<PAGE>
As filed with the Securities and Exchange Commission on November 29, 1999
Registration No. 333-____
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM S-8
REGISTRATION STATEMENT
Under
The Securities Act of 1933
___________________
CACHEFLOW INC.
(Exact name of registrant as specified in its charter)
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Delaware 7373 91-1715963
<S> <C> <C>
(State or other jurisdiction (Primary Standard Industrial (IRS Employer
of incorporation or organization) Classification Code Number) Identification No.)
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650 Almanor Avenue
Sunnyvale, California 94086
(Address of principal executive offices) (Zip Code)
___________________
CACHEFLOW INC.
1996 Stock Option Plan
1999 Director Option Plan
Employee Stock Purchase Plan
1999 Stock Incentive Plan
Shares Acquired Under Written Compensation Agreements
(Full title of the Plans)
___________________
Michael A. Johnson
Chief Financial Officer
CACHEFLOW INC.
650 Almanor Avenue
Sunnyvale, California 94086
(Name and address of agent for service)
(408) 220-2200
(Telephone number, including area code, of agent for service)
___________________
CALCULATION OF REGISTRATION FEE
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Title of Proposed Maximum Proposed Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered (1) per Share (2) Price (2) Fee
---------- ---------- --------- ----- ---
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1996 Stock Option Plan
- ----------------------
Options 7,739,899 N/A N/A N/A
Common Stock (par value $.0001) 7,739,899 $24.00 $185,757,576 $51,640.60
1999 Director Option Plan
- -------------------------
Options 500,000 N/A N/A N/A
Common Stock (par value $.0001) 500,000 $24.00 $ 12,000,000 $ 3,336
Employee Stock Purchase Plan
- ----------------------------
Options 2,500,000 N/A N/A N/A
Common Stock (par value $.0001) 2,500,000 $24.00 $ 60,000,000 $ 16,680
1999 Stock Incentive Plan
- -------------------------
Options 5,000,000 N/A N/A N/A
Common Stock (par value $.0001) 5,000,000 $24.00 $120,000,000 $ 33,360
1996 Stock Option Plan
- ----------------------
Common Stock (par value $.0001) 2,917,181 $24.00 $ 70,012,344 $19,463.43
Written Compensation Agreements
- -------------------------------
Common Stock (par value $.0001) 1,100,000 $24.00 $ 26,400,000 $ 7,339.20
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(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under the 1996 Stock Option Plan, 1999
Director Option Plan, Employee Stock Purchase Plan, 1999 Stock Incentive
Plan, and Written Compensation Agreements by reason of any stock dividend,
stock split, recapitalization or other similar transaction effected without
the receipt of consideration which results in an increase in the number of
the outstanding shares of Common Stock of CacheFlow Inc.
(2) Calculated solely for purposes of this offering under Rule 457(h) of the
Securities Act of 1933, as amended, on the basis of the fair market value
per share of Common Stock of CacheFlow Inc. on November 18, 1999.
(3) The shares reserved under the 1996 Stock Option Plan will become issuable
under the 1999 Stock Incentive Plan if and to the extent that options
outstanding under the 1996 Stock Option Plan expire unexercised and the
corresponding shares are awarded under the 1999 Stock Incentive Plan.
<PAGE>
EXPLANATORY NOTE
CacheFlow Inc. has prepared this Registration Statement in accordance
with the requirements of Form S-8 under the Securities Act of 1933, as amended
(the "1933 Act"), to register shares of its common stock, $0.0001 par value per
share. Under cover of this Form S-8 is a Reoffer Prospectus CacheFlow Inc.
prepared in accordance with Part I of Form S-3 under the 1933 Act. The Reoffer
Prospectus may be utilized for reofferings and resales of up to 2,917,181 shares
of common stock acquired by Selling Stockholders under the CacheFlow Inc. 1996
Stock Option Plan. This Registration Statement also registers the reoffer and
resale of 1,000,000 shares of common stock acquired pursuant to a non-statutory
stock option agreement dated October 14, 1998 between CacheFlow Inc. and Michael
Malcolm, a director of CacheFlow Inc. and 100,000 shares of common stock
acquired pursuant to a non-statutory stock option agreement dated October 13,
1999 between CacheFlow Inc. and Michael Malcolm, a director of CacheFlow Inc.
<PAGE>
CACHEFLOW INC.
FORM S-8 CROSS REFERENCE SHEET SHOWING LOCATION OF INFORMATION
REQUIRED BY PART I OF FORM S-3
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Form S-3 Item Number Location/Heading in Prospectus
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1. Forepart of Registration Statement and Outside Cover page
Front Cover page of Prospectus
2. Inside Front and Outside Back Cover Page of Available Information; Incorporation of Certain
Prospectus Information by Reference
3. Summary Information, Risk Factors and Ratio of Risk Factors
Earnings to Fixed Charges
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Not applicable
6. Dilution Not applicable
7. Selling Security Holder Selling Security Holder
8. Plan of Distribution Plan of Distribution
9. Description of Securities to be Registered Not Applicable
10. Interests of Named Experts and Counsel Not Applicable
11. Material Changes Not Applicable
12. Incorporation of Certain Information Documents Incorporated by Reference
13. Disclosure of Commission Position on Indemnification
Indemnification for Securities Act Liabilities
</TABLE>
<PAGE>
Shares of Common Stock
CacheFlow Inc.
This Reoffer Prospectus relates to 4,017,181 shares of the Common
Stock, par value $0.0001 (the "Common Stock"), of CacheFlow Inc. (the
"Company"), which may be offered from time to time by certain key employees
named herein and certain employees who are not named herein (the "Registered
Stockholders"). It is anticipated that the Registered Stockholders will offer
shares for sale at prevailing prices on the Nasdaq National Market System on the
date of sale. The Company will receive no part of the proceeds of sale made
hereunder. All expenses of registration incurred in connection with this
offering are being borne by the Company, but all selling and other expenses
incurred by each of the Registered Stockholders will be borne by each such
Registered Stockholder.
The Common Stock is traded on the Nasdaq National Market System.
The Registered Stockholders and any broker executing selling orders on
behalf of the Registered Stockholders may be deemed to be "underwriters" within
the meaning of the Securities Act of 1933, as amended (the "Securities Act"), in
which event commissions received by such broker may be deemed to be underwriting
commissions under the Securities Act.
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SHOULD BE CONSIDERED
ONLY BY PERSONS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT.
SEE "RISK FACTORS" BEGINNING ON PAGE 3.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
No person is authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering described herein, and, if given or made, such information or
representations must not be relied upon as having been authorized by the Company
or any Registered Stockholder. This Prospectus does not constitute an offer to
sell, or a solicitation of an offer to buy, nor shall there be any sale of these
securities by any person in any jurisdiction in which it is unlawful for such
person to make such offer, solicitation or sale. Neither the delivery of this
Prospectus nor any sale made hereunder shall under any circumstances create an
implication that the information contained herein is correct as of any time
subsequent to the date hereof.
The date of this Prospectus is November 29, 1999.
<PAGE>
AVAILABLE INFORMATION
The Company will be subject to the informational reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") upon the first date on which its Common Stock is registered under Section
12(g) of the Exchange Act and in accordance therewith will file reports, proxy
statements and other information with the Securities and Exchange Commission
(the "Commission"). Such reports, proxy statements and other information can be
inspected and copied at the Public Reference Room of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the Commission's regional offices at
219 South Dearborn Street, Chicago, IL 60604; 26 Federal Plaza, New York, NY
10007; and 5757 Wilshire Boulevard, Los Angeles, CA 90036, at prescribed rates.
