<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 18, 1996
REGISTRATION NO. 333-15169
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Amendment No. 1
to
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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METRICOM, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 77-0294597
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification Number)
organization)
</TABLE>
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980 UNIVERSITY AVENUE, LOS GATOS, CALIFORNIA 95030-2375,(408) 399-8200
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------------------
ROBERT P. DILWORTH
PRESIDENT AND CHIEF EXECUTIVE OFFICER
METRICOM, INC.
980 UNIVERSITY AVENUE, LOS GATOS, CALIFORNIA 95030-2375, (408) 399-8200
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
KENNETH L. GUERNSEY, ESQ.
COOLEY GODWARD LLP
ONE MARITIME PLAZA, 20TH FLOOR, SAN FRANCISCO, CA 94111-3580, (415) 693-2000
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Approximate date of commencement of proposed sale to the public:
FROM TIME TO TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
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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. [ ]
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 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
PROSPECTUS
$45,000,000
8% CONVERTIBLE SUBORDINATED NOTES DUE 2003 AND
SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION THEREOF
METRICOM, INC. LOGO
------------------------
This Prospectus covers the resale from time to time by the holders (the
"Selling Securityholders") of up to $45,000,000 aggregate principal amount of 8%
Convertible Subordinated Notes due 2003 (the "Notes") of Metricom, Inc. (the
"Company"). This Prospectus also covers sales by the Selling Securityholders
from time to time of shares of common stock, par value $.001 (the "Common
Stock") of the Company into which the Notes are convertible (the "Conversion
Shares"). As of the date of this Prospectus, the aggregate principal amount of
Notes outstanding is $45,000,000.
The Notes are convertible at the option of the holder into shares of Common
Stock of the Company, at any time on or after November 26, 1996 and prior to the
close of business on the Stated Maturity (as defined) of the Notes, unless
previously redeemed or repurchased, at a conversion price of $14.55 per share
(equivalent to a conversion rate of approximately 68.7285 shares per $1,000
principal amount of Notes), subject to adjustment in certain events. Interest on
the Notes is payable semi-annually on March 15 and September 15 of each year,
commencing on March 15, 1997.
The Notes are redeemable, in whole or in part, at the option of the Company,
at any time on or after September 15, 1999, at the redemption prices set forth
herein, plus accrued and unpaid interest and liquidated damages, if any, to the
date of redemption. The Company will be required to offer to purchase the Notes
upon a Change of Control (as defined), at 101% of the principal amount thereof,
plus accrued and unpaid interest and liquidated damages, if any, to the date of
purchase. There can be no assurance that the Company will have available
financial resources necessary to repurchase the Notes in such circumstances.
The Notes are unsecured general obligations of the Company, subordinated in
right of payment to all existing and future Senior Indebtedness (as defined) of
the Company. The Indenture will not restrict the incurrence of Senior
Indebtedness or other indebtedness by the Company. At September 30, 1996, the
Company had no indebtedness outstanding that would have constituted Senior
Indebtedness. See "Description of the Notes."
The Notes were originally issued by the Company on August 28, 1996, in a
private placement to qualified institutional buyers or other accredited
investors in transactions exempt from registration under the Securities Act of
1933, as amended (the "Act"), and in sales outside the United States within the
meaning of Regulation S under the Act. Furman Selz LLC and Feshbach Brothers
Investor Services Inc. (the "Placement Agents") acted as placement agents with
respect to such original issuance of Notes. The Placement Agents are not serving
as underwriters with respect to the resale of Notes and Conversion Shares
hereunder.
The Selling Securityholders, directly or through agents, broker-dealers or
underwriters, may sell the Notes or the Conversion Shares offered hereby from
time to time on terms to be determined at the time of sale. Such Notes or
Conversion Shares may be sold at market prices prevailing at the time of sale or
at negotiated prices. The Selling Securityholders and any agents, broker-dealers
or underwriters that participate in the distribution of the Notes or Conversion
Shares may be deemed to be "underwriters" within the meaning of the Act, and any
commission received by them and any profit on the resale of the Common Stock
purchased by them may be deemed to be underwriting discounts or commissions
under the Act. The Company will not receive any proceeds from the sale of Notes
or Conversion Shares by the Selling Securityholders. See "Selling
Securityholders" and "Plan of Distribution."
The Notes have been designated for trading in the Private Offerings, Resales
and Trading through Automated Linkages ("PORTAL") Market. Notes sold pursuant to
the Registration Statement will not be eligible for trading in the PORTAL
Market. The Common Stock of the Company is quoted on the Nasdaq National Market
under the symbol "MCOM." The last reported sales price of the Company's Common
Stock on the Nasdaq National Market on December 17, 1996 was $12.1875 per share.
------------------------
SEE "RISK FACTORS" ON PAGES 6 THROUGH 14 OF THE PROSPECTUS FOR CERTAIN
INFORMATION RELATED TO THE SALE OF THE NOTES.
------------------------
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.
------------------------
Expenses of preparing and filing the Registration Statement to which this
Prospectus relates and all post-effective amendments will be borne by the
Company. No underwriting commissions or discounts will be paid by the Company in
connection with this offering. Estimated expenses payable by the Company in
connection with this offering are approximately $75,000. The aggregate proceeds
to the Selling Securityholders from the Notes or Conversion Shares will be the
purchase price of the Notes or Conversion Shares sold less the aggregate agents'
commissions and underwriters' discounts, if any, and other expenses of issuance
and distribution not borne the Company. See "Plan of Distribution."
The Company has agreed to indemnify the Selling Securityholders and certain
other persons against certain liabilities, including liabilities under the Act.
See "Plan of Distribution."
The date of this Prospectus is December 18, 1996
<PAGE> 3
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files annual and quarterly reports, proxy statements and other
information with the Securities and Exchange Commission (the "SEC"). Such
reports, proxy statements and other information may be inspected and copied at
the Commission's Public Reference Section, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, as well as at the Commission's Regional Offices at 7
World Trade Center, 13th Floor, New York, New York. 10048; and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can be
obtained at prescribed rates from the Public Reference Section of the SEC at 450
Fifth Street, N.W., Washington, D.C. 20549. The SEC also maintains a World Wide
Web site that contains such reports, proxy statements and other information, if
electronically filed with the SEC. The address of the site is
http://www.sec.gov. The Common Stock of the Company is quoted on the Nasdaq
National Market. Reports and other information concerning the Company may be
inspected at the National Association of Securities Dealers, Inc. at 1735 K
Street, N.W. Washington, D.C. 20006.
The Company will make available to any prospective purchaser of the Notes
copies of the Indenture and Registration Rights Agreement, and the reports,
proxy material or other information filed with the Commission under the Exchange
Act and such additional information reasonably requested in connection with the
consideration of an investment in the Notes. Written or telephonic requests
should be directed to: Metricom, Inc., Corporate Secretary, at 980 University
Avenue, Los Gatos, California 95030 (telephone (408) 399-8200).
ADDITIONAL INFORMATION
A registration statement on Form S-3 with respect to the Notes and
Conversion Shares offered hereby (together with all amendments and exhibits, the
"Registration Statement") has been filed with the SEC under the Act. This
Prospectus does not contain all of the information contained in such
Registration Statement and the exhibits and schedules thereto, certain portions
of which have been omitted pursuant to the rules and regulations of the SEC. For
further information with respect to the Company and the Notes and Conversion
Shares offered hereby, reference is made to the Registration Statement and the
exhibits and schedules thereto. Statements contained in this Prospectus
regarding the contents of any contract or any other documents are not
necessarily complete and, in each instance, reference is hereby made to the copy
of such contract or document filed as an exhibit to the Registration Statement.
The Registration Statement, including exhibits thereto, may be inspected without
charge at the Securities and Exchange SEC's principal office in Washington,
D.C., and copies of all or any part thereof may be obtained from the Public
Reference Section, Securities and Exchange Commission, Washington, D.C., 20549,
upon payment of the prescribed fees.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents are incorporated herein by reference: (a) the
Company's proxy statement for its 1996 Annual Meeting of Stockholders held on
April 24, 1996; (b) the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995, as amended by Form 10-K/A filed October 23, 1996,
including all material incorporated by reference therein; (c) the Company's
Quarterly Reports on Form 10-Q for the three-month periods ended March 29, 1996,
June 28, 1996 (as amended by Form 10-Q/A filed December 5, 1996) and September
27, 1996; (d) the Company's Current Reports on Form 8-K filed June 7, 1996, June
25, 1996, August 20, 1996 and September 11, 1996; (e) the Company's proxy
statement for its Special Meeting of Stockholders held on August 7, 1996; and
(f) the description of the Common Stock contained in the Company's Registration
Statement on Form 8-A (No. 0-19903).
All 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 the offering shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing of such documents. Any
statement contained in this Prospectus or in a document incorporated or deemed
to be incorporated by
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reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any
subsequently-filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request of such person, a copy of any and all of the documents that have been
incorporated by reference herein (not including exhibits to such documents
unless such exhibits are specifically incorporated by reference herein or into
such documents). Such request may be directed to Metricom, Inc., Attention:
William D. Swain, 980 University Avenue, Los Gatos, California 95030-2375,
telephone (408) 399-8200.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information, appearing elsewhere in this Prospectus, and in the documents
incorporated by reference herein. This Prospectus contains forward-looking
statements that involve risks and uncertainties. The Company's actual results
could differ materially from those discussed here. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed
in the Section entitled "Risk Factors," as well as those elsewhere in this
Prospectus and any documents actually or deemed to be incorporated herein by
reference.
THE COMPANY
Metricom is a leading provider of wide area wireless data communications
solutions. The Company designs, develops and markets wireless network products
and services, which operate in the license-free, 902 to 928 MHz frequency band.
As of September 30, 1996, the Company had approximately 6,100 subscribers to its
Ricochet(@) wireless service, and it estimates that its service territory
covered a population of approximately 3.6 million people. Ricochet service is
now available in a significant part of the San Francisco Bay Area, and Ricochet
networks are currently being installed in the Seattle, Washington and
Washington, D.C. metropolitan areas.
The Company was incorporated in California in December 1985 and
reincorporated in Delaware in April 1992. Unless the context otherwise requires,
references in this Prospectus to the "Company" or "Metricom" refer to Metricom,
Inc. and its subsidiaries. The Company's executive offices are located at 980
University Avenue, Los Gatos, California 95030-2375, and its telephone number is
(408) 399-8200.
THE OFFERING
Securities Offered.............. $45,000,000 principal amount of 8%
Convertible Subordinated Notes due 2003 (the
"Notes") and shares of Common Stock issuable
upon conversion thereof.
Interest Payment Dates for
Notes........................... March 15 and September 15, commencing March
15, 1997.
Conversion Rights of Notes...... The Notes are convertible into shares of the
Company's Common Stock (the "Common Stock")
at any time on or after November 26, 1996 and
prior to the close of business on the Stated
Maturity of the Note, unless previously
redeemed or repurchased, at a conversion
price of $14.55 per share (equivalent to a
conversion rate of approximately 68.7285
shares per $1,000 principal amount of Notes),
subject to adjustment in certain events. See
"Description of the Notes -- Conversion
Rights."
Optional Redemption of Notes.... The Notes are redeemable, in whole or in
part, at the option of the Company at any
time on or after September 15, 1999 at the
redemption prices set forth herein, plus
accrued and unpaid interest and liquidated
damages, if any, to the date of redemption.
See "Description of the Notes -- Redemption
at the Company's Option."
Change of Control............... If a Change of Control (as defined) occurs,
each holder of the Notes will have the right
to require the Company to purchase all or any
part of such holder's Notes, at 101% of the
principal amount thereof, plus accrued and
unpaid interest and liquidated damages, if
any, to the date of purchase. See
"Description of the Notes -- Repurchase of
Notes at the Option of the Holder Upon a
Change of Control."
