As filed with the Securities and Exchange Commission on November 22, 1999
Registration No. 333-____________
================================================================================
Securities and Exchange Commission
Washington, DC. 20549
---------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
SKYMALL, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
NEVADA 5961 86-0651100
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
1520 EAST PIMA STREET
PHOENIX, ARIZONA 85034
(602) 254-9777
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
---------------------
ROBERT M. WORSLEY
PRESIDENT
SKYMALL, INC.
1520 EAST PIMA STREET
PHOENIX, ARIZONA 85034
(602) 254-9777
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------
Copies to:
Christopher D. Johnson, Esq. Christine A. Aguilera, Esq.
Squire, Sanders & Dempsey L.L.P. Executive Vice President of
Two Renaissance Square Business Development,
40 North Central Avenue, Suite 2700 General Counsel and Secretary
Phoenix, Arizona 85004 SkyMall, Inc.
602-528-4000 1520 East Pima Street
Phoenix, Arizona 85034
602-254-9777
<PAGE>
CALCULATION OF REGISTRATION FEE
================================================================================
PROPOSED
PROPOSED PROPOSED MAXIMUM
TITLE OF MAXIMUM MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE
---------------- ------------- -------------- --------- ------------
Common Stock 413,813 $10.375 $4,293,310 $1,194
$.001 par value
================================================================================
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(1) Includes (i) up to 39,420 shares of Common Stock to be issued upon
exercise of warrants and (ii) an indeterminate number of additional shares
of Common Stock as may from time to time become issuable upon exercise of
the warrants by reason of stock splits, stock dividends and similar
transactions, which shares are registered hereunder pursuant to Rule 416
under the Securities Act of 1933, as amended.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee, pursuant to Rule 457 of the Securities Act of 1933, as
amended, based on the average of the high and low prices for shares of
common stock of SkyMall, Inc. as reported by the Nasdaq National Market on
November 15, 1999.
Approximate date of proposed sale to public: As soon as practicable after the
effective date of this Registration Statement.
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, 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, 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 the delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
- --------------------------------------------------------------------------------
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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SEC, ACTING PURSUANT TO SAID SECTION 8(A), MAY
DETERMINE.
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-ii-
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THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
THE SELLING SHAREHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS DECLARED
EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS
NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR
SALE IS NOT PERMITTED.
- --------------------------------------------------------------------------------
SUBJECT TO COMPLETION, DATED NOVEMBER 22, 1999
PROSPECTUS
413,813 SHARES
SKYMALL, INC.COMMON STOCK
We have issued a total of 374,393 shares of our common stock and 39,420
warrants to purchase 39,420 shares of our common stock in separate transactions.
Of such shares of common stock and warrants, 25,000 warrants were issued in June
1999 to our investment advisor , 280,555 shares of common stock were issued in
September 1999 upon the acquisition of Disc Publishing, Inc., a Utah
corporation, 28,838 shares of Common Stock and 14,420 warrants were issued in
November 1999 upon conversion of the principal and interest due on an
outstanding note such note being issued pursuant to the acquisition of Durham &
Company, a Utah corporation, in October 1998, and 65,000 shares of Common Stock
were issued in November 1999 upon settlement of a litigation matter. The holders
of such common stock and warrants (which we collectively refer in this
prospectus as the "selling shareholders") can use this prospectus to sell to
other purchasers some or all of the shares of common stock they currently hold
and can use this prospectus to sell to other purchasers some or all of the
shares of common stock they will receive by exercising the warrants. Each
selling shareholder may sell the common stock in ordinary broker's transactions,
directly to market makers in our common stock, in private transactions or any of
the other methods of distribution that are described in this prospectus under
the section titled "Plan of Distribution."
The selling shareholders will receive all of the amounts received upon any
sale by them of the common stock, less any brokerage commissions or other
expenses incurred by them. We will not receive any proceeds from the sale of the
common stock by the selling shareholders. However, we will receive up to
$348,110 as payment of the warrant exercise price for the common stock
underlying the warrants if all of the warrants are exercised. We are paying for
the costs of registering the shares covered by this prospectus.
The selling shareholders and the brokers or other third parties through
whom the selling shareholders sell the common stock may be deemed "underwriters"
as that term is defined in the Securities Act of 1933, as amended, for purposes
of the resale of the shares of common stock offered in this prospectus.
Our common stock is traded on the Nasdaq National Market ("Nasdaq") under
the symbol "SKYM." According to Nasdaq, on November 19, 1999, the last reported
sale price for our common stock was $12.6875.
BEFORE PURCHASING ANY OF THE SHARES OF COMMON STOCK COVERED BY THIS PROSPECTUS,
WE URGE YOU TO READ AND CAREFULLY CONSIDER THE RISK FACTORS DISCUSSED IN THIS
PROSPECTUS, BEGINNING ON PAGE 9. YOU SHOULD BE PREPARED TO ACCEPT ALL OF THOSE
RISKS, INCLUDING THE RISK THAT YOU COULD LOSE YOUR ENTIRE INVESTMENT IN THE
COMMON STOCK, AS WELL AS ANY OTHER RISKS THAT MAY BE DISCUSSED IN THIS
PROSPECTUS.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THE SALE OF THE
COMMON STOCK OR DETERMINED THAT THE INFORMATION IN THIS PROSPECTUS IS ACCURATE
OR COMPLETE. IT IS ILLEGAL FOR ANY PERSON TO TELL YOU OTHERWISE.
The date of this Prospectus is November ___, 1999
<PAGE>
YOU SHOULD ONLY RELY UPON THE INFORMATION INCLUDED IN OR INCORPORATED BY
REFERENCE INTO THIS PROSPECTUS OR IN ANY PROSPECTUS SUPPLEMENT THAT IS DELIVERED
TO YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH ADDITIONAL OR
DIFFERENT INFORMATION.
THE COMMON STOCK IS NOT BEING OFFERED IN ANY STATE WHERE SUCH AN OFFER IS NOT
PERMITTED.
YOU SHOULD NOT ASSUME THAT THE INFORMATION INCLUDED IN OR INCORPORATED BY
REFERENCE INTO THIS PROSPECTUS OR IN ANY PROSPECTUS SUPPLEMENT IS ACCURATE AS OF
ANY DATE LATER THAN THE DATE OF SUCH DOCUMENT.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports and other information with
the U.S. Securities and Exchange Commission. You may read and copy any document
that we have filed at the SEC's Public Reference Room located at 450 Fifth
Street N.W., Room 1024, Washington, D.C. 20549 and at the SEC's regional offices
located at World Trade Center, 13th Floor, New York, New York, 10048 and at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Please call the SEC at 1-800-732-0330 for more information about
the Public Reference Room facilities. Our SEC filings are also available to you
free of charge at the SEC's website at HTTP://WWW.SEC.GOV.
Copies of publicly available documents that we have filed with the SEC can
also be inspected and copied at the offices of the National Association of
Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
We have filed a registration statement on Form S-3 with the SEC that covers
the resale of the common stock offered under this prospectus. This prospectus is
part of the registration statement; however, the prospectus does not include all
of the information included in the registration statement and its exhibits. As a
result, you should refer to the registration statement for additional
information about us and the common stock offered under this prospectus.
Statements that we make in this prospectus relating to any documents filed as an
exhibit to the registration statement or any document incorporated by reference
into the registration statement are not necessarily complete and you should
review the referenced document itself for a complete understanding of its terms.
INCORPORATION OF CERTAIN DOCUMENTS BY REFRENCE
Some of the information that we are required to include in the registration
statement has been "incorporated by reference." This means that we have
disclosed information to you simply by referring you to documents other than the
registration statement. The documents that have been incorporated by reference
are an important part of the prospectus, and you should be sure to review that
information in order to understand the nature of any investment by you in the
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common stock. In addition to previously filed documents that are incorporated by
reference, documents that we file with the SEC after the date of this prospectus
will automatically update the registration statement. The documents that we have
previously filed and that are incorporated by reference include the following:
o Our Annual Report on Form 10-K for the fiscal year ended December 31,
1998;
o Our Quarterly Reports on Form 10-Q for the quarterly periods ended
March 31, 1999, June 30, 1999 and September 30, 1999;
o Our Current Report on Form 8-K filed April 13, 1999;
o Our Current Report on Form 8-K filed September 23, 1999;
o Our Current Report on Form 8-K filed October 5, 1999;
o Our Definitive Proxy Statement for our 1999 Annual Meeting of
Shareholders dated May 6, 1999; and
o The description of our Common stock included in our Registration
Statement on Form 8-A, filed October 31, 1996, including all
amendments or reports filed for the purpose of updating the
description.
All documents and reports filed by us pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this prospectus and prior to the
date that this offering of our common stock is terminated, will automatically be
incorporated by reference into this prospectus. We will provide you with copies
of any of the documents incorporated by reference, at no charge to you; however,
we will not deliver copies of any exhibits to such documents unless the exhibit
itself is specifically incorporated by reference. If you would like a copy of
any document, please write or call us at:
SKYMALL, INC.
1520 EAST PIMA STREET
PHOENIX, ARIZONA 85034
ATTN: GENERAL COUNSEL
TELEPHONE: (602) 254-9777
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PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY SHOULD BY READ BY YOU TOGETHER WITH THE MORE DETAILED
INFORMATION INCLUDED AT OTHER SECTIONS OF THIS PROSPECTUS. IN ADDITION, YOU
SHOULD CAREFULLY CONSIDER THE FACTORS DESCRIBED UNDER "RISK FACTORS" AT PAGE 9
OF THIS PROSPECTUS.
Throughout this prospectus, we refer to SkyMall, Inc. and its subsidiaries
as "us", "we", "our", "SkyMall" or the "Company".
THE COMPANY
Founded in 1989, SkyMall, Inc., a Nevada corporation, is an integrated
specialty retailer that markets high-quality products and services through a
number of unique channels and partnerships. The Company offers its products and
services via various media, including the SkyMall in-flight print catalogs,
workplace catalogs, multi-media CD-ROM and on the Internet at WWW.SKYMALL.COM,
WWW.SKYMALLTRAVEL.COM and WWW.DURHAM.SKYMALL.COM. Our products and services are
provided by more than 300 retailers, including American Country Home, Australian
Outback Collection, Balducci's, Canadian Geographic, Claire Murray,
Frontgate(R), FTD.com, Garden.com, Hammacher Schlemmer(R), Herrington(R),
Improvements(R), Langenbach, Lillian Vernon(R), L.L. Bean(R), Orvis(R), Samsung,
Seiko, Successories(R), The Sharper Image(R), T. Shipley(R), The Wine
Enthusiast(TM), and WorldClass Concierge Services(R). The Company offers a
diverse variety of products from numerous product categories, including
clothing, fashion accessories, health and beauty aids, children's toys,
executive gifts, educational products, gourmet cooking aids, exercise equipment,
jewelry, luggage, travel aids, and home accessories.
Our principal executive offices are located at and our mailing address is
1520 East Pima Street, Phoenix, Arizona 85034. Our telephone number is (602)
254-9777.
OUR OPERATIONS
SkyMall is a "one-stop" shopping source for customers who may purchase a
variety of merchandise from many different well-known merchants in a single
transaction. Although most of the merchandise offered in the SkyMall catalogs is
available from other catalog and retail companies, each of these companies
typically has its own policies for shipping and handling charges, merchandise
returns, sales taxes and price guarantees, as well as its own Web site. In
addition, each company typically has different customer service hours and credit
and payment policies. By aggregating the merchandise of our various
participating merchants into a single location in our print catalog and on our
Web site, we afford our customers access to thousands of products offered by
more than 300 merchants and the convenience of one-stop shopping.
Our print media provides consumers with a selection of only the
best-selling products from our most well-known merchant partners. This ensures
that consumers quickly see the most popular items, without having to review
hundreds of items that may be of little interest. Through our online database,
we offer online consumers a greater product selection. For the convenience of
our customers, our online database is searchable by a number of parameters that
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allow the customer to quickly locate products that are of interest to that
consumer. We plan to further expand the selection and variety of our product
offering and implement additional online technologies that will allow us to use
customer recommendation software to offer SkyMall customers personalized
recommendations based on individual tastes and preferences.
PRINT MEDIA
GENERAL. We market our merchandise through a number of print media,
including our in-flight catalogs, international catalogs and workplace catalogs.
We continue to seek additional ways to expand our print media distribution and
are currently testing a number of new channels, including hotels, consumer
loyalty programs and alliances with credit card companies which have access to
significant customer databases. The merchandise of each participating merchant
in our catalogs is presented in a separate section of each catalog to allow
browsing from "store-to-store," providing the convenience and variety of an
upscale shopping mall environment.
SKYMALL DOMESTIC IN-FLIGHT CATALOGS. Our in-flight catalogs, which are
placed in airline seat pockets, represent our largest distribution channel. Over
the past eight years, we have experienced substantial growth in our domestic
in-flight catalog business. Our in-flight catalog is available to over 70% of
all domestic airline passengers annually.
The SkyMall program offers airlines a low-risk means of incrementally
increasing their earnings. In exchange for placement of our catalogs in
seat-back pockets, we pay each airline partner a monthly commission based on net
merchandise sales generated by the Company from sales to that airline's
passengers. Some agreements also require payment of a minimum monthly commission
or a boarding cost that reimburses the airline for the increased fuel costs
attributable to the weight of the catalogs. In addition to increasing airline
earnings, our airline partners also benefit from enhancing the in-flight
experience of their passengers by providing our catalogs as an additional
amenity.
SKYMALL INTERNATIONAL IN-FLIGHT CATALOGS. We believe that the demographic
and technological trends that are driving the domestic consumer to shift from
traditional retail shopping are also present in many international markets,
which we believe are substantially under-served. In early 1998, we launched an
international initiative under which we began making specialized catalogs
available to passengers on certain international flights traveling to Japan and
serving the Pacific Rim. These catalogs feature merchandise tailored to this
audience and are offered in three languages: English, Japanese and Chinese.
In March 1999, the Company began offering SkyMall catalogs on certain
transatlantic flights originating from New York and Boston and in June 1999, the
Company began offering a European catalog on such flights which is priced in
multiple currencies (US Dollars, British Pound Sterling, French Francs, German
Deutsche Marks, and the Euro), and is printed in English, German and French.
Although international sales have been immaterial to our total net
merchandise sales, we plan to continue exploring opportunities in these markets.
SkyMall continues to gain experience in international markets, including the
areas of merchandising, customer service and fulfillment. The Company plans to
enter into other controlled and carefully planned expansions into large
international markets through cooperative ventures with its current domestic
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airline partners, as well as new international partners. The Company believes
that its experience in the domestic in-flight business, as well as its Web-based
infrastructure that allows it to quickly set-up call center operations in
foreign countries, will enable it to expand into selected international markets,
particularly those with a strong interest in U.S. products or where remote
shopping already has some level of acceptance by consumers.
WORKPLACE MERCHANDISE CATALOGS. Through our subsidiary, Durham & Company,
we offer logo merchandise and recognition products to employees of a number of
blue-chip organizations, primarily through print catalogs and since September
1999, on the Durham Web site. Competing in the highly fragmented incentive
industry, Durham distinguishes itself by providing high-quality products and
excellent customer service and focuses its marketing efforts on large
organizations. SkyMall provides Durham's clients with unique, high-quality
merchandise offered through other SkyMall channels as well as logo merchandise
and recognition products for corporate gift giving, employee recognition, sales
promotions and incentives, and similar programs.
OTHER PRINT CHANNELS. We provide unique, upscale catalogs to the
membership-oriented airport lounges of one of our major airline partners. The
SkyMall catalogs are also available on certain Northeastern routes of Amtrak. We
continue to test distribution of our print catalogs in a number of other venues,
including hotels and in connection with loyalty and marketing programs. We are
also testing other alliances, including with major credit card companies and
with the cruise line industry. To the extent the test results of these programs
prove successful, we may expand our presence in these channels.
