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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 19, 2000.
REGISTRATION NO. 333-.....
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM F-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
FOR SECURITIES OF CERTAIN
FOREIGN PRIVATE ISSUERS
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MADGE NETWORKS N.V.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
THE NETHERLANDS
(STATE OR OTHER JURISDICTION
OF INCORPORATION OR ORGANIZATION)
NOT APPLICABLE
(I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
TRANSPOLIS SCHIPHOL AIRPORT
POLARIS AVENUE 23
2132 JH HOOFDDORP
THE NETHERLANDS
(31) 23 5649 123
(ADDRESS AND TELEPHONE NUMBER
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
MICHAEL F. KEILTY
MADGE NETWORKS, INC.
ONE STATE STREET PLAZA, 12TH FL.
NEW YORK, NEW YORK 10004
(212) 709-1000
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
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Copies to:
KIRSTIE HALLGATE, ESQ.
MADGE NETWORKS LTD.
WEXHAM SPRINGS
FRAMEWOOD ROAD, WEXHAM
BERKSHIRE SL3 6PJ ENGLAND
44-1753-661256
NILENE R. EVANS, ESQ.
MORRISON & FOERSTER LLP
1290 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10104
(212) 468-8000
WILLIAM D. SHERMAN, ESQ.
MORRISON & FOERSTER LLP
755 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304
(650) 813-5600
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<S> <C> <C> <C> <C>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT(1) PRICE(2) REGISTRATION FEE
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Debt Securities(3)...................
Common Shares, par value one Dutch
Guilder per share(3).................
Share Purchase Units(3)..............
Share Purchase Contracts(3)..........
Warrants(3)(4).......................
Total................................ $30,000,000 $7,920
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(1) Not applicable pursuant to Form F-3 General Instruction II(C).
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o).
(3) In addition to the securities that are being issued directly under this
registration statement, there are being registered hereunder an
indeterminate number of shares of common shares as may be issued upon
conversion or exchange of the securities issued directly hereunder. No
separate consideration will be received for any common shares so issued upon
conversion or exchange.
(4) Includes warrants to purchase common shares and warrants to purchase debt
securities.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD
NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME AND REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE
ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JANUARY 19, 2000
PROSPECTUS
$30,000,000
MADGE NETWORKS N.V.
DEBT SECURITIES
COMMON SHARES
WARRANTS TO PURCHASE COMMON SHARES
SHARE PURCHASE CONTRACTS
SHARE PURCHASE UNITS
WARRANTS TO PURCHASE DEBT SECURITIES
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission utilizing a "shelf" registration process. The
shelf process allows us to sell any combination of the following securities
described in this prospectus in one or more offerings up to a total dollar
amount of $30,000,000:
- debt securities;
- common shares;
- warrants to purchase common shares;
- share purchase contracts;
- share purchase units; and
- warrants to purchase debt securities.
This prospectus provides you with a general description of the securities
we may offer. Each time we offer securities, we will provide you with a
prospectus supplement containing specific information about the terms of the
securities. The prospectus supplement also may add information or change
information contained in this prospectus.
We may sell the securities to or through underwriters, dealers or agents or
directly to purchasers. The prospectus supplement will set forth the names of
any underwriters, dealers or agents involved in the sale of the securities, and
any applicable fee, commission or discount arrangements with them. See "Plan of
Distribution."
Our common shares trade on the Nasdaq National Market under the symbol
"MADGF".
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INVESTING IN THE SECURITIES WE MAY OFFER INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 2.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
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, 2000
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TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
Madge Networks N.V. ........................................ 1
Risk Factors................................................ 2
Use of Proceeds............................................. 7
Description of Securities That May Be Offered............... 8
Summary of Certain Provisions of the Articles of Association
and Other Matters......................................... 16
Plan of Distribution........................................ 18
Legal Matters............................................... 18
Experts..................................................... 19
Where You Can Find More Information......................... 19
</TABLE>
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FORWARD-LOOKING STATEMENTS
This prospectus includes "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. This Act provides a "safe
harbor" for forward-looking statements to encourage companies to provide
prospective information about themselves so long as they identify these
statements as forward-looking and provide meaningful cautionary statements
identifying important factors that could cause actual results to differ from the
projected results. All statements other than statements of historical fact we
make in this prospectus, prospectus supplement or in any document incorporated
by reference in this prospectus are forward-looking. In particular, the
statements herein that refer to improvements in operating results in 2000,
finding acceptable additional sources of funding and other statements that are
not completely historical are forward-looking statements. Forward-looking
statements reflect our current expectations and are inherently uncertain. Our
actual results could differ materially from those expressed or implied by these
forward-looking statements as a result of various factors, including the risk
factors described elsewhere in this prospectus. For more information on risk,
please refer to the section entitled "Risk Factors" that appears in this
prospectus, as well as to our filings with the Securities and Exchange
Commission on Form 20-F and Form 6-K.
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION DIFFERENT FROM THAT CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO
SELL, AND SEEKING OFFERS TO BUY, SECURITIES ONLY IN JURISDICTIONS WHERE OFFERS
AND SALES ARE PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS
ACCURATE ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF
DELIVERY OF THIS PROSPECTUS OR OF ANY SALE OF OUR SECURITIES.
NO ACTION IS BEING TAKEN IN ANY JURISDICTION OUTSIDE THE UNITED STATES TO
PERMIT A PUBLIC OFFERING OF ANY SECURITIES OR POSSESSION OR DISTRIBUTION OF THIS
PROSPECTUS IN THAT JURISDICTION. PERSONS WHO COME INTO POSSESSION OF THIS
PROSPECTUS IN JURISDICTIONS OUTSIDE THE UNITED STATES ARE REQUIRED TO INFORM
THEMSELVES ABOUT AND TO OBSERVE ANY RESTRICTIONS AS TO THIS OFFERING AND THE
DISTRIBUTION OF THIS PROSPECTUS APPLICABLE TO THAT JURISDICTION.
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MADGE NETWORKS N.V.
Madge Networks N.V. ("Madge or the Company") is a global managed network
services and product solutions provider specializing in mission-critical
enterprise needs. Our goal is to optimize the implementation of enterprises'
voice, video and data networks with the ultimate aim of converging all
networking needs on Internet Protocol (IP) solutions. We operate through two
divisions, Madge.web and Madge.connect, which became separate legal groups at
the end of 1999. Madge.web provides global managed communications and electronic
content delivery, with a focus on supporting the specialized applications of the
financial services and media/publishing industries. Madge.connect is a leading
global supplier of advanced Token Ring local area network and video networking
solutions. We serve our international customer base for our products through a
global network of distributors and resellers and market our managed network
services primarily directly to business customers.
Madge Networks N.V. (Nasdaq: MADGF), a public limited liability company,
was incorporated in The Netherlands in April 1993 and completed an initial
public offering in August 1993. Our registered offices in The Netherlands are
located at Transpolis Schiphol Airport, Polaris Avenue 23, 2132 JH, Hoofddorp,
The Netherlands, and our telephone number is (31) 23 5649 123. Our Director of
Investor and Public Relations is Ms. Lisa Ellis, who may be contacted at One
State Street Plaza, 12th Floor, New York, New York 10004, telephone number (212)
709-1007.
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RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. If any of the following risks actually occur, our business,
financial condition or results of operations could be materially adversely
affected. In that event, the trading price of our securities could decline, and
you may lose part or all of your investment.
