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As filed with the Securities and Exchange Commission on August 10, 1998
Registration No. 333-60121
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
AMENDMENT NO. 2 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FOUR MEDIA COMPANY
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 7819 95-4599440
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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2813 WEST ALAMEDA AVENUE
BURBANK, CALIFORNIA 91505
(818) 840-7000
(Address, including ZIP code, and telephone number, including area code,
of Registrant's Principal Executive Offices)
ROBERT T. WALSTON
2813 WEST ALAMEDA AVENUE
BURBANK, CALIFORNIA 91505
(818) 840-7000
(Name, address, including ZIP code, and telephone number, including area code,
of Agent for service)
Copy to:
PAULA J. PETERS, ESQ.
GREENBERG GLUSKER FIELDS CLAMAN & MACHTINGER LLP
1900 AVENUE OF THE STARS, SUITE 2100
LOS ANGELES, CALIFORNIA 90067
(310) 553-3610
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED
SALE OF THE SECURITIES TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
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. [ ]
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, AS AMENDED, 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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PROSPECTUS
FOUR MEDIA COMPANY
324,268 SHARES OF COMMON STOCK
The shares offered hereby (the "Registrable Shares") consist of 324,268
shares of common stock, $.01 par value per share (the "Common Stock"), of Four
Media Company ("4MC" or the "Company"), which are owned by the selling
shareholders listed herein under "Selling Security Holders" (collectively, the
"Selling Shareholders"). The Registrable Shares are being offered by the
Selling Shareholders. See "Selling Security Holders." The Company shall pay
its own legal and accounting fees, all registration and filing fees attributable
to the registration of the Registrable Shares, all legal fees and filing fees
relating to state securities or "blue sky" filings, the filing fee payable to
the Nasdaq Stock Market's National Market ("Nasdaq") and all printing fees
Cincurred in connection herewith. The Company will not receive any of the
proceeds from the sale of the Registrable Shares by the Selling Shareholders.
The Selling Shareholders have not informed the Company of any specific
plans for the distribution of the Registrable Shares covered by this Prospectus,
but it is anticipated that the Registrable Shares will be sold from time to time
primarily in transactions (which may include block transactions) on Nasdaq at
the market price then prevailing, although sales may also be made in negotiated
transactions or otherwise. The Selling Shareholders and the brokers and dealers
through whom sale of the Registrable Shares may be made may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"), and their commissions or discounts and other compensation may
be regarded as underwriters' compensation. See "Plan of Distribution."
On August 6, 1998, the last reported sale price of the Company's Common
Stock on Nasdaq (where it trades under the symbol "FOUR") was $6.75 per share.
SEE `RISK FACTORS' BEGINNING ON PAGE 5 OF THIS PROSPECTUS FOR CERTAIN
INFORMATION RELATING TO THE SALE OF THE SHARES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
August 10, 1998
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AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "SEC" or the "Commission"). Reports,
proxy statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W. Washington, D.C. 20549, and at the Commission's Regional
Offices at Seven World Trade Center, 13th Floor, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material can be obtained by mail from the Public Reference
Section of the Commission at 450 West Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The reports, proxy statements and other information
may also be obtained from the Web site that the Commission maintains at The
Company's Common Stock is listed on Nasdaq and such materials may be inspected
at the offices of Nasdaq, National Association of Securities Dealers, Inc., 1735
K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act with respect to the
securities offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which were
omitted in accordance with the rules and regulations of the Commission. For
further information, reference is hereby made to the Registration Statement.
Any statements contained herein concerning the provisions of any document filed
as an exhibit to the Registration Statement or otherwise filed with the
Commission are not necessarily complete, and in each instance reference is made
to the copy of such document so filed. Each such statement is qualified in its
entirety by such reference.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the fiscal year ended August 3,
1997;
2. The Company's quarterly reports on Form 10-Q for the fiscal quarters ended
November 2, 1997, January 31, 1998 and May 3, 1998;
3. The description of the Company's Common Stock contained in the Company's
Report on Form 8-A, filed January 31, 1997; and
4. The Company's Current Reports on Form 8-K dated February 2, 1998 and May 4,
1998 (each as amended on Form 8-K/A).
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All other documents filed by the Company pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to
the filing of a post-effective amendment which indicates that all securities
offered have been sold or which deregisters all securities then remaining
unsold, shall be deemed to be incorporated by reference in this Prospectus and
to be a part hereof from the date of filing such documents.
Any statement contained in this Prospectus or in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained in this Prospectus or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person, including any
beneficial owner of Registrable Shares, to whom a copy of this Prospectus is
delivered, upon the written or oral request of such person, a copy of any and
all information that has been incorporated by reference in the Prospectus not
including exhibits to the information that is incorporated by reference (unless
such exhibits are specifically incorporated by reference into such documents).
