i) an acquisition after the
date hereof by an individual or legal entity or "group" (as described in Rule
13d-5(b)(1) promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) of in excess of 1/3 of the voting securities of the
Company, (ii) a replacement of more than one-half of the members of the
Company's board of directors which is not approved by those individuals who are
members of the board of directors on the date hereof in one or a series of
related transactions, (iii) the merger of the Company with or into another
entity, consolidation or sale of all or substantially all of the assets of the
Company in one or a series of related transactions, unless following such
transaction or series of transactions, the holders of the Company's securities
prior to the first such transaction continue to hold at least 2/3 of the
securities of the surviving entity or acquirer of such assets or (iv) the
execution by the Company of an agreement to which the Company is a party or by
which it is bound, providing for any of the events set forth above in (i), (ii)
or (iii);
(ii) immediately prior to an assignment by the Company for the
benefit of creditors or commencement of a voluntary case under Title 11 of the
United States Code, or an entering into of an order for relief in an involuntary
case under Title 11 of the United States Code, or adoption by the Company of a
plan of liquidation or dissolution; or
(iii) five (5) Business Days prior to the proposed
consummation with respect to the Company of a "Rule 13e-3 transaction" as
defined in Rule 13e-3 under the Exchange Act (or, if necessary, such earlier
date as the Company shall determine in good faith to be required in order for
the Holder to be able to participate in such transaction), it being agreed that
the Holder will receive actual notice of the 13e-3 Statement filed with the
Commission on the date filed and actual notice of the date of acceleration
hereunder no later than such date, and that if such transaction is not
consummated, and this Warrant has been exercised, then the Holder (and to the
extent that this Warrant would not but for this paragraph be exercisable, the
Company) shall be entitled to declare the exercise null and void and the Holder
shall, upon return of the Warrant Shares to the Company, be entitled to receive
a refund of the Exercise Price and warrants identical to this Warrant, and such
acceleration shall become void ab initio, and the Warrants shall (as to any
remaining unexercised portion thereof) remain in full force and effect in
accordance with the terms hereof.
In the event the Holder delivers a Vesting Notice, this Warrant
shall vest with respect to the number of Warrant Shares calculated in accordance
with the formula set forth on Section 3(b); provided, however that for purposes
of such calculation, (i) the "Applicable Share Number" shall be deemed to mean
100% of the number of shares of Common Stock purchased by the original Holder
pursuant to the Purchase Agreement and (ii) the "Adjustment Period Price" shall
be deemed to mean the average of the twenty (20) lowest Per Share Market Values
(which need not occur on consecutive Trading Days) during the forty (40) Trading
Days immediately preceding the date on which the Event occurred.
(f) Subject to Sections 3(a) and (b), this Warrant shall be
exercisable by the registered Holder on any Business Day before 8:00 P.M., New
York City time, at any time and from time to time on or after the date hereof to
and including the Expiration Date. At 8:00 P.M., New York City time on the
Expiration Date, the portion of this Warrant not exercised prior thereto shall
be and become void and of no value.
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<PAGE>
(g) Subject to Sections 3(a) and (b), this Warrant shall be
exercisable, either in its entirety or, from time to time, for a portion of the
number of Warrant Shares. If less than all of the Warrant Shares which may be
purchased under this Warrant are exercised at any time, the Company shall issue
or cause to be issued, at its expense, a New Warrant evidencing the right to
purchase the remaining number of Warrant Shares for which no exercise has been
evidenced by this Warrant.
(h) For purposes of this Warrant:
(i) "Adjustment Period Price" means the average of the twenty (20) lowest
Per Share Market Values (which need not occur on consecutive Trading Days)
during the Vesting Period.
(ii) "Applicable Share Number" means 100% of the number of shares of
Common Stock purchased by the Holder pursuant to the Purchase Agreement.
(iii) "Business Day" means any day except Saturday, Sunday and any day
which shall be a federal legal holiday or a day on which banking institutions in
the State of New York generally are authorized or required by law or other
governmental action to close.
(iv) "Effectiveness Date" means the date on which the initial Underlying
Shares Registration Statement is first declared effective by the Commission.