RISKS RELATED TO OUR FINANCIAL CONDITION AND OUR BUSINESS
WE HAVE HAD DIFFICULTY MANAGING OUR CHANGING OPERATIONS AND ACQUISITIONS, WHICH
HAS HARMED AND MAY CONTINUE TO HARM OUR BUSINESS
We acquired several businesses over the last five years, including Lannet
Data Communications, Ltd. in November 1995, Teleos Communications, Inc. in
February 1996, Gains International in February 1999 and the Token Ring business
of Olicom A/S in August 1999. These companies previously operated independently,
and we have had some difficulties integrating their operations into our own. We
sold Lannet to Lucent Technologies in August 1998; however, we may experience
integration problems with regard to the remaining entities, which may be similar
to those experienced in the past or possibly new problems. Because of these
acquisitions and changes in our operations, we have continued to reallocate
resources from our pre-acquisition products to our newer offerings. These
reallocations could decrease our revenue. The continuing challenge of managing
our current products and operations may lead us to further readjust our business
priorities and resource allocation. These adjustments could harm our business.
We reorganized our operational and internal reporting structure in 1999
into products and services segments. We now operate through two divisions,
Madge.web and Madge.connect, which became separate legal groups at only the end
of 1999. Madge.web provides global managed communications and electronic content
delivery with a focus on supporting the specialized applications of the
financial services and media/publishing industries. Madge.connect is a global
supplier of our traditional Token Ring local area network and video networking
solutions. This corporate structure, which includes our recent acquisition of
Gains, is untested and our Madge.web market largely unproven. If we are
unsuccessful developing the Madge.connect and Madge.web businesses, our business
and results of operations will be further strained.
The restructuring of our business, the sale of our Token Ring manufacturing
facility and the sale of Lannet resulted in a net reduction in headcount of
approximately two-thirds between July 1997 and September 1998. Previous centers
of business, including San Jose, California, Tokyo and Hong Kong, were
substantially downsized or closed. These events have adversely affected and are
expected to continue to adversely affect our business. The challenge of managing
expenses to changing sources of revenue may lead us to adjust further our
business priorities and resource allocation.
As a result of these acquisitions and ongoing restructuring and downsizing,
including the recent reduction in the headcount of the Madge.connect division,
our management personnel have had increased responsibilities, which has strained
and may continue to strain operational, management, financial and other
resources and weaken our ability to retain employees. In addition, there can be
no assurance that we will successfully integrate any future acquisitions into
our operations.
WE WILL NEED ADDITIONAL FUNDS TO SUPPORT OUR BUSINESS PLAN
We did not generate cash from operations in the year ended December 31,
1999. Although spending levels are influenced by many factors, based upon our
current plans we will need to raise additional capital during the second quarter
of 2000 to meet our anticipated needs for working capital, capital expenditures
and operating losses of Madge.web in its growth phase. During the third quarter
of 1999, we announced plans to invest approximately $85 million in Madge.web
over the next two years. We plan to fund this cash requirement both through
lease funding and other sources of financing and we are currently exploring the
options available to meet these investment plans. There can be no assurance at
this time that our currently projected requirements will be sufficient or that
our requirements will remain the same given the fact our
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business is changing and we actively review business priorities, resource
allocation and new business opportunities. If during such period, or thereafter,
we are not successful in raising additional capital when required in sufficient
amounts and on acceptable terms, these failures would result in our having to
review our current business plans, which might include a significant reduction
in our planned capital expenditures or a sale of a part of our business. If we
raise additional funds through the issuance of equity or convertible debt
securities of the parent company or any subsidiary, the percentage ownership of
our shareholders may be reduced.
OUR REVENUE, EXPENSES, LIQUIDITY AND OPERATING RESULTS ARE SUBJECT TO
SIGNIFICANT FLUCTUATION, WHICH COULD CONTRIBUTE TO DISPARATE QUARTERLY RESULTS
We have experienced quarterly fluctuations in operating results and
anticipate that these fluctuations will continue. Various factors contribute to
this uncertainty, including:
- the timing of operating expenditures;
- the size and timing of customer orders;
- the mix of products sold;
- the mix of distribution channels through which our products are sold;
- economic conditions specific to the personal computer and computer
networking industries including any ongoing impact that Year 2000 issues
may have on the purchase and installment of computer and computer
networking equipment;
- the pattern of end-user purchasing cycles;
- the introduction of new products by us and our competitors; and
- general economic conditions.
We also believe that, in our industry, net sales in the first quarter of
each year are typically weak, and that pattern may be exacerbated as a result of
Year 2000 issues. We generally operate with little backlog in our product
business (Madge.connect) although we sometimes receive end-of-quarter orders
that are not shipped until the following quarter. Madge.web enters into customer
contracts, typically for one year or more, that provide for either monthly or
quarterly payments to be made and as such Madge.web revenue is also subject to
fluctuation as customer contracts end, tariff rates change and new contracts are
signed. Additionally, a significant portion of our operating expenses are fixed
expenditures, based primarily on sales forecasts determined months or years in
advance. If net sales do not meet our expectations in any period, our operating
results will be adversely affected. Moreover, restructuring expenses have
strained and may continue to strain our cash resources. In the nine months ended
September 30, 1999 we did not generate cash from operations. If actual
expenditures exceed estimates or if the timing of the charges changes, we will
expense additional amounts in future quarters. Any one or combination of these
factors and our failure to adequately anticipate their effect could contribute
to wide period-to-period fluctuations and could materially and adversely affect
our business.
WE CONTINUE TO BE DEPENDENT UPON REVENUE GENERATED BY OUR TOKEN RING BUSINESS
Our revenue has largely been derived from the sale and licensing of Token
Ring products and technology. We derived approximately 65%, 65% and 72% of our
net sales from our Token Ring products for the years ended December 31, 1996,
1997 and 1998, respectively. Further, in part as a result of the sale of Lannet
in August 1998, our Token Ring products accounted for 81% of our net sales for
the nine months ended September 30, 1999. Thus, we depend upon the continued
market acceptance of Token Ring and related technologies. But our total sales of
Token Ring adapter cards have declined over for the last two years and we
believe they could continue to decline. If the Token Ring market remains static,
or declines further, our net sales and profitability could further decrease
unless we are successful in our strategy of building market share.
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WE RELY ON THIRD-PARTY SUPPLIERS OF INTERNET CAPACITY, THE INTERRUPTION OR LOSS
OF WHICH WOULD HARM OUR MADGE.WEB OPERATIONS
Madge.web leases transmission capacity from many suppliers, both to link
customers to our network and for other transmissions. We could experience delays
or interruptions in transmission capacity from these suppliers. Additionally, we
may be unable to obtain such services within the requisite time periods or at a
reasonable cost. We may also be unable to purchase international capacity where
it is economically and legally feasible. Any failure to obtain transmission
capacity in a particular jurisdiction or any interruption of local access could
disrupt our service and harm our Madge.web operations and customer
relationships.
LOSS OR MODIFICATION OF OUR RELATIONSHIPS WITH THIRD-PARTY DISTRIBUTORS AND
RESELLERS WOULD HARM OUR OPERATIONS AND SALES
A majority of our product sales are fulfilled and distributed worldwide
through a network of distributors, large system integrators, value-added
resellers and original equipment manufacturers. Our indirect distribution
channels vary by division and from country to country. In the United States, the
distribution channels include major national distributors, such as Ingram Micro,
Inc. and Tech Data Corporation, Inc. In Europe, Asia and other markets, we sell
our products through a combination of locally based and pan-European
distributors and resellers, as well as directly to end-users. We generally do
not have long-term contracts with these distributors and resellers. We must now
also depend on distributors of the former Olicom product line, many of which do
not have an established relationship with us. The loss of a distributor or
reseller in a particular region could impair our operations in that region. Any
resulting declines in sales could decrease revenue. Until alternative
distribution channels could be established, if at all, our business would
suffer. The loss of a number of key sales personnel may affect our ability to
manage our distributors and resellers and continue to secure revenue from them.
