As filed with the Securities and Exchange Commission on November 24, 1997
Registration No.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
CURTIS MATHES HOLDING CORPORATION
(Exact name of Registrant as specified in its charter)
Texas 3651 75-1975147
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification No.)
incorporation or
organization)
10911 Petal Street, Dallas, Texas 75238
(214) 503-8880
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Billy J. Robinson
Vice President, Secretary and General Counsel
Curtis Mathes Holding Corporation
10911 Petal Street, Dallas, Texas 75238
(214) 503-8880
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Approximate date of commencement of proposed sale to the public:
From time to time after the registration statement becomes effective.
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans, please check
the following box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box.[X]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check
the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same
offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box.[ ]
CALCULATION OF REGISTRATION FEE
Title of Each Amount Proposed Proposed
Class of To Be Maximum Maximum Amount of
Securities to Registered(1) Offering Price Aggregate Registration
be Registered Per Unit(2) Offering Price(2) Fee
Common Stock,
$.01 par value 7,600,000 $0.39 $2,964,000 $898.18
(1) Includes up to a maximum of 7,500,000 estimated shares of
Common Stock, issuable upon conversion of or otherwise with respect to
the Registrant's Series N Convertible Preferred Stock.
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(2) Estimated solely for the purpose of calculating the
registration fee. Pursuant to Rule 457(c), the offering price and
registration fee are calculated upon the basis of the of the Common Stock
as reported by the NASDAQ SmallCap Market on November 19, 1997.
The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933, as amended,
or until this Registration Statement shall become effective on such date
as the Commission, acting pursuant to said Section 8(a), may determine.
<PAGE>
SUBJECT TO COMPLETION, DATED NOVEMBER 24, 1997
Up to 100,000 Shares of Common Stock Underlying Warrants,
Which Shares are being Registered for Resale upon Exercise of the Warrants;
Up to 7,500,000 Shares of Common Stock Convertible from Preferred Stock,
Which Shares are being Registered for Resale upon Conversion of the
Preferred Stock.
CURTIS MATHES HOLDING CORPORATION
This Prospectus covers an aggregate total of 7,600,000 (estimated)
shares of Common Stock, par value $.01 per share (the "Shares") of Curtis
Mathes Holding Corporation, a Texas corporation (the "Company.") Up to
100,000 Shares underlying Warrants are being registered for resale upon
the exercise of Warrants and up to a maximum of 7,500,000 (estimated)
shares of Common Stock issuable upon conversion of the Company's Series N
Convertible Preferred Stock (the "Preferred Stock") are being registered
for resale upon conversion of the Preferred Stock. The preferred security
holders and the warrant holders are hereinafter referred to as the
"Selling Stockholders." See "Selling Stockholders" and "Plan of
Distribution."
The number of Shares included in this Prospectus as "Common Stock
Convertible from Preferred Stock," is based on a conversion price which
represents an average closing bid price of the Common Stock over five
consecutive trading days immediately prior to conversion. The Preferred
Stock is not convertible until after this Prospectus is declared
effective, and the actual conversion price and number of actual Shares
issuable upon conversion cannot be precisely determined until such time
as the Preferred Stock is actually converted. However, pursuant to the
Registration Rights Agreement between the Company and the preferred
security holders, the Company agreed to include in this Prospectus twice
the number of Shares that would have been issuable as if the Preferred
Stock had been converted on October 15, 1997, the closing date of the
transaction. Such conversion price is used merely for the purposes of
estimating and setting forth a number of shares for this Prospectus. The
actual number of Shares issuable upon conversion of the Preferred Stock
is subject to adjustment depending on the actual date of conversion in
the future and could be materially less or more than such estimated
amount, depending on factors which cannot be predicted by the Company
including, among other things, the future market price of the Common
Stock. See "Risk Factors - Possible Volatility of Stock Price." The
Company will not receive any of the proceeds from the sale by the Selling
Stockholders of the Shares to which this Prospectus relates. The Company
will only receive an economic benefit upon conversion of the Preferred
Stock and the exercise of the warrants held by the Selling Stockholders.
ANY INVESTMENT IN THE SECURITIES OFFERED HEREIN INVOLVES A HIGH DEGREE OF
RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 5 OF THIS PROSPECTUS.
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.
<PAGE>
Price to Proceeds to Company
Public Discounts or other Persons
Per Share (1) (2) (3)
Total Maximum (4) (1) (2) (3)
(1) The Selling Stockholders may from time to time effect the sale of
their Shares at prices and at terms then prevailing or at prices
related to the then current market price. The Common Stock of the
Company is traded on the NASDAQ SmallCap Market under the symbol
"CRTM." On November 19, 1997, the average of the closing bid and
closing asked price of the Common Stock as reported by the NASDAQ
SmallCap Market was $0.39 per share.
(2) The Selling Stockholders may pay regular brokers' commissions in
cash at the time(s) of the sale of their Shares.
(3) The Company will not receive any proceeds from the sales of the
Shares to which this Prospectus relates. The Selling Stockholders
will receive proceeds based on the market price of the Shares at the
time(s) of sale.
(4) Without deduction of expenses for the offering (all of which will be
borne by the Company), estimated to be approximately $2,698.
The date of this Prospectus is ______________.
<PAGE>
(Inside front cover page of Prospectus)
AVAILABLE INFORMATION
The Company is an electronic filer and is subject to the
informational requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and in accordance therewith files reports,
proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). The 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
Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the Regional Offices of the Commission at 7 World Trade
Center, Suite 1300, New York, New York 10048 and 500 W. Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material also can be
obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. The Commission
also maintains a World Wide Web site (http://www.sec.gov) that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. As the Common
Stock of the Company is quoted on the NASDAQ SmallCap Market, reports,
proxy statements and other information concerning the Company may be
inspected at the offices of the National Association of Securities
Dealers, Inc. at 1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement
on Form S-3 (together with all amendments thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to the shares of Common Stock offered hereby. This
Prospectus does not contain all the information set forth in the
Registration Statement, certain portions of which have been omitted as
permitted by the rules and regulations of the Commission. Such
additional information may be obtained from the Commission's principal
office in Washington, D.C. Statements contained in this Prospectus as to
the contents of any contract or other document referred to herein are not
necessarily complete, and in each instance reference is made to the copy
of such contract or other document filed as an exhibit to the
Registration Statement or to documents incorporated therein by reference,
each such statement being qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission are incorporated
herein by reference:
(1) The Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1997, dated November 12, 1997 (the
"September 1997 10-Q Report.")
(2) The Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1997, dated August 6, 1997 (the "1997 10-K
Report.")
(3) The Company's Current Report on Form 8-K dated as of May 1,
1997.
(4) The Company's Current Report on Form 8-K dated as of May 14,
1997.
<PAGE>
Any documents filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus
and prior to the termination of this offering shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from
the date of filing of such documents.
Any statement contained in a document 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
other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
To the extent that any proxy statement is incorporated by reference
herein, such incorporation shall not include any information contained in
such proxy statement which is not, pursuant to the Commission's rules,
deemed to be "filed" with the Commission or subject to the liabilities of
Section 18 of the Exchange Act.
The Company will provide without charge to each person, including
any beneficial owner, to whom this Prospectus is delivered, upon the
written or oral request of such person, a copy of any and all information
that has been incorporated herein by reference (other than exhibits to
such documents unless such exhibits are specifically incorporated by
reference into such documents). Any such request should be directed to
the Company's principal executive offices: Curtis Mathes Holding
Corporation, 10911 Petal Street, Dallas, Texas 75238, Attention:
Investor Relations; telephone number (214) 503-8880.
The Offering
Common Stock Offered by the Up to 100,000 Shares
Company Upon Exercise of
Warrants
Common Stock Offered by the Up to 7,500,000 Shares
Company Upon Conversion of (estimated)
Preferred Stock
Common Stock Outstanding After 51,491,541 (estimated)
the Offering (1)
Use of Proceeds from Exercise Working capital and general
of Warrants corporate purposes
NASDAQ SmallCap Market Symbol CRTM
Risk Factors For a description of certain
risks inherent in an
investment in the Common
Stock, see "RISK FACTORS"
(1) Assumes the exercise of outstanding warrants to purchase 100,000
Shares at $1.50 per share and the conversion of Preferred Stock into
7,500,000 estimated Shares, which represents twice the number of
Shares that would have been issuable as if the Preferred Stock had
been convertible on October 15, 1997.
<PAGE>
RISK FACTORS
The following factors should be considered, together with the other
information in this Prospectus, in evaluating an investment in the
Company. When used in this Prospectus, the words "expects,"
"anticipates," "estimates" and similar expressions are intended to
identify forward-looking statements. Such statements, which may include
statements contained in the following "Risk Factors" section, are subject
to risks and uncertainties, discussed in greater detail in this section
below and elsewhere in this Prospectus, that could cause actual results
to differ materially from those projected or discussed. These forward-
looking statements speak only as of the date of this Prospectus. The
Company expressly disclaims any obligation or undertaking to release
publicly any updates or change in the Company's expectations with regard
thereto or any change in events, conditions or circumstances on which any
such statement may be based.
Prior Claims on Future Earnings
One of the Company's subsidiaries, Curtis Mathes Corporation (CMC),
is currently operating under a six-year plan of reorganization, effective
October 1, 1992 (the "Plan"). Until termination of the Plan, 1/2% of
gross sales of CMC, if any, must be paid monthly to a "Liquidating
Trustee," which has been designated by the Bankruptcy Court to administer
such payments on behalf of unsecured creditors in the order of priority.
CMC was the operating entity which historically sold commodity consumer
electronics products (televisions, VCR's, camcorders, and related
products) to consumers. In early 1996, CMC sold all of its remaining
inventory to a third party and negotiated a satisfaction of its primary
debt obligation with Deutsche Financial Services Corporation ("DFS").
CMC has had no sales since that time and has no current plans to re-enter
the commodity consumer electronics market. However, in the event CMC
does generate any future revenue, its profitability will be affected to
the extent of the required payments.
Warranty Claims
Beyond the claim of the Trustee on any potential future earnings of
CMC, and as required by the Plan, CMC remains obligated to service past
outstanding product warranties. Cash balances were set aside, as required
by the Plan, to cover a portion of these estimated past product warranty
costs. CMC has additionally in the past reserved a portion of the total
product sales price to cover estimated product warranty costs. Although
management believes that the amount reserved is adequate to meet claim
requirements based upon historical data, there can be no assurance that
the reserves will always cover warranty claims filed during any
particular period. If warranty claims during any particular period
exceed projections, the Company must cover such claims out of its current
cash flow or other operating capital, thereby reducing the profitability
of the Company during such periods. Many of the warranties on products
sold in the past are expiring, and due to lower product sales by CMC in
the past few years, remaining warranty obligations are slowly
diminishing; however, until expiration of these past outstanding product
warranties, the Company's profitability will be affected to the extent
the current required warranty expenditures exceed the cash reserves
designated for that purpose.