The Common Stock is quoted on the Nasdaq National Market System. Reports, proxy
statements, informational statements and other information concerning the
Company can be inspected at the offices of the National Association of
Securities Dealers, Inc. at 1735 K Street, N.W., Washington, D.C. 20006. The
Commission also maintains a Web site (http://www.sec.gov) that contains reports,
------------------
proxy statements and other information regarding registrants that file
electronically with the Commission.
The Company intends to furnish its stockholders with annual reports
containing additional financial statements and a report thereon by independent
certified public Auditors.
A copy of any document incorporated by reference in the Registration
Statement (not including exhibits to the information that is incorporated by
reference unless such exhibits are specifically incorporated by reference into
the information that the Registration Statement incorporates) of which this
Reoffer Prospectus forms a part but which is not delivered with this Reoffer
Prospectus will be provided by the Company without charge to any person
(including any beneficial owner) to whom this Reoffer Prospectus has been
delivered upon the oral or written request of such person. Such requests should
be directed to Bret Lawson, CacheFlow Inc., 650 Almanor Avenue, Sunnyvale, CA
94086. The Company's telephone number at that location is (408) 220-2200.
TABLE OF CONTENTS
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Page
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THE COMPANY.............................................. 3
RISK FACTORS............................................. 3
USE OF PROCEEDS.......................................... 3
REGISTERED STOCKHOLDERS.................................. 3
PLAN OF DISTRIBUTION..................................... 4
DOCUMENTS INCORPORATED BY REFERENCE...................... 4
INDEMNIFICATION.......................................... 5
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2
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THE COMPANY
CacheFlow Inc. (the "Company") designs, develops and markets
appliances that accelerate and manage the flow of information over the
Internet through a process called Internet caching. Caching in its most basic
form is a method for storing popular objects at a location separate from their
source and closer to the many individuals requesting those objects. There are
many examples of caching in everyday life. For example, it is inefficient to
go to the farm everytime you want a bottle of milk. That would be too costly,
and too slow. Instead you go to the local grocery store, where the grocer
maintains a cached inventory of milk, and is ready to offer it to customers
when they request it. An Internet cache extends this concept to information on
the Internet. An Internet cache stores Internet information physically closer
to users, eliminating the need to retrieve this information from its source
across the Internet each time it is requested. For example, without caching,
if 100 end users in the same enterprise each started their day by checking the
news headlines on CNN.com, 100 connections over the Internet from the
enterprise site to the CNN.com site would be made to retrieve identical
information. An Internet cache deployed on the enterprise site would store the
CNN information locally and serve each of those 100 requests, thereby reducing
the amount of traffic on the Internet, the load on the CNN server, and most
importantly, the response time experienced by the end users.
While there are several approaches to Internet caching, we sell Internet
caching appliances, which are specialized devices that are designed, or
purpose-built, for Internet caching. Our proprietary operating system, CacheOS,
operates directly on the hardware of our appliances and supports software that
we designed specifically for caching. We assemble our appliances using
components that we purchase from third-party manufacturers. Our appliances are
deployed by our Internet service provider and enterprise customers throughout
their networks as a way to cache information physically closer to the people
using these networks. Our appliances enable our customers to improve web
response times, deliver up-to-date web content, easily manage and administer
their networks, provide a high level of network security, and reduce overall
network costs.
The number of Internet users, Internet access devices and web pages
worldwide is expected to continue to grow rapidly. This growth, coupled with
the increasing complexity of web content, is expected to significantly increase
the amount of information transmitted across the Internet and corporate
intranets. The physical infrastructure of the Internet must therefore
accommodate sharply increased, often repetitive, traffic, as well as highly
unpredictable and event-driven usage patterns. Advances in communications
technology such as high-speed routers, switches and broadband access
technologies have improved the Internet's ability to move information quickly,
but these technologies do not reduce the amount of information that must be
moved from its source on the Internet to the user, shorten the physical
distance between source and user, or enable the analysis or control of web
content. Web servers, which are used to publish information on the Internet,
are becoming overloaded by a growing number of content requests, and slow web
response time remains a continuing problem that can have a significant
financial impact on corporate enterprises and Internet service providers. While
early approaches to caching reduced the physical distance over which
information is transmitted to the user by storing popular information closer to
the users who request it and removed much of the repetitive traffic from the
network, these approaches did not fully address the varied requirements of
Internet service providers, enterprises and users. Due to increasing network
traffic volumes, rising network complexity and heightened user expectations for
Internet performance, we believe that the market for Internet caching
appliances will grow rapidly. According to GartnerGroup, this market is
projected to grow from $92 million in 1999 to over $1 billion in 2003.
As of August 31, 1999, we had approximately 100 customers, including
Internet service providers such as Road Runner and germany.net, as well as
corporate enterprises such as Delta Airlines and Xerox. Our business strategy is
to be the leading provider of Internet caching solutions by continuing to
deliver high-performance, innovative Internet caching appliances. To implement
our strategy, we intend to take advantage of our focus on Internet caching to
target specific markets that are particularly well-suited for our appliances.
Using our technological expertise, we intend to continue to develop both the
software and hardware elements of our appliances. We intend to extend our
distribution channels by expanding our direct sales force and establishing
relationships with additional resellers, systems integrators and original
equipment manufacturers. We also intend to increase our investments in a broad
range of marketing and educational programs to build and establish the CacheFlow
brand.
We were incorporated in Delaware in March 1996. Our principal executive
offices are located at 650 Almanor Avenue, Sunnyvale, California 94086, and our
telephone number is (408) 220-2200.
We have a history of operating losses, and as of July 31, 1999, had an
accumulated deficit of approximately $26.7 million. We have never achieved
profitability in any quarter and anticipate that our operating expenses will
increase substantially in the future.
The Company's executive offices are located at 650 Almanor Avenue,
Sunnyvale, CA 94086. The Company's telephone number is (408) 220-2200.
RISK FACTORS
An investment in our common stock involves a high degree of risk. You
should carefully consider the following risk factors and the other information
in this prospectus before investing in our common stock. Our business,
financial condition and results of operations could be seriously harmed by any
of the following risks. The trading price of our common stock could decline
due to any of these risks, and you may lose all or part of your investment.
Risks Related to Our Business
We only began selling our products in May 1998 and, as a result, you may
have difficulty evaluating our business and operating results.
We were founded in March 1996 and did not sell any products or services
until May 1998. The market for our products is unproven. Our limited operating
history makes an evaluation of our future prospects very difficult. We expect
to encounter risks and difficulties frequently encountered by early stage
companies in new and rapidly evolving markets. Many of these risks are
described in more detail in this "Risk Factors" section. Our business will be
seriously harmed if we do not successfully execute our business strategy or if
we do not successfully address the risks we face.
We have a history of losses, expect to incur future losses and may never
achieve profitability, which could result in the decline of the market price
of our common stock.
We incurred net losses of $1.4 million from our inception in March 1996
through April 30, 1997, $5.5 million for the fiscal year ended April 30, 1998,
$13.2 million for the fiscal year ended April 30, 1999, and $6.6 million for
the quarter ended July 31, 1999. As of July 31, 1999, we had an accumulated
deficit of approximately $26.7 million. We have not had a profitable quarter
since our inception and we expect to continue to incur net losses in the
future. To date, we have funded our operations from the sale of equity
securities and through bank loans and equipment leases.
We expect to continue to incur significant operating expenses and, as a
result, we will need to generate significant revenues if we are to achieve
profitability. We may never achieve profitability. We expect to incur
substantial non-cash costs relating to the amortization of deferred
compensation, which will contribute to our net losses. As of July 31, 1999, we
had an aggregate of $21.3 million of deferred compensation to be amortized.