ELECTRONIC MEDIA
GENERAL. We launched our first Internet Web site in January of 1996 and
since then have continued to refine and develop our e-commerce strategies. Our
e-commerce channels showcase products offered in our print catalogs and provide
customers an additional means of customer service and support. In addition,
because the Internet does not pose the same size and weight constraints as our
paper catalogs, we offer products and services from a greater number of
merchants and a full complement of products from merchants who offer only their
best-selling items in our catalogs. Through our wholly-owned subsidiary,
SKYMALL.COM, INC., we plan to increase our revenues from this media by
developing SkyMall's Web site as a premier Internet shopping and travel
destination and increasing the number of partners in our affiliate program.
AFFILIATE PROGRAM. In addition to developing our own site, we have an
affiliate program through which we provide a turn-key merchant solution to
businesses that are interested in providing SkyMall's merchandise to visitors to
their own Web sites. Our unique proprietary technology and other systems allow
us to quickly and cost-effectively implement affiliate site programs, in many
cases with lead times of less than three weeks. Visitors to SkyMall's affiliate
sites go directly to a SkyMall site, which is typically co-branded with the
affiliate partner, for shopping services. After shopping, the customers are
directed back exclusively to the site from which they began so that the
affiliate partner does not lose the benefit of the traffic to its site. Although
an online store can be privately labeled for our affiliate partners, most of our
affiliate sites are co-branded to increase SkyMall's brand awareness as well as
generate affinity for our online partners.
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Under our agreements with our affiliate partners, we typically pay them a
commission based on net merchandise sales. Our affiliate program offers
advantages to both consumers and our partners. Consumers enjoy the convenience
of SkyMall's online shopping and our partner sites enjoy the benefit of
increased revenue, while ensuring that their customers return to their site.
Early participants in our affiliate program include some of our airline
partners and related entities, such as Delta Air Lines, Delta Crown Room and
Continental Air Lines. In addition, Northwest Airlines and America West Airlines
have joined our affiliate program. New participants are Visa USA, Visa
International, First USA, the largest Visa card issuer and a banking leader in
electronic commerce, and LinkShare(R), a premier provider of partnership-based
marketing on the Web, specializing in brokering revenue-producing links among
complementary e-commerce sites. We also have arrangements with a number of other
high-traffic sites, including the site offered by the best-selling book series,
Chicken Soup for the Soul, Microsoft's online shopping mall called MSN Shopping,
MSNBC, Trip.com, and The Weather Channel site at Weather.com. The Company
continues to evaluate the success of its individual affiliates and, in some
cases, has terminated relationships while it continues to pursue new
affiliations.
THE SKYMALLTRAVEL.COM WEB SITE. As part of SkyMall's previously announced
investment in e-commerce, in July 1999, SkyMall launched its
WWW.SKYMALLTRAVEL.COM Web site targeted to frequent travelers, which provides
one-stop access for all their travel needs. SKYMALLTRAVEL.COM organizes many of
the best travel resources in one place, including linked directories for
airlines, hotels, rental car and online booking services, as well as content and
tools that assist business travelers before, during and after their trips. The
site was designed to help travelers get the most out of online travel planning
while minimizing the effort and time involved. Some of the leading online travel
companies are affiliates at our SKYMALLTRAVEL.COM Web site, including
webflyer.com, Trip.com, ontheroad.com, mapquest.com, weather.com, homefair.com
and MyFamily.com.
THE DURHAM & COMPANY WEB SITE. In September 1999, Durham & Company launched
its Web site at WWW.DURHAM.SKYMALL.COM which offers high quality logo and
corporate identity merchandise to organizations.
DISC PUBLISHING, INC. In September 1999, SkyMall acquired Disc Publishing,
Inc. Disc Publishing's SkyDisc(TM) is a leading interactive CD-ROM targeted to
the business traveler that integrates high-quality print, broadcast and online
media to provide an exciting mix of topics that entertain, inform and enhance
the business travelers' life. SkyDisc offers the business traveler the option of
using the disk on their laptop computer whether onboard the aircraft, in a
hotel, at the office, or at home. While using the disk online, consumers can
link to Web sites promoted on SkyDisc to get more information and services. With
the continued proliferation of new Web sites, SkyDisc will help consumers sort
through the clutter of the Web and drive traffic to the sites of our program
participants. Every other month a new "issue" of SkyDisc is available free in
airline seatback pockets to more than 400,000 SkyWest Airlines passengers per
month. SkyDisc has already attracted many program participants such as
Amazon.com, Earthlink Network, Inc., Interplay Entertainment, Inc. and U S
WEST(R). To the extent sponsorship of this program continues to increase, the
Company will consider expanding distribution of SkyDisc.
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THE OFFERING
Securities offered by the selling
shareholders............................. 413,813 shares of common stock
Common stock outstanding as of
November 17, 1999........................ 10,452,264 shares(1)
Use of Proceeds.......................... We will not receive any proceeds from
the sale of the common stock by the
selling shareholders. However, we
will receive up to $348,110 as the
purchase price for the shares of
common stock underlying the warrants
if all of the warrants are exercised.
See "Use of Proceeds."
Risk Factors............................. The shares of common stock offered
under this prospectus involve a high
degree of risk. See "Risk Factors."
Nasdaq National Market Symbol............ SKYM
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(1) Does not include (i) 1,075,588 shares of common stock issuable upon
exercise of outstanding stock options issued pursuant to the Company's
stock option plans, (ii) an additional 681,878 shares of common stock
reserved for issuance pursuant to future awards granted under such stock
option plans, (iii) 29,700 shares of common stock issuable by the Company
upon the exercise of warrants issued to shareholders in connection with the
Company's 1996 Private Placement, which are exercisable at $8.00 per share,
(iv) 700,580 shares of common stock issuable by the Company upon the
exercise of warrants issued to the investors and placement agents in
connection with the Company's November 1999 private placement, which are
exercisable at prices ranging from $8.00 to $9.12 per share, (v) 50,000
shares of common stock issuable upon exercise of warrants issued in an
acquisition, which are exercisable at $8.00 per share, and (v) 39,420
shares of common stock issuable by the Company upon the exercise of the
warrants which are a part of the shares of common stock that are being
offered hereby.
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RISK FACTORS
BEFORE YOU BUY ANY OF THE SHARES OF COMMON STOCK BEING OFFERED BY THIS
PROSPECTUS, YOU SHOULD CAREFULLY READ AND CONSIDER EACH OF THE RISK FACTORS WE
HAVE DESCRIBED IN THIS SECTION. YOU SHOULD BE PREPARED TO ACCEPT ALL OF THESE
RISKS, INCLUDING THE RISK THAT YOU MAY LOSE YOUR ENTIRE INVESTMENT, BEFORE YOU
MAKE A DECISION TO BUY ANY OF THE SHARES OF COMMON STOCK.
WE MAY NOT BE PROFITABLE IN THE FUTURE. Although we have been profitable in
recent years, we plan to significantly increase spending on our growth
initiatives from historical levels and we expect to incur losses in the
foreseeable future. In addition, although we plan to spend significant
additional resources in connection with the execution of our growth strategy,
including for marketing, technological development and personnel costs, there
can be no assurance that we can successfully deploy such resources to accomplish
the objectives of our growth strategies and increase the revenues of the
Company.
WE MAY NOT BE ABLE TO RAISE SUFFICIENT CAPITAL. We currently have a working
capital deficit and our existing line of credit is not sufficient to permit the
Company to fully implement its business plan. In order to fully implement our
growth strategy, we will need to raise additional capital from third parties or
otherwise secure additional financing for the Company. There can be no assurance
that the Company will be able to successfully raise additional capital or secure
other financing, or that such funding will be available on terms that are
favorable to the Company. To the extent we are unable to raise sufficient
additional capital or secure other financing, this could have a material adverse
effect on the Company and we may be unable to fully implement our planned growth
strategy.
OUR BUSINESS MAY NOT GROW IN THE FUTURE. Since our inception, we have
rapidly expanded our operations, growing from total revenues of $200,000 in 1990
to total revenues of $66.3 million in 1998. Our continued future growth will
depend to a significant degree on our ability to increase revenues from our
existing businesses, maintain existing channel partner relationships and develop
new channel partner relationships, expand our product and content offering to
consumers, while maintaining adequate gross margins, and implement other
programs that increase the circulation of the SkyMall print catalogs and
generate traffic for our e-commerce programs. Our ability to implement our
growth strategy will also depend on a number of other factors, many of which are
or may be beyond our control, including (i) our ability to select products that
appeal to our customer base and effectively market them to our target audience,
(ii) sustained or increased levels of airline travel, particularly in domestic
airline markets, (iii) increasing adoption by consumers of the Internet for
shopping, (iv) the continued perception by participating merchants that we offer
an effective marketing channel for their products and services, and (v) our
ability to attract, train and retain qualified employees and management. There
can be no assurance that we will be able to successfully implement our growth
strategy.
OUR FUTURE GROWTH IS IN PART DEPENDENT UPON THE CONTINUED GROWTH OF THE
ELECTRONIC COMMERCE MARKET. The market for the sale of products and services
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over the Internet is a new and rapidly evolving market. Our future growth
strategy is partially dependent upon the widespread acceptance and use of online
services as an avenue for retail purchases. Consumers have only recently begun
to make purchases over the Internet and there is no assurance that they will
continue to do so in the future. In order for us to grow our online customer
base, we will need to attract purchasers who have historically relied upon
traditional venues for making their retail purchases. If use of online services
does not continue to grow as expected, or if the technological infrastructure
for the Internet is unable to effectively support its growing use, our growth
strategy may be materially adversely affected.
WE MAY BE UNABLE TO MANAGE THE POTENTIAL GROWTH OF OUR BUSINESS. Our
potential growth may place significant demands upon our personnel, management
and financial resources. In order to manage this growth, we may have to hire
additional personnel and develop additional management infrastructure. There is
no assurance that people with the necessary skills and experience will be
available as needed or on terms favorable to us. There is no assurance that our
current and planned personnel, systems, procedures and controls will be adequate
to support our future operations, that we will be able to attract, hire, train,
retain, motivate and manage necessary personnel, or that our management will be
able to identify, manage and exploit existing and potential strategic
relationships and market opportunities. If we are unable to effectively manage
any potential growth, our business and financial condition could be adversely
affected.
OUR PLANS FOR INTERNATIONAL EXPANSION POSE ADDITIONAL RISKS. A significant
aspect of our growth strategy is to expand our business internationally, through
our in-flight catalog program as well as the Internet. We have limited
experience in selling our products and services internationally. Such expansion
will place additional burdens upon our management, personnel and financial
resources and may cause the Company to incur losses. We will also face different
and additional competition in these international markets. In addition,
international expansion has certain unique risks, such as regulatory
requirements, legal uncertainty regarding liability, tariffs and other trade
barriers, difficulties in staffing and managing foreign operations, longer
payment cycles, political instability and potentially adverse tax implications.
To the extent we expand our business internationally, we will also become
subject to risks associated with international monetary exchange fluctuations.
Any one of these risks could impair our ability to expand internationally as
well as have a material adverse impact upon our overall business operations,
growth and financial condition.
WE FACE INTENSE COMPETITION. The distribution channels for our products are
highly competitive. From time to time in our airline catalog business,
competitors, typically other catalog retailers, have attempted to secure
contracts with various airlines to offer merchandise to their customers.
American Airlines currently offers merchandise catalogs to its customers through
a competitor. In addition, in July 1999, TWA, a former SkyMall partner, began
carrying a competitor's catalog. We also face competition for customers from
airport-based retailers, duty-free retailers, specialty stores, department
stores and specialty and general merchandise catalogs, many of which have
greater financial and marketing resources than we have. In addition, we compete
for customers with other in-flight marketing media, such as airline-sponsored
in-flight magazines and airline video programming. In our electronic commerce
sales, we face intense competition from other content providers and retailers
who seek to offer their products and/or services at their own Web sites or those
of other third parties. The success of online marketing cannot be currently
determined, and further penetration in this market will require substantial
10
<PAGE>
additional financial resources, acquisition of technology, investments in
marketing and contractual relationships with third parties. Results will also be
affected by existing competition, which the Company anticipates will intensify,
and by additional entrants to the market who may already have the necessary
technology and expertise, many of whom may have substantially greater resources
than the Company.
DEPENDENCE ON CHANNEL RELATIONSHIPS. Our business depends significantly on
our relationships with the airlines, affiliate Web sites, hotels and other
channel partners. Our agreements with our channel partners are typically
short-term allowing the partner to terminate the relationship on 60-to-180 days'
advance notice. There is no assurance that our channel partners will continue
their relationships with us and the loss of one or more of our significant
channel partners could have a material adverse effect on our financial condition
and results of operations.
WE MAY BE UNABLE TO MAINTAIN HISTORICAL MARGIN LEVELS. We may be unable to
increase or maintain our gross margins at historical levels, particularly for
our electronic commerce initiatives. As competition in online shopping
intensifies, our merchant participants may be unable or unwilling to participate
in our programs when more favorable economic arrangements may be available from
other third parties. Although many of our merchants have participated with us
for several years, most of our relationships are short-term and may be
re-negotiated by the merchant every 90 days. To the extent our gross margins
decline from historical levels, our financial condition and results of
operations may be adversely affected.
WE FACE CREDIT RISKS. Some participating merchants agree to pay a placement
fee to us for including their merchandise in our programs. We record an account
receivable from the merchant for the placement fee. In some cases, we collect
the placement fee either from the merchant or by withholding it from amounts due
to the merchant for merchandise sold. To the extent that the placement fee
receivable exceeds the sales of the merchant's products and the merchant is
unable or unwilling to pay the difference to us, we may experience credit losses
which could have a material adverse effect on our financial condition and
results of operations.
WE ARE VULNERABLE TO INCREASES IN PAPER COSTS AND AIRLINE FUEL PRICES. The
cost of paper used to print our catalogs and the fees paid to airlines to
reimburse them for the increased fuel costs associated with carrying our
catalogs are significant expenses of our operations. Historically, paper and
airline fuel prices have fluctuated significantly from time to time. Prices in
the paper market can and often do change dramatically over a short period of
time. Any significant increases in paper or airline fuel costs that we must pay
could have a material adverse effect on our financial condition and results of
operations.
OUR INFORMATION AND TELECOMMUNICATIONS SYSTEMS MAY FAIL OR BE INADEQUATE.
We process a large volume of relatively small orders. Consequently, our success
depends to a significant degree on the effective operation of our information
and telecommunications systems. These systems could fail for unanticipated
reasons or they may be inadequate to process any increase in our sales volume
that may occur. Any extended failure of our information and telecommunications
systems could have a material adverse effect on our financial condition and
results of operations.
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<PAGE>
WE FACE RISKS ASSOCIATED WITH ONLINE SECURITY BREACHES OR FAILURES. In
order to successfully make sales over the Internet, it is necessary that we be
able to ensure the secure transmission of confidential customer information over
public telecommunications networks. We employ certain technology in order to
protect such information, including customer credit card information. However,
there is no assurance that such information will not be intercepted illegally.
Advances in cryptography or other developments that could compromise the
security of confidential customer information could have a direct negative
impact upon our electronic commerce business. In addition, the perception by
consumers that making purchases over the Internet is not secure, even if
unfounded, will mean that fewer consumers are likely to make purchases through
that medium. Finally, any breach in security, whether or not a result of our
acts or omissions, may cause us to be the subject of litigation, which could be
very time-consuming and expensive to defend.
OUR BUSINESS IS SEASONAL. Our business is seasonal in nature, with the
greatest volume of sales typically occurring during the Holiday selling season
of the fourth calendar quarter. During 1998, approximately 41% of our net
merchandise sales were generated in the fourth quarter. Any substantial decrease
in sales for the fourth quarter could have a material adverse effect on our
results of operations.
WE FACE RISKS OF INCREASED GOVERNMENTAL REGULATION AND OTHER LEGAL
UNCERTAINTIES. Our electronic commerce activities are not currently subject to
significant regulation, other than those applicable to businesses generally.
However, electronic commerce is a new market and it is likely that regulations
and laws may be enacted in the future which would apply to our electronic
commerce activities. Any such laws or regulations could result in additional
costs associated with such activities, reduce or inhibit the growth of Internet
use, thereby reducing the growth of our electronic commerce business, or have
other adverse effects. Additionally, certain states or international
jurisdictions could enact laws that would require us to register in such
jurisdictions, pay fees or otherwise increase our costs of doing business.
