<PAGE> 1
PROSPECTUS FILED PURSUANT TO RULE 424(b)(1)
Dated November 19, 1998 REGISTRATION NO. 333-67429
MAXWELL TECHNOLOGIES, INC.
431, 279 SHARES OF COMMON STOCK
-------------------------
The 431,279 shares (the "Shares") of Common Stock, par value $.10 per
share ("Common Stock"), of Maxwell Technologies, Inc. ("Maxwell" or the
"Company") offered hereby are to be sold by the persons named herein under
"Selling Stockholders."
The Common Stock is traded on the Nasdaq National Market under the symbol
"MXWL." On November 12, 1998, the reported closing price of the Common Stock on
the Nasdaq National Market was $24.125 per share.
Holders of the Shares may resell the Shares from time to time in
transactions on the Nasdaq National Market, and may sell the Shares through a
broker or brokers or in the over-the-counter market at prices prevailing on such
exchange or over-the-counter market, as appropriate, at the times of such sales.
The Selling Stockholders may also make private sales directly or through such
broker or brokers or sell the Shares in negotiated transactions. See "Plan of
Distribution." Sales of the Shares may be effected by selling such securities to
or through broker-dealers, and such broker-dealers may receive compensation in
the form of discounts, concessions or commissions from the sellers thereof. Such
sellers and any broker-dealer who acts in connection with the sales of Shares
may be deemed to be "underwriters" as that term is defined in the Securities Act
of 1933, as amended (the "Securities Act"), and any commissions received by them
and profit on any resale of the Shares might be deemed to be underwriting
discounts and commissions under the Securities Act.
None of the proceeds from the sale of the Shares will be received by the
Company. The Company has agreed to bear all expenses (other than underwriting
discounts and selling commissions) in connection with the registration and sale
of the Shares being registered hereby. See "Plan of Distribution."
-------------------------
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 5 HEREOF.
-------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------------
THE DATE OF THIS PROSPECTUS IS NOVEMBER 19, 1998
-------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR BY ANY OTHER PERSON. ALL INFORMATION CONTAINED IN THIS PROSPECTUS IS AS OF
THE DATE OF THIS PROSPECTUS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR IN THE FACTS HEREIN
SET FORTH SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN THE
SECURITIES COVERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO OR
SOLICITATION OF ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION MAY NOT LAWFULLY BE MADE.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
AVAILABLE INFORMATION.............................................................. 2
DOCUMENTS INCORPORATED BY REFERENCE................................................ 3
THE COMPANY........................................................................ 3
RISK FACTORS....................................................................... 5
USE OF PROCEEDS.................................................................... 14
PRINCIPAL AND SELLING STOCKHOLDERS................................................. 14
PLAN OF DISTRIBUTION............................................................... 17
DESCRIPTION OF CAPITAL STOCK....................................................... 19
LEGAL MATTERS...................................................................... 20
EXPERTS............................................................................ 20
</TABLE>
<PAGE> 3
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations thereunder, and in accordance therewith files reports, proxy
statements and other information with the Securities and Exchange Commission
(the "Commission"). Reports, proxy statements and other information filed by the
Company with the Commission can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and will also be available for inspection
and copying at the regional offices of the Commission located at Seven World
Trade Center, Suite 1300, New York, New York 10048 and at Room 3190, Northwest
Atrium Center, 500 West Madison Street, Chicago, Illinois 60661-2511. Copies of
such material can be obtained by mail from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. Such reports, proxy statements and other information
concerning the Company are also available for inspection at the offices of The
Nasdaq Stock Market, Reports Section, 1735 K Street, N.W., Washington, D.C.
20006. In addition the Commission maintains a World Wide Web site at http://
www.sec.gov that contains reports, proxy and information statements and other
information regarding registrants, including the Company, that file
electronically with the Commission.
The Company has filed with the Commission a registration statement on Form
S-3 (together with all exhibits, schedules, amendments, and supplements thereto,
the "Registration Statement") (Registration No. 333-67429) under the Securities
Act of 1933, as amended (the "Securities Act") with respect to the Common Stock
offered by this Prospectus. This Prospectus, which forms a part of the
Registration Statement, does not contain all the information set forth in the
Registration Statement (certain parts of which have been omitted in accordance
with the rules and regulations of the Commission). For further information with
respect to the Company and the Common Stock, reference is made to the
Registration Statement. Statements contained in this Prospectus as to the
contents of any contract, agreement or other document are not necessarily
complete, and, in each instance, reference is made to the copy of the document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by reference to such exhibit. The Registration
Statement may be inspected and copied at the public reference facilities at the
Commission's offices at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and will also be available for inspection and copying at
the regional offices of the Commission located at Seven World Trade Center,
Suite 1300, New York, New York 10048 and at Room 3190, Northwest Atrium Center,
500 West Madison Street, Chicago, Illinois 60661-2511. Copies of all or any part
thereof may be obtained from such office upon payment of prescribed fees.
2
<PAGE> 4
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents which have been filed with the Commission by the
Company are hereby incorporated by reference in this Prospectus.
(1) Annual Report on Form 10-K for the fiscal year ended July 31, 1998.
(2) Description of the Company's Rights contained in the Registration
Statement on Form 8-A dated June 30, 1989.
(3) Current Report on Form 8-K filed October 15, 1998.
(4) Current Report on Form 8-K filed November 13, 1998.
All documents and reports filed by the Company pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering of the Common Stock made
hereby shall be deemed to be incorporated by reference in this Prospectus and
shall be a part hereof from the date of filing of such reports and 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 herein or in any subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
Copies of all documents which are incorporated herein by reference (not
including the exhibits to such information, unless such exhibits are
specifically incorporated by reference in such information) will be provided
without charge to each person, including any beneficial owner, to whom this
Prospectus is delivered, upon written or oral request. Copies of this
Prospectus, as amended or supplemented from time-to-time, and any other
documents (or parts of documents) that constitute part of this Prospectus under
Section 10(a) of the Securities Act will also be provided without charge to each
such person, upon written or oral request. Requests should be directed to
Maxwell Technologies, Inc., 9275 Sky Park Court, San Diego, California 92123,
Attention: Corporate Secretary; telephone number (619) 279-5100.
THE COMPANY
The Company is a worldwide leader in pulsed power technologies, the
storage of electrical energy and delivery of power in brief controlled bursts.
The Company has leveraged its technical expertise, gained from over 30 years of
experience performing research and development primarily for the United States
Department of Defense, to develop a portfolio of pulsed power based commercial
products. These products address a range of markets and applications and include
ultracapacitors for advanced electrical energy storage and power delivery,
purification systems for water treatment and the sterilization of medical and
pharmaceutical products and electromagnetic interference ("EMI") filter
capacitors for implantable medical devices. In addition to pulsed power based
products, the Company offers industrial computers and subsystems which are sold
to OEMs in the computer telephony, medical, manufacturing automation and other
markets. Government funded research and development projects continue to be an
important element of the Company's business, serving as an incubator for
technological innovations and a resource of scientific and engineering
expertise.