OUR PRODUCTS AND SERVICES MAY CONTAIN DEFECTS THAT MAY CAUSE US TO INCUR
SIGNIFICANT COSTS, DIVERT OUR ATTENTION FROM PRODUCT AND SERVICES DEVELOPMENT
AND RESULT IN THE LOSS OF CUSTOMERS
Networking products frequently contain undetected software and hardware
defects when first introduced or as new versions are released. Our products are
complex and defects may occasionally be found. In addition, our products are
often embedded in or deployed in conjunction with our customers' products, which
incorporate a variety of components produced by third parties. We may on
occasion sell products which are manufactured by others and for which we lack
resources and familiarity to trouble-shoot and service effectively. As a result,
when problems occur, it may be difficult to identify the source of the problem.
Our services rely upon an often complex series of network connections and
transmissions, some of which are, or will be brand new and as yet untested. Any
problems that occur may be difficult to identify and rectify given the complex
nature of the networks and transmissions and the third party suppliers involved.
If problems are found in either the products or services division, we may divert
resources to address the problem and may incur significant damages or warranty
and repair costs. We may divert the attention of our engineering personnel from
product and/or services development and we could face significant customer
relation problems or the loss of customers. These problems may then adversely
impact our business.
RETURNS OR WARRANTY COSTS IN EXCESS OF OUR BUDGETED AMOUNTS COULD HARM OUR
REVENUES
The terms of our reseller and distributor relationships subject us to
certain risks. We grant some resellers and distributors limited rights to
exchange unsold products for new purchases. Although we allow for projected
returns, these allowances may not be sufficient to offset product returns in the
future. In addition, we sometimes provide price protection to certain
distributors. A significant decrease in the price of our products, which exceed
the amounts that we have reserved, could have an adverse effect on our operating
results. Moreover, the warranty reserves may not cover actual costs. If any one
of these allowances is inadequate, our revenue could decrease.
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THE LOSS OF THE SERVICES OF OUR MANAGEMENT AND OTHER KEY EMPLOYEES COULD HARM
OUR RESULTS OF OPERATIONS AND INHIBIT GROWTH
Our success depends on the contributions of Robert H. Madge, our principal
founder and chief executive officer. The loss of Mr. Madge's services could harm
our results of operations and competitive position. We also depend upon a
limited number of members of senior management and other key employees. The loss
of the services of key personnel following our 1997 and 1998 restructuring has
compromised and could continue to compromise the efficiency of our operations.
We may also lose key personnel as a result of the restructuring in
Madge.connect. In addition, our acquisitions since 1995 and subsequent
restructurings strained and may continue to strain operational, financial and
other resources and may weaken our ability to attract and retain employees. Due
to the level of technical and management expertise necessary to our industry, we
must recruit and retain highly qualified and well-trained personnel. Competition
for these employees is intense. If we cannot attract and retain qualified
personnel, our business and prospects will suffer.
IF WE FAIL TO ESTABLISH OR MAINTAIN RELATIONSHIPS WITH PARTIES THAT AGREE TO
RESELL OUR PRODUCTS ON AN ORIGINAL EQUIPMENT MANUFACTURER BASIS, OUR REVENUE
WILL DECREASE
We anticipate that a significant portion of our future revenue will be
derived from sales to customers that integrate our products into their own or
resell our products under their own brand names. Therefore, our revenue will be
increasingly dependent upon the ability and willingness of these original
equipment manufacturers to promote products that incorporate our products and
technology. Their ability and willingness to do so is based upon a number of
factors, including:
- our timely development of new products with increased reliability,
functionality, speed and performance at acceptable prices to end users;
- the compatibility of our technology with emerging industry standards;
- general industry competition; and
- overall economic conditions.
Many of these factors are beyond our control. Additionally, these customers
may have profitability or other incentives to promote internal solutions or
competing products in lieu of products incorporating our technology. Sales by
these customers also could compete with our products, possibly hurting our
sales, reducing our margins and adversely affecting the marketability of our
products. Our inability to promote sales through these manufacturers could
decrease our revenue.
We may also enter into agreements to obtain products from another
manufacturer or manufacturers for resale on a Madge-labeled or OEM basis, such
as our agreement with Intel. We are dependent in any such arrangement upon the
manufacturer of products to provide us with timely shipments at a cost-effective
basis, and may also depend upon our OEM supplier for technology, intellectual
property indemnification, support and other assistance. There is no guarantee
that an OEM supplier can or will continue to provide such things on a
cost-effective basis.
WE DEPEND UPON OUR OPERATIONS OUTSIDE OF THE UNITED STATES, WHICH SUBJECT US TO
CURRENCY EXCHANGE RATE FLUCTUATIONS
We derived approximately $300.2 million, $252.6 million, $199.7 million and
$110.8 million, or 62%, 66%, 66% and 77%, of our net sales from operations
outside of the Americas in the years ended December 31, 1996, 1997 and 1998, and
the nine months ended September 30, 1999, respectively. We expect that sales
outside of the United States will continue to represent a majority of our
revenue. A significant portion of this business outside of the United States is
conducted in currencies other than the U.S. dollar. As a result, we are subject
to currency exchange rate fluctuations and the associated difficulty of
administering business globally. Fluctuations in the value of foreign currencies
cause revenue or other numbers tied to the U.S. dollar to change in comparison
with similar numbers in previous periods. Due to the number of currencies
involved, the constantly changing currency exposures, and the substantial
volatility of currency exchange rates, we cannot
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predict the effect of exchange rate fluctuations upon future operating results.
These exchange rate fluctuations could distort the results of our operations.
UNDETECTED YEAR 2000 COMPLIANCE ISSUES COULD STILL HARM OUR BUSINESS
We are still assessing possible impacts of the Year 2000 problem and may
still suffer as a result of defects relating to Year 2000 compliance that have
not yet been detected. Worst-case scenarios for us could include material
difficulties in obtaining finished products from our contract manufacturers,
material difficulties processing orders for our products, material difficulties
with management information systems relied upon by us which might affect
collections, management decisions and financial reporting. There can be no
assurance that Year 2000 issues will not result in disruption to our business
resulting from third party suppliers' or service providers' business disruption,
will not result in additional risks to our product supply, internal systems or
will not result in claims from external users of our products, all of which
could result in a material adverse effect on our business, operating results and
financial position.
RISKS RELATED TO THIS OFFERING
OUR COMMON SHARE PRICE HAS BEEN, AND IS LIKELY TO CONTINUE TO BE, VOLATILE AND
COULD DROP UNEXPECTEDLY
The trading price of our common shares has been volatile and may continue
to be volatile in response to the following factors:
- quarterly variations in our operating results;
- announcements of technical innovations, new products or services by us or
our competitors;
- investor perception of us, the market we operate in or the Internet in
general;
- changes in financial estimates by securities analysts; and
- general economic and market conditions.
The stocks of many technology companies have experienced significant
fluctuations in trading price and volume. Often these fluctuations have been
unrelated to operating performance. Declines in the market price of our common
shares could also materially adversely affect employee morale and retention, our
access to capital and other aspects of our business.
THE SALE OF A SUBSTANTIAL NUMBER OF COMMON SHARES IN THIS OFFERING MAY AFFECT
OUR SHARE PRICE
The market price of our common shares could decline as a result of sales of
substantial amounts of common shares in this offering or the perception that
substantial sales could occur. These sales also might make it difficult for us
to sell equity securities in the future at a time and at a price that we deem
appropriate.
IF OUR SHARE PRICE REMAINS VOLATILE, WE MAY BECOME SUBJECT TO SECURITIES
LITIGATION, WHICH IS EXPENSIVE AND COULD DIVERT OUR RESOURCES
In the past, following periods of market volatility in the price of a
company's securities, security holders have instituted class action litigation.
Many Internet-related companies have been subject to this type of litigation. If
the market value of our common shares experiences adverse fluctuations, and we
become involved in this type of litigation, regardless of the outcome, we could
incur substantial legal costs and our management's attention could be diverted,
causing our business to suffer.
