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PROSPECTUS FILED PURSUANT TO RULE 424(b)(1)
Dated April 20, 1998 REGISTRATION NO. 333-49941
MAXWELL TECHNOLOGIES, INC.
121,259 Shares of Common Stock
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The 121,259 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 April 16, 1998, the reported closing price of the Common Stock on
the Nasdaq National Market was $30.75 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."
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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.
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The date of this Prospectus is April 20, 1998
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No dealer, salesman 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.
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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. 333-49941) under the
Securities Act of 1933, as amended (the "Securities Act") with respect to the
Common Stock offered by thisProspectus. 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.
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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, 1997.
(2) Description of the Company's Rights contained in the Registration
Statement on Form 8-A dated June 30, 1989.
(3) Quarterly Report on Form 10-Q for the fiscal quarter ended October 31,
1997.
(4) Quarterly Report on Form 10-Q for the fiscal quarter ended January 31,
1998.
(5) Current Report on Form 8-K dated November 10, 1997.
(6) Current Report on Form 8-K dated April 3, 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 Power
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has a $4.0 million sales run rate. The shares of the Company Common Stock
issued in the transactions described above were not registered under the
Securities Act. Certain of the Selling Shareholders were granted and are
exercising registration rights in connection with the acquisitions of TSI and
Phoenix Power. 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 $7.0 million in sales. In April 1998, the Company acquired the
Electromagnetic Systems Group of Primex Technologies, Inc. (the "EMS Group")
for approximately $10 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.
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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.
Dependence on Product Development and Market Acceptance
Many of the Company's products, especially its ultracapacitor and
purification products, are in the development stage and are alternatives to
existing technologies. The Company's success is dependent in part on market
acceptance of its new products and there can be no assurance that any material
commercial market will develop for these products. The Company expects that
its ultracapacitor and purification products will compete with existing
products that are well established in the marketplace and that, in some cases,
are less expensive. The future success of the Company will depend in large
part on the Company's ability to accurately anticipate market demand for its
products and services as well as improve its existing technologies and
products. The Company's ability to demonstrate a technological or economic
advantage, or both, over competitive products in addition to the technical,
financial and other risks involved in introducing new products and technologies
are critical to the Company achieving its goals. There can be no assurance
that the Company will be successful in identifying markets for its technologies
or in developing, manufacturing and marketing new commercial products or
enhancements to existing products that address the needs of these markets, any
of which could have a material adverse effect on the Company's business,
results of operations and financial condition.
Continuing Transition to Commercial Business
The Company is continuing its transition from its historical reliance on
funded research and development business for defense and other federal
government agencies to developing, manufacturing and marketing of products and
services for commercial markets. The Company's success in this regard will
depend upon a number of factors, including the Company's ability to gain
customer acceptance for its products and services, to expand its customer base
through sales and marketing efforts, to expand successfully its manufacturing
capacity, to develop extensions of its existing products and services into new
applications and to conceive and develop new products and services. Commencing
in fiscal 1996, the Company changed its senior management and reorganized its
operations along product and service lines. There can be no assurance that the
Company will be able to continue its transition to commercial businesses. 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.
Fluctuations in Operating Results; History of Losses
Although the Company had net income of $4.0 million in fiscal 1997, it has
incurred significant losses in two of the past five years. Net losses for the
Company's 1996 and 1994 fiscal years were approximately $15.2 million and $1.7
million, respectively. Of the fiscal 1996 loss, $14.4 million arose from
charges related to the reorganization of the Company's operations, a change in
accounting principle and other charges. The Company may in the future
experience significant fluctuations in revenues and operating results from
period to period as a result of a number of factors including, without
limitation, the volume and timing of orders and market acceptance of the
Company's products; the Company's ability to fill orders on a timely basis;
pricing policies of the Company or its competitors; variations in the mix of
product sales; the timing of product introductions by the Company or its
competitors; cancellation, suspension or other action taken by the United
States government or its agencies on its programs and contracts with the
Company; product obsolescence resulting from new product introductions or
changes in customer demand; and expenses associated with the acquisition of
businesses, products or technologies. The Company anticipates that, in order
to obtain market penetration, from time to time it will sell new products at
prices yielding margins below those it ultimately expects to achieve, and
significant aggressive pricing in a particular quarter or quarters could
adversely affect the results of operations for such periods. The impact of the
foregoing factors may cause the Company's operating results to be below the
expectations of public market analysts and investors. In such event, the price
of the Company's Common Stock could be materially adversely affected.
