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FILED PURSUANT TO RULE 424(b)(3)
REGISTRATION NO. 333-29081
PROSPECTUS
1,705,915 SHARES OF COMMON STOCK, ALL OF WHICH ARE TO BE OFFERED
BY THE SELLING STOCKHOLDERS, INCLUDING 600,000 SHARES ISSUABLE
TO THE SELLING STOCKHOLDERS ON EXERCISE OF OUTSTANDING WARRANTS
TO PURCHASE COMMON STOCK (THE "WARRANTS")
AMATI COMMUNICATIONS CORPORATION
1,705,915 shares (the "Shares") of Common Stock, $0.20 par value, (the
"Common Stock") of Amati Communications Corporation (the "Company"), offered by
this prospectus (the "Prospectus"), including 600,000 Shares issuable to the
Selling Stockholders by the Company on exercise of warrants ("Warrants") to
purchase Common Stock, may be sold by the holders of such Shares (collectively,
the "Selling Stockholders") named in this Prospectus. See "Selling
Stockholders." The Company will not receive any proceeds from the sale of shares
by the Selling Stockholders. The Company could receive up to $12,735,000 on the
exercise of the Warrants. See "Description of Capital Stock--Warrants."
The Company has not made any underwriting arrangement with respect to the
Shares issuable upon exercise of the Warrants. The Company's Common Stock is
traded on the Nasdaq National Market under the symbol "AMTX". On August 4, 1997,
the closing price for the Common Stock, as reported on the Nasdaq National
Market, was $13.88.
All or a portion of the Shares offered by this Prospectus by the Selling
Stockholders may be delivered and/or sold in transactions from time to time in
the over-the-counter market, on the Nasdaq National Market, in negotiated
transactions, or a combination of such methods of sale, at market prices
prevailing at the time, at prices relating to such prevailing prices or at
negotiated prices and/or may also be used to cover short positions. See "Plan of
Distribution". This Prospectus may be used by the Selling Stockholders or by any
broker-dealer who may participate in sales of securities covered hereby. The
Selling Stockholders and the brokers and dealers through whom such sales are
effected may be deemed to be underwriters under the Securities Act of 1933, as
amended (the "Securities Act"). The Selling Stockholders will pay all
commissions, transfer taxes, and other expenses associated with the sales of
securities by them. Pursuant to an agreement with the Selling Stockholders, the
Company has paid the expenses of the preparation of this Prospectus. The Company
has also agreed to indemnify the Selling Stockholders against certain
liabilities, including liabilities arising under the Securities Act.
The Company has filed with the Securities and Exchange Commission (the
"Commission") Registration Statements under the Securities Act with respect to
the securities offered by this Prospectus. As permitted by the rules and
regulations of the Commission, this Prospectus does not contain all of the
information set forth in the Registration Statements and the exhibits and
schedules thereto. For further information with respect to the Company and the
securities offered hereby, reference is made to the Registration Statements and
the exhibits thereto, which may be examined without charge at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and copies of which may be obtained from
the Commission upon payment of the prescribed fees.
------------------------
SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
(SEE "RISK FACTORS" ON PAGE 3.)
------------------------
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 AUGUST 7, 1997
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No dealer, salesman, or any other person has been authorized to give any
information or to make any representations or projections of future performance
other than those contained in this Prospectus, and any such other information,
projections, or representations, if given or made, must not be relied upon as
having been so authorized. The delivery of this Prospectus or any sale hereunder
at any time does not imply that the information herein is correct as of any time
subsequent to its date. This Prospectus does not constitute an offer to sell or
a solicitation of an offer to buy any of the securities offered hereby in any
jurisdiction where, and to any person to whom, it is unlawful to make such offer
or solicitation.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act") and in accordance therewith
files reports, proxy statements and other information with the Commission. The
Registration Statements, and such reports, proxy statements and other
information can be inspected and copied at public reference facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Copies of such material can be obtained at prescribed
rates from the Public Reference Section of the Commission at such address. Such
reports, proxy statements and other information can also be inspected at the
Commission's regional offices at 7 World Trade Center, Suite 1300, New York, New
York 10048 and 500 West Madison, Chicago, Illinois 60661, and at the offices of
the Nasdaq Stock Market at 9513 Key West Avenue, Rockville, Maryland 20850-3389.
The Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants, such as the Company,
that file electronically with the Commission and the address of such site is
http://www.sec.gov.
DOCUMENTS INCORPORATED BY REFERENCE
There are hereby incorporated in this Prospectus by reference the following
documents filed pursuant to the 1934 Act: (i) the Company's Annual Report on
Form 10-K for the fiscal year ended July 27, 1996, as amended; (ii) the
Company's Proxy Statement for its annual meeting of stockholders held December
20, 1996; (iii) the Company's Quarterly Reports on Form 10-Q for the fiscal
quarters ended November 2, 1996, February 1, 1997 and May 3, 1997, and (iv) the
description of the Company's Common Stock contained in the registration
statement filed under the 1934 Act registering such Common Stock under Section
12 of the 1934 Act.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the 1934 Act after the date of this Prospectus and prior to the
termination of the offering of the securities offered hereby shall be deemed to
be incorporated by reference in this Prospectus.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus has been
delivered, upon the written or oral request of such person, a copy of any or all
of the documents referred to above which have been or may be incorporated in
this Prospectus by reference, other than exhibits to such documents which are
not specifically incorporated by reference into the information that this
Prospectus incorporates. Requests for such copies should be directed to: Amati
Communications Corporation, 2043 Samaritan Drive, San Jose, California 95124,
Attention: Investor Relations, Telephone (408) 879-2000.
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THE COMPANY
Incorporated under the laws of the State of Delaware in 1968 as Microform
Data Systems, Inc., the Company changed its name to ICOT Corporation in 1980. On
November 28, 1995, the Company and Amati Communications Corporation ("Old
Amati"), a privately held company completed a merger (the "Merger") by which Old
Amati became a wholly-owned subsidiary of the Company. Effective as of the
Merger, the Company's name was changed to Amati Communications Corporation and
its common stock began trading on the Nasdaq National Market under the symbol
"AMTX".
The Company is a developer of advanced transmission equipment utilizing
Discrete Multi-tone ("DMT") technology for Advanced Digital Subscriber Line
("ADSL") and Very High-Speed Digital Subscriber Line ("VDSL") markets. The
Company holds DMT and ADSL patents. The Company also provides network
connectivity systems for the internetworking and Original Equipment
Manufacturers ("OEM") markets.
RISK FACTORS
Other than for statements of historical fact, the information about the
Company included or incorporated by reference herein are forward looking
statements that involve risks and uncertainties, including the risks detailed
below. The Shares of Common Stock offered hereby involve a high degree of risk
and prospective purchasers should carefully consider the following factors.
HISTORY OF LOSSES. The Company had net losses for the fiscal year ended
July 27, 1996 of approximately $34,078,000 (including a charge related to the
Merger of approximately $31,554,000) and for the nine months ended May 3, 1997
of approximately $5,825,000. Due in part to the Merger, the Company is not
expected to operate profitably in the foreseeable future as the Company
continues research, development, production and marketing activities. There can
be no assurance that the Company will ever attain profitability. Any long-term
viability, profitability and growth from the Company's technology will depend
upon successful commercialization of products resulting from its research and
product development activities. Extensive research and development will be
required prior to commercialization of certain products. There can be no
assurance that the Company will be able to develop commercially viable products
from its technology, generate significant revenues and/or achieve profitability.
NEED FOR ADDITIONAL CAPITAL. During 1996, the Company secured a line of
credit for $1,500,000, which was subsequently increased to $2,000,000, and a
capital lease line of $1,500,000, which was subsequently increased to
$1,700,000, and entered into the Investment Agreement with the Selling
Stockholders which provides to the Company up to $15 million in equity
financing. As of August 7, 1997, proceeds of $15,000,000 have been received
pursuant to this financing agreement. The Company's future capital requirements
will depend on many factors, including sales levels, progress in product
development programs, the establishment of collaborative agreements, and costs
of manufacturing facilities and commercialization activities. The Company may
require funding in addition to that available under its line of credit, capital
lease line and the Investment Agreement. There can be no assurance that such
additional funding will be available on acceptable terms, if at all. If
additional funds are required and not available, the Company could be required
to curtail significantly or defer, temporarily or permanently, one or more of
its research and development programs or to obtain funds through arrangements
that may require the Company to relinquish certain technology or product rights.