WE MAY USE THE PROCEEDS FROM THIS OFFERING IN WAYS WITH WHICH YOU MAY NOT AGREE
We are not required to allocate the proceeds from this offering to any
specific investment or transaction. Therefore, we have significant flexibility
in applying these proceeds, and you cannot determine the value or propriety of
our use of proceeds. If we do not apply the funds we receive effectively, our
accumulated deficit will increase and we may lose significant business
opportunities. See "Use of Proceeds" in this prospectus and
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the applicable prospectus supplement for a more detailed description of how we
intend to apply the proceeds from this offering.
RISKS RELATED TO OUR CAPITAL STRUCTURE
VARIOUS TRUSTS POSSESS THE ABILITY TO EXERCISE CONTROL OVER US AND COULD HAVE
INTERESTS THAT DIFFER FROM INVESTORS
Various trusts established by Robert Madge, our principal founder and chief
executive officer, indirectly own approximately 47% of the outstanding common
shares. Therefore, the trustees have the power to control or influence matters
submitted for shareholder approval, including the election of directors. Certain
transactions, which also require shareholder approval, will be more difficult to
consummate without the support of the trusts. Such transactions include proxy
contests, acquisitions, tender offers, open market purchase programs or other
purchases of common shares that could give our shareholders the opportunity to
realize a premium over the then-prevailing market price for their shares. In
addition, Mr. Madge personally holds options to purchase common shares, of which
with respect to 1.16% of our outstanding common shares have vested or will vest
within the next 60 days.
OUR CHARTER DOCUMENTS AND THE LAWS OF THE NETHERLANDS COULD MAKE IT MORE
DIFFICULT FOR A THIRD PARTY TO ACQUIRE US
The shareholders have authorized the Management Board to issue preferred
shares and common shares for a fixed period of time without further shareholder
approval. The issuance of such preferred shares and common shares, while
providing flexibility in connection with possible acquisitions and other
corporate purposes, could have the effect of making it more difficult for a
third party to acquire, or of discouraging a third party from acquiring, a
majority of the outstanding voting shares of Madge.
BECAUSE JUDGMENTS ISSUED BY COURTS IN THE UNITED STATES MAY NOT BE ENFORCEABLE
IN THE NETHERLANDS OR ELSEWHERE OUTSIDE THE UNITED STATES, YOU MAY HAVE
DIFFICULTY ASSERTING CLAIMS AGAINST US
Judgments of United States courts, including judgments against us or our
officers and directors based upon allegations of violations of United States
federal or United States state securities laws, may not be enforceable in The
Netherlands or elsewhere outside the United States.
USE OF PROCEEDS
Unless otherwise indicated in the applicable prospectus supplement, we
intend to use the net proceeds from the sale of the securities for general
corporate purposes, including the funding of the expansion of Madge.web.
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DESCRIPTION OF SECURITIES THAT MAY BE OFFERED
We may offer debt securities, common shares, warrants to purchase debt
securities or common shares, share purchase units and share purchase contracts,
or any combination of the foregoing, either individually or as units consisting
of one or more securities. We may offer up to $30 million worth of securities
under this prospectus. If securities are offered as units, we will describe the
terms of the units in a prospectus supplement.
DESCRIPTION OF THE DEBT SECURITIES
We may offer any combination of senior debt securities or subordinated debt
securities. Debt securities are unsecured general obligations of Madge. Senior
debt securities will rank above all subordinated indebtedness and equal to all
other indebtedness outstanding on the date of the prospectus supplement.
Subordinated debt securities will rank in right of payment below all other
indebtedness outstanding at or after the time issued, unless the other
indebtedness provides that it is not senior to the subordinated debt. We may
issue the senior debt securities and the subordinated debt securities under
separate indentures between us, as issuer, and the trustee or trustees
identified in the prospectus supplement. A copy of the form of each type of
indenture has been or will be filed as an exhibit to the registration statement
of which this prospectus is a part. A prospectus supplement will describe the
particular terms of any debt securities we may offer. The following summaries of
the debt securities and the indentures are not complete. We strongly urge you to
read the indentures and the description of the debt securities included in the
prospectus supplement.
GENERAL
The debt securities will have terms that are consistent with the
indentures. Unless otherwise specified in the applicable prospectus supplement,
senior debt securities will be unsecured and unsubordinated obligations of Madge
and will rank equally with all our other unsecured and unsubordinated debt.
Subordinated debt securities will be paid only if all payments due under our
senior indebtedness, including any outstanding senior debt securities, have been
made. The indentures might not limit the amount of other debt that we may incur
and might not contain financial or similar restrictive covenants. The indentures
might not contain any provision to protect holders of debt securities against a
sudden or dramatic decline in our ability to pay our debt. The prospectus
supplement will describe the debt securities and the price or prices at which we
will offer the debt securities. The description will include:
- the title of the debt securities;
- any limit on the aggregate principal amount of such debt securities or
the series of which they are a part;
- the person to whom any interest on a debt security of the series will be
paid;
- the date or dates on which we must pay the principal;
- the rate or rates at which the debt securities will bear interest, if
any, the date or dates from which interest will accrue, and the dates on
which we must pay interest;
- the place or places where we must pay the principal of and any premium or
interest on the debt securities;
- the terms and conditions on which we may redeem any debt security, if at
all;
- any obligation to redeem or purchase any debt securities, and the terms
and conditions on which we must do so;
- the denominations in which we may issue the debt securities;
- the manner in which we will determine the amount of principal of or any
premium or interest on the debt securities;
- the currency in which we will pay the principal of and any premium or
interest on the debt securities;
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- the principal amount of the debt securities that we will pay upon
declaration of acceleration of their maturity;
- the amount that will be deemed to be the principal amount for any
purpose, including the principal amount that will be due and payable upon
maturity or that will be deemed to be outstanding as of any date;
- if applicable, that the debt securities are defeasible;
- if applicable, the terms of any right to convert debt securities into, or
exchange debt securities for, common shares or other securities or
property;
- whether we will issue the debt securities in the form of one or more
global securities and, if so, the respective depositaries for the global
securities and the terms of the global securities;
- the subordination provisions that will apply to the subordinated debt
securities;
- any addition to or change in the events of default applicable to the debt
securities and any change in the right of the trustee or the holders to
declare the principal amount of any of such debt securities due and
payable; and
- any addition to or change in the covenants in the indentures.
We may sell the debt securities at a substantial discount below their
stated principal amount. We will describe special U.S. federal income tax
considerations, if any, applicable to debt securities sold at an original issue
discount in the prospectus supplement. An "original issue discount security" is
any debt security that provides for an amount less than the principal amount to
be due and payable upon the declaration of acceleration of the maturity in
accordance with the terms of the applicable indenture. The prospectus supplement
relating to any original issue discount securities will describe the particular
provisions relating to acceleration of the maturity upon the occurrence of an
event of default. In addition, we will describe certain U.S. federal income tax
or other considerations applicable to any debt securities that are denominated
in a currency or unit other than U.S. dollars in the applicable prospectus
supplement.
CONVERSION AND EXCHANGE RIGHTS
The prospectus supplement will describe, if applicable, the terms on which
you may convert debt securities into or exchange them for common shares or other
securities or property. The conversion or exchange may be mandatory or may be at
your option. We will describe how the number of common shares or other
securities or property to be received upon conversion or exchange would be
calculated.
SUBORDINATION OF SUBORDINATED DEBT SECURITIES
Unless the prospectus supplement indicates otherwise, the following
provisions will apply to the subordinated debt securities. The indebtedness
underlying the subordinated debt securities will be payable only if all payments
due under senior indebtedness, including any outstanding senior debt securities,
have been made. If we distribute our assets to creditors upon any dissolution or
winding-up or liquidation or reorganization or in bankruptcy, insolvency,
receivership or similar proceedings, we must first pay all amounts due or to
become due on all senior indebtedness before we pay the principal of, or any
premium or interest on, the subordinated debt securities. In the event the
subordinated debt securities are accelerated because of an event of default, we
may not make any payment on the subordinated debt securities until we have paid
all senior indebtedness or the acceleration is rescinded. If the payment of
subordinated debt securities accelerates because of an event of default, we must
promptly notify holders of senior indebtedness of the acceleration. We may not
resume payments on the subordinated debt securities until the defaults are cured
or certain periods pass. If we experience a bankruptcy, dissolution or
reorganization, holders of senior indebtedness may receive more, ratably, and
holders of the subordinated debt securities may receive less, ratably, than our
other creditors. The indenture for subordinated debt securities may not limit
our ability to incur additional senior indebtedness.
