As filed with the Securities and Exchange Commission on January 14, 2000
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 1,998,572 $7.78125 $15,551,388 $4,106
$.001 par value
================================================================================
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(1) Includes (i) up to 1,142,857 shares of common stock to be issued upon
conversion of Series B Junior Convertible Preferred Stock, (ii) up to
855,715 shares of common stock to be issued upon exercise of warrants and
(iii) an indeterminate number of additional shares of common stock as may
from time to time become issuable upon conversion of the Series B Junior
Convertible Preferred Stock and 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
January 12, 2000.
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 JANUARY 14, 2000
PROSPECTUS
1,998,572 SHARES
SKYMALL, INC.COMMON STOCK
We have issued 80,000 shares of our Series B Junior Convertible Preferred
Stock, which are convertible into 1,142,857 shares of our common stock, and
855,715 warrants to purchase 855,715 shares of our common stock in a private
placement completed on December 30, 1999. The private placement was completed
pursuant to the terms of a Stock and Warrant Purchase Agreement. Of such shares
of preferred stock and warrants, 80,000 shares of preferred stock and 571,429
warrants were issued to the investors in the private placement, 250,000
additional warrants were issued to a financial advisor in payment of an advisory
fee in connection with the transactions contemplated pursuant to the private
placement, and 34,286 warrants were issued to the placement agent that assisted
the Company in completing the private placement. The investors, the financial
advisor and the placement agent (which we collectively refer to 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 will receive by
converting the preferred stock to common stock and 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
$6,811,434 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 under the symbol
"SKYM." According to Nasdaq, on January 12, 2000, the last reported sale price
for our common stock was $7.9375.
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 ___________, 2000
<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
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information in order to understand the nature of any investment by you in the
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 Current Report on Form 8-K filed January 3, 2000;
o Our Current Report on Form 8-K filed January 4, 2000;
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 Securities Exchange Act of 1934, as amended, 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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THE FOLLOWING SUMMARY SHOULD BY READ BY YOU TOGETHER WITH THE MORE DETAILED
INFORMATION INCLUDED IN 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
airline partners, as well as new international partners. The Company believes
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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............................. 1,998,572 shares of common stock
Common stock outstanding as of
January 12, 2000......................... 10,533,997 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 $6,811,434 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) 1,007,838 shares of common stock issuable upon the
exercise of outstanding stock options issued pursuant to the Company's
stock option plans, (ii) an additional 748,795 shares of common stock
reserved for issuance pursuant to future awards granted under such stock
option plans, (iii) 50,000 shares of common stock issuable upon the
exercise of warrants issued in an acquisition, which are exercisable at
$8.00 per share, (iv) 25,000 shares of common stock issuable upon the
exercise of warrants issued to Ryan, Beck & Co., Inc. in connection with
Ryan, Beck's services to the Company related to the Company's financing
efforts, which are exercisable at $9.31 per share, (v) 571,444 shares of
common stock issuable upon the exercise of warrants issued to investors in
the Company's November 1999 private placement, which are exercisable at
$8.00 per share, (vi) 129,136 shares of common stock issuable upon the
exercise of warrants issued to 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, (vii) 14,420 shares of common stock
issuable upon the exercise of warrants issued upon conversion of an
outstanding note, which are exercisable at $8.00 per share, (viii)
1,304,571 shares of common stock issuable upon the conversion of the Series
A Junior Convertible Preferred Stock issued to investors in the Company's
December 20, 1999 private placement, (ix) 652,289 shares of common stock
issuable upon the exercise of warrants issued to investors in the Company's
December 20, 1999 private placement, which are exercisable at $8.00 per
share, (x) 200,742 shares of common stock issuable upon the exercise of
warrants issued to placement agents in connection with the Company's
December 20, 1999 private placement, which are exercisable at prices
ranging from $7.00 to $9.12 per share, (xi) 1,142,857 shares of common
stock issuable upon the conversion of the Series B Junior Convertible
Preferred Stock which are a part of the shares of common stock that are
being offered pursuant to this prospectus, and (xii) 855,715 shares of
common stock issuable upon the exercise of the warrants which are a part of
the shares of common stock that are being offered pursuant to this
prospectus.
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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. 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
over the Internet is a new and rapidly evolving market. Our future growth
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<PAGE>
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
10
<PAGE>
of other third parties. The success of online marketing cannot be currently
determined, and further penetration in this market will require substantial
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.
11
<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 January 5,
2000, Mr. Worsley and his wife (the "Worsleys") beneficially owned 4,798,530
shares, or approximately 45.6% of our outstanding common stock. As a result, the
Worsleys have the ability to significantly influence the affairs of the Company
12
<PAGE>
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 (i) warrants and options to acquire up to
3,506,584 additional shares of common stock at prices ranging from $2.13 to
$24.50 per share, including the 855,715 warrants issued in the December 30, 1999
private placement which are a part of the shares of common stock that are being
offered pursuant to this prospectus, (ii) 91,320 shares of Series A Junior
Convertible Preferred Stock which are convertible into 1,304,571 shares of
common stock, and (iii) the 80,000 shares of Series B Junior Convertible
Preferred Stock issued in the December 30, 1999 private placement which are
convertible into 1,142,857 shares of common stock which are a part of the shares
of common stock that are being offered pursuant to this prospectus. If exercised
and/or converted, 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
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<PAGE>
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
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 implemented 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 have also reviewed
for Year 2000 compliance. In addition, we have surveyed 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 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
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<PAGE>
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
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 contacted 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.
As of January 12, 2000, we have not experienced any significant disruptions
or computer processing errors or failures related to any Year 2000 Issues.
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
15
<PAGE>
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.
SELLING SHAREHOLDERS
The shares being offered by the selling shareholders were issued in the
December 30, 1999 private placement pursuant to a Stock and Warrant Purchase
Agreement. 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 January 12, 2000.
None of the selling shareholders has a material relationship with us except as
follows: Wand Partners Inc. has performed financial advisory services to the
Company and Ryan, Beck & Co., Inc. is also a financial advisor to the Company,
including Michael Kollender and Randy Rock who are representatives of Ryan,
Beck. In addition, pursuant to the terms of the December 30, 1999 private
placement, 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. Upon conversion of the Series B Junior Convertible Preferred Stock,
Wand Partners will have the right to elect one director to the Board of
Directors of the Company, during such time as such investors continue to own 50%
or more of the shares of common stock issuable to such investors upon conversion
of the Series B Junior Convertible Preferred Stock purchased in such private
placement. 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>
Wand Equity Portfolio II L.P.(3) 1,620,515(4) 15.4% 1,620,515 0 0%
630 Fifth Avenue, Suite 2435
New York, New York 10111
Wand Affiliates Fund L.P.(3) 93,771(5) * 93,771 0 0%
630 Fifth Avenue, Suite 2435
New York, New York 10111
Wand Partners, Inc.(3) 1,964,286(6) 18.7% 1,964,286(6) 0 0%
630 Fifth Avenue, Suite 2435
New York, New York 10111
Ryan, Beck & Co., Inc. 102,790(7) * 15,428 87,362 *
200 Park Avenue
New York, New York 10166
</TABLE>
16
<PAGE>
<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>
Michael J. Kollender 62,816(8) * 9,429 53,387 *
c/o Ryan, Beck & Co., Inc.
200 Park Avenue
New York, New York 10166
Randy Rock 62,816(9) * 9,429 53,387 *
c/o Ryan, Beck & Co., Inc.
200 Park Avenue
New York, New York 10166
_______________
</TABLE>
* Less than 1%.
(1) Percentages are based upon 10,533,997 shares of the Company's common stock
outstanding as of January 12, 2000.
(2) Percentages are based upon 12,532,569 shares of the Company's common stock
being outstanding if all of the shares of common stock offered pursuant to
this prospectus are sold by the selling shareholders.
(3) These selling shareholders are co-managed under a management agreement with
Wand Partners Inc.
(4) Includes (i) 1,080,343 shares of common stock issuable upon conversion of
the preferred stock and 540,172 shares of common stock issuable upon
exercise of the warrants issued to Wand Equity Portfolio II L.P. as an
investor in the Company's December 30, 1999 private placement.
(5) Includes (i) 62,514 shares of common stock issuable upon conversion of the
preferred stock and 31,257 shares of common stock issuable upon exercise of
the warrants issued to Wand Affiliates Fund L.P. as an investor in the
Company's December 30, 1999 private placement.
(6) Includes 250,000 shares of common stock issuable upon exercise of the
advisory fee warrants issued to Wand Partners Inc. in connection with the
private placement. In addition, 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.
(7) Ryan, Beck & Co., Inc. acted as a placement agent in connection with the
November 1999, December 20, 1999 and December 30, 1999 private placements
of the Company and as an investment advisor to the Company. The number of
shares beneficially owned by Ryan, Beck includes (i) 11,250 shares of
common stock issuable upon exercise of warrants to purchase common stock
granted to Ryan, Beck in connection with the Company's financing efforts
relating to private placements, (ii) 31,112 shares of common stock issuable
upon exercise of warrants granted to Ryan, Beck as a placement agent in
connection with November 1999 private placement, (iii) 45,000 shares of
common stock issuable upon exercise of warrants granted to Ryan, Beck as a
placement agent in connection with December 20, 1999 private placement, and
(iv) 15,428 shares of common stock issuable upon exercise of warrants
granted to Ryan, Beck as a placement agent in connection with December 30,
1999 private placement.
(8) As an associate of Ryan, Beck & Co., Inc., Mr. Kollender received warrants
to purchase shares of common stock in connection with the November 1999,
December 20, 1999 and December 30, 1999 private placements of the Company
and in connection with Ryan, Beck's services to the Company in connection
with the Company's financing efforts. The number of shares beneficially
owned by Mr. Kollender includes (i) 6,875 shares of common stock issuable
upon exercise of warrants granted to Mr. Kollender relating to Ryan, Beck's
services in connection with the Company's financing efforts relating to
private placements, (ii) 19,012 shares of common stock issuable upon
exercise of warrants granted to Mr. Kollender in connection with Ryan,
Beck's services as a placement agent in the November 1999 private
placement, (iii) 27,500 shares of common stock issuable to Mr. Kollender
upon exercise of warrants granted to Mr. Kollender in connection with Ryan,
Beck's services as a placement agent in the December 20, 1999 private
placement, and (iii) 9,429 shares of common stock issuable to Mr. Kollender
upon exercise of warrants granted to Mr. Kollender in connection with Ryan,
Beck's services as a placement agent in the December 30, 1999 private
placement.
(9) As an associate of Ryan, Beck & Co., Inc., Mr. Rock received warrants to
purchase shares of common stock in connection with the November 1999,
December 20, 1999 and December 30, 1999 private placements of the Company
and in connection with Ryan, Beck's services to the Company in connection
with the Company's financing efforts. The number of shares beneficially
owned by Mr. Rock includes (i) 6,875 shares of common stock issuable upon
exercise of warrants granted to Mr. Rock relating to Ryan, Beck's services
in connection with the Company's financing efforts relating to private
placements, (ii) 19,012 shares of common stock issuable upon exercise of
warrants granted to Mr. Rock in connection with Ryan, Beck's services as a
placement agent in the November 1999 private placement, (iii) 27,500 shares
of common stock issuable to Mr. Rock upon exercise of warrants granted to
Mr. Rock in connection with Ryan, Beck's services as a placement agent in
the December 20, 1999 private placement, and (iii) 9,429 shares of common
stock issuable to Mr. Rock upon exercise of warrants granted to Mr. Rock in
connection with Ryan, Beck's services as a placement agent in the December
30, 1999 private placement.
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<PAGE>
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 $6,811,434 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 Series B
Junior Convertible Preferred Stock and warrants, we provided to them certain
registration rights and have subsequently filed a registration statement on Form
S-3 with the SEC. 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:
o at fixed prices that may be changed,
o at market prices prevailing at the time of sale, or
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<PAGE>
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.
19
<PAGE>
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.
SERIES A JUNIOR CONVERTIBLE PREFERRED STOCK
Pursuant to a Stock and Warrant Purchase Agreement dated as of December 20,
1999, we issued shares of Series A Junior Convertible Preferred Stock, $.001 par
value, to the investors in the December 20, 1999 private placement.
The Series A Junior Convertible Preferred Stock is automatically
convertible into shares of our common stock upon the approval of our
shareholders of the issuance of common stock upon the conversion of such
preferred stock. Each share of Series A Junior Convertible Preferred Stock is
convertible into an amount of our common stock equal to a conversion ratio of:
(1) a liquidation preference of $100 plus any penalties divided by (2) $7.00.
The conversion ratio is subject to adjustment if we pay a dividend or make a
distribution to the holders of our common stock, we subdivide or combine our
common stock, we reclassify our common stock or we issue or distribute rights or
warrants.
If we do not receive shareholder approval of the conversion of the Series A
Junior Convertible Preferred Stock within 180 days from the date we issued such
preferred stock, we must redeem all the outstanding shares of the Series A
Junior Convertible Preferred Stock at an amount equal to 110% of the liquidation
preference plus any penalties. We have sent out certain proxies for shareholder
approval and at this time a shareholder meeting is not yet scheduled. We expect
to obtain shareholder approval on or before June 16, 2000.
The Series A Junior Convertible Preferred Stock is not entitled to receive
any dividends or any other type of distribution. The holders of such preferred
stock will not have any voting rights other than those they are required to have
by law. The Series A Junior Convertible Preferred Stock ranks senior to our
common stock for purposes of distributing our assets in the event we must
liquidate, dissolve or wind up our business.
We must have the approval of at least a majority of the then outstanding
Series A Junior Convertible Preferred Stock to:
o alter, amend or repeal any of the rights or privileges of such
preferred stock or any other capital stock that would adversely affect
such preferred stock;
20
<PAGE>
o create any series or class of capital stock that is equal or senior in
rights to such preferred stock;
o increase the authorized number of shares of such preferred stock; and
o increase the par value of our common stock.
SERIES B JUNIOR CONVERTIBLE PREFERRED STOCK ISSUED TO SELLING SHAREHOLDERS
PURSUANT TO THE DECEMBER 30, 1999 PRIVATE PLACEMENT
Pursuant to a Stock and Warrant Purchase Agreement dated as of December 30,
1999, we issued shares of Series B Junior Convertible Preferred Stock, $.001 par
value, to the investors in the December 30, 1999 private placement.
The Series B Junior Convertible Preferred Stock is automatically
convertible into shares of our common stock upon the approval of our
shareholders of the issuance of common stock upon the conversion of such
preferred stock. Each share of Series B Junior Convertible Preferred Stock is
convertible into an amount of our common stock equal to a conversion ratio of:
(1) a liquidation preference of $100 plus any penalties divided by (2) $7.00.
The conversion ratio is subject to adjustment if we pay a dividend or make a
distribution to the holders of our common stock, we subdivide or combine our
common stock, we reclassify our common stock or we issue or distribute rights or
warrants.
If we do not receive shareholder approval of the conversion of the Series B
Junior Convertible Preferred Stock within 180 days from the date we issued the
Series B Junior Convertible Preferred Stock, we must redeem all the outstanding
shares of such preferred stock at an amount equal to 110% of the liquidation
preference plus any penalties. We have sent out certain proxies for shareholder
approval and at this time a shareholder meeting is not yet scheduled. We expect
to obtain shareholder approval on or before June 16, 2000.
The Series B Junior Convertible Preferred Stock is not entitled to receive
any dividends or any other type of distribution. Other than as described below,
the holders of such preferred stock will not have any voting rights other than
those they are required to have 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. The Series B Junior Convertible Preferred
Stock will rank senior to our common stock for purposes of distributing our
assets in the event we must liquidate, dissolve or wind up our business.
We must have the approval of at least a majority of the then outstanding
Series B Junior Convertible Preferred Stock to:
o alter, amend or repeal any of the rights, preferences or privileges of
such preferred stock or any other capital stock that would adversely
affect such preferred stock;
o create any series or class of capital stock that is equal or senior in
rights to such preferred stock;
o increase the authorized number of shares of such preferred stock;
o increase the par value of our common stock;
o create a new class or series of preferred stock entitled to payment of
dividends;
21
<PAGE>
o authorize or approve any liquidation, dissolution, or winding up of
the Company or any filing of a voluntary petition in bankruptcy;
o authorize or approve any transaction, including, without limitation, a
merger, consolidation, sale of all or substantially all of the
Company's assets or recapitalization;
o pay any dividends or distributions on any capital stock other than
capital stock senior in rights to such preferred stock; or
o redeem or repurchase (or make funds available for a sinking fund for
the redemption or repurchase of) any capital stock.
WARRANTS ISSUED TO SELLING SHAREHOLDERS PURSUANT TO THE STOCK AND WARRANT
PURCHASE AGREEMENT
Pursuant to the Stock and Warrant Purchase Agreement, we issued the
warrants to the investors in the private placement. 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 Registration
Rights Agreement entered into between the Company and the investors, or the
Company provides notice of its election to redeem the warrants, 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:
o this Registration Statement is effective;
22
<PAGE>
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 election to redeem;
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 are 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.