MARKET FOR ADSL PRODUCTS STILL UNDER DEVELOPMENT; A PRINCIPAL ADSL MARKET
OUTSIDE OF THE UNITED STATES. ADSL was initially developed to transmit digital
video over copper wire and also has application in providing access to the
Internet over copper wire. Although the current infrastructure in the local
distribution networks of telephone companies is based on copper wire, there can
be no assurance that telephone companies will pursue the deployment of ADSL
systems or, if deployment occurs, as to the volume and timing of such
deployment. Significant deployment may be prevented or delayed by a number
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of factors, including cost, regulatory barriers, lack of programming content,
lack of consumer demand and the availability of alternative technologies. Access
systems with high performance broadband capability, such as the ADSL system, may
be attractive to telecommunications providers only to the extent that the such
companies plan to offer broadcast video, video-on-demand or Internet access
services which utilize the full features of a high performance local
distribution network. Substantial amounts of time, effort and money will be
required to develop such high performance services. There can be no assurance
that sufficient programming content for video services will be developed to
justify deploying digital video transmission systems, or that programming
content will be both attractive to consumers and offered at prices that will
create a mass market. If such high performance services are offered, and there
is demand for them, there can be no assurance that telecommunications companies
will select ADSL over competing technologies, such as fiber-to-the-curb, hybrid
fiber-coaxial ("HFC"), and wireless communications. Fiber-to-the curb, HFC and
wireless systems have greater bandwidth than the ADSL products being developed
by the Company. Although Internet access services may provide a market for ADSL
in the United States, because foreign telephone companies currently face less
competition from cable companies than telephone companies face in the United
States, the Company believes that its principal markets for ADSL video
applications may be outside the United States.
PRICE COMPETITIVENESS OF ADSL PRODUCTS. The Company believes that in order
to design and manufacture commercially acceptable ADSL products, cost
improvements beyond those available with current technology will be necessary.
The future success of the Company will depend, in part, on its ability to
develop ADSL products that compete effectively on the basis of price and
performance. Current prices are significantly higher than those that the Company
believes would be necessary for mass deployment of ADSL products. There can be
no assurance that the Company will be successful in developing ADSL products
that can be sold at prices which are viable in the market.
RAPID TECHNOLOGICAL CHANGE; COMPETITION IN THE TELECOMMUNICATION
TRANSMISSION BUSINESS. Competition from existing companies, including major
communications companies, is expected to increase. Most of the Company's
competitors are more established, benefit from greater market recognition and
have greater financial, technical, production and marketing resources than the
Company. Some competitors are developing alternate access technologies, such as
HFC, fiber-to-curb and wireless systems, that may prove technologically superior
or more cost effective than the Company's technology. There can be no assurance
that developments by others will not render the Company's products or
technologies obsolete or noncompetitive or that the Company will be able to keep
pace with new technological developments.
COMPETITION IN THE PC TO MAINFRAME CONNECTIVITY BUSINESS. The PC to
Mainframe Connectivity market is highly competitive and is characterized by
rapid advances in technology which frequently result in the introduction of new
products with improved performance characteristics, thereby subjecting the
Company's products to the risk of technological obsolescence. The Company's
ability to compete is dependent on several factors, including reliability,
product performance, quality, features, distribution channels, name awareness,
customer support, product development capabilities, and the ability to meet
delivery schedules. The Company competes, directly or indirectly, with a broad
range of companies in the PC-Connectivity business, many of whom have
significantly greater financial and other resources. In addition, the Company is
only competing for a limited and declining segment of the PC-Connectivity
market, which is itself declining and expected to continue to decline. The
Company expects revenues from its PC-Connectivity business to continue to
decline.