Between August 1, 1999 and November 18, 1999, we recorded additional deferred
compensation of $39.6 million with respect to stock option grants made during
this period and a charge for $2.0 million related to the beneficial conversion
feature of the Series D Preferred Stock issued on November 1, 1999.
Because we expect our sales to fluctuate and our costs are relatively fixed
in the short term, our ability to forecast our quarterly operating results is
limited, and if our quarterly operating results are below the expectations of
analysts or investors, the market price of our common stock may decline.
Our net sales and operating results are likely to vary significantly from
quarter to quarter. We believe that quarter-to-quarter comparisons of our
operating results should not be relied upon as indicators of future
performance. It is likely that in some future quarter or quarters, our
operating results will be below the expectations of public market analysts or
investors. When this occurs, the price of our common stock could decrease
significantly. A number of factors are likely to cause variations in our net
sales and operating results, including factors described in this "Risk
Factors" section and elsewhere in this Prospectus.
We cannot reliably forecast our future quarterly sales for several reasons,
including:
. sales in any quarter are dependent on orders booked and shipped in that
quarter, and we often operate with very little order backlog;
. we have a limited operating history, and the market in which we compete
is relatively new and rapidly evolving;
. we expect that, for the foreseeable future, most of our sales will come
from a small number of customers, so delays or cancellations of orders
by a few customers can significantly impact net sales within a quarter;
and
. our sales cycle varies substantially from customer to customer.
A high percentage of our expenses, including those related to research and
development, sales and marketing, general and administrative functions and
amortization of deferred compensation, are essentially fixed in the short
term. As a result, if our net sales are less than forecasted, our quarterly
operating results are likely to be seriously harmed.
We expect increased competition and, if we do not compete effectively, we
could experience a loss in our market share and sales.
The market for Internet caching solutions is intensely competitive,
evolving and subject to rapid technological change. The intensity of
competition is expected to increase in the future. Increased competition is
likely to result in price reductions, reduced gross margins and loss of market
share, any one of which could seriously harm our business. We may not be able
to compete successfully against current or future competitors and we cannot be
certain that competitive pressures we face will not seriously harm our
business. Our competitors vary in size and in the scope and breadth of the
products and services they offer. We primarily encounter competition from a
variety of companies, including Cisco Systems, Inktomi, Network Appliance,
Novell and various others using products derived from publicly available, free
software called Squid. In addition, because there are relatively low barriers
to entry in the Internet caching market, we expect additional competition from
other established and emerging companies as the market for Internet caching
continues to develop and expand.
Many of our current and potential competitors have longer operating
histories, significantly greater financial, technical, marketing and other
resources, significantly greater name recognition and a larger installed base
of customers than we do. In addition, many of our competitors have
well-established relationships with our current and potential customers and have
extensive knowledge of our industry. As a result, our competitors may be able to
respond more quickly to new or emerging technologies and changes in customer
requirements, or to devote greater resources to the development, marketing,
promotion and sale of their products than we can. Current and potential
competitors have established or may establish cooperative relationships among
themselves or with third parties to increase the market acceptance of their
products. In addition, our competitors may be able to replicate our products,
make more attractive offers to existing and potential employees and strategic
partners, more quickly develop new products or enhance existing products and
services, or bundle Internet caching appliances in a manner that we cannot
provide. Accordingly, it is possible that new competitors or alliances among
competitors may emerge and rapidly acquire significant market share. We also
expect that competition will increase as a result of industry consolidation.
Our variable sales cycle makes it difficult to predict the timing of a sale
or whether a sale will be made, which makes our quarterly operating results
less predictable.
Because customers have differing views on the strategic importance of
implementing Internet caching appliances, the time required to educate
customers and sell our products can vary widely. As a result, the evaluation,
testing, implementation and acceptance procedures undertaken by customers can
vary, resulting in a variable sales cycle, which typically ranges from two to
six months. While our customers are evaluating our products and before they
place an order with us, we may incur substantial sales and marketing expenses
and expend significant management efforts. Sales cycles for our products that
are sold to enterprises have traditionally been longer than sales cycles for
our products that are sold to Internet service providers, or ISPs. We expect
that sales to enterprises will increase as a percentage of our total sales
over time, and, accordingly, we expect that the average sales cycle for our
products will increase. In addition, purchases of our products are frequently
subject to unplanned processing and other delays, particularly with respect to
larger customers for whom our products represent a very small percentage of
their overall purchase activity. Large customers typically require approvals
at a number of management levels within their organizations, and, therefore,
frequently have longer sales cycles.
We are entirely dependent on market acceptance of our Internet caching
appliance product family and, as a result, a decline in sales or lack of
market acceptance of these products could cause our sales to fall.
To date, our Internet caching appliance product family and related services
have accounted for all of our net sales. We anticipate that revenues from our
current product family and services will continue to constitute substantially
all of our net sales for the foreseeable future. As a result, a decline in the
prices of, or demand for, our current product family and services, or their
failure to achieve broad market acceptance, would seriously harm our business.
The CacheFlow 100 Series, 500 Series, 3000 Series and 5000 Series products are
the only products that we currently sell. Our CacheFlow 1000 Series and 2000
Series products, which have historically accounted for a substantial portion
of our net sales, have been discontinued and replaced by our recently
introduced CacheFlow 3000 Series products. We introduced our 3000 Series
product in September 1999 and our 5000 Series product in June 1999. We cannot
be certain that our CacheFlow 3000 Series or 5000 Series products will achieve
any significant degree of market acceptance.
If we are unable to introduce new products and services that achieve market
acceptance quickly, we could lose existing and potential customers and our
sales would decrease.
We need to develop and introduce new products and enhancements to existing
products on a timely basis that keep pace with technological developments and
emerging industry standards and address the increasingly sophisticated needs
of our customers. We intend to extend the offerings under our product family
in the future, both by introducing new products and by introducing
enhancements to our existing products. However, we may experience difficulties
in doing so, and our inability to timely and cost-effectively introduce new
products and product enhancements, or the failure of these new products or
enhancements to achieve market acceptance, could seriously harm our business.
Life cycles of our products are difficult to predict, because the market for
our products is new and evolving and characterized by rapid technological
change, frequent enhancements to existing products and new product
introductions, changing customer needs and evolving industry standards. The
introduction of competing products that employ new technologies and emerging
industry standards could render our products and services obsolete and
unmarketable or shorten the life cycles of our products and services. The
emergence of new industry standards might require us to redesign our products.
If our products are not in compliance with industry standards that become
widespread, our customers and potential customers may not purchase our
products.
Because we depend on several third-party manufacturers to build portions of
our products, we are susceptible to manufacturing delays and sudden price
increases, which could prevent us from shipping customer orders on time, if at
all, and may result in the loss of sales and customers.
We rely on several third-party manufacturers to build portions of our
products. If we are unable to manage our relationships with these
manufacturers effectively or if these manufacturers fail to meet our future
requirements for timely delivery, our business would be seriously harmed. We
have no written agreement with any of these manufacturers and they fulfill our
supply requirements on the basis of individual purchase orders from us.
Accordingly, these manufacturers are not obligated to continue to fulfill our
supply requirements, and the prices we are charged for these components could
be increased on short notice. Any interruption in the operations of any one of
these manufacturers would adversely affect our ability to meet our scheduled
product deliveries to our customers, which could cause the loss of existing or
potential customers and would seriously harm our business. In addition, the
products that these manufacturers build for us may not be sufficient in
quality or in quantity to meet our needs. Our delivery requirements could
exceed the capacity of these manufacturers, which would likely result in
manufacturing delays, which could result in lost sales and the loss of
existing and potential customers. We cannot be certain that these
manufacturers or any other manufacturer will be able to meet the technological
or delivery requirements of our current products or any future products that
we may develop and introduce. The inability of these manufacturers or any
other of our contract manufacturers in the future to provide us with adequate
supplies of high-quality products, or the loss of any of our contract
manufacturers in the future, would cause a delay in our ability to fulfill
customer orders while we attempt to obtain a replacement manufacturer. Delays
associated with our attempting to replace or our inability to replace one of
our manufacturers would seriously harm our business.