(v) "Per Share Market Value" means on any particular date (a) the closing
bid price per share of the Common Stock on such date on the Nasdaq or on any
Subsequent Market, or if there is no such price on such date, then the closing
bid price on the Nasdaq or on such Subsequent Market on the date nearest
preceding such date, or (b) if the Common Stock is not then listed or quoted on
the Nasdaq or a Subsequent Market, the closing bid price for a share of Common
Stock in the over-the-counter market, as reported by the national Quotation
Bureau Incorporated or similar organization or agency succeeding to its
functions of reporting prices) at the close of business on such date, or (c) if
the Common Stock is not then reported by the National Quotation Bureau
Incorporated (or similar organization or agency succeeding to its functions of
reporting prices), then the average of the "Pink Sheet" quotes for the relevant
conversion period, as determined in good faith by the Holder, or (d) if the
Common Stock is not then publicly traded the fair market value of a share of
Common Stock as determined by an appraiser selected in good faith by the Holders
of a majority of the applicable Warrant Shares.
(vi) "Purchase Agreement" means the Securities Purchase Agreement, dated
the date hereof to which the Company and the original Holder pursuant to which
this Warrant was issued are parties.
(vii) "Purchase Price" means $11.35 per share of Common Stock.
(viii) "Trading Day" means a day on which the Common Stock is traded on
Nasdaq SmallCap Market ("NASDAQ") or any other stock market trading facility on
which the shares of Common Stock are listed or quoted (each, a "Subsequent
Market"), as the case may be, or (b) if the
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<PAGE>
Common Stock is not listed on the NASDAQ or on a Subsequent Market, a day on
which the Common Stock is traded in the over-the-counter market, as reported by
the OTC Bulletin Board, or (i) if the Common Stock is not quoted on the OTC
Bulletin Board a day on which the Common Stock is quoted in the over-the-counter
market as reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding its functions of reporting price); provided,
however, that in the event that the Common Stock is not listed or quoted, as set
forth in (a), (b) or (c) hereof, the Trading Day shall mean a Business Day.
(ix) "Underlying Shares Registration Statement" shall have the meaning set
forth in the Purchase Agreement.
4. Delivery of Warrant Shares.
(a) Subject to Sections 2(b), 5 and 9, upon surrender of this
Warrant, with the Form of Election to Purchase attached hereto duly completed
and signed, to the Company at its address for notice set forth in Section 13 and
upon payment of the Exercise Price multiplied by the number of Warrant Shares
that the Holder intends to purchase hereunder, in the manner provided hereunder,
all as specified by the Holder in the Form of Election to Purchase, the Company
shall promptly (but in no event later than three (3) Trading Days after the Date
of Exercise (as defined herein)) issue or cause to be issued and cause to be
delivered to or upon the written order of the Holder and in such name or names
as the Holder may designate, a certificate for the Warrant Shares issuable upon
such exercise, free of restrictive legends, except in the event that either an
Underlying Shares Registration Statement is not then effective or the Warrant
Shares are not freely transferable without volume restrictions pursuant to Rule
144(k) promulgated under the Securities Act of 1933, as amended (the "Securities
Act"). Any person so designated by the Holder to receive Warrant Shares shall be
deemed to have become holder of record of such Warrant Shares as of the Date of
Exercise of this Warrant. The Company shall, upon request of the Holder, if
available, use its best efforts to deliver Warrant Shares hereunder
electronically through the Depository Trust Corporation or another established
clearing corporation performing similar functions.
A "Date of Exercise" means the date on which the Company shall
have received (i) this Warrant (or any New Warrant, as applicable), with the
Form of Election to Purchase attached hereto (or attached to such New Warrant)
appropriately completed and duly signed, and (ii) payment of the Exercise Price
for the number of Warrant Shares so indicated by the holder hereof to be
purchased.
(b) If the Company fails to deliver to the Holder certificate or
certificates representing the Warrant Shares pursuant to Section 4(a) by the
third (3rd) Trading Day after the Date of Exercise, the Company shall pay to
such Holder, in cash, as liquidated damages and not as a penalty, $5,000 for
each day after such third (3rd) Trading Day until such certificates are
delivered. Nothing herein shall limit the Holder's right to pursue actual
damages for the Company's failure to deliver certificates representing shares of
Common Stock upon exercise within the period specified herein and the Holder
shall have the right to pursue all remedies available to it at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief. The exercise
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of any such rights shall not prohibit the Holder from seeking to enforce damages
pursuant to any other Section hereof or under applicable law.