WE FACE A RISK OF PRODUCT LIABILITY CLAIMS. Our catalogs and our electronic
commerce sites feature products and services from more than 300 participating
merchants. Generally, our agreements with these participating merchants require
the merchants to indemnify us and thereby be solely responsible for any losses
arising from product liability claims made by customers, including the costs of
defending any such claims, and to carry product liability insurance that names
SkyMall as an additional insured. In addition, we maintain product liability
insurance in the aggregate amount of $2.0 million and $1.0 million per
occurrence. If a merchant was unable or unwilling to indemnify us as required,
and any such losses exceeded our insurance coverage or were not covered by our
insurer, our financial condition and results of operations could be materially
adversely affected.
WE RELY UPON OUR PRESIDENT AND OTHER KEY PERSONNEL. We depend on the
continued services of Robert M. Worsley, our chairman, president and chief
executive officer, and on the services of certain other executive officers. The
loss of Mr. Worsley's services or of the services of certain other executive
officers could have a material adverse effect on our business.
THE WORSLEYS CAN CONTROL MANY IMPORTANT COMPANY DECISIONS. As of November
17, 1999, Mr. Worsley and his wife (the "Worsleys") beneficially owned 4,798,530
shares, or approximately 46% of our outstanding common stock. As a result, the
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<PAGE>
Worsleys have the ability to significantly influence the affairs of the Company
and matters requiring a shareholder vote, including the election of the
Company's directors, the amendment of the Company's charter documents, the
merger or dissolution of the Company, and the sale of all or substantially all
of the Company's assets. The voting power of the Worsleys may also discourage or
prevent any proposed takeover of the Company pursuant to a tender offer.
THE PRICE OF OUR COMMON STOCK IS EXTREMELY VOLATILE. The market price of
our common stock has been highly volatile. Occurrences that could cause the
trading price of our common stock to fluctuate dramatically in the future
include:
o new merchant agreements
o the acquisition or loss of one or more airline, electronic commerce or
other channel partners
o fluctuations in our operating results
o analyst reports, media stories, Internet chat room discussions, news
broadcasts and interviews
o market conditions for retailers and electronic commerce companies in
general
o changes in airline fuel, paper or our other significant expenses
o changes in the commissions we are able to negotiate with our merchants
The stock market has from time to time experienced extreme price and volume
fluctuations that have particularly affected the market price for companies that
do some or all of their business on the Internet. During the third quarter of
1999, net merchandise sales from the Internet represented approximately 21% of
our net merchandise sales. Accordingly, the price of our common stock may be
impacted by these or other trends.
OUR OUTSTANDING SHARES MAY BE DILUTED. The market price of our common stock
may decrease as more shares of common stock become available for trading.
Certain events over which you have no control result in the issuance of
additional shares of our common stock, which would dilute your ownership
percentage in SkyMall. We may issue additional shares of common stock or
preferred stock:
o to raise additional capital or finance acquisitions; or
o upon the exercise or conversion of outstanding options and warrants
There are currently outstanding warrants and options to acquire up to
1,895,288 additional shares of common stock at prices ranging from $2.13 to
$24.50 per share, including the 39,420 warrants described in this prospectus and
the underlying shares which are included in the shares of common stock that are
being offered hereby. If exercised, these securities will dilute your percentage
ownership of common stock. These securities, unlike the common stock, provide
for antidilution protection upon the occurrence of stock splits, redemptions,
mergers, reclassifications, reorganizations and other similar corporate
transactions, and, in some cases, major corporate announcements. If one or more
of these events occurs, the number of shares of common stock that may be
acquired upon conversion or exercise would increase.
RISK THAT FORWARD-LOOKING STATEMENTS MAY NOT COME TRUE. This prospectus and
the documents incorporated herein by reference, contain forward-looking
statements that involve risks and uncertainties. We use words such as "believe,"
"expect," "anticipate," "plan" or similar words to identify forward-looking
statements. Forward-looking statements are made based upon our belief as of the
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<PAGE>
date that such statements are made. These forward-looking statements are based
largely on our current expectations and are subject to a number of risks and
uncertainties, many of which are beyond our control. You should not place undue
reliance on these forward-looking statements, which apply only as of the date of
such documents. Our actual results could differ materially from those
anticipated in these forward-looking statements for many reasons, including the
risks faced by us described above and elsewhere in this prospectus.
WE FACE RISKS ASSOCIATED WITH THE YEAR 2000. Many software programs use
only two digits to identify the year in the date field. If such programs are not
corrected, data that includes a date in the Year 2000 or later could cause many
computer applications to fail, lock-up or generate erroneous results. Further,
certain computer programs may not properly process certain dates. This potential
problem is generally referred to as the "Year 2000 Issue." We have initiated a
program to evaluate and address our exposure to the Year 2000 Issue. If not
corrected, many computer applications could fail or create erroneous results.
We have a program in process to identify our exposure to the Year 2000
Issue and we have begun to implement measures to mitigate any problems. We
believe we have identified all significant internal systems and applications
that require attention of some form in order to address Year 2000 Issue risks.
Our information or production systems which consist of order entry, order
conveyance and customer service are primarily based on the Microsoft suite of
products and the hardware is principally late model Compaq and Dell servers,
which are designed and represented to meet Year 2000 Issue functional
requirements. A testing program has been performed by an outside contractor to
certify that such systems are Year 2000 compliant. The certification program
also included the hardware and operating systems that support the applications.
We have other non-production systems such as internal security systems,
telephone systems, and network computer equipment, which we are also currently
reviewing for Year 2000 compliance. In addition, we are surveying certain third
parties, such as our vendor partners, banks and telephone service providers, to
attempt to determine the Year 2000 Issue capability of their critical systems
upon which our essential business operations are dependent.
We believe we have identified all of the major information systems used in
our internal operations and have substantially completed all modifications,
upgrades or replacements to minimize the possibility of a material disruption of
our business. The expenditures that we have incurred to date and the
expenditures we expect to incur in this regard have not been and are not
expected to be material to our business, results of operations and financial
condition. However, failure of third-party equipment, software or content to
operate properly with regard to the Year 2000 Issue could require the Company to
incur unanticipated expenses to remedy problems, which could have a material
adverse effect on its business, operating results and financial condition.
We believe that our most significant worst case Year 2000 Issue scenarios
involve the inability of our vendors to process orders and conduct business such
as arranging deliveries to customers and replenishing inventories and that the
computer systems necessary to maintain the viability of the Internet or the Web
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<PAGE>
sites that direct consumers to the Company's online catalog and related sites
may not be Year 2000 compliant. In addition, computers used by customers to
access the Company's online catalog and related sites may not be Year 2000
compliant, delaying customers' product purchases. Furthermore, a reduction in
airline travel due to concerns about the Year 2000 Issue in the airline
industry, even if based on unfounded fears, could materially impact the
Company's business.
The Company has initiated formal communications with significant suppliers
and service providers to determine the extent to which its systems may be
vulnerable if they fail to address and correct their own Year 2000 Issues. The
Company cannot guarantee that the systems of suppliers or other companies on
which it relies will be Year 2000 compliant. Failure by suppliers or other
companies to convert their systems could disrupt the Company's systems.
To the extent we are unable to adequately identify, evaluate and address
all of the Year 2000 Issues relating to our business, or are unable to develop
and implement effective contingency plans, we could experience a significant
disruption of our ability to receive and process customer orders, in which case
our financial condition and results of operations would be likely to be
materially adversely affected.
FORWARD-LOOKING STATEMENTS
Certain statements made herein, in future filings by the Company with the
SEC and in the Company's written and oral statements made by or with the
approval of an authorized executive officer, constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, and the Company intends that
such forward-looking statements be subject to the safe harbors created thereby.
These statements discuss, among other items, the Company's growth strategy and
anticipated trends in our business. Words and phrases such as "should be," "will
be," "believes," "expects," "anticipates," "plans," "intends," "may" and similar
expressions identify forward-looking statements. Forward-looking statements are
made based upon our belief as of the date that such statements are made. These
forward-looking statements are based largely on our current expectations and are
subject to a number of risks and uncertainties, many of which are beyond our
control. Actual results could differ materially from these forward-looking
statements as a result of the factors described herein, including, among others,
regulatory or economic influences. Examples of uncertainties which could cause
such differences include, but are not limited to, the Company's dependence on
its relationships with its airline, merchant, and other partners, the ability of
the Company to attract and retain key personnel, especially highly skilled
technology personnel, the ability of the Company to secure additional capital to
finance its business strategy, fluctuations in paper prices and airline fuel
costs, customer credit risks, competition from other catalog companies,
retailers and e-commerce companies, and the Company's reliance on technology and
information and telecommunications systems, all of which are discussed more
fully above and in the Company's other filings with the Securities and Exchange
Commission. The Company undertakes no obligation to publicly update or revise
any forward-looking statements whether as a result of new information, future
events, or otherwise.
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<PAGE>
SELLING SHAREHOLDERS
The shares being offered by the selling shareholders were issued in
separate transactions. We are registering the shares in order to permit the
selling shareholders to offer these shares for resale from time to time.
The following table provides certain information with respect to the common
stock beneficially owned by each selling shareholder as of November 17, 1999.
None of these selling shareholders has a material relationship with us except
Lorne Grierson, who is the President of Disc Publishing, Inc., a subsidiary of
the Company, Ryan Beck & Co., Inc., who is a financial advisor to the Company,
and Mark P. Durham who provides consulting services to the Company in connection
with its subsidiary, Durham & Company. We believe that the selling shareholders
named in the following table have sole voting and investment power with respect
to the respective shares of common stock set forth opposite their names. The
shares of common stock offered by this prospectus may be offered from time to
time by the selling shareholders named below or their nominees.
<TABLE>
<CAPTION>
Shares Beneficially Shares Beneficially
Owned Prior Number of Owned After
to the Offering Shares the Offering
------------------------- Offered ------------------------
---------
Name Number Percent(1) Number Percent(2)
- ---- -------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Lorne Grierson 148,044 (3) 1.4% 132,044 16,000 (3) *
Warren Osborn 100,634 1.0% 100,634 0 0%
Flamingo Partnership 30,495 * 30,495 0 0%
David E. Hardy 5,794 * 5,794 0 0%
Bart Howell 6,794 * 5,794 1,000 *
Kyle B. Love, Trustee 5,794 * 5,794 0 0%
KCL NACT Unitrust
Mark P. Durham, Trustee 36,470 (4) * 21,629 14,841(4) *
Mark P. Durham Trust Dated
December 10, 1997
Mary R. Durham, Trustee 22,755 * 21,629 1,126 *
Mark P. Durham Trust Dated
December 10, 1997
Andrew P. Campbell 19,363 * 19,363 0 0%
Jonathan H. Waller 3,300 * 3,300 0 0%
Charles A. McCallum III 2,200 * 2,200 0 0%
Janet R. Varnell 4,875 * 4,875 0 0%
Marcia W. Aldridge 2,762 * 2,762 0 0%
Harry Scoufos 32,500 * 32,500 0 0%
Ryan, Beck & Co., Inc. 56,112 (5) * 25,000 31,112 *
</TABLE>
_______________
* Less than 1%.
(1) Percentages are based upon 10,452,264 shares of the Company's common stock
outstanding as of November 17, 1999.
(2) Percentages are based upon 10,491,684 shares of the Company's common stock
outstanding, assuming all of the shares of common stock offered pursuant to
this prospectus are sold by the selling shareholders.
(3) Includes 15,000 shares of common stock issuable upon exercise of options
held by Mr. Grierson pursuant to the Company's 1994 Stock Option Plan, as
amended.
(4) Includes 5,000 shares of common stock issuable upon exercise of options
held by Mr. Durham pursuant to the Company's 1994 Stock Option Plan, as
amended.
(5) Includes 31,112 shares of common stock issuable upon exercise of warrants
held by Ryan, Beck & Co., Inc. and issued to Ryan, Beck as a placement
agent in connection with the Company's 1999 private placement.
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USE OF PROCEEDS
We will not receive any proceeds from the sale of the common stock by the
selling shareholders. However, we will receive up to $348,110 upon payment of
the exercise price for the common stock underlying the warrants if all of the
warrants are exercised. We will use all of these proceeds for working capital
for our operations.
DETERMINATION OF OFFERING PRICE
Because this prospectus relates only to the resale of previously issued
shares of common stock, we did not determine an offering price. The selling
shareholders will individually determine the offering price of the common stock.
The selling shareholders may use this prospectus from time to time to sell their
common stock. The price at which the common stock is sold may be based on market
prices prevailing at the time of sale, at prices relating to such prevailing
market prices, or at negotiated prices.
PLAN OF DISTRIBUTION
In connection with our issuance to the selling shareholders of our common
stock and warrants, we provided to them certain registration rights and have
subsequently filed a registration statement on Form S-3 with the Securities and
Exchange Commission. That registration statement covers the resale of the common
stock from time to time on the Nasdaq National Market or other national security
exchange or automated quotation system upon which our common stock is then
traded or in privately negotiated transactions. This prospectus forms a part of
that registration statement. We have also agreed to prepare and file any
amendments and supplements to the registration statement as may be necessary to
keep it effective until this prospectus is no longer required for the selling
shareholders to sell their shares of common stock and to indemnify and hold the
selling shareholders harmless against certain liabilities under the Securities
Act that could arise in connection with the selling shareholders' sale of their
shares. We have agreed to pay all reasonable fees and expenses incident to the
filing of the registration statement.
The selling shareholder may sell the shares of common stock described in
this prospectus directly or through underwriters, broker-dealers or agents. The
selling shareholders may also transfer, devise or gift their shares by other
means not described in this prospectus. As a result, pledgees, donees,
transferees or other successors in interest that receive such shares as a gift,
partnership distribution or other non-sale related transfer may offer shares of
common stock. In addition, if any shares covered by this prospectus qualify for
sale pursuant to Rule 144 under the Securities Act, the selling shareholders may
sell such shares under Rule 144 rather than pursuant to this prospectus.
The selling shareholders may sell shares of common stock from time to time
in one or more transactions:
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<PAGE>
o at fixed prices that may be changed,
o at market prices prevailing at the time of sale, or
o at prices related to such prevailing market prices or at negotiated
prices.
The selling shareholders may offer their shares of common stock in one or
more of the following transactions:
o on any national securities exchange or quotation service on which the
common stock may be listed or quoted at the time of sale, including
the Nasdaq National Market,
o in the over-the-counter market,
o in privately negotiated transactions,
o through options,
o by pledge to secure debts and other obligations,
o by a combination of the above methods of sale, or
o to cover short sales made pursuant to this prospectus.
In effecting sales, brokers or dealers engaged by the selling shareholders
may arrange for other brokers or dealers to participate in the resales. The
selling shareholders may enter into hedging transactions with broker-dealers,
and in connection with those transactions, broker-dealers may engage in short
sales of the shares. The selling shareholders also may sell shares short and
deliver the shares to close out such short positions. The selling shareholders
also may enter into option or other transactions with broker-dealers that
require the delivery to the broker-dealer of the shares, which the broker-dealer
may resell pursuant to this prospectus. The selling shareholders also may pledge
the shares to a broker or dealer, and upon a default, the broker or dealer may
effect sales of the pledged shares pursuant to this prospectus.
In order to comply with the securities laws of certain states, the selling
shareholders must offer or sell the shares only through registered or licensed
brokers or dealers. In addition, in certain states, the selling shareholders can
not offer or sell the shares unless the shares have been registered or qualified
for sale in the applicable state or an exemption from the registration or
qualification requirement is available and is complied with.
The SEC may deem the selling shareholders and any underwriters,
broker-dealers or agents that participate in the distribution of the shares of
common stock to be "underwriters" within the meaning of the Securities Act. The
Commission may deem any profits on the resale of the shares of common stock and
any compensation received by any underwriter, broker-dealer or agent to be
underwriting discounts and commission under the Securities Act.