We may experience production delays, quality control problems and assembly
capacity constraints in assembling our products, which could result in a
decline of sales.
We currently conduct all final assembly and testing of our products at our
headquarters in Sunnyvale, California. We plan to transition final assembly to
third parties in the future. If we are unable to identify a third-party final
assembler, we would be required to make additional capital investments in new
or existing assembly facilities. To the extent any capital investments are
required, our gross margins and, as a result, our business could be seriously
harmed. We may experience production interruptions or quality control problems
in connection with any transition of final assembly, either of which would
seriously harm our business. Either we or any third-party assembler may
experience substantial assembly capacity constraints. In the event of any
capacity constraints we may be unable to accept certain orders from, and
deliver products in a timely manner to, our customers. This could result in
the loss of existing or potential customers and would seriously harm our
business.
Because some of the key components in our products come from limited
sources of supply, we are susceptible to supply shortages or supply changes,
which could disrupt or delay our scheduled product deliveries to our customers
and may result in the loss of sales and customers.
We currently purchase several key parts and components used in the
manufacture of our Internet caching appliances from limited sources of supply.
For example, we purchase custom power supplies and Intel hardware for use in
all of our Internet caching appliances. The introduction by Intel or others of
new versions of their hardware, particularly if not anticipated by us, could
require us to expend significant resources to incorporate this new hardware
into our products. In addition, if Intel or others were to discontinue
production of a necessary part or component, we would be required to expend
significant resources in locating and integrating replacement parts or
components from another vendor. Qualifying additional suppliers for limited
source components can be time-consuming and expensive. Any of these events
would be disruptive to us and could seriously harm our business. Further,
financial or other difficulties faced by these suppliers or unanticipated
demand for these parts or components could limit the availability of these
parts or components. Any interruption or delay in the supply of any of these
parts or components, or the inability to obtain these parts or components from
alternate sources at acceptable prices and within a reasonable amount of time,
would seriously harm our ability to meet our scheduled product deliveries to
our customers.
Our use of rolling forecasts could lead to excess or inadequate inventory,
which could seriously harm our business.
We use rolling forecasts based on anticipated product orders, product order
history and backlog to determine our materials requirements. Lead times for
the parts and components that we order vary significantly and depend on
factors such as the specific supplier, contract terms and demand for a
component at a given time. If actual orders do not match our forecasts, we may
have excess or inadequate inventory of some materials and components, which
would increase our costs or prevent or delay product shipments and could
seriously harm our business.
We are dependent upon key personnel and we must attract, assimilate and
retain other highly qualified personnel in the future or our ability to
execute our business strategy or generate sales could be harmed.
Our business could be seriously disrupted if we do not maintain the
continued service of our senior management, research and development and sales
personnel. All of our employees are employed on an "at-will" basis. Our
ability to conduct our business also depends on our continuing ability to
attract, hire, train and retain a substantial number of highly skilled
managerial, technical, sales, marketing and customer support personnel. New
hires frequently require extensive training before they achieve desired levels
of productivity, so a high employee turnover rate could seriously impair our
ability to operate and manage our business. We are particularly dependent on
hiring additional personnel to increase our direct sales and research and
development organizations. Competition for personnel is intense, especially in
the San Francisco Bay Area, and we may fail to retain our key employees, or
attract, assimilate or retain other highly qualified personnel in the future.
If so, our business would be seriously harmed.
Our management team is new, and our business could be seriously harmed if
integration of our management team into our company is not successful.
We have recently experienced significant transition in our management team.
Brian NeSmith, our President and Chief Executive Officer, joined us in March
1999. Stuart Aaron, our Vice President of Marketing and Product Management,
joined us in April 1999. Terry Printy, our Vice President of Customer Support,
joined us in June 1999. Alan Robin, our Senior Vice President of Sales, and
Michael Johnson, our Vice President and Chief Financial Officer, joined us in
July 1999. Nai-Ting Hsu, our Senior Vice President of Research and
Development, joined us in October 1999. Our business could be seriously harmed
if integration of our management team into our company is not successful. We
expect that it will take time for our new management team to integrate into
our company and it is too early to predict whether these changes will be
successful.
The Nokia IP litigation could divert our management's focus and could be
costly and time-consuming to defend, and a judgment against us could harm our
business.
On September 16, 1999, Nokia IP filed a lawsuit in Santa Clara County
Superior Court naming CacheFlow Inc., Brian NeSmith, our President and Chief
Executive Officer and a director, and Alan Robin, our Senior Vice President of
Sales, as defendants. Messrs. NeSmith and Robin were officers and employees of
Ipsilon Networks, Inc., which was acquired by Nokia in December 1997.
Following the acquisition, Messrs. NeSmith and Robin became employees of
Nokia. In essence, Nokia claims that we and Messrs. NeSmith and Robin acted
improperly in hiring Nokia's employees. Nokia also claims that Mr. NeSmith has
violated a non-competition provision contained in his employment agreement
with Nokia. Nokia is seeking compensatory and punitive damages and orders
prohibiting the defendants from disclosing or using Nokia's trade secrets or
confidential information and acting in a manner that violates Messrs.
NeSmith's and Robin's contractual and fiduciary duties to Nokia. We and the
other defendants have filed an answer to this complaint denying the
allegations and believe that there are meritorious defenses to the asserted
claims. On November 14, 1999, we entered into a term sheet with Nokia to
settle the litigation. The term sheet does not require us to make any monetary
payments to Nokia. We agreed not to hire or solicit Nokia employees for six
months after November 14, 1999. We are currently negotiating a definitive
settlement agreement with Nokia. If we are unable to negotiate the definitive
settlement agreement or to enforce the term sheet, we intend to defend the
litigation vigorously. The outcome of litigation is inherently unpredictable
and the results of the litigation may not be favorable to us or the other
defendants and could include monetary damages and a court order restricting
our ability to hire Nokia's employees. Regardless of the ultimate outcome, the
litigation could result in substantial expense to us and significant diversion
of effort by our managerial and other personnel.
In order to manage our growth and expansion, we will need to improve and
implement new systems, procedures and controls, which could be time-consuming
and costly.
We have expanded our operations rapidly since the inception of our company
and we currently intend to continue this expansion. This expansion of our
operations has placed and is expected to continue to place a significant
strain upon our management systems and financial and operational resources. If
we are unable to effectively manage future growth and expansion, our business
will be seriously harmed. We currently have research and development
facilities in Sunnyvale, California; Redmond, Washington and Waterloo,
Ontario, Canada. The coordination and management of these product development
organizations that are located at different sites requires significant
management attention and coordination, particularly from our managerial and
engineering organizations. If we are unable to coordinate and manage these
separate development organizations, our business will be seriously harmed.
Our ability to compete effectively and to manage future expansion of our
operations will require us to continue to improve our financial and management
controls, reporting systems and procedures on a timely basis, and expand, train
and manage our employee work force. The number of our employees increased from
40 at April 30, 1998 to 126 at August 31, 1999, and we plan to further increase
our headcount. We believe that our existing managerial and other systems will
not be adequate to support our anticipated growth, and we are currently planning
to implement a new enterprise resource planning software system that will
replace substantially all of our business and manufacturing systems. We may
encounter difficulties in transitioning to the new enterprise resource planning
software system. Even after we implement this system, our personnel, systems,
procedures and controls may be inadequate to support our future operations.