<PAGE>
Increase in Cost of Finished Goods
Curtis Mathes Marketing Corporation ("CMMC"), the operating entity
which designed and markets the Company's well known uniViewT Internet
access product, is dependent upon outside sources for manufacturing and
assembly of all finished goods, and is therefore subject to increases in
the cost of such goods. Such costs are typically stable in the short
term because parts and components are provided to CMMC pursuant to
seasonal contracts with suppliers at an agreed cost. However, there can
be no assurance that such costs will not increase significantly in the
future. Any such increase in cost would either have to be absorbed by
CMMC, or would have to be reflected in the sale price of the products at
the consumer level, which could in turn affect product sales levels.
Variable Economy
The consumer electronics industry is influenced significantly by
general economic conditions, including consumer behavior and consumer
confidence, the level of personal discretionary spending, interest rates
and credit availability. Variations in the general economy affecting
expendable consumer dollars impacts a consumer's willingness to expend
monies for the Company's product lines, which translates into
fluctuations in sales volumes for the Company. There can be no assurance
that a prolonged economic downturn would not have a material adverse
effect upon the profitability of the Company.
Excessive Inventory Levels
The market for consumer electronics products continues to be driven
by technological changes that are inherent to the industry. Management
makes every effort to maintain ample inventory to meet short term sale
requirements. However, the Company is in the same position as other
consumer electronics companies in attempting to accurately gauge consumer
demand, and there can be no assurance of sufficient consumer reaction and
demand upon the Company's product lines in the future to avoid
accumulating excessive inventory levels. In the event that consumer
demand is less than reasonably estimated, inventory on hand could exceed
the minimally acceptable levels, resulting in reduced cash flows and a
further restriction on the use of the Company's capital which is
dedicated to the inventory. Excessive inventory levels could also lead
to inventory obsolescence, which is discussed in the following section.
Inventory Obsolescence
Closely tied to excessive inventory levels is the risk of inventory
obsolescence. If inventory on hand reaches such a level that new models
of products cannot be rotated for sale to the consumer within a
reasonable period of time, the risk will increase that the Company may
not be able to sell the older models at the expected margin, resulting is
markdowns to move the products, all of which affects the profitability of
the Company.
Dependence on New Product Introduction
The Company's future success will depend to a great extent upon the
timely introduction and market acceptance of successful new products to
the marketplace, such as the uniView Internet access product and the
Curtis Mathes XpresswayT Internet Service Provider and Online Service,
recently introduced by the Company. A significant delay in the
introduction of, or the presence of a defect in, one or more of these new
<PAGE>
products could have a material adverse effect on the ultimate success of
such products and on the Company's business, operating results and
financial condition, particularly in view of the seasonality of the
Company's business related to the uniView set top box. Further, because
of the revenue typically associated with initial shipments of a new
product, delaying a product introduction expected near the end of a
fiscal quarter may materially adversely affect operating results for that
quarter. The process of developing television Internet access products
containing software-related components such as the uniView and Curtis
Mathes Xpressway is extremely complex and is expected to become more
complex and expensive in the future as new platforms and technologies are
introduced or incorporated. This new technology also requires and
depends upon externally manufactured hardware components, such as file
servers, routers, modems, and other similar devices commonly used in the
computer industry, but not yet used on a wide scale for television
Internet access products.
In the past, the Company has experienced delays in the introduction
of certain new products. The Company anticipates that there may be
similar delays in developing and introducing new products in the future
and there can be no assurance that new products will be introduced on
schedule in the future or at all. Further, the market for these new
products is evolving and, in comparison with the overall market for
consumer electronics and Internet access products, is considered
relatively small, making it difficult to predict with any assurance the
future growth rate and size of the market. There can be no assurance
that new products introduced by the Company will achieve market
acceptance or generate significant revenues.
Changes in Technology and Industry Standards
The consumer electronics and Internet access industry is undergoing
rapid changes, including evolving industry standards, frequent new
product introductions and changes in consumer requirements and
preferences. The introduction of new technologies and products can
render the Company's existing and announced products obsolete or
unmarketable. The development cycle for products utilizing new
technology may be significantly longer than the Company's current
development cycle for products on existing and proposed technology and
may require the Company to invest resources in products that may not
become profitable. There can be no assurance that the expected demand
for the Company's products will materialize or continue or that the mix
of the Company's future product offerings will keep pace with
technological changes or satisfy evolving consumer preferences or that
the Company will be successful in developing and marketing future
products. Failure to develop and introduce new products and product
enhancements in a timely fashion could have a material adverse effect on
the Company's business, operating results and financial condition.
Risk of Product Failures
Television Internet access products containing software-related
components as complex as those recently introduced by the Company may
contain undetected errors when first introduced. As any such undetected
errors become known to the Company, delays or lost revenues during the
period required to correct these errors can be expected. The Company has
experienced delays and significant technical support expenses in
connection with products in the past and there can be no assurance that,
despite testing by the Company, errors will not be found in new products
<PAGE>
or releases after commencement of commercial shipments, resulting in loss
of or delay in market acceptance, which could have a material adverse
effect on the Company's business, operating results and financial
condition.
Limited Protection of Intellectual Property and Proprietary Rights; Risk
of Litigation
The Company regards its television Internet access technology
containing software-related components as proprietary and relies
primarily on a combination of trademark, copyright and trade secret laws,
employee and third-party nondisclosure agreements, and other methods to
protect these proprietary rights. As the number of television Internet
access products in the industry increases and the functionality of these
products overlap, infringement claims may also increase. There can be no
assurance that third parties will not assert infringement claims against
the Company in the future with respect to current or future products. As
is common in the industry, from time to time the Company receives notices
from third parties claiming infringement of intellectual property rights
of such parties. The Company investigates these claims and responds as
it deems appropriate. Policing unauthorized use of the Company's
products is also difficult and can be expected to be a recurring problem.
Further, the Company enters into transactions in countries where
intellectual property laws are not well developed or are poorly enforced.
Legal protections of the Company's rights may be ineffective in such
countries, and software-related products developed in such countries may
not be protectable in jurisdictions where protection is ordinarily
available. Any claim or litigation, with or without merit, could be
costly and could result in a diversion of management's attention, which
could have a material adverse effect on the Company's business, operating
results and financial condition. Adverse determinations in such claims
or litigation could also have a material adverse effect on the Company's
business, operating results and financial condition.
Dependence on Distribution Channels
CMMC expects to sell its products through consumer electronics
stores, computer stores, mail order companies, and by direct mail. Sales
to a limited number of distributors and retailers are anticipated to
constitute a substantial portion of CMMC's net revenues related to
uniView. Minimum purchase obligations of any principal distributor or
retailer are not expected to be significant and the Company expects to
sell on a purchase order basis without a long-term agreement to a
majority of these entities. The loss of, or significant reduction in
sales attributable to, any of these distribution channels could
materially adversely affect the Company's business, operating results and
financial condition. Distribution and retailing businesses in the
consumer electronics industry have from time to time experienced
significant fluctuations in their businesses and there have been a number
of business failures among these entities. The insolvency or business
failure of any significant distributor or retailer of the Company's
products could have a material adverse effect on the Company's business,
operating results and financial condition.
Seasonality of the Industry
CMMC is expected to be subject to decreased sales and profitability
on the uniView product during the first and second quarters of each
calendar year, resulting from the seasonal effect of the consumer buying
<PAGE>
season. Its operations must be supplemented during such periods through
its reserves or through other operations of the Company. Although the
Company typically plans ahead for this seasonal variation in product
sales, there can be no assurance that past budgetary expectations will be
adequate to cover such periods in the future.
Highly Competitive Industry
The industry in which the Company operates is intensely and
increasingly competitive and includes a large number of Internet service
providers and both domestic and foreign manufacturers of consumer
electronics products. Competition occurs principally in the areas of
style, quality, functionality, service, design and price. The Company
has positioned itself over the years in a niche market of high-end
consumer electronics home entertainment products and has chosen to
compete primarily on quality, rather than price and volume. However,
competition from competitors, with greater financial resources than the
Company, could adversely affect the Company's operating results by
forcing it to reduce its sales prices, offer enhanced credit arrangements
including longer payment terms, increase customer discounts or
incentives, increase spending for co-operative advertising arrangements
with customers, incur additional shipping costs, or provide other
services which could adversely affect the profitability of the Company.
It is already apparent that competition in the area of television
Internet access products and Internet service providers will be intense.
With the announcement of similar television Internet access devices by
several existing and start-up consumer electronics companies and, to the
extent that these competitors achieve product and brand name recognition,
product quality, price or other selling advantages, the Company could be
adversely affected. There can be no assurance that the Company will have
the resources required to respond effectively to market or technological
changes or to compete successfully in the future.
Off-Balance Sheet Risks
An "off-balance sheet risk" is one in which the ultimate obligation
of the Company may exceed the amount reported in the liability section of
the financial statements and which may be triggered by the default of a
third party on an obligation upon which the Company is contingently
liable. CMC is a party to financial instruments with such off-balance
sheet risks to meet the financing requirements of former CMC dealers. In
the normal course of business, CMC has transferred receivables from
qualified dealers to Deutsche Financial Services Corporation ("DFS")
under a repurchase agreement. The agreement requires CMC, in the event
of default by the dealer, to repurchase property that is collateral
(inventory consisting of consumer electronics products) for the financing
provided to the dealer. CMC is contingently liable to DFS for the
portion of the receivable which is defaulted through nonpayment or
nonrecovery of the collateral. This amount is partially offset by
recovery of unsold products from such dealers, which can then be resold.
As dealer defaults occur in the future and the Company honors its
repurchase obligations, the profitability of the Company could be reduced
accordingly.
<PAGE>
Absence of Profitable Operations in Recent Periods
The Company has reported a net loss in each of its last five fiscal
years. The Company purchased a computer chip company, Southwest Memory,
Inc. ("SWM") in December, 1992. It purchased CMC in November, 1993 and
sold SWM in December, 1994. In late 1994, CMMC acquired the rights to
RealViewTM, a ten foot square projection television used in commercial
advertising applications. In April, 1996, CMMC began development of
uniView, its television Internet access product. In late 1996 another
subsidiary, Curtis Mathes Xpressway Corporation ("CMX"), initiated the
Curtis Mathes Xpressway and offers its services as an Internet Service
Provider and Online Service. Although the character of the Company has
changed over the past couple of years, and management believes that
operations will improve, there is a limited operating history for the
Company in its present form and there can be no assurance that the
present combination of operating segments will be profitable in the
future.
Limited Cash Flow
As of September 30, 1997, the Company had not achieved a positive
cash flow from operations. Accordingly, the Company relies on available
credit arrangements and continued sales of its common and preferred stock
to fund operations until a positive cash flow from operations can be
achieved. If the Company is unable to achieve a positive cash flow from
operations, additional financing or placements will be required.
Management continually evaluates opportunities with various investors to
raise additional capital, without which, the Company's growth and
profitability could be restricted. Although management believes that
sufficient financing resources are available, there can be no assurance
that such resources will continue to be available to the Company or that
they will be available upon terms favorable to the Company.
Dependence on Key Personnel
The Company's success depends to a significant extent on the
performance and continued service of its senior management and certain
key employees. Competition for highly skilled employees with technical,
management, marketing, sales, product development and other specialized
training is intense, and there can be no assurance that the Company will
be successful in attracting and retaining such personnel. Specifically,
the Company may experience increased costs in order to attract and retain
skilled employees. In addition, there can be no assurance that employees
will not leave the Company or compete against the Company. The Company's
failure to attract additional qualified employees or to retain the
services of key personnel could materially adversely affect the Company's
business, operating results and financial condition.