COMPETITION FOR VDSL STANDARDS. The Company expects to apply its DMT
technology to the development of VDSL products for the transmission of digital
video service in connection with a fiber-optic backbone to cover the distance
from this platform or node to subscribers' homes over copper wire or coaxial
cable. American National Standards Institute ("ANSI") has not yet awarded the
standard for VDSL technology, and the competition for the ANSI standard for VDSL
is expected to be intense. AT&T, as well as other companies with greater
resources than the Company, are expected to compete for these
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standards. There is no assurance that the Company's DMT technology will be
successful in obtaining the ANSI VDSL standard.
DEPENDENCE ON COMPLEMENTARY PRODUCTS. Widespread use of ADSL and VDSL
products will depend on the commercial availability of other products and
components, including content, digital switches, video servers, encode/decode
equipment, and set-top boxes in subscribers' homes. There can be no assurance
that other suppliers will develop and market these complementary components
effectively or that these components, when combined with the Company's ADSL and
VDSL products, will be a cost-effective means of transmitting video-on-demand or
video dialtone.
DEPENDENCE ON LARGE CUSTOMERS AND SYSTEMS INTEGRATORS. The Company expects
to sell many of its telecommunication transmission products to large
telecommunications service companies which serve as integrators for the various
component systems that make up a video-on-demand or multimedia system. These
systems integrators in turn sell the systems to telecommunications providers for
distribution to their subscribers. The Company is largely dependent on these
systems integrators for the introduction of its products to field trials. There
can be no assurance that systems integrators will select the Company's products
for field trials or, if they do initially select the Company's products, that
they will continue to use them. In addition, telephone companies are generally
reluctant to deploy new technologies available only from a single source,
especially when the supplier is as relatively small as the Company, and often
require the availability of alternative sources before deploying a new
technology. This reluctance may put the Company at a competitive disadvantage
relative to some of its competitors. Further, acceptance of the Company's
products by these customers may require Company to relinquish rights to its
technology or products. There can be no assurance, however, that even if the
Company were to relinquish such rights to its technology or products, telephone
companies would deploy the Company's ADSL or VDSL products.
CUSTOMER CONCENTRATION; RELIANCE ON SALES TO IBM. Sales to IBM for PC to
Mainframe connectivity and related products accounted for approximately 65%, 83%
and 69% of the Company's net sales in fiscal 1994, 1995 and 1996, respectively,
and 49% for the nine months ended May 3, 1997. Since IBM considers product sales
and market data confidential, the Company has very little ability to anticipate
future demands and IBM is not obligated to purchase any specified amount of
products. For its PC-connectivity products, the Company is highly dependent on
sales to IBM and expects that quarterly and annual results could be volatile due
to its dependence on this dominant customer. In addition, there can be no
assurance that IBM will continue to distribute and support the Company's
products. The Company's principal contract with IBM, which originally expired in
December 1996 has been extended. IBM may terminate its agreements with the
Company upon 30 days' notice without a significant penalty.
INTERNATIONAL BUSINESS. The Company expects that sales outside of the
United States will represent a significant portion of its future sales,
especially of the Company's ADSL products. Operations outside of the United
States are subject to various risks, including exposure to currency
fluctuations, the imposition of governmental controls, the need to comply with a
wide variety of foreign and United States export laws, political and economic
instability, trade restrictions, changes in tariffs and taxes, and longer
payment cycles typically associated with international sales. The inability of
the Company to design products to comply with foreign standards or any
significant or prolonged delay in the Company's international sales could have a
material adverse effect on the Company's future business and results of
operations.
REGULATORY MATTERS. Telephone companies, which constitute the initial
primary market for the Company's telecommunication transmission products, and
cable television companies, which may become a future market for such products,
are subject to extensive regulation by both the federal and state governments in
the United States and by foreign governments. Many of these regulations have the
effect of limiting the economic incentive of telephone companies to deploy new
technologies. Restrictions on telephone companies and cable television companies
may materially and adversely affect demand for the products of the Company.
Recent legislation passed by Congress will significantly alter the regulations
on telephone companies and cable companies in the United States, and there can
be no assurance that such
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legislation will not adversely affect the commercialization of the Company's
products. In addition, both in the United States and abroad, rates for
telecommunications services are governed by tariffs or licensed carriers that
are subject to regulatory approval. These tariffs also could have a material
adverse affect on the demand for the Company's products.