Under the Exchange Act, any person engaged in the distribution of the
shares of common stock may not simultaneously engage in market-making activities
with respect to the common stock for five business days prior to the start of
the distribution. In addition, each selling shareholder and any other person
participating in a distribution will be subject to the Exchange Act, which may
limit the timing of purchases and sales of common stock by the selling
shareholder or any such other person.
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DESCRIPTION OF SECURITIES
COMMON STOCK
For a description of our common stock, see our Registration Statement on
Form 8-A filed with the SEC on October 31, 1996 and incorporated by reference
into this prospectus.
RIGHTS
In September 1999, we adopted a Shareholder Rights Plan for the protection
of our shareholders. For a description of the Rights relating to our Shareholder
Rights Plan, see our Form 8-K filed with the SEC on September 23, 1999 and
incorporated by reference into this prospectus.
WARRANTS ISSUED TO THE DURHAM TRUSTS
Pursuant to the conversion of the outstanding note, we issued warrants to
the Mark P. Durham and Mary R. Durham Trusts. The warrants expire five years
after issuance.
EXERCISE OF WARRANTS. The warrants may be exercised at any time after
issuance.
EXERCISE PRICE. The exercise price of each warrant is $8.00 per share of
common stock represented by the warrant. The exercise price of the warrants is
subject to customary anti-dilution adjustments upon such events as the
subdivision or combination of the common stock, the distribution of our assets
to holders of common stock, and other similar events.
CASHLESS EXERCISE OPTION. If the common stock to be issued in exchange for
the warrants is not registered for resale in accordance with the provisions of
the note conversion, the warrant holders are entitled to a "cashless exercise"
option. This option entitles the warrant holders to elect to receive fewer
shares of common stock without paying the cash exercise price. The number of
shares to be issued would be determined by a formula based on the total number
of shares to which the warrant holder is entitled, the last reported sale price
of the common stock and the applicable exercise price of the warrants.
FAILURE TO DELIVER THE COMMON STOCK UNDERLYING THE WARRANTS. If we fail to
deliver the common stock underlying the warrants upon exercise of such warrants
within two business days of receipt of the notice of exercise, we will be
required to pay to the exercising holder of the warrant an amount equal to 0.5%
of the product of:
o the number of shares of common stock not issued to the holder, and
o the average last closing price of the common stock for the five
consecutive trading days immediately preceding the last possible day
we could have issued the common stock.
REDEMPTION AT OUR ELECTION. We may redeem the warrants upon 30 days prior
written notice to the holder, in our sole discretion, at $.01 per share of
common stock underlying the warrants provided the following conditions have been
met:
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o this Registration Statement is effective;
o the closing bid price of our common stock is greater than $12.00 (as
equitably adjusted to reflect any merger, consolidation or
reorganization of the Company or any stock split, subdivision, reverse
stock split or combination effected by the Company) for twenty
consecutive trading days immediately preceding our exercise; and
o our common stock is listed on Nasdaq National Market, the American
Stock Exchange or the New York Stock Exchange.
COVENANTS. We made certain customary covenants with respect to the
warrants, including, among others:
o the warrants, and any common stock to be issued upon exercise of the
warrants, are and will be duly authorized and validly issued;
o we will have 100% of the underlying shares of common stock authorized
and reserved for issuance during the term of the warrants;
o we must reserve at least 100% of the number of shares of common stock
issuable upon exercise of the warrants;
o the common stock issuable upon exercise of the warrants shall be
listed on each national securities exchange or automated quotation
system upon which our common stock is then listed; and
o we will act in good faith in carrying out the provisions of the
warrants.
If we grant any dividend rights to holders of common stock, the holders of
the warrants and entitled to acquire the aggregate amount of rights which such
holder could have acquired if such holder had completely exercised their warrant
immediately prior to the record date for the granting of such rights.
In addition, upon any conveyance or exchange of all or substantially all of
our assets to another corporation or entity, or a recapitalization,
reorganization, reclassification, consolidation, or merger in which the holders
of our common stock are entitled to receive stock, securities or assets with
respect to or in exchange for our common stock in which we are not the surviving
entity, we will obtain from the acquiring person or entity a written agreement
to deliver to each holder of the warrants, in exchange for the warrants, a
security from the acquiring entity evidenced by a written instrument
substantially similar in form and substance to the warrant.
AMENDMENT. The provisions of the warrants may be amended only after we have
obtained the written consent of warrant holders representing 66.7% of the shares
of common stock issuable upon exercise of the warrants then outstanding.
However, we may not increase the exercise price of the warrants, decrease the
term of the warrants or decrease the amount of common stock issuable upon
exercise of any warrant or otherwise materially adversely effect the rights of
the holder without the written consent of the holder of such warrant.
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<PAGE>
WARRANTS ISSUED RYAN, BECK & CO., INC.
The warrants issued to Ryan, Beck & Co., Inc. were issued in connection
with services performed as investment advisor to the Company. The warrants
expire five years after issuance.
EXERCISE OF WARRANTS. The warrants may be exercised at any time after
issuance.
EXERCISE PRICE. The exercise price of the warrants is $9.31 per share of
common stock represented by the warrants. The exercise price of the warrants is
subject to customary anti-dilution adjustments upon such events as the
subdivision or combination of the common stock, the distribution of our assets
to holders of common stock, and other similar events.
CASHLESS EXERCISE OPTION. The placement agents are entitled to a "cashless
exercise" option. This option entitles the placement agents to elect to receive
fewer shares of common stock without paying the cash exercise price. The number
of shares to be issued would be determined by a formula based on the total
number of shares to which the warrant holder is entitled, the last reported sale
price of the common stock and the applicable exercise price of the warrants.
COVENANTS. We made certain customary covenants with respect to the
warrants, including, among others:
o the warrants, and any common stock to be issued upon exercise of the
warrants, are and will be duly authorized and validly issued;
o we will have 100% of the underlying shares of common stock authorized
and reserved for issuance during the term of the warrants;
o we must reserve at least 100% of the number of shares of common stock
issuable upon exercise of the warrants;
o the common stock issuable upon exercise of the warrants shall be
listed on each national securities exchange or automated quotation
system upon which our common stock is then listed; and
o we will act in good faith in carrying out the provisions of the
warrants.
In addition, upon any conveyance or exchange of all or substantially all of
our assets to another corporation or entity, or a recapitalization,
reorganization, reclassification, consolidation, or merger in which the holders
of our common stock are entitled to receive stock, securities or assets with
respect to or in exchange for our common stock in which we are not the surviving
entity, we will obtain from the acquiring person or entity a written agreement
to deliver to each holder of the warrants, in exchange for the warrants, a
security from the acquiring entity evidenced by a written instrument
substantially similar in form and substance to the warrants.
AMENDMENT. We may not increase the exercise price of the warrants, decrease
the term of the warrants or decrease the amount of common stock issuable upon
21
<PAGE>
exercise of any warrant or otherwise substantially alter the rights of the
holder without the written consent of the holder of such warrant.
LEGAL MATTERS
Certain legal matters have been passed upon for the Company by Squire,
Sanders & Dempsey L.L.P., Phoenix, Arizona.
EXPERTS
The audited financial statements of the Company as of and for each of the
three years in the period ended December 31, 1998, 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
report with respect thereto, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said reports.
22
<PAGE>
<TABLE>
<S> <C>
============================================== ============================================
No dealer, salesman or other person has
been authorized to give any information
or to make any representations other than
those contained or incorporated by
reference in this prospectus in connection
with the offering described herein, and,
if given or made, such information or
representation must not be relied upon as
having been authorized by the Company or
by any selling shareholder. This prospectus
does not constitute an offer to sell, or a
solicitation of an offer to buy, any
securities other than the registered
securities to which it relates, or an offer
to sell, or a solicitation of an offer to
buy, in any jurisdiction in which it is
unlawful to make such offer or solicitation. SKYMALL, INC.
Neither the delivery of this prospectus nor
any sale made hereunder shall, under any
circumstances, create an implication that
there has been no change in the affairs of
the Company since the date hereof or that 413,813 SHARES
the information contained herein is correct COMMON STOCK
as of any time subsequent to the date hereof.
---------------------
PROSPECTUS
TABLE OF CONTENTS
Page
----
Where You Can Find More Information...... 2
Incorporation of Certain Documents
By Reference............................ 2
Prospectus Summary....................... 4
The Company.............................. 4
Our Operations........................... 4 NOVEMBER ___, 1999
The Offering............................. 8
Risk Factors............................. 9
Selling Shareholders..................... 16
Use of Proceeds.......................... 17
Determination of Offering Price.......... 17
Plan of Distribution..................... 17
Description of Securities................ 19
Legal Matters............................ 22
Experts.................................. 22
============================================== ============================================
</TABLE>
<PAGE>
PART II TO FORM S-3
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated costs and expenses of the
Company in connection with the offering other than commissions and discounts, if
any.
SEC Registration Fee.............................$ 1,194
Legal Fees and Expenses.......................... 5,000
Accounting Fees and Expenses..................... 2,500
Printing and Engraving Expenses.................. 500
Blue Sky Fees and Expenses....................... 500
Miscellaneous.................................... 1,306
---------
Total...........................................$ 11,000
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Articles 11 and 12 of the Company's Articles of Incorporation provide as
follows:
1. To the fullest extent permitted by the laws of the State of Nevada, as
the same exist or may hereinafter be amended, no director or officer of the
Corporation shall be personally liable to the Corporation or its shareholders
for monetary damages for breach of fiduciary duty as a director or officer,
provided, however, that nothing contained herein shall eliminate or limit the
liability of a director or officer of the Corporation to the extent provided by
applicable laws (i) for acts or omissions which involve intentional misconduct,
fraud or knowing violation of law or (ii) for authorizing the payment of
dividends in violation of Nevada Revised Statutes Section 78.300. The limitation
of liability provided herein shall continue after a director or officer has
ceased to occupy such position as to acts or omissions occurring during such
director's or officer's term or terms of office. No repeal, amendment or
modification of this Article, whether direct or indirect, shall eliminate or
reduce its effect with respect to any act or omission of a director or officer
of the Corporation occurring prior to such repeal, amendment or modification.
2. The Corporation shall indemnify, defend and hold harmless any person who
incurs expenses, claims, damages or liability by reason of the fact that he or
she is, or was, an officer, director, employee or agent of the Corporation, to
the fullest extent allowed pursuant to Nevada law.
II-1
<PAGE>
ITEM 16. EXHIBITS
Exhibit
Number Description Method of Filing
- ------- ----------- ----------------
4.1 Form of Warrant issued to the Mark P. Durham
and Mary R. Durham Trusts (1)
4.2 Warrant issued to Ryan, Beck & Co., Inc. (1)
5 Opinion re: legality of the securities being
registered (1)
23.1 Consent of Independent Public Accountants (1)
23.2 Consent of Counsel See Exhibit 5
24 Powers of Attorney See Signature Page
- ---------------
(1) Filed herewith.
ITEM 17. UNDERTAKINGS
1. The undersigned Registrant hereby undertakes to file, during any
period in which offers or sales are being made, a post-effective amendment to
this registration statement:
(a) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933.
(b) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement; provided, however, that paragraphs (a) and (b) shall not apply if
such information is contained in periodic reports filed by the Registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934
that is incorporated by reference into this Registration Statement.
(c) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
II-2
<PAGE>
2. The undersigned Registrant hereby undertakes that, for the purpose of
determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
3. The undersigned Registrant hereby undertakes to remove from
registration by means of a post-effective amendment any of the securities being
registered which remain unsold at the termination of the offering.
4. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference into 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.
5. The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
6. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Phoenix, State of Arizona, on November 18, 1999.
SKYMALL, INC.,
a Nevada Corporation
By: /s/ Robert M. Worsley
------------------------------
Robert M. Worsley, President
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, constitute and
appoint ROBERT M. WORSLEY, STEPHEN R. PETERSON and CHRISTINE A. AGUILERA, and
each of them, his true and lawful attorney-in-fact and agent with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities to sign any and all pre- and post-effective amendments
(including any amendments pursuant to Rule 462(b) to this Form S-3 Registration
Statement, and to file the same with all exhibits thereto, and all documents in
connection therewith, with the Securities and Exchange Commission, granting such
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully and to all intents and purposes as he or she
might or could do in person, hereby ratifying and confirming all that such
attorney-in-fact and agents, or each of them, may lawfully do or cause to be
done by virtue hereof.
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.
Signature Title Date
--------- ----- ----
/s/ Robert M. Worsley Chairman of the Board, November 18, 1999
- ------------------------ President and Chief Executive
Robert M. Worsley Officer (Principal Executive
Officer)
/s/ Stephen R. Peterson Chief Financial Officer November 18, 1999
- ------------------------ (Principal Financial and
Stephen R. Peterson Accounting Officer)
S-1
<PAGE>
Signature Title Date
--------- ----- ----
/s/ Lyle R. Knight Director November 18, 1999
- ------------------------
Lyle R. Knight
/s/ Thomas J. Litle Director November 18, 1999
- ------------------------
Thomas J. Litle
/s/ Randy Petersen Director November 18, 1999
- ------------------------
Randy Petersen
S-2
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description Method of Filing
- ------- ----------- ----------------
4.1 Form of Warrant issued to the Mark P. Durham
and Mary R. Durham Trusts (1)
4.2 Warrant issued to Ryan, Beck & Co., Inc. (1)
5 Opinion re: legality of the securities being
registered (1)
23.1 Consent of Independent Public Accountants (1)
23.2 Consent of Counsel See Exhibit 5
24 Powers of Attorney See Signature Page
- ---------------
(1) Filed herewith.
Exhibit 4.1
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN A FORM REASONABLY
SATISFACTORY TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID
ACT. NOTWITHSTANDING THE FOREGOING, THIS WARRANT MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT.
SKYMALL, INC.
WARRANT TO PURCHASE COMMON STOCK
Warrant No.: ___ Number of Shares: 7,210
Date of Issuance: November 16, 1999
SkyMall, Inc., a Nevada corporation (the "Company"), hereby certifies that, for
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, _________________________________________________________, the
registered holder hereof or its permitted assigns (a "holder"), is entitled,
subject to the terms set forth below, to purchase from the Company upon
surrender of this Warrant, at any time or times on or after the date hereof, but
not after 11:59 P.M. Eastern Time on the Expiration Date (as defined herein)
SEVEN THOUSAND TWO HUNDRED TEN (7,210) fully paid nonassessable shares of Common
Stock (as defined herein) of the Company (the "Warrant Shares") at the purchase
price per share provided in Section 2(a) below.
1. DEFINITIONS.
(a) STOCK AND WARRANT PURCHASE AGREEMENT. This Warrant is one of the
Warrants (the "Warrants") issued pursuant to the Stock and Warrant Purchase
Agreement dated as of November 16, 1999, among the Company and the Investors (as
such term in defined therein) (the "Agreement").
<PAGE>
(b) DEFINITIONS. The following words and terms as used in this Warrant
shall have the following meanings:
(i) "Business Day" means any day other than Saturday, Sunday or other
day on which commercial banks in the City of New York are authorized or required
by law to remain closed.
(ii) "Closing Bid Price" means, for any security as of any date, the
last closing bid price for such security on the Principal Market (as defined
below) as reported by Bloomberg Financial Markets ("Bloomberg"), or, if the
Principal Market is not the principal trading market for such security, the last
closing bid price of such security on the principal securities exchange or
trading market where such security is listed or traded as reported by Bloomberg,
or if the foregoing do not apply, the last closing bid price of such security in
the over-the-counter market on the electronic bulletin board for such security
as reported by Bloomberg, or, if no closing bid price is reported for such
security by Bloomberg, the last closing trade price for such security as
reported by Bloomberg, or, if no last closing trade price is reported for such
security by Bloomberg, the average of the bid prices of any market makers for
such security as reported in the "pink sheets" by the National Quotation Bureau,
Inc. If the Closing Bid Price cannot be calculated for such security on such
date on any of the foregoing bases, the Closing Bid Price of such security on
such date shall be the fair market value as mutually determined by the Company
and the holder of this Warrant. All such determinations to be appropriately
adjusted for any stock dividend, stock split or other similar transaction during
such period.