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GLOBAL SECURITIES
The debt securities may be represented, in whole or in part, by one or more
global securities that will have an aggregate principal amount equal to that of
the debt securities. Each global security will be registered in the name of a
depositary identified in the prospectus supplement. We will deposit the global
security with the depositary or a custodian, and the global security will bear a
legend regarding the restrictions on exchanges and registration of transfer. No
global security may be exchanged in whole or in part for debt securities
registered, and no transfer of a global security in whole or in part may be
registered, in the name of any person other than the depositary or any nominee
of the depositary unless (1) the depositary has notified us that it is unwilling
or unable to continue as depositary or (2) an event of default occurs and
continues with respect to the debt securities. The depositary will determine how
all securities issued in exchange for a global security will be registered. As
long as the depositary or its nominee is the registered holder of a global
security, the depositary or the nominee will be considered the sole owner and
holder of the global security and the underlying debt securities. Except as
stated above, owners of beneficial interests in a global security will not be
entitled to have the global security or any debt security registered in their
names, will not receive physical delivery of certificated debt securities and
will not be considered to be the owners or holders of the global security or
underlying debt securities.
We will make all payments of principal, premium and interest on a global
security to the depositary or its nominee. The laws of some jurisdictions
require that certain purchasers of securities take physical delivery of such
securities in definitive form. These laws may prevent you from transferring your
beneficial interests in a global security. Only institutions that have accounts
with the depositary or its nominee and persons that hold beneficial interests
through the depositary or its nominee may own beneficial interests in a global
security. The depositary will credit, on its book-entry registration and
transfer system, the respective principal amounts of debt securities represented
by the global security to the accounts of its participants.
Ownership of beneficial interests in a global security will be shown only
on, and the transfer of those ownership interests will be effected only through,
records maintained by the depositary or any such participant. The policies and
procedures of the depositary may govern payments, transfers, exchanges and
others matters relating to beneficial interests in a global security. We and the
applicable trustee assume no responsibility or liability for any aspect of the
depositary's or any participant's records relating to, or for payments made on
account of, beneficial interests in a global security.
PAYMENT AND PAYING AGENTS
Unless otherwise stated in the prospectus supplement, we will pay principal
of and any premium or interest on a debt security to the person in whose name
the debt security is registered at the close of business on the regular record
date for such interest. Unless otherwise stated in the prospectus supplement, we
will pay principal of and any premium or interest on the debt securities at the
office of our designated paying agent, except we may pay interest by check
mailed to the address of the person entitled to the payment. Unless we state
otherwise in the prospectus supplement, the corporate trust office of the
trustee will be the paying agent for the debt securities. Any other paying
agents we designate for the debt securities of a particular series will be named
in the prospectus supplement. We may designate additional paying agents, rescind
the designation of any paying agent or approve a change in the office through
which any paying agent acts, but we must maintain a paying agent in each place
of payment for the debt securities. The paying agent will return to us all money
we pay to it for the payment of the principal, premium or interest on any debt
security that remains unclaimed for a specified period. The holder thereafter
may look only to us for payment.
CONSOLIDATION, MERGER AND SALE OF ASSETS
Under the terms of the indentures, we may not consolidate with or merge
into any other person, in a transaction in which we are not the surviving
corporation, or convey, transfer or lease our properties and assets
substantially as an entirety to, any person, unless:
- the successor is a corporation, limited liability company, partnership,
trust or other entity organized and existing under the laws of The
Netherlands, the United States or any state thereof or any other country
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recognized by the United States and assumes our obligations under the
debt securities and the indentures;
- immediately after the transaction, no event of default occurs and
continues; and
- we meet certain other conditions.
EVENTS OF DEFAULT
Each of the following will constitute an event of default under each
indenture:
- failure to pay principal of or any premium on any debt security when due;
- failure to pay any interest on any debt security when due, continued for
a specified number of days;
- failure to deposit any sinking fund payment, when due;
- failure to perform any other covenant in the indenture that continues for
a specified number of days after written notice has been given by the
trustee, or the holders of a specified percentage in aggregate principal
amount of the debt securities of that series;
- certain events in bankruptcy, insolvency or reorganization of Madge
Networks N.V.; and
- any other event of default specified in the prospectus supplement.
If an event of default, other than an event of default as a result of
certain events of bankruptcy, insolvency or reorganization, occurs and
continues, either the trustee or the holders of a specified percentage in
aggregate principal amount of the outstanding securities of that series may
declare the principal amount of the debt securities of that series to be
immediately due and payable. If an event of default occurs as a result of
certain events of bankruptcy, insolvency or reorganization, the principal amount
of all the debt securities of that series automatically will become immediately
due and payable. The holders of a majority in aggregate principal amount of the
outstanding securities of that series may, under certain circumstances, rescind
and annul the acceleration if all events of default, other than the nonpayment
of accelerated principal, have been cured or waived. Except for certain duties
in case of an event of default, the trustee will not be obligated to exercise
any of its rights or powers at the request or direction of any of the holders,
unless the holders have offered the trustee reasonable indemnity. If they
provide this indemnification, the holders of a majority in aggregate principal
amount of the outstanding securities of any series may direct the time, method
and place of conducting any proceeding for any remedy available to the trustee
or exercising any trust or power conferred on the trustee with respect to the
debt securities of that series. No holder of a debt security of any series may
institute any proceeding with respect to the indentures, or for the appointment
of a receiver or a trustee, or for any other remedy, unless (1) the holder has
previously given the trustee written notice of a continuing event of default,
(2) the holders of a specified percentage in aggregate principal amount of the
outstanding securities of that series have made a written request, and the
holders have offered reasonable indemnity to the trustee to institute the
proceeding, and (3) the trustee has failed to institute the proceeding, and has
not received a direction inconsistent with the request within a specified number
of days. Each indenture will include a covenant requiring our officers to
furnish to the trustee annually a statement as to whether, to their knowledge,
we are in default under the indenture and, if so, specifying all such known
defaults.
MODIFICATION AND WAIVER
We and the trustee may amend the indentures with the consent of the holders
of a majority in aggregate principal amount of the outstanding securities of
each series affected by the amendment. However, to the extent discussed in the
prospectus supplement, without the consent of each holder, we may not make any
amendment that would:
- change the stated maturity of the principal of, or any installment of
principal or interest on, any debt security;
- reduce the principal, premium or interest on any debt security;
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- reduce the amount of principal of an original issue discount security or
any other debt security payable upon acceleration of the maturity;
- change the place or currency of payment of principal, premium or interest
on any debt security;
- impair the right to enforce any payment on any debt security;
- in the case of subordinated debt securities, modify the subordination
provisions in a manner materially adverse to their holders;
- in the case of debt securities that are convertible or exchangeable into
other securities of Madge Networks N.V., adversely affect the right of
holders to convert or exchange any of the debt securities;
- reduce the percentage in principal amount of outstanding securities of
any series for which the holders' consent is required;
- reduce the percentage in principal amount of outstanding securities of
any series necessary for waiver of compliance with certain provisions of
the indentures or for waiver of certain defaults; or
- modify provisions with respect to modification and waiver.