23
<PAGE>
ADVISORY WARRANTS ISSUED IN CONNECTION WITH THE PRIVATE PLACEMENT
Pursuant to the Stock and Warrant Purchase Agreement, we issued warrants to
Wand Partners Inc. in payment of an advisory fee in connection with the
transactions contemplated pursuant to the private placement. 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. Wand Partners Inc. is entitled to a "cashless
exercise" option. This option entitles the warrant holder 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:
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 election to redeem;
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:
24
<PAGE>
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 are 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.
WARRANTS ISSUED TO THE PLACEMENT AGENTS IN CONNECTION WITH THE PRIVATE PLACEMENT
In connection with services performed as placement agents, we issued
warrants to the placement agents in connection with the private placement. The
warrants expire five years after issuance.
EXERCISE OF WARRANTS. The warrants may be exercised at any time after
issuance.
EXERCISE PRICE. The exercise prices of the warrants is $7.00 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
25
<PAGE>
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
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.
26
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<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 1,998,572 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 __________, 2000
The Offering............................. 8
Risk Factors............................. 9
Selling Shareholders..................... 16
Use of Proceeds.......................... 18
Determination of Offering Price.......... 18
Plan of Distribution..................... 18
Description of Securities................ 20
Legal Matters............................ 26
Experts.................................. 26
============================================= ============================================
</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.............................$ 4,106
Legal Fees and Expenses.......................... 10,000
Accounting Fees and Expenses..................... 5,000
Printing and Engraving Expenses.................. 1,000
Blue Sky Fees and Expenses....................... 1,000
Miscellaneous.................................... 3,894
---------
Total...........................................$ 25,000
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 Certificate of Designations, Rights, Preferences
and Limitations of the Series B Junior Convertible
Preferred Stock (1)
4.2 Form of Series B Junior Convertible Preferred Stock
Stock Certificate (1)
4.3 Form of Warrant issued to investors in the private
placement (1)
4.4 Form of Advisory Fee Warrant issued to Wand Partners
Inc. pursuant to the private placement (1)
4.5 Form of Warrant issued to Ryan, Beck & Co., Inc.,
Michael J. Kollender and Randy Rock as placement
agents in the private placement (1)
5 Opinion re: legality of the securities being
registered (1)
10.1 Stock and Warrant Purchase Agreement between the
Company and the investors in the private placement (1)
10.2 Registration Rights Agreement between the
Company and the investors in the private placement (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.
II-2
<PAGE>
(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.
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 January 12, 2000.
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, January 12, 2000
- ------------------------ President and Chief Executive
Robert M. Worsley Officer (Principal Executive
Officer)
/s/ Stephen R. Peterson Chief Financial Officer January 12, 2000
- ------------------------ (Principal Financial and
Stephen R. Peterson Accounting Officer)
S-1
<PAGE>
Signature Title Date
--------- ----- ----
/s/ Lyle R. Knight Director January 12, 2000
- ------------------------
Lyle R. Knight
/s/ Thomas J. Litle Director January 12, 2000
- ------------------------
Thomas J. Litle
/s/ Randy Petersen Director January 12, 2000
- ------------------------
Randy Petersen
S-2
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description Method of Filing
- ------ ----------- ----------------
4.1 Certificate of Designations, Rights, Preferences
and Limitations of the Series B Junior Convertible
Preferred Stock (1)
4.2 Form of Series B Junior Convertible Preferred Stock
Stock Certificate (1)
4.3 Form of Warrant issued to investors in the private
placement (1)
4.4 Form of Advisory Fee Warrant issued to Wand Partners
Inc. pursuant to the private placement (1)
4.5 Form of Warrant issued to Ryan, Beck & Co., Inc.,
Michael J. Kollender and Randy Rock as placement
agents in the private placement (1)
5 Opinion re: legality of the securities being
registered (1)
10.1 Stock and Warrant Purchase Agreement between the
Company and the investors in the private placement (1)
10.2 Registration Rights Agreement between the
Company and the investors in the private placement (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
CERTIFICATE OF DESIGNATIONS, RIGHTS,
PREFERENCES AND LIMITATIONS
SKYMALL, INC.
SERIES B JUNIOR CONVERTIBLE PREFERRED STOCK
PURSUANT TO TITLE 7, CHAPTER 78, SECTION 78.1955 OF THE NEVADA REVISED STATUTES
SkyMall, Inc., a corporation organized and existing under the laws of the
State of Nevada, in accordance with the requirements of Title 7, Chapter 78,
Section 78.1955 of the Nevada Revised Statutes, does hereby submit this
Certificate of Designations, Rights, Preferences and Limitations ("Certificate
of Designations") as follows:
1. NAME. The name of the Corporation is:
SkyMall, Inc.
2. RESOLUTION ESTABLISHING AND DESIGNATING A SERIES OF PREFERRED STOCK AND
FIXING AND DETERMINING THE RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF THE
SHARES THEREOF.
RESOLVED, that pursuant to the authority expressly granted and vested
in the Board of Directors of this Corporation by the Articles of
Incorporation, as amended, a series of the Corporation's authorized
preferred stock, par value $0.001 per share, be and hereby is created, as
to which the terms of issuance and the rights, preferences and limitations
thereof shall be as follows:
a. DESIGNATION. The distinctive serial designation of the series is
Series B Junior Convertible Preferred Stock, par value $0.001 per share
(the "Convertible Preferred Stock").
b. RANKING. The Convertible Preferred Stock shall rank (i) prior to
the Corporation's common stock, par value $.001 per share ("Common Stock");
(ii) PARI PASSU with the Corporation's Series A Junior Convertible
Preferred Stock, par value $.001 per share (the "Series A Preferred
Stock"); (iii) prior to any class or series of capital stock of the
Corporation hereafter created (unless, with the consent of the holders of
Convertible Preferred Stock (which may be withheld in such holders' sole
and absolute discretion) obtained in accordance with Section 2(j) hereof,
such class or series of capital stock specifically, by its terms, ranks
senior to or PARI PASSU with the Convertible Preferred Stock); (iv) PARI
PASSU with any class or series of capital stock of the Corporation
hereafter created (with the consent of the holders of the Convertible
Preferred Stock (which may be withheld in such holders' sole and absolute
discretion) obtained in accordance with Section 2(j) hereof) specifically
ranking, by its terms, on parity with the Convertible Preferred Stock
("Pari Passu Securities"); and (v) junior to any class or series of capital
stock of the Corporation hereafter created (with the consent of the holders
of Convertible Preferred Stock (which may be withheld in such holders' sole
<PAGE>
and absolute discretion) obtained in accordance with Section 2(j) hereof)
specifically ranking, by its terms, senior to the Convertible Preferred
Stock ("Senior Securities"), in each case as to distribution of assets upon
liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary.
c. NUMBER OF SHARES IN SERIES. The number of shares of Convertible
Preferred Stock created hereby shall be 80,000 shares, out of the
10,000,000 shares of preferred stock authorized by the Articles of
Incorporation. No shares of preferred stock are issued as of the date
hereof.
d. CONSIDERATION FOR ISSUANCE. The Convertible Preferred Stock shall
be issued by the Corporation from time to time, in the discretion of the
Board of Directors. Upon issuance of the shares of Convertible Preferred
Stock and receipt of payment therefor, such shares shall be fully paid and
non-assessable.
e. CONVERSION. The Convertible Preferred Stock shall be convertible
into shares of Common Stock of the Corporation as follows:
(i) RIGHT TO CONVERT. Subject to the conversion limitations set forth
in Sections 2(e)(vi) and 2(l)(vii), each share of Convertible Preferred
Stock shall be automatically convertible into such number of fully paid and
non-assessable shares of Common Stock as is determined by dividing (1) the
sum of (a) the Liquidation Preference (as defined below) thereof plus (b)
at the option of such holder of Convertible Preferred Stock, any amounts
owed to such holder pursuant to Section 2(b) of the Registration Rights
Agreement, dated as of December 30, 1999, by and among the Corporation and
the other signatories thereto (the "Registration Rights Agreement") (the
sum of (a) and (b) being collectively referred to as the "Conversion
Amount"), by (2) the then effective Conversion Price (as defined below).
"Conversion Price" shall initially mean $7.00.
(ii) FRACTIONAL SHARES. No fractional shares of Common Stock shall be
issued upon conversion of the Convertible Preferred Stock. In lieu of
fractional shares, the Corporation shall pay cash equal to such fraction
multiplied by the average closing bid price of the Common Stock on the
Nasdaq National Market (or the average closing price of the Common Stock on
the principal exchange on which the shares of Common Stock are then listed)
for the ten trading days immediately preceding the notice of conversion.
(iii) ADJUSTMENTS TO THE CONVERSION PRICE. The Conversion Price will
be subject to adjustment in the event the Corporation shall do any of the
following after the first date on which shares of Convertible Preferred
Stock are issued (the "Issue Date"): (i) pay a dividend or make a
distribution in shares of its capital stock (whether shares of Common Stock
or of capital stock of any other class), to the holders of its Common
Stock, (ii) subdivide its outstanding shares of Common Stock, (iii) combine
its outstanding shares of Common Stock into a smaller number of shares,
(iv) issue by reclassification of its shares of Common Stock any shares of
capital stock of the Corporation, (v) issue rights or warrants to all
holders of Common Stock entitling them to subscribe for or purchase Common
2
<PAGE>
Stock at a price per share less than the then current market price per
share of Common Stock or less than the Conversion Price then in effect or
(vi) distribute to all holders of Common Stock any other rights or warrants
to subscribe to any of its Common Stock, or any securities, or evidences of
indebtedness or any assets (excluding cash dividends or cash distributions
out of earned surplus). The conversion privilege and the Conversion Price
in effect immediately prior to any such action shall be adjusted so that if
the Convertible Preferred Stock is thereafter surrendered for conversion, a
holder of Convertible Preferred Stock shall be entitled to receive the
number of shares of capital stock of the Corporation or other rights which
he would have been entitled to receive immediately following such action
had the Convertible Preferred Stock been converted immediately prior
thereto. An adjustment so made shall become effective immediately after the
close of business on the record date in the case of a dividend or
distribution and shall become effective immediately after the close of
business on the effective date in the case of a subdivision, combination or
reclassification. If, as a result of such adjustment, a holder of
Convertible Preferred Stock shall become entitled, if the Convertible
Preferred Stock is thereafter surrendered for conversion, to receive shares
of two or more classes of capital stock of the Corporation or other rights,
the Board of Directors, whose determination shall be conclusive, shall
determine the allocation of the adjusted conversion ratio between or among
shares of such classes of capital stock or other rights. Except in the
cases enumerated above, the conversion ratio will not be adjusted for the
issuance of Common Stock.
(iv) No adjustment in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at least $.01 in
such Conversion Price; PROVIDED, HOWEVER, that any adjustments which for
this reason are not required to be made shall be carried forward and taken
into account in any subsequent adjustment.
(v) MERGERS, ETC. In case the Corporation shall be a party to any
transaction (including, without limitation, a merger, consolidation, sale
of all or substantially all of the Corporation's assets or recapitalization
of the Common Stock) (each of the foregoing being referred to as a
"Transaction"), in each case as a result of which shares of Common Stock
shall be converted into the right to receive stock, securities or other
property (including cash or any combination thereof), each share of
Convertible Preferred Stock which is not converted into the right to
receive stock, securities or other property in connection with such
Transaction shall thereafter be convertible into the kind and amount of
shares of stock and other securities and property receivable (including
cash) upon the consummation of such Transaction by a holder of that number
of shares or fraction thereof of Common Stock into which one share of
Convertible Preferred Stock was convertible immediately prior to such
Transaction. The Corporation shall not be a party to any Transaction unless
the terms of such Transaction are consistent with the provisions of this
subsection (e)(v) and it shall not consent or agree to the occurrence of
any Transaction until the Corporation has entered into an agreement with
the successor or purchasing entity, as the case may be, for the benefit of
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<PAGE>
the holders of the Convertible Preferred Stock which will contain
provisions enabling the holders of the Convertible Preferred Stock which
remains outstanding after such Transaction to convert into the
consideration received by holders of Common Stock at the Conversion Price
immediately after such Transaction. The provisions of this subsection
(e)(v) shall similarly apply to successive Transactions.
(vi) MANDATORY CONVERSION. The shares of Convertible Preferred Stock
shall not be convertible into Common Stock except in accordance with the
terms of this Section 2(e)(vi). Each share of Convertible Preferred Stock
shall be automatically converted into Common Stock in accordance with the
terms of this Section 2(e) at such time as (A) the shareholders of the
Corporation have approved (the "Shareholder Approval") the issuance of such
shares of Common Stock issuable upon conversion of the Convertible
Preferred Stock in accordance with the applicable corporate governance
rules of the Nasdaq Stock Market relating to 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; and (B) such shares of Common Stock
are subject to an effective registration statement under the Securities Act
of 1933, as amended.
(vii) MECHANICS OF CONVERSION. Each certificate evidencing any of the
outstanding shares of Convertible Preferred Stock shall, upon such
automatic conversion, be deemed to be a certificate evidencing the number
of shares of Common Stock into which the Convertible Preferred Stock has
been converted. Each share of Convertible Preferred Stock is convertible
pursuant to Section 2(e)(vi) in whole but not in part. Such conversion
shall be deemed to have been effected immediately prior to the close of
business on the date on which the Shareholder Approval has been obtained
and the shares of Common Stock become subject to an effective registration
statement under the Securities Act, whichever date is later. As promptly as
practicable after receipt of a holder's share certificate(s) formerly
representing shares of Convertible Preferred Stock, the Corporation shall
issue and deliver to the holder of the Convertible Preferred Stock a
certificate representing the number of shares of Common Stock into which
the Convertible Preferred Stock was converted.
f. MANDATORY REDEMPTION. In the event (i) the Corporation fails to
obtain the Shareholder Approval, or (ii) the Shareholders Agreement
referred to in Section 2(l)(vii) is not entered into by all of the parties
thereto (excluding Wand Partners Inc.), in either case, on or prior to the
180th day following the issuance date of the Convertible Preferred Stock,
the then outstanding shares of Convertible Preferred Stock shall become
immediately redeemable and the Corporation shall purchase each holder's
outstanding shares of Convertible Preferred Stock for an amount per share
equal to 110% multiplied by (a) the Liquidation Preference of the shares to
be redeemed plus (b) all amounts owed to such holder pursuant to Sections
2(b) and 7(e) of the Registration Rights Agreement.
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<PAGE>
g. LIQUIDATION OR DISSOLUTION. The Convertible Preferred Stock carries
a liquidation preference of $100.00 per share (the "Liquidation
Preference"). In the event of any liquidation, dissolution, winding up,
either voluntary or involuntary, of the Corporation, or any partial
liquidation effected by means of a distribution of assets or return of
capital, the holders of each share of Convertible Preferred Stock shall be
entitled to receive and be paid in cash out of the surplus funds of the
Corporation or out of the assets so distributed, full payment of the
Liquidation Preference of such share before any amount shall be paid to the
holders of any other class of capital stock of the Corporation.
If upon liquidation, the assets of the Corporation available for
distribution to stockholders shall be insufficient to permit the payment in
full of the Liquidation Preference payable hereunder to the holders of
Convertible Preferred Stock and PARI PASSU Securities, then all such assets
shall be distributed ratably among the holders of such shares of
Convertible Preferred Stock and PARI PASSU Securities first in payment of
the Liquidation Preference per share of Convertible Preferred Stock and
PARI PASSU Securities, in proportion to the respective amounts that would
be payable per share if such assets were sufficient to permit such payments
in full.
No distribution shall be made with respect to any class of capital
stock of the Corporation standing junior in preference to the Convertible
Preferred Stock until the distributions required hereunder have been paid
in full to all holders of Convertible Preferred Stock. After the holders of
Convertible Preferred Stock have received the sum per share equal to the
Liquidation Preference of such Convertible Preferred Stock, the holders of
classes of capital stock standing junior in preference shall be entitled to
share in accordance with their respective rights and preferences hereunder
in the distribution of all remaining assets of the Corporation available
for distribution.
h. DIVIDENDS. The Convertible Preferred Stock shall not be entitled to
the payment of dividends or other distributions of the assets of the
Corporation other than distributions of assets upon liquidation,
dissolution or winding up of the Corporation, whether voluntary or
involuntary.
i. VOTING RIGHTS. Other than as set forth in the Certificate of
Designations, each holder of Convertible Preferred Stock shall have no
voting rights (except as otherwise required by law).
j. PROTECTIVE PROVISIONS. (A) So long as shares of Convertible
Preferred Stock are outstanding, the Corporation shall not, without first
obtaining the approval (by vote or written consent, as provided by the
Nevada General Corporation Law) of the holders of at least a majority of
the then outstanding shares of Convertible Preferred Stock voting as a
separate class:
(i) alter, amend or repeal (whether by merger, consolidation or
otherwise) any of the rights, preferences or privileges of the Convertible
Preferred Stock or any capital stock of the Corporation so as to affect
adversely the Convertible Preferred Stock;
5
<PAGE>
(ii) create or issue any new class or series of Senior Securities;
(iii) create or issue any new class or series of Pari Passu
Securities;
(iv) increase the authorized number of shares of Convertible Preferred
Stock;
(v) increase the par value of the Common Stock;
(vi) create any new class or series of preferred stock entitled to the
payment of dividends;
(vii) authorize or approve any liquidation, dissolution, or winding up
of the Corporation or any filing of a voluntary petition in bankruptcy;
(viii) authorize or approve any Transaction;
(ix) pay any dividends or distributions on any capital stock of the
Corporation, other than Senior Securities; or
(x) redeem or repurchase (or make funds available for a sinking fund
for the redemption or repurchase of) any capital stock of the Corporation.