(iii) "Closing Sale Price" means, for any security as of any date, the
last closing trade price for such security on the Principal Market (as defined
below) as reported by Bloomberg, or, if the Principal Market is not the
principal securities exchange or trading market for such security, the last
closing trade price of such security on the principal securities exchange or
trading market where such security is listed or traded as reported by Bloomberg,
or if the foregoing do not apply, the last closing trade price of such security
in the over-the-counter market on the electronic bulletin board for such
security as reported by Bloomberg, or, if no last closing trade price is
reported for such security by Bloomberg, the last closing ask price of such
security as reported by Bloomberg, or, if no last closing ask price is reported
for such security by Bloomberg, the average of the lowest ask price and lowest
bid price of any market makers for such security as reported in the "pink
sheets" by the National Quotation Bureau, Inc. If the Closing Sale Price cannot
be calculated for such security on such date on any of the foregoing bases, the
Closing Sale Price of such security on such date shall be the fair market value
as mutually determined by the Company and the holder of this Warrant. If the
Company and the holder of this Warrant are unable to agree upon the fair market
value of the Common Stock, then such dispute shall be resolved by the term
2
<PAGE>
"Market Price" being substituted for the term "Closing Sale Price." All such
determinations to be appropriately adjusted for any stock dividend, stock split
or other similar transaction during such period.
(iv) "Common Stock" means (i) the Company's common stock, par value
$.001 per share, and (ii) any capital stock into which such Common Stock shall
have been changed or any capital stock resulting from a reclassification of such
Common Stock.
(v) "Expiration Date" means the date five (5) years from the date of
this Warrant or, if such date falls on a Saturday, Sunday or other day on which
banks are required or authorized to be closed in the City of New York or the
State of New York or on which trading does not take place on the principal
exchange or automated quotation system on which the Common Stock is traded (a
"Holiday"), the next date that is not a Holiday.
(vi) "Issuance Date" means, with respect to each Warrant, the date of
issuance of the applicable Warrant.
(vii) "Market Price" means, with respect to any security for any date
of determination, that price which shall be computed as the arithmetic average
of the Closing Bid Prices for such security on each of the five (5) consecutive
trading days immediately preceding such date of determination (all such
determinations to be appropriately adjusted for any stock dividend, stock split
or similar transaction during the pricing period).
(viii) "Person" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof.
(ix) "Principal Market" means the Nasdaq National Market.
(x) "Securities Act" means the Securities Act of 1933, as amended.
(xi) "Warrant" means this Warrant and all warrants issued in exchange,
transfer or replacement thereof.
(xii) "Warrant Exercise Price" shall be equal to $8.00 per share.
(xiv) OTHER DEFINITIONAL PROVISIONS. Except as otherwise specified
herein, all references herein (A) to the Company shall be deemed to include the
Company's successors and (B) to any applicable law defined or referred to
3
<PAGE>
herein, shall be deemed references to such applicable law as the same may have
been or may be amended or supplemented from time to time. When used in this
Warrant, the words "herein," "hereof," and "hereunder," and words of similar
import, shall refer to this Warrant as a whole and not to any provision of this
Warrant, and the words "Section," "Schedule," and "Exhibit" shall refer to
Sections of, and Schedules and Exhibits to, this Warrant unless otherwise
specified. Whenever the context so requires, the neuter gender includes the
masculine or feminine, and the singular number includes the plural, and vice
versa.
2. EXERCISE OF WARRANT.
(a) Subject to the terms and conditions hereof, this Warrant may be
exercised by the holder hereof then registered on the books of the Company, in
whole or in part, at any time on any Business Day on or after the opening of
business on the date hereof and prior to 11:59 P.M. Eastern Time on the
Expiration Date by (i) delivery of a written notice, in the form of the
subscription notice attached as EXHIBIT A hereto (the "Exercise Notice"), of
such holder's election to exercise this Warrant, which notice shall specify the
number of Warrant Shares to be purchased; (ii) (A) payment to the Company of an
amount equal to the Warrant Exercise Price multiplied by the number of Warrant
Shares as to which this Warrant is being exercised (the "Aggregate Exercise
Price") in cash, certified or bank funds or wire transfer of immediately
available funds or (B) notifying the Company that this Warrant is being
exercised pursuant to a Cashless Exercise (as defined in Section 2(e)); and
(iii) the surrender of this Warrant (or a Lost Warrant Affidavit in
substantially the form annexed hereto as Exhibit C with respect to this Warrant
in the case of its loss, theft or destruction) to a common carrier for overnight
delivery to the Company; provided, that if such Warrant Shares are to be issued
in any name other than that of the registered holder of this Warrant, such
issuance shall be deemed a transfer and the provisions of Section 8 shall be
applicable. In the event of any exercise of the rights represented by this
Warrant in compliance with this Section 2(a), the Company shall on the second
Business Day following the date of receipt of the Exercise Notice, the Aggregate
Exercise Price (or notice of a Cashless Exercise) and this Warrant (or a Lost
Warrant Affidavit in substantially the form annexed hereto as EXHIBIT C with
respect to this Warrant in the case of its loss, theft or destruction) (the
"Exercise Delivery Documents"), credit such aggregate number of shares of Common
Stock to which the holder (or its designee) shall be entitled to the holder's
(or its designee's) balance account with The Depository Trust Company; provided,
however, if the holder who submitted the Exercise Notice requested physical
delivery of any or all of the Warrant Shares, then the Company shall, on or
before the second Business Day following receipt of the Exercise Delivery
Documents issue and surrender to a common carrier for overnight delivery to the
address specified in the Exercise Notice, a certificate, registered in the name
of the holder (or its designee), for the number of shares of Common Stock to
which the holder (or its designee) shall be entitled. Upon delivery of the
Exercise Notice and Aggregate Exercise Price referred to above or notification
to the Company of a Cashless Exercise referred to in Section 2(e), the holder of
this Warrant (or its designee) shall be deemed for all corporate purposes to
4
<PAGE>
have become the holder of record of the Warrant Shares with respect to which
this Warrant has been exercised, irrespective of the date of delivery of this
Warrant as required by clause (iii) above or the certificates evidencing such
Warrant Shares. In the case of a dispute as to the determination of the Warrant
Exercise Price or the Market Price of a security or the arithmetic calculation
of the Warrant Shares, the Company shall promptly issue to the holder (or its
designee) the number of shares of Common Stock that is not disputed and shall
submit the disputed determinations or arithmetic calculations to the holder via
facsimile within one Business Day of receipt of the holder's Exercise Notice. If
the holder and the Company are unable to agree upon the determination of the
Warrant Exercise Price or the Market Price or arithmetic calculation of the
Warrant Shares within one day of such disputed determination or arithmetic
calculation being submitted to the holder, then the Company shall immediately
submit via facsimile (i) the disputed determination of the Warrant Exercise
Price or the Market Price to an independent, reputable investment banking firm
of nationally recognized standing, mutually acceptable to both the Company and
the holder or (ii) the disputed arithmetic calculation of the Warrant Shares to
an independent, outside accountant, mutually acceptable to both the Company and
the holder. The Company shall cause the investment banking firm or the
accountant, as the case may be, to perform the determinations or calculations
and notify the Company and the holder of the results no later than forty-eight
(48) hours from the time it receives the disputed determinations or
calculations. Such investment banking firm's or accountant's determination or
calculation, as the case may be, shall be deemed conclusive absent manifest
error.
(b) Unless the rights represented by this Warrant shall have expired or
shall have been fully exercised, the Company shall, as soon as practicable and
in no event later than two (2) Business Days after delivery of the Exercise
Delivery Documents and at its own expense, issue a new Warrant identical in all
respects to this Warrant exercised except it shall represent rights to purchase
the number of Warrant Shares purchasable immediately prior to such exercise
under this Warrant exercised, less the number of Warrant Shares with respect to
which such Warrant is exercised.
(c) No fractional shares of Common Stock are to be issued upon the exercise
of this Warrant, but rather the number of shares of Common Stock issued upon
exercise of this Warrant shall be rounded up to the nearest whole number.
(d) If the Company shall fail for any reason or for no reason to issue to
the holder within two (2) Business Days of receipt of the Exercise Delivery
Documents, a certificate for the number of shares of Common Stock to which the
holder (or its designee) is entitled or to credit the holder's (or designee's)
5
<PAGE>
balance account with The Depository Trust Company for such number of shares of
Common Stock to which the holder (or its designee) is entitled upon the holder's
exercise of this Warrant or a new Warrant for the number of shares of Common
Stock to which such holder is entitled pursuant to Section 2(b) hereof, the
Company shall, in addition to any other remedies under this Warrant or the
Agreement or otherwise available to such holder, including any indemnification
under the Agreement, pay as additional damages in cash to such holder on each
day the issuance of such Common Stock certificate or new Warrant, as the case
may be, is not timely effected, an amount equal to 0.5% of the product of (A)
the sum of the number of shares of Common Stock not issued to the holder (or its
designee) on a timely basis and to which the holder (or its designee) is
entitled and/or, the number of shares represented by the portion of this Warrant
which is not being converted, as the case may be, and (B) the average of the
Closing Sale Price of the Common Stock for the five (5) consecutive trading days
immediately preceding the last possible date which the Company could have issued
such Common Stock or Warrant, as the case may be, to the holder without
violating this Section 2.
(e) If, despite the Company's obligations under the Agreement, the Warrant
Shares to be issued are not registered and available for resale pursuant to a
registration statement in accordance with the Agreement, then notwithstanding
anything contained herein to the contrary, the holder of this Warrant may, at
its election exercised in its sole discretion, exercise this Warrant in whole or
in part and, in lieu of making the cash payment otherwise contemplated to be
made to the Company upon such exercise in payment of the Aggregate Exercise
Price, elect instead to receive upon such exercise the "Net Number" of shares of
Common Stock determined according to the following formula (a "Cashless
Exercise"):
Net Number = (A x B) - (A x C)
-----------------
B
For purposes of the foregoing formula:
A = the total number of shares with respect
to which this Warrant is then being exercised.
B = the Market Price as of the date of the
Exercise Notice.
C = the Warrant Exercise Price then in effect
for the applicable Warrant Shares at the
time of such exercise.
6
<PAGE>
3. (a) ADJUSTMENT FOR DIVIDENDS IN OTHER STOCK AND PROPERTY;
RECLASSIFICATIONS. In case at any time or from time to time the holders of the
Common Stock (or any shares of stock or other securities at the time receivable
upon the exercise of this Warrant) shall have received, or, on or after the
record date fixed for the determination of eligible shareholders, shall have
become entitled to receive, without payment therefor,
(1) other or additional stock or other
securities or property (other than cash) by way of
dividend,
(2) any cash or other property paid or
payable out of any source other than retained
earnings (determined in accordance with generally
accepted accounting principles), or
(3) other or additional stock or other
securities or property (including cash) by way of
stock-split, spin-off, reclassification, combination
of shares or similar corporate rearrangement,
(other than (x) shares of Common Stock or any other stock or securities into
which such Common Stock shall have been exchanged, or (y) any other stock or
securities convertible into or exchangeable for such Common Stock or such other
stock or securities), then and in each such case a holder, upon the exercise
hereof as provided in Section 2, shall be entitled to receive the amount of
stock and other securities and property (including cash in the cases referred to
in clauses (2) and (3) above) which such holder would hold on the date of such
exercise if on the Issuance Date such holder had been the holder of record of
the number of shares of Common Stock called for on the face of this Warrant, and
had thereafter, during the period from the Issuance Date to and including the
date of such exercise, retained such shares and/or all other or additional stock
and other securities and property (including cash in the cases referred to in
clause (2) and (3) above) receivable by it as aforesaid during such period,
giving effect to all adjustments called for during such period by Sections 3(a)
and 3(b).
(b) ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION AND MERGER. In case of any
reorganization of the Company (or any other corporation the stock or other
securities of which are at the time receivable on the exercise of this Warrant)
or reclassification of its securities after the Issuance Date, or the Company
(or any such other corporation) shall consolidate with or merge into another
corporation or entity or convey or exchange all or substantially all its assets
to another corporation or entity, then and in each such case the holder of this
Warrant, upon the exercise hereof as provided in Section 2 at any time after the
consummation of such reorganization, reclassification, consolidation, merger,
conveyance or exchange, shall be entitled to receive, in lieu of the stock or
7
<PAGE>
other securities and property receivable upon the exercise of this Warrant prior
to such consummation, the stock or other securities or property to which such
holder would have been entitled upon such consummation if such holder had
exercised this Warrant immediately prior thereto, all subject to further
adjustment as provided in Sections 3(a), (b), (c) and (d); in each such case,
the terms of this Warrant shall be applicable to the shares of stock or other
securities or property receivable upon the exercise of this Warrant after such
consummation.
(c) ADJUSTMENT FOR CERTAIN DIVIDENDS AND DISTRIBUTIONS. If the Company at
any time or from time to time makes, or fixes a record date for the
determination of holders of Common Stock (or any shares of stock or other
securities at the time receivable upon the exercise of this Warrant) entitled to
receive, a dividend or other distribution payable in additional shares of (x)
Common Stock or any other stock or securities into which such Common Stock shall
have been exchanged, or (y) any other stock or securities convertible into or
exchangeable for such Common Stock or such other stock or securities, then and
in each such event
(1) the Warrant Exercise Price then in
effect shall be decreased as of the time of the issuance of such additional
shares or, in the event such record date is fixed, as of the close of business
on such record date, by multiplying the Warrant Exercise Price then in effect by
a fraction (A) the numerator of which is the total number of shares of Common
Stock issued and outstanding immediately prior to the time of such issuance or
the close of business on such record date, and (B) the denominator of which
shall be the total number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the close of business on such
record date as the case may be, plus the number of shares of Common Stock
issuable in payment of such dividend or distribution; PROVIDED, HOWEVER, that if
such record date is fixed and such dividend is not fully paid or if such
distribution is not fully made on the date fixed therefor, the Warrant Exercise
Price shall be recomputed accordingly as of the close of business on such record
date, and thereafter the Warrant Exercise Price shall be adjusted pursuant to
this Section 3(c) as of the time of actual payment of such dividends or
distributions; and
(2) the number of shares of Common Stock
theretofore receivable upon the exercise of this Warrant shall be increased, as
of the time of such issuance or, in the event such record date is fixed, as of
the close of business on such record date, in inverse proportion to the decrease
in the Warrant Exercise Price.
(d) STOCK SPLIT AND REVERSE STOCK SPLIT. If the Company at any time or from
time to time effects a stock split or subdivision of the outstanding Common
Stock, the Warrant Exercise Price then in effect immediately before that stock
split or subdivision shall be proportionately decreased and the number of shares
8
<PAGE>
of Common Stock theretofore receivable upon the exercise of this Warrant shall
be proportionately increased. If the Company at any time or from time to time
effects a reverse stock split or combines the outstanding shares of Common Stock
into a smaller number of shares, the Warrant Exercise Price then in effect
immediately before that reverse stock split or combination shall be
proportionately increased and the number of shares of Common Stock theretofore
receivable upon the exercise of this Warrant shall be proportionately decreased.
Each adjustment under this Section 3(d) shall become effective at the close of
business on the date the stock split, subdivision, reverse stock split or
combination becomes effective.