The holders of a majority in aggregate principal amount of the outstanding
debt securities of any series may waive, on behalf of the holders of all debt
securities of that series, our compliance with certain restrictive provisions of
the indentures. The holders of a majority in principal amount of the outstanding
debt securities of any series may waive any past default under the indenture
with respect to debt securities of that series, except a default in the payment
of principal of an premium, if any, or interest on any debt security of that
series or in respect of a covenant or provision of the indenture that cannot be
amended without each holder's consent. Except in certain limited circumstances,
we may set any day as a record date for the purpose of determining the holders
of outstanding securities of any series entitled to give or take any direction,
notice, consent, waiver or other action under the indentures. In certain limited
circumstances, the trustee may set a record date for action by holders. To be
effective, the action must betaken by holders of the requisite principal amount
of such debt securities within a specified period following the record date.
DEFEASANCE AND COVENANT DEFEASANCE
To the extent stated in the prospectus supplement, we may elect to apply
the provisions relating to defeasance and discharge of indebtedness, or to
defeasance of certain restrictive covenants in the indentures, to the debt
securities of any series.
NOTICES
We will mail notices to holders of debt securities at the addresses that
appear in the security register.
TITLE
We may treat the person in whose name a debt security is registered as the
absolute owner, whether or not such debt security may be overdue, for the
purpose of making payment and for all other purposes.
DESCRIPTION OF COMMON SHARES
Under our articles of association, we may issue up to 100,000,000 common
shares. On December 31, 1999, there were 40,380,554 common shares outstanding
and 130,000 common shares held in treasury. Each shareholder of record is
entitled to one vote for each common share held on every matter submitted to a
vote of shareholders. Following a resolution by the Board concerning the
reservation to be made for the Company, if any, the shareholders, at a general
meeting of shareholders, may decide upon a distribution of the remainder of our
profits to all shareholders out of nonreserved profits insofar as permitted by
law and taking into account the dividend rights of holders of preferred shares,
if any. In the event of our liquidation, dissolution or winding up, subject to
the liquidation preference of holders of the preferred shares, if any, holders
of common shares
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are entitled to receive, on a pro rata basis, all remaining assets available for
distribution to the holders of common shares. The holders of common shares are
entitled to preemptive rights to purchase a pro rata portion of future common
share offerings; however, the shareholders have conferred on the Management
Board the power to limit or exclude these preemptive rights for a period of five
years. The Management Board has exercised this power to exclude the preemptive
rights to which all holders of outstanding shares and the shares offered by this
prospectus would otherwise be entitled. See "Summary of Certain Provision of the
Articles of Association and Other Matters -- Preemptive Rights."
DESCRIPTION OF THE WARRANTS TO PURCHASE COMMON SHARES
The following summarizes the terms of common share warrants we may issue.
This description is subject to the detailed provisions of a share warrant
agreement that we will enter between us and a share warrant agent we select at
the time of issue. Copies of any share warrant agreement will be filed with the
SEC.
GENERAL
We may issue share warrants evidenced by share warrant certificates under
the share warrant agreement independently or together with any securities we
offer by any prospectus supplement. If we offer share warrants, the prospectus
supplement will describe the terms of the share warrants, including:
- the offering price, if any;
- the number of common shares purchasable upon exercise of one share
warrant and the initial price at which the shares may be purchased upon
exercise;
- the dates on which the right to exercise the share warrants begins and
expires;
- U.S. federal income tax consequences;
- call provisions, if any;
- the currencies in which the offering price and exercise price are
payable; and
- if applicable, the antidilution provisions of the share warrants.
The common shares we issue upon exercise of the share warrants will, when
issued in accordance with the share warrant agreement, be validly issued, fully
paid and nonassessable.
EXERCISE OF SHARE WARRANTS
You may exercise share warrants by surrendering to the share warrant agent
the share warrant certificate, which indicates your election to exercise all or
a portion of the share warrants evidenced by the certificate. Surrendered share
warrant certificates must be accompanied by payment of the exercise price in the
form of cash or a check. The share warrant agent will deliver certificates
evidencing duly exercised share warrants to the transfer agent. Upon receipt of
the certificates, the transfer agent will deliver a certificate representing the
number common shares purchased. If you exercise fewer than all the share
warrants evidenced by any certificate, the share warrant agent will deliver a
new share warrant certificate representing the unexercised share warrants.
NO RIGHTS AS SHAREHOLDERS
Holders of share warrants are not entitled to vote, to consent, to receive
dividends or to receive notice as shareholders with respect to any meeting of
shareholders, or to exercise any rights whatsoever as shareholders of Madge.
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DESCRIPTION OF THE SHARE PURCHASE
UNITS AND SHARE PURCHASE CONTRACTS
The following summarizes the general terms of share purchase units and
share purchase contracts we may issue. The particular terms of any share
purchase units or share purchase contracts we offer will be described in the
prospectus supplement. This description is subject to the share purchase
contracts, and any collateral arrangements and depositary arrangements, relating
to the share purchase contracts or share purchase units. We may issue share
purchase contracts, including contracts obligating holders to purchase from us,
and we to sell to the holders, a specified number of common shares at a future
date or dates. We may fix the consideration per common share at the time we
issue the share purchase contracts, or the consideration may be determined by
referring to a specific formula stated in the share purchase contracts. We may
issue the share purchase contracts separately or as a part of share purchase
units consisting of a share purchase contract and debt securities or debt
obligations of third parties, including U.S. Treasury securities, that secure
the holders' obligations to purchase the common share under the share purchase
contracts. The share purchase contracts may require us to make periodic payments
to the holders of the share purchase units or vice versa. These payments may be
unsecured or refunded on some basis. The share purchase contracts may require
holders to secure their obligations in a specified manner.
DESCRIPTION OF THE WARRANTS TO PURCHASE DEBT SECURITIES
The following summarizes the terms of the debt warrants we may offer. The
debt warrants will be subject to the detailed provisions of a debt warrant
agreement that we will enter into with a debt warrant agent we select at the
time of issue.
GENERAL
We may issue debt warrants evidenced by debt warrant certificates
independently or together with any securities offered by any prospectus
supplement. If we offer debt warrants, the prospectus supplement will describe
the terms of the warrants, including:
- the offering price, if any;
- the designation, aggregate principal amount and terms of the debt
securities purchasable upon exercise of the warrants;
- if applicable, the designation and terms of the debt securities with
which the debt warrants are issued and the number of debt warrants issued
with each debt security;
- if applicable, the date on and after which the debt warrants and the
related securities will be separately transferable;
- the principal amount of debt securities purchasable upon exercise of one
debt warrant and the price at which the principal amount of debt
securities may be purchased upon exercise;
- the dates on which the right to exercise the debt warrants begins and
expires;
- U.S. federal income tax consequences;
- whether the warrants represented by the debt warrant certificates will be
issued in registered or bearer form;
- the currencies in which the offering price and exercise price are
payable; and
- if applicable, any antidilution provisions.
You may exchange debt warrant certificates for new debt warrant
certificates of different denominations and may present debt warrant
certificates for registration of transfer at the corporate trust office of the
debt warrant agent, which will be listed in the prospectus supplement. Warrant
holders do not have any of the rights of holders of debt securities, except to
the extent that the consent of warrant holders may be required for
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certain modifications of the terms of an indenture or form of the debt security,
as the case may be, and the series of debt securities issuable upon exercise of
the debt warrants. In addition, warrant holders are not entitled to payments of
principal of and interest, if any, on the debt securities.
EXERCISE OF DEBT WARRANTS
You may exercise debt warrants by surrendering the debt warrant certificate
at the corporate trust office of the debt warrant agent with payment in full of
the exercise price. Upon the exercise of debt warrants, the debt warrant agent
will, as soon as practicable, deliver the debt securities in authorize
denominations in accordance with your instructions and at your sole cost and
risk. If less than all the debt warrants evidenced by the debt warrant
certificate are exercised, the agent will issue a new debt warrant certificate
for the remaining amount of debt warrants.