Possible Volatility of Stock Price
The stock market has recently experienced significant price and
volume fluctuations that could continue in the future. These
fluctuations could adversely affect the market price of the Common Stock
without regard to the Company's operating performance. The market price
for shares of the Company's Common Stock has varied significantly and may
be volatile depending on news announcements and changes in general market
conditions. The Company believes that factors such as quarterly
variations in the Company's financial results or the financial results of
competitors, general industry conditions, including competitive
<PAGE>
developments, and general economic conditions could also cause uncertain
price fluctuations in the Common Stock. In addition, the shares being
registered under this Prospectus will become eligible for sale in the
public market after the Registration Statement becomes effective. The
shares are expected to have no underwriters and will therefore not be
subject to underwriter price stabilization transactions. No prediction
can be made as to the effect, if any, that sales of such securities, or
the availability of such securities for sale, will have on the market
prices prevailing from time to time for the Common Stock. However, even
the possibility that a substantial number of the Company's securities
may, in the near future, be sold in the public market may adversely
affect prevailing market prices for the Common Stock and could impair the
Company's ability to raise capital through the sale of its equity
securities.
Risks Related to Under-Priced Stocks
The Common Stock is currently listed on the Nasdaq SmallCap Market
("Nasdaq"). In order to continue to be listed on Nasdaq, however, the
Company must currently maintain $2,000,000 in total assets, a $200,000
market value of the public float, $1,000,000 in total stockholders'
equity, two market-makers, and a minimum bid price of $1.00 per share.
If the price of the Common Stock drops below $1.00 per share, the Company
will still qualify for listing on Nasdaq if the public float is at least
$1 million and capital and surplus is at least $2 million. Further, the
Nasdaq Stock Market, the NASD, and the SEC have approved substantial
changes in Nasdaq listing requirements which are to become effective on
or about February 23, 1998. These changes will require that companies
maintain $2,000,000 in net tangible assets (total assets less total
liabilities and goodwill) or market capitalization of $35,000,000 or
$500,000 in net income for two of the last three years, a $1,000,000
market value for the public float, two market-makers, and a minimum bid
price of $1.00 per share. After the changes become effective, if the
price of the Common Stock drops below $1.00 per share for 30 days, the
Company will be notified of delisting proceedings unless the stock closes
at $1.00 or more for ten consecutive days, within 90 days of falling out
of compliance. In the future, if the Company fails to meet these
maintenance criteria it may result in the delisting of the Company's
securities from Nasdaq, and trading, if any, of the Company's securities
would thereafter be conducted in the non-Nasdaq over-the-counter market.
If the Company's securities are delisted, an investor could find it more
difficult to dispose of, or to obtain accurate quotations as to the
market value of, the Company's securities. In addition, if the Common
Stock were to become delisted from trading on Nasdaq and the trading
price of the Common Stock were to remain below $5.00 per share, trading
in the Common Stock would also be subject to the requirements of certain
rules promulgated under the Securities Exchange Act of 1934, as amended,
which require additional disclosure by broker-dealers in connection with
any trades involving a stock defined as a penny stock (generally, any non-
Nasdaq equity security that has a market price of less than $5.00 per
share, subject to certain exceptions.) Such rules require the delivery,
prior to any penny stock transaction, of a disclosure schedule explaining
the penny stock market and the risks associated therewith, and impose
various sales practice requirements on broker-dealers who sell penny
stocks to persons other than established customers and accredited
investors (generally institutions.) For these types of transactions, the
broker-dealer must make a special suitability determination for the
purchaser and must receive the purchaser's written consent to the
transaction prior to the sale. The additional burdens imposed upon
<PAGE>
broker-dealers by such requirements may discourage broker-dealers from
effecting transactions in the Common Stock, which could severely limit
the market liquidity of the Common Stock and the ability of purchasers in
this offering to sell the Common Stock in the secondary market.
Potential Dilution of Shareholders' Ownership Interests
As of November 19, 1997, there were 43,891,541 common shares of the
Company issued and outstanding. Assuming the issuance of 11,610,730
common shares in exchange for the total number of warrants and stock
options outstanding as of that date (without regard to whether such
shares are being registered hereunder), and the issuance of common shares
in conversion to Common Stock of all convertible preferred stock
outstanding as of that date (all preferred stock convertible into
approximately 14,931,720 common shares, based upon the conversion price
as of November 19, 1997), there would be approximately 70,433,991 common
shares outstanding. In such event, an existing shareholder before such
issuances would experience dilution of their ownership interest in the
Company to the extent such shareholder held none of the warrants or
preferred stock being exercised or converted. For example, an existing
10% shareholder before such issuances would become a 6.23% shareholder
after such issuance, assuming such shareholder held none of the warrants
or preferred stock being exercised or converted, and other existing
shareholders would experience a similar dilution of their ownership
interest in the Company.
Further assuming the exercise of all outstanding warrants and stock
options and the issuance of common shares in conversion to Common Stock
of all convertible preferred stock outstanding as of November 19, 1997,
the pro forma net tangible book value of the Company would also increase
by the amount of the proceeds paid to the Company for the Common Stock
issued in exchange for the warrants and stock options (approximately
$18,295,771 or $0.26 per share increase.) "Pro forma net tangible book
value" represents the amount of total tangible assets, less total
liabilities, divided by the number of shares of Common Stock outstanding
after considering the issuance of Common Stock for outstanding warrants
and stock options and the conversion of Preferred Stock into Common
Stock. The increase results from giving effect to the receipt by the
Company of the net proceeds from the exercise of the warrants and stock
options.
The likelihood that the warrants and stock options will be exercised
increases as the market price of the stock rises above the exercise price
of the warrants and stock options. (See page 17 herein for further
discussion of the Warrants.)
Preferred Stock's Preference Over Common Stock
The Company's Preferred Stock has preferences over the Common Stock
in payment of dividends and in distributions to shareholders upon
dissolution of the Company. (See the description of Preferred Stock
beginning on page 16 herein for a more detailed description of these
preferences.) During ongoing operation of the Company, these preferences
mean very little; payment of dividends to Preferred Shareholders has no
adverse effect upon Common Shareholders because the Company has not in
the past, and does not expect in the foreseeable future, to declare any
dividends on its Common Stock. However, in the event it became necessary
to dissolve the Company, to the extent of any assets remaining after
<PAGE>
payment of all creditors of the Company, Preferred Shareholders would
receive the face amount and all accrued dividends on their Preferred
Stock before any distributions could be made to Common Shareholders. In
the event of a dissolution of the Company at the November 19, 1997 levels
of Common and Preferred Stock, because of the Preferred Stock
preferences, a Common Shareholder could receive a distribution which is
approximately $0.10 per share less than it would otherwise receive if
there were no shares of Preferred Stock outstanding.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sales of
the Shares by Selling Stockholders. The likelihood of the Company
receiving any proceeds from the exercise of the warrants increases as the
market price of the Company's stock increases above the exercise price of
the warrants. If the market price of the stock does not increase to the
required levels, the Company will most likely not receive any proceeds
from this offering. Assuming the exercise of the warrants to purchase
100,000 Shares at $1.50 per share (expiring in mid-2000), the net
proceeds to the Company from the sale of Shares issuable upon exercise of
the warrants would be approximately $150,000.
Any proceeds received by the Company upon exercise of the warrants
will be used for general corporate purposes, including, but not limited
to, operating and working capital requirements. Various uses of the
proceeds may include additional advertising, promotion, and development
of uniView and the Curtis Mathes Xpressway.
SELLING STOCKHOLDERS
This Prospectus relates to a maximum of 7,500,000 estimated Shares
issuable upon the conversion of Preferred Stock, which was issued
pursuant to Securities Subscription Agreements (the "Securities
Subscription Agreements") between the Company and certain Selling
Stockholders. This Prospectus also relates to 100,000 Shares issuable
upon the exercise of warrants, which were issued to J.P. Carey, Inc.,
("J.P. Carey"), pursuant to an agreement dated August 8, 1997, (the "J.P.
Carey Agreement"), as partial consideration for $2,000,000 of capital
raised by J.P. Carey for the Company. See "Plan of Distribution."
The "Number of Shares Underlying Warrants," and the "Maximum Number
of Shares Convertible from Preferred Stock" set out in the table below
represent the total number of Shares beneficially owned by the Selling
Stockholders before the offering. All of such Shares are being offered
for the account of the Selling Stockholders and after the offering the
Selling Stockholders will each own no Common Stock of the Company.
<PAGE>
Maximum
Number of Number of
Shares Shares
Relationship to Underlying Convertible from
Selling Stockholder the Company Warrants Preferred Stock
SECURITIES ACQUIRED PURSUANT TO A SECURITIES SUBSCRIPTION AGREEMENT:
Thomson Kernaghan
& Co. Ltd. Private Investor N/A 7,500,000
------- ---------
SUBTOTAL N/A 7,500,000
WARRANTS ACQUIRED PURSUANT TO THE J.P. CAREY AGREEMENT:
J.P. Carey, Inc. (1) Finder 100,000 N/A
------- ---------
SUBTOTAL 100,000 N/A
======= =========
TOTAL 100,000 7,500,000
GRAND TOTAL 7,600,000
(1) These warrants were issued by the Company to J.P. Carey, Inc.
pursuant to the J.P. Carey Agreement.
PLAN OF DISTRIBUTION
Securities Being Registered
The following securities are covered by this Prospectus:
1. The resale by J.P. Carey of up to 100,000 Shares that may be
acquired upon the exercise of warrants issued pursuant to the J.P. Carey
Agreement.
2. The resale by the respective holders thereof of a maximum of
7,500,000 estimated Shares that may be acquired upon the conversion of
Preferred Stock issued pursuant to a Securities Subscription Agreement.
Plan of Distribution
The Shares being registered hereunder may be sold from time to time
by any of the Selling Stockholders, or by pledgees, donees, transferees
or other successors in interest, or by additional selling stockholders.
The Shares may be disposed of from time to time in one or more
transactions through any one or more of the following: (i) to purchasers
directly, (ii) in ordinary brokerage transactions and transactions in
which the broker solicits purchasers, (iii) through underwriters or
dealers who may receive compensation in the form of underwriting
discounts, concessions or commissions from the Selling Stockholders or
such successors in interest and/or from the purchasers of the Shares for
whom they may act as agent, (iv) the pledge of the Shares as security for
any loan or obligation, including pledges to brokers or dealers who may,
from time to time, themselves effect distributions of the Shares or
interests therein, (v) purchases by a broker or dealer as principal and
resale by such broker or dealer for its own account pursuant to this
Prospectus, (vi) a block trade in which the broker or dealer so engaged
will attempt to sell the Shares as agent but may position and resell a
<PAGE>
portion of the block as principal to facilitate the transaction and (vii)
an exchange distribution in accordance with the rules of such exchange,
including the NASDAQ SmallCap Market, prices and at terms then prevailing
or at prices related to the then current market price or at negotiated
prices and terms. In effecting sales, brokers or dealers may arrange for
other brokers or dealers to participate. The Selling Stockholders or
such successors in interest, 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 the Shares by them and any discounts, commissions
or concessions received by any such underwriters, brokers, dealers or
agents may be deemed to be underwriting commissions or discounts under
the Securities Act.
