SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant
Check the appropriate box:
[X] Preliminary proxy statement [ ] Confidential, for use of the
[ ] Definitive proxy statement Commission only (as permitted
[ ] Definitive additional materials by Rule 14a-6(e)(2))
[ ] Soliciting material 14a-12
SKYMALL, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11 (a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date filed:
<PAGE>
SKYMALL, INC.
1520 East Pima Street
Phoenix, Arizona 85034
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NOTICE AND PROXY STATEMENT FOR SPECIAL MEETING OF
SHAREHOLDERS TO BE HELD MARCH 10, 2000
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To the Shareholders of SkyMall, Inc.:
The Special Meeting of Shareholders of SkyMall, Inc., a Nevada corporation
(the "Company"), will be held at the corporate offices of the Company located at
1520 East Pima Street, Phoenix, Arizona 85034 on March 10, 2000, at 10:00 a.m.,
local time, for the following purposes:
1. To approve the issuance of shares of the Company's common stock, par
value $.001 per share (the "Common Stock"), upon conversion of the
Company's Series A Junior Convertible Preferred Stock, par value $.001
per share (the "Series A Preferred Stock"), and Series B Junior
Convertible Preferred Stock, par value $.001 per share (the "Series B
Preferred Stock"), and exercise of related warrants to acquire shares
of Common Stock, all on the terms and conditions set forth in those
certain Stock and Warrant Purchase Agreements, dated as of December
20, 1999 and December 30, 1999, between the Company and the
undersigned investors thereto (the "Private Placement Transactions").
2. To transact such other business as may properly come before the
Special Meeting or any adjournment(s) or postponement(s) thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. The Company is presently aware of no other
business to come before the Special Meeting.
Shareholders of record at the close of business on January 24, 2000 (the
"Record Date") are entitled to vote at the Special Meeting or any adjournment or
postponement thereof. Shares may be voted at the Special Meeting only if the
holder is present or represented by proxy. A list of Shareholders entitled to
vote at the Special Meeting will be available for inspection at the Company's
corporate headquarters for any purpose germane to the Special Meeting during
ordinary business hours for ten (10) days prior to the Special Meeting.
Management and the Board of Directors cordially invite you to attend the
Special Meeting.
By Order of the Board of Directors,
Robert M. Worsley
Chairman, Chief Executive Officer and
President
Phoenix, Arizona
February 1, 2000
SHAREHOLDERS ARE ENCOURAGED TO SIGN, DATE AND MAIL THE ENCLOSED PROXY. A
PRE-ADDRESSED ENVELOPE IS PROVIDED FOR THEIR CONVENIENCE. SHAREHOLDERS ARE
ENCOURAGED TO VOTE REGARDLESS OF WHETHER OR NOT THEY ATTEND THE SPECIAL MEETING
OF SHAREHOLDERS.
<PAGE>
SKYMALL, INC.
1520 East Pima Street
Phoenix, Arizona 85034
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PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
MARCH 10, 2000
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This Proxy Statement is furnished by the Board of Directors of SkyMall,
Inc., a Nevada corporation (the "Company" or "SkyMall"), in connection with the
solicitation of proxies to be used for the purpose of voting at a Special
Meeting of Shareholders (the "Special Meeting"). The Special Meeting will be
held on March 10, 2000 at 10:00 a.m., local time, at the corporate offices of
the Company located at 1520 East Pima Street, Phoenix, Arizona 85034.
The enclosed proxy is solicited by the Board of Directors of the Company.
The proxy materials relating to the Special Meeting were mailed on or about
February 1, 2000, to shareholders of record at the close of business on January
24, 2000 (the "Record Date"). Only holders (the "Shareholders") of record at the
close of business on the Record Date will be entitled to vote at the Special
Meeting, or any adjournment or postponement thereof, either in person or by
valid proxy. As of January 12, 2000, there were outstanding 10,553,997 shares of
common stock, $.001 par value per share (the "Common Stock").
Shareholders are entitled to one vote for each share of Common Stock held
of record on each matter of business to be considered at the Special Meeting.
Ballots cast at the Special Meeting will be counted by the Inspector of
Elections and determinations of whether a quorum exists and whether the Private
Placement Transactions are approved will be announced at the Special Meeting.
The Inspector of Elections will treat abstentions and broker non-votes
received as shares that are present and entitled to vote for purposes of
determining a quorum, but as unvoted for purposes of determining the approval of
any matter. If a broker indicates on the proxy that it does not have
discretionary authority as to certain shares to vote on a particular matter,
those shares will not be considered as present and entitled to vote with respect
to that matter.
The Company will bear the cost of the solicitation of proxies, including
the charges and expenses of brokerage firms and others for forwarding
solicitation materials to the beneficial owners of the outstanding Common Stock.
In addition to soliciting proxies by mail, proxies may be solicited personally
or by telephone by directors, officers or employees of the Company, who will
receive no additional compensation of such services. A person giving the
enclosed proxy has the power to revoke it at anytime before it is exercised by:
(i) attending the Special Meeting and voting in person; (ii) duly executing and
delivering a proxy bearing a later date; or (iii) sending a written notice of
revocation to the Secretary of the Company at its corporate offices. The
corporate offices of the Company are located at 1520 East Pima Street, Phoenix,
Arizona 85034 and its telephone number at that address is (602) 254-9777.