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Subordination of Notes.......... The Notes are subordinated in right of
payment to all existing and future Senior
Indebtedness (as defined) of the Company. As
of September 30, 1996, the Company had no
indebtedness outstanding that would have
constituted Senior Indebtedness. The
Indenture (as defined) does not restrict the
incurrence of Senior Indebtedness or other
indebtedness by the Company. See "Description
of the Notes -- Subordination."
Registration Rights and
Liquidated
Damages....................... Pursuant to a Registration Rights Agreement
between the Company and the Placement Agents,
for the benefit of the holders of the Notes,
the Company has filed with the SEC a shelf
registration statement (of which this
Prospectus is a part) with respect to the
resale of the Notes and the underlying Common
Stock. The Company will be required to pay
liquidated damages to the holders of the
Notes or the underlying Common Stock, as the
case may be, under certain circumstances if
the Company is not in compliance with its
registration obligations. See "Description of
the Notes -- Registration Rights; Liquidated
Damages."
Use of Proceeds................. The Company will not receive any proceeds
from the sale of the Notes or Conversion
Shares by the Selling Securityholders. See
"Use of Proceeds."
Book Entry, Delivery and Form... Notes sold to QIBs (as defined) in reliance
on Rule 144A under the Securities Act are
represented by a single, permanent global
Note (the "Global Note") in fully registered
form deposited with the Trustee as custodian
for, and registered in the name of a nominee
of, DTC (as defined). Purchasers of Notes
that are not QIBs will receive certificates
for the Notes owned by them, which cannot
then be traded through the facilities of DTC,
except in connection with a transfer to a
QIB. See "Description of the Notes -- Book
Entry, Delivery and Form."
Common Stock Traded............. The Common Stock is traded on the Nasdaq
National Market under the symbol "MCOM."
For a discussion of the terms of the Notes, see "Description of the Notes,"
and for a discussion of certain factors that should be considered in connection
with an investment in the Notes or the Common Stock, see "Risk Factors."
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RISK FACTORS
This Prospectus and documents incorporated by reference in this Prospectus
include forward-looking statements that involve risks and uncertainties. Actual
results of the Company's activities may differ materially from the results
anticipated in such forward-looking statements. Factors that might cause or
contribute to such differences include, but are not limited to, those factors
identified below and under the caption "Risk Factors" in documents incorporated
herein by reference. In addition to the other information in this Prospectus,
prospective investors should consider the following factors, together with the
information and financial data included or incorporated by reference in this
Prospectus, before purchasing any Notes or Conversion Shares offered hereby.
UNCERTAINTY REGARDING DEPLOYMENT OF RICOCHET; ACQUISITION OF DEPLOYMENT
AGREEMENTS
The Company believes that its future success depends on the successful
deployment of Ricochet in major metropolitan areas of the United States. Before
offering Ricochet service, the Company must complete deployment of the network
in a portion of a metropolitan area that is large enough to justify commencement
of marketing and sales efforts. The deployment process consists of obtaining
site agreements, designing the network configuration, installing the network
infrastructure and testing the network. The Company substantially completed
deployment of its first Ricochet network in the Silicon Valley portion of the
San Francisco Bay Area, in September 1995. After initial deployment and
commencement of service in a portion of a metropolitan area, the Company can
extend the geographic coverage of the Ricochet network to include additional
portions of the metropolitan area, as the Company is currently doing in the San
Francisco Bay Area. Deployment has also begun in the Seattle, Washington and
Washington, D.C. metropolitan areas. The Company believes that the deployment of
the initial service territory in a metropolitan area equivalent to an average of
the 50 largest Urbanized Areas, as defined by the U.S. Bureau of the Census,
will take approximately 12 to 18 months depending on a number of factors,
including availability of sufficient financial, technical, marketing and
management resources, technological feasibility and availability of Ricochet
radios and modems. The Company has limited prior experience in deploying and
operating a wireless data communications service. Accordingly, there can be no
assurance as to the timing or extent of the deployment of Ricochet.
The construction of the Company's networks will depend, to a significant
degree, on the Company's ability to lease or acquire sites for the location of
its network equipment and to maintain agreements for such sites as needed. The
Company installs most of its Ricochet network radios on street lights on which
it leases space from electric utilities, municipalities or other local
government entities. In addition, the Company is often required to enter into
agreements with owners of the right-of-way in which street lights are located
and supply agreements with providers of electricity to the street lights to
provide power for the Company's network radios. The process of obtaining these
agreements is complex and has caused significant delays in deploying Ricochet
networks. Among other factors, the Company must deal separately with each city
in which it plans to deploy its network. In some instances, cities have never
faced requests similar to the Company's, are reluctant to grant such rights or
do not have a process in place to do so. The Company must then meet with various
municipal organizations to discuss issues such as pricing, health and safety
concerns, traffic disruption, aesthetics and citizen concerns. In the event the
Company is unable to negotiate site agreements in a timely manner and on
commercially reasonable terms or at all, it would need to obtain sites to deploy
network radios on commercial buildings, residential dwellings or similar
structures. Deploying a large area in this manner could be significantly more
expensive than installing network radios on street lights and may be restricted
or prohibited by a municipality. The Company also leases space on building
rooftops for its WAP sites. In connection with the leasing of WAP sites, the
Company faces competition with other providers of wireless communication
services. The Company expects that the site acquisition process will continue
throughout the construction of the Company's networks. Each stage of the process
involves various risks and contingencies, many of which are not within the
control of the Company and any of which could adversely affect the construction
of the Company's networks should there be delays or other problems.
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UNCERTAINTY OF MARKET ACCEPTANCE
Commercialization of Ricochet is subject to market acceptance risks. A
broad market for wide area wireless data communications services has not yet
developed. As a result, the extent of the potential demand for Ricochet service
cannot be reliably estimated. In addition, the Company has limited experience
marketing to individual subscribers. As of September 30, 1996, the Company had
approximately 6,100 subscribers. The Company believes that market acceptance
depends principally on cost competitiveness, data rate, ease of use, including
compatibility with existing applications, cost and size of Ricochet modems,
extent of coverage, customer support, marketing, distribution and pricing
strategies of the Company and competitors, Company reputation and general
economic conditions. Some of the foregoing factors are beyond the control of the
Company. If the Company's customer base for Ricochet does not expand as required
to support the deployment of additional networks, the Company's business,
financial condition and operating results will be materially and adversely
affected. In addition, the market for wireless communications services is
characterized by a high turnover rate for customers. There can be no assurance
that the Company will be able to retain existing or future customers.
CONTINUING NET LOSSES; NEGATIVE CASH FLOW
The Company has incurred cumulative net losses since inception. The Company
expects that net losses and negative cash flow from operating activities will
increase in the future as a result of the continued development, deployment and
commercialization of its Ricochet networks. There can be no assurance that the
Company will achieve or sustain profitability or positive cash flow from
operating activities in the future. In addition, the Company's ability to
achieve or sustain positive cash flow from operating activities may be
restricted by contractual arrangements with joint venture partners, which may
limit distributions of cash to the Company from certain joint ventures. If the
successful development, deployment and commercialization of Ricochet are not
achieved, the Company may not be able to make required payments on the Notes and
may have to refinance the Notes in order to repay these obligations. There can
be no assurance that the Company would be able to refinance the Notes.
CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FINANCING
The Company intends to continue the development, deployment and
commercialization of its Ricochet networks. The timing and amount of capital
expenditures may vary significantly depending on numerous factors including
market acceptance of Ricochet, availability and financial terms of site
agreements for the Company's network infrastructure, availability of Ricochet
radios and modems and availability of sufficient management, technical,
marketing and financial resources. The Company will need to raise substantial
additional funds through the sale of its equity or debt securities in private or
public financings or through strategic partnerships in order to extend the
deployment and commercialization of Ricochet to a significant number of
metropolitan areas. No assurance can be given that additional financing will be
available or that, if available, such funding can be obtained on terms favorable
to the Company. Should the Company be unable to obtain additional financing, it
may be required to scale back the planned deployment of its Ricochet networks
and reduce capital expenditures, which would have a material adverse effect on
the Company's business, financial condition and operating results.
RISKS OF DEVELOPING TECHNOLOGY
Neither Ricochet nor UtiliNet networks have been in commercial operation
for an extended period of time. There can be no assurance that unforeseen
problems will not develop with respect to the Company's technology or products
or that the Company will be successful in completing the development of its
technology and products. Significant risks remain as to the technological
performance of the Company's services and products. These include, for example,
firmware failures, problems associated with large-scale deployment, inability of
networks to meet expected performance in data rate, latency, capacity and range,
hardware reliability and performance problems, problems associated with links
between Ricochet network radios, WAPs, the wired backbone and other wired
networks, excessive interference with or by the Company's networks, failure to
receive FCC certification, inability to reduce product size and cost and timing
of
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completion of development. Given the limited deployment of Ricochet to date
there can be no assurance that selected Ricochet network components will be
adequate to meet the geographic and radio frequency propagation characteristics
of new areas of development. For example, in mid-1995 because of network
performance problems discovered during the initial deployment of the Ricochet
network in the Silicon Valley, the Company had to redesign certain portions of
its Ricochet radios and modems to improve transmission and reception quality and
upgrade all of the radios that had been deployed to date. Delays in
implementation of the Company's networks as a result of technical difficulties
could have a material adverse effect on the Company's business, financial
condition and operating results.
HIGHLY COMPETITIVE INDUSTRY
Competition in the market for wide area wireless data communications
services is intensifying and a large number of companies in diverse industries
are expected to enter the market. There can be no assurance that the Company
will be able to compete successfully in this market. A number of privately and
publicly held communications companies have developed or are developing wireless
data communications services and products using competing technologies. Two
wireless data communications network services, ARDIS and RAM, are widely
installed and operating across the United States and in some foreign countries.
CDPD is either installed or being installed in a number of metropolitan areas
and analog cellular networks are widely available throughout the United States.
Additional competition is expected from companies that currently provide paging
services and from emerging providers of PCS. Most of the current and anticipated
competitors in this market have substantially greater management, technical,
marketing and financial resources than the Company. There can be no assurance
that the Company's competitors will not succeed in developing new technologies,
products and services that achieve broader market acceptance, which could render
Ricochet obsolete or noncompetitive.
A broad market for wide area wireless data communications services has not
yet developed. In order for the market to develop and for wireless services to
compete effectively with widely available wired solutions, the Company believes
that wireless data communications services will need to provide data rates and
functionality comparable to those of the predominant mode of wired
communications at an affordable cost without compromising ease of use.
In addition, the Company's Internet access services compete with those
offered by a large number of companies. Many of these companies have had
significantly more experience offering such services than the Company. Several
of the current and anticipated competitors in this market have substantially
greater management, technical, marketing and financial resources than the
Company. Certain competitors could choose to offer Internet access services at a
price substantially below the cost of providing such services. Such actions
would place the Company at a substantial competitive disadvantage.
A number of competitors have substantially greater financial, technical and
marketing resources than the Company, offer products or have announced new
products that provide or, when available, will provide many of the capabilities
of the UtiliNet product line. There can be no assurance that the Company's
competitors will not succeed in developing services or products that are more
effective that UtiliNet, that would render UtiliNet obsolete or non-competitive,
or that would be priced more competitively than UtiliNet.
TECHNOLOGICAL CHANGE
The market for data communications systems is characterized by rapidly
changing technology and evolving industry standards in both the wireless and
wireline industries. The Company's success will depend to a substantial degree
on its ability to develop and introduce in a timely and cost-effective manner
enhancements to its existing systems and new products that meet changing
customer requirements and evolving industry standards. For example, increased
data rates, such as those provided by wired solutions like Integrated Services
Digital Network ("ISDN"), may affect customer perceptions as to the adequacy of
the Company's services and may also result in the widespread development and
acceptance of applications that
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require a higher data rate than the Company's Ricochet service currently
provides. There can be no assurance that the Company's technology or systems
will not become obsolete upon the introduction of alternative technologies. If
the Company does not develop and introduce new products and services and achieve
market acceptance in a timely manner, its business, financial condition and
operating results could be materially and adversely affected.