Requests should be directed to the Company's Secretary at the Company's
principal offices located at 2813 W. Alameda Avenue, Burbank, California 90505.
The telephone number is (818) 840-7000.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained herein regarding matters that are not
historical facts are forward-looking statements (within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act). Because such
forward-looking statements include risks and uncertainties, actual results may
differ materially from those expressed or implied by such forward-looking
statements. Factors that could cause actual results to differ materially
include, but are not limited to, those discussed under "RISK FACTORS."
RISK FACTORS
Prospective investors should carefully consider the risk factors set forth
below, as well as the other information contained or incorporated by reference
in this Prospectus, in evaluating an investment in the securities offered
hereby. This Prospectus contains certain forward-looking statements that
involve risks and uncertainties. The Company's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including those set forth below and elsewhere in this
Prospectus.
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LOSS OF RELATIONSHIPS WITH KEY CUSTOMERS
Revenue Concentration. A significant portion of the Company's revenues is
derived from a small number of customers. The Company's ten largest customers
accounted for 57.4% and 52.0% of total revenues in fiscal 1996 and 1997,
respectively. In addition, 29.5% and 38.8% of the Company's revenues were
generated by the six major domestic studios (Disney, Universal, Sony Pictures,
Viacom/Paramount, Warner Bros./Turner and Twentieth Century Fox) in fiscal 1996
and 1997, respectively. Except for MTV Asia, TVN and a limited number of other
customers, none of 4MC's customers has a long-term contractual relationship with
the Company whereby the customer is obligated to purchase any specified level of
services from the Company. Accordingly, there can be no assurance that revenues
generated from these customers, individually or in the aggregate, will reach or
exceed historical levels in any future period. Any substantial decrease in
services provided to one or more of these customers would have a material
adverse effect on the Company's results of operations and financial condition.
Relationship with MTV Asia. MTV Asia, partially owned by Viacom Inc.,
accounted for 15% and 13% of the Company's consolidated revenues in fiscal 1996
and 1997, respectively. 4MC Asia provides broadcast services to MTV Asia under
a contract which expires in April 2002 and provides for certain minimum
performance standards including, among other things, maintenance by 4MC Asia of
specified staffing levels and on-air reliability. MTV Asia has the right to
terminate the contract at any time if, among other things, 4MC Asia fails to
meet the performance standards or certain key employees cease to be employed by
the Company. See "Risk Factors -- Dependence on Key Personnel." MTV Asia also
has the right to terminate the contract any time after April 14, 2000 upon
payment of specified amounts to 4MC Asia. Termination of the MTV Asia contact
would have a material adverse effect on the Company's results of operations and
financial condition. Further, there can be no assurance that the MTV Asia
contract will be renewed upon expiration. Any such failure to renew could have
a material adverse effect on the Company's business.
Relationship with TVN. TVN, a pay-per-view service that provides movies,
sporting events and concerts to satellite dish owners and certain cable systems,
accounted for 7% and 4% of the Company's revenues during fiscal 1996 and 1997,
respectively. The Company provides broadcast services to TVN under a contract
which expires in January 1999. In August 1997, the Company and TVN entered into
a letter agreement pursuant to which TVN agreed to pay $2,300,000 of outstanding
accounts receivable on or prior to December 31, 1997 (which amount was timely
paid) and to pay $4,436,337 of additional outstanding accounts receivable, with
10% interest thereon, in 60 equal monthly installments of $98,972.01 commencing
March 31, 1998, with no principal or interest payments due from August 19, 1997
to March 30, 1998. In addition, TVN and the Company agreed to negotiate in
good faith the terms of an expanded service contract in connection with TVN's
recently-implemented digital technology. The Company agreed to these terms in
view of: (i) the revenues historically collected by the Company from the TVN
relationship; (ii) the prospect of new services based upon TVN's expansion; and
(iii) the complementary nature of TVN's requirements with the Company's
anticipated conversion of its broadcast infrastructure from analog to digital
technology. TVN is current with respect to its payment obligations under the
August 1997 letter agreement. In
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addition, TVN has paid the Company $2,604,112 of the $5,050,000 billed by the
Company for broadcast services rendered since August 4, 1997. The Company is
currently negotiating with TVN the terms of an expanded service contract. There
can be no assurance, however, that TVN will ultimately repay all outstanding
amounts due to the Company, fulfill its obligations under the August 1997 letter
agreement or reach agreement with the Company with respect to a new service
contract.