The Company will pay all of the expenses incident to the offering
and sale of the Shares to the public other than underwriting discounts or
commissions, brokers' fees and the fees and expenses of any counsel to
the Selling Stockholders related thereto.
In the event of a material change in the plan of distribution
disclosed in this Prospectus, the Selling Stockholders will not be able
to effect transactions in the Shares pursuant to this Prospectus until
such time as a post-effective amendment to the Registration Statement is
filed with, and declared effective by, the Commission.
DESCRIPTION OF SECURITIES
Common Stock
The Company is authorized by its articles of incorporation, as
amended, to issue up to 80,000,000 shares of Common Stock, $.01 par
value, of which 43,891,541 shares were outstanding as of November 19,
1997. Holders of Common Stock are entitled to one vote per share on all
matters submitted to a vote of the shareholders and do not have
cumulative voting rights in the election of directors. Accordingly, the
holders of a majority of the outstanding Common Stock can, if they so
choose, elect all directors. The vote of the holders of a majority of
the shares entitled to vote, present in person or represented by proxy,
shall decide any question brought before a meeting of the Company's
shareholders at which a quorum is present. A quorum consists of a
majority of the issued and outstanding shares of the Common Stock
entitled to vote. The articles of incorporation of the Company specify
that a majority vote of shareholders shall be determinative regardless of
provisions requiring more than a majority vote under the Texas Business
Corporation Act.
All of the shares issuable upon exercise of warrants and conversion
of preferred stock will be fully paid and nonassessable. Holders of the
Common Stock have no preemptive or other subscription rights, and shares
of Common Stock have no redemption, sinking fund, or conversion
privileges. Holders of Common Stock are entitled to receive dividends
when, as and if declared by the board of directors of the Company, out of
funds legally available therefor. In the event of liquidation or
dissolution of the Company, holders of Common Stock are entitled to share
ratably in all assets available for distribution to such shareholders.
<PAGE>
Preferred Stock
The Company is authorized to issue up to 1,000,000 shares of
Preferred Stock, $1.00 par value, in one or more series, which, if
issued, would have certain preferences over the Common Stock. The
articles of incorporation of the Company vest the board of directors with
authority to establish and designate series of Preferred Stock and to fix
and determine the relative rights and preferences of any series so
established. As of November 19, 1997, outstanding Preferred Stock
consisted of (a) 140,000 shares of Series A Preferred Stock with an
annual dividend rate of 6%, a redemption value of $1.00 per share, and no
right to convert into Common Stock; (b) 3 shares of Series H Preferred
Stock with an annual dividend rate of 5%, a redemption value of $25,000
per share, and the right to convert such Preferred Stock into 50,000
shares of Common Stock, at a minimum conversion price of $1.50 per share;
(c) 93 shares of Series M Preferred Stock with a 3% dividend rate, a
redemption value of $33,250 per share, and the right to convert such
Preferred Stock, as of November 19, 1997, into 8,000,000 shares of Common
Stock at a variable conversion price based upon the stock price of the
Company's common stock for a period immediately preceding the date of
conversion; and (d) 80 shares of Series N Preferred Stock with a 3%
dividend rate, a redemption value of $33,250 per share, and the right to
convert such Preferred Stock, as of November 19, 1997, into 6,881,720
shares of Common Stock at a variable conversion price based upon the
stock price of the Company's common stock for a period immediately
preceding the date of conversion
Such Preferred Stock has no voting rights. It has preference over
the Common Stock as to dividends, and no dividends can be declared or
paid on the Common Stock unless full dividends on all Preferred Stock
then outstanding for all past dividend periods and for the current period
had been declared and paid. Dividends on all Preferred Stock, regardless
of series, are cumulative. No dividend may be declared on shares of any
series of Preferred Stock for any dividend period unless all dividends
accumulated for all prior dividend periods have been declared on all
Preferred Stock then outstanding and a dividend for the same period is
declared at the same time upon all Preferred Stock outstanding in like
proportions to the dividend rate then declared. In the event of
dissolution, liquidation or winding up of the Company, whether voluntary
or involuntary, the holders of each series of the then outstanding
Preferred Stock would be entitled to receive the amount fixed for such
purpose in the resolution of the board of directors establishing the
respective series of Preferred Stock plus a sum equal to the amount of
all accumulated and unpaid dividends thereon. After such payment to the
holders of Preferred Stock, the remaining assets and funds of the Company
could be distributed pro rata among the holders of the Common Stock. The
whole or any part of outstanding Series A, Series H, Series M, and Series
N Preferred Stock may be called for redemption and redeemed at any time
at the option of the Company, exercisable by the board of directors upon
thirty days' notice by mail to the holders of such shares as are to be
redeemed.
Warrants
As of November 19, 1997, the Company had outstanding warrants held
by various investors and stock options held by various employees which
were exercisable for a total of 11,610,730 shares of Common Stock.
Exercise prices of the warrants and stock options range from a high of
$4.50 per share, to a low of $0.94 per share and expiration dates range
from June, 1998 through April, 2002.
<PAGE>
Debentures
As of November 19, 1997, the Company had no outstanding debentures.
The transfer agent and registrar for Common Stock is American Stock
Transfer & Trust Company, 40 Wall Street, New York, New York 10005.
RECENT DEVELOPMENTS
There have been no material changes in the Company's affairs since
the filing of the Company's September 1997 10-Q Report, which report has
been incorporated herein by reference.
LEGAL MATTERS
Certain legal matters in connection with the validity of the
securities offered hereby have been passed upon for the Company by Billy
J. Robinson. Mr. Robinson is an attorney who acts as counsel to the
Company. Mr. Robinson is also a director and owns 65,000 shares of
Common Stock and holds vested options to purchase an additional 37,500
shares of Common Stock.
EXPERTS
The financial statements and the related financial statement
schedules incorporated in this prospectus by reference from the Company's
Annual Report on Form 10-K as of June 30, 1997 and 1996, and for each of
the years in the three-year period ended June 30, 1997 have been audited
by King Griffin & Adamson P.C., independent certified public accountants,
as stated in their report which is incorporated herein by reference, and
has been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the Company's Articles of
Incorporation or Bylaws, or otherwise, the registrant has been advised
that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection
with the securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed
in the Securities Act and will be governed by the final adjudication of
such issue.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Securities and Exchange Commission registration fee paid $ 898
Transfer agent's fees 150
Costs of printing 150
Legal fees and expenses 500
Accounting fees and expenses 250
Blue sky fees and expenses 250
Miscellaneous expenses 500
Total estimated fees $2,698
All amounts estimated except for Securities and Exchange Commission
registration fee.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article 2.02(16) and 2.02-1 of the Texas Business Corporation Act
empowers a corporation to indemnify its directors and officers or former
directors or officers and to purchase insurance with respect to liability
arising out of their capacity or status as directors and officers.
Article XIII of the Company's Articles of Incorporation, as amended,
provides that a director of the Company shall not be personally liable to
the Company or its shareholders for monetary damages for any act or
omission in his capacity as a director, except to the extent otherwise
expressly provided by a statute of the State of Texas. Article IX of the
Company's Bylaws provides for indemnification of officers and directors.
The Company has to date entered into no Indemnity Agreements with any of
its officers or directors, although it is permitted to do so.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered,
the registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
ITEM 16. EXHIBITS
The following is a list of all exhibits filed as a part of this
Registration Statement on Form S-3, including those incorporated herein
by reference.
Exhibit
Number Description of Exhibit
<PAGE>
4.1 Articles of Incorporation of the Company, as amended,
defining the rights of security holders (filed as Exhibit "4.1"
to the Company's Quarterly Report on Form 10-Q filed with the
Commission on October 22, 1996 and incorporated herein by
reference.)
4.2 Bylaws of the Company, as amended (filed as Exhibit
"3(ii)" to the Company's annual report on Form 10-K for the
fiscal year ended June 30, 1994 and incorporated herein by
reference.)
4.3 Series A Preferred Stock terms and conditions (filed as
Exhibit "4.3" to the Company's annual report on Form 10-K for
the fiscal year ended June 30, 1994 and incorporated herein by
reference.)
4.4 Series H Preferred Stock terms and conditions (filed as
Exhibit "4.4" to the Company's Registration Statement on Form S-
3 filed with the Commission on June 20, 1996 and incorporated
herein by reference.)
4.5 Form of warrant issued in connection with Series K
Preferred Stock (filed as Exhibit "4.4" to the Company's
Current Report on Form 8-K dated May 14, 1997 and incorporated
herein by reference.)
4.6 Series M Preferred Stock terms and conditions, as amended
(filed as Exhibit "4.7" to the Company's Registration Statement
on Form S-3 originally filed with the Commission on August 18,
1997 and incorporated herein by reference.)
4.7 Series N Preferred Stock terms and conditions.
4.8 Form of warrant issued in connection with the J.P. Carey
Agreement.
5 Opinion of Billy J. Robinson.
23.1 Consent of King Griffin & Adamson P.C.
23.2 Consent of Billy J. Robinson (included in his opinion filed as
Exhibit 5.)
24 Powers of Attorney (included on the Signature Page of
the Registration Statement.)
99.1 Agreement between the Company and J.P. Carey, Inc. dated
August 8, 1997 (the "J.P. Carey Agreement")(filed as Exhibit
"99.2" to the Company's Registration Statement on Form S-3
originally filed with the Commission on August 18, 1997 and
incorporated herein by reference.)
99.2 Form of Securities Subscription Agreement for Series N
Preferred Stock.
<PAGE>
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the Registration Statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information in
the Registration Statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed by
the registrant pursuant to Section 13 or Section 15(d) of the Exchange
Act that are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of
the Exchange Act that is incorporated by reference in the Registration
Statement shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned Registrant hereby undertakes that: (1) For
purposes of determining any liability under the Securities Act of 1933,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-3 and has duly caused this
Amendment No. 1 to the Company's Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Dallas, State of Texas, on November 24, 1997.
CURTIS MATHES HOLDING CORPORATION
By: /s/ PAT CUSTER
Patrick A. Custer
President and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints each of Patrick A. Custer and F.
Shelton Richardson, Jr., each of whom may act without joinder of the
other, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign, execute and file with the
Commission and any state securities regulatory board or commission any
documents relating to the proposed issuance and registration of the
securities offered pursuant to this Registration Statement on Form S-3
under the Securities Act of 1933, including any amendment or amendments
relating thereto, which amendments may make such changes in the
Registration Statement as such attorney may deem appropriate, with all
exhibits and any and all documents required to be filed with respect
thereto with any regulatory authority, granting unto said attorneys-in-
fact and agents, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to be done
in and about the premises in order to effectuate the same as fully to all
intents and purposes as he might or could do if personally present,
hereby ratifying and confirming all that said attorneys-in-fact and
agents, or either of them, or their or his substitute or substitutes, may
lawfully do or cause to be done.