(c) In addition to any other rights available to the Holder, if the
Company fails to deliver to the Holder certificate or certificates representing
the Warrant Shares pursuant to Section 4(a) by the third (3rd) Trading Day after
the Date of Exercise, and if after such third (3rd) Trading Day the Holder
purchases (in an open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by the Holder of the Warrant Shares which the
Holder anticipated receiving upon such exercise (a "Buy-In"), then the Company
shall pay (1) in cash to the Holder the amount by which (x) the Holder's total
purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the
number of Warrant Shares that the Company was required to deliver pursuant to
Section 4(b) to deliver to the Holder in connection with the exercise at issue
by (B) the Per Share Market Value at the time of the obligation giving rise to
such purchase obligation and (2) deliver to the Holder the number of shares of
Common Stock that would have been issued had the Company timely complied with
its exercise and delivery obligations under Section 4(b). For example, if the
Holder purchases Common Stock having a total purchase price of $11,000 to cover
a Buy-In with respect to an attempted exercise of shares of Common Stock with a
market price on the date of exercise totaled $10,000, under clause (A) of the
immediately preceding sentence the Company shall be required to pay the Holder
$1,000. The Holder shall provide the Company written notice indicating the
amounts payable to the Holder in respect of the Buy-In.
(d) The Company's obligations to issue and deliver Warrant Shares in
accordance with the terms hereof are absolute and unconditional, irrespective of
any action or inaction by the Holder to enforce the same, any waiver or consent
with respect to any provision hereof, the recovery of any judgment against any
Person or any action to enforce the same, or any setoff, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach by the
Holder or any other Person of any obligation to the Company or any violation or
alleged violation of law by the Holder or any other Person, and irrespective of
any other circumstance which might otherwise limit such obligation of the
Company to the Holder in connection with the issuance of Warrant Shares. If the
Company breaches its obligations under this Warrant, then, in addition to any
other liabilities the Company may have hereunder and under applicable law, the
Company shall pay or reimburse the Holder on demand for all costs of collection
and enforcement (including reasonable attorneys fees and expenses).
5. Payment of Taxes. The Company will pay all documentary stamp taxes
attributable to the issuance of Warrant Shares upon the exercise of this
Warrant; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the registration
of any certificates for Warrant Shares or Warrants in a name other than that of
the Holder. The Holder shall be responsible for all other tax liability that may
arise as a result of holding or transferring this Warrant or receiving Warrant
Shares upon exercise hereof.
6. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
for this Warrant, a New Warrant, but only upon receipt of
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evidence reasonably satisfactory to the Company of such loss, theft or
destruction and customary and reasonable indemnity, if requested. Applicants for
a New Warrant under such circumstances shall also comply with such other
reasonable regulations and procedures and pay such other reasonable charges as
the Company may prescribe.
7. Reservation of Warrant Shares. The Company covenants that it will at
all times reserve and keep available out of the aggregate of its authorized but
unissued Common Stock, solely for the purpose of enabling it to issue Warrant
Shares upon exercise of this Warrant as herein provided, the number of Warrant
Shares which are then issuable and deliverable upon the exercise of this entire
Warrant, free from preemptive rights or any other actual contingent purchase
rights of persons other than the Holder (taking into account the adjustments and
restrictions of Section 8). The Company covenants that all Warrant Shares that
shall be so issuable and deliverable shall, upon issuance and the payment of the
applicable Exercise Price in accordance with the terms hereof, be duly and
validly authorized, issued and fully paid and nonassessable.
8. Certain Adjustments. The Exercise Price and number of Warrant Shares
issuable upon exercise of this Warrant are subject to adjustment from time to
time as set forth in this Section. Upon each such adjustment of the Exercise
Price pursuant to this Section, the Holder shall thereafter prior to the
Expiration Date be entitled to purchase, at the Exercise Price resulting from
such adjustment, the number of Warrant Shares obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
Warrant Shares issuable upon exercise of this Warrant immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(i) If the Company, at any time while this Warrant is outstanding, (i)
shall pay a stock dividend (except scheduled dividends paid on outstanding
preferred stock as of the date hereof which contain a stated dividend rate) or
otherwise make a distribution or distributions on shares of its Common Stock or
on any other class of capital stock payable in shares of Common Stock, (ii)
subdivide outstanding shares of Common Stock into a larger number of shares, or
(iii) combine outstanding shares of Common Stock into a smaller number of
shares, the Exercise Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding treasury
shares, if any) outstanding before such event and of which the denominator shall
be the number of shares of Common Stock (excluding treasury shares, if any)
outstanding after such event. Any adjustment made pursuant to this Section shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision or
combination, and shall apply to successive subdivisions and combinations.