FEDERAL AND STATE REGULATION OF COMMUNICATIONS ACTIVITIES
The Company is subject to various FCC regulations. The FCC, pursuant to the
Communications Act, regulates non-government use of the electromagnetic spectrum
in the United States, including the 902 to 928 MHz frequency band currently used
by the Company's radio products. Part 15 of the FCC's regulations (47 C.F.R.
sec. 151 et seq.) specifies frequency bands in which the operation of certified
radio equipment is permitted without a license. The Company has designed its
products to conform to, and be certified under, the FCC's Part 15 spread
spectrum rules.
License-free operation of the Company's and other Part 15 products in the
902 to 928 MHz band is subordinate to certain licensed and unlicensed uses of
the band, including industrial, scientific and medical equipment, the United
States government and, in certain instances, location and monitoring systems and
amateur radio services. The Company's products must not cause harmful
interference to any non-Part 15 equipment operating in the band and must accept
interference from any of them, as well as from any other Part 15 equipment
operating in the band. If the Company were unable to eliminate any such harmful
interference caused by its products through technical or other means, the
Company or its customers could be required to cease operations in the band in
the locations affected by the harmful interference. Additionally, in the event
the 902 to 928 MHz band becomes unacceptably crowded, and no additional
frequencies are allocated by the FCC, the Company's business, financial
condition and operating results could be materially and adversely affected.
The regulatory environment in which the Company operates is subject to
change. Changes in the regulation of the Company's activities by the FCC, as a
result of its own regulatory process or as directed by legislation or the
courts, including changes in the allocation of available spectrum, could have a
material adverse effect on the Company, and the Company might deem it necessary
or advisable to move to another of the Part 15 bands or to obtain the right to
operate in the licensed spectrum or other portions of the unlicensed spectrum.
Redesigning products to operate in another band could be expensive and time
consuming, and there can be no assurance that such redesign would result in
commercially viable products. In addition, there can be no assurance that, if
needed, the Company could obtain appropriate licensed or unlicensed spectrum on
commercially acceptable terms, if at all.
The FCC recently adopted rules for LMS services that are, in certain
instances, senior to the Company's unlicensed operation in the 902 to 928 MHz
band because they are licensed. While the Company believes that there are
sufficient means to mitigate harmful interference by its networks to this
service, there can be no assurance that the operation of one or more of the
Company's network installations at particular locations would not be adversely
affected. These rules are currently under reconsideration by the FCC. While the
Company believes that the revised rules ultimately adopted by the FCC will serve
to further minimize any impact LMS will have on present license-free use of the
band, there can be no assurance that the FCC will not take regulatory action in
this proceeding that would have a material adverse effect on the Company's
business, financial condition or operating results.
As a result of the recent amendment to the Communications Act, certain
states may attempt to regulate the Company with respect to the terms and
conditions of service offerings. While the Company believes that state
regulation, if any, will be minimal, there can be no assurance that such
regulation will not have a material adverse effect on the Company's business,
financial condition or operating results.
The Company recently purchased an option to acquire Overall Wireless, a
corporation that holds a nationwide wireless communications license, issued by
the FCC with respect to 50 kHz of radio spectrum in the 220 to 222 MHz frequency
band. Before the license can be transferred to the Company, Overall Wireless
must construct 40% of the system, and the FCC must approve the transfer.
Operation in the licensed service is
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<PAGE> 11
governed by Part 90 of the FCC's rules (47 C.F.R. sec. 90.01 et seq.). At
present, these rules permit only mobile voice communications. The Company is
interested in using the 220 MHz license for communications that are not
currently authorized under Part 90, but that are proposed in a current Notice of
Proposed Rule Making. There can be no assurance that the FCC will approve the
license transfer or that the FCC will not take action that would significantly
affect the Company's investment in Overall Wireless. See "-- Risks Relating to
Potential Acquisition of Overall Wireless and Related Legal Proceedings."
On an ongoing basis, the FCC proposes and issues new rules and amendments
to existing rules that affect the Company's business. The Company closely
monitors the FCC's activities and, when appropriate, files comments on the
proposed rules. The Company is currently monitoring several proceedings at the
FCC that could have an impact on the Company. If the FCC adopts rules that
directly or indirectly restrict the Company's ability to conduct its business as
currently conducted or proposed to be conducted, the Company's business,
financial condition or operating results could be materially adversely affected.
RISKS RELATING TO POTENTIAL ACQUISITION OF OVERALL WIRELESS AND RELATED LEGAL
PROCEEDINGS
The Company recently purchased an option to acquire Overall Wireless (the
"Option"), a corporation that holds a nationwide, wireless communications
license issued by the FCC with respect to 50 kHz of radio spectrum in the 220 to
222 MHz frequency band. The Company paid $700,000 for the Option and agreed to
loan to Overall Wireless up to $2 million for the construction of a system
utilizing the License, of which approximately $500,000 had been loaned as of
July 31, 1996. The Option, which terminates in January 1997, may be extended
until July 1997 under certain circumstances upon payment by the Company of an
additional $500,000. The additional consideration payable upon exercise of the
Option includes a combination of cash and stock valued at $7.3 million in the
aggregate.
The transaction was the subject of litigation challenging the right of
Overall Wireless to transfer any interest in the License to the Company and
naming both parties as defendants. The plaintiffs requested specific performance
including the potential transfer of the license to them, subject to the approval
of the FCC. Although the Company is entitled to indemnification with respect to
the litigation by the principal shareholder of Overall Wireless, it is possible
that the indemnitor will not have sufficient assets to reimburse the Company for
any damages awarded. In September 1996, the Company was dismissed from the
action for lack of jurisdiction. In November 1996, a judgment was entered in
favor of Overall Wireless. The Company has been advised that the parties have
entered into a stipulation that no appeal will be filed from the judgment in
favor of Overall Wireless and its principal shareholder. See "-- Pending
Litigation."
The Company's ability to exercise the Option is subject to Overall
Wireless' completion of construction of 40% of the system prior to July 29,
1997, the subsequent filing of an application to transfer the License with the
FCC and the approval by the FCC of the application, which approval process
typically takes from three to six months. While the Company believes that the
requisite construction will be completed on time, that the FCC will consent to
the assignment of the License and that the FCC will adopt 220 MHz rules as
proposed, there can be no assurance that the FCC will not take action that would
significantly affect the Company's investment in Overall Wireless and the
Company's ability to develop 220 MHz equipment to perform as desired. There also
can be no assurance that the pending litigation will not delay or defeat FCC
action on the license transfer application, and there can be no assurance even
if the FCC takes favorable action, that the Company will be able to develop
satisfactory equipment for 220 MHz operations. Accordingly, the Option may
expire prior to becoming exercisable. In the event that the Company does not
exercise the Option or terminates it due to the failure of certain conditions,
the Company must pay a termination fee of up to $2 million, which may be paid
through cancellation of indebtedness of Overall Wireless.
In the event that the Option becomes exercisable and is in fact exercised
by the Company, the Company intends to use the License to provide enhancements
to its Ricochet networks, which could include "wake-up" features that would
extend the battery life of Ricochet devices and short messaging capabilities
that could improve the "reach" of the Ricochet network significantly. The
License could also enable the Company to offer additional wireless services such
as low-cost telemetry, two-way paging and a wireless return path for
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<PAGE> 12
wireless cable customers. All of such uses would require significant engineering
efforts by the Company to develop satisfactory equipment for 220 MHz operations.
In addition, the FCC rules governing the spectrum covered by the License
currently permit only mobile voice communications and would not permit the uses
of the License proposed by the Company. If, by January 1, 1997, the FCC rules
are not changed to permit such activities or the FCC has not approved the
transfer of the License to the Company, the Company can terminate the Option and
obtain a refund of $350,000. See "-- Federal and State Regulation of
Communications Activities."
UNCERTAINTY OF PROPRIETARY RIGHTS
The Company relies on a combination of patent, copyright, trademark and
trade secret protection and non-disclosure agreements to establish and protect
its proprietary rights. As of September 30, 1996, the Company has been issued 21
patents in the United States, which expire on dates between 2004 and 2014.
Corresponding patents of one domestic patent have been granted so far in nine
foreign countries, and other foreign and domestic patents are pending. The
Company has applied for patents covering several other features of the Company's
current products. However, there can be no assurance that patents will issue
from any pending applications or, if patents do issue, that claims allowed will
be sufficiently broad to protect the Company's technology. There can be no
assurance that any patents issued to the Company or that may be issued in the
future will not be challenged, invalidated or circumvented, or that the rights
granted thereunder will provide proprietary protection to the Company. In
addition, there can be no assurance that infringement, invalidity, right to use
or ownership claims by third parties or claims for indemnification resulting
from infringement claims will not be asserted in the future. Litigation to
defend and enforce the Company's proprietary rights could result in substantial
costs and diversion of resources and could have a material adverse effect on the
Company's business, financial condition or operating results regardless of the
final outcome of such litigation.
MANAGEMENT OF GROWTH
Management of growth is especially challenging for a company with a short
operating history and the failure to effectively manage growth could have a
material adverse effect on the Company's business, financial condition and
operating results. Development, deployment and commercialization of Ricochet has
required and will continue to require management of a number of operational
activities in which the Company has little or no prior experience, including the
administration of its subscriber base, maintenance and support of Ricochet
hardware and software and management of Company activities and properties in
dispersed locations. There can be no assurance that the Company will be able to
manage the growth of its business successfully.
PENDING LITIGATION
In US MobilComm Inc., et al. ("US MobilComm") v. Warren, et al., an action
filed in the United States District Court for the Western District of Oklahoma
in September 1994, US MobilComm alleged that Overall Wireless breached an oral
agreement to transfer an interest in its national FCC license. In May 1996, US
MobilComm filed an amended complaint naming the Company as a defendant, alleging
that the Company tortiously interfered with its oral agreement with Overall
Wireless. US MobilComm sought specific performance, including transfer of the
license to them, subject to the approval of the FCC, and alleged damages for,
among other things, lost revenues, profits and business opportunities in excess
of $100 million. Although the Company is entitled to indemnification with
respect to the litigation by the sole stockholder of Overall Wireless, it is
possible that the indemnitor will not have sufficient assets to reimburse the
Company for any damages awarded. In September 1996, the Company was dismissed
from the action for lack of jurisdiction. In November 1996, a judgment was
entered in favor of Overall Wireless. The Company has been advised that the
parties have entered into a stipulation that no appeal will be filed from the
judgment in favor of Overall Wireless and its principal shareholder.
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<PAGE> 13
QUARTERLY FLUCTUATIONS
The Company has recognized product revenues for only a limited period and
most of such revenues have been associated with UtiliNet. The Company's product
revenues have historically fluctuated from quarter to quarter based on such
factors as the timing of significant customer orders, the timing of product
shipments, customer buying patterns and general trends in the economy. The
procurement process of the Company's electric utility customers is lengthy and
may involve competing capital budget considerations, making the timing of
product revenues from sales of UtiliNet difficult to predict. In addition,
Ricochet is at an early stage of development, and as a result the timing or
degree of success of Ricochet cannot be reliably predicted. It is not known
whether revenues from Ricochet, if any, will be subject to seasonal or periodic
fluctuations. As a result, the Company expects that quarter-to-quarter
performance will fluctuate for the foreseeable future and, consequently, that
quarter-to-quarter comparisons may not be meaningful.
DEPENDENCE ON SOUTHERN CALIFORNIA EDISON
The Company has relied to date primarily on SCE as the principal source of
its revenues. Revenues from SCE accounted for 79%, 84%, 72% and 64% of the
Company's total revenues in 1993, 1994, 1995 and for the nine-month period
ending September 30, 1996, respectively. As of September 30, 1996, SCE is the
only company that has made a commitment to purchase a large volume of the
Company's products. Thus, the benefits of large-scale, commercial deployment of
UtiliNet have not been fully demonstrated. There can be no assurance that other
companies will adopt UtiliNet or that the Company will be successful in
marketing UtiliNet to other industries.