In January 1998, Tekna Seal, Inc., ("TSI") a closely held company,
merged into the Company's Maxwell Energy Products, Inc. subsidiary. The
transaction was accounted for as a pooling-of-interests. The Company issued an
aggregate of 154,030 shares of Common Stock in exchange for all of the
outstanding shares of TSI. TSI manufactures glass to metal seals and other seals
for a variety of customers. In 1997, TSI reported approximately $3.0 million in
sales. In February 1998, the Company acquired closely held Phoenix Power
Systems, Inc. ("Phoenix Power") for 100,679 shares of Company Common Stock and
approximately $1.0 million in cash. Phoenix Power manufactures power conversion
systems utilized in the Company's pulsed power products and systems. Phoenix
3
<PAGE> 5
Power has a $4.0 million sales run rate. In March 1998, the Company acquired
MAP-Micro Ltd. ("MAP-Micro") for 290,076 shares of Company Common Stock. The
transaction was accounted for as a pooling-of-interests. MAP- Micro designs and
manufactures industrial computer components, primarily for the
telecommunications marketplace in the United Kingdom. In 1997, MAP-Micro posted
approximately $7.0 million in sales. None of the shares of the Company Common
Stock issued in the transactions described above were registered under the
Securities Act. Certain of the Selling Stockholders were granted and are
exercising registration rights in connection with the acquisitions of TSI,
Phoenix Power and MAP-Micro.
In April 1998, the Company acquired the Electromagnetic Systems Group of
Primex Technologies, Inc. (the "EMS Group") for approximately $10.0 million in
cash. The EMS Group specializes in high-energy pulsed power technology. In 1997,
the EMS Group had sales of approximately $17.0 million.
PowerCache(TM), PureBright(R), CoolPure(R), JAMIS(R) and
ElectroBlast(TM) are trademarks of the Company. All other trademarks or
tradenames referred to or incorporated by reference in this Prospectus are the
property of their respective owners.
The Company's executive offices are located at 9275 Sky Park Court, San
Diego, California 92123. Its telephone number is (619) 279-5100.
4
<PAGE> 6
RISK FACTORS
Prospective investors should consider carefully, in addition to other
information contained in this Prospectus, the following factors before
purchasing the shares offered hereby.
RISKS ASSOCIATED WITH ACQUISITIONS
As part of its business strategy, the Company regularly reviews possible
acquisitions of complementary companies, technologies or products, and
periodically engages in discussions regarding such possible acquisitions.
Acquisitions involve numerous risks, including evaluating new technologies;
difficulties in the assimilation of the operations, products, personnel and
cultures of the acquired companies; the ability to manage effectively
geographically remote units; the diversion of management's attention from other
day-to-day business concerns; risks of entering markets in which the Company has
limited or no direct experience and the potential loss of key employees of the
acquired companies. In addition, acquisitions may result in dilutive issuances
of equity securities; the incurrence of debt; reduction of any then-existing
cash balances; amortization expenses related to goodwill and other intangible
assets and other charges to operating results that may materially adversely
affect the Company's results of operations. Moreover, there can be no assurance
that any equity or debt financings proposed in connection with any acquisition
would be available to the Company on acceptable terms or at all, when, and if,
suitable strategic acquisition opportunities arise. Although management expects
to carefully analyze any opportunity before committing the Company's resources,
there can be no assurance that any acquisition that is completed will result in
long-term benefits to the Company or its stockholders or that the Company's
management will be able to manage effectively the resulting business. Such risks
are applicable as well to the Company's recently completed acquisitions of TSI,
Phoenix Power, MAP-Micro and the EMS Group.
EXTENSIVE RELIANCE ON STRATEGIC RELATIONSHIPS; RESTRICTIONS DUE TO EXCLUSIVITY
RIGHTS
The Company has established and will continue to seek to establish
strategic relationships with corporate partners and research relationships with
United States government agencies to support its various development programs,
leverage its expertise and manufacturing resources, obtain an understanding of
and access to markets and validate products. The Company currently collaborates
with a variety of strategic partners, including Tetra Pak International AB, a
leading food packaging machinery and products company, for purification systems,
and PacifiCorp, a leading utility holding company, for ultracapacitors.
The loss of certain of its strategic relationships could have a material
adverse effect on the Company's sales growth. The Company's future success will
depend in part on its continued relationships with various of its strategic
partners, its ability to enter into other similar collaborative arrangements,
the interest of certain of the Company's strategic partners in the potential
products under development, the Company's success in meeting expectations of
strategic partners and, ultimately, their success in marketing or willingness to
purchase any such products. These programs may require the Company to share
control over its development, manufacturing and marketing programs, limit its
ability to license its technology to others, relinquish certain rights to its
technology, sell equity or rights to purchase equity in the Company or its
subsidiaries to the strategic partner or restrict its ability to engage in
certain areas of product development, production and marketing. Some of the
Company's existing collaborative arrangements permit, and future arrangements
also may permit, the Company's strategic partners to use or disclose the
technology developed in the program without any royalty obligation, to the
extent that the technology is jointly developed. Furthermore, the Company often
grants an exclusivity right to its strategic partner as an inducement to the
partner to participate in the development of a product or application. Any
exclusivity rights granted to strategic partners may inhibit the Company's
ability to find a wider market for certain of its commercial products and thus
may materially reduce revenues during the exclusivity period. There can be no
assurance that the Company will be able to enter into strategic arrangements on
commercially reasonable terms or that these arrangements, if established, will
result in successful programs to develop, manufacture or market pulsed power and
other products or that the Company's strategic partners will not seek to
manufacture jointly developed products themselves or obtain them from
alternative sources.
5
<PAGE> 7
LIMITED VOLUME MANUFACTURING EXPERIENCE
The Company has limited experience with volume manufacturing of
commercial products. To date, the Company has not manufactured in volume its
ultracapacitors or purification systems. The Company may face challenges in
scaling up production of its new products, especially those products that
contain newly developed technologies, including problems involving production
yields, quality control and assurance, component supply and shortages of
qualified management and other personnel. In addition, the Company will need to
expand its current facilities or obtain additional facilities in order to
manufacture a substantial quantity of its ultracapacitor, purification and EMI
filter products. There can be no assurance that the Company will be successful
in expanding its facilities or obtaining additional facilities, or that it will
be able to overcome the management, technological, engineering and other
challenges associated with the production of significant quantities of products
at acceptable cost on a timely basis. The Company may elect to outsource
manufacturing of certain of its products, if such opportunities are available.
Outsourcing of manufacturing involves risks with respect to quality assurance,
cost and the absence of close engineering support. In addition, part of the
Company's ultracapacitor development strategy is the implementation of a process
that could allow customization of products while retaining the benefits of
volume manufacturing and materials procurement. There can be no assurance that
such a process can be developed and implemented in time to meet the Company's
needs in this regard. Difficulties in manufacturing or in obtaining appropriate
facilities or locating and qualifying outsourcing for manufacturing could have a
material adverse effect on the Company's business, financial condition and
results of operations.