4. REDEMPTION AT THE COMPANY'S ELECTION. The Company, upon thirty (30) days'
prior written notice to the holder, may elect to redeem all or part of this
Warrant at a price equal to $0.01 per Warrant Share issuable upon the exercise
hereof, if, but only if: (i) the Closing Bid Price shall have exceeded $12.00
per share (as equitably adjusted to reflect any merger, consolidation or
reorganization of the Company or any stock split, subdivision, reverse stock
split or combination effected by the Company) on each of the twenty (20)
consecutive trading days ending not more than one Business Day prior to the date
on which the notice of redemption shall be delivered to the holder, (ii) the
registration statement required to be filed under Section 4.1 of the Agreement,
dated as of the date hereof, by and among the Company and the other parties
signatory thereto, shall be effective and permit the sale of all Warrant Shares,
and (iii) the Common Stock shall be listed and trading on the Nasdaq National
Market, AMEX or the NYSE. Any such redemption shall be effective on the
thirtieth day following the delivery of such notice, PROVIDED, HOWEVER, that the
holder may elect at any time prior to the effective date of redemption to
exercise all or any portion of this Warrant in accordance with the terms hereof;
and PROVIDED FURTHER, that the Company's right to redeem this Warrant shall be
suspended if, after the notice has been delivered, the Warrant Shares may not be
sold pursuant to an effective registration statement for any reason whatsoever
or the Common Stock shall cease to be listed and trading on the Nasdaq National
Market, AMEX or the NYSE. The notice period shall then be extended for a period
of time equal to the number of days during the notice period during which the
registration statement shall not have permitted the sale of such Warrant Shares
or the Common Stock shall not have been so listed and trading, as the case may
be; provided, however, that the notice period shall not begin to run until such
time as the holder receives notice from the Company that the registration
statement permits the sale of the Warrant Shares and/or the Common Stock shall
have been so listed and trading, as the case may be. The redemption price shall
be payable in full, in cash, on the effective date of any redemption pursuant to
this paragraph (4). A redemption notice delivered by the Company pursuant to
this paragraph (4) shall be irrevocable. Notwithstanding the foregoing, the
Company's right to redeem all or part of this Warrant may not be exercised if on
the date on which the Company delivers notice of such exercise the Market Price
shall be less than $12.00 per share (as equitably adjusted to reflect any
merger, consolidation or reorganization of the Company or any stock split,
subdivision, reverse stock split or combination effected by the Company).
9
<PAGE>
5. COVENANTS AS TO COMMON STOCK. The Company hereby covenants and agrees as
follows:
(a) This Warrant is, and any Warrants issued in substitution for or
replacement of this Warrant will upon issuance be, duly authorized and validly
issued.
(b) All Warrant Shares which may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be validly issued, fully paid
and nonassessable and free from all taxes, liens and charges with respect to the
issuance thereof.
(c) During the period within which the rights represented by this Warrant
may be exercised, the Company will at all times have authorized and reserved at
least 100% of the number of shares of Common Stock needed to provide for the
exercise of the rights then represented by this Warrant and the par value of
said shares will at all times be less than or equal to the applicable Warrant
Exercise Price.
(d) The Company shall secure the listing of the shares of Common Stock
issuable upon exercise of this Warrant upon each national securities exchange or
automated quotation system, if any, upon which shares of Common Stock are then
listed within the time required by such exchange or quotation system's rules and
regulations and shall maintain, so long as any other shares of Common Stock
shall be so listed, such listing of all shares of Common Stock from time to time
issuable upon the exercise of this Warrant; and the Company shall so list on
each national securities exchange or automated quotation system within the time
required by such exchange or quotation system's rules and regulations, as the
case may be, and shall maintain such listing of, any other shares of capital
stock of the Company issuable upon the exercise of this Warrant if and so long
as any shares of the same class shall be listed on such national securities
exchange or automated quotation system.
(e) The Company will not, by amendment of its Certificate of Incorporation
or through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities, or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the holder of this
Warrant in order to protect the exercise privilege of the holder of this Warrant
against dilution or other impairment, consistent with the tenor and purpose of
this Warrant. Without limiting the generality of the foregoing, the Company (i)
will not increase the par value of any shares of Common Stock receivable upon
the exercise of this Warrant above the Warrant Exercise Price then in effect,
and (ii) will take all such actions as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable
shares of Common Stock upon the exercise of this Warrant.
10
<PAGE>
(f) This Warrant will be binding upon any entity succeeding to the Company
by merger, consolidation or acquisition of all or substantially all of the
Company's assets and any such successive mergers, consolidations or
acquisitions.
6. TAXES. The Company shall pay any and all taxes which may be payable with
respect to the issuance and delivery of Warrant Shares upon exercise of this
Warrant; provided, however, that the Company shall not be required to pay any
tax that may be payable in respect of any transfer involved in the issue or
delivery of Common Stock or other securities or property in a name other than
that of the registered holders of this Warrant to be converted and such holder
shall pay such amount, if any, to cover any applicable transfer or similar tax.
7. WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise specifically
provided herein, no holder of this Warrant, solely by virtue of such holding,
shall be entitled to vote or receive dividends or be deemed the holder of shares
of the Company for any purpose, nor shall anything contained in this Warrant be
construed to confer upon the holder hereof, as such, any of the rights of a
stockholder of the Company or any right to vote, give or withhold consent to any
corporate action (whether a reorganization, issue of stock, reclassification of
stock, consolidation, merger, conveyance or otherwise), receive notice of
meetings, receive dividends or subscription rights, or otherwise, prior to the
issuance to the holder of this Warrant of the Warrant Shares which he or she is
then entitled to receive upon the due exercise of this Warrant. In addition,
nothing contained in this Warrant shall be construed as imposing any liabilities
on such holder to purchase any securities (upon exercise of this Warrant or
otherwise) or as a stockholder of the Company, whether such liabilities are
asserted by the Company or by creditors of the Company. Notwithstanding this
Section 6, the Company will provide the holder of this Warrant with copies of
the same notices and other information given to the stockholders of the Company
generally, contemporaneously with the giving thereof to the stockholders.
8. REPRESENTATIONS OF HOLDER. The holder of this Warrant, by the acceptance
hereof, represents that it is acquiring this Warrant and the Warrant Shares for
its own account for investment only and not with a view towards, or for resale
in connection with, the public sale or distribution of this Warrant or the
Warrant Shares, except pursuant to sales registered or exempted under the
Securities Act; provided, however, that by making the representations herein,
the holder does not agree to hold this Warrant or any of the Warrant Shares for
any minimum or other specific term and reserves the right to dispose of this
Warrant and the Warrant Shares at any time in accordance with or pursuant to a
registration statement or an exemption under the Securities Act. The holder of
this Warrant further represents, by acceptance hereof, that, as of this date,
such holder is an "accredited investor" as such term is defined in Rule
501(a)(1) of Regulation D promulgated by the Securities and Exchange Commission
under the Securities Act (an "Accredited Investor").
11
<PAGE>
9. OWNERSHIP AND TRANSFER.
(a) The Company shall maintain at its principal executive offices (or such
other office or agency of the Company as it may designate by notice to the
holder hereof), a register for this Warrant, in which the Company shall record
the name and address of the person in whose name this Warrant has been issued,
as well as the name and address of each transferee. The Company may treat the
person in whose name any Warrant is registered on the register as the owner and
holder thereof for all purposes, but in all events recognizing any transfers
made in accordance with the terms of this Warrant.
(b) This Warrant and the rights granted hereunder shall be assignable by
the holder hereof without the consent of the Company.
(c) The Company is obligated to register the Warrant Shares for resale
under the Securities Act pursuant to the Agreement and any holder of this
Warrant (and the assignees thereof) is entitled to the registration rights in
respect of the Warrant Shares as set forth in the Agreement.
10. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant is lost,
stolen, mutilated or destroyed, the Company shall, on receipt of an executed
Lost Warrant Affidavit in substantially the form annexed hereto as EXHIBIT C
(or, in the case of a mutilated Warrant, the Warrant), issue a new Warrant of
like denomination and tenor as this Warrant so lost, stolen, mutilated or
destroyed.
11. NOTICE. Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Warrant must be in writing and
will be deemed to have been delivered: (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending party); or (iii) one Business Day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company:
SkyMall, Inc.
1520 East Pima Street
Phoenix, Arizona 85034
Telephone: 602-254-8620
Facsimile: 602-254-6544
Attention: Robert M. Worsley, President and Chief Executive Officer
12
<PAGE>
With copy to:
Squire, Sanders & Dempsey L.L.P.
Two Renaissance Square
40 North Central Avenue, Suite 2700
Phoenix, Arizona 85004
Facsimile: 602-253-8129
Attention: Gregory R. Hall, Esq.
If to a holder of this Warrant, to it at the address and facsimile number set
forth on the Schedule of Investors to the Agreement, with copies to such
holder's representatives as set forth on such Schedule of Investors, or at such
other address and facsimile as shall be delivered to the Company by the holder
at any time. Each party shall provide five days' prior written notice to the
other party of any change in address or facsimile number. Written confirmation
of receipt (A) given by the recipient of such notice, consent, waiver or other
communication, (B) mechanically or electronically generated by the sender's
facsimile machine containing the time, date, recipient facsimile number and an
image of the first page of such transmission or (C) provided by a nationally
recognized overnight delivery service shall be rebuttable evidence of personal
service, receipt by facsimile or receipt from a nationally recognized overnight
delivery service in accordance with clause (i), (ii) or (iii) above,
respectively.
12. DATE. The date of this Warrant is November 16, 1999. This Warrant, in all
events, shall be wholly void and of no effect after the close of business on the
Expiration Date, except that notwithstanding any other provisions hereof, the
provisions of Section 8 shall continue in full force and effect after such date
as to any Warrant Shares or other securities issued upon the exercise of this
Warrant.
13. AMENDMENT AND WAIVER. Except as otherwise provided herein, the provisions
of the Warrants issued pursuant to the Agreement may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company has obtained the written
consent of the holders of Warrants representing 66.7% of the shares of Common
Stock obtainable upon exercise of the Warrants then outstanding; provided that
no such action may increase the Warrant Exercise Price of the Warrants, decrease
the number of shares or class of stock obtainable upon exercise of any Warrants,
or otherwise materially adversely effect the rights of the holder of this
Warrant without the written consent of such holder.
14. DESCRIPTIVE HEADINGS; GOVERNING LAW; JURISDICTION. The descriptive headings
of the several Sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. The corporate
laws of the State of New York shall govern all issues concerning the relative
13
<PAGE>
rights of the Company and its stockholders. All other questions concerning the
construction, validity, enforcement and interpretation of this Warrant shall be
governed by the internal laws of the State of New York, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
New York, or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York. Each of the parties
hereto irrevocably consents and submits to the nonexclusive jurisdiction of the
Supreme Court of the State of New York and the United States District Court for
the Southern District of New York in connection with any proceeding arising out
of or relating to this Warrant, waives any objection to venue in the County of
New York, State of New York, or such District, and agrees that service of any
summons, complaint, notice of other process relating to such proceeding may be
effected in the manner provided by Section 10 hereof.
[Signature Page Follows]
14
<PAGE>
SKYMALL, INC.
By: ______________________________
Name: ____________________________
Title: ___________________________
15
<PAGE>
EXHIBIT A TO WARRANT
SUBSCRIPTION FORM
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT
SKYMALL, INC.
The undersigned holder hereby exercises the right to purchase
_________________ of the shares of Common Stock ("Warrant Shares") of SkyMall,
Inc., a Nevada corporation (the "Company"), evidenced by the attached Warrant
(the "Warrant"). Capitalized terms used herein and not otherwise defined shall
have the respective meanings set forth in the Warrant.
1. Form of Warrant Exercise Price. The Holder intends that payment of
the Warrant Exercise Price shall be made as:
____________ a "CASH EXERCISE" with respect to ____________________
Warrant Shares; and/or
____________ a "CASHLESS EXERCISE" with respect to _______________
Warrant Shares (to the extent permitted by the terms
of the Warrant).
2. Payment of Warrant Exercise Price. In the event that the holder has
elected a Cash Exercise with respect to some or all of the Warrant Shares to be
issued pursuant hereto, the holder shall pay the sum of $___________________ to
the Company in accordance with the terms of the Warrant.
3. Delivery of Warrant Shares. The Company shall deliver to the holder
__________ Warrant Shares in accordance with the terms of the Warrant.
Date: _______________ __, ______
________________________________
Name of Registered Holder
By: ____________________________
Name:
Title:
A-1
<PAGE>
EXHIBIT B TO WARRANT
FORM OF WARRANT POWER
FOR VALUE RECEIVED, the undersigned does hereby assign and transfer to
________________, Federal Identification No. __________, a warrant to purchase
____________ shares of the capital stock of SkyMall, Inc., a Nevada corporation,
represented by warrant certificate no. _____, standing in the name of the
undersigned on the books of said corporation. The undersigned does hereby
irrevocably constitute and appoint ______________, attorney to transfer the
warrants of said corporation, with full power of substitution in the premises.
Dated: _________________, ____
______________________________________
By: _________________________________
Its: _________________________________
B-1
<PAGE>
EXHIBIT C TO WARRANT
FORM OF AFFIDAVIT OF LOSS
STATE OF )
) ss:
COUNTY OF )
The undersigned (hereinafter "Deponent"), being duly sworn, deposes and
says that:
1. Deponent is an adult whose mailing address is:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. Deponent is the recipient of a Warrant (the "Warrant") from SkyMall,
Inc. (the "Company"), dated ___________________________________ for the purchase
of ___________________________________ shares of Common Stock, par value $.001
per share, of the Company, at an exercise price of $_________________________
per share. 3. The Warrant has been lost, stolen, destroyed or misplaced, under
the following circumstances:
4. The Warrant was not endorsed.
5. Deponent has made a diligent search for the Warrant, and has been unable
to find or recover same, and Deponent was the unconditional owner of the Warrant
at the time of loss, and is entitled to the full and exclusive possession
thereof; that neither the Warrant nor the rights of Deponent therein have, in
whole or in part, been assigned, transferred, hypothecated, pledged or otherwise
disposed of, in any manner whatsoever, and that no person, firm or corporation
other than the Deponent has any right, title, claim, equity or interest in, to,
or respecting the Warrant.
C-1
<PAGE>
6. Deponent makes this Affidavit for the purpose of requesting and inducing
the Company and its agents to issue a new warrant in substitution for the
Warrant.
7. If the Warrant should ever come into the hands, custody or power of the
Deponent or the Deponent's representatives, agents or assigns, the Deponent will
immediately and without consideration surrender the Warrant to the Company, its
representatives, agents or assigns, its transfer agents or subscription agents
for cancellation.
8. The Deponent hereby indemnifies and holds harmless the Company from any
claim or demand for payment or reimbursement of any party arising in connection
with the subject matter of this Affidavit.
Signed, sealed and dated: _________________________
___________________________________
Deponent
Sworn to and subscribed before me this
____ day of _____________, _________
______________________________________
Notary Public
C-2
Exhibit 4.2
- --------------------------------------------------------------------------------
SKYMALL, INC.
AND
RYAN, BECK & CO., INC.
ADVISOR'S
WARRANT AGREEMENT
DATED AS OF JUNE 30, 1999
- --------------------------------------------------------------------------------
ADVISOR'S WARRANT AGREEMENT dated as of June 30, 1999 between SKYMALL,
INC., a Nevada corporation (the "Company"), and Ryan, Beck & Co., Inc.
(hereinafter referred to variously as the "Holder", "Ryan, Beck" or the
"Advisor").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue to Ryan, Beck or its designees
warrants ("Warrants") to purchase up to an aggregate 25,000 shares of common
stock of the Company ("Common Stock"); and
WHEREAS, Ryan, Beck has agreed pursuant to an advisor's agreement (the
"Advisor's Agreement") dated as of the date hereof between Ryan, Beck (the
"Advisor"), and the Company to act as financial advisor to the Company; and
WHEREAS, the Company proposes to issue to Ryan, Beck (and/or designees)
the Warrants in connection with payment for Financial Advisor's services;
NOW, THEREFORE, in consideration of the premises, the payment by Ryan,
Beck to the Company of an aggregate of two dollars and fifty cents ($2.50), the
agreements herein set forth and other good and valuable consideration, hereby
acknowledged, the parties hereto agree as follows:
<PAGE>
1. GRANT. Ryan, Beck is hereby granted the right to purchase, at any
time from June 30, 1999, until 5:30 P.M., New York time, on June 30, 2004, up to
an aggregate of 25,000 shares of Common Stock (the "Shares") at an initial
exercise price (subject to adjustment as provided in SECTION 8 hereof) of $9.31
per share of Common Stock subject to the terms and conditions of this Agreement.
Except as set forth herein, the Shares issuable upon exercise of the Warrants
are in all respects identical to the shares of Common Stock that have been
issued to the public.