Minimum Performance Standards; Possible Termination of Contracts or
Liquidated Damages. Most of the Company's customer contracts, including those
with MTV Asia and TVN, contain provisions that require the Company to meet
specified performance standards. Failure to meet specified performance
standards could result in the termination of the contract and payment of
liquidated damages, the amount of which depends on the nature and duration of
the nonperformance.
Conversion to In-House Operations. Many of the major studios and other
customers of the Company have substantial capabilities to perform several or all
of the services offered by the Company, and evaluate from time-to-time whether
to perform those services in-house. For example, in 1995, The Disney Channel, a
subsidiary of The Walt Disney Company, changed its operating strategy and moved
its network origination and uplink operations in-house. The Disney Channel
accounted for 6%, 4%, and 1% of the Company's revenues in fiscal 1994, 1995 and
1996, respectively. A decision by other major customers to move in-house
services they currently purchase from the Company could have a material adverse
effect on the Company's results of operations.
INCURRENCE OF SUBSTANTIAL INCREMENTAL COSTS AND CAPITAL EXPENDITURES PRIOR TO
GENERATION OF REVENUES
The Company incurs substantial incremental costs (primarily labor) and
makes significant capital expenditures prior to generating revenues. For
example, the Company has expanded its television services operations, which has
increased labor and depreciation expense significantly, through the addition of
new personnel at increased compensation levels and through the purchase of new
equipment and the construction of infrastructure. The Company incurs such costs
before the equipment and infrastructure generate revenues or achieve capacity
utilization and before the new services gain market acceptance. The incurrence
of incremental costs prior to the generation of revenues will have an immediate
adverse effect on the Company's net income. In addition, the Company may elect
to discontinue services that fail to generate sufficient levels of revenue and
write off the net book value of the assets related to such services. Failure of
the Company to generate anticipated levels of revenue or the write-off of assets
would have an immediate and adverse effect on the Company's results of
operations and financial condition.
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RISK OF IMPLEMENTING NEW TECHNOLOGY; TECHNOLOGICAL OBSOLESCENCE
A key growth strategy of the Company is to integrate new systems and
equipment in its facilities and offer new services to customers. The Company
may experience difficulties in deploying new technologies that could delay or
prevent the successful introduction of new services. There can be no assurance
that the deployment of new technology or introduction of new services by the
Company will achieve market acceptance. Failure of the Company to implement new
technology and develop new services successfully or the failure of new
technology and services to achieve market acceptance could have a material
adverse effect on the Company's results of operations.
The systems and equipment utilized by the Company in providing certain
services to customers are subject to rapid technological change and
obsolescence, as well as evolving customer needs and industry standards. In
addition, the Company's competitors may introduce services embodying new
technology which could render the Company's existing services obsolete or
unmarketable. The Company thus may be required to undertake significant capital
expenditures to maintain its technological and competitive position in the
industry. There can be no assurance that the Company will have sufficient
capital or be able to obtain sufficient financing to fund such capital
expenditures, or that subsequent technological change will not make acquired
infrastructure obsolete before the Company recovers its investment.
DEPENDENCE ON KEY PERSONNEL
The Company's future success depends in large part on the continued service
of its executive officers, its key creative artists and skilled technicians, and
other key personnel. A significant percentage of the Company's revenues can be
attributed to services requiring highly compensated creative technicians. In
some instances, certain of the Company's customers specify by name the personnel
that are to work on their projects. Competition for highly qualified employees
is intense and the process of locating key technical, creative and management
personnel with the combination of skills and attributes required to execute the
Company's strategy is often lengthy. There can be no assurance that the Company
will continue to attract, motivate and retain key personnel. Failure by the
Company to retain and attract qualified key personnel could have a material
adverse effect on the Company's business and results of operations.
4MC Asia's contract with MTV Asia permits MTV Asia to terminate the
contract if both Robert T. Walston, Chairman and Chief Executive Officer, and
Gavin W, Schutz, Vice President and Chief Technology Officer, cease to be
employed by the Company and replacements acceptable to MTV Asia are not found.
Termination of this agreement would have a material adverse effect on the
Company's results of operations and financial condition. The Company's bank
line of credit similarly requires that all of Robert Walston, Gavin Schutz,
Robert Bailey and John Donlon, or replacement officers acceptable to the lending
banks, continue their full time employment by the Company.