DEPENDENCE ON SUPPLIERS AND THIRD-PARTY MANUFACTURERS. Certain key
components in the Company's products, such as integrated circuits, are currently
available only from single sources. The Company does not have any long-term
supply contracts with its sole source vendors and purchases these components on
a purchase order basis. In addition, certain components and subassemblies for
the Company's products have long lead times. While the Company seeks to
accurately forecast its requirements, inaccuracies in its forecast could result
in shortages or oversupplies of these components. The inability to obtain
sufficient quantities of sole source components or subassemblies as required, or
to develop alternative sources as required in the future, or inaccuracies in
forecasts for long lead time components or subassemblies could result in delays
or reductions in product shipments or product redesigns which would materially
and adversely affect the Company's business, operating results and financial
condition. In addition, increases in the prices of components for which the
Company does not have alternate sources could materially and adversely affect
the Company's operating results.
The Company may outsource a portion of its manufacturing operations to
independent third party manufacturers. There are risks associated with the use
of independent manufacturers, including unavailability of or delays in obtaining
adequate supplies of products and reduced control of manufacturing quality and
production costs. There can be no assurance that the Company's third party
manufacturers will provide adequate supplies of quality products on a timely
basis. The inability to obtain such products on a timely basis would have a
material adverse effect on the Company's business, operating results and
financial condition.
PATENTS AND TRADE SECRETS. There can be no assurance that any patents owned
or controlled by the Company will provide commercially significant protection of
the Company's technology or ensure that the Company may not be determined to
infringe valid patents of others. The Company's patents have not been tested in
court, and the validity and scope of the Company's proprietary rights could be
challenged. The Company has also received foreign patents, but since the patent
laws of foreign countries differ from those of the United States, the degree of
protection afforded by any foreign patents may be different from that available
under U.S. patent laws.
The Company also relies on trade secrets and proprietary know-how which it
seeks to protect by confidentiality agreements with its collaborators, employees
and consultants. There can be no assurance that these agreements will not be
breached, that the Company will have adequate remedies for any breach or that
the Company's trade secrets and proprietary know-how will not otherwise become
known or be discovered by competitors.
THE COMPANY'S RSI LAWSUIT. The Company is a defendant in a suit brought in
November 1993 alleging repetitive stress injuries ("RSI") resulting from the use
of the Company's products claiming $1 million in compensatory and $10 million in
punitive damages. While the Company believes that the claim is without merit and
has tendered defense of the suit to its insurance carriers, there can be no
assurance that the suit will not have a material adverse effect on the financial
position or results of operations of the Company.
POSSIBLE VOLATILITY OF STOCK PRICE; SHARES ELIGIBLE FOR FUTURE SALE. The
market price of the Company's Common Stock has been and may continue to be
highly volatile. Future events, many of which will be beyond the control of the
Company, as well as announcements related to technology and product development
and collaborative arrangements and expected quarterly fluctuations in revenues
and financial results, may have a significant impact on the market price of the
Company's Common Stock. Future sales of Shares by the Selling Stockholders or
sales of the Company's Common Stock by other current
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stockholders and by option holders and warrant holders who exercise Company
stock options or warrants could have a depressive effect on the market price of
the Company's Common Stock.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the Shares
by the Selling Stockholders. The Company could receive up to $12,735,000 if the
Warrants are exercised in full. No assurance can be given that any of the
Warrants will be exercised and the Warrants provide to the Selling Stockholders
"net exercise" right which will not result in any cash proceeds to the Company.
See "Description of Capital Stock--Warrants". The Company expects that any net
proceeds from the exercise of the Warrants will be used for working capital and
general corporate purposes, including product development and marketing. Pending
utilization, such funds will be invested in money market and other short-term
interest bearing obligations.