Quarterly results are not necessarily indicative of future performance for any
particular period, and there can be no assurance that the Company will attain
or sustain growth in sales and profitability on a quarterly or annual basis.
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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.
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
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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 requalified management and other personnel. 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.
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.
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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 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
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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 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
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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 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
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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.
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
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<PAGE>
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
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
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<PAGE>
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 twenty trading days ended April 3, 1998 averaged 67,600
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 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.
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
shareholders of 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 Merger and the Purchase
Agreements (as defined herein). 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 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 shareholders 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
shareholders of TSI, the Company agreed to file this Registration Statement
providing for the sale of 34,004 shares of Common Stock by those persons who
were not affiliates of TSI.
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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 "Purchase Agreement") dated March 1, 1998 by and among the
shareholders 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
shareholders of Phoenix Power, the Company agreed to file this Registration
Statement providing for the sale of 87,255 shares of Common Stock by those
stockholders who were a party to the Phoenix Power Registration Rights
Agreement.
Pursuant to the terms of each of the TSI and Phoenix Power 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.
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<PAGE>
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. None of the Selling Stockholders owned prior
to this offering, and none will own after this offering, more than one percent
(1%) of the Company's outstanding Common Stock (based on the number of shares
outstanding on the date of this Prospectus).
Number of Number of Percentage of
Shares Shares of Shares
Name of Beneficially Common Stock Beneficially
Beneficial Owner(1) Owned Offered Owned(1)
- ------------------- ------------ ------------ --------------
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 Trustee
of the Irwin and
Edna Brodsky
Family Trust Dated
11-10-97 1,211 1,211 *
Kuo Chang 1,730 1,730 *
Chin-Shia Chiu 865 865 *
Charles H. Cornell 865 865 *
Marylyn Eliason 77 77 *
Robert R. Etem 432 432 *
Victor G. Etem 432 432 *
Jahangir Gaviri 4,155 4,155 *
Donald F. Hagen 1,730 1,730 *
Harold N. Hansen 865 865 *
Carl R. Hanson 1,730 1,730 *
Albert P. Hum 519 519 *
Judith A. Kielty 1,509 1,509 *
Ronald J. Kielty 519 519 *
Ronald J. and
Judith A. Kielty 865 865 *
Laureen Kreuziger 1,730 1,730 *
Robert Lang and
Dorothy M. Lang 1,730 1,730 *
Clifford S. Lozinski 519 519 *
Kimiko Mika 1,730 1,730 *
Eric Molsen/Ella
Gates-Molsen JT-TEN 519 519 *
Virginia E. Muehlberg
(Etem) 432 432 *
Hamid Nekouie 5,194 5,194 *
Arthur Sund Nelson 1,730 1,730 *
Myron Schnickels 1,730 1,730 *
Pete Stromme 153 153 *
Ralph H. Torberg 1,730 1,730 *
Yung-Yu Ike Wang 1,730 1,730 *
Hassan Yarpezeshkan 77,906 77,906 *
__________________________
* Amount represents less than 1% of the Common Stock.
(1) Information with respect to beneficial ownership is based on information
furnished to the Company by each shareholder 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.
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.
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<PAGE>
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 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.
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<PAGE>
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.
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<PAGE>
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 April 16, 1998, there were 8,408,103
shares of Common Stock outstanding, excluding shares issuable upon the
exercise of outstanding options to purchase an aggregate of 1,136,145 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."
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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 financial statements and the related financial statement schedule
incorporated in this Prospectus by reference from the Company's Annual Report
on Form 10-K for the year ended July 31, 1997 have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report, which are
incorporated herein by reference, and have been so incorporated in reliance
on their report given on their authority as experts in accounting and auditing.
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