Because we depend on a limited number of customers, our quarterly operating
results may decline substantially if we are unable to complete one or more
large sales.
To date, a significant portion of our net sales has resulted from a small
number of customers placing relatively large orders. For the fiscal year ended
April 30, 1999, three customers accounted for approximately 33% of our net
sales. For the quarter ended July 31, 1999, two customers accounted for
approximately 22% of our net sales. We anticipate that our operating results
for any given period will continue to depend to a significant extent on large
orders from a small number of customers. As a result, our quarterly operating
results may fluctuate significantly if we are unable to complete one or more
substantial sales in a quarter.
If we fail to expand our direct and indirect sales channels, our sales will
not grow.
We need to substantially expand our direct sales operations, both
domestically and internationally, in order to increase market awareness and
sales of our products and services. Our products and services require a
sophisticated sales effort targeted at senior management of our customers. We
have recently expanded our direct sales force and plan to hire additional
sales personnel. New hires will require extensive training and typically take
several months to achieve productivity. Competition for qualified sales
personnel is intense, and we might not be able to hire the kind and number of
sales personnel we are targeting. If we fail to increase our direct sales
capabilities as we have planned, our business will be seriously harmed.
We also need to expand our indirect sales channels, and if we fail to do so
our ability to market and sell our products could be seriously harmed. We
depend on our indirect sales channels, which include resellers, systems
integrators and original equipment manufacturers, for a significant percentage
of our net sales. For example, for the fiscal year ended April 30, 1999,
approximately 41% of our net sales resulted from sales through indirect sales
channels. For the quarter ended July 31, 1999, approximately 39% of our net
sales resulted from sales through indirect channels. Our agreements with our
indirect channel partners are generally not exclusive and in many cases may be
terminated by either party without cause. Many of these indirect channel
partners do not have minimum purchase or resale requirements and carry
products that are competitive with our products. These resellers may not give
a high priority to the marketing of our products or may not continue to carry
our products. They may give a higher priority to other products, including the
products of competitors. We may not retain any of our current indirect channel
partners or successfully recruit new indirect channel partners. Events or
occurrences of this nature could seriously harm our business.
If we are unable to expand our customer service and support organization,
we may not be able to retain our existing customers or attract new customers,
and our sales may decline.
We currently have a small customer service and support organization and
will need to increase our capabilities to support new customers and the
expanding needs of our existing customers. If we are unable to expand our
customer service and support organization, we may not be able to retain our
existing customers or attract new customers.
We may not be able to enter into new international markets or generate a
significant level of sales from the international markets in which we
currently operate.
For the fiscal year ended April 30, 1999, we derived approximately 44% of our
net sales from customers outside of the United States and Canada. For the
quarter ended July 31, 1999, sales to customers outside of the United States and
Canada accounted for approximately 48% of our net sales. We expect international
customers to continue to account for a significant percentage of net sales in
the future, but we may fail to maintain or increase international market demand
for our products. Also, because our international sales are currently
denominated in United States dollars, an increase in the value of the United
States dollar relative to foreign currencies could make our products more
expensive and, therefore, potentially less competitive in international markets,
and this would decrease our international sales. Our ability to expand
international sales depends on our ability to expand our international
operations, including establishing manufacturing assembly capabilities overseas,
hire international personnel and recruit additional international resellers. To
the extent we are unable to do so in a timely manner, our growth, if any, in
international sales will be limited and our business could be seriously harmed.
In addition, if we fail to expand and improve our worldwide operating systems,
our ability to accurately forecast sales demand, manage our supply chain and
record and report financial and management information will be adversely
affected, seriously harming our business.
Undetected software or hardware errors could cause us to incur significant
warranty and repair costs and negatively impact the market acceptance of our
products.
Our products may contain undetected software or hardware errors. These
errors may cause us to incur significant warranty and repair costs, divert the
attention of our engineering personnel from our product development efforts
and cause significant customer relations problems. The occurrence of these
problems could result in the delay or loss of market acceptance of our
products and would likely seriously harm our business. All of our products
operate on our internally developed CacheOS operating system. As a result, any
error in CacheOS will affect all of our products. We have experienced minor
errors in the past in connection with new products. We expect that errors will
be found from time to time in new or enhanced products after commencement of
commercial shipments.
We could be subject to product liability claims, which are time-consuming
and costly to defend.
Our customers install our Internet caching appliances directly into their
network infrastructures. Any errors, defects or other performance problems
with our Internet caching appliance products could negatively impact our
customers' internal networks, resulting in financial or other damages to our
customers. Our customers may then seek damages from us for their losses.
Although our license agreements typically contain provisions designed to limit
our exposure to claims, unfavorable judicial decisions could negate these
limitation of liability provisions. We have not experienced any product
liability claims to date. However, a product liability claim brought against
us, even if not successful, would likely be time-consuming and costly. A
product liability claim could seriously harm our business reputation.
Our business could be affected by Year 2000 issues, which could disrupt or
delay our scheduled product deliveries to customers or affect customer demand
for our products and result in the loss of sales and customers.
The "Year 2000 issue" refers generally to the problems that some software
and hardware may have in determining the correct century for the year. For
example, software with date-sensitive functions that is not Year 2000
compliant may not be able to distinguish whether "00" means 1900 or 2000,
which may result in failures or the creation of erroneous results. Our
products and internal systems and those of our suppliers and customers may be
affected by Year 2000 issues. If they are, our business would likely be
harmed. For a discussion of our efforts regarding Year 2000 issues, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Year 2000 Readiness."
If the protection of our proprietary technology is inadequate, our
competitors may gain access to our technology, and our market share could
decline.
We depend significantly on our ability to develop and maintain the
proprietary aspects of our technology. If we are unable to do so, our business
would be seriously harmed. For a discussion of our efforts to protect our
proprietary technology, see "Business--Intellectual Property and Other
Proprietary Rights."
If we are unable to raise additional capital, our ability to effectively
manage our growth or enhance our products could be harmed.
At July 31, 1999, we had approximately $17.8 million in cash and cash
equivalents. We believe that this amount, combined with proceeds from the
initial public offering, will enable us to meet our capital requirements for at
least the next twelve months. However, if cash is used for acquisitions or other
unanticipated uses, we may need additional capital. The development and
marketing of new products and the expansion of indirect channels and associated
support personnel will require a significant commitment of resources. In
addition, if the market for Internet caching appliances develops at a slower
pace than anticipated or if we fail to establish significant market share and
achieve a meaningful level of sales, we could be required to raise substantial
additional capital. We cannot be certain that additional capital will be
available to us on favorable terms, or at all. If we are unable to raise
additional capital when we require it, our business would be seriously harmed.
Risks Related to the Internet Caching Appliance Industry
The market for Internet caching appliances is new and unpredictable, and if
this market does not develop as we anticipate, our sales may not grow.
Sales of our products depend on increased demand for Internet caching
appliances. The market for Internet caching appliances is a new and rapidly
evolving market. If the market for Internet caching appliances fails to grow
as we anticipate, or grows more slowly than we anticipate, our business will
be seriously harmed. Because this market is new, we cannot predict its
potential size or future growth rate. Our ability to generate net sales in
this emerging market will depend on, among other things, our ability to:
. educate potential end users and indirect channel partners about the
benefits of Internet caching appliances;
. continue to develop our direct sales channel; and
. establish and maintain relationships with leading indirect channel
partners.
The legal environment in which we operate is uncertain and claims against
us could cause our business to suffer.