The affirmative vote of holders of a majority of the outstanding shares of
Common Stock entitled to vote and present in person or by proxy at the Special
Meeting are required for approval of the Private Placement Transactions proposed
to be acted upon at the Special Meeting (the "Proposal"). It is expected that
shares held by officers and directors of the Company and certain shareholders of
the Company, which in the aggregate represent approximately ___% of the shares
of Common Stock outstanding as of the Record Date, will be voted in favor of the
Proposal.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The table below sets forth certain information as of January 12, 2000
concerning the beneficial ownership of the Company's Common Stock by (i) each
beneficial owner of more than 5% of the Company's Common Stock, (ii) each
executive officer of the Company, including the Named Executive Officers, (iii)
each director of the Company, and (iv) all directors and executive officers of
the Company as a group. To the knowledge of the Company, each of the persons
listed below has sole voting and investment power with respect to such shares,
unless otherwise indicated.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED (1)
----------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER (2) NUMBER PERCENT
- ---------------------------------------- ------ -------
<S> <C> <C>
Quintel Communications, Inc.(3) 642,857 (4) 6.1%
RS Emerging Growth Pacific Partners (Jaguar)(5)(6) 311,798 (7) 3.0%(5)
RS Emerging Growth Partners LP (Wildcat)(5)(6) 145,698 (8) 1.4%(5)
RS Premium Partners LP (Puma)(5)(6) 185,361 (9) 1.8%(5)
Special Situations Cayman Fund L.P.(10)(11) 101,265 (12) *
Special Situations Fund III L.P.(10)(11) 290,879 (13) 2.8%(10)
Special Situations Private Equity Fund L.P.(10)(11) 277,186 (14) 2.6%(10)
The Paisley Fund(5)(6) 75,000 (15) * (5)
The Paisley Pacific Fund(5)(6) 300,000 (16) 2.8%(5)
Wand Equity Portfolio II L.P.(17)(18) 1,620,515 (19) 15.4%(17)
Wand Affiliates Fund L.P.(17)(18) 93,771 (20) * (17)
Wand Partners Inc.(17)(18) 1,964,286 (21) 18.7%(17)
Robert M. and Christi M. Worsley(2) 4,798,530 (22) 45.6%
Christine A. Aguilera(2) 79,150 (23) *
Curtis D. Brown(2) 50,000 (24) *
Scott R. Dastrup(2) 25,999 (25) *
Thomas C. Edwards(2) 53,333 (26) *
Marisha K. Geraghty(2) 0 *
Stephen R. Peterson(2) 16,666 (27) *
Lyle R. Knight(2) 148,586 (28) *
Thomas J. Litle(2) 278,786 (29) *
Randy Petersen(2) 50,144 (30) *
All directors and executive officers as a group
(10 persons)(22)(23)(24)(25)(26)(27)(28)(29)(30) 5,500,694 52.2%
- -------------------
</TABLE>
* Less than 1%
(1) A person is deemed to be the beneficial owner of securities that can be
acquired within 60 days from the date set forth above through the exercise
of any option, warrant or right. Shares of Common Stock subject to options,
warrants or rights that are currently exercisable or exercisable within 60
days are deemed outstanding for computing the percentage of the person
holding such options, warrants or rights, but are not deemed outstanding
for computing the percentage of any other person. The amounts and
percentages are based upon 10,533,977 shares of Common Stock outstanding as
of January 12, 2000.
(2) The business address for all directors and officers of the Company is c/o
the Company, 1520 E. Pima Street, Phoenix, Arizona 85034.
(3) The business address of Quintel Communications is One Blue Hill Plaza,
Pearl River, New York 10965.
(4) Includes 214,286 shares of common stock issuable to Quintel upon exercise
of the warrants issued in the Company's November 1999 private placement.
(5) RS Growth Group LLC is the General Partner of RS Emerging Growth Pacific
Partners (Jaguar), RS Emerging Growth Partners LP (Wildcat), RS Premium
Partners LP (Puma), The Paisley Fund and The Paisley Pacific Fund. As a
group, these shareholders beneficially own a total of 1,017,857 shares of
Common Stock of the Company, or 9.7% as of January 12, 2000.
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<PAGE>
(6) The business address of this shareholder is 388 Market Street, Second
Floor, San Francisco, California 94111
(7) Includes 207,865 shares of common stock issuable upon conversion of Series
A Preferred Stock and 103,933 shares of common stock issuable upon exercise
of warrants issued to RS Emerging Growth Pacific Partners (Jaguar) pursuant
to the Stock and Warrant Purchase Agreement dated as of December 20, 1999
(the "Series A Agreement").
(8) Includes 97,132 shares of common stock issuable upon conversion of Series A
Preferred Stock and 48,566 shares of common stock issuable upon exercise of
warrants issued to RS Emerging Growth Partners LP (Wildcat) pursuant to the
Series A Agreement.
(9) Includes 123,574 shares of common stock issuable upon conversion of Series
A Preferred Stock and 61,787 shares of common stock issuable upon exercise
of warrants issued to RS Premium Partners LP (Puma) pursuant to the Series
A Agreement.
(10) MGP Advisers Limited Partnership (MGP), a Delaware limited partnership, is
the general partner of the Special Situations Fund III, L.P., a Delaware
limited partnership. AWM Investment Company, Inc. (AWM), a Delaware
corporation, is the general partner of MGP and the general partner of and
investment adviser to the Special Situations Cayman Fund, L.P. MG Advisers
L.L.C. (MG), a New York limited liability company, is the general partner
of the Special Situations Private Equity Fund, L.P., a Delaware limited
partnership. Austin W. Marxe and David M. Greenhouse are the principal
owners of MG, MGP and AWM and are principally responsible for the
selection, acquisition and disposition of the portfolios securities by the
investment advisers on behalf of their funds. As a group, these
shareholders beneficially own a total of 669,330 shares of Common Stock of
the Company, or 6.4% as of January 12, 2000.
(11) The business address of this shareholder is 153 E. 53rd Street, New York,
New York 10022-1200.