(B) So long as the Convertible Preferred Stock is outstanding, the
holders of the Convertible Preferred Stock shall have the exclusive right,
voting separately as a class, to elect one director for a newly created
directorship of the Corporation, such director to be in addition to the
number of directors constituting the Board of Directors of the Corporation
in the absence of this subsection (ii). Such right may be exercised at any
annual meeting (or special meeting in lieu thereof) of stockholders at
which directors are elected or at a special meeting called as described
below (or in either case by action by written consent). At any time after
the Issue Date, the Corporation may, and upon the written request of the
holders of not less than 25% of the shares of Convertible Preferred Stock
then outstanding shall, within one business day of such written request,
call a special meeting of the holders of Convertible Preferred Stock to
fill such newly created directorship. Such director may be removed at any
time, either with or without cause, by the affirmative vote of the holders
of a majority of the outstanding shares of Convertible Preferred Stock,
voting separately as one class, and such vacancy resulting from such
removal to be filled by the holders of Convertible Preferred Stock, voting
separately as one class.
k. LEGENDS. Each certificate representing shares of Convertible
Preferred Stock shall bear the following legends:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS AND CONDITIONS UNDER THAT CERTAIN CERTIFICATE OF
DESIGNATIONS, PREFERENCES AND RIGHTS OF SERIES B JUNIOR CONVERTIBLE
6
<PAGE>
PREFERRED STOCK OF SKYMALL, INC., AS FILED WITH THE SECRETARY OF STATE
OF NEVADA.
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND THEY MAY NOT BE OFFERED,
SOLD, PLEDGED, HYPOTHECATED, ASSIGNED OR TRANSFERRED EXCEPT (I)
PURSUANT A REGISTRATION STATEMENT THAT HAS BECOME EFFECTIVE AND IS
CURRENT WITH RESPECT TO THESE SECURITIES OR (II) PURSUANT TO A
SPECIFIC EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, BUT
ONLY UPON A HOLDER HEREOF FIRST HAVING OBTAINED THE WRITTEN OPINION OF
COUNSEL REASONABLY ACCEPTABLE TO THE ISSUER THAT THE PROPOSED
DISPOSITION IS CONSISTENT WITH ALL APPLICABLE PROVISIONS OF THE
SECURITIES ACT AS WELL AS ANY APPLICABLE "BLUE SKY" OR SIMILAR
SECURITIES LAW.
l. COVENANTS AS TO CONVERTIBLE PREFERRED STOCK AND COMMON STOCK. The
Company hereby covenants and agrees as follows:
(i) The Convertible Preferred Stock is, and any securities issued in
substitution for or replacement of the Convertible Preferred Stock will
upon issuance be, duly authorized and validly issued.
(ii) All shares of Common Stock which may be issued upon the
conversion of the Convertible Preferred Stock will, upon issuance, be
validly issued, fully paid and nonassessable and free from all taxes, liens
and charges with respect to the issuance thereof.
(iii) During the period within which the securities represented by
this Certificate of Designations may be converted, the Corporation will at
all times have authorized and reserved at least 100% of the number of
shares of Common Stock needed to provide for the conversion of the
Convertible Preferred Stock.
(iv) The Corporation shall secure the listing of the shares of Common
Stock issuable upon conversion of the Convertible Preferred Stock 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
conversion of the Convertible Preferred Stock; and the Corporation 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
7
<PAGE>
other shares of capital stock of the Corporation issuable upon conversion
of the Convertible Preferred Stock if and so long as any shares of the same
class shall be listed on such national securities exchange or automated
quotation system.
(v) The Corporation 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 Certificate of Designations.
(vi) This Certificate of Designations will be binding upon any entity
succeeding to the Corporation by merger, consolidation or acquisition of
all or substantially all of the Corporation's assets and any such
successive mergers, consolidations or acquisitions.
(vii) Notwithstanding anything in this Certificate of Designations to
the contrary, the Convertible Preferred Stock shall not be convertible into
shares of Common Stock until such time as the Corporation and the
shareholders listed on Schedule II to the Stock and Warrant Purchase
Agreement, dated as of December 30, 1999, relating to the issuance of the
Convertible Preferred Stock have entered into a Shareholders Agreement in
form and substance reasonably acceptable to Wand Partners Inc.
3. DATE OF RESOLUTION. The foregoing Resolution of the Board of Directors
of SkyMall, Inc. was adopted by the Board of Directors on the 30 day of
December, 1999.
8
<PAGE>
I, THE UNDERSIGNED, being the Executive Vice President and Secretary of the
Corporation, for the purpose of establishing a series of the preferred stock of
the Corporation and setting forth the designations, rights, preferences and
limitations thereof pursuant to the requirements of Title 7, Chapter 78, Section
78.195 of the Nevada Revised Statutes, do make this certificate, hereby
declaring and certifying that this is my act and deed and that the facts herein
stated are true, and accordingly have hereunto set my hand as of this 30 day of
December, 1999.
/s/ Christine A. Aguilera
----------------------------------
Christine A. Aguilera, Executive
Vice President & Secretary
STATE OF ARIZONA )
)ss.
COUNTY OF MARICOPA )
On this 30th day of December, 1999, before me, a Notary Public, personally
appeared Christine A. Aguilera who has acknowledged that he executed the above
instrument.
/s/
-----------------------------------
Notary Public
My Commission Expires:
- ---------------------
6
EXHIBIT 4.2
FORM OF SERIES B JUNIOR CONVERTIBLE PREFERRED STOCK CERTIFICATE
Stock Certificate with a Certificate No., the number of shares and with the
following text:
INCORPORATED UNDER THE LAWS OF THE STATE OF NEVADA
Series B Junior Convertible Preferred Stock
par value $.001 per share
SKYMALL, INC.
THIS CERTIFIES THAT ________________ is the owner of ________ fully paid and
non-assessable Shares of the above Corporation transferable only on the books of
the Corporation by the holder hereof in person or by duly authorized Attorney
upon surrender of this Certificate properly endorsed.
IN WITNESS WHEREOF, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and to be sealed with the Seal of the
Corporation.
Dated: ______________________
_____________________________ _______________________________
Secretary President
Corporate Seal
<PAGE>
Back of Certificate: Legends:
A statement of the rights, preferences, privileges and restrictions granted or
imposed upon the respective classes or series of shares and upon the holders
thereof as established, from time to time, by the Articles of Incorporation of
the Corporation and by the Certificate of Designations, the number of shares
constituting each class and series and the designations thereof, may be obtained
by the holder hereof upon written request and without charge from the Secretary
of the Corporation at its principal executive offices.
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND THEY MAY NOT BE OFFERED, SOLD, PLEDGED,
HYPOTHECATED, ASSIGNED OR TRANSFERRED EXCEPT (I) PURSUANT TO A REGISTRATION
STATEMENT UNDER THE SECURITIES ACT WHICH HAS BECOME EFFECTIVE AND IS CURRENT
WITH RESPECT TO THESE SECURITIES OR (II) PURSUANT TO A SPECIFIC EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT, BUT ONLY UPON HOLDER HEREOF FIRST HAVING
OBTAINED THE WRITTEN OPINION OF COUNSEL OF THE ISSUER, OR OTHER COUNSEL
REASONABLY ACCEPTABLE TO THE ISSUER, THAT THE PROPOSED DISPOSITION IS CONSISTENT
WITH ALL APPLICABLE PROVISIONS OF THE SECURITIES ACT AS WELL AS ANY APPLICABLE
"BLUE SKY" OR SIMILAR SECURITIES LAWS.
Various abbreviations and the language:
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations. Additional abbreviations may also
be used though not in the list.
<TABLE>
<S> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT - ________ Custodian _________ (Minor)
TEN ENT -- as tenants by the entireties under Uniform Gifts to Minors Act ____________ (State)
JT TEN -- as joint tenants with right of
survivorship and not as tenants in
common
</TABLE>
For value received, the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
--------------------------------------
| |
| |
- --------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
_________________________________________________________________________ Shares
represented by the within Certificate, and do hereby irrevocably constitutes and
appoints __________________________________ Attorney to transfer the shares on
the books of the within-named Corporation with full power of substitution in the
premises.
Dated _____________________
_________________________________________
_________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME(S) AS
WRITTEN UPON THE FACE OF THE CERTIFICATE
IN EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.
In presence of
__________________________________
Exhibit 4.3
FORM OF WARRANT
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND THEY MAY NOT BE OFFERED, SOLD, PLEDGED,
HYPOTHECATED, ASSIGNED OR TRANSFERRED EXCEPT (I) PURSUANT TO A REGISTRATION
STATEMENT UNDER THE SECURITIES ACT WHICH HAS BECOME EFFECTIVE AND IS CURRENT
WITH RESPECT TO THESE SECURITIES OR (II) PURSUANT TO A SPECIFIC EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT, BUT ONLY UPON A HOLDER HEREOF FIRST
HAVING OBTAINED THE WRITTEN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE
ISSUER THAT THE PROPOSED DISPOSITION IS CONSISTENT WITH ALL APPLICABLE
PROVISIONS OF THE SECURITIES ACT, AS WELL AS ANY APPLICABLE "BLUE SKY" OR
SIMILAR SECURITIES LAW.
SKYMALL, INC.
WARRANT TO PURCHASE COMMON STOCK
Warrant No.: Number of Shares:
Date of Issuance: December 30, 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) [ ] 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 December 30, 1999, among the Company and the Investors (as
such term in defined therein) (the "Agreement").
(b) DEFINITIONS. The following words and terms as used in this Warrant
shall have the following meanings:
<PAGE>
(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 "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.
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<PAGE>
(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 is not a Business Day or falls on a day 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 $8.00.
(xiii) 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 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.
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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
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
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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, at its sole cost and expense, 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)
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 or the Company has
provided notice of its election to redeem all or a part of this Warrant pursuant
to Section 4 hereof, then notwithstanding anything contained herein to the
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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.
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
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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 (or
the portion hereof being exercised at such time), 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
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 (on an as converted basis in the case of the
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issuance of stock or securities convertible or exchangeable for such Common
Stock or such other stock or securities); 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
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
one hundred fifty percent (150%) of the Warrant Exercise Price (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
pursuant to the terms of that certain Registration Rights Agreement of even date
herewith, 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
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<PAGE>
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; PROVIDED, FURTHER, that the effective date of the redemption
shall be no less than 10 Business Days from the date of such subsequent notice.
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).
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.
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(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.
(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
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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.
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 Registration Rights Agreement, dated as
of December 30, 1999, by and among the Company and the Investors (as defined
therein) (the "Registration Rights 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 Registration Rights 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
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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
With copy to:
Squire, Sanders & Dempsey L.L.P.
Two Renaissance Square
40 North Central Avenue, Suite 2700
Phoenix, Arizona 85004
Telephone: 602-528-4000
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 December 30, 1999. This Warrant, in
all events, shall be wholly void and of no effect after 11:59 P.M. Eastern Time
on the Expiration Date, except to the extent previous exercised and 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
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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, other than as provided in Section 3, no such action may increase the
Warrant Exercise Price of the Warrants, decrease the number of shares or alter
the 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 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 (i)
hereby irrevocably submits to the exclusive jurisdiction of the United States
District Court, the New York State courts and other courts of the United States
sitting in New York County, New York for the purposes of any suit, action or
proceeding arising out of or relating to this Agreement and (ii) hereby waives,
and agrees not to assert in any such suit, action or proceeding, any claim that
it is not personally subject to the jurisdiction of such court, that the suit,
action or proceeding is brought in an inconvenient forum or that the venue of
the suit, action or proceeding is improper. Each of the parties hereto consents
to process being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address in effect for notices to it under this
Warrant and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing in his paragraph shall affect or
limit any right to serve process in any other manner permitted by law.
[Signature Page Follows]
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SKYMALL, INC.
By: ____________________________________
Name: __________________________________
Title: ________________________________
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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
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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 4.4
FORM OF WARRANT
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND THEY MAY NOT BE OFFERED, SOLD, PLEDGED,
HYPOTHECATED, ASSIGNED OR TRANSFERRED EXCEPT (I) PURSUANT TO A REGISTRATION
STATEMENT UNDER THE SECURITIES ACT WHICH HAS BECOME EFFECTIVE AND IS CURRENT
WITH RESPECT TO THESE SECURITIES OR (II) PURSUANT TO A SPECIFIC EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT, BUT ONLY UPON A HOLDER HEREOF FIRST
HAVING OBTAINED THE WRITTEN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE
ISSUER THAT THE PROPOSED DISPOSITION IS CONSISTENT WITH ALL APPLICABLE
PROVISIONS OF THE SECURITIES ACT, AS WELL AS ANY APPLICABLE "BLUE SKY" OR
SIMILAR SECURITIES LAW.
SKYMALL, INC.
WARRANT TO PURCHASE COMMON STOCK
Warrant No.: Number of Shares: 250,000
Date of Issuance: December 30, 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, Wand Partners, Inc., 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) 250,000 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 December 30, 1999, among the Company and the Investors (as
such term in defined therein) (the "Agreement").
(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.
<PAGE>
(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 "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.
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<PAGE>
(v) "Expiration Date" means the date five (5) years from the date of
this Warrant or, if such date is not a Business Day or falls on a day 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 $8.00.
(xiii) 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 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
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<PAGE>
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
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, at its sole cost and expense, shall cause the
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<PAGE>
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)
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) The holder of this Warrant may, at its election exercised in its sole
discretion at any time (including, without limitation, after receipt from the
Company of the Company's intent to exercise its rights pursuant to Section 4
hereof), 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"):
5
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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.
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 (or
the portion hereof being exercised at such time), 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)
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<PAGE>
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
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 (on an as converted basis in the case of the
issuance of stock or securities convertible or exchangeable for such Common
Stock or such other stock or securities); 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
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(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
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
one hundred fifty percent (150%) of the Warrant Exercise Price (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
pursuant to the terms of that certain Registration Rights Agreement of even date
herewith, 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
8
<PAGE>
the case may be; PROVIDED, FURTHER, that the effective date of the redemption
shall be no less than 10 Business Days from the date of such subsequent notice.
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).
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
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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.
(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
10
<PAGE>
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.
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 Registration Rights Agreement, dated as
of December 30, 1999, by and among the Company and the Investors (as defined
therein) (the "Registration Rights 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 Registration Rights 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:
11
<PAGE>
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
With copy to:
Squire, Sanders & Dempsey L.L.P.
Two Renaissance Square
40 North Central Avenue, Suite 2700
Phoenix, Arizona 85004
Telephone: 602-528-4000
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 December 30, 1999. This Warrant, in
all events, shall be wholly void and of no effect after 11:59 P.M. Eastern Time
on the Expiration Date, except to the extent previous exercised and 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, other than as provided in Section 3, no such action may increase the
Warrant Exercise Price of the Warrants, decrease the number of shares or alter
12
<PAGE>
the 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 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 (i)
hereby irrevocably submits to the exclusive jurisdiction of the United States
District Court, the New York State courts and other courts of the United States
sitting in New York County, New York for the purposes of any suit, action or
proceeding arising out of or relating to this Agreement and (ii) hereby waives,
and agrees not to assert in any such suit, action or proceeding, any claim that
it is not personally subject to the jurisdiction of such court, that the suit,
action or proceeding is brought in an inconvenient forum or that the venue of
the suit, action or proceeding is improper. Each of the parties hereto consents
to process being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address in effect for notices to it under this
Warrant and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing in his paragraph shall affect or
limit any right to serve process in any other manner permitted by law.
[Signature Page Follows]
13
<PAGE>
SKYMALL, INC.
By: ____________________________________
Name: __________________________________
Title: ________________________________
14
<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 4.5
- --------------------------------------------------------------------------------
SKYMALL, INC.