(ii) In case of any reclassification of the Common Stock or any compulsory
share exchange pursuant to which the Common Stock is converted into other
securities, cash or property, then the Holder shall have the right thereafter to
exercise this Warrant only into the shares of stock and other securities and
property receivable upon or deemed to be held by holders of Common Stock
following such reclassification, transfer or share exchange, and the Holder
shall be entitled upon such event to receive such amount of securities or
property equal to the amount of Warrant Shares such Holder would have been
entitled to had such Holder exercised this Warrant immediately prior to such
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reclassification or share exchange. The terms of any such reclassification or
share exchange shall include such terms so as to continue to give to the Holder
the right to receive the securities or property set forth in this Section 8(b)
upon any exercise following any such reclassification or share exchange.
(iii) If the Company, at any time while this Warrant is outstanding, shall
distribute to all holders of Common Stock (and not to holders of this Warrant)
evidences of its indebtedness or assets or rights or warrants to subscribe for
or purchase any security (excluding those referred to in Sections 8(a), (b) and
(d)), then in each such case the Exercise Price shall be determined by
multiplying the Exercise Price in effect immediately prior to the record date
fixed for determination of stockholders entitled to receive such distribution by
a fraction of which the denominator shall be the Exercise Price determined as of
the record date mentioned above, and of which the numerator shall be such
Exercise Price on such record date less the then fair market value at such
record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of Common Stock as determined by
the Company's independent certified public accountants that regularly examines
the financial statements of the Company (an "Appraiser").
(iv) If at any time the Company or any subsidiary thereof, as applicable
with respect to Common Stock Equivalents (as defined below), shall issue shares
of Common Stock or rights, warrants, options or other securities or debt that is
convertible into or exchangeable for shares of Common Stock ("Common Stock
Equivalents"), entitling any person or entity to acquire shares of Common Stock
at a price per share less than the market price of the Common Stock at the time
of issuance, then, forthwith upon such issue or sale, the Exercise Price shall
be reduced to the price (calculated to the nearest cent) determined by
multiplying the Exercise Price in effect immediately prior thereto by a
fraction, the numerator of which shall be the sum of (i) the number of shares of
Common Stock outstanding immediately prior to such issuance, and (ii) the number
of shares of Common Stock which the aggregate consideration received (or to be
received, assuming exercise or conversion in full of such Common Stock
Equivalents) for the issuance of such additional shares of Common Stock would
purchase at the Exercise Price, and the denominator of which shall be the sum of
the number of shares of Common Stock outstanding immediately after the issuance
of such additional shares. For purposes hereof, all shares of Common Stock that
are issuable upon conversion, exercise or exchange of Common Stock Equivalents
shall be deemed outstanding immediately after the issuance of such Common Stock
Equivalents. Such adjustment shall be made whenever such Common Stock or Common
Stock Equivalents are issued. However, upon the expiration of any Common Stock
Equivalents the issuance of which resulted in an adjustment in the Exercise
Price pursuant to this Section, if any such Common Stock Equivalents shall
expire and shall not have been exercised, the Exercise Price shall immediately
upon such expiration be recomputed and effective immediately upon such
expiration be increased to the price which it would have been (but reflecting
any other adjustments in the Exercise Price made pursuant to the provisions of
this Section after the issuance of such Common Stock Equivalents) had the
adjustment of the Exercise Price made upon the issuance of such Common Stock
Equivalents been made on the basis of offering for subscription or purchase only
that number of shares of the Common Stock actually purchased upon the exercise
of such Common Stock Equivalents actually exercised. The foregoing provisions
shall not apply to any options issued under existing option plans as of the date
hereof.