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RISKS OF ACQUISITION GROWTH STRATEGY
Ability to Implement Strategy. An important element of the Company's
growth strategy is the acquisition of complementary businesses which may enhance
the Company's operations and profitability. Execution of its growth strategy
requires the Company's existing management to, among other things: (i) identify
acquisition candidates for sale at reasonable prices; (ii) obtain financing for
acquisitions; (iii) consummate identified acquisitions; (iv) hire, train and
assimilate new personnel; and (v) in some instances, invest substantial funds to
enhance the capabilities of the acquired business. There can be no assurance
that the Company will successfully identify, finance, consummate or assimilate
acquisitions. Further, the Company's focus on acquisition opportunities could
lessen the effectiveness of management with respect to existing operations,
which could have a material adverse effect on the Company's results of
operations. In addition, certain of the Company's competitors may seek to
acquire some of the same types of companies that the Company seeks to acquire.
Such competition for acquisitions may increase acquisition prices and related
costs and result in fewer acquisition opportunities, which could have a material
adverse effect on the Company's growth. The Company has entered into an
agreement that provides for an exclusive negotiating period for a potential
acquisition. The Company has not completed its due diligence with respect to
such potential acquisition and there can be no assurance that the Company will
be successful in consummating the transaction if it continues to pursue this
opportunity.
Potential Adverse Financial Impacts of Acquisitions. With respect to
certain of the Company's past acquisitions, it generally has taken two years
before the necessary balance sheet restructuring, consolidation with the
Company's existing operations and/or repositioning of marketing strategies,
personnel or equipment has been achieved and the acquisition has been successful
from a financial and operational perspective. The Company expects that certain
of its future acquisitions will take an equal or longer period of time to become
successful, if they ever are successful. Accordingly, the Company expects that
certain future acquisitions could have a material adverse effect on the
business, results of operations and financial condition of the Company for a
minimum period of two years. The Company expects that its future acquisitions
often will involve the recording of a significant amount of goodwill and
deferred charges on its balance sheet. In addition, the Company also might
record deferred charges related to noncompetition agreements. Amortization of
goodwill and deferred charges will reduce net income. The Company may issue
equity securities to finance all or a portion of future acquisitions, which may
have a dilutive effect on the Company's earnings and net tangible book value per
share.
POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
The Company has experienced significant quarterly fluctuations in operating
results and anticipates that these fluctuations will continue. These
fluctuations have been caused by a number of factors, including: (i) with
respect to the Company's studio division, seasonal and sometimes fluctuating
demand for programming by international broadcasters and other content buyers,
increased labor costs and uneven capacity utilization due to delays caused by
factors
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outside the Company's control (for example, changes in customers' production key
personnel; (ii) with respect to the Company's broadcast division, the expiration
of month-to-month service contracts, the unpredictable use of the Company's
facilities for the broadcast of news stories and special events, and the
inability of the Company to remarket its unused transponder capacity
consistently; (iii) with respect to the Company's television division, the
unpredictability of television production schedules; and (iv) with respect to
the Company's film division, the absorption by the Company of cost overruns in
fixed price contracts and delays in meeting completion deadlines (for reasons
other than the fault of the Company). The Company therefore believes that
quarter-to-quarter comparisons of its results of operations are not necessarily
meaningful and should not be relied upon as indications of future performance.
COMPETITION
The Company experiences intense competition in each of its divisions.
Although the Company believes no one competitor offers a comparable range of
services, some of the Company's current and potential competitors, particularly
those production companies that perform services in-house, have substantially
greater financial, technical, creative, marketing and other resources than the
Company. The Company's competitors may devote substantially greater resources
to the development and marketing of new competitive services. The Company
expects that competition will increase substantially as a result of industry
consolidations and alliances, as well as the emergence of new competitors.
Increased competition could result in price reductions, reduced profit margins
or loss of market share, all of which would have a material adverse effect on
the Company's results of operations.
DEPENDENCE ON ENTERTAINMENT INDUSTRY
The Company's business is dependent on the success of the motion picture
and television industries, which success in turn is highly dependent upon a
number of factors, including the quality of content produced, the availability
of alternative forms of entertainment and leisure activities, general economic
conditions and international demand for content originated in the United States.
The Company's business also is subject to downturns in the event of a strike by
any creative or other personnel integral to the production of motion pictures or
television programming.
RISKS ASSOCIATED WITH SINGAPORE OPERATIONS
Foreign Exchange Rate Fluctuations. The Company provides certain of its
broadcast services in Singapore through its Singapore subsidiary, 4MC Asia.