Our Internet caching appliances operate in part by storing material
available on the Internet and making this material available to end users from
our appliance. This creates the potential for claims to be made against us,
either directly or through contractual indemnification provisions with
customers, for defamation, negligence, copyright or trademark infringement,
personal injury, invasion of privacy or other legal theories based on the
nature, content or copying of these materials. It is also possible that if any
information provided through any of our products contains errors, third
parties could make claims against us for losses incurred in reliance on this
information. Our insurance may not cover potential claims of this type or be
adequate to protect us from all liability that may be imposed.
The adoption of laws that impose taxes on Internet commerce could adversely
affect our business.
Tax authorities at the international, federal, state and local levels are
currently reviewing the appropriate tax treatment of companies engaged in
Internet commerce. Many of our customers are engaged in Internet commerce, and
any taxes imposed on them may adversely impact their businesses and may result
in order cancellations or postponements of product purchases by them, which
would seriously harm our business. Laws regarding the Internet remain largely
unsettled and the adoption or modification of laws or regulations relating to
the Internet, or interpretations of existing law, could seriously harm our
business.
Because the sales of our products are dependent on the increased use and
widespread adoption of the Internet, if use of the Internet does not develop
as we anticipate, our sales may not grow.
Sales of our products depend on the increased use and widespread adoption
of the Internet. Our business would be seriously harmed if the use of the
Internet does not increase as anticipated or if our ISP customers' Internet-
related services are not well received by the marketplace. The acceptance and
use of the Internet in international markets, where we derive a large portion
of our net sales, are in earlier stages of development than in the United
States. If the Internet fails to gain sufficient acceptance in international
markets, our business could be seriously harmed. The resolution of various
issues concerning the Internet will likely affect use and adoption of the
Internet. These issues include security, reliability, capacity, congestion,
cost, ease of access and quality of service. Even if these issues are
resolved, if the market for Internet-related products and services fails to
develop, or develops at a slower pace than anticipated, our business would be
seriously harmed.
Governmental regulation of the communications industry may negatively
affect our customers and result in decreased demand for our products, which
would cause a decline in our sales.
The jurisdiction of the Federal Communications Commission, or FCC, extends
to the communications industry, to our customers and to the products that our
customers sell. Future regulations set forth by the FCC or other regulatory
bodies may adversely affect Internet-related industries. Regulation of our
customers may seriously harm our business. For example, FCC regulatory
policies that affect the availability of data and Internet services may impede
our customers' penetration into some markets. In addition, international
regulatory bodies are beginning to adopt standards for the communications
industry. The delays that these governmental processes entail may cause order
cancellations or postponements of product purchases by our customers, which
would seriously harm our business.
Risks Related to the Securities Markets
Our stock price may be volatile and, as a result, you may have difficulty
evaluating the value of our stock, and the market price of our stock may
decline.
Prior to the initial public offering in November 1999, you could not buy or
sell our common stock publicly. An active public market for our common stock may
not develop or be sustained after this offering. The market price of the common
stock may fluctuate significantly in response to the following factors:
. variations in our quarterly operating results;
. changes in financial estimates or investment recommendations by
securities analysts;
. changes in market valuations of Internet-related and networking
companies;
. announcements by us or our competitors of significant contracts,
acquisitions, strategic partnerships, joint ventures or capital
commitments;
. loss of a major customer;
. additions or departures of key personnel; and
. fluctuations in stock market prices and volumes.
Our stock price volatility may make us susceptible to class action
litigation, which is time-consuming and costly to defend.
In the past, securities class action litigation has often been brought
against a company following periods of volatility in the market price of the
company's securities. We may in the future be the target of similar
litigation. If we become engaged in securities class action litigation, our
management's attention and resources may be diverted and we may incur
substantial costs, resulting in serious harm to our business.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the offering
hereunder. All expenses of registration incurred in connection with this
offering are being borne by the Company, but all selling and other expenses
incurred by the individual Registered Stockholders will be borne by such
Registered Stockholders.
REGISTERED STOCKHOLDERS
The Reoffer Prospectus relates to shares of Common Stock which have
been acquired by certain key employees (the "Registered Stockholders") of the
Company. Registered Stockholders acquired shares of Common Stock to be offered
hereunder pursuant to the exercise of options granted under the 1996 Stock
Option Plan, except that Mr. Malcolm acquired shares under options granted
outside of any plan.
The following table sets forth certain information with respect to the
Registered Stockholders as of November 22, 1999:
The following table sets forth certain information with respect to the
Registered Stockholders as of November 30, 1999:
<TABLE>
<CAPTION>
Number of Shares Number of Shares Number of
Registered Stockholder's Position with Owned Before to be Offered Shares Owned
Stockholder Company Offering Hereby After Offering*
- ---------------- ----------------------------- ------------------- ------------------ ----------------
<S> <C> <C> <C> <C>
1% Holders
Brian NeSmith President, Chief Executive 2,000,000 2,000,000 0
Officer, Director
Michael Malcolm Chairman, Director 5,163,785 1,100,000 4,063,785
Nai-Ting Hsu Senior Vice President,
Research and Development 420,000 410,000 10,000
Terry L. Printy Vice President, Customer
Support 112,500 37,500 75,000
David Hanna Director 1,626,692 250,000 1,376,692
Other Registered Employees N/A 219,681 N/A
Stockholders
holding less than
1% of the Capital
Stock
</TABLE>
3
<PAGE>
================================================================================
*Assumes sale of all of the shares offered; however, the Registered Stockholders
may or may not sell all or any of the offered shares.
PLAN OF DISTRIBUTION
The shares of Common Stock covered by this Reoffer Prospectus are
being registered by the Company for the account of the Registered Stockholders.
The Selling Stockholder(s) may sell the shares in one or more
transactions (which may involve one or more block transactions) on the Nasdaq
National Market, in sales occurring in the public market off such system, in
privately negotiated transactions or in a combination of such transactions.
Each such sale may be made either at market prices prevailing at the time of
such sale or at negotiated prices. The Selling Stockholder(s) may sell some or
all of the shares in transactions involving broker-dealers, who may act as agent
or acquire the shares as principal. Any broker-dealer participating in such
transactions as agent may receive commissions from the Selling Stockholder(s)
(and, if they act as agent for the purchaser of such shares, from such
purchaser). The Selling Stockholder(s) will pay usual and customary brokerage
fees. Broker-dealers may agree with the Selling Stockholder(s) to sell a
specified number of shares at a stipulated price per share and, to the extent
such a broker-dealer is unable to do so acting as agent for the Selling
Stockholder(s), to purchase as principals any unsold shares at the price
required to fulfill the respective broker-dealer's commitment to the Selling
Stockholder(s). Broker-dealers who acquire shares as principals may thereafter
resell such shares from time to time in transactions (which may involve cross
and block transactions and which may involve sales to and through other broker-
dealers, including transactions of the nature described above) in the over-the-
counter market, negotiated transactions or otherwise, at market prices
prevailing at the time of sale or at negotiated prices, and in connection with
such resales may pay to or receive from the purchasers of such shares
commissions.
To the knowledge of the Company, there is currently no agreement with
any broker or dealer respecting the sale of the shares offered hereby. Upon the
sale of any such shares, the Selling Stockholder(s) or anyone effecting sales on
behalf of the Selling Stockholder(s) may be deemed an underwriter, as that term
is defined under the Securities Act of 1933, as amended. The Company will pay
all expenses of preparing and reproducing this Reoffer Prospectus, but will not
receive the proceeds from sales by the Registered Stockholders. Sales will be
made at prices prevailing at the time of such sales.