LIMITED SALES AND MARKETING EXPERIENCE
The Company has limited experience marketing and selling ultracapacitors
and purification systems. To market these products, the Company will be required
to develop a marketing and sales force that will be able to effectively
demonstrate the advantages of these products over competing products and other
traditional solutions. Furthermore, the highly technical nature of the Company's
products limits the pool of potential sales personnel. The Company also enters
into agreements with distributors or sales representatives regarding the
marketing of its products. By entering into such agreements, the Company may be
substantially dependent upon the efforts of others in deriving commercial
benefits from its products. There can be no assurance that the Company will be
successful in marketing and selling its products, that it will be able to
establish adequate sales and distribution capabilities, that it will be able to
enter into marketing agreements with third parties on financially acceptable
terms or that any third parties with whom it enters into such arrangements will
be successful in marketing the Company's products. The Company's inability to
achieve any of these objectives would have a material adverse effect on the
Company's business, results of operations and financial condition.
DEPENDENCE ON OEM CUSTOMERS; LENGTHY SALES CYCLES
A substantial portion of the Company's sales are derived from sales to a
relatively small number of OEM customers. The timing and amount of sales to
these customers ultimately depend on sales levels and shipping schedules for the
OEM products into which the Company's products are incorporated. The Company has
no control over the shipping date or volumes of products shipped by its OEM
customers, and there can be no assurance that any OEM will continue to ship
products that incorporate the Company's products at current levels or at all.
Failure of these OEMs to achieve significant sales of products incorporating the
Company's products and fluctuations in the timing and volume of such sales could
have a material adverse effect on the Company's business, financial condition
and results of operations.
The decision process leading to the selection of the Company's products
and services is typically lengthy, with significant additional time required for
design, engineering and product approval before commercial shipments can begin.
Moreover, although customers sometimes substitute a new and better product into
an existing product, market opportunities with respect to any particular
customer typically occur at the time the customer is engaged in the design of a
new product or a substantial enhancement of an existing product, which typically
occur at infrequent intervals. Any failure of the Company to maintain continuing
awareness of its customers' product development schedules, or its inability to
provide the optimum solution at the time of such development can cause the
Company to miss a market opportunity that may not reappear for a substantial
period of time.
6
<PAGE> 8
Lucent Technologies ("Lucent"), an OEM customer of the Company,
accounted for approximately 12% of the Company's total sales in fiscal 1997 and
is a significant customer of the Company's Industrial Computers and Subsystems
business segment. A substantial portion of the Company's existing sales to
Lucent involves products that have not been designed into Lucent's next
generation products and the Company therefore expects that its business with
Lucent will decline substantially in the second half of fiscal 1998 and
subsequent periods. In replacing the Lucent business, the Company's Industrial
Computers and Subsystems division continues to be dependent on large orders from
relatively few customers.
DEPENDENCE ON PROPRIETARY TECHNOLOGY
The Company's success is heavily dependent upon the establishment and
maintenance of proprietary technologies. Although the Company attempts to
protect its intellectual property rights through patents, copyrights, trade
secrets and other measures, there can be no assurance that the steps taken by
the Company to protect its proprietary technologies will be adequate to prevent
misappropriation by third parties or will be adequate under the laws of some
foreign countries, which may not protect the Company's proprietary rights to the
same extent as do the laws of the United States. In addition, others could
"reverse engineer" the Company's products in order to determine their method of
operation and introduce competing products or develop competing technology
independently. Any such adverse circumstances could have a material adverse
effect on the Company's business, financial condition and results of operations.
The Company uses employee and third-party confidentiality and
non-disclosure agreements to protect its trade secrets and unpatented know-how.
The Company requires each of its employees to enter into a proprietary rights
and non-disclosure agreement in which the employee agrees to maintain the
confidentiality of all proprietary information of the Company and, subject to
certain exceptions, to assign to the Company all rights in any proprietary
information or technology made or contributed by the employee during his or her
employment. In addition, the Company regularly enters into non-disclosure
agreements with third parties, such as consultants, potential joint venture
partners and customers. No assurance can be given that these methods will enable
the Company to maintain its trade secrets or unpatented know-how or that third
parties will not independently develop and/or patent substantially equivalent
proprietary information or copy, develop or otherwise obtain and use the
Company's proprietary technology without authorization.
The Company has historically relied primarily on its technological and
engineering abilities and on its design and production capabilities, rather than
on patents, for the development and maintenance of its business. However, the
Company does file patent applications on concepts and processes developed by the
Company's personnel and, as its commercial businesses expand, the Company has
placed increased emphasis on patents to provide protection for certain of its
technologies and products. The Company believes that its future success will
depend in part on its ability to maintain its patents, add to them where
appropriate, and to develop new products and applications without infringing the
patent and other proprietary rights of third parties and without breaching or
otherwise losing rights in technology licenses obtained by the Company for other
products. There can be no assurance that any patent owned by the Company will
not be circumvented or challenged, that the rights granted thereunder will
provide competitive advantages to the Company or that any of the Company's
pending or future patent applications will be issued with claims of the scope
sought by the Company, if at all. If challenged, there can be no assurance that
the Company's patents (or patents under which it licenses technology) will be
held valid or enforceable. In addition, there can be no assurance that others
will not claim rights in the technology covered by the patents and other
proprietary technology owned or licensed by the Company or that others have not
developed or will not develop similar products or technology without violating
the Company's proprietary rights. The invalidity of a patent or determination
that the Company (or its licensor) does not hold sole rights to the technology
covered thereby could have a material adverse effect on the Company,
particularly if the Company is unable to design around others' proprietary
rights.
Competing research and patent activity in many of the Company's
technologies is substantial and the markets are large enough that conflicting
patent and other proprietary rights claims may result in disputes or litigation.
Although the Company does not believe any of its products or proprietary rights
infringe the rights of third parties, there can be no assurance that
infringement claims will not be asserted against the Company in the
7
<PAGE> 9
future. Any such claims, with or without merit, could be time-consuming, result
in costly litigation, cause product shipment delays or require the Company to
enter into royalty or licensing agreements. Such royalty or licensing
agreements, if required, may not be available on terms acceptable to the
Company, or at all. If infringement were established, the Company could be
required to pay damages or be enjoined from making, using or selling the
infringing product. Likewise, there can be no assurance that a third party's
product, if infringing on the Company's proprietary rights, may be prevented
from doing so without litigation. Any of the foregoing could have a material
adverse effect upon the Company's business, financial condition and results of
operations.
A number of the patents and patent applications owned or licensed by the
Company are subject to "march-in" rights and non-exclusive, royalty-free,
confirmatory licenses held by various governmental agencies or other entities.
March-in rights refer to the right of the United States government or a United
States government agency to cancel agreements and require a contractor to grant
licenses to third parties if the contractor fails to continue to develop the
technology related to the agreements. Confirmatory licenses permit the United
States government agencies or other governmental entities to select vendors
other than the Company to produce products for the United States government
which would otherwise infringe the Company's patent rights which are subject to
the royalty-free licenses. In addition, the United States government has the
right to require the Company to grant licenses (including exclusive licenses)
under such patents and patent applications or other inventions to a third party
if the United States government determines that adequate steps have not been
taken to commercialize such inventions, such action is necessary to meet public
health or safety needs, such action is necessary to meet requirements for public
use under federal regulations or such action is necessary because the Company
has not exercised reasonable efforts to ensure products manufactured pursuant to
such invention are manufactured in the United States.