Substantially all of 4MC Asia's transactions are denominated in Singapore
dollars. Although 4MC Asia is not subject to foreign exchange transaction gains
or losses, its financial statements are translated into United States dollars as
part of the Company's consolidated financial reporting. Fluctuations in the
exchange rate therefore will affect the Company's consolidated balance sheets
and may, upon
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repatriation of funds from 4MC Asia to the Company and payment of related income
taxes, affect the Company's net income. Until recently, the Singapore dollar has
been stable relative to the United States dollar. However, between June 1997 and
June 1998, the Singapore dollar lost approximately 20% of its value relative to
the United States dollar. There can be no assurance that the Company will not
experience material losses as a result of changes in the relative value of the
Singapore dollar as compared to the United States dollar. The Company currently
does not engage in any hedging activities to mitigate its exchange rate risk. In
the event the Company engages in hedging activities in the future, there can be
no assurance that the Company will not experience losses as a result of such
hedging activities.
Foreign Country Operating Risks. In addition to exchange rate risks, the
Company's Singapore operations are subject to a number of risks inherent in
international operations, including unexpected changes in regulatory
requirements, the costs and burdens of complying with a variety of complex
foreign laws, tariffs and other trade barriers, and political and economic
instability. There can be no assurance that the foregoing factors will not have
a material adverse effect on the Company's future results of operations.
Loss of Tax Exemption. In 1995, the government of the Republic of
Singapore granted 4MC Asia a seven-year tax exemption as a "pioneer status"
company. The tax exemption is conditioned upon 4MC Asia meeting certain
investment and expenditure requirements. Although the Company has met these
requirements, the Republic of Singapore retains the right to review certain
expenditures. The termination or expiration of the tax exemption would have a
material adverse effect on the Company's results of operations. The Company is
subject to taxation in the United States to the extent that 4MC Asia's income
(in excess of intercompany debt) is repatriated from Singapore, less applicable
taxes paid in Singapore, if any.
CONCENTRATION OF OWNERSHIP
Robert T. Walston, Chairman and Chief Executive Officer, beneficially owns
approximately 15% of the outstanding shares of Common Stock, and the present
executive officers and directors of the Company and their affiliates, as a
group, beneficially own approximately 49% of the outstanding shares of Common
Stock. Accordingly, these stockholders have the ability to control or
significantly influence all matters requiring approval by the stockholders of
the Company, including the election of directors and approval of significant
corporate transactions. Such a level of ownership may have the effect of
delaying, deferring or preventing a change in the control of the Company.
SHARES ELIGIBLE FOR FUTURE SALE
Sales of a substantial number of shares of Common Stock in the public
market following this offering could adversely affect the market price of the
Common Stock. As of July 1, 1998, the Company had 9,876,770 shares of Common
Stock outstanding. Of these shares, 5,000,000 shares of Common Stock are freely
tradable without restriction or further registration under the
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Securities Act. The remaining 4,876,770 shares of Common Stock outstanding are
"restricted securities" as that term is defined in Rule 144 under the Securities
Act ("Rule 144"). The restricted securities include the Registrable Shares and
4,552,502 shares of Common Stock owned by officers, directors and affiliates of
the Company. The number of shares of Common Stock available for sale in the
public market is limited by restrictions under the Securities Act and lock-up
agreements executed by all of the officers and directors of the Company under
which the officers and directors (other than Messrs. Kirtman and Topor in
respect of Common Stock pursuant to a distribution from the principal
stockholder) have agreed not to sell or otherwise dispose of any of their shares
prior to February 7, 2000, without the prior written consent of Furman Selz LLC.
Furman Selz LLC may, however, in its sole discretion and at any time without
notice, release all or any portion of the shares subject to lock-up agreements.
As a result of the lock-up agreements described above and the provisions of
Rules 144(k), 144 and 701, the restricted shares will be available for sale in
the public market as follows: (i) the 3,119,627 shares owned by the principal
stockholders are currently eligible for sale, subject to the limitations imposed
by Rule 144; and (ii) 1,432,875 shares will be eligible for sale February 7,
2000, upon expiration of lock-up agreements.
In addition to the outstanding shares of Common Stock, the Company has the
obligation to issue shares of Common Stock upon the exercise of options and upon
the conversion of Preferred Stock. The Company has granted options to purchase
a total of 2,080,000 shares, of which options to purchase 568,333 shares are
presently exercisable. Presently exercisable options to purchase a total of
513,333 shares are held by officers and directors of the Company and shares
acquired upon the exercise of those options would be subject to the lock-up
arrangements described above. All of the shares of Common Stock subject to
options have been registered under the Securities Act.
In February 1998 the Company issued 150,000 shares of Preferred Stock in a
private placement. The Preferred Stock is convertible, at the option of the
holders thereof, into 1,500,000 shares of Common Stock. The holders have the
right to demand registration of the shares of Common Stock underlying the
Preferred Stock under certain circumstances, as well as the right to participate
in certain registrations initiated by the Company or by other Stockholders. The
holders of the Preferred Stock have waived their right to registration of the
Common Stock subject to their conversion rights in connection with this
offering.