SELLING STOCKHOLDERS
The Company and the Selling Stockholders entered into an Investment
Agreement dated October 3, 1996 (the "Investment Agreement") which provides to
the Company up to $15 million in equity financing. 1,705,915 Shares are offered
hereby by the Selling Stockholders, of which (i) 604,913 Shares represent a
portion of the 741,913 Shares issued to the Investors in October and December
1996 in connection with the initial $10 million in equity financing provided
under the Investment Agreement, (ii) 600,000 of the Shares offered hereby
represent shares issuable upon exercise of the Warrants, and (iii) 501,002
Shares offered hereby represent Shares issued in respect of the final $5 million
in equity financing under the Investment Agreement.
Under the Investment Agreement the Company was granted the right, by
delivering notice (a "Put Notice") to the Selling Stockholders, to require the
Selling Stockholders to fund the equity financing to be provided under the
Investment Agreement. The prices per share paid by the Selling Stockholders for
shares of Common Stock acquired by them pursuant to the Investment Agreement
represent a 15% discount from market prices of the Common Stock over agreed upon
pricing periods commencing on delivery of the applicable Put Notice (each a
"Pricing Period"). The initial Put Notice was delivered on October 24, 1996 for
the first $10 million of equity financing and the Pricing Period related thereto
ended on December 5, 1996. However, with respect to the first $5 million
provided under the Investment Agreement, the price per share paid by the Selling
Stockholders was based on a 15% discount from the market prices of the Common
Stock over a period ending August 15, 1996. The second Put Notice was delivered
June 3, 1997 for the remaining $5 million of equity financing provided for in
the Investment Agreement and the Pricing Period related thereto ended on July
31, 1997. Under the Investment Agreement, each Selling Stockholder represented
to the Company that it was acquiring the Shares from the Company for investment
for its own account and not with a view to, or for the resale in connection
with, any distribution thereof in any transaction which would be a violation by
the Selling Stockholders of the Securities Act or any other securities laws of
the United States or any state. However, in accordance with the Investment
Agreement, the Company agreed to register the resale of the Shares offered
hereby by the Selling Stockholders to permit sales of such Shares from time to
time in the market or in privately-negotiated transactions. See "Plan of
Distribution." The Company will prepare and file such amendments and supplements
to the Registration Statement as may be necessary in accordance with the rules
and regulations of the Securities Act to keep it effective for a period of
approximately eighteen months. In addition, the Selling Stockholders have
certain demand and piggy-back registration rights provided to them in connection
with the Investment Agreement. The Company has agreed to bear certain expenses
(other than broker discounts and commissions, if any) in connection with the
Registration Statement.
The following table sets forth certain information regarding ownership of
the Company's Common Stock by the Selling Stockholders as of August 7, 1997,
including the shares underlying the Warrants, and as adjusted to reflect the
sale by Selling Stockholders of all Shares offered hereby by them. Because a
Selling Stockholder may sell some or all of the Shares offered hereby and
because there are currently no
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agreements, arrangements or understandings with respect to the sale of any of
the Shares, no estimate can be given as to the actual amount of Shares that will
be held by the Selling Stockholders after completion of such distribution. See
"Plan of Distribution". If all the Shares offered hereby are sold, none of the
Selling Stockholders will own more than 1% of the outstanding shares of Common
Stock. The Warrants became exercisable on December 17, 1996, and will remain
exercisable for five years thereafter, except under certain circumstances.
<TABLE>
<CAPTION>
SHARES OWNED SHARES OFFERED
PRIOR TO OFFERING HEREBY
------------------ --------------
<S> <C> <C>
Quantum Industrial Partners LDC............................................... 852,958(1) 852,958(1)
S-C Phoenix Holdings, L.L.C................................................... 426,479(2) 426,479(2)
Winston Partners, L.P......................................................... 142,184(3) 142,184(3)
Winston Partners II LDC....................................................... 189,747(4) 189,747(4)
Winston Partners II L.L.C..................................................... 94,547(5) 94,547(5)
------------------ --------------
TOTAL..................................................................... 1,705,915(6) 1,705,915(6)
------------------ --------------
------------------ --------------
</TABLE>
- ------------------------
(1) Includes 300,000 shares issuable upon exercise of a Warrant.
(2) Includes 150,000 shares issuable upon exercise of a Warrant.