COMPETITION
The markets in which the Company sells commercial products is highly
competitive, rapidly changing and significantly affected by new product
introductions and other market activities of industry participants. The
Company's primary competitors in ultracapacitors include Panasonic and SAFT, a
part of the Alcatel-Alsthom Group; and in the passive backplane segment for
industrial computers, include Texas Microsystems, Diversified Technology,
Advantech, Industrial Computer Source, Teknor and Trenton. The Company's
emerging products also compete with established technologies in many markets,
including batteries in ultracapacitor products and a number of established
methods of treating water and decontaminating food packaging and medical
products.
Many of the Company's competitors have longer operating histories,
significantly greater financial, technical, marketing and other resources,
greater name recognition, and a larger installed base of customers than the
Company. In addition, certain competitors have well-established relationships
with customers and potential customers of the Company. Furthermore, as the
Company's new products gain acceptance, companies with significantly greater
resources than the Company could attempt to increase their presence in these
markets. In order to be successful in the future, the Company must continue to
respond promptly and effectively to the challenges of technological change and
its competitors' innovations by continually enhancing its own product offerings.
There can be no assurance, however, that the Company's products will continue to
compete favorably or that the Company will be successful in the face of
increasing competition from new products and enhancements introduced by existing
competitors or new companies entering its market.
RISKS ASSOCIATED WITH GOVERNMENT BUSINESS
A substantial portion of the Company's sales (approximately 33% in
fiscal 1997, 40% in fiscal 1996 and 43% in fiscal 1995) is derived from
contracts with the United States government, principally agencies of the United
States Department of Defense, and subcontracts with government suppliers. After
the Company completes the acquisition of the Electromagnetic Systems Group of
Primex Technologies, the portion of the Company's revenues derived from
Department of Defense contracts will likely increase. The reductions in defense
budgets over the past several years have adversely affected the Company's
business, particularly in the area of system survivability products and
services, such as weapons effects simulation and testing. The Company has
experienced significant reductions in this business as the Department of Defense
has responded to reduced global threats and shrinking
8
<PAGE> 10
defense budgets. The Company believes that continuing reductions in Department
of Defense spending in its System Division's core simulator business is possible
but that if such reductions occur they would be offset partially by government
spending on scientific programs for which the Company's expertise could be
utilized. The Company has experienced increased competition in bidding for new
defense programs from contractors seeking to replace their lost government
business. There can be no assurance that defense spending in general or that
contract awards to the Company specifically will not be reduced in the future. A
significant loss of United States government funding would have a material
adverse effect on the Company's business, results of operations and financial
condition.
The Company's United States government business is also subject to other
various risks, including: unilateral termination for the convenience of the
government; reduction or modification in the event of changes in the
government's requirements or budgetary constraints; increased or unexpected
costs causing losses or reduced profits under fixed-price contracts or
unallowable costs under cost plus contracts; risks of potential disclosure of
the Company's confidential information to third parties; the failure or
inability of a contractor to perform its obligations under a contract in
circumstances where the Company is a partner contractor or subcontractor; the
failure of the government to exercise options provided for in the contracts and
the exercise of march-in rights or confirmatory licenses by the government.
There can be no assurance that the Company's contracts with the Department of
Defense and other government agencies will not be terminated, reduced or
modified or that the grant of such licenses and rights will not result in a loss
of potential revenues, any of which could have a material adverse effect on the
Company's business, results of operations and financial condition.
The Company participates in government funded programs which may extend
for several years, but are normally funded on an annual basis and shorter
periods in some cases. There can be no assurance that funding will continue for
programs covering the Company's development projects or that the Company can
compete successfully in obtaining contracts for such programs. A significant
reduction in, or discontinuation of, such funding or of the Company's
participation in such programs would have a material adverse effect on the
Company's business, results of operations and financial condition.
SUBSTANTIAL FUTURE CAPITAL NEEDS
The Company believes that, in order to achieve its long-term strategic
objectives and maintain and enhance its competitive position, it will need
significant additional financial resources over the next several years. To meet
anticipated volume production requirements for several of the Company's product
lines, in particular ultracapacitors and purification systems, the Company will
need expanded manufacturing capabilities and facilities or viable production
alternatives. The Company anticipates that the estimated cash on hand, together
with cash flow from operations and possible debt financing or leasing, should be
adequate to support the Company's anticipated facilities expansion and equipment
purchases through fiscal 1998. The Company anticipates that it will require
additional capital in the future to fund its continuing expansion into
commercial markets, to construct and equip additional facilities, or to acquire
new or complementary businesses, product lines and technologies. Currently the
Company has a $20 million line of credit, but there can be no assurance that any
necessary additional financing will be available to the Company on acceptable
terms or at all. If adequate funds are not available, the Company may be
required to change, delay, reduce or eliminate its planned product
commercialization strategy or its anticipated facilities expansion plans and
expenditures, which could have a material adverse effect on the Company's
business, results of operations and financial condition.
DEPENDENCE ON KEY PERSONNEL
The Company's future performance depends in significant part upon the
continued service of its key technical and senior management personnel. The
Company is dependent on its ability to identify, hire, train, retain and
motivate high quality personnel, especially key manufacturing executives and
highly skilled engineers and scientists involved in the ongoing development,
introduction and enhancement of the Company's products and technologies. The
industries in which the Company competes are characterized by a high level of
employee mobility and aggressive recruiting of skilled personnel. The Company's
employees may terminate their employment with the Company at any time.
Accordingly, there can be no assurance that any of the Company's current key
employees will
9
<PAGE> 11
continue to work for the Company. Loss of services of key employees could have a
material adverse effect on the Company's business, financial condition and
results of operations.
RELIANCE ON THIRD PARTY SUPPLIERS
The Company's success is dependent in part on its ability to secure
qualified and adequate sources for supplies of materials, components and
sub-assemblies. The Company manufactures most of its products using a large
number of components or sub-assemblies, many of which are of commercially
available industrial parts and the remainder of which are custom-made to the
Company's specifications (by the Company and certain qualified outside
manufacturers). The Company endeavors to maintain more than one source of supply
for each of its major components or subassemblies, to the extent possible,
although certain suppliers are currently the sole source of one or more items
upon which the Company is dependent in the manufacture of its EMI filters and
industrial computing products. In the past, the Company has on occasion
experienced difficulty in obtaining timely delivery of power supplies for
industrial computers from outside suppliers which has adversely impacted the
Company's delivery time to its customers and in one circumstance the Company
believes such delivery problems were a contributing factor to the loss of
certain business from a major customer. There can be no assurance that these and
other similar supply problems will not recur. In addition, the Company currently
has only one qualified supplier for a certain component of its ultracapacitors
and is contractually obligated to qualify at least one additional supplier. No
assurance can be given that such qualification will be completed in a timely
manner. Moreover, the current sole domestic source of a component of the
Company's EMI filter has indicated its plans to design, build and sell a
competing filter in the future. The Company believes this supplier will continue
to sell to the Company but that, if necessary, the Company could replace this
supplier. Although the Company seeks to reduce its dependence on sole and
limited source suppliers, the partial or complete loss of these sources could
have at least a temporary material adverse effect on the Company's results of
operations and damage customer relationships due to the complexity of the
products supplied and the significant amount of time required to qualify new
suppliers.