DEPENDENCE ON KEY PERSONNEL
The Company is highly dependent on certain members of its management and
engineering staff, the loss of the services of one or more of whom might impede
the achievement of the Company's business objectives. None of these individuals
has an employment contract with the Company. Furthermore, recruiting and
retaining qualified technical personnel to perform research, development and
technical support work is critical to the Company's success. If the Company's
Ricochet business grows, the Company will also need to recruit a significant
number of management, technical and other personnel for such business.
Competition for employees in the Company's industry is intense. Although the
Company believes that it will be successful in attracting and retaining skilled
and experienced personnel, there can be no assurance that the Company will be
able to continue to attract and retain such personnel on acceptable terms.
LIMITED MANUFACTURING EXPERIENCE AND CAPABILITY; INVENTORY MANAGEMENT
The Company has limited experience in large-scale manufacturing. The
Company's printed circuit boards and other subassemblies are assembled on a
contract basis by local manufacturers. Final assembly and test operations are
performed internally. The Company believes that it has or can secure adequate
capacity to meet forecasted demand for Ricochet products and UtiliNet networks
for at least the next 12 months. However, if customers begin to place large
orders for the Company's products or if the Company decides to accelerate
deployment of Ricochet, the Company's present manufacturing capacity may prove
inadequate. To be successful, the Company's products and components must be
manufactured in commercial quantities at competitive cost and quality. The
Company's long-term manufacturing strategy is to supplement its manufacturing
capabilities by increasing outsourcing of product assembly and test and by
licensing other companies to manufacture certain of the Company's products. In
the future, the Company will be required to achieve significant product and
component cost reductions. If the Company is unable to develop or contract for
manufacturing capabilities on acceptable terms and if product and component cost
reductions are not achieved, the Company's competitive position, and the ability
of the Company to achieve profitability, would be materially impaired.
Effective inventory management requires the Company to accurately forecast
demand for its services and products and to adequately take into account the
introduction of new or replacement products. Failure to manage this process
effectively could result in insufficient inventory to meet demand, thereby
limiting
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<PAGE> 14
revenues and deployment of Ricochet networks, or in excess inventory that may
become obsolete before it is sold, either of which could have a material adverse
effect on the Company's business, financial condition or operating results.
SOLE SOURCES OF SUPPLY
The Company generally uses standard component parts that are available from
multiple sources. However, certain component parts used in the Company's
products are available only from sole or limited source vendors. The Company's
reliance on these sole or limited source vendors involves certain risks,
including the possibility of a shortage of certain key component parts and
reduced control over delivery schedules, manufacturing capability, quality and
costs. In addition, some key component parts require long delivery times. The
Company has in the past experienced delays in its ability to obtain certain key
component parts from suppliers. In the event of future supply problems from the
Company's sole or limited source vendors, the inability of the Company to
develop alternative sources of supply quickly and on a cost-effective basis
could materially impair the Company's ability to manufacture and deliver its
products and to implement its services.
VOLATILITY OF STOCK PRICE
The market price of the Company's Common Stock has been volatile and may be
volatile in the future. Future announcements concerning the Company or its
competitors, including technological innovations, new commercial products,
status of network implementation, government regulations, proprietary rights or
product or patent litigation, operating results and general market and economic
conditions may have a significant impact on the market price of the Company's
Common Stock. In addition, any delays or difficulties in establishing Ricochet
or attracting Ricochet subscribers are likely to result in pronounced
fluctuations in the market price of the Company's Common Stock.
SUBORDINATION AND ABSENCE OF FINANCIAL COVENANTS
The Notes are subordinated in right of payment to all existing and future
Senior Indebtedness and are structurally subordinated to all liabilities
(including trade payables) of the Company's subsidiaries. The Indenture does not
restrict the incurrence of Senior Indebtedness or other indebtedness by the
Company or its subsidiaries. At September 30, 1996, the Company had no
indebtedness outstanding that would have constituted Senior Indebtedness. By
reason of such subordination of the Notes, in the event of the insolvency,
bankruptcy, liquidation, reorganization, dissolution or winding up of the
business of the Company, the assets of the Company will be available to pay the
amounts due on the Notes only after all Senior Indebtedness has been paid in
full and there may not be sufficient assets remaining to pay amounts due on any
or all of the Notes then outstanding. See "Description of the
Notes -- Subordination."
The Company's ability to meet its cash obligations in the future may be
dependent in part upon the ability of its subsidiaries to make cash
distributions to the Company. The ability of its subsidiaries to make
distributions to the Company is and will continue to be restricted by, among
other limitations, applicable provisions of the laws of national or state
governments and contractual provisions. The Indenture does not limit the ability
of the Company's subsidiaries to incur such restrictions in the future. The
right of the Company to participate in the assets of any subsidiary (and thus
the ability of holders of the Notes to benefit indirectly from such assets) are
generally subject to the prior claims of creditors, including trade creditors,
of that subsidiary except to the extent that the Company is recognized as a
creditor of such subsidiary, in which case the Company's claims would still be
subject to any security interest of other creditors of such subsidiary. The
Notes, therefore, are structurally subordinated to creditors, including trade
creditors, of subsidiaries of the Company with respect to the assets of the
subsidiaries against which such creditors have a claim.
LIMITATIONS ON REPURCHASE OF NOTES UPON CHANGE IN CONTROL
Upon the occurrence of a Change in Control, unless waived by holders of in
excess of two-thirds aggregate principal amount of the then outstanding Notes,
each holder of Notes may require the Company to
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<PAGE> 15
repurchase all or a portion of such holder's Notes. If a Change in Control were
to occur, there can be no assurance that the Company would have sufficient
financial resources, or would be able to arrange financing, to pay the
repurchase price for all Notes tendered by holders thereof. In addition, the
Company's repurchase of the Notes as a result of a Change in Control may be
prohibited or limited by, or create an event of default under, the terms of
agreements related to borrowings which the Company may enter into from time to
time, including agreements relating to Senior Indebtedness. Failure of the
Company to purchase tendered Notes would constitute an Event of Default under
the Indenture. See "Description of the Notes -- Repurchase of Notes at the
Option of the Holder Upon a Change of Control."
ABSENCE OF EXISTING MARKET FOR NOTES
The Notes constitute a new issue of securities with no well-established
trading market. The Company does not intend to list the Notes on any national
securities exchange or to seek the admission thereof to trading in the National
Association of Securities Dealers Automated Quotation system. The Placement
Agents may make a market in the Notes and the underlying Common Stock. However,
the Placement Agents are not obligated to make such a market and may discontinue
any market-making activities at any time without notice. In addition, such
market-making activities are subject to limits imposed by the Exchange Act.
Although prior to the registration of the Notes under the Registration
Statement the Notes were designated for trading through PORTAL, the Notes sold
hereunder will no longer be eligible for trading through PORTAL, and no
assurance can be given that an active trading market for the Notes will develop
or, if such market develops, as to the liquidity or sustainability of such
market. If a trading market does not develop or is not maintained, holders of
the Notes may experience difficulty in reselling, or an inability to sell, the
Notes. If a market for the Notes develops, any such market may be discontinued
at any time. If a public trading market develops for the Notes, future trading
prices of the Notes will depend on many factors, including, among other things,
prevailing interest rates, the Company's operating results and the market for
similar securities. Depending on prevailing interest rates, the market for
similar securities and other factors, including the financial condition of the
Company, the Notes may trade at a discount from their principal amount.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, -----------------------------
---------------------------------------------------- SEPTEMBER 29, SEPTEMBER 27,
1991 1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to
fixed charges(1).... -- -- -- -- -- -- --
</TABLE>
- ---------------
(1) For the purpose of calculating the ratio of earnings to fixed charges (i)
earnings consist of income before income taxes, plus fixed charges, and
(ii) fixed charges consist of interest expense incurred and the portion of
rental expense deemed by the Company to be representative of the interest
factor of rental payments under operating leases. Earnings were inadequate
to cover fixed charges by $1.3, $4.5, $6.1, $11.7 and $23.5 million in the
years ended December 31, 1991, 1992, 1993, 1994 and 1995, respectively, and
$16.8 and $26.3 million for the nine-month periods ended September 29, 1995
and September 27, 1996, respectively.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Notes and
Conversion Shares by the Selling Securityholders in the offering.
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<PAGE> 16
DESCRIPTION OF THE NOTES
Set forth below is a summary of certain provisions of the Notes. The Notes
were issued pursuant to an indenture (the "Indenture") dated as of August 15,
1996, by and between the Company and U.S. Trust Company of California, N.A., as
trustee (the "Trustee"). The following summary of the Notes, the Indenture and
the Registration Rights Agreement (as defined) does not purport to be complete
and is subject to, and is qualified in its entirety by, reference to all of the
provisions of the Indenture and the Registration Rights Agreement, including the
definitions therein of certain terms. Copies of the Indenture and the
Registration Rights Agreement can be obtained from the Company upon request.
Capitalized terms used herein without definition have the meanings ascribed to
them in the Indenture or the Registration Rights Agreement, as appropriate. As
used in this section, the "Company" refers to Metricom, Inc., exclusive of its
subsidiaries. Wherever particular provisions or defined terms of the Indenture
(or the form of Note, which is part thereof) or the Registration Rights
Agreement are referred to in this summary, such provisions or defined terms are
incorporated by reference as a part of the statements made and such statements
are qualified in their entirety by such reference. Certain definitions of terms
used in the following summary are set forth under " -- Certain Definitions"
below.
GENERAL
The Notes are unsecured, subordinated, general obligations of the Company,
limited in aggregate principal amount to $45,000,000. The Notes are subordinated
in right of payment to all Senior Indebtedness of the Company, as described
under "Subordination" below. The Notes will be issued only in fully registered
form, without coupons, in denominations of $1,000 and integral multiples
thereof.
The Notes mature on September 15, 2003. The Notes bear interest at the rate
per annum stated on the cover page of this Prospectus from August 28, 1996 or
from the most recent Interest Payment Date to which interest has been paid or
provided for, payable semiannually on March 15 and September 15 of each year,
commencing March 15, 1997, to the persons in whose names such Notes are
registered at the close of business on March 1 or September 1 immediately
preceding such Interest Payment Date. Principal of, premium, if any, and
interest on, and liquidated damages with respect to, the Notes will be payable,
the Notes will be convertible and the Notes may be presented for registration of
offer or exchange at the office or agency of the Company maintained for such
purpose, which office or agency shall be maintained in the Borough of Manhattan,
The City of New York (which initially will be the office of an affiliate of the
Trustee). Interest is calculated on the basis of a 360-day year consisting of
twelve 30-day months.
At the option of the Company, payment of interest and liquidated damages
may be made by check mailed to the Holders of the Notes at the addresses set
forth upon the registry books of the Company. No service charge will be made for
any registration of transfer or exchange of the Notes, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith.
The Indenture does not contain any financial covenants or any restrictions
on the payment of dividends, the repurchase of securities of the Company or the
incurrence of Senior Indebtedness. The Indenture contains no covenants or other
provisions to afford protection to holders of Notes in the event of a
highly-leveraged transaction or a change in control of the Company, except to
the limited extent described under " -- Repurchase of Notes at the Option of the
Holder Upon a Change of Control" below.
CONVERSION RIGHTS
The Holder of any Note has the right at any time on or after November 26,
1996 and prior to the close of business on the Stated Maturity of the Note,
unless previously redeemed or repurchased, at the Holder's option, to convert
any portion of the principal amount thereof that is an integral multiple of
$1,000 into shares of Common Stock at any time at the Conversion Price set forth
on the cover page of this Prospectus (subject to adjustment as described below).
Based on the initial Conversion Price, approximately 3,092,783 shares of Common
Stock would be issuable in the event all of the Notes were converted. The right
to convert a Note called for redemption or delivered for repurchase and not
withdrawn will terminate at the close of business on
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<PAGE> 17
the Business Day, respectively, immediately prior to the Redemption Date or
Repurchase Date for such Note, unless the Company subsequently fails to pay the
applicable Redemption Price or Repurchase Price, as the case may be.