Pursuant to the requirements of the Securities Act, this
Registration Statement on Form S-3 has been signed by the following
persons in the capacities and on the dates indicated.
Principal Executive Officer
/s/ PAT CUSTER Chairman of the Board, November 24, 1997
Patrick A. Custer President, Chief
Executive Officer
and Director
Principal Financial and Accounting Officer
/s/ F. SHELTON RICHARDSON, JR. Vice President, November 24, 1997
F. Shelton Richardson, Jr. Chief Financial
Officer
Additional Directors
/s/ BILLY J. ROBINSON Vice President, Secretary, November 24, 1997
Billy J. Robinson General Counsel and Director
/s/ EDWARD M. WARREN Director November 24, 1997
Edward M. Warren
/s/ BERNARD S. APPEL Director November 24, 1997
Bernard S. Appel
<PAGE>
EXHIBIT INDEX
Sequential
Page
Exhibit Number Number
4.1 Articles of Incorporation of the Company, as amended, defining
the rights of security holders (filed as Exhibit "4.1" to the
Company's Quarterly Report on Form 10-Q filed with the
Commission on October 22, 1996 and incorporated herein by
reference.) N/A
4.2 Bylaws of the Company, as amended (filed as Exhibit "3(ii)" to
the Company's annual report on Form 10-K for the fiscal year
ended June 30, 1994 and incorporated herein by reference.) N/A
4.3 Series A Preferred Stock terms and conditions (filed as Exhibit
"4.3" to the Company's annual report on Form 10-K for the
fiscal year ended June 30, 1994 and incorporated herein by
reference.) N/A
4.4 Series H Preferred Stock terms and conditions (filed as Exhibit
"4.4" to the Company's Registration Statement on Form S-3 filed
with the Commission on June 20, 1996 and incorporated herein by
reference.) N/A
4.5 Form of warrant issued in connection with Series K Preferred
Stock (filed as Exhibit "4.4" to the Company's Current Report
on Form 8-K dated May 14, 1997 and incorporated herein by
reference.) N/A
4.6 Series M Preferred Stock terms and conditions, as amended
(filed as Exhibit "4.7" to the Company's Registration Statement
on Form S-3 originally filed with the Commission on August 18,
1997 and incorporated herein by reference.) N/A
4.7* Series N Preferred Stock terms and conditions. 27
4.8* Form of warrant issued in connection with the J.P. Carey
Agreement. 32
5* Opinion of Billy J. Robinson. 36
23.1* Consent of King Griffin & Adamson P.C. 37
23.2 Consent of Billy J. Robinson (included in his opinion filed as
Exhibit 5.) N/A
24 Powers of Attorney (included on the Signature Page of the
Registration Statement.) N/A
99.1 Agreement between the Company and J.P. Carey, Inc. dated August
8, 1997 (the "J.P. Carey Agreement")(filed as Exhibit "99.2" to
the Company's Registration Statement on Form S-3 originally
filed with the Commission on August 18, 1997 and incorporated
herein by reference.) N/A
99.2* Form of Securities Subscription Agreement for Series N
Preferred Stock. 38
* Filed herewith.
<PAGE>
CURTIS MATHES HOLDING CORPORATION
(the "Corporation")
CERTIFICATE OF DESIGNATION
FIXING THE NUMBER AND DESIGNATING THE RIGHTS, PRIVILEGES,
RESTRICTIONS AND CONDITIONS ATTACHING TO THE SERIES N CLASS A
PREFERENCE SHARES
WHEREAS:
A. The Corporation's share capital includes 1,000,000 Preference Shares
par value, $1.00 per share which Preference Shares may be issued in
one or more series with the directors of the Corporation (the
"Board") being entitled by resolution to fix the number of shares in
each series and to designate the rights, privileges, restrictions
and conditions attaching to the share of each series; and
B. It is in the best interests of the Corporation for the Board to
create a series of Class A Preference Shares;
NOW, THEREFORE, BE IT RESOLVED, THAT:
The series of the Class A Preference Shares (the "Series N Class A
Shares") of the Corporation shall consist of 80 shares and no more
and shall be designated as the Series N Class A Preference Shares
and in addition to the preferences, rights, privileges, restrictions
and conditions attaching to all the Class A Preference Shares as a
class, the rights, privileges, restrictions and conditions attaching
to the Series N Class A Shares shall be as follows:
Part 1 - Pre-emptive Rights.
1.1 The Series N Class A Shares shall not give their holders any pre-
emptive rights to acquire any other securities issued by the Corporation
at any time in the future.
Part 2 - Liquidation Rights.
2.1 If the Corporation shall be voluntarily or involuntarily liquidated,
dissolved or wound up, at any times when any Series N Class A Shares
shall be outstanding, the holders of the then outstanding Series N Class
A Shares shall have a preference in distribution of the Corporation's
property available for distribution to the holders of the Common Shares
equal to $25,000.00 consideration per Series N Class A Share; provided,
however, that the amalgamation of the Corporation with any Corporation or
corporations, the sale or transfer by the Corporation of all or
substantially all of its property, or any reduction of the authorized or
issued capital of the Corporation of any class, whether now or hereafter
authorized, shall be deemed to be a liquidation of the Corporation within
the meaning of any of the provisions of this Part 2.
2.2 All amounts to be paid as preferential distributions to the holders
of Series N Class A Shares as provided in this Part 2 shall be paid or
set apart for payment before the payment or setting apart for payment of
any amount for, or the distribution of any of the Corporation's property
to the holders of Common Shares, whether now or hereafter authorized, in
connection with such liquidation, dissolution or winding up.
<PAGE>
Part 3 - Dividends.
3.1 Holders of record of Series N Class A Shares shall be entitled to
receive dividends on their Series N Class A Shares at the annual coupon
rate of three percent (3%).
Part 4 - Conversion.
4.1 Any holder of Series N Class A Preferred Stock (an "Eligible
Holder") may at any time after the registration statement is declared
effective convert any whole number of shares of Series N Class A
Preferred Stock in accordance with this Part. For the purposes of
conversion, the Series N Class A Preferred Stock shall be valued at
$25,000 per share ("Value"), and, if converted, the Series N Class A
Preferred Stock shall be converted into such number of Common Shares of
the Company $.01 par value (the "Conversion Shares") as is obtained by
dividing the aggregate Value of the shares of Series N Class A Preferred
Stock being so converted by the "Conversion Price." For purposes of this
Part, the "Conversion Price" means Seventy-five percent (75%), or such
lesser amount which reflects any penalty which may accrue in accordance
with Paragraph 7 of the Subscription Agreement, of the average daily
closing bid price of Common Stock as reported by NASDAQ for the period of
5 consecutive trading days immediately preceding the date of the
conversion of the Series N Class A Preferred Stock in respect of which
such Conversion Price is determined. The number of Conversion Shares so
determined shall be rounded to the nearest whole number of shares.
4.2 The conversion right provided by the above section may be exercised
only by an Eligible Holder of Series N Class A Preferred Stock, in whole
or in part, by the surrender of the share certificate or share
certificates representing the Series N Class A Preferred Stock to be
converted at the principal office of the Corporation (or at such other
place as the Corporation may designate in a written notice sent to the
holder by first-class mail, postage prepaid, at its address shown on the
books of the Corporation) against delivery of that number of whole Common
Shares as shall be computed by dividing (1) the aggregate Value of the
Series N Class A Preferred Stock so surrendered, if any, by (2) the
Conversion Price. Each Series N Class A Preferred Stock certificate
surrendered for conversion shall be endorsed by its holder. In the event
of any exercise of the conversion right of the Series N Class A Preferred
Stock granted herein (i) share certificates representing the Common Stock
purchased by virtue of such exercise, free of restrictive legend or stop
transfer orders, shall be delivered to such holder within 5 business days
after receipt by the Corporation of the original Notice of Conversion and
the certificate representing the Series N Class A Preferred Stock (the
fifth business day after receipt of such original documents, not counting
the date of receipt, being the "Delivery Date"), and (ii) unless the
Series N Class A Preferred Stock has been fully converted, a new share
certificate representing the Series N Class A Preferred Stock not so
converted, if any, shall also be delivered to such holder on or before
such Delivery Date, or carried on the Corporation's ledger, at holder's
option. Any Eligible Holder may exercise its right to convert the Series
N Class A Preferred Stock by telecopying an executed and completed Notice
of Conversion to the Corporation, and within 72 hours thereafter,
delivering the original Notice of Conversion and the certificate
representing the Series N Class A Preferred Stock to the Corporation by
express courier. Each date on which a telecopied Notice of Conversion is
received by the Corporation in accordance with the provisions hereof
shall be deemed a Conversion Date. The Corporation will cause delivery
<PAGE>
of the Common Stock certificates issuable upon conversion of any Series N
Class A Preferred Stock (together with the certificates representing the
Series N Class A Preferred Stock not so converted, if requested) to the
Eligible Holder via express courier on or before the Delivery Date if the
Corporation has received the original Notice of Conversion and Series N
Class A Preferred Stock certificate being so converted in accordance with
this paragraph.
4.3 All Common Shares which may be issued upon conversion of Series N
Class A Shares will, upon issuance, be duly issued, fully paid and
nonassessable and free from all taxes, liens, and charges with respect to
the issue thereof. At all times that any Series N Class A Shares are
outstanding, the Corporation shall have authorized, and shall have
reserved for the purpose of issuance upon such conversion, a sufficient
number of Common Shares to provide for the conversion into Common Shares
of all Series N Class A Shares then outstanding at the then effective
Conversion Price. Without limiting the generality of the foregoing, if,
at any time, the Conversion Price is decreased, the number of Common
Shares authorized and reserved for issuance upon the conversion of the
Series N Class A Shares shall be proportionately increased.
4.4 Notwithstanding the provisions hereof, in no event shall the holder
be entitled to convert any Series N Class A Preferred Stock in excess of
that number of shares upon conversion of which the sum of (1) the number
of shares of Common Stock beneficially owned by the Purchaser and its
affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unconverted portion of
the Preferred Stock), and (2) the number of shares of Common Stock
issuable upon the conversion of the Preferred Stock with respect to which
the determination of this proviso is being made, would result in
beneficial ownership by the Purchaser and its affiliates of more than
4.9% of the outstanding shares of Common Stock. For purposes of the
proviso to the immediately preceding sentence, beneficial ownership shall
be determined in accordance with Section 13(d) of the Securities Exchange
Act of 1934, as amended, and Regulation 13 D-G thereunder, except as
otherwise provided in clause (1) of such proviso.
4.5 No Series N Class A Shares which have been converted into Common
Shares shall be reissued by the Corporation; provided, however, that each
such share, after being retired and canceled, shall be restored to the
status of an authorized but unissued Class A Preference Share without
designation as to series and may thereafter be issued as a Class A
Preference Share not designated as Series N Class A Share.
Part 5 - Redemption.
5.1 At any time, and from time to time, the Corporation may, at its sole
option, but shall not be obligated to, redeem, in whole or in part, the
then outstanding Series N Class A Shares at a price per share of 133% of
its face value (the "Redemption Price") (such price to be adjusted
proportionately in the event of any change in the Conversion Price or any
change of the Series N Class A Shares into a different number of Shares).