PRODUCT LIABILITY RISKS
Certain of the Company's products may expose it to product liability
risks. The Company's EMI filters are components of implantable medical devices
and, due to the litigious environment surrounding the medical device industry,
subject the Company to an increased risk of product liability claims that may
involve significant defense costs. Other of the Company's products, such as
ultracapacitors and purification systems, may also be used in functions
involving significant product liability risks. There can be no assurance that
product liability claims will not be asserted against the Company in the future.
Although the Company maintains product liability insurance with coverage limits
it believes to be adequate, there can be no assurance that this coverage will in
fact be adequate to protect the Company against future product liability claims.
In addition, product liability insurance is expensive and there can be no
assurance that, in the future, product liability insurance will be available to
the Company in amounts or on terms satisfactory to the Company, if at all. A
successful product liability claim or series of claims brought against the
Company could have a material adverse effect on the Company's business,
financial condition and results of operations.
ENVIRONMENTAL REGULATIONS
The Company is subject to a variety of governmental regulations relating
to the use, storage, discharge, handling, emission, generation, manufacture and
disposal of toxic or other hazardous substances. The failure to comply with
current or future regulations could result in substantial fines being imposed on
the Company, suspension of production, alteration of its manufacturing process
or cessation of operations. Such regulations could require the Company to
acquire expensive remediation or abatement equipment or to incur substantial
expenses to comply with environmental regulations. Any failure by the Company to
control the use, disposal or storage of, or adequately restrict the discharge
of, hazardous or toxic substances could subject the Company to significant
liabilities.
10
<PAGE> 12
POTENTIAL DILUTIVE IMPACT OF EMPLOYEE STOCK OPTION PROGRAMS AT SUBSIDIARIES
The Company has adopted stock option plans at five of its subsidiaries
providing for the issuance of incentive and nonqualified stock options to
purchase common stock of these companies. Any of these subsidiary stock options
that have an exercise price per share less than the fair market value per share
of the common stock of a subsidiary ("in-the-money") will have a negative impact
on the Company's earnings per share. The Company expects that its reported
diluted earnings per share will be reduced in future quarters due to the
increased fair market value of certain of the Company's subsidiaries. Such
options, when and if exercised, will dilute the Company's actual ownership
interests in its subsidiaries, thus reducing the Company's share of the net
income, potential dividends or distributions and proceeds of any sale or other
disposition of such subsidiary. The equity interests upon exercise of stock
options in the subsidiaries would be accounted for as a minority interest. Based
on current programs, the dilutive impact attributable to these option plans
could be up to 13% at each of the affected subsidiaries (17% at one subsidiary).
In addition, certain key employees of the Company's Maxwell Business Systems,
Inc. subsidiary, which owns and markets the Company's job-cost accounting
software, currently own an aggregate of 20%, and have the right to purchase up
to an additional 29%, of that subsidiary. Currently, no established trading
market exists for the common stock underlying any of the subsidiary options and
such options are not exchangeable for Common Stock of the Company. The Company
has no plan to offer an exchangeability feature for options to purchase Company
Common Stock or otherwise provide liquidity for these subsidiary options, but
the Company could consider such alternatives in the future.
ECONOMIC IMPACT OF POTENTIAL PUBLIC OFFERINGS OF SUBSIDIARY STOCK
By conducting its operations through separate subsidiaries, the Company
promotes clearer market definition and product identity. This business unit
focus also allows the Company to more actively monitor opportunities for growth
or cost savings and to promote entrepreneurism with each subsidiary. While this
corporate structure also affords the Company a high level of flexibility to
implement various strategic alternatives, including future public offerings of
subsidiary stock, sales of subsidiaries or strategic acquisitions, certain of
these alternatives may have negative effects upon the Company's consolidated
sales, gross profit, net income and earnings per share. For example, any public
offering or other sale of a minority portion of a subsidiary's stock, including
in connection with any strategic relationship entered into by the Company, would
reduce that subsidiary's contribution to the Company's net income and earnings
per share. While any transaction would be preceded by a determination that such
transaction is in the best interests of the Company and its stockholders, such a
transaction could, nonetheless, have a material adverse effect on the Company's
results of operations.
GOVERNMENT REGULATION
The testing, manufacture and sale of certain of the Company's products
are subject to regulation by numerous governmental authorities. Pursuant to the
Federal Food, Drug, and Cosmetic Act, and the regulations promulgated
thereunder, the United States Food and Drug Administration (the "FDA") regulates
the preclinical and clinical testing, manufacture, labeling, storage,
distribution and promotion of food and medical products and processes. The
Company has obtained clearance from the FDA of its CoolPure technology for
preservation of liquid foods. In addition, the Company has obtained clearance
from the FDA of PureBright for food use and is applying for similar approvals in
Canada and Europe, as well as supporting customers in obtaining clearance of
PureBright for medical applications. Implantable defibrillators and pacemakers
that incorporate the Company's EMI filter have been approved by the FDA. Delays
in receipt of or failure to receive anticipated approvals or clearances, the
loss of previously received approvals or clearances, limitations on intended use
imposed as a condition of such approvals or clearances, or failure to comply
with existing or future regulatory requirements would have a material adverse
effect on the Company's business, financial condition and results of operations.
The testing, preparation of necessary marketing applications and
processing of those applications with the FDA is expensive and time consuming,
can vary based on the type of product and may take several years to complete.
There is no assurance that the FDA will act favorably or quickly in making such
reviews, and significant difficulties or costs may be encountered by the Company
or others in its efforts to obtain FDA approvals that could delay or preclude
the Company from marketing any products it may develop. The FDA may also require
11
<PAGE> 13
postmarketing testing and surveillance to monitor the effects of approved
products or place conditions on any approval that could restrict the commercial
applications of such products. Product approvals may be withdrawn if compliance
with regulatory standards is not maintained or if problems occur following
initial marketing. Noncompliance with applicable requirements can result in,
among other things, fines, injunctions, civil penalties, recall or seizure of
products, total or partial suspension of production, failure of the United
States government to grant pre-market clearance or pre-market approval for
products, withdrawal of marketing clearances or approvals and criminal
prosecution.
LONG-TERM FIXED-PRICE CONTRACTS
A portion of Maxwell's software business consists of work under a small
number of large, multi-year fixed-price contracts with state and local
government agencies involving sophisticated integration and networking tasks and
a certain amount of application software development. In addition, certain of
the Company's other businesses, primarily those conducted in its government
funded research and systems development business, may also enter into long-term
fixed-price contracts for large hardware systems or components. The expansion of
this business through acquisition will likely result in the Company assuming
additional fixed-price contracts. Events and developments such as unanticipated
delays in program schedule, failure to anticipate costs accurately over a two-or
three-year period or performance problems with important vendors can adversely
affect the profitability of such contracts. When these contracts are assumed in
acquisitions, there can be no assurance that the Company is properly valuing
remaining liabilities or profitability potential.