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(v) In case of any (1) merger or consolidation of the Company with or into
another Person, or (2) sale by the Company of more than one-half of the assets
of the Company (on a book value basis) in one or a series of related
transactions, or (3) tender or other offer or exchange (whether by the Company
or another Person) pursuant to which holders of Common Stock are permitted to
tender or exchange their shares for other securities, stock, cash or property of
the Company or another Person; then the Holder shall have the right thereafter
to (A) exercise this Warrant for the shares of stock and other securities, cash
and property receivable upon or deemed to be held by holders of Common Stock
following such merger, consolidation or sale, and the Holder shall be entitled
upon such event or series of related events to receive such amount of
securities, cash and property as the Common Stock for which this Warrant could
have been exercised immediately prior to such merger, consolidation or sales
would have been entitled, (B) in the case of a merger or consolidation, (x)
require the surviving entity to issue to the Holder a warrant entitling the
Holder to acquire shares of such entity's common stock, which warrant shall have
terms identical (including with respect to exercise) to the terms of this
Warrant and shall be entitled to all of the rights and privileges set forth
herein and the agreements pursuant to which this Warrant was issued (including,
without limitation, as such rights relate to the acquisition, transferability,
registration and listing of such shares of stock other securities issuable upon
exercise thereof), or (C) in the event of an exchange or tender offer or other
transaction contemplated by clause (3) of this Section, tender or exchange this
Warrant for such securities, stock, cash and other property receivable upon or
deemed to be held by holders of Common Stock that have tendered or exchanged
their shares of Common Stock following such tender or exchange, and the Holder
shall be entitled upon such exchange or tender to receive such amount of
securities, cash and property as the shares of Common Stock for which this
Warrant could have been exercised immediately prior to such tender or exchange
would have been entitled as would have been issued. In the case of clause (B),
the exercise price applicable for the newly issued warrant shall be based upon
the amount of securities, cash and property that each shares of Common Stock
would receive in such transaction and the Exercise Price immediately prior to
the effectiveness or closing date for such transaction. The terms of any such
merger, sale, consolidation, tender or exchange shall include such terms so as
continue to give the Holder the right to receive the securities, cash and
property set forth in this Section upon any conversion or redemption following
such event. This provision shall similarly apply to successive such events.
(vi) For the purposes of this Section 8, the following clauses shall also
be applicable:
(i) Record Date. In case the Company shall take a record of the
holders of its Common Stock for the purpose of entitling them (A) to receive a
dividend or other distribution payable in Common Stock or in securities
convertible or exchangeable into shares of Common Stock, or (B) to subscribe for
or purchase Common Stock or securities convertible or exchangeable into shares
of Common Stock, then such record date shall be deemed to be the date of the
issue or sale of the shares of Common Stock deemed to have been issued or sold
upon the declaration of such dividend or the making of such other distribution
or the date of the granting of such right of subscription or purchase, as the
case may be.
(ii) Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or for
the account of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock.
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(vii) All calculations under this Section 8 shall be made to the nearest
cent or the nearest 1/100th of a share, as the case may be.
(viii) Whenever the Exercise Price is adjusted pursuant to Section 8(c)
above, the Holder, after receipt of the determination by the Appraiser, shall
have the right to select an additional appraiser (which shall be a nationally
recognized accounting firm), in which case the adjustment shall be equal to the
average of the adjustments recommended by each of the Appraiser and such
appraiser. The Holder shall promptly mail or cause to be mailed to the Company,
a notice setting forth the Exercise Price after such adjustment and setting
forth a brief statement of the facts requiring such adjustment. Such adjustment
shall become effective immediately after the record date mentioned above.
(ix) If (i) the Company shall declare a dividend (or any other
distribution) on its Common Stock; (ii) the Company shall declare a special
nonrecurring cash dividend on or a redemption of its Common Stock; (iii) the
Company shall authorize the granting to all holders of the Common Stock rights
or warrants to subscribe for or purchase any shares of capital stock of any
class or of any rights; (iv) the approval of any stockholders of the Company
shall be required in connection with any reclassification of the Common Stock,
any consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company, or any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property; or (v) the Company shall authorize the voluntary
dissolution, liquidation or winding up of the affairs of the Company, then the
Company shall cause to be mailed to each Holder at their last addresses as they
shall appear upon the Warrant Register, at least 30 calendar days prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up; provided, however, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice.
9. Payment of Exercise Price. The Holder may pay the Exercise Price in one
of the following manners:
(a) Cash Exercise. The Holder shall deliver immediately available
funds; or
(b) Cashless Exercise. The Holder shall surrender this Warrant to
the Company together with a notice of cashless exercise, in which event the
Company shall issue to the Holder the number of Warrant Shares determined as
follows:
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X = Y (A-B)/A
where:
X = the number of Warrant Shares to be issued to the
Holder.
Y = the number of Warrant Shares with respect to which
this Warrant is being exercised.
A = the average of the closing sale prices of the Common
Stock on the Nasdaq for the five (5) trading days
immediately prior to (but not including) the Date of
Exercise as reported by Bloomberg Information Systems,
Inc. (or any successor to its function of reporting
stock prices).