(3) Includes 49,980 shares issuable upon exercise of a Warrant.
(4) Includes 66,720 shares issuable upon exercise of a Warrant.
(5) Includes 33,300 shares issuable upon exercise of a Warrant.
(6) Includes 600,000 shares issuable upon exercise of a Warrant.
PLAN OF DISTRIBUTION
All or a portion of the Shares offered hereby by the Selling Stockholders
may be delivered and/or sold in transactions from time to time on the
over-the-counter market, on the Nasdaq National Market, in negotiated
transactions, or a combination of such methods of sale, at market prices
prevailing at the time, at prices related to such prevailing prices or at
negotiated prices. After the effectiveness of the Registration Statements of
which this Prospectus is a part, the Selling Stockholders may make short sales
of the Company's Common Stock and may use the Shares to cover the resulting
short positions. The Selling Stockholders may effect such transactions by
selling to or through one or more broker-dealers, and such broker-dealers may
receive compensation in the form of underwriting discounts, concessions or
commissions from the Selling Stockholders. The Selling Stockholders and any
broker-dealers that participate in the distribution may under certain
circumstances be deemed to be "underwriters" within the meaning of the
Securities Act, and any commissions received by such broker-dealers and any
profits realized on the resale of Shares by them may be deemed to be
underwriting discounts and commissions under the Securities Act. The Selling
Stockholders may agree to indemnify such broker-dealers against certain
liabilities, including liabilities under the Securities Act. In addition, the
Company has agreed to indemnify the Selling Stockholders with respect to the
Shares offered hereby against certain liabilities, including, without
limitation, certain liabilities under the Securities Act, or, if such indemnity
is unavailable, to contribute toward amounts required to be paid in respect of
such liabilities.
Any broker-dealer participating in such transactions as agent may receive
commissions from the Selling Stockholders (and, if they act as agent for the
purchaser of such Shares, from such purchaser). Broker-dealers may agree with
the Selling Stockholders to sell a specified number of Shares at a stipulated
price per share, and, to the extent such a broker-dealer is unable to do so
acting as agent for the Selling Stockholders, to purchase as principal any
unsold Shares. Broker-dealers who acquire Shares as principal may thereafter
resell such Shares from time to time in transactions (which may involve crosses
and block transactions and which may involve sales to and through other
broker-dealers, including transactions of the nature described above) in the
over-the-counter market, in negotiated transactions or otherwise at market
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prices prevailing at the time of sale or at negotiated prices, and in connection
with such resales may pay to or receive from the purchasers of such Shares
commissions computed as described above. To the extent required under the
Securities Act, a supplemental prospectus will be filed, disclosing (a) the name
of any such broker-dealers, (b) the number of Shares involved, (c) the price at
which such Shares are to be sold, (d) the commissions paid or discounts or
concessions allowed to such broker-dealers, where applicable, (e) that such
broker-dealers did not conduct any investigation to verify the information set
out or incorporated by reference in this prospectus, as supplemented, and (f)
other facts material to the transaction.
Under applicable rules and regulations under the 1934 Act, any person
engaged in the distribution of the Shares may not simultaneously engage in
market making activities with respect to the Common Stock of the Company for a
period that begins two business days prior to the commencement of such
distribution and ends upon completion of that person's participation in the
distribution. In addition and without limiting the foregoing, the Selling
Stockholders will be subject to applicable provisions of the 1934 Act, and the
rules and regulations thereunder, including, without limitation, Regulation M,
which provisions may limit the timing of purchases and sales of shares of the
Company's Common Stock by the Selling Stockholders.
The Selling Stockholders will pay all commissions, transfer taxes, and other
expenses associated with the sale of securities by them. The Shares offered
hereby are being registered pursuant to contractual obligations of the Company,
and the Company has paid the expenses of the preparation of this Prospectus. The
Company has not made any underwriting arrangements with respect to the sale of
Shares offered hereby on exercise of the Warrants. Upon exercise of the
Warrants, the Shares will be issued by the Company directly to the persons
exercising the Warrants.