ANTI-TAKEOVER PROVISIONS
The Company's Board of Directors is divided into three classes, each of
which is elected and serve overlapping three-year terms. In addition, the
Company has adopted a rights plan that, among other things, grants rights to
purchase Common Stock to all stockholders at a price significantly below market
value upon a business combination in the event a single person or group has
previously acquired more than 20% of the outstanding Common Stock without the
Board of Directors having elected to redeem such rights. Furthermore, the
Company's certificate of incorporation contains a "fair price provision"
intended to require an acquiror to obtain the consent of the Board of Directors
to any business combination involving the Company. The Company's certificate of
incorporation and bylaws also contain provisions barring stockholders action by
written consent and the calling by stockholders of a special meeting. Amendment
of such provisions requires a super majority vote by the stockholders, except
with the consent of the Board of Directors. The rights plan and provisions of
the Company's certificate of incorporation and bylaws could delay, deter or
prevent a merger, tender offer, or other business combination or change in
control involving the Company that some, or a majority of, stockholders might
consider to be in their best interests, including offers or attempted takeovers
that might otherwise result in such stockholders receiving a premium over the
market price of the Common Stock.
LIMITED TRADING VOLUME; VOLATILITY OF STOCK PRICE
The Company's Common Stock is traded on the Nasdaq National Market.
Trading volume in the five trading days ended June 23, 1998 averaged 39,500
shares traded per day. Trading of relatively small blocks of stock can have a
significant impact on the price at which the stock is traded. The Company
believes factors such as quarterly fluctuations in financial results, of new
technologies impacting the Company's products, announcements regarding
acquisitions or dispositions by the Company, announcements by competitors or
changes in securities analysts' recommendations may cause the market price to
fluctuate, perhaps substantially. These fluctuations, as well as general
economic conditions, such as recessions or high interest rates, may adversely
affect the market price of the Common Stock. See "Price Range of Common Stock."
FORWARD-LOOKING STATEMENTS
This Prospectus may contain forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. Such statements are subject to a number of risks and uncertainties. Actual
results in the future could differ materially from those described in any
forward-looking
12
<PAGE> 14
statements as a result of the Risk Factors set forth above and the matters set
forth elsewhere in this Prospectus generally. The Company undertakes no
obligation to publicly release the result of any revisions to these
forward-looking statements that may be made to reflect any future events or
circumstances.
13
<PAGE> 15
USE OF PROCEEDS
All of the shares of Common Stock covered hereby are being offered by
the Selling Stockholders. The Company will not receive any proceeds from the
sales of Common Stock by the Selling Stockholders.
PRINCIPAL AND SELLING STOCKHOLDERS
The shares of Common Stock to be sold hereunder were issued to the
former stockholders of MAP-Micro Ltd., a United Kingdom private limited company
("MAP-Micro"), Tekna Seal, Inc., a Minnesota corporation ("TSI") and Phoenix
Power Systems, Inc., a California corporation ("Phoenix Power") (collectively,
the "Selling Stockholders") in connection with the acquisitions of those
companies by Maxwell or its subsidiaries. None of the Selling Stockholders has
held any position, office or other material relationship with the Company or any
of its affiliates within the past three years other than as a result of (i) his
or her beneficial ownership of Shares or (ii) the fact that certain Selling
Stockholders were employees of MAP-Micro, TSI or Phoenix Power and have become
employees of the Company.
On January 29, 1998 (the "TSI Closing Date"), Maxwell through its wholly
owned subsidiary, Maxwell Energy Products, Inc., a California corporation
("MEP") completed the acquisition of TSI, pursuant to the terms of an Agreement
and Plan of Reorganization (the "Merger Agreement") dated January 26, 1998, by
and among TSI, the stockholders of TSI, MEP and Maxwell. The acquisition was
accounted for as a pooling of interests. The Merger Agreement provided for the
merger of TSI with and into MEP (the "Merger"). In connection with the Merger,
Maxwell delivered to the stockholders of TSI an aggregate of 154,030 shares of
Common Stock. Pursuant to the terms of the Registration Rights Agreement dated
as of January 29, 1998 (the "TSI Registration Rights Agreement") entered into
among Maxwell and certain stockholders of TSI, the Company agreed to file this
Registration Statement with respect to the sale of Common Stock by those
stockholders who were a party to the TSI Registration Rights Agreement.
On March 5, 1998 (the "Phoenix Power Closing Date"), Maxwell completed
the acquisition of Phoenix Power, pursuant to the terms of the Stock Purchase
Agreement (the "Phoenix Purchase Agreement") dated March 1, 1998 by and among
the stockholders of Phoenix Power and Maxwell. In connection with the Purchase
Agreement, Maxwell delivered to certain stockholders of Phoenix Power an
aggregate of 100,679 shares of Common Stock. Pursuant to the terms of the
Registration Rights Agreement dated as of March 5, 1998 (the "Phoenix Power
Registration Rights Agreement") entered into among Maxwell and certain
stockholders of Phoenix Power, the Company agreed to file this Registration
Statement with respect to the sale of Common Stock by those stockholders who
were a party to the Phoenix Power Registration Rights Agreement.
On March 24, 1998 (the "MAP-Micro Closing Date"), Maxwell completed the
acquisition of MAP-Micro and affiliated companies, pursuant to the terms of the
Share Exchange Deed (the "MAP-Micro Purchase Agreement") dated March 24, 1998 by
and among the stockholders of MAP-Micro and Maxwell and to certain other related
documents and agreements involving minority stockholders of companies affiliated
with MAP-Micro. In connection with such Agreements, Maxwell delivered to certain
stockholders of MAP-Micro and affiliated companies an aggregate of 290,076
shares of Common Stock. Pursuant to the terms of the Registration Rights
Agreement entered into in connection with such purchase agreement (the
"MAP-Micro Registration Rights Agreements") entered into among Maxwell and
certain stockholders of MAP-Micro and affiliated companies, the Company agreed
to file this Registration Statement with respect to the sale of Common Stock by
those stockholders who were a party to said Registration Rights Agreements.
Pursuant to the terms of each of the TSI, Phoenix Power and MAP-Micro
Registration Rights Agreements, the Company and the Selling Stockholders have
agreed to certain indemnity and contribution provisions between the Company and
the Selling Stockholders against certain liabilities arising under the
securities laws. The Company has agreed to bear certain expenses in connection
with the registration of the Shares offered hereby.
14
<PAGE> 16
The following table sets forth, with respect to the Selling Stockholders,
the number of shares of Common Stock owned by each Selling Stockholder prior to
this offering and the number of shares of Common Stock offered for each Selling
Stockholder's account.