In the case of any Note that has been converted after any Record Date, but
on or before the next Interest Payment Date, interest, the stated due date of
which is on such Interest Payment Date, shall be payable on such Interest
Payment Date notwithstanding such conversion, and such interest shall be paid to
the Holder of such Note who is a Holder on such Record Date. Any Note converted
after any Record Date but before the next Interest Payment Date must be
accompanied by payment of an amount equal to the interest payable on such
Interest Payment Date on the principal amount of Notes being surrendered for
conversion; provided no such payment shall be required with respect to interest
payable on September 15, 1999. No fractional shares will be issued upon
conversion but, in lieu thereof, an appropriate amount will be paid in cash by
the Company based on the market price of Common Stock (as determined in
accordance with the Indenture) at the close of business on the day of
conversion.
The Conversion Price will be subject to adjustment in certain events,
including: (a) any payment of a dividend (or other distribution) payable in
Common Stock on any class of Capital Stock of the Company, (b) any issuance to
all holders of Common Stock of rights, options or warrants entitling them to
subscribe for or purchase Common Stock at less than the then current market
price (as determined in accordance with the Indenture) of Common Stock, (c)
certain subdivisions, combinations or reclassifications of Common Stock, (d) any
distribution to all holders of Common Stock of evidences of indebtedness, shares
of Capital Stock other than Common Stock, cash or other assets (including
securities, but excluding those dividends, rights, options, warrants and
distributions referred to above and excluding dividends and distributions paid
exclusively in cash), (e) any distribution consisting exclusively of cash
(excluding any cash portion of distributions referred to in (d) above, or cash
distributed upon a merger or consolidation to which the third succeeding
paragraph applies) to all holders of Common Stock in an aggregate amount that,
combined together with (i) all other such all-cash distributions made within the
then preceding 12 months in respect of which no adjustment has been made and
(ii) any cash and the fair market value of other consideration paid or payable
in respect of any tender offer by the Company or any of its subsidiaries for
Common Stock concluded within the preceding 12 months in respect of which no
adjustment has been made, exceeds 15% of the Company's market capitalization
(defined as being the product of the then current market price of the Common
Stock times the number of shares of Common Stock then outstanding) on the record
date of such distribution, and (f) the completion of a tender offer made by the
Company or any of its subsidiaries for Common Stock that involves an aggregate
consideration that, together with (i) any cash and other consideration payable
in a tender offer by the Company or any of its subsidiaries for Common Stock
expiring within the 12 months preceding the expiration of such tender offer in
respect of which no adjustment has been made and (ii) the aggregate amount of
any such all-cash distributions referred to in (e) above to all holders of
Common Stock within the 12 months preceding the expiration of such tender offer
in respect of which no adjustments have been made, exceeds 15% of the Company's
market capitalization on the expiration of such tender offer. No adjustment of
the conversion price will be required to be made until the cumulative
adjustments amount to 1.0% or more of the conversion price as last adjusted.
In the event of a taxable distribution to holders of Common Stock or other
transaction that results in any adjustment of the Conversion Price, the Holders
of Notes may, in certain circumstances, be deemed to have received a
distribution subject to United States federal income tax as a dividend; in
certain other circumstances, the absence of such an adjustment may result in a
taxable dividend to the holders of Common Stock.
The Company, from time to time and to the extent permitted by law, may
reduce the Conversion Price by any amount for any period of at least 20 Business
Days, in which case the Company shall give at least 15 days notice of such
reduction, if the Board of Directors has made a determination that such
reduction would be in the best interests of the Company, which determination
shall be conclusive. The Company may, at its option, make such reductions in the
Conversion Price, in addition to those set forth above, as the Board of
Directors deems advisable to avoid or diminish any income tax to holders of
Common Stock resulting from any dividend
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<PAGE> 18
or distribution of stock (or rights to acquire stock) from any event treated as
such for United States federal income tax purposes. See "Certain Federal Income
Tax Consequences."
In case of any reclassification, consolidation or merger of the Company
with or into another Person or any merger of another Person with or into the
Company (with certain exceptions), or in case of any sale, transfer or
conveyance of all or substantially all of the assets of the Company, each Note
then outstanding will, without the consent of any Holder of Notes, become
convertible only into the kind and amount of securities, cash and other property
receivable upon such reclassification, consolidation, merger, sale, transfer or
conveyance by a holder of the number of shares of Common Stock into which such
Note was convertible immediately prior thereto, after giving effect to any
adjustment event, who failed to exercise any rights of election and received per
share the kind and amount received per share by a plurality of non-electing
shares.
The Company will cause all registrations with, and obtain any approvals by,
any governmental authority under any Federal or state law of the United States
that may be required in connection with the conversion of the Notes into Common
Stock. If at any time during the three-year period following the Closing Date a
registration statement under the Securities Act covering the shares of Common
Stock issuable upon conversion of the Notes is not effective or is otherwise
unavailable for effecting resales of such shares, shares of Common Stock issued
upon conversion of the Notes ("Restricted Shares") may not be sold or otherwise
transferred except in accordance with or pursuant to an exemption from, or
otherwise in a transaction not subject to, the registration requirements of the
Securities Act and, if a registration statement under the Securities Act is not
effective or is otherwise unavailable for effecting resales of such shares at
the time of a conversion, the Restricted Shares will bear a legend to that
effect. The Transfer Agent for the Common Stock will not be required to accept
for registration or transfer any Restricted Shares, except upon presentation of
satisfactory evidence that these restrictions on transfer have been complied
with, all in accordance with such reasonable regulations as the Company may from
time to time agree with the Transfer Agent. Under certain circumstances, the
holders of the Restricted Shares will be entitled to liquidated damages during
such period. See " -- Registration Rights; Liquidated Damages."
SUBORDINATION
The Notes are general, unsecured obligations of the Company, subordinated
in right of payment to all existing and future Senior Indebtedness of the
Company. The Notes are structurally subordinated in right of payment to all
liabilities (including trade payables) of the Company's subsidiaries. At
September 30, 1996, the Company had no indebtedness outstanding that would have
constituted Senior Indebtedness. The Indenture does not restrict the incurrence
of Senior Indebtedness or other indebtedness by the Company or its subsidiaries
or the ability of the Company to transfer assets or business operations to its
subsidiaries.
The Indenture provides that no payment may be made by the Company on
account of the principal of, premium, if any, interest on, or liquidated damages
with respect to, the Notes, or to acquire any of the Notes (including
repurchases of Notes at the option of the Holder) for cash or property (other
than Junior Securities), or on account of the redemption provisions of the
Notes, (i) upon the maturity of any Designated Senior Indebtedness of the
Company by lapse of time, acceleration (unless waived) or otherwise, unless and
until all principal of, premium, if any, and interest on such Designated Senior
Indebtedness are first paid in full (or such payment is duly provided for), or
(ii) in the event of default in the payment of any principal of, premium, if
any, or interest on any Designated Senior Indebtedness of the Company when it
becomes due and payable, whether at maturity or at a date fixed for prepayment
or by declaration or otherwise (a "Payment Default"), unless and until such
Payment Default has been cured or waived or otherwise has ceased to exist. The
payment of cash, property or securities (other than Junior Securities) upon
conversion of a Note will constitute payment on a Note and therefore will be
subject to the subordination provisions in the Indenture.
Upon (i) the happening of an event of default (other than a Payment
Default) that permits the holders of Designated Senior Indebtedness or their
representative immediately to accelerate its maturity and (ii) written notice of
such event of default given to the Company and the Trustee by the holders of an
aggregate of at least $3 million outstanding principal amount of such Designated
Senior Indebtedness or their representative (a "Payment Notice"), then, unless
and until such event of default has been cured or waived or
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<PAGE> 19
otherwise has ceased to exist, no payment (by set-off or otherwise) may be made
by or on behalf of the Company on account of the principal of, premium, if any,
interest on, or liquidated damages with respect to, the Notes, or to acquire or
repurchase any of the Notes for cash or property, or on account of the
redemption provisions of the Notes, in any such case other than payments made
with Junior Securities. Notwithstanding the foregoing, unless (i) the Designated
Senior Indebtedness in respect of which such event of default exists has been
declared due and payable in its entirety within 179 days after the Payment
Notice is delivered as set forth above (the "Payment Blockage Period"), and (ii)
such declaration has not been rescinded or waived, at the end of the Payment
Blockage Period, the Company shall be required to pay all sums not paid to the
Holders of the Notes during the Payment Blockage Period due to the foregoing
prohibitions and to resume all other payments as and when due on the Notes. Any
number of Payment Notices may be given; provided, however, that (i) not more
than one Payment Notice shall be given within a period of any 365 consecutive
days and (ii) no default that existed (whether or not such default is on the
same Designated Senior Indebtedness) upon the date of such Payment Notice or the
commencement of such Payment Blockage Period shall be made the basis for the
commencement of any other Payment Blockage Period.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company (other than Junior Securities) shall be
received by the Trustee or the Holders at a time when such payment or
distribution is prohibited by the foregoing provisions, such payment or
distribution shall be held in trust for the benefit of the holders of Senior
Indebtedness of the Company, and shall be paid or delivered by the Trustee or
such Holders, as the case may be, to the holders of the Senior Indebtedness of
the Company remaining unpaid or unprovided for or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing any of such Senior Indebtedness of the Company
may have been issued, ratably according to the aggregate amounts remaining
unpaid on account of the Senior Indebtedness of the Company held or represented
by each, for application to the payment of all Senior Indebtedness of the
Company remaining unpaid, to the extent necessary to pay or to provide for the
payment of all such Senior Indebtedness in full after giving effect to any
concurrent payment or distribution, or provision therefor, to the holders of
such Senior Indebtedness.
Upon any distribution of assets of the Company upon any dissolution,
winding up, total or partial liquidation or reorganization of the Company,
whether voluntary or involuntary, in bankruptcy, insolvency, receivership or a
similar proceeding or upon assignment for the benefit of creditors or any
marshaling of assets or liabilities (i) the holders of all Senior Indebtedness
of the Company will first be entitled to receive payment in full (or have such
payment duly provided for) before the Holders are entitled to receive any
payment on account of the principal of, premium, if any, interest on, and
liquidated damages with respect to, the Notes (other than Junior Securities) and
(ii) any payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities (other than Junior
Securities) to which the Holders or the Trustee on behalf of the Holders would
be entitled (by set-off or otherwise), except for the subordination provisions
contained in the Indenture, will be paid by the liquidating trustee or agent or
other person making such a payment or distribution directly to the holders of
Senior Indebtedness of the Company or their representative to the extent
necessary to make payment in full of all such Senior Indebtedness remaining
unpaid, after giving effect to any concurrent payment or distribution, or
provision therefor, to the holders of such Senior Indebtedness.
No provision contained in the Indenture or the Notes affects the obligation
of the Company, which is absolute and unconditional, to pay, when due, principal
of, premium, if any, interest on, and liquidated damages with respect, to the
Notes. The subordination provisions of the Indenture and the Notes do not
prevent the occurrence of any Default or Event of Default under the Indenture or
limit the rights of the Trustee or any Holder, subject to the preceding
paragraphs, to pursue any other rights or remedies with respect to the Notes.
As a result of these subordination provisions, in the event of the
liquidation, bankruptcy, reorganization, insolvency, receivership or similar
proceeding or an assignment for the benefit of the creditors of the Company or
any of its subsidiaries or a marshalling of assets or liabilities of the Company
and its subsidiaries, Holders of Notes may receive ratably less than other
creditors.