(12) Includes (i) 32,150 shares of common stock issuable to Special Situations
Cayman Fund L.P. upon exercise of certain warrants issued in the Company's
November 1999 private placement and (ii) 32,143 shares of common stock
issuable upon conversion of Series A Preferred Stock and 16,072 shares of
common stock issuable upon exercise of warrants issued to pursuant to the
Series A Agreement.
(13) Includes (i) 96,450 shares of common stock issuable to Special Situations
Fund III L.P. upon exercise of certain warrants issued in the Company's
November 1999 private placement and (ii) 94,286 shares of common stock
issuable upon conversion of Series A Preferred Stock and 47,143 shares of
common stock issuable upon exercise of warrants issued pursuant to the
Series A Agreement.
(14) Includes (i) 85,700 shares of common stock issuable to Special Situations
Private Equity Fund L.P. upon exercise of certain warrants issued in the
Company's November 1999 private placement and (ii) 87,857 shares of common
stock issuable upon conversion of Series A Preferred Stock and 43,929
shares of common stock issuable upon exercise of warrants issued pursuant
to the Series A Agreement.
(15) Includes 50,000 shares of common stock issuable upon conversion of Series A
Preferred Stock and 25,000 shares of common stock issuable upon exercise of
the warrants issued to The Paisley Fund pursuant to the Series A Agreement.
(16) Includes 200,000 shares of common stock issuable upon conversion of Series
A Preferred Stock and 100,000 shares of common stock issuable upon exercise
of warrants issued to The Paisley Pacific Fund pursuant to the Series A
Agreement.
(17) These shareholders are co-managed under a management agreement with Wand
Partners Inc. Wand Partners Inc. may be deemed to be the beneficial holder
of the shares held by Wand Equity Portfolio II L.P. and Wand Affiliates
Fund L.P. As a group, these shareholders beneficially own a total of
1,964,286 shares of Common Stock of the Company, or 18.7% as of January 12,
2000.
(18) The business address of this shareholder is 630 Fifth Avenue, Suite 2435,
New York, New York 10111.
(19) Includes (i) 1,080,343 shares of common stock issuable upon conversion of
Series B Preferred Stock and 540,172 shares of common stock issuable upon
exercise of warrants issued to Wand Equity Portfolio II L.P. pursuant to
the Stock and Warrant Purchase Agreement dated as of December 30, 1999 (the
"Series B Agreement").
(20) Includes (i) 62,514 shares of common stock issuable upon conversion of
Series B Preferred Stock and 31,257 shares of common stock issuable upon
exercise of warrants issued to Wand Affiliates Fund L.P. pursuant to the
Series B Agreement.
(21) Includes 250,000 shares of common stock issuable upon exercise of the
advisory fee warrants issued to Wand Partners Inc. pursuant to the Series
B Agreement.
(22) Includes 71,429 shares of common stock issuable upon exercise of certain
warrants issued to The Robert Merrill Worsley and Christi Marie Worsley
Family Revocable Trust dated July 28, 1998 of which Mr. and Mrs. Worsley
are the Trustees (the "Worsley Trust") in the Company's November 1999
private placement and 1,660,908 shares of Common Stock held by the Worsley
Trust.
(23) Includes 75,000 shares issuable upon exercise of stock options granted to
Ms. Aguilera pursuant to the Company's 1994 Stock Option Plan.
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<PAGE>
(24) Includes 50,000 shares issuable upon exercise of stock options granted to
Mr. Brown pursuant to the Company's 1994 Stock Option Plan.
(25) Includes 24,999 shares issuable upon exercise of stock options granted to
Mr. Dastrup pursuant to the Company's 1994 Stock Option Plan.
(26) Includes 53,333 shares issuable upon exercise of stock options granted to
Mr. Edwards pursuant to the Company's 1994 Stock Option Plan.
(27) Includes 16,666 shares issuable upon exercise of stock options granted to
Mr. Peterson pursuant to the Company's 1994 Stock Option Plan.
(28) Mr. Knight serves as a director of the Company. Includes (i) 14,571 shares
of common stock issuable upon conversion of Series A Preferred Stock and
7,286 shares of common stock issuable upon exercise of warrants issued to
Mr. and Mrs. Knight pursuant to the Series A Agreement, (ii) 14,286 shares
of common stock issuable upon conversion of Series A Preferred Stock and
7,143 shares of common stock issuable upon exercise of warrants issued to
FISERV Securities, Inc. FBO IRA R-0 for Lyle R. Knight pursuant to the
Series A Agreement, and (iii) 38,500 shares of common stock issuable to Mr.
Knight upon exercise of options to purchase shares of common stock granted
pursuant to the Company's Non-Employee Director Stock Option Plan.
(29) Mr. Litle serves as a director of the Company. Includes (i) 142,857 shares
of common stock issuable upon conversion of Series A Preferred Stock and
71,429 shares of common stock issuable upon exercise of warrants issued to
Mr. Litle pursuant to the Series A Agreement, and (ii) 38,500 shares of
common stock issuable to Mr. Litle upon exercise of options to purchase
shares of common stock granted pursuant to the Company's Non-Employee
Director Stock Option Plan.
(30) Mr. Petersen serves as a director of the Company. Includes (i) 3,571 shares
of common stock issuable upon conversion of Series A Preferred Stock and
1,786 shares of common stock issuable upon exercise of warrants issued to
Mr. Petersen pursuant to the Series A Agreement, and (ii) 38,500 shares of
common stock issuable to Mr. Petersen upon exercise of options to purchase
shares of common stock granted pursuant to the Company's Non-Employee
Director Stock Option Plan.