AND
________________________
PLACEMENT AGENT'S
WARRANT AGREEMENT
DATED AS OF _________, 1999
- --------------------------------------------------------------------------------
PLACEMENT AGENT'S WARRANT AGREEMENT dated as of _________, 1999 between
SKYMALL, INC., a Nevada corporation (the "Company"), and
_________________________ (hereinafter referred to variously as the "Holder",
"_________" or the "Placement Agent").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue to _______________ or its designees
warrants ("Warrants") to purchase up to an aggregate _________ shares of common
stock of the Company ("Common Stock"); and
WHEREAS, _______________ has agreed pursuant to a Placement Agent agreement
(the "Placement Agent's Agreement") dated ____________, 1999 and amended
________, 1999 between _______________ (the "Placement Agent"), and the Company
to act as Placement Agent to the Company; and
WHEREAS, the Company proposes to issue to _______________ (and/or
designees) the Warrants in connection with payment for Placement Agent's
services;
NOW, THEREFORE, in consideration of the premises, the payment by
___________ to the Company of an aggregate of _______________ ($____), the
agreements herein set forth and other good and valuable consideration, hereby
acknowledged, the parties hereto agree as follows:
<PAGE>
1. GRANT. __________ is hereby granted the right to purchase, at any time
from __________, 1999, until 5:30 P.M., New York time, on __________, 2004, up
to an aggregate of _____________ shares of Common Stock (the "Shares") at an
initial exercise price (subject to adjustment as provided in SECTION 8 hereof)
of $7.00 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
2
<PAGE>
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
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, except to officers or employees of the Holder.
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 $7.00 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.
Any transfer of a Warrant shall constitute an automatic transfer and assignment
of the registration rights set forth in SECTION 7 hereof with regard to the
Common Stock, properties or rights underlying the Warrants.
6.2 EXERCISE PRICE. The term "Exercise Price" herein shall mean
the initial exercise price or the adjusted exercise price, depending upon the
context.
3
<PAGE>
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
notice by registered mail, at least thirty (30) days prior to the filing of each
such registration statement, to ____________ and to all other Holder(s) of the
Warrants and/or the Warrant Securities of its intention to do so. If
_______________ 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 ____________ 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
_______________ 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.
4
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(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
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
5
<PAGE>
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 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
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<PAGE>
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 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 ___________. 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.
7
<PAGE>
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
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;
8
<PAGE>
(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
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
9
<PAGE>
(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
(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 ___________, to __________________________________________,
Attention: ___________________.
14. SUPPLEMENTS AND AMENDMENTS. The Company and _______________ may
from time to time supplement or amend this Agreement without the approval of any
holder of Warrant Certificates (other than ___________) 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 ___________ may deem necessary or desirable and which the Company and
___________ 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.
10
<PAGE>
16. TERMINATION. This Agreement shall terminate at the close of
business on November 4, 2006. Notwithstanding the foregoing, the indemnification
provisions of SECTION 7 shall survive such termination until the close of
business on November 4, 2012.
17. GOVERNING LAW; SUBMISSION TO JURISDICTION. This Agreement and
each Warrant Certificate issued hereunder shall be deemed to be a contract made
under 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, ___________ 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, _______________ 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, ___________ 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, _______________ 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
____________ 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
___________ 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.
11
<PAGE>
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: _____________________________________
Name: ___________________________________
Title: __________________________________
Attest:
____________________________________
Secretary
_________________________________________
By: _____________________________________
Name: ___________________________________
Title: __________________________________
12
<PAGE>
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, ___________, 2004
No. W-_________ Warrants to Purchase
______ Shares of Common Stock
WARRANT CERTIFICATE
This Warrant Certificate certifies that , or registered assigns, is the
registered holder of ______ Warrants to purchase initially, at any time from
__________, 1999 until 5:30 p.m. New York time on __________, 2004 ("Expiration
Date"), up to (______) __________________________________________ 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 $7.00 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 __________, 1999 between the Company, and _____________
(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 or by surrender of this Warrant Certificate in connection
with an election to purchase pursuant to Section 3.2.
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.
A-1
<PAGE>
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
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.
A-2
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed under its corporate seal.
Dated as of ___________, 1999
SKYMALL, INC.
[SEAL]
By: _____________________________________
Name: ___________________________________
Title: __________________________________
Attest:
____________________________________
Secretary
A-3
<PAGE>
[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
Placement Agent's Warrant Agreement dated as of ___________, 1999 between
SkyMall, Inc. and ______________________. 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 ____________, 1999 between Skymall, Inc. and
_______________ 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
January 12, 2000
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 1,998,572
shares of the Company's common stock, par value $.001 per share (the "Common
Stock"), including 80,000 shares of Series B Junior Convertible Preferred Stock,
par value $.001 per share (the "Series B Preferred"), convertible into 1,142,857
shares of Common Stock and 855,715 Warrants (the "Warrants") exercisable to
purchase 855,715 shares of Common Stock, 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 upon conversion of
the Series A Preferred and receipt by the Company of the consideration provided
for upon exercise of the Warrants, the 1,998,572 shares of Common Stock, when
issued in compliance with the Series B Preferred and 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 January 12, 2000
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 10.1
STOCK AND WARRANT PURCHASE AGREEMENT
STOCK AND WARRANT PURCHASE AGREEMENT ("Agreement") dated as of December 30,
1999, between SkyMall, Inc., a Nevada corporation (the "Company"), and each
person or entity who executes a counterpart signature page to this Agreement and
is listed as an investor on SCHEDULE I attached to this Agreement (each
individually an "Investor" and collectively the "Investors").
W I T N E S S E T H:
WHEREAS, the Company desires to sell and issue to the Investors listed on
SCHEDULE I, and the Investors listed on SCHEDULE I desire to purchase from the
Company, up to an aggregate of 80,000 shares of Series B Junior Convertible
Preferred Stock, par value $.001 per share (the "Preferred Stock"), having the
rights, designations and preferences set forth in the Certificate of Designation
of the Company (the "Designations") in the identical form and substance of
EXHIBIT A attached hereto on the terms and conditions set forth herein; and
WHEREAS, each Investor listed on SCHEDULE I will also receive five-year
warrants (the "Purchase Warrants"), in substantially the form and substance of
EXHIBIT B1 attached hereto, to purchase that number of shares of common stock,
par value $.001 per share ("Common Stock"), equal to the product of fifty
percent (50%) multiplied by the number of shares of Common Stock issuable upon
conversion of the Preferred Stock (as of the Closing Date) purchased by such
Investor at a per share exercise price equal to the closing bid price of the
Common Stock on the Nasdaq National Market as of the Closing Date;
WHEREAS, the Company has agreed to issue to Wand Partners Inc. ("Wand
Partners") a Warrant (the "Fee Warrant" and, together with the Purchase
Warrants, the "Warrants"), in substantially the form and substance of EXHIBIT B2
attached hereto, to purchase an aggregate of 250,000 shares of Common Stock as
an advisory fee in connection with the transactions contemplated by this
Agreement; and
WHEREAS, pursuant to the terms of the Registration Rights Agreement, dated
as of the date hereof (the "Registration Rights Agreement"), the Company has
granted the Investors registration rights with respect to the shares of Common
Stock issuable upon conversion of the Preferred Stock (the "Common Shares")
purchased hereunder and the shares of Common Stock issuable upon exercise of the
Warrants (the "Warrant Shares") pursuant to the terms thereof;
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
CERTAIN DEFINITIONS. As used in this Agreement, the following terms shall
have the following respective meanings:
"Closing" and "Closing Date" shall have the meanings ascribed to such terms
in Section 1.3 herein.
<PAGE>
"Commission" shall mean the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Holder" and "Holders" shall include an Investor or Investors,
respectively, and any transferee of the shares of Preferred Stock, the Common
Shares, the Warrants or the Warrant Shares or Registrable Securities (as defined
in the Registration Rights Agreement) which have not been sold to the public to
whom the registration rights conferred by the Registration Rights Agreement have
been transferred in compliance thereof.
"Regulation D" shall mean Regulation D as promulgated pursuant to the
Securities Act, and as subsequently amended.
"Securities" shall mean the shares of Preferred Stock, the Common Shares,
the Warrants and the Warrant Shares, collectively.
"Securities Act" or "Act" shall mean the Securities Act of 1933, as
amended.
ARTICLE I
PURCHASE AND SALE OF THE STOCK AND WARRANTS
Section 1.1 PURCHASE AND SALE. Upon the following terms and conditions, the
Company shall issue and sell to each Investor listed on SCHEDULE I severally,
and each Investor listed on SCHEDULE I severally shall purchase from the
Company, the number of shares of Preferred Stock and the number of Warrants
indicated next to such Investor's name on SCHEDULE I attached hereto.
Section 1.2 PURCHASE PRICE. The per share purchase price for the shares of
Preferred Stock shall be $100.00 per share (the "Preferred Stock Purchase
Price"). Each Investor listed on SCHEDULE I will also receive Warrants to
purchase such number of shares of Common Stock equal to the product of fifty
percent (50%) multiplied by the number of shares of Common Stock issuable upon
conversion of the Preferred Stock as of the Closing Date.
Section 1.3 THE CLOSING. (a) The closing of the purchase and sale of the
Preferred Stock and Warrants (the "Closing"), shall take place by facsimile
transmission of signature pages to each of the documents contemplated by this
Agreement, following acceptance by the Company of subscriptions for shares of
Preferred Stock, which acceptance shall not occur until the conditions set forth
in Article V hereof shall be fulfilled or waived in accordance herewith. The
date on which the Closing occurs is referred to herein as the "Closing Date."
(b) On the Closing Date, the Company shall deliver to each Investor
certificates (with the number of and denomination of such certificates
reasonably requested by such Investor) representing the Warrants and the
Preferred Stock purchased hereunder by such Investor registered in the name of
such Investor or its nominee or deposit such Warrants and Preferred Stock into
accounts designated by such Investor, and such Investor shall deliver to the
Company the purchase price for the Warrants and Preferred Stock purchased by
2
<PAGE>
such Investor hereunder by wire transfer in immediately available funds ($80,000
of such payment to be withheld by mutual agreement of the parties hereto in
accordance with the expense reimbursement requirements of Section 7.17 hereof)
to an account designated in writing not less than two (2) business days prior to
the Closing Date by the Company. In addition, each party shall deliver all
documents, instruments and writings required to be delivered by such party
pursuant to this Agreement at or prior to the Closing Date.
(c) On the Closing Date, the Company shall enter into a Registration Rights
Agreement with each Investor in the Form of EXHIBIT C attached hereto.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby makes the following representations and warranties to each of the
Investors from and as of the date hereof through the Closing Date:
(a) ORGANIZATION AND QUALIFICATION; MATERIAL ADVERSE EFFECT. The Company
owns 100% of the outstanding capital stock of each of Durham & Company, a Utah
corporation, Disc Publishing Inc., a Utah corporation, and skymall.com, inc., a
Nevada corporation (collectively, the "Subsidiaries"), in each case free and
clear of all liens, pledges, charges, claims, security interests or other
encumbrances. Other than the Subsidiaries, there are no other corporations or
other entities (including partnerships, limited liability companies and joint
ventures) in which the Company directly or indirectly owns at least a majority
of the voting power represented by the outstanding capital stock or other voting
securities or interests having voting power under ordinary circumstances to
elect a majority of the directors or similar members of the governing body, or
otherwise to direct the management and policies, of such corporation or entity.
Each of the Company and its Subsidiaries is a corporation duly incorporated and
validly existing and in good standing under the laws of its respective
jurisdiction of incorporation and the Company and the Subsidiaries each have the
requisite corporate power to own its properties and to carry on its business as
now being conducted. Each of the Company and each Subsidiary is duly qualified
as a foreign corporation to do business and is in good standing in every
jurisdiction in which the nature of the business conducted or property owned by
it makes such qualification necessary other than those in which the failure so
to qualify would not, individually or in the aggregate, have a Material Adverse
Effect. "Material Adverse Effect" means any adverse effect on the business,
operations, properties, prospects, or financial condition of the entity with
respect to which such term is used and which is material to such entity and
other entities controlling or controlled by such entity, taken as a whole, and
any material adverse effect on the transactions contemplated under the Agreement
or any other agreement or document contemplated hereby.
(b) AUTHORIZATION; ENFORCEMENT. (i) The Company has the requisite corporate
power and authority to enter into and perform this Agreement and the
Registration Rights Agreement and to issue the Securities in accordance with the
terms hereof, the terms of the Designations and the terms of the Warrants, (ii)
the execution and delivery of this Agreement and the Registration Rights
Agreement by the Company and the consummation by it of the transactions
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contemplated hereby and thereby, including the issuance of the Preferred Stock
and the Warrants in accordance with the terms of this Agreement, the Common
Shares in accordance with the terms of the Designations and the Warrant Shares
in accordance with the terms of the Warrants, have been duly authorized by all
necessary corporate action, and no further consent or authorization of the
Company or its Board of Directors or stockholders is required, except for the
consent of the holders of the Series A Preferred Stock (as defined below) (which
consent is attached hereto as EXHIBIT D), (iii) each of this Agreement and the
Registration Rights Agreement has been duly executed and delivered by the
Company, and (iv) each of this Agreement and the Registration Rights Agreement
constitutes the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms.
(c) CAPITALIZATION. The authorized capital stock of the Company consists of
50,000,000 shares of Common Stock and 10,000,000 shares of preferred stock;
without giving effect to this offering, as of December 27, 1999, there are
10,533,997 shares of Common Stock and 91,320 shares of Series A Junior
Convertible Preferred Stock (the "Series A Preferred Stock") issued and
outstanding, respectively. All of the outstanding shares of the Common Stock and
Series A Preferred Stock have been validly issued and are fully paid and
non-assessable. Except as set forth on SCHEDULE 2.1(C), no shares of Common
Stock or preferred stock are entitled to preemptive rights or registration
rights; and without giving effect to this offering, as of December 27, 1999,
there are outstanding options for 1,007,838 shares of Common Stock and
outstanding warrants for 1,643,031 shares of Common Stock, in each case at the
exercise prices set forth on Schedule 2.1(c). Except as disclosed in the prior
sentence and as contemplated by this Agreement, and the Preferred Stock Purchase
Rights issued pursuant to the Rights Agreement, dated as of September 15, 1999,
between the Company and Continental Stock Transfer & Trust Company, as Rights
Agent, there are no other scrip, rights to subscribe for, calls or commitments
of any character whatsoever relating to, or securities or rights exchangeable or
convertible into, any shares of capital stock of the Company or any of the
Subsidiaries, or contracts, commitments, understandings or arrangements by which
the Company or any of the Subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of the Subsidiaries or
options, warrants, scrip, rights to subscribe for, or commitments to purchase or
acquire, any shares, or securities or rights convertible into shares, of capital
stock of the Company or any of the Subsidiaries. Except for the shares of Series
A Junior Convertible Preferred Stock to be issued to Rose Glen Capital Group,
Inc. (or its designated affiliate), the Company represents and warrants that,
other than as contemplated by this Agreement, it has no current plan or
intention to sell or otherwise issue any shares of Common Stock or securities
convertible into or exercisable for shares of Common Stock.
(d) ISSUANCE OF PREFERRED STOCK, COMMON SHARES AND WARRANT SHARES. The
Preferred Stock, Common Shares and the Warrant Shares are duly authorized and
the Common Shares and the Warrant Shares will be, as of the Closing Date,
reserved for issuance and, upon conversion or exercise in accordance with terms
of the Designations or Warrants, as the case may be, the Common Shares and
Warrant Shares will be validly issued, fully paid and non-assessable, free and
clear of any and all liens, claims and encumbrances, and the holders of such
Common Shares and Warrant Shares shall be entitled to all rights and preferences
accorded to a holder of Common Stock. The outstanding shares of Common Stock are
currently listed on the Nasdaq National Market ("Nasdaq").
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(e) NO CONFLICTS. The execution, delivery and performance of this Agreement
and the Registration Rights Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby do not and will not
(i) result in a violation of the charter or Bylaws of the Company or any
Subsidiary or (ii) conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture, patent, patent license or instrument to which the
Company or any Subsidiary is a party, or result in a violation of any Federal,
state, local or foreign law, rule, regulation, order, judgment or decree
(including Federal and state securities laws and regulations) applicable to the
Company or any Subsidiary or by which any property or asset of the Company or
any Subsidiary is bound or affected (except for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse Effect); provided
that, for purposes of such representation as to Federal, state, local or foreign
law, rule or regulation, no representation is made herein with respect to any of
the same applicable solely to the Investors and not to the Company or any
Subsidiary. Neither the business of the Company nor of any Subsidiary has been
or is being conducted in violation of any law, ordinance or regulation of any
governmental entity, except for violations which either singly or in the
aggregate do not and will not have a Material Adverse Effect. The Company is not
required under Federal, state, local or foreign law, rule or regulation to
obtain any consent, authorization or order of, or to make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under this Agreement, the Registration
Rights Agreement, the Designations or the Warrants or issue and sell the
Preferred Stock or the Warrants in accordance with the terms hereof, the Common
Shares issuable upon conversion of the Preferred Stock or the Warrant Shares
issuable upon exercise of the Warrants, except for the registration provisions
provided for in the Registration Rights Agreement, provided that, for purposes
of the representation made in this sentence, the Company is assuming and relying
upon the accuracy of the relevant representations and agreements of the
Investors herein.