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<PAGE> 20
The Company's ability to meet its cash obligations in the future may be
dependent in part upon the ability of its subsidiaries to make cash
distributions to the Company. The ability of its subsidiaries to make
distributions to the Company is and will continue to be restricted by, among
other limitations, applicable provisions of the laws of national and state
governments and contractual provisions. The Indenture does not limit the ability
of the Company's subsidiaries to incur such restrictions in the future. The
right of the Company to participate in the assets of any subsidiary (and thus
the ability of holders of the Notes to benefit indirectly from such assets) is
generally subject to the prior claims of creditors, including trade creditors,
of that subsidiary except to the extent that the Company is recognized as a
creditor of such subsidiary, in which case the Company's claims would still be
subject to any security interest of other creditors of such subsidiary. The
Notes, therefore, are structurally subordinated to creditors, including trade
creditors, of subsidiaries of the Company with respect to the assets of the
subsidiaries against which such creditors have a claim.
REDEMPTION AT THE COMPANY'S OPTION
The Notes are not subject to redemption prior to September 15, 1999 and
will be redeemable on such date and thereafter at the option of the Company, in
whole or in part, upon not less than 30 nor more than 60 days' notice to each
Holder, at the following redemption prices (expressed as percentages of the
principal amount) if redeemed during the 12-month period commencing September 15
of the years indicated below, in each case (subject to the right of Holders of
record on a Record Date to receive interest due on an Interest Payment Date that
is on or prior to such Redemption Date) together with accrued and unpaid
interest and liquidated damages, if any, to, but excluding, the Redemption Date:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
1999............................................................. 104.0
2000............................................................. 102.7
2001............................................................. 101.3
2002............................................................. 100.0
</TABLE>
In the case of a partial redemption, the Trustee shall select the Notes or
portions thereof for redemption on a pro rata basis, by lot or in such other
manner it deems appropriate and fair. The Notes may be redeemed in part in
multiples of $1,000 only.
The Notes do not have the benefit of any sinking fund.
Notice of any redemption will be sent, by first-class mail, at least 30
days and not more than 60 days prior to the date fixed for redemption, to the
Holder of each Note to be redeemed to such Holder's last address as then shown
upon the registry books of the Registrar. The notice of redemption must state
the Redemption Date, the Redemption Price and the amount of accrued interest to
be paid. Any notice that relates to a Note to be redeemed in part only must
state the portion of the principal amount equal to the unredeemed portion
thereof and must state that on and after the Redemption Date, upon surrender of
such Note, a new Note or Notes in principal amount equal to the unredeemed
portion thereof will be issued. On and after the Redemption Date, interest will
cease to accrue on the Notes or portions thereof called for redemption, unless
the Company defaults in its obligations with respect thereto.
REPURCHASE OF NOTES AT THE OPTION OF THE HOLDER UPON A CHANGE OF CONTROL
The Indenture provides that in the event that a Change of Control has
occurred, each Holder of Notes will have the right, at such Holder's option,
pursuant to an irrevocable and unconditional (except as set forth below) offer
by the Company (the "Repurchase Offer"), to require the Company to repurchase
all or any part of such Holder's Notes (provided, that the principal amount of
such Notes must be $1,000 or an integral multiple thereof) on the date (the
"Repurchase Date") that is no later than 40 Business Days after the occurrence
of such Change of Control at a cash price (the "Repurchase Price") equal to 101%
of the principal amount thereof, together with accrued and unpaid interest and
liquidated damages, if any, to (but excluding) the Repurchase Date. The
Repurchase Offer shall be made within 15 Business Days following a Change of
Control and shall remain open for 20 Business Days following its commencement
(the "Repurchase Offer
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<PAGE> 21
Period"). Upon expiration of the Repurchase Offer Period, the Company shall
purchase all Notes tendered in response to the Repurchase Offer. If required by
applicable law, the Repurchase Date and the Repurchase Offer Period may be
extended as so required; however, if so extended, it shall nevertheless
constitute an Event of Default if the Repurchase Date does not occur within 60
Business Days of the Change of Control.
On or before the Repurchase Date, the Company will (i) accept for payment
Notes or portions thereof properly tendered pursuant to the Repurchase Offer,
(ii) deposit with the Paying Agent cash sufficient to pay the Repurchase Price
(together with accrued and unpaid interest) of all Notes so tendered and (iii)
deliver to the Trustee Notes so accepted, together with an Officers' Certificate
listing the Notes or portions thereof being purchased by the Company. The Paying
Agent will promptly mail to the Holders of Notes so accepted payment in an
amount equal to the Repurchase Price (together with accrued and unpaid
interest), and the Trustee will promptly authenticate and mail or deliver to
such Holders a new Note or Notes equal in principal amount to any unpurchased
portion of the Notes surrendered. Any Notes not so accepted will be promptly
mailed or delivered by the Company to the Holder thereof. The Company will
publicly announce the results of the Repurchase Offer on or as soon as
practicable after the Repurchase Date.
The phrase "all or substantially all" of the assets of the Company is
likely to be interpreted by reference to applicable state law at the relevant
time, and will be dependent on the facts and circumstances existing at such
time. As a result, there may be a degree of uncertainty in ascertaining whether
a sale or transfer of "all or substantially all" of the assets of the Company
has occurred.
The Change of Control purchase feature of the Notes may make more difficult
or discourage a takeover of the Company, and, thus, the removal of incumbent
management. The Change of Control purchase feature resulted from negotiations
between the Company and the Placement Agents.
The provisions of the Indenture relating to a Change of Control may not
afford the Holders protection in the event of a highly leveraged transaction,
reorganization, restructuring, merger, spin-off or similar transaction that may
adversely affect Holders, if such transaction does not constitute a Change of
Control, as set forth above. Moreover, certain events with respect to the
Company that may involve an actual change of control of the Company would not
constitute a "Change of Control" for purposes of the Indenture.
The Company may not have sufficient financial resources available to
fulfill its obligation to repurchase the Notes upon a Change of Control or to
repurchase other debt securities of the Company or its subsidiaries providing
similar rights to the holders thereof. The right to require the Company to
repurchase Notes as a result of the occurrence of a Change of Control could
create an event of default under Senior Indebtedness as a result of which any
repurchase could, absent a waiver, be blocked by the subordination provision of
the Notes. Failure of the Company to repurchase the Notes when required would
result in an Event of Default with respect to the Notes whether or not such
repurchase is permitted by the subordination provisions. Any such default may,
in turn, cause a default under Senior Indebtedness of the Company. Moreover, the
Change of Control may cause an event of default under Senior Indebtedness of the
Company. As a result, in each ease, any repurchase of the Notes could, absent a
waiver, be blocked by the subordination provisions of the Notes. See " --
Subordination" above.
Except as described herein, no modification of the Indenture regarding the
provisions on repurchase at the option of any Holder of a Note upon a Change of
Control is permissible without the consent of the holder of the Note so
affected. In the event of a Change of Control, if Holders of in excess of
two-thirds of the outstanding aggregate principal amount of the Notes so
determine at any time following the occurrence of such Change of Control and
before the close of business on the Business Day immediately preceding the
Repurchase Date, such event shall not be treated as a Change of Control for
purposes of the Indenture. In such event, (i) the Company shall not be required
to make the Repurchase Offer, (ii) to the extent the Repurchase Offer has
already been made, such Repurchase Offer shall be deemed revoked, and (iii) to
the extent any Notes have been tendered in response to any such revoked
Repurchase Offer, such tender shall be rescinded and the Notes so tendered shall
be promptly returned to the Holders thereof. For purposes of any such
determination by the Holders of the outstanding Notes, Notes held by the Company
or an Affiliate of the Company (including any Person that would become an
Affiliate of the Company (or its successor) as a
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<PAGE> 22
consequence of the event or series of events that otherwise would be treated as
a Change of Control for purposes of the Indenture) shall be disregarded.
To the extent applicable, the Company will comply with the provisions of
Rule 13e-4 or any other tender offer rules, and will file a Schedule 13E-4 or
any other schedule required under such rules, in connection with any offer by
the Company to repurchase the Notes at the option of the Holders upon a Change
of Control.
RULE 144A INFORMATION REQUIREMENT
The Company has agreed to furnish to the Holders or beneficial holders of
the Notes or the underlying Common Stock and prospective purchasers of the Notes
or the underlying Common Stock designated by the Holders of the Notes or the
underlying Common Stock, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act until such time
as such securities are no longer "restricted securities" within the meaning of
Rule 144 under the Securities Act.
LIMITATION ON MERGER, SALE OR CONSOLIDATION
The Indenture provides that the Company may not, directly or indirectly,
consolidate with or merge with or into another Person or sell, lease, convey or
transfer all or substantially all of its assets (other than to sell, lease,
convey or transfer all or substantially all of its assets to its subsidiaries),
whether in a single action or a series of related transactions, to another
Person or group of affiliated Persons, unless (i) either (a) in the case of a
merger or consolidation, the Company is the surviving entity or (b) the
resulting, surviving or transferee entity is a corporation organized under the
laws of the United States, any state thereof or the District of Columbia and
expressly assumes by supplemental indenture all of the obligations of the
Company in connection with the Notes and the Indenture; and (ii) no Default or
Event of Default shall exist or shall occur immediately after giving effect to
such transaction.
Upon any consolidation or merger or any transfer of all or substantially
all of the assets of the Company in accordance with the foregoing, the successor
corporation formed by such consolidation or into which the Company is merged or
to which such transfer is made shall succeed to and be substituted for, and may
exercise every right and power of, the Company under the Indenture with the same
effect as if such successor corporation had been named therein as the Company,
and the Company will be released from its obligations under the Indenture and
the Notes, except as to any obligations that arise from or as a result of such
transaction.
REPORTS
Whether or not the Company is subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act, the Company shall deliver to the
Trustee, within 15 days after it is or would have been required to file such
with the SEC, annual and quarterly consolidated financial statements
substantially equivalent to financial statements that would have been included
in reports filed with the SEC if the Company were subject to the requirements of
Section 13 or 15(d) of the Exchange Act, including, with respect to annual
information only, a report thereon by the Company's certified independent public
accountants as such would be required in such reports to the SEC and, in each
case, together with a management's discussion and analysis of financial
condition and results of operations as such would be so required.
EVENTS OF DEFAULT AND REMEDIES
The Indenture defines an Event of Default as (i) the failure by the Company
to pay any installment of interest on, or liquidated damages with respect to,
the Notes as and when due and payable and the continuance of any such failure
for 30 days, (ii) the failure by the Company to pay all or any part of the
principal of, or premium, if any, on the Notes when and as the same become due
and payable at maturity, redemption, by acceleration or otherwise, including,
without limitation, pursuant to any Repurchase Offer or otherwise, (iii) the
failure of the Company to perform any conversion of Notes required under the
Indenture and the continuance of any such failure for 30 days, (iv) the failure
by the Company to observe or perform any other covenant or agreement contained
in the Notes or the Indenture and subject to certain exceptions, the
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<PAGE> 23
continuance of such failure for a period of 60 days after written notice is
given to the Company by the Trustee or to the Company and the Trustee by the
Holders of at least 25% in aggregate principal amount of the Notes outstanding,
(v) certain events of bankruptcy, insolvency or reorganization in respect of the
Company or any of its Significant Subsidiaries, (vi) failure of the Company or
any Significant Subsidiary to make any payment at maturity, including any
applicable grace period, in respect of Indebtedness (other than non-recourse
obligations) in an amount in excess of $5 million and continuance of such
failure for 30 days after written notice is given to the Company by the Trustee
or to the Company and the Trustee by the Holders of at least 25% in aggregate
principal amount of Notes outstanding, (vii) default by the Company or any
Significant Subsidiary with respect to any Indebtedness (other than non-recourse
obligations), which default results in the acceleration of Indebtedness in an
amount in excess of $5 million without such Indebtedness having been discharged
or such acceleration having been rescinded or annulled for 30 days after written
notice is given to the Company by the Trustee or to the Company and the Trustee
by the Holders of at least 25% in aggregate principal amount of Notes
outstanding, and (viii) final unsatisfied judgments not covered by insurance
aggregating in excess of $5 million at any one time rendered against the Company
or any of its Significant Subsidiaries and not stayed, bonded or discharged
within 60 days. The Indenture provides that if an Event of Default occurs and is
continuing, the Trustee must, within 90 days after the occurrence of such Event
of Default, give to the Holders notice of such Event of Default, but the Trustee
shall be protected in withholding such notice if it in good faith determines
that the withholding of such notice is in the best interest of the Holders,
except in the case of a default in the payment of the principal of, a premium,
if any, or interest on, any of the Notes when due or in the payment of any
redemption or repurchase obligation.