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SUMMARY OF CERTAIN PROVISIONS OF THE ARTICLES
OF ASSOCIATION AND OTHER MATTERS
GENERAL MEETINGS OF SHAREHOLDERS
All holders of common shares are entitled personally to attend any general
meeting of shareholders and to cast one vote for each share held. The annual
general meeting of shareholders is required to be held in The Netherlands, no
later than six months after the end of our fiscal year. Other general meetings
may be called by the Board, which shall consist of the members of the management
board and of the supervisory board, or, subject to certain conditions, by the
holders of at least 10% of our outstanding shares. Resolutions at general
meetings of shareholders may be taken only when a quorum of at least 33 1/3% of
the outstanding shares entitled to vote are represented in person or by proxy.
There are no laws currently in effect in The Netherlands or provisions in the
articles of association limiting the rights of non-resident or foreign investors
to hold or vote common shares.
ELECTION AND TENURE OF MANAGING DIRECTORS AND SUPERVISORY DIRECTORS; POWER TO
REPRESENT AND BIND THE COMPANY
Madge has a management board and a supervisory board. The management board
is entrusted with our management. The supervisory board supervises the
management board and the general affairs and business. Our Board as set forth
above consists of the members of the management board and supervisory board. The
number of managing directors and supervising directors is determined from time
to time by the shareholders at the annual general meeting of shareholders.
Vacancies in the management board or supervisory board are filled by the
shareholders, generally at the first general meeting after such vacancy occurs
or is created. Managing directors and supervisory directors serve until the
expiration of their respective terms of office or their resignation, death or
removal, with or without cause, by the shareholders. Members of our management
board will stand for election at each annual general meeting of shareholders. In
accordance with our articles of association, the supervisory board has adopted a
retirement plan such that the supervisory board is effectively divided into
three classes, with staggered three-year terms. As a result, only one-third of
the supervisory board will be elected at each annual general meeting of
shareholders, with the other classes continuing for the remainder of their
respective three-year terms. This classification of the supervisory board may
make it more difficult for our shareholders to replace the supervisory board but
should not be construed to operate as staggered boards do in the United States.
In addition, because Netherlands law permits perpetual terms for members of
boards and because approximately 47% of our outstanding common shares are owned
by various trusts established by Robert Madge, the trustees of these trusts will
have significant control or influence to change or make perpetual the terms of
office of members of our management and supervisory boards.
ANNUAL FINANCIAL STATEMENTS AND DIVIDENDS
Within five months after the close of our fiscal year, the management board
is required to submit to the shareholders a report of management with respect to
such fiscal year and our financial statements for such year, accompanied by a
certificate of an independent accountant on such financial statements. The
annual financial statements are submitted for adoption by the shareholders at
the annual general meeting of shareholders, which must be held no later than six
months after the close of our fiscal year. Under our articles of association,
the unconditional adoption of the annual financial statements constitutes a
discharge of the management board for the matters disclosed in such financial
statements.
Under our articles of association, the Board may set aside as reserves a
part or all of our annual profits. The amount reserved is not available for the
distribution of dividends. The general meeting of shareholders is entitled to
decide upon a distribution of our profits to all shareholders out of nonreserved
profits insofar as permitted by law and taking into account the dividend rights
of holders of preferred shares, if any. Dividends may be paid either in cash or
in kind. There are no laws currently in force in The Netherlands or provisions
of our Articles of Association restricting payment of dividends to holders of
common shares not resident in The Netherlands.
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LIQUIDATION RIGHTS
In the event of our liquidation, the assets remaining after payment of all
debts, liquidation expenses and taxes are to be distributed ratably to the
holders of common shares, subject to prior liquidation rights of the preferred
shares, if any, then outstanding.
PREEMPTIVE RIGHTS
Under the articles of association, the holders of common shares have
preemptive rights with regard to common shares, to be issued pro rata in
proportion to the aggregate par value of the common shares held. The holders of
preferred shares have no preemptive rights.
Preemptive rights in respect of common shares may be limited or precluded
by resolution of a general meeting of shareholders. Preemptive rights may also
be limited or precluded by a resolution of another body of the Company if
shareholders have conferred such power on another such body of the Company. Such
power may be conferred on such other body of the Company for a maximum period of
five years and may from time to time be extended, but never for a period longer
than five years.
The management board currently has the authority to limit or exclude
preemptive rights with respect to common shares issued until June 2004. The
management board has exercised such right to preclude the exercise of preemptive
rights with respect to all issued common shares and the common shares offered by
this prospectus.
REPURCHASE BY US OF OUR OWN SHARES
Subject to certain restrictions contained in Netherlands law and our
articles of association, the shareholders have delegated to the management board
the authority to cause us to purchase our own fully-paid shares in an amount not
to exceed 10% of the outstanding shares in any year. Such authorization is valid
through December 2001.
ISSUANCE OF ADDITIONAL SHARES
Our authorized but unissued shares may be issued at such time, and on such
conditions, as may be authorized by the shareholders or by the board, if
authorized by the shareholders, for a maximum of five years. The shareholders
have authorized the Management Board to issue all common shares and preferred
shares of the Company until June 2004.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar of the common shares is ChaseMellon
Shareholder Services, New York, New York.
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PLAN OF DISTRIBUTION
We may sell the securities through underwriters or dealers, through agents,
or directly to one or more purchasers. The applicable prospectus supplement will
describe the terms of the offering of the securities, including:
- the name or names of any underwriters, if any;
- the purchase price of the securities and the proceeds we will receive
from the sale;
- any underwriting discounts and other items constituting underwriters'
compensation;
- any initial public offering price;
- any discounts or concessions allowed or reallowed or paid to dealers; and
- any securities exchange or market on which the securities may be listed.
Only underwriters named in the prospectus supplement are underwriters of
the securities offered by the prospectus supplement. If underwriters are used in
the sale, they will acquire the securities for their own account and may resell
them from time to time in one or more transactions at a fixed public offering
price or at varying prices determined at the time of sale.
We may offer the securities to the public through underwriting syndicates
represented by managing underwriters or by underwriters without a syndicate.
Subject to certain conditions, the underwriters will be obligated to purchase
all the securities of the series offered by the prospectus supplement. Any
public offering price and any discounts or concessions allowed or reallowed or
paid to dealers may change from time to time.
We may sell securities directly or through agents we designate from time to
time. We will name any agent involved in the offering and sale of securities and
we will describe any commissions we will pay the agent in the prospectus
supplement. Unless the prospectus supplement states otherwise, an agent will act
on a best efforts basis for the period of its appointment.
We may authorize agents or underwriters to solicit offers by certain types
of institutional investors to purchase securities from us at the public offering
price set forth in the prospectus supplement pursuant to delayed delivery
contracts providing for payment and delivery on a specified date in the future.
We will describe the conditions to these contracts and the commissions we must
pay for solicitation of these contracts in the prospectus supplement.
We may provide agents and underwriters with indemnification against certain
civil liabilities, including liabilities under the Securities Act, or
contribution with respect to payments that the agents or underwriters may make
with respect to such liabilities.
Agents and underwriters may engage in transactions with, or perform
services for, us in the ordinary course of business.
All securities we offer other than certain common shares held in our
treasury will be new issues of securities with no established trading market.
Any underwriters may make a market in these securities, but will not be
obligated to do so and may discontinue any market making at any time without
notice. We cannot guarantee the liquidity of the trading markets for any
securities.
LEGAL MATTERS
Certain legal matters in connection with the securities offered hereby will
be passed upon by Morrison & Foerster LLP, Palo Alto, California. The validity
of the common shares offered hereby, and all other matters of Netherlands law
will be passed upon by Allen & Overy, Amsterdam, The Netherlands.