(f) SEC DOCUMENTS; FINANCIAL STATEMENTS. The Common Stock of the Company is
registered pursuant to Section 12(g) of the Exchange Act and the Company has
timely filed all reports, schedules, forms, statements and other documents
required to be filed by it with the Commission pursuant to the reporting
requirements of the Exchange Act, including material filed pursuant to Section
13(a) or 15(d), in addition to one or more registration statements and
amendments thereto heretofore filed by the Company with the Commission (all of
the foregoing including filings incorporated by reference therein being referred
to herein as the "SEC Documents"). The Company has delivered or made available
to the Investors true and complete copies of all SEC Documents (including,
without limitation, proxy information and solicitation materials and
registration statements) filed with the Commission since September 30, 1998. As
of their respective dates, the SEC Documents (as amended by any amendments filed
prior to the date of this Agreement) complied or will comply in all material
respects with the requirements of the Securities Act or the Exchange Act, as
applicable, and the rules and regulations of the Commission promulgated
thereunder and other Federal, state and local laws, rules and regulations
applicable to such SEC Documents, and none of the SEC Documents contained or
will contain any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Company included in the SEC
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Documents comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the Commission or other
applicable rules and regulations with respect thereto. Such financial statements
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto or (ii) in
the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). The transactions contemplated by this Agreement will not and, to
the Company's knowledge, no event or circumstance has occurred or exists with
respect to the Company or any Subsidiary which would, require a change in the
Company's method of accounting for the acquisition by the Company of Disc
Publishing Inc.
(g) PRINCIPAL EXCHANGE/MARKET. The principal market on which the Common
Stock is currently traded is Nasdaq.
(h) NO MATERIAL ADVERSE CHANGE. Since September 30, 1999, the date through
which the most recent quarterly report of the Company on Form 10-Q has been
prepared and filed with the Commission, a copy of which is included in the SEC
Documents, no event which, individually or in the aggregate, when considered
with any other event, had or is likely to have a Material Adverse Effect has
occurred or exists with respect to the Company or any Subsidiary, except as
otherwise disclosed or reflected in press releases or other SEC Documents
prepared through or as of a date subsequent to September 30, 1999, and provided
to the Investors prior to the date hereof.
(i) NO UNDISCLOSED LIABILITIES. Neither the Company nor any Subsidiary has
any liabilities or obligations not disclosed in the SEC Documents, other than
those liabilities incurred in the ordinary course of its respective business
since September 30, 1999, or liabilities or obligations, individually or in the
aggregate, which do not or would not have a Material Adverse Effect on the
Company or the Subsidiaries, taken as a whole.
(k) NO GENERAL SOLICITATION. None of the Company, the Subsidiaries or, to
the Company's knowledge, any of their respective affiliates or any person acting
on its or their behalf has engaged in any form of general solicitation or
general advertising (within the meaning of Regulation D) in connection with the
offer or sale of the Securities.
(l) NO INTEGRATED OFFERING. None of the Company, the Subsidiaries, or, to
the Company's knowledge, any of their respective affiliates, or any person
acting on its or their behalf has, directly or indirectly, made any offers or
sales of any security or solicited any offers to buy any security, under
circumstances that would require registration of any of the Securities.
(m) INTELLECTUAL PROPERTY. Each of the Company and the Subsidiaries owns,
or has legal and valid rights by license, lease, or other agreement to use, all
trademarks, trade names, service marks, Internet domain names, logos, assumed
names, copyrights, patents, trade secrets, software, databases and names,
likenesses and other information concerning real persons, and all registrations
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and applications therefor (collectively, the "Intellectual Property Rights")
which are used or are needed to conduct its respective business as it is now
being conducted or as proposed to be conducted as disclosed in the SEC
Documents. The Company has no reason to believe that the Intellectual Property
Rights owned or used by the Company or any of its Subsidiaries are invalid or
unenforceable or that the use of such Intellectual Property Rights by the
Company or the Subsidiaries infringes upon or conflicts with any right of any
third party, and neither the Company nor any Subsidiary has any knowledge of a
basis for such claim or has received notice of any such infringement or
conflict. The Company has no knowledge of any infringement or other violation of
the Company's or any Subsidiary's Intellectual Property Rights by any third
party. All registrations and applications for material Intellectual Property
Rights owned by the Company or its Subsidiaries are valid and subsisting, and
standing in the record ownership of the Company or its Subsidiaries. There are
no settlements, consents, agreements to forebear or other similar agreements or
arrangements to which the Company or any of its Subsidiaries is bound which
materially affects its rights to own, use or enforce any Intellectual Property
Rights.
(n) NO LITIGATION. Except as set forth in the SEC Documents delivered to
the Investors and in SCHEDULE 2.1(N), no litigation or claim (including those
for unpaid taxes) against the Company or any Subsidiary is pending or, to the
Company's knowledge, threatened, and no other event has occurred, which if
determined adversely would have a Material Adverse Effect on the Company or any
Subsidiary, taken as a whole, or would materially adversely effect the
transactions contemplated hereby. The legal proceedings described in the SEC
Documents will not have an effect on the transactions contemplated hereby, and
will not have a Material Adverse Effect on the Company or the Subsidiaries,
taken as a whole.
(o) BROKERS. The Company has taken no action which would give rise to any
claim by any person, other than Ryan, Beck & Co., Inc., for brokerage
commissions, finder's fees or similar payments by the Company relating to this
Agreement, the Registration Rights Agreement or the transactions contemplated
hereby or thereby. The fee to be paid to Ryan, Beck & Co., Inc. consists of
$240,000 and a warrant to purchase 34,285 shares of Common Stock. The Company
has taken no action which would give rise to any claim by any person for
brokerage commissions, finder's fees or similar payments by any Investor
relating to this Agreement, the Registration Rights Agreement or the
transactions contemplated hereby or thereby.
(p) FORMS S-3. The Company is eligible to file a Registration Statement on
Form S-3 under the Act and the rules promulgated thereunder, and Form S-3 is
permitted to be used for the transactions contemplated hereby and by the
Registration Rights Agreement under the Act and the rules promulgated
thereunder.
(q) YEAR 2000 COMPLIANCE. To the Company's knowledge, each system which
includes software, hardware, databases or embedded control systems
(microcompressor controlled, robotic or other device) (collectively, a
"System"), that constitutes any part of, or is used in connection with the use,
operation or enjoyment of, any asset, property or leased premises of the Company
or any Subsidiary (i) is designed (or has been modified) to be used prior to and
after January 1, 2000, (ii) to the Company's knowledge, will operate without
error arising from the creation, recognition, acceptance, calculation, display,
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storage, retrieval, accessing, comparison, sorting, manipulation, processing or
other use of dates or date-based, date-dependent or date-related data, including
but not limited to century recognition, day-of-the-week recognition, leap years,
date values and interfaces of date functionalities, and (iii) to the Company's
knowledge, will not be adversely affected by the advent of the year 2000, the
advent of the twenty-first century or the transition from the twentieth century
through the year 2000 and into the twenty-first century (collectively, items (i)
through (iii) are referred to herein as "Year 2000 Compliant"). No System that
is material to the business, finances or operations of the business of the
Company or any Subsidiary receives data from or communicates with any component
or system external to itself (whether or not such external component or system
is the Company's or any Subsidiary's or any third party's) that is not itself
Year 2000 Compliant. To the Company's knowledge, all licenses for the use of any
system-related software, hardware, databases or embedded control systems permit
the Company or the Subsidiaries to make all modifications, bypasses, debugging,
work-arounds, repairs, replacements, conversions or corrections necessary to
permit the System to operate compatibly, in conformance with their respective
specifications, and to be Year 2000 Compliant. None of the Company nor any of
the Subsidiaries has incurred, and none of the Company nor any of the
Subsidiaries has any reason to believe that it may in the future incur, any
expenses arising from or related to the failure of any of its Systems as a
result of not being Year 2000 Compliant.
Section 2.2 REPRESENTATIONS AND WARRANTIES OF THE INVESTORS. Each of the
Investors, severally and not jointly, hereby makes the following representations
and warranties to the Company as of the date hereof and on the Closing Date:
(a) AUTHORIZATION; ENFORCEMENT. (i) Such Investor has the requisite power
and authority, or the legal capacity, as the case may be, to enter into and
perform this Agreement and to purchase the Securities being sold to such
Investor hereunder, (ii) the execution and delivery of this Agreement by such
Investor and the consummation by it of the transactions contemplated hereby have
been duly authorized by all necessary corporate or partnership action, as
required, and (iii) this Agreement constitutes the valid and binding obligation
of such Investor enforceable against such Investor in accordance its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally the enforcement of creditors' rights and remedies or by
other equitable principles of general application.
(b) NO CONFLICTS. The execution, delivery and performance of this Agreement
and the consummation by such Investor of the transactions contemplated hereby do
not and will not (i) result in a violation of such Investor's organizational
documents, or (ii) conflict with any agreement, indenture, or instrument to
which such Investor is a party, or (iii) result in a violation of any law, rule,
or regulation or any order, judgment or decree of any court or governmental
agency applicable to such Investor. Such Investor is not required to obtain any
consent or authorization of any governmental agency in order for it to perform
its obligations under this Agreement.
(c) INVESTMENT REPRESENTATION. Such Investor is purchasing the securities
purchased hereunder for its own account and not with a view to distribution in
violation of any securities laws. Such Investor has no present intention to sell
the securities purchased hereunder and such Investor has no present arrangement
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(whether or not legally binding) to sell the Securities purchased hereunder to
or through any person or entity; provided, however, that by the representations
herein, such Investor does not agree to hold any of the Securities for any
minimum or other specific term and reserves the right to dispose of any of the
Securities at any time in accordance with Federal and state securities laws
applicable to such disposition.
(d) ACCREDITED INVESTOR. Such Investor is an "accredited investor" as
defined in Rule 501 promulgated under the Act. The Investor has such knowledge
and experience in financial and business matters in general and investments in
particular, so that such Investor is able to evaluate the merits and risks of an
investment in the securities purchased hereunder and to protect its own
interests in connection with such investment. In addition (but without limiting
the effect of the Company's representations and warranties contained herein),
such Investor has received such information as it considers necessary or
appropriate for deciding whether to purchase the Securities purchased hereunder.
(e) RULE 144. Such Investor understands that there is no public trading
market for the Preferred Stock or the Warrants, that none is expected to
develop, and that the Preferred Stock and the Warrants must be held indefinitely
unless converted or exercised, as applicable, or unless such securities are
registered under the Act or an exemption from registration is available. Such
Investor understands that the Common Shares and the Warrant Shares must be held
indefinitely unless such securities are registered under the Act or an exemption
from registration is available. Such Investor has been advised or is aware of
the provisions of Rule 144 promulgated under the Act.
(f) BROKERS. Such Investor has taken no action which would give rise to any
claim by any person for brokerage commissions, finder's fees or similar payments
by the Company relating to this Agreement or the transactions contemplated
hereby.
(g) RELIANCE BY THE COMPANY. Such Investor understands that the Preferred
Stock and Warrants are being offered and sold in reliance on a transactional
exemption from the registration requirements of Federal and state securities
laws and that the Company is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and understandings of
such Investor set forth herein in order to determine the applicability of such
exemptions and the suitability of such Investor to acquire the Securities.
ARTICLE III
COVENANTS
Section 3.1 CERTIFICATES ON CONVERSION OR EXERCISE. Upon (i) any conversion
of the shares of Preferred Stock pursuant to the Designations, or (ii) the
exercise of any Warrants in accordance with the terms of the Warrants, the
Company shall issue and deliver to such Investor (or the then holder) within
three (3) business days of the conversion or the exercise date, as the case may
be, (x) a Certificate or Certificates for the Common Shares or Warrant Shares
issuable upon conversion or exercise, as the case may be, and (y) a new
certificate or certificates for the shares of Preferred Stock or Warrants, as
the case may be, of such Investor (or holder) which have not yet been converted
or exercised, as the case may be, but which are evidenced in part by the
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certificate(s) submitted to the Company in connection with such conversion or
exercise (with the number of and denomination of such new certificate(s)
designated by such Investor or holder).
Section 3.2 REPLACEMENT CERTIFICATES. The certificate(s) representing the
shares of Preferred Stock, Common Shares, Warrant Shares or the Warrants held by
any Investor (or then holder) may be exchanged by such Investor (or such holder)
at any time and from time to time for certificates with different denominations
representing an equal number of shares of Preferred Stock, Common Shares,
Warrant Shares or Warrants, as the case may be, as reasonably requested by such
Investor (or such holder) upon surrendering the same. No service charge will be
made for such registration, transfer or exchange.
Section 3.3 SECURITIES COMPLIANCE. The Company shall notify the Commission
and Nasdaq, in accordance with their requirements, of the transactions
contemplated by this Agreement and the Designations and shall take all other
necessary action and proceedings as may be required and permitted by applicable
law, rule and regulation, for the legal and valid issuance of the Securities.
Section 3.4 NOTICES. The Company agrees to provide all holders of Preferred
Stock and all holders of Warrants with copies of all notices and information,
including, without limitation, notices and proxy statements in connection with
any meetings, that are provided to the holders of shares of Common Stock,
contemporaneously with the delivery of such notices or information to such
Common Stock holders.
Section 3.5 RESERVATION OF STOCK ISSUABLE UPON EXERCISE. The Company shall
at all times reserve and keep available out of its authorized but unissued
Common Stock, solely for the purpose of affecting the conversion or exercise of
the Preferred Stock or Warrants, as the case may be, such number of shares of
Common Stock as shall from time to time be sufficient to effect the conversion
or exercise of all outstanding Preferred Stock or Warrants, as the case may be.
Section 3.6 NO IMPAIRMENT. 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 under this Agreement, the
Registration Rights Agreement, the Designations and the Warrants, but will at
all times in good faith assist in the carrying out of all the provisions of such
agreements and instruments.
Section 3.7 SERIES A CONVERTIBLE PREFERRED STOCK. The Company shall not
issue any shares of its Series A Convertible Preferred Stock , par value $.001
per share, and shall promptly take such action as is necessary to decrease such
number of authorized shares of Series A Convertible Preferred Stock from 8,000
to zero.
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ARTICLE IV
CONDITIONS
Section 4.1 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO ISSUE
AND SELL THE STOCK AND WARRANTS. The obligation hereunder of the Company to
issue and sell the Preferred Stock and Warrants to the Investors is subject to
the satisfaction, at or before the Closing Date, of each of the conditions set
forth below. These conditions are for the Company's sole benefit and may be
waived by the Company at any time in its sole discretion.
(a) ACCURACY OF THE INVESTORS' REPRESENTATIONS AND WARRANTIES. The
representations and warranties of each Investor shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made at that time (except for representations and warranties that speak as of a
particular date, which shall be true and correct in all material respects as of
such other date).
(b) PERFORMANCE BY THE INVESTORS. Each Investor shall have performed all
agreements and satisfied all conditions required hereby to be performed or
satisfied by such Investor at or prior to the Closing Date.
(c) NO INJUNCTION. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement.
Section 4.2 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE INVESTORS TO
PURCHASE THE STOCK AND THE WARRANTS. The obligation hereunder of each Investor
to acquire and pay for the Preferred Stock and Warrants is subject to the
satisfaction, at or before the Closing Date, of each of the conditions set forth
below. These conditions are for each Investor's sole benefit and may be waived
by each Investor at any time in its sole discretion.
(a) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES. The
representation and warranties of the Company shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made at that time (except for representations and warranties that speak as of a
particular date which shall be true and correct in all material respects as of
such other date), and except that all representations and warranties that by
their terms are qualified by reference to "materiality" or to a "Material
Adverse Effect" shall be, or have been, true and correct in all respects.
(b) PERFORMANCE BY THE COMPANY. The Company shall have performed all
agreements and satisfied all conditions required to be performed or satisfied by
the Company at or prior to the Closing Date.
(c) NASDAQ. From the date hereof to the Closing Date, trading in the
Company's Common Stock shall not have been suspended by the Commission or Nasdaq
(except for one day suspensions relating to material business announcements by
the Company) and trading in securities generally as reported by Nasdaq, shall
not have been suspended or limited, and the Common Stock shall not have been
delisted from any exchange or market where it is currently listed.
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(d) NO INJUNCTION. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority or competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement.