4
<PAGE>
PROPOSAL
TO APPROVE THE ISSUANCE BY THE COMPANY OF SHARES OF COMMON STOCK
UPON CONVERSION OF SERIES A JUNIOR CONVERTIBLE PREFERRED STOCK
AND SERIES B JUNIOR CONVERTIBLE PREFERRED STOCK AND
UPON EXERCISE OF RELATED WARRANTS
In December 1999, the Board of Directors of the Company (the "Board")
approved the designation of 150,000 shares of the Company's 10,000,000
authorized shares of Preferred Stock as Series A Junior Convertible Preferred
Stock, par value $.001 per share (the "Series A Preferred Stock"), and 80,000
shares of such Preferred Stock as Series B Junior Convertible Preferred Stock,
par value $.001 per share (the "Series B Preferred Stock"). Shares of the Series
A Preferred Stock and Series B Preferred Stock, together with warrants to
purchase shares of Common Stock ("Warrants"), were issued to investors in
separate private placement transactions as follows:
<TABLE>
<CAPTION>
Date of
Number of Date of Board Number of Number of
Preferred Stock Shares Issuance Approval Warrants Investors
- --------------- --------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Series A Preferred Stock 91,320 12/22/99 12/09/99 652,289 19
& 12/20/99
Series B Preferred Stock 80,000 12/31/99 12/23/99 571,429 2
</TABLE>
In addition to the Preferred Stock and Warrants issued to investors in the
private placements set forth above, the Company also issued an aggregate of
235,028 warrants to the placement agents who assisted the Company in the private
placements (the "Placement Agent Warrants"), and as part of the Series B
Preferred Stock private placement transaction, the Company issued 250,000
warrants to its financial advisor in such private placement (the "Advisor
Warrants"). The Series A Preferred Stock and Warrants and the Series B Preferred
Stock and Warrants were issued pursuant to the terms and conditions of separate
Stock and Warrant Purchase Agreements, dated as of December 20, 1999 and
December 30, 1999, respectively (the "Purchase Agreements"), by and among the
Company and certain investors (collectively the "Preferred Issuances"). The
purchase price of each share of the Series A Preferred and Series B Preferred
Stock and related Warrants was $100.00. The initial gross proceeds of the Series
A Preferred Stock and Series B Preferred Stock issuances were $9.1 million and
$8 million, respectively, before deducting expenses relating to such share
issuances. The Company intends to use the net proceeds of the Preferred
Issuances to fund the Company's ongoing e-commerce initiatives and to supplement
the Company's working capital.
The Purchase Agreements each provide, among other things, that the Company
will solicit its shareholders' approval of the Company's issuance of the shares
of Common Stock issuable upon conversion of the Series A Preferred Stock and
Series B Preferred Stock and upon exercise of the Warrants. The deadline for
obtaining such approval is 180 days after the date of issuance of the respective
series of Preferred Stock (June 19, 2000 in the case of the Series A Preferred
Stock and June 28, 2000 in the case of the Series B Preferred Stock). If the
Company's shareholders do not approve the issuance by the Company of all shares
of Common Stock issuable upon conversion of the Series A Preferred Stock and the
Series B Preferred Stock, the shares of Series A Preferred Stock and Series B
Preferred Stock shall become immediately redeemable and the Company will be
required to purchase each holder's outstanding shares of Preferred Stock for an
amount per share equal to 110% multiplied by the liquidation preference of the
shares to be redeemed plus all amounts owed to such holder pursuant to the terms
of the Registration Rights Agreements entered into in connection with such
Preferred Issuances (such Registration Rights Agreements being hereafter
referred to as the "Registration Rights Agreement"). The liquidation preference
of each share of Series A Preferred Stock and Series B Preferred Stock is
$100.00 (the "Liquidation Preference").
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<PAGE>
Though the Preferred Issuances did not require shareholder approval under
Nevada or any other applicable laws, the corporate governance rules of the
Nasdaq National Market ("Nasdaq"), on which the Company's Common Stock is listed
and traded, require majority shareholder approval, in certain circumstances, of
the sale or issuance of common stock, or securities convertible into, or
exercisable for, common stock, equal to 20% or more of the common stock or
voting power outstanding immediately preceding such issuance (the "Nasdaq
Shareholder Approval Rules"). The number of shares of Common Stock issuable upon
conversion of the Series A Preferred Stock and Series B Preferred Stock is
calculated pursuant to a fixed conversion formula, and such issuance, together
with the issuance of Common Stock upon exercise of the Warrants, would result in
the issuance of a number of shares of Common Stock that represents more than 20%
of the currently outstanding common shares. Therefore, the Company seeks to
obtain shareholder approval of the issuance of shares of its Common Stock upon
conversion of the Series A Preferred Stock and Series B Preferred Stock and upon
exercise of the Warrants and otherwise comply with its obligations under the
Purchase Agreements and the Certificates of Designations, Preferences and Rights
of each of the Series A Preferred Stock and Series B Preferred Stock (the
"Certificates of Designations").
Each share of the Series A Preferred Stock and Series B Preferred Stock is
convertible into the number of shares of Common Stock determined by dividing the
conversion amount by the conversion price. The conversion amount is equal to the
sum of the Liquidation Preference plus any amounts owed to holders of the
Preferred Stock pursuant to the terms of the applicable Registration Rights
Agreement. The conversion price for each series of Preferred Stock is equal to
$7.00. Pursuant to the Warrants, the holders thereof may purchase upon exercise
up to an aggregate of 1,223,718 shares of Common Stock at a per share exercise
price of $8.00. In addition, holders of the Placement Agent Warrants may
purchase upon exercise up to an aggregate of 235,028 shares of Common Stock at
exercise prices ranging from $7.00 to $9.12 per share and the holder of the
Advisor Warrants may purchase upon exercise up to an aggregate of 250,000 shares
of Common Stock at an exercise price of $8.00. The exercise price and the number
of shares of Common Stock purchasable upon exercise of the Warrants, the
Placement Agent Warrants and the Advisor Warrants are subject to adjustment to
prevent dilution. As of January 12, 2000, the number of shares of Common Stock
issuable upon conversion of the Series A Preferred Stock and upon exercise of
the related Warrants (including the Placement Agent Warrants issued in such
transaction) was 2,157,602, or 20.5% of the Common Stock outstanding as of such
date. As of January 12, 2000, the number of shares of Common Stock issuable upon
conversion of the Series B Preferred Stock and upon exercise of the related
Warrants (including the Placement Agent Warrants and the Advisor Warrants) was
1,998,572, or 19.0% of the Common Stock outstanding as of such date. The Company
is obligated to seek listing approval for all shares issuable upon conversion of
the Series A Preferred Stock and Series B Preferred Stock and upon exercise of
the Warrants, the Placement Agent Warrants and the Advisor Warrants.