2. WARRANT CERTIFICATES. The warrant certificates (the "Warrant
Certificates") delivered and to be delivered pursuant to this Agreement shall be
in the form set forth in Exhibit A, attached hereto and made a part hereof, with
such appropriate insertions, omissions, substitutions, and other variations as
required or permitted by this Agreement.
3. EXERCISE OF WARRANT.
3.1 METHOD OF EXERCISE. The Warrants initially are exercisable at an
aggregate initial exercisE price per share of Common Stock set forth in SECTION
6 hereof payable by certified or official bank check in New York Clearing House
funds, subject to adjustment as provided in SECTION 8 hereof. Upon surrender of
a Warrant Certificate with the annexed Form of Election to Purchase duly
executed, together with payment of the Exercise Price (as hereinafter defined)
for the shares of Common Stock purchased at the Company's principal offices in
Phoenix, Arizona (presently located at 1520 East Pima Street, Phoenix, Arizona
85034) the registered holder of a Warrant Certificate ("Holder" or "Holder")
shall be entitled to receive a certificate or certificates for the shares of
Common Stock so purchased. The purchase rights represented by each Warrant
Certificate are exercisable at the option of the Holder thereof, in whole or in
part (but not as to fractional shares of the Common Stock underlying the
Warrants). Warrants may be exercised to purchase all or part of the shares of
Common Stock represented thereby. In the case of the purchase of less than all
the shares of Common Stock purchasable under any Warrant Certificate, the
Company shall cancel said Warrant Certificate upon the surrender thereof and
shall execute and deliver a new Warrant Certificate of like tenor for the
balance of the shares of Common Stock purchasable thereunder.
3.2 EXERCISE BY SURRENDER OF WARRANT. In addition to the method of
payment set forth in SECTION 3.1 and in lieu of any cash payment required
thereunder, the Holder(s) of the Warrants shall have the right at any time and
from time to time to exercise the Warrants in full or in part by surrendering
the Warrant Certificate in the manner specified in SECTION 3.1 in exchange for
the number of Shares equal to the product of (x) the number of Shares as to
which the Warrants are being exercised multiplied by (y) a fraction, the
numerator of which is the Market Price (as defined in SECTION 3.3 below) of the
Shares less the Exercise Price and the denominator of which is such Market
Price. Solely for the purposes of this paragraph, Market Price shall be
calculated either (i) on the date which the form of election attached hereto is
deemed to have been sent to the Company pursuant to SECTION 13 hereof ("Notice
Date") or (ii) as the average of the Market Prices for each of the five trading
days preceding the Notice Date, whichever of (i) or (ii) is greater.
3.3 DEFINITION OF MARKET PRICE. As used herein, the phrase "Market
Price" at any date shall bE deemed to be the last reported sale price, or, in
case no such reported sale takes place on such day, the average of the last
reported sale prices for the last three (3) trading days, in either case as
2
<PAGE>
officially reported by the principal securities exchange on which the Common
Stock is listed or admitted to trading or by the Nasdaq National Market ("NNM"),
or, if the Common Stock is not listed or admitted to trading on any national
securities exchanged or quoted by NNM, the average closing bid price as
furnished by the NASD through NNM or similar organization if NNM is no longer
reporting such information, or if the Common Stock is not quoted on NNM, as
determined in good faith by resolution of the Board of Directors of the Company,
based on the best information available to it.
4. ISSUANCE OF CERTIFICATES. Upon the exercise of the Warrants, the
issuance of certificates for shares of Common Stock and/or other securities,
properties or rights underlying such Warrants, shall be made forthwith (and in
any event within five (5) business days thereafter) without charge to the Holder
thereof including, without limitation, any tax which may be payable in respect
of the issuance thereof, and such certificates shall (subject to the provisions
of SECTIONS 5 and 7 hereof) be issued in the name of, or in such names as may be
directed by, the Holder thereof; 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 issuance and delivery of any such certificates in a name other
than that of the Holder, and the Company shall not be required to issue or
deliver such certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
The Warrant Certificates and the certificates representing the Shares
underlying the Warrants (and/or other securities, property or rights issuable
upon the exercise of the Warrants) shall be executed on behalf of the Company by
the manual or facsimile signature of the then Chairman or Vice Chairman of the
Board of Directors or President or Vice President of the Company. Warrant
Certificates shall be dated the date of execution by the Company upon initial
issuance, division, exchange, substitution or transfer.
5. RESTRICTION ON TRANSFER OF WARRANTS. The Holder of a Warrant
Certificate, by its acceptance thereof, covenants and agrees that the Warrants
are being acquired as an investment and not with a view to the distribution
thereof.
6. EXERCISE PRICE.
6.1 INITIAL AND ADJUSTED EXERCISE PRICE. Except as otherwise
provided in SECTION 8 hereof, thE initial exercise price of each Warrant shall
be $9.31 per share of Common Stock. The adjusted exercise price shall be the
price which shall result from time to time from any and all adjustments of the
initial exercise price in accordance with the provisions of SECTION 8 hereof.
6.2 EXERCISE PRICE. The term "Exercise Price" herein shall mean the
initial exercise price or the adjusted exercise price, depending upon the
context.
7. REGISTRATION RIGHTS.
7.1 PIGGYBACK REGISTRATION. If, at any time commencing after the
date hereof and expiring seven (7) years from the effective date, the Company
proposes to register any of its equity securities under the Act (other than in
connection with a merger or pursuant to Form S-8 or S-4) it will give written
3
<PAGE>
notice by registered mail, at least thirty (30) days prior to the filing of each
such registration statement, to Ryan, Beck and to all other Holder(s) of the
Warrants and/or the Warrant Securities of its intention to do so. If Ryan, Beck
or other Holder(s) of the Warrants and/or Warrant Securities notify the Company
within twenty (20) business days after receipt of any such notice of its or
their desire to include any such securities in such proposed registration
statement, the Company shall afford Ryan, Beck and such Holder(s) of the
Warrants and/or Warrant Securities the opportunity to have any such Warrant
Securities registered under such registration statement (sometimes referred to
herein as the "Piggyback Registration").
Notwithstanding the provisions of this SECTION 7.1, the Company shall
have the right at any time after it shall have given written notice pursuant to
this SECTION 7.1 (irrespective of whether a written request for inclusion of any
such securities shall have been made) to elect not to file any such proposed
registration statement, or to withdraw the same after the filing but prior to
the effective date thereof.
If a Piggyback Registration is an underwritten primary registration on
behalf of the Company, and the managing underwriters advise the Company in
writing that in their reasonable opinion based upon market conditions the number
of securities requested to be included in such registration exceeds the number
which can be sold in such offering the Company will include in such registration
(i) first, the securities the Company proposes to sell, (ii) second, the Warrant
Securities requested to be included in such registration, pro rata among the
Holders of such Warrant Securities, on the basis of the number of shares
requested by such holders to be included, and (iii) third, other securities to
be included in such registration.
7.2 DEMAND REGISTRATION.
(a) At any time after the date hereof and expiring five (5) years from
the effective date, the Holder of the Warrants and/or Warrant Securities
representing a "Majority" (as hereinafter defined) of such securities (assuming
the exercise of all of the Warrants) shall have the right (which right is in
addition to the registration rights under SECTION 7.1 hereof), exercisable by
written notice to the Company, to have the Company prepare and file with the
Securities and Exchange Commission (the "Commission"), on one occasion, a
registration statement and such other documents, including a prospectus, as may
be necessary in the opinion of both counsel for the Company and counsel for
Ryan, Beck and Holder, in order to comply with the provisions of the Act, so as
to permit a public offering and sale of their respective Warrant Securities for
nine (9) consecutive months by such Holder and any other Holder of the Warrants
and/or Warrant Securities who notify the Company within ten (10) days after
receiving notice from the Company of such request.
(b) The Company covenants and agrees to give written notice of any
registration request under this SECTION 7.2 by any Holder or Holder(s) to all
other registered Holder(s) of the Warrants and the Warrant Securities within ten
(10) days from the date of the receipt of any such registration request.
(c) In addition to the registration rights under SECTION 7.1 and
subsection (a) of this SECTION 7.2, at any time commencing after the date hereof
and expiring five (5) years from the effective date, any Holder of Warrants
and/or Warrant Securities shall have the right, exercisable by written request
4
<PAGE>
to the Company, to have the Company prepare and file, on one occasion, with the
Commission a registration statement so as to permit a public offering and sale
for nine (9) consecutive months by any such Holder of its Warrant Securities,
provided, however, that the provisions of SECTION 7.3(b) hereof shall not apply
to any such registration request and registration and all costs incident thereto
shall be at the expense of the Holder or Holders making such request.
(d) Notwithstanding anything to the contrary contained herein, if the
Company shall not have filed a registration statement for the Warrant Securities
within the time period specified in SECTION 7.3(a) hereof pursuant to the
written notice specified in SECTION 7.2(a) of a Majority of the Holders of the
Warrants and/or Warrant Securities, the Company shall have the option, upon the
written notice of election of a Majority of the Holders of the Warrants and/or
Warrant Securities, to repurchase (i) any and all Warrant Securities at the
higher of the Market Price per share of Common Stock on (x) the date of the
notice sent pursuant to SECTION 7.2(a) or (y) the expiration of the period
specified in SECTION 7.3(a) and (ii) any and all Warrants at such Market Price
less the Exercise Price of such Warrant. Such repurchase shall be in immediately
available funds and shall close within two (2) days after the later of (i) the
expiration of the period specified in SECTION 7.3(a) or (ii) the delivery of the
written notice of election specified in this SECTION 7.2(d). The Company shall
have no obligation to exercise the option that may be granted pursuant to the
terms of this paragraph (d) of SECTION 7.2 hereof.
7.3 COVENANTS OF THE COMPANY WITH RESPECT TO REGISTRATION. In
connection with any registration under SECTION 7.1 or 7.2 hereof, the Company
covenants and agrees as follows:
(a) The Company shall use its best efforts to file a registration
statement within thirty (30) days of receipt of any demand therefor, shall use
its best efforts to have any registration statements declared effective at the
earliest possible time, and shall furnish each Holder desiring to sell Warrant
Securities such number of prospectuses as shall reasonably be requested.
(b) The Company shall pay all costs (excluding fees and expenses of
Holder(s)' counsel and any underwriting or selling commissions), fees and
expenses in connection with all registration statements filed pursuant to
SECTIONS 7.1 and 7.2(a) hereof including, without limitation, the Company's
legal and accounting fees, printing expenses, blue sky fees and expenses. The
Holder(s) will pay all costs, fees and expenses in connection with any
registration statement filed pursuant to SECTION 7.2(c). If the Company shall
fail to comply with the provisions of SECTION 7.3(a), the Company shall, in
addition to any other equitable or other relief available to the Holder(s), be
liable for any or all incidental or special damages sustained by the Holder(s)
requesting registration of their Warrant Securities.
(c) The Company will take all necessary action which may be required in
qualifying or registering the Warrant Securities included in a registration
statement for offering and sale under the securities or blue sky laws of such
states as reasonably are requested by the Holder(s), provided that the Company
shall not be obligated to execute or file any general consent to service of
process or to qualify as a foreign corporation to do business under the laws of
any such jurisdiction.
(d) The Company shall indemnify the Holder(s) of the Warrant Securities
to be sold pursuant to any registration statement and each person, if any, who
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<PAGE>
controls such Holder within the meaning of SECTION 15 of the Act or SECTION
20(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
against all loss, claim, damage, expense or liability (including all expenses
reasonably incurred in investigating, preparing or defending against any claim
whatsoever) to which any of them may become subject under the Act, the Exchange
Act or otherwise, arising from such registration statement.
(e) The Holder(s) of the Warrant Securities to be sold pursuant to a
registration statement, and their successors and assigns, shall severally, and
not jointly, indemnify the Company, its officers and directors and each person,
if any, who controls the Company within the meaning of SECTION 15 of the Act or
SECTION 20(a) of the Exchange Act, against all loss, claim, damage or expense or
liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which they may become
subject under the Act, the Exchange Act or otherwise, arising from information
furnished by or on behalf of such Holder, or their successors or assigns, for
specific inclusion in such registration statement.
(f) Nothing contained in this Agreement shall be construed as requiring
the Holder(s) to exercise their Warrants prior to the initial filing of any
registration statement or the effectiveness thereof.
(g) The Company shall not permit the inclusion of any securities other
than the Warrant Securities to be included in any registration statement filed
pursuant to SECTION 7.2 hereof, without the prior written consent of the
Holder(s) of the Warrants and Warrant Securities representing a Majority of such
securities.
(h) The Company shall furnish to each Holder participating in the
offering and to each underwriter, if any, a signed counterpart, addressed to
such Holder or underwriter, of (i) an opinion of counsel to the Company, dated
the effective date of such registration statement (and, if such registration
includes an underwritten public offering, an opinion dated the date of the
closing under the underwriting agreement), and (ii) a "cold comfort" letter
dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, a letter dated the date
of the closing under the underwriting agreement) signed by the independent
public accountants who have issued a report on the Company's financial
statements included in such registration statement, in each case covering
substantially the same matters with respect to such registration statement (and
the prospectus included therein) and, in the case of such accountants' letter,
with respect to events subsequent to the date of such financial statements, as
are customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities.
(i) The Company shall as soon as practicable after the effective date
of the registration statement, and in any event within 15 months thereafter,
make "generally available to its security holders" (within the meaning of Rule
158 under the Act) an earnings statement (which need not be audited) complying
with SECTION 11(a) of the Act and covering a period of at least 12 consecutive
months beginning after the effective date of the registration statement.
(j) The Company shall deliver promptly to each Holder participating in
the offering requesting the correspondence and memoranda described below and to
6
<PAGE>
the managing underwriters, copies of all correspondence between the Commission
and the Company, its counsel or auditors and all memoranda relating to
discussions with the Commission or its staff with respect to the registration
statement and permit each Holder and underwriters to do such investigation, upon
reasonable advance notice, with respect to information contained in or omitted
from the registration statement as it deems reasonably necessary to comply with
applicable securities laws or rules of the National Association of Securities
Dealers, Inc. ("NASD"). Such investigation shall include access to books,
records and properties and opportunities to discuss the business of the Company
with its officers and independent auditors, all to such reasonable extent and at
such reasonable times and as often as any such Holder or underwriter shall
reasonably request.
(k) The Company shall enter into an underwriting agreement with the
managing underwriters selected for such underwriting by Holder(s) holding a
Majority of the Warrant Securities requested to be included in such
underwriting, which may be Ryan, Beck. Such agreement shall be satisfactory in
form and substance to the Company, each Holder and such managing underwriters,
and shall contain such representations, warranties and covenants by the Company
and such other terms as are customarily contained in agreements of that type
used by the managing underwriter. The Holder(s) shall be parties to any
underwriting agreement relating to an underwritten sale of their Warrant
Securities and may, at their option, require that any or all the
representations, warranties and covenants of the Company to or for the benefit
of such underwriters shall also be made to and for the benefit of such
Holder(s). Such Holder(s) shall not be required to make any representations or
warranties to or agreements with the Company or the underwriters except as they
may relate to such Holder(s) and their intended methods of distribution.
(l) In addition to the Warrant Securities, upon the written request
therefor by any Holder(s), the Company shall include in the registration
statement any other securities of the Company held by such Holder(s) as of the
date of filing of such registration statement, including without limitation
restricted shares of Common Stock, options, warrants or any other securities
convertible into shares of Common Stock.
(m) For purposes of this Agreement, the term "Majority" in reference to
the Holder(s) of Warrants or Warrant Securities, shall mean in excess of fifty
percent (50%) of the then outstanding Warrants or Warrant Securities that (i)
are not held by the Company, an affiliate, officer, creditor, employee or agent
thereof or any of their respective affiliates, members of their family, persons
acting as nominees or in conjunction therewith and (ii) have not been resold to
the public pursuant to a registration statement filed with the Commission under
the Act.
8. ADJUSTMENTS TO EXERCISE PRICE AND NUMBER OF SECURITIES.
8.1 SUBDIVISION AND COMBINATION. In case the Company shall at any
time subdivide or combine thE outstanding shares of Common Stock, the Exercise
Price shall forthwith be proportionately decreased in the case of subdivision or
increased in the case of combination.