(e) OPINION OF COUNSEL. At the Closing Date the Investors shall have
received an opinion of counsel to the Company in substantially the form attached
hereto as EXHIBIT E and such other opinions, certificates and documents as the
Investors or their counsel shall reasonably require incident to the Closing.
(f) SECRETARY'S CERTIFICATE. The Company shall have delivered to the
Investors a certificate in form and substance reasonably satisfactory to the
Investors, executed by the Secretary or an Assistant Secretary of the Company on
behalf of the Company, certifying as to the satisfaction of all closing
conditions, incumbency of signing officers, charter, Bylaws, good standing and
authorizing resolutions of the Company.
(g) PROXIES. The shareholders listed on SCHEDULE II (the "Shareholders")
shall have executed and delivered Irrevocable Proxies in the form of EXHIBIT F
attached hereto.
(h) FEE WARRANT. The Fee Warrant shall have been simultaneously issued to
Wand Partners.
Section 4.3 POST-CLOSING OBLIGATIONS.
(a) STOCKHOLDERS AGREEMENT. Promptly following the Closing, the Company,
Wand Partners and shareholders of the Company that beneficially own at least
50.01% of the outstanding shares of Common Stock of the Company shall enter into
a Stockholders Agreement in a form and substance mutually acceptable to such
parties agreeing, following conversion of the Preferred Stock into Common Stock,
to vote such shares for the designee of Wand Partners to the Company's Board of
Directors, PROVIDED, HOWEVER, that such obligation shall cease at such time as
the Investors cease to own less than fifty percent (50%) of the number of shares
of Common Stock issuable upon conversion of the Preferred Stock as of the
Closing Date.
(b) PROXIES. Promptly following the Closing, the Company shall obtain and
deliver executed Irrevocable Proxies in the form of EXHIBIT F attached hereto
from shareholders of the Company that beneficially own at least 50.01% of the
outstanding shares of Common Stock of the Company.
ARTICLE V
LEGEND AND STOCK
Each certificate representing the Preferred Stock, Common Shares, the
Warrants and the Warrant Shares shall be stamped or otherwise imprinted with a
legend substantially in the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND THEY MAY NOT BE OFFERED, SOLD, PLEDGED,
HYPOTHECATED, ASSIGNED OR TRANSFERRED EXCEPT (I) PURSUANT TO A REGISTRATION
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STATEMENT UNDER THE SECURITIES ACT WHICH HAS BECOME EFFECTIVE AND IS CURRENT
WITH RESPECT TO THESE SECURITIES OR (II) PURSUANT TO A SPECIFIC EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT, BUT ONLY UPON A HOLDER HEREOF FIRST
HAVING OBTAINED THE WRITTEN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE
ISSUER THAT THE PROPOSED DISPOSITION IS CONSISTENT WITH ALL APPLICABLE
PROVISIONS OF THE SECURITIES ACT AS WELL AS ANY APPLICABLE "BLUE SKY" OR SIMILAR
SECURITIES LAW.
The appropriate portions of the legend will be removed from the
certificates representing the Preferred Stock, Common Shares, the Warrants and
the Warrant Shares promptly upon delivery to the Company of such satisfactory
evidence as may be reasonably required by the Company that such legend is not
required to ensure compliance with the Securities Act.
ARTICLE VI
TERMINATION
Section 6.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be terminated
at any time prior to the Closing Date by the mutual written consent of the
Company and the Investors.
Section 6.2 OTHER TERMINATION. This Agreement may be terminated by action
of the Board of Directors of the Company or by any of the Investors at any time
if the Closing Date shall not have occurred by the fifth business day following
the date of this Agreement; provided, however, that the right to terminate this
Agreement under Section 6.2 shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the cause of, or resulted
in, the failure of the Closing Date to have occurred on or prior to such date.
ARTICLE VII
MISCELLANEOUS
Section 7.1 STAMP TAXES; AGENT FEES. The Company shall pay all stamp and
other taxes and duties levied in connection with the issuance of the Preferred
Stock and the Warrants pursuant hereto, the Common Shares issued upon conversion
of the Preferred Stock and the Warrant Shares issued upon exercise of the
Warrants.
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Section 7.2 SPECIFIC ENFORCEMENT; CONSENT TO JURISDICTION.
(a) The Company and the Investors acknowledge and agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent or cure breaches of the provisions of this
Agreement and to enforce specifically the terms and provisions hereof, this
being in addition to any other remedy to which any of them may be entitled by
law or equity.
(b) The Company and each of the Investors (i) hereby irrevocably submits to
the exclusive jurisdiction of the United States District Court, the New York
State courts and other courts of the United States sitting in New York County,
New York for the purposes of any suit, action or proceeding arising out of or
relating to this Agreement and (ii) hereby waives, and agrees not to assert in
any such suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of such court, that the suit, action or proceeding is
brought in an inconvenient forum or that the venue of the suit, action or
proceeding is improper. The Company and each of the Investors consents to
process being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing in this paragraph shall affect or
limit any right to serve process in any other manner permitted by law.
Section 7.3 ENTIRE AGREEMENT; AMENDMENT. This Agreement together with the
agreements and documents executed in connection herewith, contains the entire
understanding of the parties with respect to the matters covered hereby and,
except as specifically set forth herein, neither the Company nor any Investor
makes any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived or amended other than by a
written instrument signed by the party against whom enforcement of any such
amendment or waiver is sought.
Section 7.4 NOTICES. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement 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:
to the Company: SkyMall, Inc.
1520 East Pima Street
Phoenix, Arizona 85034
Telephone: 602-254-8620
Facsimile: 602-254-6544
Attn: Robert M. Worsley
Chief Executive Officer
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with copies to: Squire, Sanders & Dempsey L.L.P.
Two Renaissance Square
40 North Central Avenue, Suite 2700
Phoenix, Arizona 85004-4498
Telephone: 602-528-4134
Facsimile: 602-253-8129
Attn: Gregory R. Hall, Esq.
to the Investors: To each Investor with a copy to its counsel
at the addresses set forth on SCHEDULE I of
this Agreement.
Any party hereto may from time to time change its address for notices by giving
at least five (5) days written notice of such changed address to the other
parties hereto. 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.
Section 7.5 INDEMNITY. Each party shall indemnify, defend and hold harmless
each other party against any loss, cost or damages (including reasonable
attorney's fees) incurred as a result of such parties' breach of any
representation, warranty, covenant or agreement in this Agreement. The
procedures for such indemnification shall be as set forth in Section 5(c) of the
Registration Rights Agreement.
Section 7.6 WAIVERS. No waiver by any party of any default with respect to
any provision, condition or requirement of this Agreement shall be deemed to be
a continuing waiver in the future or a waiver of any other provision, condition
or requirement hereof, nor shall any delay or omission of any party to exercise
any right hereunder in any manner impair the exercise of any such right accruing
to it thereafter.
Section 7.7 HEADINGS. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
Section 7.8 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
this Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The parties hereto may amend this
Agreement without notice to or the consent of any third party. The Company may
not assign this Agreement or any rights or obligations hereunder without the
prior written consent of all Investors (which consent may be withheld for any
reason in their sole discretion), except that the Company may assign this
Agreement in connection with a merger, consolidation, business combination or
the sale of all or substantially all of its assets provided that the Company is
not released from any of its obligations hereunder, such successor in interest
or assignee assumes all obligations of the Company hereunder, and appropriate
adjustment of the provisions contained in this Agreement, the Designations and
the Warrant is made, in form and substance satisfactory to the Investors, to
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place the Investors in substantially the same position as they would have been
but for such assignment. Any Investor may assign this Agreement (in whole or in
part) or any rights or obligations hereunder without the consent of the Company
in connection with any sale or transfer of all or any portion of the Securities
held by such Investor, provided that no Investor may assign this Agreement prior
to the Closing Date without the Company's prior consent except to an affiliate
or affiliates of such Investor.
Section 7.9 NO THIRD PARTY BENEFICIARIES. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
Section 7.10 GOVERNING LAW. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York without regard to such state's principles of conflict of laws.
Section 7.11 SURVIVAL. The representations and warranties and the
agreements and covenants of the Company and each Investor contained herein shall
survive the Closing.
Section 7.12 EXECUTION. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement, it
being understood that all parties need not sign the same counterpart.
Section 7.13 PUBLICITY. The Company agrees that it will not disclose, and
will not include in any public announcement, the name of any Investor without
its consent, unless and until such disclosure is required by law or applicable
regulation, and then only to the extent of such requirement.
Section 7.14 SEVERABILITY. The parties acknowledge and agree that all
representations, warranties, covenants and agreements of the Investors hereunder
are several and not joint, that no Investor shall have any responsibility or
liability for the representations, warrants, agreements, acts or omissions of
any other Investor, and that any rights granted to "Investors" hereunder shall
be enforceable by each Investor hereunder.
Section 7.15 LIKE TREATMENT OF HOLDERS. Neither the Company nor any of its
affiliates shall, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee, payment for the redemption or
exchange of Securities, or otherwise, to any holder of Securities, for or as an
inducement to, or in connection with the solicitation of, any consent, waiver or
amendment of any terms or provisions of the Securities or this Agreement, unless
such consideration is required to be paid to all holders of Securities bound by
such consent, waiver or amendment whether or not such holders so consent, waive
or agree to amend and whether or not such holders tender their Securities for
redemption or exchange. The Company shall not, directly or indirectly, redeem
any Securities unless such offer of redemption is made pro rata to all holders
of Securities on identical terms.
Section 7.16 INSPECTION RIGHTS. In addition to inspection and visitation
rights granted pursuant to Nevada law, the Investors (for so long as they hold
Registrable Securities) and their authorized representatives shall be entitled
to visit the premises of the Company and its Subsidiaries, meet with the
Company's and its Subsidiaries' officers and directors and inspect the books and
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records of the Company and its Subsidiaries during normal business hours and
upon reasonable notice, PROVIDED, HOWEVER, that, other than with respect to the
rights granted pursuant to Nevada law, such Investors shall have entered into a
confidentiality agreement in form and substance reasonably acceptable to the
Company and shall have otherwise agreed not to engage in any trading of the
Company's securities while in possession of material nonpublic information
regarding the Company.
Section 7.17 EXPENSES. Except as otherwise provided herein, each party
shall pay its own expenses incident to the preparation and performance of this
Agreement and the documents provided for herein. The Company shall pay the
reasonable legal and accounting fees and expenses and travel expenses incurred
by or on behalf of the Investors, subject to a maximum amount of $80,000.00.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
SKYMALL, INC.
By: /s/ Robert M. Worsley
---------------------------------------
Name: Robert M. Worsley
Title: President
INVESTOR:
By: /s/
---------------------------------------
Name:
Title:
INVESTOR:
By: /s/
---------------------------------------
Name:
Title:
INVESTOR:
By: /s/
---------------------------------------
Name:
Title:
18
Exhibit 10.2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "AGREEMENT") is made and
entered into as of December 30, 1999, among SkyMall, Inc., a Nevada corporation
(the "COMPANY"), and each of the Investors listed on Schedule 1 attached hereto.
Each of the Investors listed on Schedule 1 attached hereto is referred to herein
as a "INVESTOR" and are collectively referred to herein as the "INVESTORS."
This Agreement is being entered into pursuant to the Stock and Warrant
Purchase Agreement, dated as of the date hereof, by and among the Company and
the Investors (the "PURCHASE AGREEMENT").
The Company and the Investors hereby agree as follows:
1. DEFINITIONS.
Capitalized terms used and not otherwise defined herein shall have the
meanings given such terms in the Purchase Agreement. As used in this Agreement,
the following terms shall have the following meanings:
"ADVICE" shall have the meaning set forth in Section 3(m).
"AFFILIATE" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition, "CONTROL," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms of "AFFILIATED," "CONTROLLING" and "CONTROLLED" have meanings
correlative to the foregoing.
"CERTIFICATE OF DESIGNATIONS" shall mean the Certificate of
Designations, Rights, Preferences and Limitations governing the Preferred Stock.
"BLACKOUT PERIOD" shall have the meaning set forth in Section 3(n).
"BOARD" shall have the meaning set forth in Section 3(n).
"BUSINESS DAY" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the state of
New York generally are authorized or required by law or other government actions
to close.
"CLOSING DATE" shall mean the Closing Date as defined in the Purchase
Agreement.
<PAGE>
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the Company's Common Stock, par value $.001 per
share.
"EFFECTIVENESS DATE" means with respect to the Registration Statement
the earlier of the 90th day following the Closing Date and the date which is not
more than ten (10) days of the date on which the Commission informs the Company
that (i) the Commission will not review the Registration Statement or (ii) the
Company may request the acceleration of the effectiveness of the Registration
Statement.
"EFFECTIVENESS PERIOD" shall have the meaning set forth in Section
2(a).
"EVENT" shall have the meaning set forth in Section 7(e).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FILING DATE" means the date the Registration Statement is filed,
which Filing Date shall be within 15 days of the Closing Date.
"HOLDER" or "HOLDERS" means the holder or holders, as the case may be,
from time to time of Registrable Securities, including without limitation the
Investors and their assignees.
"INDEMNIFIED PARTY" shall have the meaning set forth in Section 5(c).
"INDEMNIFYING PARTY" shall have the meaning set forth in Section 5(c).
"LOSSES" shall have the meaning set forth in Section 5(a).
"NASDAQ" means the Nasdaq National Market.
"PERSON" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"PLACEMENT SHARES" shall have the meaning set forth in Section 2.
"PREFERRED STOCK" means the Company's Series B Junior Convertible
Preferred Stock, par value $.001 per share, as authorized pursuant to the
Certificate of Designations.
"PROCEEDING" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
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"PROSPECTUS" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference in such Prospectus.
"REGISTRABLE SECURITIES" means (i) the shares of Common Stock (A)
issuable upon conversion of the Preferred Stock pursuant to the Designations
(the "COMMON SHARES") and (B) issuable upon exercise of the Warrants (the
"WARRANT SHARES"), and upon any stock split, stock dividend, recapitalization or
similar event with respect to such Common Shares and Warrant Shares, and (ii)
any other dividend or other distribution with respect to, conversion or exchange
of, or in replacement of, Registrable Securities; PROVIDED, HOWEVER, that
Registrable Securities shall include (but not be limited to) a number of shares
of Common Stock equal to no less than 100% of the maximum number of shares of
Common Stock which would be issuable upon conversion of the Preferred Stock and
upon exercise of the Warrants, assuming such conversion or exercise occurred on
the Closing Date or the Filing Date, whichever date would result in the greater
number of Registrable Securities. Notwithstanding anything herein contained to
the contrary, such registered shares of Common Stock shall be allocated among
the Holders pro rata based on the total number of Registrable Securities issued
or issuable as of each date that a Registration Statement, as amended, relating
to the resale of the Registrable Securities is declared effective by the
Commission. Notwithstanding anything contained herein to the contrary, if the
actual number of shares of the Common Shares and the Warrant Shares exceeds 100%
of the number of shares of the Common Shares and the Warrant Shares based upon a
computation as at the Closing Date or the Filing Date, the term "Registrable
Securities" shall be deemed to include such additional shares of Common Stock.
"REGISTRATION STATEMENT" means the registration statements and any
additional registration statements contemplated by Section 2, including (in each
case) the Prospectus, amendments and supplements to such registration statement
or Prospectus, including pre- and post-effective amendments, all exhibits
thereto, and all material incorporated by reference in such registration
statement.
"RULE 144" means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"RULE 158" means Rule 158 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"RULE 415" means Rule 415 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
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"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SPECIAL COUNSEL" means any special counsel to the Holders, for which
the Holders will be reimbursed by the Company pursuant to Section 4.
2. REGISTRATION.
(a) On or prior to the Filing Date the Company shall prepare and file
with the Commission a "shelf" Registration Statement covering all Registrable
Securities for an offering to be made on a continuous basis pursuant to Rule
415. The Registration Statement shall be on Form S-3 (or on another form
appropriate for such registration in accordance herewith). The Company shall (i)
not permit any securities other than the Registrable Securities and any shares
issuable pursuant to any warrant issued to any financial advisor or placement
agent in connection with the transaction described in the Purchase Agreement
(the "PLACEMENT SHARES") to be included in the Registration Statement and (ii)
use its best efforts to cause the Registration Statement to be declared
effective under the Securities Act within 90 days from the Closing Date, but in
any event prior to the Effectiveness Date, and to keep such Registration
Statement continuously effective under the Securities Act until such date as is
the earlier of (x) the date when all Registrable Securities covered by such
Registration Statement have been sold or (y) the date on which the Registrable
Securities may be sold without any restriction pursuant to Rule 144(k) as
determined by the counsel to the Company (such counsel to be reasonably
acceptable to the Holders of a majority of the Registrable Securities) pursuant
to a written opinion letter, addressed to the Company's transfer agent to such
effect (the "EFFECTIVENESS PERIOD"). If an additional Registration Statement is
required, for any reason, to be filed because the actual number of shares of
Common Shares and Warrant Shares exceeds the number of shares of Common Stock
initially registered in respect of the Common Shares and the Warrant Shares, the
Company shall have 20 Business Days to file such additional Registration
Statement, and the Company shall use its best efforts to cause such additional
Registration Statement to be declared effective by the Commission as soon as
possible, but in no event later than 90 days after filing.