The Company has granted registration rights to the holders of the Series A
Preferred Stock and Series B Preferred Stock and the Warrants, the Placement
Agent Warrants and the Advisor Warrants with respect to all of the shares of
Common Stock issuable upon their conversion or exercise, as the case may be. By
exercising their registration rights, converting the Series A Preferred Stock
and Series B Preferred Stock into Common Stock and purchasing Common Stock upon
exercise of the Warrants, the Placement Agent Warrants and the Advisor Warrants,
the holders of such securities can cause a large number of shares of Common
Stock to be registered and freely tradeable without restrictions under the
Securities Act of 1933, as amended. To the extent any such sales occurred, it
may have an adverse effect on the market price of the Common Stock and could
impair the Company's ability to raise additional capital.
The following discussion summarizes the material terms of the Preferred
Issuances, but does not purport to be an exhaustive discussion of all of the
terms of thereof. The discussion contained in this Proxy Statement is qualified
in its entirety by reference to (i) the applicable Purchase Agreements; (ii) the
applicable Certificate of Designations; (iii) the applicable Registration Rights
Agreements, and (iv) the applicable Form of Warrant (collectively, the
"Documents') for the Series A Preferred Stock and Series B Preferred Stock
private placement transactions. Copies of the Documents can be obtained free of
charge by contacting the Secretary of the Company at (602) 254-9777 or by
reference to the exhibits to the Company's Form S-3 Registration Statements
(File Nos. 333-94099 and 333-94731) previously filed with the Securities and
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<PAGE>
Exchange Commission (the "SEC"). Copies of these Registration Statements can be
obtained free of charge at the SEC's web site at HTTP://WWW.SEC.GOV.
PRINCIPAL REASONS FOR THE TRANSACTIONS
The Board of Directors believes that the transactions contemplated by the
Documents, including the Preferred Issuances, are fair to, and in the best
interests of, the Company and its shareholders. Accordingly, the Board of
Directors has approved such transactions and recommends that the Company's
shareholders vote for approval of the issuance of its Common Stock upon the
conversion of the Series A Preferred Stock and the Series B Preferred Stock. In
reaching its determination, the Board consulted with the Company's management,
legal counsel and consultants and considered a variety of factors, including the
following:
1. The Board investigated and considered other alternative sources of
financing and determined that the transactions contemplated by the Documents
offered the most favorable terms of any available means of financing for the
Company.
2. The Board considered that, as a result of the Preferred Issuances, the
Company would have the additional resources necessary to facilitate the
implementation of its business plan.
POTENTIAL RISKS ASSOCIATED WITH THE TRANSACTIONS.
The Board of Directors considered potentially negative factors that could
arise from the transactions contemplated by the Documents, including the
following:
1. The Board considered that the remedies available to the Investors if the
Company fails to comply with the Documents for any reason, particularly the
Investors' redemption rights and other penalties associated with non-compliance,
could have a material adverse effect on the Company's financial condition.
2. The Board considered that the aggregate number of shares of Common Stock
issuable upon conversion of the Series A Preferred Stock and Series B Preferred
Stock and upon exercise of the Warrants will increase in certain circumstances,
and could result in significant dilution of current shareholders' percentage
ownership interest and effective voting power in the Company, which could affect
the market price for the Common Stock.
The Board did not believe that the negative factors were sufficient, either
individually or collectively, to outweigh the advantages of the transactions.
THE PURCHASE AGREEMENTS
ISSUANCE OF SERIES A PREFERRED STOCK, SERIES B PREFERRED STOCK AND RELATED
WARRANTS
On December 20, 1999, the Company and the Investors executed the Purchase
Agreement, pursuant to which the Company agreed to issue and sell up to 150,000
shares of the Series A Preferred Stock and related Warrants, as described below.
Pursuant to the terms of the Purchase Agreement, 91,320 shares of Series A
Preferred Stock and Warrants to purchase an aggregate of 652,289 shares of
Common Stock were issued to the Investors on December 22, 1999. Warrants to
purchase an aggregate of 200,742 shares of Common Stock also were issued to the
placement agents who assisted the Company in completing this transaction.
On December 30, 1999, the Company and the Investors executed the Purchase
Agreement, pursuant to which the Company agreed to issue and sell up to 80,000
shares of the Series B Preferred Stock and related Warrants as described below.
Pursuant to the terms of the Purchase Agreement, 80,000 shares of Series B
Preferred Stock and Warrants to purchase an aggregate of 571,429 shares of
Common Stock were issued to the Investors on December 30, 1999. Warrants to
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purchase an aggregate of 34,286 shares of Common Stock also were issued to the
placement agent who assisted the Company in completing this transaction and
warrants to purchase an aggregate of 250,000 shares of Common Stock were issued
to the Company's financial advisor in this transaction.
REPRESENTATIONS AND WARRANTIES.