5.2 Five (5) days prior to any date stipulated by the Corporation for
the redemption of Series N Class A Shares (the "Redemption Date"),
written notice (the "Redemption Notice") shall be mailed to each holder
of record on such notice date of the Series N Class A Shares. The
Redemption Notice shall state (I) the Redemption Date of such Shares (ii)
the number of Series N Class A Shares to be redeemed from the holder to
<PAGE>
whom the Redemption Notice is addressed (iii) instructions for surrender
to the Corporation, in the manner and at the place designated of a share
certificate or share certificates representing the number of Series N
Class Shares to be redeemed from such holder and (iv) instructions as to
how to specify to the Corporation the number of Series N Class A Shares
to be redeemed as provided in this Part and the number of shares to be
converted into Common Shares.
5.3 Upon receipt of the Redemption Notice, any Eligible Holder (as
defined in Section 5.2 hereof) shall have the right to convert into
Common Shares that number of Series N Class A Shares not called for
redemption in the Redemption Notice.
5.4 On or before the Redemption Date in respect of any Series N Class A
Shares, each holder of such shares shall surrender the required
certificate or certificates representing such shares to the Corporation,
in the manner and at the place designated in the Redemption Notice, and
upon the Redemption Date, the Redemption Price for such shares shall be
made payable, in the manner provided in Section 5.5 hereof, to the order
of the person whose name appears on such certificate or certificates as
the owner thereof, and each surrendered share certificate shall be
canceled and retired. If a share certificate is surrendered and all the
shares evidenced thereby are not being redeemed (as described below), the
Corporation shall cause the Series N Class A Shares which are not being
redeemed to be registered in the names of the persons whose names appear
as the owners on the respective surrendered share certificates and
deliver such certificate to such person.
5.5 On the Redemption Date in respect of any Series N Class A Shares or
prior thereto, the Corporation shall deposit with the Escrow Agent, as a
trust fund, a sum equal to the aggregate Redemption Price of all such
shares called for redemption (less the aggregate Redemption Price for
those Series N Class A Shares in respect of which the Corporation has
received notice from the Eligible Holder thereof of its election to
convert Series N Class A Shares into Common Shares), with irrevocable
instructions and authority to the Escrow Agent to pay, on or after the
Redemption Date, the Redemption Price to the respective holders upon the
surrender of their share certificates. The deposit shall constitute full
payment for the shares to their holders, and from and after the date of
the deposit the redeemed shares shall be deemed to be no longer
outstanding, and holders thereof shall cease to be shareholders with
respect to such shares and shall have no rights with respect thereto
except the rights to receive from the Escrow Agent payments of the
Redemption Price of the shares, without interest, upon surrender of their
certificates thereof. Any funds so deposited and unclaimed at the end of
one year following the Redemption Date shall be released or repaid to the
Corporation, after which the former holders of shares called for
redemption shall be entitled to receive payment of the Redemption Price
in respect of their shares only from the Corporation.
Part 6 - Amendment.
6.1 In addition to any requirement for a series vote pursuant to the
General Corporation Laws in respect of any amendment to the rights,
privileges, restrictions and conditions attaching to the Series N Class A
Shares, the rights, privileges, restrictions and conditions attaching to
the Series N Class A Shares may be amended only if the Corporation has
obtained the affirmative vote at a duly called and held meeting of a
majority of the Series N Class A Shares or written consent by the holders
of a majority of the Series N Class A Shares then outstanding.
<PAGE>
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR UNDER ANY STATE SECURITIES OR BLUE SKY LAWS. NEITHER
THIS WARRANT NOR ANY OF SUCH SHARES MAY BE SOLD, ASSIGNED,
TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
REGISTRATION UNDER SAID ACT AND UNDER APPLICABLE STATE
SECURITIES OR BLUE SKY LAWS OR EXEMPTIONS FROM SUCH
REGISTRATION.
Date: October 20, 1997 Warrant No. 1997-S-02
CURTIS MATHES HOLDING CORPORATION
STOCK PURCHASE WARRANT
Registered Owner: J.P. Carey, Inc.
For value received, CURTIS MATHES HOLDING CORPORATION, a Texas
corporation, (the ''Corporation'') grants the following rights to the
registered owner of this Warrant:
(a) RESTRICTED STOCK; REGISTRATION. The shares of Common Stock
of the Corporation purchased upon exercise of this Warrant (''Restricted
Stock'') or purchasable upon exercise of this Warrant (''Underlying
Stock'') shall not be transferable except upon the conditions stated
below, which are intended to insure compliance with federal and state
securities laws. The certificates representing these shares of stock,
unless the same are registered prior to exercise of this Warrant, shall
be stamped or otherwise imprinted with a legend in substantially the
following form:
''The securities represented by this Certificate have not been
registered under the Securities Act of 1933, as amended, or the
securities laws of any state. The securities have been
acquired for investment and may not be sold, offered for sale
or transferred in the absence of an effective registration
under the Securities Act of 1933, as amended, and any
applicable state securities laws or an opinion of counsel
satisfactory in form and substance to counsel for the
Corporation that the transaction shall not result in a
violation of state or federal securities laws.''
(b) ISSUE. Upon tender to the Corporation (as defined in
paragraph (f) hereof), the Corporation shall issue to the registered
owner hereof up to the number of shares specified in paragraph (c) hereof
of fully paid and nonassessable shares of Common Stock of the Corporation
that the registered owner is otherwise entitled to purchase.
(c) NUMBER OF SHARES. The total number of shares of Common Stock
of the Corporation that the registered owner of this Warrant is entitled
to receive upon exercise of this Warrant is One Hundred Thousand
(100,000) shares. The Corporation shall at all times reserve and hold
available sufficient shares of Common Stock to satisfy all conversion and
purchase rights represented by outstanding convertible securities,
options and warrants, including this Warrant. The Corporation covenants
and agrees that all shares of Common Stock that may be issued upon the
exercise of this Warrant shall, upon issuance, be duly and validly
issued, fully paid and nonassessable, and free from all taxes, liens and
charges with respect to the purchase and the issuance of the shares.
<PAGE>
(d) EXERCISE PRICE. The exercise price of this Warrant, the
price at which the shares of stock purchasable upon exercise of this
Warrant may be purchased, is One and one-half Dollars ($1.50) per share.
(e) EXERCISE PERIOD. Provided, that this Warrant may only be
exercised up to and including October 19, 2000 (''Exercise Period''). If
not exercised during this period, this Warrant and all rights granted
under this Warrant shall expire and lapse.
(f) TENDER. The exercise of this Warrant must be accomplished by
actual delivery of the Exercise Price in cash, certified check, or
official bank draft in lawful money of the United States of America, and
by actual delivery of a duly executed exercise form, a copy of which is
attached to this Warrant as Exhibit ''1'', properly executed by the
registered owner of this Warrant, and by surrender of this Warrant. The
payment and exercise form must be delivered, personally or by mail, to
the registered office of the Corporation. Documents sent by mail shall
be deemed to be delivered when they are received by the Corporation.
IN WITNESS WHEREOF, the Corporation has signed this Warrant by its
duly authorized officers effective as of October 20, 1997.
CURTIS MATHES HOLDING CORPORATION
Corporate Seal By: __________________________________
F. Shelton Richardson, Jr., Vice President
EXHIBIT "1"
Warrant Exercise Form
TO: CURTIS MATHES HOLDING CORPORATION
The undersigned hereby: (1) irrevocably subscribes for and offers
to purchase One Hundred Thousand (100,000) shares of Common Stock of
CURTIS MATHES HOLDING CORPORATION, pursuant to Warrant No. 1997-S-02
heretofore issued to the undersigned on October 20, 1997; (2) encloses
payment of One Hundred Fifty Thousand and No/100 Dollars ($150,000) for
these shares at a price of One and one-half Dollars ($1.50) per share;
and (3) requests that a certificate for the shares be issued in the name
of the undersigned and delivered to the undersigned at the address
specified below.
Date: ____________________
INVESTOR NAME: J.P. Carey, Inc.
By: ______________________________
Printed Name: ____________________
Title: ____________________
Address: ____________________
____________________
Signature guaranteed by:
<PAGE>
November 24, 1997
Curtis Mathes Holding Corporation
10911 Petal Street
Dallas, Texas 75238
Gentlemen:
I have acted as counsel to Curtis Mathes Holding Corporation, a
Texas corporation (the "Company") in connection with the proposed public
offering of up to 7,600,000 shares of the Company's Common Stock, $.01
par value (the "Common Stock"), as described in the Registration
Statement on Form S-3 filed with the Securities and Exchange Commission
on the date hereof (the "Registration Statement").
I have, as counsel, as I have deemed necessary examined such
corporate records, certificates and other documents and reviewed such
questions of law as I have deemed necessary, relevant or appropriate to
enable me to render the opinions expressed below. In rendering such
opinions, I have assumed the genuineness of all signatures and the
authenticity of all documents examined by me. As to various questions of
fact material to such opinions, I have relied upon representations of the
Company.
Based upon such examination and representations, I advise you that,
in my opinion:
A. The shares of Common Stock which are to be sold and delivered
by the Company and certain selling stockholders of the Company (the
"Selling Stockholders") as contemplated by the Plan of Distribution
specified in the Registration Statement, have been duly and validly
authorized by the Company and, in the case of the shares of Common Stock
to be sold by the Selling Stockholders, have been validly issued and are
fully paid and non-assessable.
B. The shares of Common Stock which are to be sold and delivered
by the Company pursuant to the exercise of the warrants, when issued and
delivered in accordance with the terms of the warrants, will be validly
issued, fully paid, and non-assessable.
I consent to the filing of this opinion as Exhibit "5" to the
Registration Statement and to the reference to myself under the caption
"Legal Matters" in the prospectus contained therein.
Sincerely,
/s/ Billy J. Robinson
Billy J. Robinson, General Counsel
Curtis Mathes Holding Corporation
<PAGE>
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' CONSENT
We consent to the incorporation by reference in this Registration
Statement of Curtis Mathes Holding Corporation on Form S-3 of our report
dated August 6, 1997 appearing in the Annual Report on Form 10-K of
Curtis Mathes Holding Corporation as of June 30, 1997 and 1996 and for
each of the years in the three-year period ended June 30, 1997 and to the
reference to us under the heading "Experts" in the Prospectus, which is
part of this Registration Statement.
/s/ King Griffin & Adamson P.C.
KING GRIFFIN & ADAMSON P.C.
Dallas, Texas
November 24, 1997
<PAGE>
THE SECURITIES OFFERED HEREIN ARE SUBJECT TO
SUBSTANTIAL RESTRICTIONS ON TRANSFERABILITY
SECURITIES SUBSCRIPTION AGREEMENT
1. Curtis Mathes Holding Corporation, a Texas corporation (the
"Company"), has offered for sale and the undersigned purchaser (the
"Purchaser") hereby tenders this subscription and applies for the
purchase of shares of Series N, Class A Preference Shares (the "Class A
Preferred Stock") of the Company, [together with the shares of the
Company's Common Stock, par value $0.01, issuable upon conversion of the
Series N, Class A Preferred Stock (the "Shares")] at a purchase price per
Share of $25,000, and containing all the rights, obligations, and
conditions as more fully set out in the form of the Certificate of
Designation of Class A Preferred Stock attached hereto as Exhibit "A" and
incorporated herein for all purposes (the "Offering"). Together with
this Subscription Agreement, the Purchaser is delivering to the Escrow
Agent by wire transfer the full amount of the purchase price for the
Shares for which it is subscribing pursuant hereto against delivery of
the Class A Preferred Stock certificates. Time is of the essence in
connection with this Subscription Agreement.