The Company is bearing all costs relating to the registration of the
shares. Any commissions or other fees payable to broker-dealers in connection
with any sale of the shares will be borne by the Selling Stockholder(s) or other
party selling such shares. In order to comply with certain states' securities
laws, if applicable, the shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In certain states the shares may not
be sold unless the shares have been registered or qualified for sale in such
state, or unless an exemption form registration or qualification is available
and is obtained.
DOCUMENTS INCORPORATED BY REFERENCE
CacheFlow Inc. hereby incorporates by reference into this Registration
Statement the following documents previously filed with the Commission:
(a) CacheFlow Inc.'s prospectus filed with the SEC pursuant to Rule 424(b)
under the Securities Act of 1933, as amended (the "1933 Act"), in
connection with Registration Statement No. 333-87997 on Form S-1 filed
with the SEC on September 28, 1999, together with any and all
amendments thereto, in which there are set forth audited financial
statements for CacheFlow Inc.'s fiscal years ended April 30, 1997,
1998, and 1999 and
4
<PAGE>
(b) The description of CacheFlow Inc.'s outstanding Common Stock contained
in the Registrant's Registration Statement No. 000-28139 on Form 8-
A12G filed with the SEC on November 16, 1999, pursuant to Section 12
of the 1934 Act, including any amendment or report filed for the
purpose of updating such description.
All of such documents are on file with the Commission. All documents
subsequently filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act prior to the filing of a post-effective amendment which
indicates that all securities to be offered pursuant hereto have been sold or
which deregisters all such securities then remaining unsold shall be deemed to
be incorporated by reference in this Prospectus and to be a part hereof from the
date of the filing of such documents.
INDEMNIFICATION
Section 145 of the Delaware General Corporation Law authorizes a court
to award or a corporation's Board of Directors to grant indemnification to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the 1933 Act. CacheFlow
Inc.'s Bylaws provide for mandatory indemnification of its directors and
officers and permissible indemnification of employees and other agents to the
maximum extent permitted by the Delaware General Corporation Law. CacheFlow
Inc.'s Certificate of Incorporation provides that, under Delaware law, its
directors shall not be liable for monetary damages for breach of their fiduciary
duty as directors to CacheFlow Inc. and its stockholders. This provision in the
Certificate of Incorporation does not eliminate the fiduciary duty of the
directors, and, in appropriate circumstances, equitable remedies such as
injunctive or other forms of non-monetary relief will remain available under
Delaware law. In addition, each director will continue to be subject to
liability for breach of the director's duty of loyalty to CacheFlow Inc. for
acts or omissions not in good faith or involving intentional misconduct, for
knowing violations of law, for actions leading to improper personal benefit to
the director and for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Delaware law. The provision also does not
affect a director's responsibilities under any other law, such as the federal
securities laws or state or federal environmental laws. CacheFlow Inc. has
entered into Indemnification Agreements with its officers and directors. The
Indemnification Agreements provide CacheFlow Inc.'s officers and directors with
further indemnification to the maximum extent permitted by the Delaware General
Corporation Law.
5
<PAGE>
PART II
Information Required in the Registration Statement
Item 3. Incorporation of Documents by Reference
---------------------------------------
CacheFlow Inc. (the "Registrant") hereby incorporates by reference
into this Registration Statement the following documents previously filed with
the Securities and Exchange Commission (the "SEC"):
(a) The Registrant's prospectus filed with the SEC pursuant to Rule
424(b) under the Securities Act of 1933, as amended (the "1933
Act"), in connection with Registration Statement No. 333-87997 on
Form S-1 filed with the SEC on September 28, 1999, together with
any and all amendments thereto, in which there are set forth
audited financial statements for the Registrant's fiscal years
ended April 30, 1997, 1998, and 1999 and
(b) The description of the Registrant's outstanding Common Stock
contained in the Registrant's Registration Statement No. 000-
28139 on Form 8-A12G filed with the SEC on November 16, 1999,
pursuant to Section 12 of the 1934 Act, including any amendment
or report filed for the purpose of updating such description.
All reports and definitive proxy or information statements filed
pursuant to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act after the date of
this Registration Statement and prior to the filing of a post-effective
amendment which indicates that all securities offered hereby have been sold or
which deregisters all securities then remaining unsold shall be deemed to be
incorporated by reference into this Registration Statement and to be a part
hereof from the date of filing of such documents.
Item 4. Description of Securities
-------------------------
Not Applicable.
Item 5. Interests of Named Experts and Counsel
--------------------------------------
Not Applicable.
Item 6. Indemnification of Directors and Officers
-----------------------------------------
Section 145 of the Delaware General Corporation Law authorizes a court
to award or a corporation's Board of Directors to grant indemnification to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the 1933 Act. The
Registrant's Bylaws provide for mandatory indemnification of its directors and
permissible indemnification of officers, employees and other agents to the
maximum extent permitted by the Delaware General Corporation Law. The
Registrant's Certificate of Incorporation provides that, pursuant to Delaware
law, its directors shall not be liable for monetary damages for breach of their
fiduciary duty as directors to the Registrant and its stockholders. This
provision in the Certificate of Incorporation does not eliminate the fiduciary
duty of the directors, and, in appropriate circumstances, equitable remedies
such as injunctive or other forms of non-monetary relief will remain available
under Delaware law. In addition, each director will continue to be subject to
liability for breach of the director's duty of loyalty to the Registrant for
acts or omissions not in good faith or involving intentional misconduct, for
knowing violations of law, for actions leading to improper personal benefit to
the director and for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Delaware law. The provision also does not
affect a director's responsibilities under any other law, such as the federal
securities laws or state or federal environmental laws. The Registrant has
entered into Indemnification Agreements with its directors. The Indemnification
Agreements provide the Registrant's directors with further indemnification to
the maximum extent permitted by the Delaware General Corporation Law.
II-1
<PAGE>
Item 7. Exemption from Registration Claimed
-----------------------------------
The sale and issuance of securities to the registered stockholders by
CacheFlow Inc. to whom the shares offered for resale pursuant to this
Registration Statement were sold were in each case deemed to be exempt from
registration under the Securities Act of 1933 by virtue of Section 4(2) thereof.
Item 8. Exhibits
--------
Exhibit Number Exhibit
- -------------- -------
4 Instrument Defining Rights of Stockholders. Reference is
made to Registrant's Registration Statement No. 000-28139 on
Form 8-A12G, which is incorporated herein by reference
pursuant to Item 3(b) of this Registration Statement.
5 Opinion and consent of Gunderson Dettmer Stough Villeneuve
Franklin & Hachigian, LLP.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Gunderson Dettmer Stough Villeneuve Franklin &
Hachigian, LLP is contained in Exhibit 5.
24 Power of Attorney. Reference is made to page II-4 of this
Registration Statement.
99.1 Form of written Compensation Agreement.
Item 9. Undertakings
------------
A. The undersigned Registrant hereby undertakes: (1) to file,
during any period in which offers or sales are being made, a post-effective
amendment to this Registration Statement (i) to include any prospectus required
by Section 10(a)(3) of the 1933 Act, (ii) to reflect in the prospectus any facts
or events arising after the effective date of this Registration Statement (or
the most recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in this
Registration Statement and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in this
Registration Statement or any material change to such information in this
Registration Statement; provided, however, that clauses (1)(i) and (1)(ii) shall
--------
not apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed with or
furnished to the SEC by the Registrant pursuant to Section 13 or Section 15(d)
of the 1934 Act that are incorporated by reference in this Registration
Statement; (2) that for the purpose of determining any liability under the 1933
Act each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof and (3) to remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the Registrant's 1996 Stock Option Plan, 1999 Director Option
Plan, Employee Stock Purchase Plan, and 1999 Stock Incentive Plan.