B = the Exercise Price.
For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have been
commenced, on the issue date.
10. Certain Exercise Restrictions.
(a) A Holder may not exercise this Warrant to the extent such
exercise would result in the Holder, together with any affiliate thereof,
beneficially owning (as determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and the rules
promulgated thereunder) in excess of 4.999% of the then issued and outstanding
shares of Common Stock, including shares of Common Stock issuable upon such
exercise and held by such Holder after application of this Section. Since the
Holder will not be obligated to report to the Company the number of shares of
Common Stock it may hold at the time of an exercise hereunder, unless the
exercise at issue would result in the issuance of shares of Common Stock in
excess of 4.999% of the then outstanding shares of Common Stock without regard
to any other shares of Common Stock which may be beneficially owned by the
Holder or an affiliate thereof, the Holder shall have the authority and
obligation to determine whether the restriction contained in this Section will
limit any particular exercise hereunder and to the extent that the Holder
determines that the limitation contained in this Section applies, the
determination of which portion of this Warrant is exercisable shall be the
responsibility and obligation of the Holder. If the Holder has delivered a Form
of Election to Purchase for a number of Warrant Shares that would result in the
issuance in excess of the permitted amount hereunder, the Company shall notify
the Holder of this fact and shall honor the exercise for the maximum portion of
this Warrant permitted to be exercised on such Date of Exercise in accordance
with the periods described herein and disregard the balance of such Form of
Election to Purchase, as if never delivered The provisions of this Section may
be waived by a Holder (but only as to itself and not to any other Holder) upon
not less than 61 days prior notice to the Company. Other Holders shall be
unaffected by any such waiver.
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(b) A Holder may not exercise this Warrant to the extent such
exercise would result in the Holder, together with any affiliate thereof,
beneficially owning (as determined in accordance with Section 13(d) of the
Exchange Act and the rules promulgated thereunder) in excess of 9.999% of the
then issued and outstanding shares of Common Stock, including shares of Common
Stock issuable upon such exercise and held by such Holder after application of
this Section. Since the Holder will not be obligated to report to the Company
the number of shares of Common Stock it may hold at the time of an exercise
hereunder, unless the exercise at issue would result in the issuance of shares
of Common Stock in excess of 9.999% of the then outstanding shares of Common
Stock without regard to any other shares of Common Stock which may be
beneficially owned by the Holder or an affiliate thereof, the Holder shall have
the authority and obligation to determine whether the restriction contained in
this Section will limit any particular exercise hereunder and to the extent that
the Holder determines that the limitation contained in this Section applies, the
determination of which portion of this Warrant is exercisable shall be the
responsibility and obligation of the Holder. If the Holder has delivered a Form
of Election to Purchase for a number of Warrant Shares that would result in the
issuance in excess of the permitted amount hereunder, the Company shall notify
the Holder of this fact and shall honor the exercise for the maximum portion of
this Warrant permitted to be exercised on such Date of Exercise in accordance
with the periods described herein and disregard the balance of such Form of
Election to Purchase, as if never delivered The provisions of this Section may
be waived by a Holder (but only as to itself and not to any other Holder) upon
not less than 61 days prior notice to the Company. Other Holders shall be
unaffected by any such waiver.