2. Representations and Warranties of Purchaser. In order to induce
the Company to accept this subscription, the Purchaser hereby represents
and warrants to, and covenants with, the Company as follows:
A. (i) The purchaser has received and carefully reviewed the
Company's most recent Annual Report on Form 10-K, its subsequent
Quarterly Reports on Form 10-Q, its most recent Registration
Statement on Form S-3, and its Current Reports on Form 8-K
(collectively, the "SEC Reports"), and a copy of the Certificate of
Designation for the Series N Class A Preferred Stock;
(ii) The Purchaser has had a reasonable opportunity to ask
questions of and receive answers from the Company concerning the
Company and the Offering, and all such questions, if any, have been
answered to the full satisfaction of the Purchaser;
(iii) The Purchaser is an accredited investor and has
such knowledge and expertise in financial and business matters that
the Purchaser is capable of evaluating the merits and risks involved
in an investment in the Class A Preferred Stock and acknowledges
that an investment in the Class A Preferred Stock entails a number
of very significant risks and funds should only be invested by
persons able to withstand the total loss of their investment;
(iv) Except as set forth in this Agreement, no
representations or warranties have been made to the Purchaser by the
Company or any agent, employee or affiliate of the Company and in
entering into this transaction the Purchaser is not relying upon any
information, other than that contained in this Agreement, the SEC
Reports and the results of independent investigation by the
Purchaser;
(v) The Purchaser understands that the Class A Preferred
Stock is being offered and sold to it in reliance on specific
exemptions from the registration requirements of the United States
Federal and State securities laws and that the Company is relying
upon the truth and accuracy of the representations, warranties,
<PAGE>
agreements, acknowledgments and understandings of the Purchaser set
forth herein in order to determine the applicability of such
exemptions and the suitability of the Purchaser to acquire the Class
A Preferred Stock;
(vi) The Purchaser has full power and authority to execute
and deliver this Agreement and to perform its obligations hereunder;
and this Agreement is a legally binding obligation of the Purchaser
enforceable against the Purchaser in accordance with its terms; and
3. Representations of the Company. The Company represents and
warrants:
A. The Company is a Reporting Issuer as defined by Regulation
D. The Company is in full compliance, to the extent applicable,
with all reporting obligations under either Section 13(a) or 15(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
B. The execution, delivery and performance of this Agreement
by the Company and the performance of its obligations hereunder do
not and will not constitute a breach or violation of any of the
terms and provisions of, or constitute a default under or conflict
with or violate any provision of (i) the Company's Certificate of
Incorporation or By-laws, (ii) any indenture, mortgage, deed of
trust, agreement or other instrument to which the Company is a party
or by which it or any of its property is bound, (iii) any applicable
statute of regulation, (iv) or any judgment, decree or order of any
court or governmental body having jurisdiction over the Company or
any of its property.
C. The Company is a corporation duly organized, validly
existing and in good standing under the law of its jurisdiction of
incorporation and is duly qualified as a foreign corporation in all
jurisdictions where the failure to be so qualified would have a
materially adverse effect on its business, taken as a whole.
D. The execution, delivery and performance of this Agreement
and the consummation of the issuance of the Class A Preferred Stock
and the transactions contemplated by this Agreement are within the
Company's corporate powers and have been duly authorized by all
necessary corporate and stockholder action on behalf of the Company.
E. There is no action, suit or proceeding before or by any
court or governmental agency or body, domestic or foreign, now
pending or, to the knowledge of the Company, threatened, against or
affecting the Company, or any of its properties, which might result
in any material adverse change in the condition (financial or
otherwise) or in the earnings, business affairs or business
prospects of the Company, or which might materially and adversely
affect the properties or assets thereof.
F. The Company is not in default in the performance or
observance of any material obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust or
other material instrument or agreement to which it is a party or by
which it or its property may be bound; and neither the execution,
nor the delivery by the Company, nor the performance by the Company
of its obligations under, this Agreement or, the Class A Preferred
<PAGE>
Stock will conflict with or result in the breach or violation of any
of the terms or provisions of, or constitute a default or result in
the creation or imposition of any lien or charge on any assets or
properties of the Company under, any material indenture, mortgage,
deed of trust or other material agreement or instrument to which the
Company is a party or by which it is bound or any statute or the
Certificate of Incorporation or Bylaws of the Company, or any
decree, judgment, order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or
its properties.
G. None of the Company's filings with the Securities and
Exchange Commission contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statement therein in light of the
circumstances under which they were made, not misleading. The
Company has timely filed all requisite forms, reports and exhibits
thereto with the Securities and Exchange Commission.
H. There has been no material adverse change in the financial
condition, earnings, business affairs or business prospects of the
Company since the date of the Company's most recent SEC Report filed
with the Securities and Exchange Commission.
I. As of the date hereof, the conduct of the business
complies in all material respects with all statutes, laws,
regulations, ordinances, rules, judgments, orders or decrees
applicable thereto. The Company has not received notice of any
alleged violation of any statute, law, regulation ordinance, rule,
judgment, order or decree from any governmental authority which
would materially adversely affect the business of the Company.
J. There is no fact known to the Company (other than general
economic conditions known to the public generally) that has not been
disclosed in writing to the Purchaser that (i) could reasonably be
expected to have a material adverse effect on the condition
(financial or otherwise) or in the earnings, business affairs,
business prospects, properties or assets of the Company or (ii)
could reasonably be expected to materially and adversely affect the
ability of the Company to perform its obligations pursuant to this
Agreement and the Class A Preferred Stock.
K. There is no action pending for delisting of the Common
Stock nor is the Company aware of any threatened action relating
thereto.
L. During the twelve (12) months immediately preceding the
date hereof, the Company has not issued any securities pursuant to
Regulation S or Regulation D under the Act, except as may be
reflected in the Company's filings with the U.S. Securities and
Exchange Commission pursuant Sections 13(a) or 15(d) of the Exchange
Act.
M. The Company covenants and agrees that it will not enter
into any subsequent or further offer or sale of Common Stock or
securities convertible into Common Stock with any third party until
the expiration of the earlier of (a) one hundred eighty (180) days
from the Closing Date, or (b) forty-five (45) days after the
effective date of the Registration Statement required to be filed
<PAGE>
under the Registration Rights Agreement, without first offering the
Purchaser the opportunity (which shall remain open for a period of
two business days from the date the Purchaser's representative
receives notice thereof) to purchase all of such additional
securities (in the discretion of the Purchaser) on the terms and
provisions on which the Company proposes to offer such additional
securities to such third party. In the event that the Purchaser
declines to participate in any such investment, the Company shall
provide the Purchaser with prompt written notice of the consummation
of any such transaction with a third party, specifying the material
terms thereof. However, this clause will not apply to (x) the
issuance of securities (other than for cash) in connection with a
merger, consolidation, sale of assets, disposition of a business,
product or license by the Company, strategic alliance, bank loan or
agreement, public offering, securities issued at the then current
market price (as determined in good faith by the Board of
Directors), or the exercise of options, (y) the exchange of the
capital stock or the Company for assets, stock or other joint
venture interests, or (z) any transaction which would result in
beneficial ownership by the Purchaser and its affiliates of more
than 4.9% of the outstanding shares of Common Stock as set out in
Section 6.3 below. This Section 3(M) may be waived by the holders
of two-thirds of the outstanding shares of Preferred Stock (whether
or not the Purchaser shall consent thereto).
4. The Purchaser understands that this subscription is not binding
upon the Company until the Company accepts it, which acceptance is at the
sole discretion of the Company and is to be evidenced by the Company's
execution of this Agreement where indicated. This Agreement shall be
null and void if the Company does not accept it as aforesaid. Upon
acceptance by the Company and receipt by the Escrow Agent of the total
purchase price, the Company will issue to the Escrow Agent one or more
certificates for the full number of shares of Class A Preferred Stock
subscribed for.
5. Covenants of the Company. For so long as any Class A Preferred
Stock held by the Purchaser remain outstanding, the Company covenants and
agrees with the Purchaser that:
(a) It will reserve from its authorized but unissued shares of
Common Stock a sufficient number of shares of Common Stock to permit
the conversion in full of the outstanding Class A Preferred Stock.
(b) It will maintain the listing of its Common Stock on
NASDAQ.
6. Any holder of Series N Class A Preferred Stock (an "Eligible
Holder") may at any time after the registration statement is declared
effective convert any whole number of shares of Series N Class A
Preferred Stock in accordance with this Part. For the purposes of
conversion, the Series N Class A Preferred Stock shall be valued at
$25,000 per share ("Value"), and, if converted, the Series N Class A
Preferred Stock shall be converted into such number of Common Shares of
the Company $.01 par value (the "Conversion Shares") as is obtained by
dividing the aggregate Value of the shares of Series N Class A Preferred
Stock being so converted by the "Conversion Price." For purposes of this
Part, the "Conversion Price" means Seventy-five percent (75%), or such
lesser amount which reflects any penalty which may accrue in accordance
with Paragraph 7 of this Subscription Agreement, of the average daily
<PAGE>
closing bid price of Common Stock as reported by NASDAQ for the period of
5 consecutive trading days immediately preceding the date of the
conversion of the Series N Class A Preferred Stock in respect of which
such Conversion Price is determined. The number of Conversion Shares so
determined shall be rounded to the nearest whole number of shares.
6.1 The conversion right provided by the above section may be
exercised only by an Eligible Holder of Series N Class A Preferred Stock,
in whole or in part, by the surrender of the share certificate or share
certificates representing the Series N Class A Preferred Stock to be
converted at the principal office of the Corporation (or at such other
place as the Corporation may designate in a written notice sent to the
holder by first-class mail, postage prepaid, at its address shown on the
books of the Corporation) against delivery of that number of whole Common
Shares as shall be computed by dividing (1) the aggregate Value of the
Series N Class A Preferred Stock so surrendered, if any, by (2) the
Conversion Price. Each Series N Class A Preferred Stock certificate
surrendered for conversion shall be endorsed by its holder. In the event
of any exercise of the conversion right of the Series N Class A Preferred
Stock granted herein (i) share certificates representing the Common Stock
purchased by virtue of such exercise, free of restrictive legend or stop
transfer orders, shall be delivered to such holder within 5 business days
after receipt by the Corporation of the original Notice of Conversion and
the certificate representing the Series N Class A Preferred Stock (the
fifth business day after receipt of such original documents, not counting
the date of receipt, being the "Delivery Date"), and (ii) unless the
Series N Class A Preferred Stock has been fully converted, a new share
certificate representing the Series N Class A Preferred Stock not so
converted, if any, shall also be delivered to such holder on or before
such Delivery Date, or carried on the Corporation's ledger, at holder's
option. Any Eligible Holder may exercise its right to convert the Series
N Class A Preferred Stock by telecopying an executed and completed Notice
of Conversion to the Corporation, and within 72 hours thereafter,
delivering the original Notice of Conversion and the certificate
representing the Series N Class A Preferred Stock to the Corporation by
express courier. Each date on which a telecopied Notice of Conversion is
received by the Corporation in accordance with the provisions hereof
shall be deemed a Conversion Date. The Corporation will cause delivery
of the Common Stock certificates issuable upon conversion of any Series N
Class A Preferred Stock (together with the certificates representing the
Series N Class A Preferred Stock not so converted, if requested) to the
Eligible Holder via express courier on or before the Delivery Date if the
Corporation has received the original Notice of Conversion and Series N
Class A Preferred Stock certificate being so converted in accordance with
this paragraph.