The Purchase Agreements contain customary representations and warranties
relating to the parties thereto and pertaining to the Preferred Stock and the
Warrants. These representations include, among others, representations with
respect to: (i) the organization, formation, corporate structure and ownership
of the Company and other corporate matters; (ii) the due authorization,
execution, delivery, performance and enforceability of the Documents; (ii) the
absence of conflicts in connection with the transactions contemplated by the
Documents; (iv) the absence of certain material adverse events, changes or
effects; (v) the absence of litigation threatened against or affecting the
Company; (vi) taxes, employment relations and intellectual property rights; and
(vii) financial statements and financial information and reports and other
documents filed with the SEC and other regulatory agencies.
COVENANTS.
The Purchase Agreements contain covenants by the Company, including, among
others, covenants relating to the timely filing of required SEC reports and the
provision of financial information to the Investors.
Pursuant to the terms of the Purchase Agreements, the Company has agreed to
seek the approval of its shareholders of the issuance of its Common Stock upon
conversion of the Series A Preferred Stock and Series B Preferred Stock pursuant
to this Proxy Statement. In the event that the Company fails to receive the
requisite majority approval of its shareholders for the issuance of its Common
Stock upon conversion of the Series A Preferred Stock or Series B Preferred
Stock within 180 days following the issuance, each share of Series A Preferred
Stock and Series B Preferred Stock shall be redeemed at a price per share equal
to 110% of the Liquidation Preference plus any amounts payable pursuant to the
Registration Rights Agreement. The Company has agreed to provide registration
rights with respect to the Common Stock issuable upon the conversion of the
Series A Preferred Stock and Series B Preferred Stock and upon exercise of the
related Warrants as described below under the caption "Registration Rights."
INDEMNIFICATION
The Purchase Agreements contain customary indemnification provisions
whereby the Company has agreed to indemnify the Investors and certain related
parties from losses relating to the breach by the Company of its representations
or warranties or any of its obligations under the Documents or arising out of
the Investors' execution, delivery, performance or enforcement of the Documents.
THE SERIES A AND SERIES B PREFERRED STOCK
The following is a summary of the Certificate of Designations and of the
rights and preferences of the Series A Preferred Stock and Series B Preferred
Stock.
DESIGNATION AND AMOUNT.
The Series A Preferred Stock has a par value per share equal to $.001, and
the number of shares issuable is 150,000. The Series B Preferred Stock also has
a par value per share equal to $.001, and the number of shares issuable is
80,000.
DIVIDENDS.
Neither the Series A Preferred Stock nor the Series B Preferred Stock has
any dividend rights.
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VOTING RIGHTS.
Holders of the Series A Preferred Stock and Series B Preferred Stock are
not entitled as such to voting rights on any matter submitted to a vote of the
shareholders of the Company, except as required by law. So long as the Series B
Convertible Preferred Stock is outstanding, the holders of such preferred stock
shall have the exclusive right, voting separately as a class, to elect one
director to the Board of Directors of the Company.
RANK.
The Series A Preferred Stock and Series B Preferred Stock rank senior to
the Common Stock and PARI PASSU with each such series of Preferred Stock. The
Company may not issue any additional or other capital stock that is senior to or
PARI PASSU with the Series A Preferred Stock or Series B Preferred Stock without
the prior written consent of the holders of at least a majority of the Series A
Preferred Stock and Series B Preferred Stock, voting separately.
CONVERSION BY HOLDERS.
Subject to the limitations discussed below, each share of the Series A
Preferred Stock and Series B Preferred Stock is convertible into shares of
Common Stock at a conversion ratio (the "Conversion Ratio") equal to the
Conversion Amount divided by the applicable Conversion Price. The "Conversion
Price" is $7.00. The Conversion Ratio is subject to adjustment, as described
further under "Adjustment of Conversion Ratio." The "Conversion Amount" is
defined as $100, plus any payments due under the applicable Registration Rights
Agreements. For purposes of an example only, one share of either Series A
Preferred Stock or Series B Preferred Stock is convertible into approximately 14
shares of Common Stock ($100 divided by $7.00 = 14.286), with any fractional
share amounts being payable in cash.
ADJUSTMENT OF CONVERSION RATIO
The Conversion Ratio of the Series A Preferred Stock and Series B Preferred
Stock is subject to adjustment in the event that the Company issues Common
Stock, options or other convertible securities, at a per share price less than
the current market price per share of Common Stock or less than the Conversion
Price then in effect, or subdivides or combines outstanding shares of its Common
Stock or recapitalizes or undertakes any other similar event. There are no
market reset provisions with respect to either series of Preferred Stock. No
adjustment will be made unless the adjustment would result in a cumulative
increase or decrease of at least 1% in the Conversion Price.
MANDATORY CONVERSION
The shares of Series A Preferred Stock and Series B Preferred Stock
automatically convert into shares of Common Stock upon approval of the
shareholders of the Company of the issuance of Common Stock upon conversion of
the Series A Preferred Stock and Series B Preferred Stock, respectively.
MANDATORY REDEMPTION
If the Company fails to obtain the approval of its shareholders within 180
days of the issuance of the respective series of Preferred Stock, the then
outstanding shares of Series A Preferred Stock and Series B Preferred Stock, as
applicable, shall become immediately redeemable by the Company at a price equal
to 110% of the Liquidation Preference plus any amounts due under the applicable
Registration Rights Agreement.
RESERVATION OF SHARES
To ensure that the Series A Preferred Stock, Series B Preferred Stock and
the related Warrants can at all times be properly converted or exercised, as the
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case may be, the Company must reserve at least 100% of the number of shares of
Common Stock for which the Series A Preferred Stock, Series B Preferred Stock
and Warrants may be converted or exercised, as the case may be.
LIQUIDATION, DISSOLUTION OR WINDING UP
In the event of any liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, the holders of outstanding shares of Series A
Preferred Stock and Series B Preferred Stock are entitled to receive out of the
assets of the Company available for distribution to its stockholders, an amount
per share equal to $100.00 plus any and all accrued interest thereon.