DESCRIPTION OF CAPITAL STOCK
As of the date of this Prospectus, the authorized capital stock of the
Company consists of 45,000,000 shares of Common Stock, $.20 par value ("Common
Stock"), and 5,000 shares of Preferred Stock, $100 par value ("Preferred
Stock").
COMMON STOCK
As of July 31, 1997, there were 19,616,522 shares of Common Stock
outstanding held of record by 1,577 stockholders. The holders of shares of
Common Stock are entitled to one vote per share on all matters to be voted on by
stockholders, except that holders may cumulate their votes in the election of
directors. Subject to preferences that may be applicable to any outstanding
Preferred Stock, holders of Common Stock are entitled to receive ratably such
dividends as may be declared by the Board of Directors in its discretion from
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 of liabilities and the liquidation
preference of any outstanding Preferred Stock. Holders of Common Stock have no
preemptive rights and have no rights to convert their Common Stock into any
other securities. The outstanding shares of Common Stock are fully paid and
nonassessable.
PREFERRED STOCK
The Board of Directors has the authority to issue up to 5,000 shares of
Preferred Stock in one or more series and to fix the rights, preferences,
privileges and restrictions thereof, including dividend rights, conversion
rights, voting rights, terms of redemption, liquidation preferences and the
number of shares constituting any series or the designation of such series,
without any further vote or action by the shareholders. The issuance of
Preferred Stock may have the effect of delaying, deferring or preventing a
change in control of the Company or making removal of management more difficult
without further action by the shareholders and could adversely affect the rights
and powers, including voting rights, of the holders of Common Stock. This could
have the effect of decreasing the market price of the Common Stock. The Company
has no present plans to issue any additional shares of Preferred Stock.
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WARRANTS
Of the Shares offered hereby, an aggregate of 600,000 Shares are issuable
upon exercise of Warrants to purchase Common Stock held by the Selling
Stockholders, 300,000 of which are Class A Warrants and 300,000 of which are
Class B Warrants. The Warrants became exercisable on December 17, 1996 and will
remain exercisable for five years thereafter, except under certain
circumstances.
The exercise price of the Class A Warrants is $17.45 per share. The exercise
price of the Class B Warrants is $25.00 per share; provided, however, if the
average of the per share daily low trading price of the Company's Common Stock
over any 90-day period ending on October 24, 1997 exceeds $50.00 per share, the
number of shares issuable pursuant to the Class B Warrant shall be reduced from
300,000 to 150,000.
The exercise price of the Warrants is payable as follows: (a) by payment to
the Company in cash, (b) by surrender to the Company for cancellation of
securities of the Company, including the Warrant having a market price equal to
the exercise price of the Warrant; or (c) by any combination thereof. In lieu of
exercising the Warrant, the holder may elect to receive a payment equal to the
difference between (i) the market price of the shares issuable upon exercise of
the Warrant multiplied by the number of shares as to which the payment is then
being elicited and (ii) the exercise price with respect to such shares. Such
payment is payable by the Company to the holder only in shares of Common Stock
of the Company valued at the market price on the date of exercise.
The Warrants may be exercised for less than the full number of shares of
Common Stock, in which case the number of shares issuable upon exercise of the
Warrants as a whole, and the sum payable upon exercise of the Warrants as a
whole, shall be proportionately reduced.
The exercise price of each Warrant is subject to adjustment (i) in the event
there is a subdivision or combination of the outstanding shares of the Company
Common Stock, (ii) in the event there is a reorganization, reclassification,
consolidation, merger or sale of assets, (iii) if the Company declares dividends
on its Common Stock payable otherwise than out of earnings or earned surplus, or
(iv) except under certain circumstances, if the Company sells or issues any
shares of its Common Stock for consideration per share less than the warrant
exercise price.
LEGAL MATTERS
The legality of the issuance of the securities being offered hereby is being
passed upon for the Company by Heller Ehrman White & McAuliffe, Palo Alto,
California.
EXPERTS
The audited financial statements and schedules of the Company at July 30,
1994, July 29, 1995 and July 27, 1996 and for each of the three years in the
period ended July 27, 1996 incorporated by reference herein have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in giving said reports.
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