RISK OF LOSS FROM EARTHQUAKES, FIRE OR OTHER CATASTROPHIC EVENTS
The Company is subject to the risk of loss arising from earthquakes, fires
and other catastrophic events due to the concentration of its business
activities and operations in specific structures. The structures housing the
Company's business activities consist of commercial office buildings subject to
vibration and movement that, in such a catastrophic event, could cause the
dislocation of various pieces of equipment, potentially creating downtime in the
Company's operations. The Company's operations, other than its Singapore
operations, are located in Southern California which may expose the Company to
greater risk from earthquakes and fires. For example, the Northridge,
California earthquake in January 1994 damaged certain of the
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Company's facilities and equipment and temporarily interrupted the Company's
operations. Because of the large amount of specialized equipment combined with
customized listening and viewing environments, the Company's operations cannot
temporarily be relocated to mitigate the occurrence of a catastrophic event. The
Company also may be unable to broadcast signals for an extended period of time.
Consequently, the Company carries insurance for property loss and business
interruption resulting from such events, subject to deductibles. Although the
Company believes that it possesses adequate insurance coverage for damage to its
property and the disruption of its business from earthquakes, fire and other
casualties, there can be no assurance that such insurance would be sufficient to
cover all of the Company's potential losses or that it will continue to be
available at rates acceptable to the Company, if at all.
RENEWAL OF FCC LICENSES
Pursuant to the Communications Act of 1934, as amended (the "Communications
Act"), transmissions from the Company's domestic broadcast division's earth
station to satellites must be made pursuant to license granted by the Federal
Communications Commission ("FCC"). Catalina Transmission Corp. ("Catalina"), a
wholly owned subsidiary of the Company, holds three licenses for satellite earth
stations. The three licenses (two for fixed earth stations and one for a
transportable earth station) were granted for a period of ten years with one
expiring in 2001, one expiring in 2004 and one expiring in 2007. While the FCC
generally renews licenses for satellite earth stations routinely, there can be
no assurance that the Company's licenses will be renewed at their expiration
dates, and failure to obtain such renewal could have a material adverse effect
on the Company.
ANTI-TAKEOVER PROVISIONS; POSSIBLE ISSUANCE OF PREFERRED STOCK
Certain provisions of the Company's Certificate of Incorporation and By-
Laws may be deemed to have anti-takeover effects and may delay, defer or prevent
a tender offer, proxy contest or takeover attempt that a stockholder might
consider to be in such stockholder's best interest, including those attempts
that might result in a premium over the market price for the shares held by such
stockholder. In addition, the Board of Directors, without further stockholder
approval, may issue additional preferred stock that could have the effect of
delaying, deterring or preventing a change in control of the Company. The
issuance of additional preferred stock could also adversely affect the voting
power of the holders of Common Stock, including the loss of voting control to
others. The Company has no present plans to issue any additional preferred
stock.
YEAR 2000 COMPLIANCE
Substantially all of the Company's software and computer systems are Year
2000 compliant. Software and computer systems not currently Year 2000 compliant
will be upgraded to Year 2000 compliant condition in fiscal 1998 under existing
maintenance agreements. The
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<PAGE>
Company has not yet determined, but will attempt to the extent practicable to
determine, if any significant Year 2000 risks exist in the operations of its key
business partners that may be material to the Company.
FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act
concerning the Company's future operations, economic performances and financial
condition, including such things as business strategy and measures to implement
strategy, competitive strengths, goals, expansion and growth of the Company's
business and operations and references to future success. These statements are
based on certain assumptions and analyses made by the Company in light of its
experience and its perception of historical trends, current conditions and
expected future developments as well as other factors it believes are
appropriate in the circumstances. However, whether actual results and
developments will conform with the Company's expectations and predictions is
subject to a number of risks and uncertainties, in addition to the risk factors
discussed above, including a global economic slowdown in the entertainment
industry, difficulties and unanticipated expense of assimilating newly-acquired
businesses, technological shifts away from the Company's technologies and core
competencies, unforeseen interruptions to the Company's business with its
largest customers resulting from, but not limited to, strikes, financial
instabilities, unexpected government policies and regulations affecting the
Company or its significant customers, the effects of extreme changes in monetary
and fiscal policies in the U.S. and abroad, including extreme currency
fluctuations and unforeseen inflationary pressures, drastic and unforeseen price
pressures on the Company's services or significant cost increases that cannot be
recovered through price increases or productivity improvements, significant
changes in interest rates and the availability of financing for the Company, any
difficulties in obtaining or retaining the management or other human resource
competencies that the Company needs to achieve its business objectives, and
other factors, many of which are beyond the control of the Company.