(c) If the Company Stock is then listed for trading on the Nasdaq
National Market or Nasdaq SmallCap Market and the Company has not obtained the
Shareholder Approval (as defined below), then the Company may not issue in
excess of 947,200 shares of Common Stock upon exercise of this Warrant, which
number of shares shall be subject to adjustment pursuant to the anti-dilution
provisions hereof (number of shares, the "Issuable Maximum"). The Issuable
Maximum equals 19.999% of the number of shares of Common Stock outstanding
multiplied by the quotient obtained by dividing (x) the number of shares of
Common Stock issued and sold by the Company on the date hereof by (y) the number
of shares of Common Stock issued and sold to the original Holder on the date
hereof. If on any Date of Exercise (A) the Company Stock is listed for trading
on the Nasdaq National Market or Nasdaq SmallCap Market, (B) the Exercise Price
then in effect is such that the aggregate number of shares of Common Stock that
would then be issuable upon exercise in full of this Warrant, together with any
shares of Common Stock previously issued upon exercise of this Warrant, would
equal or exceed the Issuable Maximum, and (C) the Company shall not have
previously obtained the vote of shareholders, if any, as may be required by the
applicable rules and regulations of the Nasdaq Stock Market to approve the
issuance of shares of Common Stock in excess of the Issuable Maximum pursuant to
the terms hereof (the "Shareholder Approval"), then the Company shall issue to
the Holder a number of shares of Common Stock equal to the Issuable Maximum and,
with respect to the shares whose issuance would result in an issuance of shares
of Common Stock in excess of the Issuable Maximum (the "Excess Warrant Shares"),
the Holder shall have the option to require the Company to either (1) use its
best efforts to obtain the Shareholder Approval applicable to such issuance as
soon as possible, but, in any event, no later than 60 days after such request
(such 60th day, the "Target Date") or (2) pay to the Holder an amount in cash
equal to the product of (x) the Excess Warrant Shares multiplied by (y) the
closing sales price of the Common Stock on (a) the Target Date or (b) the Date
of Exercise giving rise to the obligation to seek
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Shareholder Approval, whichever is greater (the "Cash Payment"). In the event
the Holder has elected to require the Company to seek the Shareholder Approval
pursuant to clause (1) of the immediately preceding sentence and the Company
does not obtain the Shareholder Approval on or prior to the Target Date, then,
on the Target Date, the Company shall pay the Cash Payment to the Holder. If the
Company fails to pay the Cash Payment in full pursuant to this Section within
seven (7) days after the date payable, the Company will pay interest on such
amount at a rate of 18% per annum, or such lesser maximum amount that is
permitted to be paid by applicable law, to the Holder, accruing daily from the
date payable until such amount, plus all such interest thereon, is paid in full.
The Company and the Holder understand and agree that shares of Common Stock
issued upon exercise of the Warrant and then held by the Holder or an Affiliate
thereof may not cast votes or be deemed outstanding for purposes of any vote to
obtain the Shareholder Approval.
12. Fractional Shares. The Company shall not be required to issue or cause
to be issued fractional Warrant Shares on the exercise of this Warrant. The
number of full Warrant Shares which shall be issuable upon the exercise of this
Warrant shall be computed on the basis of the aggregate number of Warrant Shares
purchasable on exercise of this Warrant so presented. If any fraction of a
Warrant Share would, except for the provisions of this Section 14, be issuable
on the exercise of this Warrant, the Company shall pay an amount in cash equal
to the Exercise Price multiplied by such fraction.
13. Notices. Any and all notices or other communications or deliveries
hereunder shall be in writing and shall be deemed given and effective on the
earliest of (i) the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section prior to 8:00PM. (New York City time) on a Business Day, (ii) the
Business Day after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section later than 8:00 PM. (New York City time) on any date and earlier than
11:59 PM (New York City time) on such date, (iii) the Business Day following the
date of mailing, if sent by nationally recognized overnight courier service with
next day delivery specified thereon, or (iv) upon actual receipt by the party to
whom such notice is required to be given. The addresses for such communications
shall be: (i) if to the Company, to 116 Newark Avenue, Jersey City, New Jersey
07302; facsimile number (201) 234-5052, attention Chief Financial Officer, or
(ii) if to the Holder, to the Holder at the address or facsimile number
appearing on the Warrant Register or such other address or facsimile number as
the Holder may provide to the Company in accordance with this Section 13.
14. Warrant Agent.
(a) The Company shall serve as warrant agent under this Warrant.
Upon thirty (30) days' notice to the Holder, the Company may appoint a new
warrant agent.
(b) Any corporation into which the Company or any new warrant agent
may be merged or any corporation resulting from any consolidation to which the
Company or any new warrant agent shall be a party or any corporation to which
the Company or any new warrant agent transfers substantially all of its
corporate trust or shareholders services business shall be a successor warrant
agent under this Warrant without any further act. Any such successor warrant
agent shall
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promptly cause notice of its succession as warrant agent to be mailed (by first
class mail, postage prepaid) to the Holder at the Holder's last address as shown
on the Warrant Register.
15. Miscellaneous.
(a) This Warrant shall be binding on and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. This
Warrant may be amended only in writing signed by the Company and the Holder and
their successors and assigns.
(b) Subject to Section 15(a), above, nothing in this Warrant shall
be construed to give to any person or corporation other than the Company and the
Holder any legal or equitable right, remedy or cause under this Warrant. This
Warrant shall inure to the sole and exclusive benefit of the Company and the
Holder.
(c) This Warrant shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York without regard to the
principles of conflicts of law thereof.