B. The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the 1933 Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
1934 Act that is incorporated by reference in this 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
1933 Act may be permitted to directors, officers or controlling persons of the
Registrant pursuant to the indemnification provisions summarized in Item 6 or
otherwise, the Registrant has been advised that, in the opinion of the SEC, such
indemnification is against public policy as expressed in the 1933 Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
II-2
<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-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Sunnyvale, State of California on this 24th day
of November, 1999.
CACHEFLOW INC.
By: /s/ Brian M. NeSmith
---------------------------------------
Brian NeSmith
Chief Executive Officer, President, and
Director
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS:
That the undersigned officers and directors of Cacheflow Inc., a
Delaware corporation, do hereby constitute and appoint Brian M. NeSmith and
Michael A. Johnson, and either of them, the lawful attorneys-in-fact and agents
with full power and authority to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, and either one of them,
determine may be necessary or advisable or required to enable said corporation
to comply with the Securities Act of 1933, as amended, and any rules or
regulations or requirements of the Securities and Exchange Commission in
connection with this Registration Statement. Without limiting the generality of
the foregoing power and authority, the powers granted include the power and
authority to sign the names of the undersigned officers and directors in the
capacities indicated below to this Registration Statement, to any and all
amendments, both pre-effective and post-effective, and supplements to this
Registration Statement, and to any and all instruments or documents filed as
part of or in conjunction with this Registration Statement or amendments or
supplements thereof, and each of the undersigned hereby ratifies and confirms
all that said attorneys and agents, or either one of them, shall do or cause to
be done by virtue hereof. This Power of Attorney may be signed in several
counterparts.
IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
Signature Title Date
- --------- ----- ----
/s/ Brian M. NeSmith Chief Executive Officer,President, and Director November 24, 1999
______________________
Brian M. NeSmith (Principal Executive Officer)
Chief Financial Officer, Vice President, and November 24, 1999
/s/ Michael A. Johnson Secretary
______________________
Michael A. Johnson (Principal Financial and Accounting Officer)
/s/ Marc Andreessen Director November 29, 1999
______________________
Marc Andreessen
/s/ David W. Hanna Director November 29, 1999
______________________
David W. Hanna
Director
______________________
Michael M. Malcolm
/s/ Stuart G. Phillips Director November 29, 1999
______________________
Stuart G. Phillips
/s/ Andrew Rachleff Director November 29, 1999
______________________
Andrew Rachleff
</TABLE>
II-3
<PAGE>
EXHIBIT INDEX
Exhibit Number Exhibit
- -------------- -------
4 Instrument Defining Rights of Stockholders. Reference is
made to CacheFlow Inc.'s Registration Statement No. 0-25853
on Form 8-A, which is incorporated herein by reference under
Item 3(b) of this Registration Statement.
5 Opinion and consent of Gunderson Dettmer Stough Villeneuve
Franklin & Hachigian LLP.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Gunderson Dettmer Stough Villeneuve Franklin &
Hachigian LLP is contained in Exhibit 5.
24 Power of Attorney. Reference is made to page II-4 of this
Registration Statement.
99.1 Form of Written Compensation Agreement
<PAGE>
Exhibit 5
---------
November 29, 1999
CacheFlow Inc.
650 Almanor Avenue
Sunnyvale, California 94539
Re: CacheFlow Inc. Registration Statement
for Offering of 15,739,899 Shares of Common Stock
Ladies and Gentlemen:
We refer to your registration on Form S-8 (the "Registration Statement")
under the Securities Act of 1933, as amended, of (i) 7,739,899 shares of Common
Stock under the 1996 Stock Option Plan, (ii) 500,000 shares of Common Stock
under the 1999 Director Option Plan, (iii) 2,500,000 shares of Common Stock
under the Employee Stock Purchase Plan, and (iv) 5,000,000 shares of Common
Stock under the 1999 Stock Incentive Plan. We advise you that, in our opinion,
when such shares have been issued and sold pursuant to the applicable provisions
of the 1996 Stock Option Plan, 1999 Director Option Plan, Employee Stock
Purchase Plan, and 1999 Stock Incentive Plan and in accordance with the
Registration Statement, such shares will be validly issued, fully paid and
nonassessable shares of the Company's Common Stock.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Gunderson Dettmer Stough Villeneuve Franklin &
Hachigian, LLP
<PAGE>
Exhibit 23.1
------------
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference in the Registration
Statement on (Form S-8) pertaining to the 1996 Stock Option Plan, 1999 Director
Option Plan, Employee Stock Purchase Plan, and the 1999 Stock Incentive Plan of
CacheFlow Inc. of our report dated September 24, 1999 with respect to the
consolidated financial statements and schedule of CacheFlow Inc. as of April 30,
1998 and 1999 and for each of the three years in the period ended April 30,
1999, included in its Registration Statement (No. 333-87997), on Form S-1, as
amended, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Walnut Creek, California
November 24, 1999
<PAGE>
Exhibit 99.1
------------
CACHEFLOW INC.
NOTICE OF GRANT OF STOCK OPTION
-------------------------------
Notice is hereby given of the following option grant (the "Option") to
purchase shares of the Common Stock of CacheFlow Inc. (the "Corporation"):
Optionee: _________________
--------
Grant Date: ________________
----------
Vesting Commencement Date:
-------------------------
Exercise Price: $__________
--------------
Number of Option Shares: ______ shares
-----------------------
Expiration Date: ______________
---------------
Type of Option ______________ Stock Option
--------------
Date Exercisable: Immediately Exercisable
----------------
Vesting Schedule: The Option Shares shall be unvested and subject to
----------------
repurchase by the Corporation at the Exercise Price paid per share.
Optionee shall acquire a vested interest in, and the Corporation's
repurchase right will accordingly lapse with respect to, ________ of
the Option Shares in successive equal monthly installments upon
Optionee's completion of each of the _____ months of Service measured
from the Vesting Commencement Date. In no event shall any additional
Option Shares vest after Optionee's cessation of Service.
Optionee understands and agrees that the Option is granted subject to
and in accordance with the terms of the Option as set forth in the Stock Option
Agreement attached hereto as Exhibit A. Optionee understands that any Option
Shares purchased under the Option will be subject to the terms set forth in the
Stock Purchase Agreement attached hereto as Exhibit B.
REPURCHASE RIGHTS. OPTIONEE HEREBY AGREES THAT ALL OPTION SHARES
-----------------
ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL BE SUBJECT TO CERTAIN REPURCHASE
RIGHTS AND RIGHTS OF FIRST REFUSAL EXERCISABLE BY THE CORPORATION AND ITS
ASSIGNS. THE TERMS OF SUCH RIGHTS ARE SPECIFIED IN THE ATTACHED STOCK PURCHASE
AGREEMENT.
No Employment or Service Contract. Nothing in this Notice or in the
---------------------------------
attached Stock Option Agreement shall confer upon Optionee any right to continue
in Service for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Corporation (or any Parent or Subsidiary
employing or retaining Optionee) or of Optionee, which rights are hereby
expressly reserved by each, to terminate Optionee's Service at any time for any
reason, with or without cause.
Definitions. All capitalized terms in this Notice shall have the
-----------
meaning assigned to them in this Notice or in the attached Stock Option
Agreement.
___________, 199___
Date
CACHEFLOW INC.
By: ________________________________
Title: ________________________________
_______________________________________
OPTIONEE
Address: ______________________________
_______________________________________
ATTACHMENTS
- -----------
Exhibit A - Stock Option Agreement
Exhibit B - Stock Purchase Agreement