The Indenture provides that if an Event of Default occurs and is continuing
(other than an Event of Default specified in clause (v) above with respect to
the Company), then in every such case, unless the principal of all of the Notes
shall have already become due and payable, either the Trustee or the Holders of
25% in aggregate principal amount of the Notes then outstanding, by notice in
writing to the Company (and to the Trustee if given by Holders) (an
"Acceleration Notice"), may declare all principal and accrued interest thereon
to be due and payable immediately. If an Event of Default specified in clause
(v) above with respect to the Company occurs, all principal and accrued interest
will be immediately due and payable on all outstanding Notes without any
declaration or other act on the part of the Trustee or the Holders. The Holders
of no less than a majority in aggregate principal amount of Notes generally are
authorized to rescind such acceleration if all existing Events of Default, other
than the non-payment of the principal of, premium, if any, and interest on, and
liquidated damages with respect to, the Notes that have become due solely by
such acceleration, have been cured or waived.
Prior to the declaration of acceleration of the maturity of the Notes, the
Holders of a majority in principal amount of the Notes at the time outstanding
may waive on behalf of all the Holders any default, except a default in the
payment of principal of or interest on any Note not yet cured, or a default with
respect to any covenant or provision that cannot be modified or amended without
the consent of the Holder of each outstanding Note affected. Subject to the
provisions of the Indenture relating to the duties of the Trustee, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indenture at the request, order or direction of any of the Holders, unless such
Holders have offered to the Trustee reasonable security or indemnity. Subject to
all provisions of the Indenture and applicable law, the Holders of a majority in
aggregate principal amount of the Notes at the time outstanding will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred on
the Trustee.
The Indenture provides that no Holder may pursue any remedy under the
Indenture, except for a default in the payment of principal, premium, if any, or
interest or liquidated damages, if any, on the Notes, unless the Holder gives to
the Trustee written notice of a continuing Event of Default, the Holders of at
least 25% in principal amount of the outstanding Notes make a written request to
the Trustee to pursue the remedy, such Holders offer to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or expense, the Trustee
does not comply with the request within 60 days after receipt of the request and
the offer of indemnity, and the Trustee shall not have received a contrary
direction from the Holders of a majority in principal amount of the outstanding
Notes.
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<PAGE> 24
AMENDMENTS AND SUPPLEMENTS
The Indenture contains provisions permitting the Company and the Trustee to
enter into a supplemental indenture for certain limited purposes without the
consent of the Holders. With the consent of the Holders of not less than a
majority in aggregate principal amount of the Notes at the time outstanding, the
Company and the Trustee are permitted to amend or supplement the Indenture or
any supplemental indenture or modify the rights of the Holders; provided, that
no such modification may, without the consent of each Holder affected thereby:
(i) change the Stated Maturity of any Note or reduce the principal amount
thereof or the rate (or extend the time for payment) of interest thereon or any
premium payable upon the redemption thereof, or change the place of payment
where, or the coin or currency in which, any Note or any premium or the interest
thereon is payable, or impair the right to institute suit for the enforcement of
any such payment or the conversion of any Note on or after the due date thereof
(including, in the case of redemption, on or after the Redemption Date), or
reduce the Repurchase Price, or alter the Repurchase Offer (other than as set
forth herein) or redemption provisions in a manner adverse to the Holders, (ii)
reduce the percentage in principal amount of the outstanding Notes, the consent
of whose Holders is required for any such amendment, supplemental indenture or
waiver provided for in the Indenture, (iii) adversely affect the right of such
Holder to convert Notes, or (iv) modify any of the waiver provisions, except to
increase any required percentage or to provide that certain other provisions of
the Indenture cannot be modified or waived without the consent of the Holder of
each outstanding Note affected thereby.
NO PERSONAL LIABILITY OF STOCKHOLDERS, OFFICERS, DIRECTORS AND EMPLOYEES
The Indenture provides that no past, present or future stockholder,
employee, officer or director of the Company or any successor corporation shall
have any personal liability in respect of the obligations of the Company under
the Indenture or the Notes by reason of his, her or its status as such
stockholder, employee, officer or director.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange the Notes in accordance with the
Indenture. The Company may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents, and to pay any taxes and fees
required by law or permitted by the Indenture. The Company is not required to
transfer or exchange any Notes selected for redemption. Also, the Company is not
required to transfer or exchange any Notes for a period of 15 days before (i)
the mailing of a notice of an offer to repurchase as a result of a Change of
Control or (ii) a selection of Notes to be redeemed.
The registered holder of a Note may be treated as the owner of it for all
purposes.
BOOK-ENTRY, DELIVERY AND FORM
Notes initially held by "qualified institutional buyers," as defined in
Rule 144A under the Securities Act ("QIBs"), are evidenced by a global Note (the
"Global Note") deposited on the date of the closing of the sale of the Notes
(the "Closing Date") with, or on behalf of, The Depository Trust Company, New
York, New York (the "Depositary") and registered in the name of Cede & Co.
("Cede") as Depositary's nominee. Except as set forth below, the Global Note may
be transferred, in whole or in part, only to another nominee of Depositary or to
a successor of Depositary or its nominee.
QIBs may hold their interests in the Global Note directly through
Depositary if such holder is a participant in Depositary, or indirectly through
organizations that are participants in Depositary (the "Participants").
Transfers between Participants will be effected in the ordinary way in
accordance with Depositary rules and will be settled in clearing house funds.
Notes that were (i) originally issued to or transferred to "accredited
investors," as defined in Rule 501(a) under the Securities Act, who are not QIBs
or to any other persons who are not QIBs, (ii) originally issued to or
transferred by persons who acquired such Notes in compliance with Regulation S
under the Securities Act or (iii) issued as described below in this section,
will be issued in the form of registered definitive securities
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<PAGE> 25
("Certificated Notes"). Upon the transfer to a QIB of Certificated Notes in
accordance with the restrictions described in "Notice to Investors," such
Certificated Notes will, unless the Global Note has previously been exchanged
for Certificated Notes, be exchanged for an interest in the Global Note
representing the principal amount of Notes being transferred. For a description
of the restrictions on the transfer of Certificated Notes, see "Notice to
Investors."
The Depositary has advised the Company that it is a limited-purpose trust
company that was created to hold securities for its participating organizations
(collectively, the "Participants") and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants. The Depositary's
Participants include securities brokers and dealers, banks and trust companies,
clearing corporations and certain other organizations. Access to the
Depositary's system is also available to other entities such as banks, brokers,
dealers and trust companies (collectively, "Indirect Participants") that clear
through or maintain a custodial relationship with a Participant, either directly
or indirectly. QIBs may elect to hold Notes purchased by them through the
Depositary. Holders of the Notes who are not Participants may beneficially own
securities held by or on behalf of the Depositary only through Participants or
Indirect Participants.
Pursuant to procedures established by the Depositary (i) upon deposit of
the Global Note on the Closing Date, the accounts of Participants designated by
the Placement Agents were credited with an interest in the Global Note and (ii)
ownership of the Notes evidenced by the Global Note was shown on, and the
transfer of ownership thereof will be effected only through, records maintained
by the Depositary (with respect to the interests of Participants), the
Participants and the Indirect Participants. The laws of some states require that
certain persons take physical delivery in definitive form of securities that
they own and that security interests in negotiable instruments can only be
perfected by delivery of certificates representing the instruments.
Consequently, the ability to transfer Notes evidenced by the Global Note will be
limited to such extent. For certain other restrictions on the transferability of
the Notes, see "Notice to Investors."
So long as the Depositary or its nominee is the registered owner of a Note,
the Depositary or such nominee, as the case may be, will be considered the sole
owner or holder of the Notes represented by the Global Note for all purposes
under the Indenture. Except as provided below, owners of beneficial interests in
a Global Note will not be entitled to have Notes represented by such Global Note
registered in their names and will not be considered the owners or holders
thereof under the Indenture for any purpose, including with respect to the
giving of any directions, instructions or approvals to the Trustee thereunder.
As a result, the ability of a person having a beneficial interest in Notes
represented by a Global Note to pledge such interest to persons or entities that
do not participate in the Depositary's system, or to otherwise take actions with
respect to such interest, may be affected by the lack of a physical certificate
evidencing such interest.
Neither the Company nor the Trustee will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of Notes by the Depositary, or for maintaining, supervising or reviewing any
records of the Depositary relating to such Notes.
Payments with respect to the principal of, premium, if any, interest on,
and liquidated damages with respect to, any Note represented by the Global Note
registered in the name of the Depositary or its nominee on the applicable record
date will be payable by the Trustee to or at the direction of the Depositary or
its nominee in its capacity as the registered Holder of the Global Note
representing such Notes under the Indenture. Under the terms of the Indenture,
the Company and the Trustee may treat the persons in whose names the Notes are
registered as the owners thereof for the purpose of receiving such payments and
for any and all other purposes whatsoever. Consequently, neither the Company nor
the Trustee has or will have any responsibility or liability for the payment of
such amounts to beneficial owners of Notes (including principal, premium, if
any, interest, or liquidated damages with respect thereto), or to immediately
credit the accounts of the relevant Participants with such payment, in amounts
proportionate to their respective holdings in principal amount of beneficial
interests in the Global Note as shown on the records of the Depositary. Payments
by the Participants and the Indirect Participants to the beneficial owners of
Notes will be governed by standing instructions and customary practice and will
be the responsibility of the Participants or the Indirect Participants.
24
<PAGE> 26
Holders who desire to convert their Notes into Common Stock pursuant to the
terms of the Notes should contact their brokers or other Participants or
Indirect Participants to obtain information on procedures, including proper
forms and cut-off times, for submitting such requests.
If (i) the Company notifies the Trustee in writing that the Depositary is
no longer willing or able to act as a depositary and the Company is unable to
locate a qualified successor within 90 days or (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of Notes in
definitive form under the Indenture, then, upon surrender by the Depositary of
the Global Note, Certificated Notes will be issued to each person that the
Depositary identifies as the beneficial owner of the Notes represented by the
Global Note. In addition, subject to certain conditions, any person having a
beneficial interest in the Global Note may, upon request to the Trustee,
exchange such beneficial interest for Notes in the form of Certificated Notes.
Upon any such issuance, the Trustee is required to register such Certificated
Notes in the name of such person or persons (or the nominee of any thereof), and
cause the same to be delivered thereto. All such Certificated Notes shall be
subject to the legend requirements described herein under "Notice to Investors."
Neither the Company nor the Trustee shall be liable for any delay by the
Depositary or any Participant or Indirect Participant in identifying the
beneficial owners of the Notes, and the Company and the Trustee may conclusively
rely on, and shall be protected in relying on, instructions from the Depositary
for all purposes (including with respect to the registration and delivery, and
the respective principal amounts, of the Notes to be issued).
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
The Company and the Placement Agents entered into a Registration Rights
Agreement on the Closing Date for the benefit of the holders of the Notes.
Pursuant to the Registration Rights Agreement, the Company has filed with
the SEC a shelf registration statement under the Securities Act (the "Shelf
Registration Statement") on Form S-3 to cover resales of Transfer Restricted
Securities by the holders thereof. The Company will use reasonable efforts to
keep the Shelf Registration Statement effective until the earlier of the date
that is three years after the Closing Date (August 28, 1999) or such time as the
Shelf Registration Statement is no longer required for resale of the Notes or
the Common Stock. For purposes of the foregoing, "Transfer Restricted
Securities" means each Note and share of Common Stock issued upon conversion
thereof until the date on which such Note or share of Common Stock has been
effectively registered under the Securities Act and disposed of in accordance
with the Shelf Registration Statement or the date on which such Note or share of
Common Stock is distributed to the public pursuant to Rule 144 under the
Securities Act or is salable pursuant to Rule 144(k) under the Securities Act
(or any similar provisions then in force).