Consequently, all of the forward-looking statements made in this Prospectus are
qualified by these cautionary statements, and there can be no assurance that the
actual results or developments anticipated by the Company will be realized or
that they will have the expected consequences to or effects on the Company and
its subsidiaries or their business or operations.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Registrable
Shares by the Selling Stockholders.
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<PAGE>
SELLING SECURITY HOLDERS
The following table sets forth the name of each Selling Stockholder and:
(i) the number of shares owned by each Selling Stockholder as of July 1, 1998;
(ii) the number of shares being offered for sale by each Selling Stockholder
under this Prospectus; and (iii) the number of shares owned by each Selling
Stockholder after the offering.
<TABLE>
<CAPTION>
NAME OF SELLING NUMBER OF SHARES NUMBER OF SHARES BEING NUMBER OF SHARES
SECURITYHOLDER OWNED BEFORE THE OFFERED FOR SALE OWNED AFTER THE
OFFERING OFFERING
<S> <C> <C> <C>
Michael Flanagan 143,363 143,363 *
Thomas Flanagan 36,438 36,438 *
Michael Herbert 10,460 10,460 *
Greg Howard 129,091 129,091 *
Richard Andrew Webb 4,916 4,916 *
</TABLE>
_____________
* Because the Selling Stockholders may, pursuant to this Prospectus, offer
all or some portion of the Common Stock they presently hold, no estimate
can be given as to the amount of the Common Stock that will be held by the
Selling Stockholders upon termination of any such sales. In addition, the
Selling Stockholders identified above may have sold, transferred or
otherwise disposed of all or a portion of their Common Stock since the date
on which they provided the information regarding their Common Stock, in
transactions exempt from the registration requirements of the Securities
Act. See "Plan of Distribution."
Only Selling Stockholders identified above who beneficially own the Common
Stock set forth opposite each such Selling Stockholder's name in the foregoing
table on the effective date of the Registration Statement may sell such Common
Stock pursuant to this Prospectus. The Company may from time to time include
additional Selling Stockholders in supplements to this Prospectus.
PLAN OF DISTRIBUTION
The Selling Stockholders may from time to time sell all or a portion of the
Shares in transactions on Nasdaq, in the over-the-counter market, in negotiated
transactions or a combination of such methods of sale, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. The Shares may be sold directly or through
underwriters or broker-dealers. If the Shares are sold through underwriters or
broker-dealers, the Selling Stockholders may pay underwriting discounts or
brokerage commissions and charges. The methods by which the Shares may be sold
include: (i) a block trade in which the broker or dealer so involved will
attempt to sell the securities as agent but may position and resell a portion of
the block as principal to facilitate the transaction; (ii) purchases by a broker
or dealer as principal and resale by such broker or dealer for its own account
pursuant to this Prospectus; (iii) exchange distributions and/or secondary
distributions in accordance with the rules of Nasdaq; (iv) ordinary brokerage
transactions and transactions in which the broker solicits purchasers; and (v)
privately negotiated transactions.
15
<PAGE>
The Company will pay the costs and expenses incident to its registration
and qualification of the Shares offered hereby, including registration and
filing fees. In addition, the Company has agreed to indemnify the Selling
Stockholders in certain circumstances, against certain liabilities. Each
Selling Stockholder has agreed to indemnify the Company and its directors,
officers, employees and agents against certain liabilities.
Any securities covered by this Prospectus that qualify for sale pursuant to
Rule 144 or Rule 144A may be sold under Rule 144 or Rule 144A rather than
pursuant to this Prospectus. There can be no assurance that any Selling
Stockholder will sell any or all of the Shares described herein, and any Selling
Stockholder may transfer, devise or gift such securities by other means not
described herein.
LEGAL MATTERS
Certain legal matters relating to the validity of the Common Stock offered
hereby will be passed upon for the Company by Greenberg Glusker Fields Claman &
Machtinger LLP, Los Angeles, California.
EXPERTS
The consolidated balance sheets as of August 3, 1997 and August 4, 1996 and
the consolidated statements of operations, stockholders' equity and cash flows
for the years ended August 3, 1997, August 4, 1996 and July 30, 1995 and the
notes thereto, included in the Company's Annual Report on Form 10-K for the year
ended August 3, 1997, incorporated herein by reference, have been incorporated
herein in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
The combined balance sheets of Visualize (d/b/a Pacific Ocean Post) and
Affiliate, as of October 31, 1997 and December 31, 1996, and the related
combined statements of operations, shareholders equity and cash flows for the
ten months ended October 31, 1997 and the year ended December 31, 1996
incorporated herein by reference to the Company's Current Report on Form 8-K
dated February 2, 1998, have been incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
that firm as experts in accounting and auditing.