18
<PAGE> 22
EXPERTS
Ernst & Young, independent auditors, have audited our consolidated
financial statements and schedule included in our Annual Report on Form 20-F for
the year ended December 31, 1998, as set forth in their report, which is
incorporated by reference in this prospectus and registration statement. Our
financial statements and schedule are incorporated by reference in reliance on
Ernst & Young's report, given on their authority as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934 and file reports, proxy statements and other information with the
Securities and Exchange Commission. Such reports, proxy statements and other
information, as well as the registration statement and the exhibits and
schedules thereto, may be inspected, without charge, at the public reference
facility maintained by the Securities and Exchange Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, NW, Washington, D.C. 20549, and at the
Securities and Exchange Commission's regional offices located at Seven World
Trade Center, New York, New York 10048 and Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material may
also be obtained from the Public Reference Section of the Securities and
Exchange Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. All of our filings beginning with our Quarterly Report on Form
6-K for the Quarter Ended July 4, 1999 can also be inspected on the Securities
and Exchange Commission's Web site at www.sec.gov.
We have filed with the Securities and Exchange Commission a registration
statement on Form F-3 under the Securities Act of 1933 with respect to the
securities offered hereby. This prospectus does not contain all of the
information set forth in the registration statement, certain portions of which
are omitted as permitted by the rules and regulations of the Securities and
Exchange Commission. You may inspect and copy the registration statement,
including exhibits, at the Securities and Exchange Commission's public reference
facilities or Web site.
The SEC allows us to "incorporate by reference" into this prospectus the
information we file with it. This means that we can disclose important
information to you by referring you to those documents. The information we
incorporate by reference is considered a part of this prospectus, and later
information we file with the SEC will automatically update and supersede this
information. We incorporate by reference the documents listed below and any
future filings we make with the SEC under Section 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934 until this offering is completed:
- Annual Report on Form 20-F for the year ended December 31, 1998;
- Quarterly Report on Form 6-K for the quarter ended April 4, 1999;
- Report on Form 6-K attaching the Notice and Proxy Statement for the
Annual General Meeting of Shareholders in June 1999;
- Quarterly Report on Form 6-K for the quarter ended July 4, 1999; and
- Quarterly Report on Form 6-K for the quarter ended October 1, 1999.
You may obtain copies of these documents, other than exhibits, free of
charge by contacting our Director of Investor and Public Relations, Ms. Lisa
Ellis, at One State Street Plaza, 12th Floor, New York, New York 10004,
telephone number (212) 709-1007. You should rely only on the information
incorporated by reference or provided in this prospectus or any prospectus
supplement. We have not authorized anyone else to provide you with different
information. You should not assume that the information in this prospectus or
any prospectus supplement is accurate after the date on the front of the
prospectus or prospectus supplement.
19
<PAGE> 23
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Expenses in connection with the issuance and distribution of the securities
to be registered hereunder, all of which will be paid by us, will be
substantially as follows (all amounts are estimated except the Securities and
Exchange Commission registration fee.
<TABLE>
<CAPTION>
ITEM AMOUNT
---- ---------
<S> <C>
Securities and Exchange Commission registration fee......... $7,920.00
Accounting fees and expenses................................ *
Trustee fees................................................ *
Rating agency fees.......................................... *
Legal fees and expenses..................................... *
Transfer agent fees and expenses............................ *
Printing and engraving expenses............................. *
Miscellaneous expenses...................................... *
---------
Total............................................. $ *
=========
</TABLE>
- ---------------
* To be provided by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The registrant has indemnification agreements with its directors and
officers providing for limitations on a director's and officer's liability for
damages, judgments, settlements, payments, fines, awards or costs and expenses
of defense (including attorney's fees, bonds and costs of investigation) arising
out of or in any way related to acts or omissions as a director or an officer,
or in any other capacity in which services are rendered to the registrant or to
any entity in which the registrant owns an equity interest. The registrant
believes its indemnification agreements will assist it in attracting and
retaining qualified individuals to serve as directors and officers. The
agreements provide that a director officer is not entitled to indemnification in
circumstances in which he has been found to have committed an intentionally
wrongful act or has been grossly negligent. Indemnification may not be available
for certain violations of federal securities law or actions brought under
Netherlands law and may be determined by the United States or Netherlands courts
to be unenforceable in such circumstances.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <S>
1.1* Proposed Form of Underwriting Agreement
4.1* Form of Indenture
4.2* Form of Warrant to Purchase Common Shares
4.3* Form of Share Purchase Contract
4.4* Form of Warrant to Purchase Debt Securities
5.1* Opinion of Allen & Overy
23.1* Consent of Allen & Overy (included in Exhibit 5.1)
23.2 Consent of Ernst & Young, Independent Auditors
</TABLE>
- ---------------
* To be filed by amendment or as an exhibit to a report pursuant to Section
13(a) or 15(d) of the Exchange Act.
II-1
<PAGE> 24
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes the following :
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement 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) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for the purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or 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 in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing of the offering specified in the Underwriting Agreement,
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser.
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 Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 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 Securities
Act of 1933 and will be governed by the final adjudication of such issue.
II-2
<PAGE> 25
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL
OF THE REQUIREMENTS FOR FILING ON FORM F-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE NETHERLANDS, ON JANUARY 19, 2000.
MADGE NETWORKS N.V.
By: ROBERT H. MADGE
------------------------------------
ROBERT H. MADGE
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
------------------------
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints and hereby authorizes Robert H. Madge and
Christopher Bradley, severally, such person's true and lawful attorneys-in-fact,
with full power of substitution or resubstitution, for such person and in such
person's name, place and stead, in any and all capacities, to sign on such
person's behalf, individually and in each capacity stated below, any and all
amendments, including post-effective amendments to this registration statement
and to sign any and all additional registration statements relating to the same
offering of securities as this registration statement that are filed pursuant to
Rule 462(b) of the Securities Act of 1933, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact, full
power and authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as such person might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact, or the substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
------------------------
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AS OF JANUARY 19, 2000.
<TABLE>
<CAPTION>
NAME AND SIGNATURES TITLE
------------------- -----
<S> <C>
ROBERT H. MADGE Chairman of the Board and Chief Executive
- --------------------------------------------- Officer
ROBERT H. MADGE (Principal Executive Officer)
CHRISTOPHER BRADLEY Chief Financial Officer
- --------------------------------------------- (Principal Financial Officer)
CHRISTOPHER BRADLEY
Supervisory Director
- ---------------------------------------------
MICHAEL D. FISHER
CHARLES A. LYNCH Supervisory Director
- ---------------------------------------------
CHARLES A. LYNCH
DENIS A. POMROY Supervisory Director
- ---------------------------------------------
DENIS A. POMROY
MICHAEL F. KEILTY Authorized Representative
- --------------------------------------------- in the United States
MICHAEL F. KEILTY
</TABLE>
II-3
<PAGE> 26
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ------------------------------------------------------------
<C> <S>
*1.1 Proposed Form of Underwriting Agreement
*4.1 Form of Indenture
*4.2 Form of Warrant to Purchase Common Shares
*4.3 Form of Share Purchase Contract
*4.4 Form of Warrant to Purchase Debt Securities
*5.1 Opinion of Allen & Overy
*23.1 Consent of Allen & Overy (included in Exhibit 5.1)
23.2 Consent of Ernst & Young, Independent Auditors
</TABLE>
- ---------------
* To be filed by amendment or as an exhibit to a report pursuant to Section
13(a) or 15(d) of the Exchange Act.
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement on Form F-3 (No. 333- ) and related prospectus of
Madge Networks N.V. for the registration of the securities listed on the facing
sheet and to the incorporation by reference therein of the reference to our firm
in "Item 8 Selected Financial Data" and of our report dated January 22, 1999,
with respect to the consolidated financial statements and schedule of Madge
Networks N.V. included in its Annual Report on Form 20-F for the year ended
December 31, 1998, filed with the Securities and Exchange Commission.
/s/ Ernst & Young
Reading, England
January 18, 2000