(b) If the Registration Statement covering the Registrable Securities
required to be filed by the Company pursuant to Section 2(a) hereof is not
declared effective by the Effectiveness Date, then the Company shall make
payments to the Investors in such amounts and at such times as shall be
determined pursuant to this Section 2(b) as partial relief for the damages to
the Investors by reason of any such delay in or reduction of their ability to
sell the Registrable Securities (which remedy shall not be exclusive of any
other remedies available at law or in equity). The Company shall pay to each
holder of Registrable Securities an amount equal to the Liquidation Preference
(as defined in the Certificate of Designations) of the Preferred Stock then
outstanding and/or of the Common Stock (valued at the higher of $7.00 or the per
share Market Price (as defined in the Warrant)), as applicable (the "AGGREGATE
SHARE PRICE"), multiplied by the Applicable Percentage (as defined below) times
the number of months (prorated for partial months) after the Effectiveness Date
and prior to the date the Registration Statement is declared effective by the
Commission; PROVIDED, HOWEVER, that there shall be excluded from such period any
delays which are soley attributable to changes required by the Investors in the
Registration Statement with respect to information relating to the Investors,
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including, without limitation, changes to the plan of distribution, or to the
failure of the Investors to conduct their review of the Registration Statement
timely in accordance with the terms of this Agreement. The term "APPLICABLE
PERCENTAGE" means two hundredths (.02). (For example, if the Registration
Statement becomes effective one (1) month after the Effectiveness Date, the
Company would pay $20,000 for each $1,000,000 of Aggregate Share Price. If
thereafter, sales could not be made pursuant to the Registration Statement for
an additional period of one (1) month, the Company would pay an additional
$20,000 for each $1,000,000 of Aggregate Share Price). Such amounts shall be
paid in cash or, at each Investor's option, may be added to the Conversion
Amount (as defined in the Certificate of Designation) of the Preferred Stock and
thereafter be convertible into Common Stock at the Conversion Price (as defined
in the Certificate of Designations) in accordance with the terms of the
Preferred Stock. If the Investor desires to convert the amounts due hereunder
into Registrable Securities, it shall so notify the Company in writing within
two (2) Business Days of the date on which such amounts are first payable in
cash and such amounts shall be so convertible (pursuant to the mechanics set
forth in the Certificate of Designations), beginning on the last day upon which
the cash amount would otherwise be due in accordance with the following
sentence. Payments of cash pursuant hereto shall be made within five (5) days
after the end of each period that gives rise to such obligation, provided that,
if any such period extends for more than thirty (30) days, interim payments
shall be made for each such thirty (30) day period.
3. REGISTRATION PROCEDURES. In connection with the Company's registration
obligations hereunder, the Company shall:
(a) Prepare and file with the Commission on or prior to the Filing
Date, a Registration Statement on Form S-3 (or on another form appropriate for
such registration in accordance herewith) in accordance with the method or
methods of distribution thereof as specified by the Holders (except if otherwise
directed by the Holders), and cause the Registration Statement to become
effective and remain effective as provided herein; PROVIDED, HOWEVER, that not
less than five (5) Business Days prior to the filing of the Registration
Statement or any related Prospectus or any amendment or supplement thereto
(including any document that would be incorporated therein by reference), the
Company shall (i) furnish to the Holders and any Special Counsel, copies of all
such documents proposed to be filed, which documents (other than those
incorporated by reference) will be subject to the review of such Holders and
such Special Counsel, and (ii) at the request of any Holder cause its officers
and directors, counsel and independent certified public accountants to respond
to such inquiries, and to make available for inspection, during reasonable
business hours, all financial and other records and pertinent corporate
documents and properties of the Company, as shall be necessary, in the
reasonable opinion of counsel to such Holders, to conduct a reasonable
investigation within the meaning of the Securities Act. The Company shall not
file the Registration Statement or any such Prospectus or any amendments or
supplements thereto to which the Holders of a majority of the Registrable
Securities or any Special Counsel shall reasonably object in writing setting
forth the basis for such objection within three (3) Business Days of their
receipt thereof.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective as to the
applicable Registrable Securities for the Effectiveness Period and prepare and
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file with the Commission such additional Registration Statements in order to
register for resale under the Securities Act all of the Registrable Securities;
(ii) cause the related Prospectus to be amended or supplemented by any required
Prospectus supplement, and as so supplemented or amended to be filed pursuant to
Rule 424 (or any similar provisions then in force) promulgated under the
Securities Act; (iii) respond as promptly as possible to any comments received
from the Commission with respect to the Registration Statement or any amendment
thereto and as promptly as possible provide the Holders true and complete copies
of all correspondence from and to the Commission relating to the Registration
Statement; and (iv) comply in all material respects with the provisions of the
Securities Act and the Exchange Act with respect to the disposition of all
Registrable Securities covered by the Registration Statement during the
applicable period in accordance with the intended methods of disposition by the
Holders thereof set forth in the Registration Statement as so amended or in such
Prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities and any Special
Counsel as promptly as possible (and, in the case of (i)(A) below, not less than
five (5) Business Days prior to such filing) and (if requested by any such
Person) confirm such notice in writing no later than one (1) Business Day
following the day (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment to the Registration Statement is proposed to be filed;
(B) when the Commission notifies the Company whether there will be a "review" of
such Registration Statement and whenever the Commission comments in writing on
such Registration Statement and (C) with respect to the Registration Statement
or any post-effective amendment, when the same has become effective; (ii) of any
request by the Commission or any other Federal or state governmental authority
for amendments or supplements to the Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement covering any or
all of the Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) if at any time any of the representations and warranties of the
Company contained in any agreement contemplated hereby ceases to be true and
correct in all material respects; (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (vi) of the occurrence of any event that makes any statement made
in the Registration Statement or Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
The Company shall promptly furnish to Special Counsel, without charge,
(i) any correspondence from the Commission or the Commission's staff to the
Company or its representatives relating to any Registration Statement and (ii) a
copy of any written response to the correspondence received from the Commission
in accordance with the procedures of Section 3(a) relating to the filing of
Registration Statements.
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(d) Use its best efforts to avoid the issuance of, or, if issued,
obtain the withdrawal of, (i) any order suspending the effectiveness of the
Registration Statement or (ii) any suspension of the qualification (or exemption
from qualification) of any of the Registrable Securities for sale in any
jurisdiction, at the earliest practicable moment.
(e) If requested by the Holders of a majority in interest of the
Registrable Securities, (i) promptly incorporate in a Prospectus supplement or
post-effective amendment to the Registration Statement such information as the
Company reasonably agrees should be included therein and (ii) make all required
filings of such Prospectus supplement or such post-effective amendment as soon
as practicable after the Company has received notification of the matters to be
incorporated in such Prospectus supplement or post-effective amendment.
(f) Furnish to each Holder and any Special Counsel, without charge, at
least one (1) conformed copy of each Registration Statement and each amendment
thereto, including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference, and all exhibits
to the extent requested by such Person (including those previously furnished or
incorporated by reference) promptly after the filing of such documents with the
Commission.
(g) Promptly deliver to each Holder and any Special Counsel, without
charge, as many copies of the Prospectus or Prospectuses (including each form of
prospectus) and each amendment or supplement thereto as such Persons may
reasonably request; and the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities, use its
best efforts to register or qualify or cooperate with the selling Holders and
any Special Counsel in connection with the registration or qualification (or
exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any Holder requests in writing, to
keep each such registration or qualification (or exemption therefrom) effective
during the Effectiveness Period and to do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by a Registration Statement; PROVIDED, HOWEVER,
that the Company shall not be required to qualify generally to do business in
any jurisdiction where it is not then so qualified or to take any action that
would subject it to general service of process in any such jurisdiction where it
is not then so subject or subject the Company to any material tax in any such
jurisdiction where it is not then so subject.
(i) Cooperate with the Holders to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be sold
pursuant to a Registration Statement, which certificates shall be free of all
restrictive legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any Holder may request at least
two (2) Business Days prior to any sale of Registrable Securities.
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(j) Upon the occurrence of any event contemplated by Section 3(c)(vi),
as promptly as possible, prepare a supplement or amendment, including a
post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
(k) Use its best efforts to cause all Registrable Securities relating
to such Registration Statement to be listed on Nasdaq, and any other securities
exchange, quotation system, market or over-the-counter bulletin board, if any,
on which similar securities issued by the Company are then listed as and when
required pursuant to the Purchase Agreement.
(l) Comply in all material respects with all applicable rules and
regulations of the Commission and make generally available to its security
holders earning statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 not later than 45 days after the end of any 12-month
period (or 90 days after the end of any 12-month period if such period is a
fiscal year) commencing on the first day of the first fiscal quarter of the
Company after the effective date of the Registration Statement, which statement
shall conform to the requirements of Rule 158.
(m) Require each selling Holder to furnish to the Company information
regarding such Holder and the distribution of such Registrable Securities as is
required by law to be disclosed in the Registration Statement, and the Company
may exclude from such registration the Registrable Securities of any such Holder
who fails to furnish such information within a reasonable time prior to the
filing of each Registration Statement, supplemented Prospectus and/or amended
Registration Statement.
If the Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder shall
have the right to require (if such reference to such Holder by name or otherwise
is not required by the Securities Act or any similar federal statute then in
force) the deletion of the reference to such Holder in any amendment or
supplement to the Registration Statement filed or prepared subsequent to the
time that such reference ceases to be required.
Each Holder covenants and agrees that (i) it will not sell any
Registrable Securities under the Registration Statement until it has received
copies of the Prospectus as then amended or supplemented as contemplated in
Section 3(g) and notice from the Company that such Registration Statement and
any post-effective amendments thereto have become effective as contemplated by
Section 3(c) and (ii) it and its officers, directors or Affiliates, if any, will
comply with the prospectus delivery requirements of the Securities Act as
applicable to them in connection with sales of Registrable Securities pursuant
to the Registration Statement.
Each Holder agrees by its acquisition of such Registrable Securities
that, upon receipt of a notice from the Company of the occurrence of any event
of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or
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3(c)(vi), such Holder will forthwith discontinue disposition of such Registrable
Securities under the Registration Statement until such Holder's receipt of the
copies of the supplemented Prospectus and/or amended Registration Statement
contemplated by Section 3(j), or until it is advised in writing (the "ADVICE")
by the Company that the use of the applicable Prospectus may be resumed, and, in
either case, has received copies of any additional or supplemental filings that
are incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement.
(n) If (i) there is material non-public information regarding the
Company which the Company's Board of Directors (the "BOARD") reasonably
determines not to be in the Company's best interest to disclose and which the
Company is not otherwise required to disclose, or (ii) there is a significant
business opportunity (including, but not limited to, the acquisition or
disposition of assets (other than in the ordinary course of business) or any
merger, consolidation, tender offer or other similar transaction) available to
the Company which the Board reasonably determines not to be in the Company's
best interest to disclose and which the Company would be required to disclose
under the Registration Statement, then the Company may postpone or suspend
filing or effectiveness of a registration statement for a period not to exceed
20 consecutive days, provided that the Company may not postpone or suspend its
obligation under this Section 3(n) for more than 45 days in the aggregate during
any 12 month period (each, a "BLACKOUT PERIOD"); PROVIDED, HOWEVER, that no such
postponement or suspension shall be permitted for consecutive 20 day periods,
arising out of the same set of facts, circumstances or transactions.
(o) The Company shall have no obligation to assure the terms and
conditions of distribution, to obtain a commitment from an underwriter relative
to the sale of the Registrable Securities or to otherwise assume any
responsibility for the manner, price or terms of the distribution of the
Registrable Securities.
4. REGISTRATION EXPENSES. All fees and expenses incident to the
performance of or compliance with this Agreement by the Company shall be borne
by the Company whether or not the Registration Statement is filed or becomes
effective and whether or not any Registrable Securities are sold pursuant to the
Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with The Nasdaq Stock Market and each other securities
exchange or market on which Registrable Securities are required hereunder to be
listed, (B) with respect to filings required to be made with the Commission, and
(C) in compliance with state securities or Blue Sky laws (including, without
limitation, fees and disbursements subject to the dollar limitation set forth in
Section 4(iv) below of counsel for the Holders in connection with Blue Sky
qualifications of the Registrable Securities and determination of the
eligibility of the Registrable Securities for investment under the laws of such
jurisdictions as the Holders of a majority of Registrable Securities may
designate)), (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities and of printing prospectuses if
the printing of prospectuses is requested by the holders of a majority of the
Registrable Securities included in the Registration Statement), (iii) messenger,
telephone and delivery expenses, (iv) fees and disbursements of counsel for the
Company and Special Counsel for the Holders, in the case of the Special Counsel,
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to a maximum amount of $25,000, (v) Securities Act liability insurance, if the
Company so desires such insurance, and (vi) fees and expenses of all other
Persons retained by the Company in connection with the consummation of the
transactions contemplated by this Agreement, including, without limitation, the
Company's independent public accountants (including the expenses of any comfort
letters or costs associated with the delivery by independent public accountants
of a comfort letter or comfort letters). In addition, the Company shall be
responsible for all of its internal expenses incurred in connection with the
consummation of the transactions contemplated by this Agreement (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit, the
fees and expenses incurred in connection with the listing of the Registrable
Securities on any securities exchange as required hereunder. The fees and
expenses referred to in the first sentence of this Section 4 shall not include
(x) expenses of any Holder's counsel other than the Special Counsel or (y) any
underwriting discounts, selling commissions or accountable or non-accountable
expenses paid to any person attributable to Registrable Securities, all of which
shall be borne by the Holder.
5. INDEMNIFICATION
(a) INDEMNIFICATION BY THE COMPANY. The Company shall, notwithstanding
any termination of this Agreement, indemnify and hold harmless each Holder, the
officers, directors, agents, brokers (including brokers who offer and sell
Registrable Securities as principal as a result of a pledge or any failure to
perform under a margin call of Common Stock), investment advisors and employees
of each of them, each Person who controls any such Holder (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act) and the
officers, directors, agents and employees of each such controlling Person, to
the fullest extent permitted by applicable law, from and against any and all
losses, claims, damages, liabilities, costs (including, without limitation,
costs of preparation and attorneys' fees) and expenses (collectively, "LOSSES"),
as incurred, arising out of or relating to any untrue or alleged untrue
statement of a material fact contained in the Registration Statement, any
Prospectus or any form of prospectus or in any amendment or supplement thereto
or in any preliminary prospectus, or arising out of or relating to any omission
or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any Prospectus or form
of prospectus or supplement thereto, in the light of the circumstances under
which they were made) not misleading, except to the extent, but only to the
extent, that such untrue statements or omissions are based solely upon
information regarding such Holder furnished in writing to the Company by such
Holder expressly for use therein, which information was reasonably relied on by
the Company for use therein or to the extent that such information relates to
such Holder or such Holder's proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such Holder
expressly for use in the Registration Statement, such Prospectus or such form of
Prospectus or in any amendment or supplement thereto. The Company shall notify
the Holders promptly of the institution, threat or assertion of any Proceeding
of which the Company is aware in connection with the transactions contemplated
by this Agreement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of an Indemnified Party (as
defined in Section 5(c) to this Agreement) and shall survive the transfer of the
Registrable Securities by the Holders.
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(b) INDEMNIFICATION BY HOLDERS. Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, the directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses, as
incurred, arising solely out of or based solely upon any untrue statement of a
material fact contained in the Registration Statement, any Prospectus, or any
form of prospectus, or arising solely out of or based solely upon any omission
of a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in the light of the circumstances under which they were
made) not misleading, to the extent, but only to the extent, that such untrue
statement or omission is contained in or omitted from any information so
furnished in writing by such Holder to the Company specifically for inclusion in
the Registration Statement or such Prospectus and that such information was
reasonably relied upon by the Company for use in the Registration Statement,
such Prospectus or such form of prospectus or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of Prospectus Supplement. Notwithstanding anything to
the contrary contained herein, the Holder shall be liable under this Section
5(b) for only that amount as does not exceed the net proceeds to such Holder as
a result of the sale of Registrable Securities pursuant to such Registration
Statement.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
"INDEMNIFIED PARTY"), such Indemnified Party promptly shall notify the Person
from whom indemnity is sought (the "INDEMNIFYING PARTY) in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof; provided, that
the failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
except (and only) to the extent that it shall be finally determined by a court
of competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel
in any such Proceeding and to participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; or (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel that a conflict of interest is likely to
exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
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expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party which
imposes any future obligation on the Indemnified Party or which does not include
an unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including reasonable
fees and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within ten (10)
Business Days of written notice thereof to the Indemnifying Party (regardless of
whether it is ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party may require
such Indemnified Party to undertake to reimburse all such fees and expenses to
the extent it is finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).