The combined balance sheets of Video Symphony, Inc. and Affiliate as of
December 31, 1997, 1996 and 1995, and the related combined statements of
operations, shareholders' equity and cash flows for the years then ended
incorporated herein by reference to the Company's Current Report on Form 8-K
dated May 4, 1998 have been incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
that firm as experts on accounting and auditing.
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<PAGE>
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Section 145 of the Delaware General Corporation Law (the "DGCL"), a
corporation may indemnify its directors, officers, employees and agents and its
former directors, officers, employees and agents and those who serve, at the
corporation's request, in such capacities with another enterprise, against
expenses (including attorney's fees), as well as judgments, fines and
settlements in nonderivative lawsuits, actually and reasonably incurred in
connection with the defense of any action, suit or proceeding by reason of their
serving or having served in such capacity. The DGCL provides, however, that
such person must have acted in good faith and in a manner he or she reasonably
believed to be in (or not opposed to) the best interests of the corporation and,
in the case of a criminal action, such person must have had no reasonable cause
to believe his or her conduct was unlawful. In addition, the DGCL does not
permit indemnification in an action or suit by or in the right of the
corporation, where such person has been adjudged liable to the corporation,
unless, and only to the extent that, a court determines that such person fairly
and reasonably is entitled to indemnity for expenses the court deems proper in
light of liability adjudication. With respect to present or former directors
and officers, indemnity is mandatory to the extent a claim, issue or matter has
been successfully defended.
The Company's Bylaws (the "Bylaws") provide for mandatory indemnification
of directors and officers generally to the same extent authorized by the DGCL.
Under the Bylaws, the Company shall advance expenses incurred by an officer or
director in defending any such action if the director or officer undertakes to
repay such amount if it is determined that he or she is not entitled to
indemnification. The Company has obtained directors' and officers' liability
insurance.
The Company has entered into separate indemnification agreements with its
directors and officers. Each indemnification agreement provides for, among
other things: (i) indemnification against any and all expenses, liabilities and
losses (including attorney's fees, judgments, fines, taxes, penalties and
amounts paid in settlement) of any claim against an indemnified party unless it
is determined, as provided in the indemnification agreement, that
indemnification is not permitted under any applicable law; and (ii) prompt
advancement of expenses to any indemnified party in connection with his or her
defense against any claim.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Act and is therefore unenforceable.
17
<PAGE>
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. 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 DATES AS OF WHICH
INFORMATION IS GIVEN IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATIONS
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
PAGE
----
<S> <C> <C>
Available Information................................ 4
Incorporation Of Certain Information By.............. 324,268 SHARES
Reference............................................ 4 FOUR MEDIA COMPANY
Cautionary Statement Regarding Forward-Looking
Statements......................................... 5
Risk Factors......................................... 5 COMMON STOCK
Forward-Looking Statements........................... 14
Use Of Proceeds...................................... 14
Selling Security Holders............................. 15 PROSPECTUS
Plan Of Distribution................................. 15 August 10, 1998
Legal Matters........................................ 16
Experts.............................................. 16
Indemnification Of Directors And Officers............ 17
</TABLE>
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<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 of Form S-3 and has duly caused this Amendment to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Burbank, State of California, on this 10th day
of August, 1998.
FOUR MEDIA COMPANY
By: /s/ Robert T. Walston
---------------------
Robert T. Walston
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ Robert T. Walston Chairman of the Board and August 10, 1998
- -------------------------- Chief Executive Officer
Robert T. Walston (principal executive officer)
/s/ Alan S. Unger Vice President and Chief Financial Officer August 10, 1998
- -------------------------- (principal financial and accounting officer)
Alan S. Unger
- -------------------------- Director August 10, 1998
William Amon*
- -------------------------- Director August 10, 1998
Robert Bailey*
- -------------------------- Director August 10, 1998
Paul Bricault*
- -------------------------- Director August 10, 1998
John H. Donlon*
- -------------------------- Director August 10, 1998
Edward Kirtman*
- -------------------------- Director August 10, 1998
Gavin W. Schutz*
- -------------------------- Director August 10, 1998
Shimon Topor*
- -------------------------- Director August 10, 1998
Thomas Wertheimer*
* By /s/ Robert T. Walston
---------------------
Robert T. Walston
Attorney-in-Fact
</TABLE>
19