(d) The headings herein are for convenience only, do not constitute
a part of this Warrant and shall not be deemed to limit or affect any of the
provisions hereof.
(e) In case any one or more of the provisions of this Warrant shall
be invalid or unenforceable in any respect, the validity and enforceability of
the remaining terms and provisions of this Warrant shall not in any way be
affected or impaired thereby and the parties will attempt in good faith to agree
upon a valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its authorized officer as of the date first indicated above.
CYBERSHOP.COM, INC.
By:_____________________________________
Name:___________________________________
Title:__________________________________
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FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)
To Cybershop.Com, Inc.
In accordance with the Warrant enclosed with this Form of Election to
Purchase, the undersigned hereby irrevocably elects to purchase _____________
shares of Common Stock ("Common Stock"), $.001 par value per share, of
Cybershop.Com, Inc. and, if such Holder is not utilizing the cashless exercise
provisions set forth in this Warrant, encloses herewith $________ in cash,
certified or official bank check or checks, which sum represents the aggregate
Exercise Price (as defined in the Warrant) for the number of shares of Common
Stock to which this Form of Election to Purchase relates, together with any
applicable taxes payable by the undersigned pursuant to the Warrant.
The undersigned requests that certificates for the shares of Common Stock
issuable upon this exercise be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
----------------------------------------
- --------------------------------------------------------------------------------
(Please print name and address)
If the number of shares of Common Stock issuable upon this exercise shall
not be all of the shares of Common Stock which the undersigned is entitled to
purchase in accordance with the enclosed Warrant, the undersigned requests that
a New Warrant (as defined in the Warrant) evidencing the right to purchase the
shares of Common Stock not issuable pursuant to the exercise evidenced hereby be
issued in the name of and delivered to:
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dated:__________________, ____ Name of Holder:
(Print)_________________________________
(By:)___________________________________
(Name:)
(Title:)
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant)
<PAGE>
FORM OF ASSIGNMENT
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Warrant to purchase ____________ shares of Common Stock of Cybershop.Com, Inc.
to which the within Warrant relates and appoints ________________ attorney to
transfer said right on the books of Cybershop.Com, Inc. with full power of
substitution in the premises.
Dated:
_______________, ____
________________________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant)
________________________________________
Address of Transferee
________________________________________
________________________________________
In the presence of:
__________________________
Exhibit 5.1
[Letterhead of Davis & Gilbert LLP]
4800
December 15, 1999
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
Re: Cybershop.com, Inc.
Ladies and Gentlemen:
We have acted as counsel to Cybershop.com, Inc., a Delaware
corporation (the "Company") in connection with the registration pursuant to a
Registration Statement on Form S-3 (the "Registration Statement") under the
Securities Act of 1933, as amended, of an aggregate of 1,452,952 shares of
Common Stock of the Company, par value $.001 per share ("Common Stock").
In connection with this opinion, we have examined originals, or
copies certified to our satisfaction, of the Certificate of Incorporation of the
Company, as amended, the By-Laws of the Company, as amended, the minutes and
other records of the proceedings of the Board of Directors and of the
stockholders of the Company, and such other documents, corporate and public
records, agreements, and certificates of officers of the Company and of public
and other officials, and we have considered such questions of law, as we have
deemed necessary as a basis for the opinions hereinafter expressed. In such
examination we have assumed the genuineness of all signatures and the
authenticity of all documents submitted to us as originals and the conformity to
original documents of all documents submitted to us as certified or photostatic
copies.
Based on and subject to the foregoing, we hereby advise you that, in
our opinion, the shares of Common Stock to be sold pursuant to the prospectus
included in Registration Statement have been duly authorized and have been, and
with respect to the shares of Common Stock to be exercised upon exercise of the
warrants ("Warrant Shares") which shares are included in the prospectus, will be
validly issued, and are, and with respect to the Warrant Shares, following
receipt of the purchase price therefor will be, fully-paid and nonassessable.
We hereby consent to the use and filing of this opinion in
connection with the Registration Statement and to the reference to our firm
under the caption "Legal Matters" in the Registration Statement and in the
related Prospectus.
Very truly yours,
/s/ Davis & Gilbert LLP
Davis & Gilbert LLP
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Cybershop.com, Inc. (formerly known as Cybershop International, Inc.):
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated February 16, 1999
included in Cybershop International, Inc.'s Form 10-K for the year ended
December 31, 1998 and to all references to our Firm included in this
registration statement.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Roseland, New Jersey
December 13, 1999