(d) CONTRIBUTION. If a claim for indemnification under Section 5(a) or
5(b) is unavailable to an Indemnified Party because of a failure or refusal of a
governmental authority to enforce such indemnification in accordance with its
terms (by reason of public policy or otherwise), then each Indemnifying Party,
in lieu of indemnifying such Indemnified Party, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such Losses, in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party and Indemnified Party in connection with the actions, statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party and Indemnified
Party shall be determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission of a material fact, has been taken
or made by, or relates to information supplied by, such Indemnifying, Party or
Indemnified Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action, statement or
omission. The amount paid or payable by a party as a result of any Losses shall
be deemed to include, subject to the limitations set forth in Section 5(c), any
reasonable attorneys' or other reasonable fees or expenses incurred by such
party in connection with any Proceeding to the extent such party would have been
indemnified for such fees or expenses if the indemnification provided for in
this Section was available to such party in accordance with its terms.
Notwithstanding anything to the contrary contained herein, the Holder shall be
liable or required to contribute under this Section 5(c) for only that amount as
does not exceed the net proceeds to such Holder as a result of the sale of
Registrable Securities pursuant to such Registration Statement.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
No Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
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The indemnity and contribution agreements contained in this Section
are in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
6. RULE 144. As long as any Holder owns Preferred Stock, Common Shares,
Warrants or Warrant Shares, the Company covenants to timely file (or obtain
extensions in respect thereof and file within the applicable grace period) all
reports required to be filed by the Company after the date hereof pursuant to
Section 13(a) or 15(d) of the Exchange Act and to promptly furnish the Holders
with true and complete copies of all such filings. As long as any Holder owns
Preferred Stock, Common Shares, Warrants or Warrant Shares, if the Company is
not required to file reports pursuant to Section 13(a) or 15(d) of the Exchange
Act, it will make publicly available and furnish to the Holders the information
required thereby. The Company further covenants that it will take such further
action as any Holder may reasonably request, all to the extent required from
time to time to enable such Person to sell Common Shares and Warrant Shares
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144 promulgated under the Securities Act, including
compliance with the provisions of the Purchase Agreement relating to the
transfer of the Common Shares and Warrant Shares. Upon the request of any
Holder, the Company shall deliver to such Holder a written certification of a
duly authorized officer as to whether it has complied with such requirements.
7. MISCELLANEOUS.
(a) REMEDIES. In the event of a breach by the Company or by a Holder,
of any of their obligations under this Agreement, each Holder or the Company, as
the case may be, in addition to being entitled to exercise all rights granted by
law and under this Agreement, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company and each
Holder agree that monetary damages would not provide adequate compensation for
any losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.
(b) NO INCONSISTENT AGREEMENTS. Neither the Company nor any of its
Subsidiaries has, as of the date hereof, entered into and currently in effect,
nor shall the Company or any of its Subsidiaries, on or after the date of this
Agreement, enter into any agreement with respect to its securities that is
inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. Except as disclosed in the
Purchase Agreement, neither the Company nor any of its subsidiaries has
previously entered into any agreement currently in effect granting any
registration rights with respect to any of its securities to any Person. Without
limiting the generality of the foregoing, without the written consent of the
Holders of a majority of the then outstanding Registrable Securities, the
Company shall not grant to any Person the right to request the Company to
register any securities of the Company under the Securities Act unless the
rights so granted are subject in all respects to the prior rights in full of the
Holders set forth herein, and are not otherwise in conflict with the provisions
of this Agreement.
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(c) NO PIGGYBACK ON REGISTRATIONS. Neither the Company nor any of its
security holders (other than the Holders in such capacity pursuant hereto) may
include securities of the Company in the Registration Statement, and the Company
shall not after the date hereof enter into any agreement providing such right to
any of its security holders, unless the right so granted is subject in all
respects to the prior rights in full of the Holders set forth herein, and is not
otherwise in conflict with the provisions of this Agreement.
(d) PIGGY-BACK REGISTRATIONS. If at any time when there is not an
effective Registration Statement covering (i) Common Shares or (ii) Warrant
Shares, the Company shall determine to prepare and file with the Commission a
registration statement relating to an offering for its own account or the
account of others under the Securities Act of any of its equity securities,
other than on Form S-4 or Form S-8 (each as promulgated under the Securities
Act) or its then equivalents relating to equity securities to be issued solely
in connection with any acquisition of any entity or business or equity
securities issuable in connection with stock option or other employee benefit
plans, the Company shall send to each holder of Registrable Securities written
notice of such determination and, if within 30 days after receipt of such
notice, any such holder shall so request in writing (which request shall specify
the Registrable Securities intended to be disposed of by the Holders), the
Company will cause the registration under the Securities Act of all Registrable
Securities which the Company has been so requested to register by the holder, to
the extent requisite to permit the disposition of the Registrable Securities so
to be registered, provided that if at any time after giving written notice of
its intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to such holder and, thereupon, (i) in the case of a determination
not to register, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its obligation to
pay expenses in accordance with Section 4 hereof), and (ii) in the case of a
determination to delay registering, shall be permitted to delay registering any
Registrable Securities being registered pursuant to this Section 7(d) for the
same period as the delay in registering such other securities. The Company shall
include in such registration statement all or any part of such Registrable
Securities such holder requests to be registered; PROVIDED, HOWEVER, that the
Company shall not be required to register any Registrable Securities pursuant to
this Section 7(d) that are eligible for sale pursuant to Rule 144(k) of the
Securities Act. In the case of an underwritten public offering, if the Company
after consultation with the managing underwriter should reasonably determine
that the inclusion of such Registrable Securities would materially adversely
affect the offering contemplated in such registration statement, and based on
such determination recommends inclusion in such registration statement of fewer
or none of the Registrable Securities of the Holders, then (x) the number of
Registrable Securities of the Holders included in such registration statement
shall be reduced pro-rata among such Holders (based upon the number of
Registrable Securities requested to be included in the registration), if the
Company after consultation with the underwriter(s) recommends the inclusion of
fewer Registrable Securities, or (y) none of the Registrable Securities of the
Holders shall be included in such registration statement, if the Company after
consultation with the underwriter(s) recommends the inclusion of none of such
Registrable Securities; PROVIDED, HOWEVER, that if securities are being offered
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for the account of other persons or entities as well as the Company, such
reduction shall not represent a greater fraction of the number of Registrable
Securities intended to be offered by the Holders than the fraction of similar
reductions imposed on such other persons or entities (other than the Company).
(e) FAILURE TO FILE REGISTRATION STATEMENT AND OTHER EVENTS. The
Company and the Holders agree that the Holders will suffer damages if the
Registration Statement is not filed on or prior to the Filing Date and not
declared effective by the Commission on or prior to the Effectiveness Date and
maintained in the manner contemplated herein during the Effectiveness Period.
The Company and the Holders further agree that it would not be feasible to
ascertain the extent of such damages with precision. Accordingly, if (i) the
Registration Statement is not filed on or prior to the Filing Date, or is not
declared effective by the Commission on or prior to the Effectiveness Date (or
in the event an additional Registration Statement is filed because the actual
number of Common Shares and Warrant Shares, exceeds the number of shares of
Common Stock initially registered is not filed and declared effective within the
time periods set forth in Section 2(a)), or (ii) the Registration Statement is
filed with and declared effective by the Commission but thereafter ceases to be
effective as to all Registrable Securities at any time prior to the expiration
of the Effectiveness Period, without being succeeded immediately by a subsequent
Registration Statement filed with and declared effective by the Commission, or
(iii) the Common Stock is delisted from Nasdaq, or (iv) trading in the Common
Stock is suspended from Nasdaq and the over-the-counter electronic bulletin
board (OTC) for any reason for more than five (5) Business Days, or (v) the
exercise rights of the Holders in regard to the Warrants are suspended for any
reason, or (vi) the Company breaches in a material respect any covenant or other
material term or condition to this Agreement, the Purchase Agreement (other than
a representation or warranty contained therein) or any other agreement,
document, certificate or other instrument delivered in connection with the
transactions contemplated hereby and thereby, and such breach continues for a
period of 30 days after written notice thereof to the Company, or (vii) the
Company has breached Section 3(n) of this Agreement (any such failure or breach
being referred to as an "EVENT"), the Company shall pay in cash as liquidated
damages for such failure and not as a penalty to each Holder an amount equal to
two percent (2%) of such Holder's pro rata share of the purchase price paid by
all Holders for the Preferred Stock purchased pursuant to the Purchase Agreement
for each 30 day period until the applicable Event has been cured, which shall be
pro rated for such periods less than 30 days (the "PERIODIC Amount"). Payments
to be made pursuant to this Section 7(e) shall be due and payable immediately
upon demand in immediately available cash funds. The parties agree that the
Periodic Amount represents a reasonable estimate on the part of the parties, as
of the date of this Agreement, of the amount of damages that may be incurred by
the Holders if the Registration Statement is not filed on or prior to the Filing
Date or has not been declared effective by the Commission on or prior to the
Effectiveness Date and maintained in the manner contemplated herein during the
Effectiveness Period or if any other Event as described herein has occurred.
Amounts payable under this Section 7(e) shall be in addition to any amounts
payable under Section 2(b).
(f) SPECIFIC ENFORCEMENT, CONSENT TO JURISDICTION.
(i) The Company and the Holders acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement or the Purchase Agreement were not performed in accordance with their
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specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement or the Purchase Agreement and to
enforce specifically the terms and provisions hereof or thereof, this being in
addition to any other remedy to which any of them may be entitled by law or
equity.
(ii) Each of the Company and the Holders (i) hereby irrevocably
submits to the jurisdiction of the United States District Court, the New York
State courts and other courts of the United States sitting in New York County,
New York for the purposes of any suit, action or proceeding arising out of or
relating to this Agreement and (ii) hereby waives, and agrees not to assert in
any such suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of such court, that the suit, action or proceeding is
brought in an inconvenient forum or that the venue of the suit, action or
proceeding is improper. The Company and each of the Holders consents to process
being served in any such suit, action or proceeding by mailing a copy thereof to
such party at the address in effect for notices to it under this Agreement and
agrees that such service shall constitute good and sufficient service of process
and notice thereof. Nothing in this paragraph shall affect or limit any right to
serve process in any other manner permitted by law.
(g) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and each of the Holders. Notwithstanding the foregoing, a waiver or consent to
depart from the provisions hereof with respect to a matter that relates
exclusively to the rights of certain Holders and that does not directly or
indirectly affect the rights of other Holders may be given by Holders of at
least a majority of the Registrable Securities to which such waiver or consent
relates; PROVIDED, HOWEVER, that the provisions of this sentence may not be
amended, modified, or supplemented except in accordance with the provisions of
the immediately preceding sentence.
(h) NOTICES. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall 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 over night delivery service, in each case properly addressed to the
party to receive the same. The addresses for such communications shall be with
respect to each Holder at its address set forth under its name on Schedule 1
attached hereto, or with respect to the Company, addressed to:
Company Info: SkyMall, Inc.
Attn: General Counsel
1520 E. Pima Street
Phoenix, Arizona 85034
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or to such other address or addresses or facsimile number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice. Copies of notices to the Issuer shall also be sent to Squire,
Sanders & Dempsey L.L.P., Two Renaissance Square, 40 North Central Avenue, Suite
2700, Phoenix, Arizona 85004. Copies of notices to any Holder shall be sent to
the addresses listed on Schedule 1 attached hereto, if applicable.
(i) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns
and shall inure to the benefit of each Holder and its successors and assigns.
The Company may not assign this Agreement or any of its rights or obligations
hereunder without the prior written consent of each Holder. Each Holder may
assign its rights hereunder in the manner and to the Persons as permitted under
the Purchase Agreement.
(j) ASSIGNMENT OF REGISTRATION RIGHTS. The rights of each Holder
hereunder, including the right to have the Company register for resale
Registrable Securities in accordance with the terms of this Agreement, shall be
automatically assignable by each Holder to any transferee of such Holder of all
or a portion of the shares of the Registrable Securities if: (i) the Holder
agrees in writing with the transferee or assignee to assign such rights, and a
copy of such agreement is furnished to the Company within a reasonable time
after such assignment, (ii) the Company is, within a reasonable time after such
transfer or assignment, furnished with written notice of (a) the name and
address of such transferee or assignee, and (b) the securities with respect to
which such registration rights are being transferred or assigned, (iii)
following such transfer or assignment the further disposition of such securities
by the transferee or assignees is restricted under the Securities Act and
applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this Section 7(j),
the transferee or assignee agrees in writing with the Company to be bound by all
of the provisions of this Agreement, and (v) such transfer shall have been made
in accordance with the applicable requirements of the Purchase Agreement. In
addition, each Holder shall have the right to assign its rights hereunder to any
other Person with the prior written consent of the Company, which consent shall
not be unreasonably withheld. The rights to assignment shall apply to the
Holders (and to subsequent) successors and assigns.
(k) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and, all of which taken together shall constitute one and the same Agreement. In
the event that any signature is delivered by facsimile transmission, such
signature shall create a valid binding obligation of the party executing (or on
whose behalf such signature is executed) the same with the same force and effect
as if such facsimile signature were the original thereof.
(l) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, without regard to
principles of conflicts of law thereof.
(m) CUMULATIVE REMEDIES. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.
17
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(n) SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement is held to be invalid, illegal, void or unenforceable in any
respect, the remainder of the terms, provisions, covenants and restrictions set
forth herein shall remain in full force and effect and shall in no way be
affected, impaired or invalidated, and the parties hereto shall use their
reasonable efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and DECLARED to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
(o) HEADINGS. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
(p) SHARES HELD BY THE COMPANY AND ITS AFFILIATES. Whenever the
consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its Affiliates (other than any Holder or transferees or successors or assigns
thereof if such Holder is deemed to be an Affiliate solely by reason of its
holdings of such Registrable Securities and/or membership on the Company's Board
of Directors) shall not be counted in determining whether such consent or
approval was given by the Holders of such required percentage.
(q) NOTICE OF EFFECTIVENESS. As promptly as possible after the
Registration Statement which includes the Registrable Securities is ordered
effective by the Commission, the Company shall deliver, and shall cause legal
counsel for the Company to deliver, to the transfer agent for such Registrable
Securities (with copies to the Holders whose Registrable Securities are included
in such Registration Statement and Special Counsel) confirmation that the
Registration Statement has been declared effective by the Commission in the form
attached hereto as EXHIBIT A.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights
Agreement to be duly executed by their respective authorized persons as of the
date first indicated above.
SKYMALL, INC.
By: /s/ Robert M. Worsley
---------------------------------------
Name: Robert M. Worsley
Title: President
INVESTOR:
By: /s/
---------------------------------------
Name:
Title:
INVESTOR:
By: /s/
---------------------------------------
Name:
Title:
INVESTOR:
By: /s/
---------------------------------------
Name:
Title:
19
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EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[TRANSFER AGENT]
ATTN:
RE: COMPANY
Ladies and Gentlemen:
We are counsel to SkyMall, Inc., a company incorporated in Nevada (the
"COMPANY"), and have represented the Company in connection with that certain
Stock and Warrant Purchase Agreement (the "PURCHASE AGREEMENT") entered into by
and among the Company and the investors named therein (collectively, the
"INVESTORS") pursuant to which the Company issued to the Investors (i) shares of
its Series B Junior Convertible Preferred Stock, par value $.001 per share (the
"PREFERRED SHARES"), and (ii) warrants to purchase shares of the Common Stock
(the "WARRANTS"). Pursuant to the Purchase Agreement, the Company has also
entered into a Registration Rights Agreement with the Holders (the "REGISTRATION
RIGHTS AGREEMENT") pursuant to which the Company agreed, among other things, to
register the Registrable Securities (as defined in the Registration Rights
Agreement), including the shares of Common Stock issuable upon conversion or
exercise of the Preferred Shares and Warrants, as the case may be, under the
Securities Act of 1933, as amended (the "1933 ACT"). In connection with the
Company's obligations under the Registration Rights Agreement, on ____________
___, 2000, the Company filed a Registration Statement on Form S-3 (File No.
333-_____________) (the "REGISTRATION STATEMENT") with the Securities and
Exchange Commission (the "SEC") relating to the Registrable Securities which
names each of the Investors as a selling stockholder thereunder.
In connection with the foregoing, we advise you that a member of the SEC's
staff has advised us by telephone that the SEC has entered an order declaring
the Registration Statement effective under the 1933 Act at [ENTER TIME OF
EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge, after
telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.
Very truly yours,
[COMPANY'S COUNSEL]
By:
cc: [LIST NAMES OF HOLDERS AND SPECIAL COUNSEL]
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,
January 10, 2000.