AMENDMENT
No change is to be made to the Certificate of Designations of such
Preferred Stock without the affirmative vote of at least a majority of the
holders of the outstanding shares of such series of Preferred Stock.
THE WARRANTS
GENERAL
Pursuant to the Purchase Agreements, the Company issued Warrants to the
Investors in each private placement transaction. The Warrants expire five years
after issuance. The Company also issued the Placement Agent Warrants and the
Advisor Warrants which expire five years after issuance.
EXERCISE
The terms of the Warrants entitle each holder to purchase that number
shares of Common Stock equal to 50% of the number of shares of Common Stock
initially issuable upon conversion of such holder's Series A Preferred Stock or
Series B Preferred Stock, as the case may be. The exercise price of each Warrant
is $8.00. The exercise price of the Placement Agent Warrants range from $7.00 to
$9.12 per share and the exercise price of the Advisor Warrants is $8.00 per
share. The exercise of the Warrants, the Placement Agent Warrants and the
Advisor Warrants is subject to customary anti-dilution adjustments upon such
events as a dividend or other distribution, stock split, reorganization, merger,
and other similar events. The Warrants do not contain market reset provisions.
CASHLESS EXERCISE OPTION
WARRANTS. Generally, if the Common Stock to be issued in exchange for the
Warrants is not registered for resale in accordance with the applicable
Registration Rights Agreement, 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 (the number of shares to 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) without paying the cash exercise price. As of the date of this
Proxy Statement, the Company has filed and obtained the effectiveness of two
separate Form S-3 Registration Statements relating to the shares of Common Stock
issuable upon conversion or exercise of the Series A Preferred Stock, the Series
B Preferred Stock, the Warrants, the Placement Agent Warrants and the Advisor
Warrants.
PLACEMENT AGENT WARRANTS AND ADVISOR WARRANTS. The warrants issued to the
placement agents and to Wand Partners Inc. contain cashless exercise options
that are exercisable at any time by the holder thereof.
REDEMPTION AT COMPANY'S ELECTION
The Company may redeem all or part of the Warrants upon 30 days prior
written notice at a price equal to $.01 per share of Common Stock exercisable
under such Warrant if the following conditions are met: (i) the closing bid
price for its Common Stock is at least 150% of the exercise price of the Warrant
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($12.00 as of January 12, 2000), as adjusted if required, for a period of twenty
consecutive trading days; (ii) the registration statement required to be filed
pursuant to the Registration Rights Agreement is effective; and (iii) the Common
Stock is listed on Nasdaq National Market, AMEX or the NYSE.
COVENANTS
The Company made certain customary covenants with respect to the Warrants,
including, among others: (i) the Warrants, and any Common Stock to be issued
upon exercise of the Warrants, are and will be duly authorized and validly
issued; (ii) the Company shall reserve at least 100% of the number of shares of
Common Stock issuable upon exercise of the Warrants; (iii) the Common Stock
issuable upon exercise of the Warrants shall be listed on each national
securities exchange or automated quotation system upon which the Company's
Common Stock is then issued; and (iv) the Company will act in good faith in
carrying out the provisions of the Warrants.
AMENDMENT
The provisions of the Warrants may be amended only after the Company has
obtained the written consent of Warrant holders representing at least 66.7% of
the shares of Common Stock issuable upon exercise of the Warrants then
outstanding. However, the Company 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 without the written consent of the
holder of such Warrant.
REGISTRATION RIGHTS
The Registration Rights Agreements provide for mandatory registration
covering the resale of all shares issued or issuable upon conversion of the
Series A Preferred Stock and the Series B Preferred Stock, as the case may be,
and the maximum number of share issuable upon exercise of the related Warrants
(as issued or issuable, the "Registrable Securities") and grants certain
piggyback registration rights with respect to the Registrable Securities. The
Registration Rights Agreement contains customary covenants and agreements of the
respective parties concerning the registration of the Common Stock and the
incurrence of certain costs and expenses in connection with the obligations of
the parties thereunder, as well as the agreement of the parties to provide
customary indemnification from material misstatements or omissions in connection
with any registration of the Common Stock as required. The Company must have a
registration statement covering the Registrable Securities declared effective
within 90 days after the issuance of the applicable Series A Preferred Stock,
Series B Preferred Stock and related Warrants.
If the Company (1) fails to file a registration statement within 15 days of
the issuance; (2) fails to file a request for acceleration within 5 days of
receipt of notice from the SEC that the registration statement is not subject to
any further review; (3) has its registration statement cease to become
effective; (4) has its Common Stock delisted; (5) has its Common Stock suspended
for any reason for more than 5 days; (6) has to suspend the exercise rights of
the holders of the Warrants for any reason; (7) materially breaches any of the
Documents and fails to cure such breach within 30 days after notice of the
breach; or (8) postpones or suspends filing or effectiveness of a registration
statement pursuant to Section 3(n) of the Registration Rights Agreement for more
than 45 days in any 12 month period (each individually being referred to as an
"Event"), the Company must pay each holder of the Series A Preferred Stock and
Series B Preferred Stock, as the case may be, a liquidated damages amount equal
to 2% of such holder's purchase price of their Series A Preferred Stock or
Series B Preferred Stock, as the case may be, for each 30 day period until any
such Event is cured.