6.2 All Common Shares which may be issued upon conversion of
Series N Class A Shares will, upon issuance, be duly issued, fully paid
and nonassessable and free from all taxes, liens, and charges with
respect to the issue thereof. At all times that any Series N Class A
Shares are outstanding, the Corporation shall have authorized, and shall
have reserved for the purpose of issuance upon such conversion, a
sufficient number of Common Shares to provide for the conversion into
Common Shares of all Series N Class A Shares then outstanding at the then
effective Conversion Price. Without limiting the generality of the
foregoing, if, at any time, the Conversion Price is decreased, the number
of Common Shares authorized and reserved for issuance upon the conversion
of the Series N Class A Shares shall be proportionately increased.
<PAGE>
6.3 Notwithstanding the provisions hereof, in no event shall
the holder be entitled to convert any Series N Class A Preferred Stock in
excess of that number of shares upon conversion of which the sum of (1)
the number of shares of Common Stock beneficially owned by the Purchaser
and its affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unconverted portion of
the Preferred Stock), and (2) the number of shares of Common Stock
issuable upon the conversion of the Preferred Stock with respect to which
the determination of this proviso is being made, would result in
beneficial ownership by the Purchaser and its affiliates of more than
4.9% of the outstanding shares of Common Stock. For purposes of the
proviso to the immediately preceding sentence, beneficial ownership shall
be determined in accordance with Section 13(d) of the Securities Exchange
Act of 1934, as amended, and Regulation 13 D-G thereunder, except as
otherwise provided in clause (1) of such proviso.
7. Registration. The Company shall be required, at the Company's
expense, to effect the registration of twice the number of the Underlying
Shares issuable on the "Closing Date" (October 15, 1997) upon conversion
of the Class A Preferred Stock under the Act and relevant Blue Sky laws.
The Company and the Purchaser shall cooperate in good faith in connection
with the furnishing of information required for such registration and the
taking of such other actions as may be legally or commercially necessary
in order to effect such registration. The Company shall file a
registration statement on or before November 24, 1997 and shall use its
best efforts to cause such registration statement to become effective as
soon as practicable thereafter. Such best efforts shall include, but not
be limited to, promptly responding to all comments received from the
staff of the Securities and Exchange Commission with respect to such
registration statement and promptly preparing and filing amendments to
such registration statement which are responsive to the comments received
from the staff of the Securities and Exchange Commission. Once declared
effective by the Securities and Exchange Commission the Company shall
cause such registration statement to remain effective until the earlier
of (i) the sale by the Purchaser of all Underlying Shares registered or
(ii) one year after the effective date of such registration statement.
In the event the registration statement is not declared effective within
90 days after the date of filing, at Purchaser's option, either (i) the
current Twenty-five percent (25%) discount provided in the Conversion
Price shall increase by three percent (3%) and such discount shall
continue to increase by two percent (2%) for each thirty (30) day period
thereafter until the registration statement is declared effective by the
SEC, or until the discount reached is thirty-five percent (35%), and
additional Common Stock shall be issued to the Purchaser upon conversion
in accordance with such additional discounts, or (ii) Purchaser may
convert any whole number of shares of Series N Class A Preferred Stock
into Common Shares of the Corporation pursuant to Regulation S, provided
that Purchaser demonstrates to the Corporation's reasonable satisfaction
that Purchaser is qualified at all relevant times as an investor under
Regulation S.
8. Indemnification.
A. The Purchaser agrees to indemnify the Company and hold it
harmless from and against any and all losses, damages, liabilities,
costs and expenses which it may sustain or incur in connection with
the breach by the Purchaser of any representation, warranty or
covenant made by it herein.
<PAGE>
B. The Company agrees to indemnify the Purchaser and hold it
harmless from and against any and all losses, damages, liabilities,
costs and expenses which it may sustain or incur in connection with
the breach by the Company of any representation, warranty or
covenant made by it herein.
9. Neither this Agreement nor any of the rights of the Purchaser
hereunder may be transferred or assigned by the Purchaser.
10. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Delaware. Each of the parties
consents to the jurisdiction of the federal courts whose districts
encompass any part of the City of New York or the City of Dallas, or the
state courts of the State of New York sitting in the City of New York, or
the state courts of the State of Texas sitting in the City of Dallas in
connection with any dispute arising under this Agreement and hereby
waives, to the maximum extent permitted by law, any objection, including
any objection based on forum non conveniens, to the bringing of any such
proceeding in such jurisdictions. A facsimile transmission of this
signed Agreement shall be legal and binding on all parties hereto. This
Agreement may be signed in one or more counterparts, each of which shall
be deemed an original. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement. If any provision of this Agreement
shall be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this
Agreement in any other jurisdiction. This Agreement may be amended only
by an instrument in writing signed by the party to be charged with
enforcement. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject
matter hereof.
11. Unless the context otherwise requires, all personal pronouns
used in this Agreement, whether in the masculine, feminine or neuter
gender, shall include all other genders.
12. All notices or other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered
personally or mailed by certified or registered mail, return receipt
requested, postage prepaid, as follows: If to Purchaser, to the address
set forth on the signature page of this Agreement and if to the Company,
to Curtis Mathes Holding Corporation, 10911 Petal Street, Dallas, Texas
75238, or to such other address as the Company or the Purchaser shall
have designated to the other by like notice.
13. Restricted Legend. The Purchaser recognizes that the Class A
Preferred Stock, when issued, will not have been registered for public
sale under the Securities Act of 1933 (the "Act") or the securities laws
of any state and that the share certificate will bear a "Restricted
Stock" legend as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED, OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF (1) AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES
UNDER SAID ACT, OR (2) AN OPINION OF COMPANY COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED."
Signatures Follow
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of October 15, 1997.
The Purchaser declares under penalty of perjury that the statements,
representations and warranties contained in the foregoing Securities
Purchase Agreement and in the following Purchaser Acknowledgments are
true, correct and complete.
PURCHASER: ______________________________
______________________________
(Signature) (Title)
______________________________
(Print Name)
Exact Name(s) in which ownership of Securities is to be registered:
______________________________________
Principal Place of Business: _________________________________________
_________________________________________
_________________________________________
Federal Tax ID Number: __________________________________________
Amount of Subscription $
AGREED AND ACCEPTED:
CURTIS MATHES HOLDING CORPORATION
By:______________________________
Patrick A. Custer
President and CEO
APPENDIX "A"
PURCHASER ACKNOWLEDGMENTS
In order to induce the Company to accept the foregoing Securities
Purchase Agreement, the Purchaser expressly acknowledges the following by
placing his or her initials (or, if the Purchaser is a person other than
an individual, the initials of an individual duly empowered to act for
the Purchaser) in each of the spaces provided below:
THE PURCHASER HAS RECEIVED, HAS CAREFULLY REVIEWED INFORMATION ON
THE COMPANY AND HAS MADE AN INDEPENDENT INVESTIGATION AND ANALYSIS OF THE
INVESTMENT.
THE PURCHASER HAS CAREFULLY READ THE FOREGOING SECURITIES PURCHASE
AGREEMENT AND IN PARTICULAR, HAS CAREFULLY READ AND UNDERSTANDS THE
PURCHASER'S REPRESENTATIONS AND WARRANTIES MADE THEREIN AND CONFIRMS THAT
ALL SUCH REPRESENTATIONS AND WARRANTIES ARE TRUE AND CORRECT.
THE PURCHASER QUALIFIES UNDER THE FOLLOWING CATEGORY OR CATEGORIES
OF DEFINITIONS OF "ACCREDITED INVESTOR" (INDICATE EACH APPLICABLE
CATEGORY):
<PAGE>
(1) The Purchaser is a natural person whose individual net worth,
or joint net worth with that person's spouse, exceeds
$1,000,000.
(______) Yes (______) No
(2) The Purchaser is a natural person who had an individual income
in excess of $200,000 in each of the two most recent years or
joint income with that person's spouse in excess of $300,000 in
each of those years and has a reasonable expectation of
realizing the same income level in the current year.
(______) Yes (______) No
(3) The Purchaser is a broker or dealer registered pursuant to
Section 15 of the Securities Exchange Act of 1934, as amended.
(______) Yes (______) No
(4) The Purchaser is an insurance company, a registered securities
broker or dealer, a licensed Small Business Investment Company,
a registered investment company, a business development company
as defined in Section 2(a)(48) of the Investment Company Act of
1940 or a private business development company as defined in
Section 202(a)(22) of the Investment Advisers Act of 1940.
(______) Yes (______) No
(5) The Purchaser is an organization described in Section 501(c)(3)
of the Internal Revenue Code of 1986, as amended, or a
corporation, Massachusetts or similar business trust or
partnership, not formed for the specific purpose of acquiring
the Units, with total assets in excess of $5,000,000.
(______) Yes (______) No
(6) The Purchaser is a trust with total assets in excess of
$5,000,000, not formed for the specific purpose of acquiring
the Units offered, whose purchase is directed by a person who
has such knowledge and experience that he or she is capable of
evaluating the merits and risks of the proposed investment.
(______) Yes (______) No
(7) The Purchaser is a bank, savings and loan association or
similar institution acting in its individual or fiduciary
capacity, or an employee benefit plan with total assets in
excess of $5,000,000.
(______) Yes (______) No
(8) The Purchaser is a Plan established and maintained by a state,
its political subdivisions, or any agency or instrumentality of
a state or its political subdivisions for the benefit of its
employees, with total assets in excess of $5,000,000.
(______) Yes (______) No
<PAGE>
(9) The Purchaser is an employee benefit plan within the meaning of
the Employee Retirement Income Security Act of 1974 ("ERISA"),
the investment decisions for which are made by a plan
fiduciary, as defined in Section 3(21) of ERISA, which is
either a bank, savings and loan association, insurance company,
or registered investment adviser, or is an employee benefit
plan that has total assets in excess of $5,000,000.
(______) Yes (______) No
(10) The Purchaser is an entity in which all of the equity owners
are accredited investors or individuals who are accredited
investors (as defined above).
(______) Yes (______) No
IN WITNESS WHEREOF, the Purchaser has executed and delivered this
Purchaser Acknowledgment as of the day and year specified above.
Official Signatory of Purchaser:
Name of Company: ___________________
By: _______________________________
(Signature)
Name Printed: _______________________
Title: ______________________________