<TABLE>
<CAPTION>
NUMBER OF
NUMBER OF SHARES OF PERCENTAGE OF
SHARES COMMON SHARES
BENEFICIALLY STOCK BENEFICIALLY
NAME OF BENEFICIAL OWNER(1) OWNED OFFERED OWNED(1)
--------------------------- ------------ ---------- ------------
<S> <C> <C> <C>
Ronald M. Ahlman & Karen Ann Ahlman JT-TEN ............. 1,730 1,730 *
Glenn E. Bergstrom and Patricia N. Bergstrom, JTWROS ... 3,461 3,461 *
Harold G. Bergstrom and Nellie M. Bergstrom, JTWROS .... 3,461 3,461 *
Irwin Brodsky or Edna Brodsky, Trustee or the
Successor of the Irwin and Edna Brodsky Family
Trust Dated 11-10-97 .................................. 1,211 1,211 *
Kuo Chang .............................................. 1,730 1,730 *
Chin-Shia Chui ......................................... 865 865 *
Charles H. Cornell ..................................... 865 865 *
Marylyn Eliason(2) ..................................... 77 77 *
Robert R. Etem ......................................... 432 432 *
Victor G. Etem ......................................... 432 432 *
Jahangir Gaviri ........................................ 4,155 4,155 *
Linda R. Gonier ........................................ 28,636 4,590 *
Carol Goodridge ........................................ 5,000 5,000 *
Paul Goodridge(2) ...................................... 135,788 135,788 1.6%
Kenneth A. Hagstrom .................................... 23,443 3,945 *
Harold N. Hansen ....................................... 865 865 *
Carl R. Hanson ......................................... 1,730 1,730 *
Albert P. Hum .......................................... 519 519 *
Steven W. Johnson(2) ................................... 7,437 1,379 *
Judith A. Kielty(2) .................................... 1,509 1,509 *
Ronald J. Kielty ....................................... 519 519 *
Ronald J. and Judith A. Kielty ......................... 865 865 *
Brian P. King .......................................... 7,511 1,679 *
Laureen Kreuziger ...................................... 1,730 1,730 *
Robert Lang and Dorothy M. Lang ........................ 1,730 1,730 *
Clifford S. Lozinski ................................... 519 519 *
Kenneth C. Maki(2) ..................................... 23,905 6,445 *
D. McCarron ............................................ 461 461 *
Kimiko Mika ............................................ 1,730 1,730 *
Eric Molson/Ella Gates-Molson JT-TEN ................... 519 519 *
Virginia E. Muehlberg (Etem) ........................... 432 432 *
Hamid Nekouie .......................................... 5,194 5,194 *
Arthur Sund Nelson ..................................... 1,730 1,730 *
Jacqueline Ponsford .................................... 5,000 5,000 *
Mark Ponsford(2) ....................................... 135,788 135,788 1.6%
Myron Schnickels ....................................... 1,730 1,730 *
Anthony Charles Strickland(2) .......................... 2,500 2,500 *
Pete Stromme(2) ........................................ 153 153 *
Ralph H. Torberg ....................................... 1,730 1,730 *
Yung-Yu Ike Wang ....................................... 1,730 1,730 *
Stanley J. Weinberger, Jr .............................. 23,443 6,445 *
John Weller(2) ......................................... 1,000 1,000 *
Hassan Yarpezeshkan(2) ................................. 77,906 77,906 *
</TABLE>
- -------------
* Amount represents less than 1% of the Common Stock.
15
<PAGE> 17
(1) Information with respect to beneficial ownership is based on information
furnished to the Company by each stockholder included in the table or
included in filings with the Securities and Exchange Commission. The Company
believes that each individual person has sole voting and investment power
for shares beneficially owned by him, subject to community property laws
where applicable.
(2) The stockholder is an employee of the Company.
The Shares may be offered from time to time by the Selling Stockholders
named above. However, such Selling Stockholders are under no obligation to sell
all or any portion of such Shares, nor are the Selling Stockholders obligated to
sell any such Shares immediately under this Prospectus. Because the Selling
Stockholders may sell all or part of their shares of Common Stock offered
hereby, no estimate can be given as to the number of shares of Common Stock that
will be held by any Selling Stockholder upon termination of any offering made
hereby.
16
<PAGE> 18
PLAN OF DISTRIBUTION
The Shares are being registered to permit sales of the Shares by the
Selling Stockholders from time to time for 30 days following the effective date
of the Registration Statement of which this Prospectus is a part, or until such
time as all Shares are sold or disposed of. The Company has agreed, among other
things, to bear certain expenses in connection with the registration and sale of
the Shares, including without limitation all registration and filing fees, fees
and expenses of compliance with securities or blue sky laws, printing expenses,
messenger and delivery expenses, National Association of Securities Dealers,
Inc., stock exchange and qualification fees, fees and disbursements of counsel
for the Company and of independent certified public accountants of the Company
(including the expenses of any special audit required by or incident to such
performance), the fees of one counsel and one accountant representing the
Selling Stockholders in connection with the registration and sale of the Shares,
expenses of any underwriters that are customarily requested in similar
circumstances by such underwriters (excluding discounts, commissions or fees of
underwriters, selling brokers, dealer managers or similar securities industry
professionals relating to the distribution of the Shares, which will be borne by
the Selling Stockholders).
The Shares may be sold from time to time to purchasers directly by any
or all of the Selling Stockholders. Alternatively, the Selling Stockholders may
from time to time offer the Shares to or through underwriters, brokers, dealers
or agents, who may receive compensation in the form of underwriting discounts,
concessions or commissions from the Selling Stockholders or the purchasers of
such securities for whom they may act as agents. The Selling Stockholders and
any underwriters, brokers, dealers or agents that participate in the
distribution of the Shares may be deemed to be "underwriters" within the meaning
of the Securities Act and any profit on the sale of such securities and any
discounts, commissions, concessions or other compensation received by any such
underwriter, broker, dealer or agent may be deemed to be underwriting discounts
and commissions under the Securities Act. Underwriters, brokers, dealers and
agents also may be customers of, engage in transactions with, or perform other
services for Maxwell and its affiliates in the ordinary course of business.
Any distribution hereunder of the Shares by the Selling Stockholders may
be effected from time to time in one or more of the following transactions: (a)
on the Nasdaq National Market, or through broker-dealers acting as principal or
agent, in transactions (which may involve crosses or block transactions), in
special offerings, or in the over-the-counter market, or otherwise, at market
prices obtainable at the time of sale, at prices related to such prevailing
market prices, at negotiated prices or at fixed prices, (b) to underwriters who
will acquire shares of Common Stock for their own account and resell such shares
in one or more transactions, including negotiated transactions, at a fixed
public offering price or at varying prices determined at the time of sale (any
public offering price and any discount or concessions allowed or reallowed or
paid to dealers may be changed from time to time), (c) directly or through
brokers or agents in private sales at negotiated prices (including without
limitation, pursuant to Rule 144 under the Securities Act), (d) by distributions
or dispositions to shareholders or partners or other persons affiliated or
associated with one or more of the Selling Stockholders or with Maxwell or one
of its affiliates, (e) to lenders pledged as collateral to secure loans, credit
or other financing arrangements and any subsequent foreclosure, if any,
thereunder, (f) through the writing of options or other derivative instruments
(whether listed on an exchange or otherwise) and pursuant to exercise,
conversion, exchange, distribution on or similar delivery in respect of a
derivative security or instrument relating to some or all of such Common Stock,
(g) pursuant to a stock lending or repurchase or reverse repurchase transaction,
or (h) by any other legally available means. Also, offers to purchase the Common
Stock may be solicited by agents designated by the Selling Stockholders from
time to time. The Registration Statement and this Prospectus shall cover any
such sale and resale. Any of such transactions may be effected at market prices
prevailing at the time of sale, at prices prevailing at the time of sale, at
prices related to such prevailing market prices, at negotiated prices or at
fixed prices. To the extent required, the specific amount of Common Stock to be
sold, the purchase price and public offering price, the names of any resale
agent, dealer or underwriter, and the terms and amount of any applicable
commission or discount with respect to a particular offer will be set forth in a
Prospectus Supplement and/or post-effective amendment to the Registration
Statement of which this Prospectus constitutes a part.