VOTING REQUIREMENTS
Each holder of Common Stock is entitled to one vote per share held. The
affirmative vote of holders of a majority of the outstanding shares of Common
Stock of the Company entitled to vote and present in person or by proxy at the
Special Meeting is required for approval of this Proposal, provided that the
number of shares present in person or by proxy constitutes a quorum. In the
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event that a quorum is not present or represented at the Special Meeting, the
shareholders entitled to vote at the meeting present in person or by proxy shall
have the power to adjourn the meeting until a quorum shall be present or
represented. Proxies solicited by the Board of Directors will be voted for
approval of this Proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE ISSUANCE OF THE
SHARES OF COMMON STOCK UPON CONVERSION OF THE SERIES A PREFERRED STOCK AND
SERIES B PREFERRED STOCK AND UPON EXERCISE OF THE WARRANTS.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers and beneficial owners of more than
10% of the Common Stock to file with the SEC initial statements of beneficial
ownership and statements of changes in beneficial ownership of the Common Stock
and other equity securities of the Company held by such persons. Except as noted
below, the Company believes, based solely upon a review of the copies of such
beneficial ownership statements furnished to it, that during the year ended
December 31, 1999, all Section 16(a) filing requirements applicable to the
Company's officers, directors and owners of more than 10% of the Company's
Common Stock were complied with.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On April 19, 1996, the Company entered into an agreement with OrderTrust
LLC (formerly LitleNet LLC), a company in which Thomas J. Litle, a director of
the Company, has a controlling ownership interest, pursuant to which OrderTrust
LLC provides the Company with order processing management services. On December
4, 1998, the Company entered into a new agreement with OrderTrust LLC to
continue to provide such services. In fiscal 1999, the Company incurred
processing fees of approximately $450,000 pursuant to such agreements.
On May 12, 1999, skymall.com, inc., a wholly-owned subsidiary of SkyMall,
Inc. entered into an agreement with Ran Decisions, Inc., a Colorado corporation
doing business as Frequent Flyer Services. The agreement provides that
skymall.com, inc. acquires the right to utilize Frequent Flyer Services' Mileage
Manager Service, which is currently being offered on SkyMall's skymalltravel.com
Web site. Randy Petersen, a director of the Company, is President of Frequent
Flyer Services.
As of the Record Date, Quintel Communications, Inc. ("Quintel")
beneficially owns 6.1% of the Common Stock of the Company. On November 5, 1999,
Quintel and the Company entered into a strategic marketing agreement whereby
Quintel will offer the Company's products through Quintel's new MultiBuyer.com
website, as well as through Quintel's other online assets. The parties also
agreed to other cross-selling and promotional opportunities.
SHAREHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING
Any stockholder who wishes to present any proposal for stockholder action
at the next Annual Meeting of Stockholders to be held in 2000, must have been
received by the Company's Secretary, at the Company's offices, not later than
January 7, 2000, in order to be included in the Company's proxy statement and
form of proxy for that meeting. Such proposals should be addressed to the
Corporate Secretary, SkyMall, Inc., 1520 East Pima Street, Phoenix, Arizona
85034. If a shareholder proposal is introduced at the 2000 Annual Meeting of
Stockholders without any discussion of the proposal in the Company's proxy
statement, and the stockholder does not notify the Company on or before March
22, 2000, as required by SEC Rule 14(a)-4(c)(1), of the intent to raise such
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proposal at the Annual Meeting of Stockholders, then proxies received by the
Company for the 2000 Annual Meeting will be voted by the persons named as such
proxies in their discretion with respect to such proposals. Notice of such
proposal is to be sent to the above address.
OTHER BUSINESS
The Board of Directors is not aware of any other business to be considered
or acted upon at the Special Meeting other than those described above.
By Order of the Board of Directors,
Robert M. Worsley
Chairman, Chief Executive Officer
and President
Phoenix, Arizona
February 1, 2000
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PROXY
[FRONT OF CARD]
SKYMALL, INC.
1520 EAST PIMA STREET
PHOENIX, ARIZONA 85034
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF SKYMALL, INC.
FOR THE SPECIAL MEETING OF SHAREHOLDERS
The undersigned shareholder of SkyMall, Inc., a Nevada corporation (the
"Company"), hereby acknowledges receipt of the Notice of Special Meeting of
Shareholders, dated January 24, 2000, and hereby appoints Robert M. Worsley,
Christine A. Aguilera and Stephen R. Peterson, and each of them, proxies and
attorneys-in-fact, with full power of substitution, on behalf and in the name of
the undersigned, to represent the undersigned at the Special Meeting of
Stockholders of SKYMALL, INC. to be held at the corporate offices of the Company
located at 1520 East Pima Street, Phoenix, Arizona 85034 on March 10, 2000, at
10:00 a.m., local time, and at any adjournment(s) or postponement(s) thereof,
and to vote all shares of Common Stock that the undersigned would be entitled to
vote if then and there personally present, on the matter set forth below.
To approve the issuance of shares of the Company's common stock, par value
$.001 per share (the "Common Stock"), upon conversion of the Company's
Series A Junior Convertible Preferred Stock, par value $.001 per share (the
"Series A Preferred Stock"), and Series B Junior Convertible Preferred
Stock, par value $.001 per share (the "Series B Preferred Stock"), and
exercise of related warrants to acquire shares of Common Stock, all on the
terms and conditions set forth in those certain Stock and Warrant Purchase
Agreements, dated as of December 20, 1999 and December 30, 1999, between
the Company and the undersigned investors thereto.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE
<PAGE>
[REVERSE OF CARD]
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR EACH OF THE LISTED PROPOSALS
Dated: _____________, 2000
Signature _______________________________________
[Shareholder Name/Address
Label]
Signature if held jointly _______________________
Please sign exactly as name appears at left. When
shares are held by joint tenants, both should
sign. When signing as an attorney, executor,
administrator, trustee or guardian, please give
full title as such. If a corporation, please
sign in full corporate name by president or other
authorized officer. If a partnership, please sign
in partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
POSTAGE-PAID ENVELOPE
I [ ] will [ ] will not attend the Special Meeting