8.2 STOCK DIVIDENDS AND DISTRIBUTIONS. In case the Company shall pay
a dividend in, or make A distribution of, shares of Common Stock or of the
Company's capital stock convertible into Common Stock, the Exercise Price shall
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<PAGE>
forthwith be proportionately decreased. An adjustment made pursuant to this
SECTION 8.2 shall be made as of the record date for the subject stock dividend
or distribution.
8.3 ADJUSTMENT IN NUMBER OF SECURITIES. Upon each adjustment of the
Exercise Price pursuant to the provisions of this SECTION 8, the number of
Warrant Securities issuable upon the exercise at the adjusted exercise price of
each Warrant shall be adjusted to the nearest full amount by multiplying a
number equal to the Exercise Price in effect immediately prior to such
adjustment by the number of Warrant Securities issuable upon exercise of the
Warrants immediately prior to such adjustment and dividing the product so
obtained by the adjusted Exercise Price.
8.4 DEFINITION OF COMMON STOCK. For the purpose of this Agreement,
the term "Common Stock" shalL mean (i) the class of stock designated as Common
Stock in the Articles of Incorporation of the Company as may be amended as of
the date hereof, or (ii) any other class of stock resulting from successive
changes or reclassifications of such Common Stock consisting solely of changes
in par value, or from par value to no par value, or from no par value to par
value.
8.5 MERGER OR CONSOLIDATION. In case of any consolidation of the
Company with, or merger of thE Company with, or merger of the Company into,
another corporation (other than a consolidation or merger which does not result
in any reclassification or change of the outstanding Common Stock), the
corporation formed by such consolidation or merger shall execute and deliver to
the Holder a supplemental warrant agreement providing that the holder of each
Warrant then outstanding or to be outstanding shall have the right thereafter
(until the expiration of such Warrant) to receive, upon exercise of such
warrant, the kind and amount of shares of stock and other securities and
property receivable upon such consolidation or merger, by a holder of the number
of shares of Common Stock of the Company for which such warrant might have been
exercised immediately prior to such consolidation, merger, sale or transfer.
Such supplemental warrant agreement shall provide for adjustments which shall be
identical to the adjustments provided in SECTION 8. The above provision of this
subsection shall similarly apply to successive consolidations or mergers.
8.6 NO ADJUSTMENT OF EXERCISE PRICE IN CERTAIN CASES. No adjustment
of the Exercise Price shall bE made:
(a) Upon the issuance or sale of the Warrants or the shares of Common
Stock issuable upon the exercise of the Warrants;
(b) If the amount of said adjustment shall be less than two cents
(2(cent)) per Warrant Security, provided, however, that in such case any
adjustment that would otherwise be required then to be made shall be carried
forward and shall be made at the time of and together with the next subsequent
adjustment which, together with any adjustment so carried forward, shall amount
to at least two cents (2(cent)) per Warrant Security.
9. EXCHANGE AND REPLACEMENT OF WARRANT CERTIFICATES. Each Warrant
Certificate is exchangeable without expense, upon the surrender thereof by the
registered Holder at the principal executive office of the Company, for a new
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<PAGE>
Warrant Certificate of like tenor and date representing in the aggregate the
right to purchase the same number of Warrant Securities in such denominations as
shall be designated by the Holder thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of any Warrant Certificate, and,
in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Warrants, if
mutilated, the Company will make and deliver a new Warrant Certificate of like
tenor, in lieu thereof.
10. ELIMINATION OF FRACTIONAL INTERESTS. The Company shall not be
required to issue certificates representing fractions of shares of Common Stock
upon the exercise of the Warrants, nor shall it be required to issue scrip or
pay cash in lieu of fractional interests, it being the intent of the parties
that all fractional interests shall be eliminated by rounding any fraction up to
the nearest whole number of shares of Common Stock or other securities,
properties or rights.
11. RESERVATION AND LISTING OF SECURITIES. The Company shall at all
times reserve and keep available out of its authorized shares of Common Stock,
solely for the purpose of issuance upon the exercise of the Warrants, such
number of shares of Common Stock or other securities, properties or rights as
shall be issuable upon the exercise thereof. The Company covenants and agrees
that, upon exercise of the Warrants and payment of the Exercise Price therefor,
all shares of Common Stock and other securities issuable upon such exercise
shall be duly and validly issued, fully paid, non-assessable and not subject to
the preemptive rights of any stockholder. As long as the Warrants shall be
outstanding, the Company shall use its best efforts to cause all shares of
Common Stock issuable upon the exercise of the Warrants to be listed (subject to
official notice of issuance) on all securities exchanges on which the Common
Stock issued to the public in connection herewith may then be listed and/or
quoted.
12. NOTICES TO WARRANT HOLDER. Nothing contained in this Agreement
shall be construed as conferring upon the Holder the right to vote or to consent
or to receive notice as a stockholder in respect of any meetings of stockholders
for the election of directors or any other matter, or as having any rights
whatsoever as a stockholder of the Company. If, however, at any time prior to
the expiration of the Warrants and their exercise, any of the following events
shall occur:
(a) the Company shall take a record of the holders of its shares of
Common Stock for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or distribution
payable otherwise than out of current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution on the books of the
Company; or
(b) the Company shall offer to all the holders of its Common Stock any
additional shares of capital stock of the Company or securities convertible into
or exchangeable for shares of capital stock of the Company, or any option, right
or warrant to subscribe therefor; or
9
<PAGE>
(c) a dissolution, liquidation or winding up of the Company (other
than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business as an entirety shall be
proposed;
then, in any one or more of said events, the Company shall give written notice
of such event at least fifteen (15) days prior to the date fixed as a record
date or the date of closing the transfer books for the determination of the
stockholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, or entitled to vote on such
proposed dissolution, liquidation, winding up or sale. Such notice shall specify
such record date or the date of closing the transfer books, as the case may be.
Failure to give such notice or any defect therein shall not affect the validity
of any action taken in connection with the declaration or payment of any such
dividend, or the issuance of any convertible or exchangeable securities, or
subscription rights, options or warrants, or any proposed dissolution,
liquidation, winding up or sale.
13. NOTICES. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made and
sent when delivered, or mailed by registered or certified mail, return receipt
requested:
(a) If to a registered Holder of the Warrants, to the address of such
Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in SECTION 3 hereof or
to such other address as the Company may designate by notice to the Holder; or
(c) If to Ryan, Beck, to Ryan, Beck & Co., 200 Park Avenue, New York,
NY 10166, Attention: Michael J. Kollender.
14. SUPPLEMENTS AND AMENDMENTS. The Company and Ryan, Beck may from
time to time supplement or amend this Agreement without the approval of any
holder of Warrant Certificates (other than Ryan, Beck) in order to cure any
ambiguity, to correct or supplement any provision contained herein which may be
defective or inconsistent with any provisions herein, or to make any other
provisions in regard to matters or questions arising hereunder which the Company
and Ryan, Beck may deem necessary or desirable and which the Company and Ryan,
Beck deem shall not adversely affect the interests of the Holder(s) of Warrant
Certificates.
15. SUCCESSORS. All the covenants and provisions of this Agreement
shall be binding upon and inure to the benefit of the Company, the Holder(s) and
their respective successors and assigns hereunder.
16. TERMINATION. This Agreement shall terminate at the close of
business on June 30, 2006. Notwithstanding the foregoing, the indemnification
provisions of SECTION 7 shall survive such termination until the close of
business on June 30, 2012.
17. GOVERNING LAW; SUBMISSION TO JURISDICTION. This Agreement and each
Warrant Certificate issued hereunder shall be deemed to be a contract made under
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<PAGE>
the laws of the State of New York and for all purposes shall be construed in
accordance with the laws of said State without giving effect to the rules of
said State governing the conflicts of laws.
The Company, Ryan, Beck and the Holder hereby agree that any action,
proceeding or claim against it arising out of, or relating in any way to, this
Agreement shall be brought and enforced in the courts of the State of New York
or of the United States of America for the Southern District of New York, and
irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive.
The Company, Ryan, Beck and the Holder hereby irrevocably waive any objection to
such exclusive jurisdiction or inconvenient forum. Any such process or summons
to be served upon any of the Company, Ryan, Beck and the Holder(s) (at the
option of the party bringing such action, proceeding or claim) may be served by
transmitting a copy thereof, by registered or certified mail, return receipt
requested, postage prepaid, addressed to it at the address set forth in SECTION
13 hereof. Such mailing shall be deemed personal service and shall be legal and
binding upon the party so served in any action, proceeding or claim. The
Company, Ryan, Beck and the Holder(s) agree that the prevailing party(ies) in
any such action or proceeding shall be entitled to recover from the other
party(ies) all of its/their reasonable legal costs and expenses relating to such
action or proceeding and/or incurred in connection with the preparation
therefor.
18. ENTIRE AGREEMENT; MODIFICATION. This Agreement contains the entire
understanding between the parties hereto with respect to the subject matter
hereof and may not be modified or amended except by a writing duly signed by the
party against whom enforcement of the modification or amendment is sought.
19. SEVERABILITY. If any provision of this Agreement shall be held to
be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision of this Agreement.
20. CAPTIONS. The caption headings of the Sections of this Agreement
are for convenience of reference only and are not intended, nor should they be
construed as, a part of this Agreement and shall be given no substantive effect.
21. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and Ryan,
Beck and any other registered Holder(s) of the Warrant Certificates or Warrant
Securities any legal or equitable right, remedy or claim under this Agreement;
and this Agreement shall be for the sole benefit of the Company and Ryan, Beck
and any other registered Holder(s) of Warrant Certificates or Warrant
Securities.
22. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
SKYMALL, INC.
By: /s/ Robert M. Worsley
-----------------------------------
Name: Robert M. Worsley
Title: President
Attest:
/s/ Christine A. Aguilera
- -----------------------------------
Secretary
RYAN, BECK & CO., INC.
By: /s/ Michael J. Kollender
-----------------------------------
Name: Michael J. Kollender
Title: Managing Director
12
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EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT (OR ANY
SIMILAR RULE UNDER THE ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii)
AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO
COUNSEL FOR THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER THE ACT IS
AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., NEW YORK TIME, June 30, 2004
No. W- Warrants to Purchase
25,000 Shares of Common Stock
WARRANT CERTIFICATE
This Warrant Certificate certifies that , or registered assigns, is the
registered holder of 25,000 Warrants to purchase initially, at any time from
June 30, 1999 until 5:30 p.m. New York time on June 30, 2004 ("Expiration
Date"), up to (25,000) TWENTY-FIVE THOUSAND fully-paid and non-assessable shares
of common stock, ("Common Stock") of SKYMALL, INC., a Nevada corporation (the
"Company"), (one share of Common Stock referred to individually as a "Security"
and collectively as the "Securities") at the initial exercise price, subject to
adjustment in certain events (the "Exercise Price"), of $9.31 per share of
Common Stock upon surrender of this Warrant Certificate and payment of the
Exercise Price at an office or agency of the Company, but subject to the
conditions set forth herein and in the warrant agreement dated as of June 30,
1999 between the Company, and RYAN, BECK & CO., Inc. (the "Warrant Agreement").
Payment of the Exercise Price shall be made by certified or official bank check
in New York Clearing House funds payable to the order of the Company.
No Warrant may be exercised after 5:30 p.m., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, hereby shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of this
A-1
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instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Company and the
holder(s) (the words "holder" or "holder(s)" meaning the registered holder or
registered holder(s)) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price and the type and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Warrants; provided,
however, that the failure of the Company to issue such new Warrant Certificates
shall not in any way change, alter, or otherwise impair, the rights of the
holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided herein and in the Warrant
Agreement, without any charge except for any tax or other governmental charge
imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate, which are defined in the
Warrant Agreement, shall have the meanings assigned to them in the Warrant
Agreement.
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IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated as of JUNE 30, 1999
SKYMALL, INC.
[SEAL]
By: /s/ Robert M. Worsley
-----------------------------------
Name: Robert M. Worsley
Title: President
Attest:
/s/ Christine A. Aguilera
- -----------------------------------
Secretary
A-3
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[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.1]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase:
________________ shares of Common Stock;
and herewith tenders in payment for such securities a certified or official bank
check payable in New York Clearing House Funds to the order of SkyMall, Inc. in
the amount of $ , all in accordance with the terms of Section 3.1 of the
Representative's Warrant Agreement dated as of June 30, 1999 between SkyMall,
Inc. and Ryan, Beck & Co. Inc. The undersigned requests that a certificate for
such securities be registered in the name of whose address is and that such
Certificate be delivered to whose address is .
Dated:
Signature ___________________________
(Signature must conform in all respects to name of holder as specified
on the face of the Warrant Certificate.)
______________________________________
(Insert Social Security or Other Identifying Number of Holder)
A-4
<PAGE>
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.2]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase shares of Common Stock of
SKYMALL, INC., in accordance with the terms of Section 3.2 of that certain
Warrant Agreement dated as of June 30, 1999 between Skymall, Inc. and Ryan, Beck
& Co., Inc. and herewith tenders in payment for such securities
__________________________ Warrants. The undersigned requests that a certificate
for such securities be registered in the name of __________________________
whose address is ___________________________________________and that such
Certificate be delivered to _________________________________ whose address is
__________________________________________________________.
Dated: _________________________________
Signature: _______________________________
(Signature must conform in all respects
to name of Holder as specified on the
face of the Warrant Certificate).
__________________________________________
(Insert Social Security or Other Identifying Number
of Holder)
A-5
<PAGE>
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED ____________________ hereby sells, assigns and transfers unto
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint Attorney, to transfer the
within Warrant Certificate on the books of the within-named Company, with full
power of substitution.
Dated: _____________________ Signature: __________________________
(Signature must conform in all respects to name of holder as specified on the
face of the Warrant Certificate.)
__________________________________
(Insert Social Security or Other Identifying Number of Assignee)
A-6
Squire, Sanders & Dempsey L.L.P.
Two Renaissance Square
40 North Central Avenue, Suite 2700
Phoenix, Arizona 85004
Phone: (602) 528-4000
Facsimile: (602) 253-8129
November 22, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
This firm is counsel for SkyMall, Inc., a Nevada corporation (the
"Company"). As such, we are familiar with the Certificate of Incorporation, as
amended, and the Bylaws, as amended, of the Company, as well as resolutions
adopted by its Board of Directors authorizing the issuance and sale of 413,813
shares of the Company's common stock, par value $.001 per share (the "Common
Stock"), including 39,420 shares of Common Stock issuable upon exercise of
outstanding Warrants (the "Warrants"), which are the subject of a Registration
Statement on Form S-3 (the "Registration Statement") under the Securities Act of
1933, as amended (the "1993 Act").
We also have examined all instruments, documents, and records which we
deemed relevant and necessary for the basis of our opinion hereinafter
expressed. In such examination, we have assumed the genuineness and authority of
all signatures and the authenticity of all documents submitted to us as
originals and the conformity to the originals of all documents submitted to us
as copies.
Based on such examination, we are of the opinion that the 413,813 shares
of Common Stock are validly issued, fully paid and nonassessable, and that upon
receipt by the Company of the consideration provided for upon exercise of the
Warrants, the Common Stock, when issued in compliance with the Warrants, will be
validly issued, fully paid and nonassessable.
We acknowledge that we are referred to under the heading "Legal Matters" in
the Prospectus which is part of the Registration Statement and we hereby consent
to the use of our name in such Registration Statement. We further consent to the
filing of this opinion as Exhibit 5.1 to the Registration Statement and with the
<PAGE>
Securities and Exchange Commission November 22, 1999
Page 2
state regulatory agencies in such states as may require such filing in
connection with the registration of the Common Stock for offer and sale in such
states.
Respectfully submitted,
Squire, Sanders & Dempsey L.L.P.
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated March 1, 1999
included in SkyMall, Inc.'s Form 10-K for the year ended December, 31 1998 and
to all references to our firm included in this registration statement.
ARTHUR ANDERSEN LLP
Phoenix, Arizona,
November 17, 1999.