In order to comply with the securities laws of certain states, if
applicable, the Common Stock will be sold hereunder in such jurisdictions only
through registered or licensed brokers or dealers. In addition, in certain
states
17
<PAGE> 19
the Common Stock may not be sold hereunder unless the Common Stock has been
registered or qualified for sale in such state or an exemption from registration
or qualification is available and complied with.
The Company is not aware of any existing arrangements between any
Selling Stockholder, any other stockholder, broker, dealer, underwriter or agent
relating to the sale or distribution of the Shares.
The Selling Stockholders will be indemnified by the Company, to the
extent permitted by law, against certain civil liabilities, including certain
liabilities under the Securities Act, or will be entitled to contribution in
connection therewith, subject to certain limitations. The Company, at its
request, will be indemnified by the Selling Stockholders, to the extent
permitted by law, against certain civil liabilities, including certain
liabilities under the Securities Act, or will be entitled to contribution in
connection therewith, subject to certain limitations.
18
<PAGE> 20
DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
The Company's authorized capital stock consists of 40,000,000 shares of
Common Stock, $.10 par value. As of June 23, 1998, there were 8,498,703 shares
of Common Stock outstanding, excluding shares issuable upon the exercise of
outstanding options to purchase an aggregate of 1,099,255 shares of Common Stock
held by employees, management and directors. Holders of Common Stock are
entitled to one vote for each share held of record on all matters submitted to a
vote of stockholders. There is no cumulative voting for the election of
directors. Holders of Common Stock are entitled to receive ratably such
dividends as may be declared by the Board of Directors out of funds legally
available therefor. In the event of a liquidation, dissolution or winding up of
the Company, holders of Common Stock are entitled to share ratably in all assets
remaining after payment to all creditors. Holders of Common Stock have no
preemptive rights and have no rights to convert their Common Stock into any
other securities. All of the outstanding shares of Common Stock are, and the
shares being offered hereby will upon issuance and sale be, fully paid and
nonassessable.
The transfer agent and registrar for the Common Stock is ChaseMellon
Shareholder Services, L.L.C.
COMMON STOCK RIGHTS
On June 20, 1989, the Board of Directors of Maxwell declared a dividend
distribution of one Right for each outstanding share of its common stock, par
value $.10 per share (the "Common Stock"), to stockholders of record at the
close of business on June 30, 1989. Each Right entitles the registered holder to
initially purchase from the Company one-half of a share of Common Stock at a
purchase price of $32.50 per one-half share (the "Purchase Price"), since
adjusted to $16.25 per one-half share. The description and terms of the Rights
are set forth in a rights agreement, as amended (the "Rights Agreement") between
the Company and ChaseMellon Shareholder Services, L.L.C., as Rights Agent.
In general, the Rights become exercisable or transferable only upon the
occurrence of certain events related to changes in ownership of the Common
Stock. Once exercisable, each Right entitles its holder initially to purchase
from the Company one-half of a share of Common Stock at a purchase price of
$16.25 per one-half share. The Rights become exercisable upon the earlier of the
close of business on (i) the tenth day following public announcement that a
person or group of affiliated or associated persons (an "Acquiring Person") has
acquired, or generally obtained the right to acquire, beneficial ownership of
20% or more of the outstanding shares of Common Stock (the "Stock Acquisition
Date"), or (ii) the tenth business day following the commencement of a tender
offer or exchange offer that would result in a person or group beneficially
owning 20% or more of such outstanding shares of Common Stock. Upon the
occurrence of certain other events related to changes in the ownership of the
Common Stock, each holder of a Right would be entitled to purchase shares of the
Common Stock, or an acquiring corporation's common stock, having a market value
equal to four times the exercise value of the Right. However, Rights are not
exercisable following the occurrence of any of the events set forth above until
such time as the Rights are no longer redeemable by the Company as set forth
below.
The Rights expire at the close of business on June 20, 1999, unless
earlier redeemed by the Company. At any time until the close of business on the
tenth business day following the Stock Acquisition Date, the Company may redeem
the Rights in whole, but not in part, at a price of $.01 per Right (payable in
cash, Common Stock or other consideration deemed appropriate by the Board of
Directors). After the redemption period has expired, the Company's right of
redemption may be reinstated if an Acquiring Person reduces his beneficial
ownership to 10% or less of the outstanding shares of Common Stock in a
transaction or series of transactions not involving the Company. Immediately
upon the action of the Board of Directors ordering redemption of the Rights, the
Rights will terminate and the only right of the holders of Rights will be to
receive the $.01 redemption price. The Rights, if exercised, will cause a
substantial dilution to the equity interest in Maxwell to a person's or group's
ownership interest in the Company's Common Stock that attempts to acquire the
Company on terms not approved by the Company's Board of Directors. See "Risk
Factors--Anti-Takeover Provisions."
19
<PAGE> 21
ADDITIONAL ANTI-TAKEOVER PROVISIONS
The provisions of the Company's certificate of incorporation and bylaws
having possible "anti-takeover" effects are those that: (i) from a classified
Board of Directors with staggered terms of office, eliminate cumulative voting
and permit the removal of directors only for cause; (ii) impose supermajority
shareholder vote or disinterested director approval requirements in connection
with certain mergers, acquisitions and other business combinations, unless
specified minimum price and procedural requirements are satisfied in the
proposed transaction (a "fair price provision"); (iii) eliminate the right of
stockholders to call special stockholders' meetings and limit their right to
take action without a meeting by written consent and (iv) impose supermajority
shareholder vote or disinterested director approval requirements for amendments
to a number of provisions in the Company's charter documents, including the
provisions described in clauses (i) through (iii) above.
In general, the fair price provisions may have the effect of requiring
payment in cash for shares of Common Stock by an acquiror having accumulated 10%
or more of the Common Stock at a price no less than the highest market price of
the Common Stock within a recent date. Such a 10% or more stockholder must also
meet certain procedural requirements intended to prevent accumulations of
additional stock below the fair price.
DELAWARE LAW
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law, an anti-takeover law. In general, Section 203 prohibits
a publicly held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years after the date of
the transaction in which the person became an interested stockholder, unless
either (i) prior to the date at which the person becomes an interested
stockholder, the Board of Directors approves such transaction or business
combination; (ii) the stockholder acquires more than 85% of the outstanding
voting stock of the corporation (excluding shares held by directors who are
officers or held in certain employee stock plans) upon consummation of such
transaction or (iii) the business combination is approved by the Board of
Directors and by two-thirds of the outstanding voting stock of the corporation
(excluding shares held by the interested stockholder) at a meeting of
stockholders (and not by written consent). A "business combination" includes a
merger, asset sale or other transaction resulting in a financial benefit to such
interested stockholder. An "interested stockholder" is a person who, together
with affiliates and associates, owns (or within three years prior, did own) 15%
or more of the corporation's voting stock.
LEGAL MATTERS
The validity of the Common Stock in respect of which this Prospectus is
being delivered will be passed on for the Company by Riordan & McKinzie, a
Professional Corporation, Los Angeles, California.
EXPERTS
The consolidated financial statements of Maxwell Technologies, Inc.
appearing in Maxwell Technologies, Inc.'s Annual Report (Form 10-K) for the year
ended July 31, 1998, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon included therein and incorporated
herein by reference. Such consolidated financial statements are incorporated
herein by reference in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
20