The Registration Rights Agreement provides that, if the Shelf Registration
Statement is filed and declared effective but shall thereafter cease to be
effective or usable (without being succeeded immediately by an additional Shelf
Registration Statement filed and declared effective, which is then available for
effecting resales of Transfer Restricted Securities) for a period of time that
shall exceed 90 days in the aggregate per year (each such event a "Registration
Default"), the Company will accrue liquidated damages to each Holder of Transfer
Restricted Securities, during the first 90-day period immediately following the
occurrence of such Registration Default in an amount equal to $0.05 per week per
$1,000 principal amount of Notes and, if applicable, $0.01 per week per share
(subject to adjustment in the event of stock splits, stock recombinations, stock
dividends and the like) of Common Stock constituting Transfer Restricted
Securities held by such Holder. The rate of accrual of the liquidated damages
will increase by an additional $0.05 per week per $1,000 principal amount or
$0.01 per week per share (subject to adjustment as set forth above) of Common
Stock constituting Transfer Restricted Securities for each subsequent 90-day
period until the Shelf Registration Statement again becomes effective and
usable, as the case may be, up to a maximum amount of liquidated damages with
respect to any Registration Default of $0.25 per week per $1,000 principal
amount of Notes or $0.05 per week per share (subject to adjustment as set forth
above) of Common Stock constituting Transfer Restricted Securities. All accrued
liquidated damages shall be paid to holders of Notes by wire transfer of
immediately available funds or by Federal funds check by the Company on each
Damages Payment Date.
25
<PAGE> 27
Following the cure of a Registration Default, liquidated damages will cease to
accrue with respect to such Registration Default. The use of the Shelf
Registration Statement for effecting resales of Transfer Restricted Securities
may be suspended in certain circumstances upon notice by the Company to the
holders of the Transfer Restricted Securities, subject to the rights of the
holders of Transfer Restricted Securities to receive liquidated damages if the
aggregate number of days of such suspensions in any year exceeds the periods
described above.
The Company will provide to each registered holder copies of the prospectus
contained in the effective Shelf Registration Statement, notify each registered
holder when the Shelf Registration Statement has become effective and take
certain other actions as are required to permit unrestricted resales of the
Transfer Restricted Securities. A holder who sells Transfer Restricted
Securities pursuant to the Shelf Registration Statement generally will be
required to be named as a selling stockholder in the related prospectus and to
deliver such prospectus to purchasers and will be bound by the provisions of the
Registration Rights Agreement that are applicable to such holder (including
certain indemnification provisions). Holders of the Transfer Restricted
Securities will be required to make certain representations to the Company (as
described in the Registration Rights Agreement) and will be required to deliver
information to be used in connection with the Shelf Registration Statement in
order to have their Transfer Restricted Securities included in the Shelf
Registration Statement.
CERTAIN DEFINITIONS
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
that is not a day on which banking institutions in New York, New York are
authorized or obligated by law or executive order to close.
"Capital Stock" means, with respect to any corporation, any and all shares,
interests, rights to purchase (other than convertible or exchangeable
indebtedness), warrants, options, participations or other equivalents of or
interests (however designated) in stock issued by that corporation.
"Change of Control" means (i) an event or series of events as a result of
which any "person" or "group" (as such terms are used in Sections 13(d)(3) and
14(d) of the Exchange Act) is or becomes, directly or indirectly, the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
whether or not applicable) of more than 50% of the combined voting power of the
then outstanding securities entitled to vote generally in elections of
directors, managers or trustees, as applicable, of the Company or any successor
entity ("Voting Stock"), (ii) the completion of any consolidation with or merger
of the Company into any other Person, or conveyance, transfer or lease by the
Company of all or substantially all of its assets to any Person, or any merger
of any other Person into the Company in a single transaction or series of
related transactions, and, in the case of any such transaction or series of
related transactions, the outstanding Common Stock of the Company is changed or
exchanged as a result, unless the stockholders of the Company immediately before
such transaction own, directly or indirectly, immediately following such
transaction, at least 51% of the combined voting power of the outstanding voting
securities of the Person resulting from such transaction in substantially the
same proportion as their ownership of the Voting Stock immediately before such
transaction, or (iii) such time as the Continuing Directors do not constitute a
majority of the Board of Directors of the Company (or, if applicable, a
successor corporation to the Company); provided that a Change of Control shall
not be deemed to have occurred if either (x) the last sale price of the Common
Stock for any five trading days during the 10 trading days immediately preceding
the Change of Control is at least equal to 105% of the Conversion Price in
effect on such day, or (y) with respect to a merger or consolidation otherwise
constituting a Change of Control described in clause (ii) above, at least 90% of
the consideration in such transaction or transactions consists of common stock
or securities convertible into common stock that are, or upon issuance will be,
traded on a United States national securities exchange or approved for quotation
on the Nasdaq National Market.
"Continuing Director" means at any date a member of the Company's Board of
Directors (i) who was a member of such board on August 26, 1996 or (ii) who was
nominated or elected by at least a majority of the directors who were Continuing
Directors at the time of such nomination or election or whose election to the
26
<PAGE> 28
Company's Board of Directors was recommended or endorsed by at least a majority
of the directors who were Continuing Directors at the time of such nomination or
election.
"Designated Senior Indebtedness" means any Senior Indebtedness with an
aggregate principal amount in excess of $3 million and that is designated in its
governing instrument as Senior Indebtedness.
"Indebtedness" of any person means, without duplication, (a) all
liabilities and obligations, contingent otherwise, of any such person, (i) in
respect of borrowed money (whether or not the recourse of the lender is to the
whole of the assets of such person or only to a portion thereof), (ii) evidenced
by bonds, notes, debentures or similar instruments, (iii) evidenced by bankers'
acceptances or similar instruments issued or accepted by banks, (iv) for the
payment of money relating to a Capitalized Lease Obligation, or (v) evidenced by
a letter of credit or a reimbursement obligation of such person with respect to
any letter of credit; (b) all net obligations of such person under Interest Swap
and Hedging Obligations (as defined); (c) all liabilities of others of the kind
described in the preceding clauses (a) or (b) that such person has guaranteed or
that is otherwise its legal liability and all obligations to purchase, redeem or
acquire any Capital Stock; and (d) any and all deferrals, renewals, extensions,
refinancings and refundings (whether direct or indirect) of, or amendments,
modifications or supplements to, any liability of the kind described in any of
the preceding clauses (a), (b) or (c), or this clause (d), whether or not
between or among the same parties.
"Issue Date" means August 28, 1996.
"Junior Security" means any Qualified Capital Stock and any Indebtedness of
the Company that is fully subordinated in right of payment to the Notes and has
no scheduled installment of principal due, by redemption, sinking fund payment
or otherwise, on or prior to the Stated Maturity of the Notes.
"Senior Indebtedness" means all obligations of the Company to pay the
principal of, premium, if any, interest (including all interest accruing
subsequent to the commencement of any bankruptcy or similar proceeding, whether
or not a claim for post-petition interest is allowable as a claim in any such
proceeding) and rent payable on or in connection with, and all fees, costs,
expenses and other amount accrued or due on or in connection with, any
Indebtedness of the Company, whether outstanding on the date of the Indenture or
thereafter created, incurred, assumed, guaranteed or in effect guaranteed by the
Company, unless the instrument creating or evidencing such Indebtedness provides
that such Indebtedness is not senior or superior in right of payment to the
Notes or which is pari passu with, or subordinated to, the Notes; provided that
in no event shall Senior Indebtedness include (a) Indebtedness of the Company
owed or owing to any subsidiary of the Company or any officer, director or
employee of the Company or any subsidiary of the Company, (b) Indebtedness
representing or with respect to any account payable or other accrued current
liability or obligation incurred in the ordinary course of business in
connection with the obtaining of materials or services or (c) any liability for
taxes owed or owing by the Company or any subsidiary of the Company.
"Stated Maturity" when used with respect to any Note, means September 15,
2003.
27
<PAGE> 29
SELLING SECURITYHOLDERS
The following table sets forth the names of the Selling Securityholders,
the number of shares of Common Stock beneficially owned by each of them as of
December 9, 1996 and the principal amount of Notes and number of Conversion
Shares that may be offered pursuant to this Prospectus. This information is
based upon information provided by U.S. Trust Company of California, N.A.,
trustee under the Indenture, and by or on behalf of the Selling Securityholders.
The Selling Securityholders may offer all, some or none of their Notes or
Conversion Shares.
<TABLE>
<CAPTION>
SHARES OF COMMON NOTES OR CONVERSION
STOCK BENEFICIALLY SHARES BEING OFFERED
OWNED ------------------------
PRIOR TO OFFERING(1)(3) NUMBER OF
----------------------- PRINCIPAL CONVERSION
NAME NUMBER PERCENT(2) AMOUNT SHARES(3)(4)
- --------------------------------------------- -------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Commonwealth Life Insurance Camden
Nonenhanced................................ 68,728** * $1,000,000 68,728
Global Bermuda Limited Partnership........... 185,567** 1% 2,700,000 185,567
Joseph J. Ritchie............................ 418,312(5) 3% 2,900,000 199,312
August J. Pelizzi, Jr........................ 6,872** * 100,000 6,872
Michael Angelo, L.P.......................... 17,182** * 250,000 17,182
Raphael, L.P................................. 17,182** * 250,000 17,182
Marcia Diamond, Trustee, The Marcia Diamond
Trust of 1995.............................. 7,872(6) * 100,000 6,872
Laterman Strategies 90's LP.................. 21,374** * 311,000 21,374
Laterman & Company........................... 14,707** * 214,000 14,707
Offshore Strategies Ltd...................... 36,082** * 525,000 36,082
Lindner Growth Fund.......................... 1,861,464(7) 11% 7,500,000 515,463
Lindner Dividend Fund........................ 1,716,427(7) 10% 15,000,000 1,030,927
Father Schmidt Foundation for Youth.......... 6,872** * 100,000 6,872
Lautze & Lautze.............................. 6,872** * 100,000 6,872
RCB Boise.................................... 6,872** * 100,000 6,872
Santa Clara Missions Cemetery................ 10,309** * 150,000 10,309
St. Mary's Pooled Endowment.................. 17,182** * 250,000 17,182
RCASF High School Teachers................... 13,745** * 200,000 13,745
Pabst Brewing Co............................. 41,237** * 600,000 41,237
SCU Schmidt Foundation....................... 13,745** * 200,000 13,745
San Felipe Del Rio........................... 6,872** * 100,000 6,872
Lynch Loofbourrow............................ 13,745** * 200,000 13,745
McLean Trust................................. 13,745** * 200,000 13,745
Salesian Society General..................... 6,872** * 100,000 6,872
St. Patrick's Seminary....................... 13,745** * 200,000 13,745
TCW Convertible Value L.P.................... 14,776** * 215,000 14,776
TCW Convertible Strategy Fund................ 43,642** * 635,000 43,642
TCW Convertible Value Fund................... 47,422** * 690,000 47,422
TCW Convertible Securities Fund.............. 130,927** 1% 1,905,000 130,927
Cincinnati Bell Telephone Convertible Value
Fund....................................... 25,085** * 365,000 25,085
TCW/DW Income & Growth Fund.................. 16,494** * 240,000 16,494
</TABLE>
28
<PAGE> 30
<TABLE>
<CAPTION>
SHARES OF COMMON NOTES OR CONVERSION
STOCK BENEFICIALLY SHARES BEING OFFERED
OWNED NUMBER OF
PRIOR TO OFFERING(1)(3) PRINCIPAL CONVERSION
NAME NUMBER PERCENT(2) AMOUNT SHARES(3)(4)
- --------------------------------------------- ------------ --- ---------- ---------
<S> <C> <C> <C> <C>
Southern New England Telephone............... 6,872** * 100,000 6,872
Dow Chemical Retirement Plan................. 17,182** * 250,000 17,182
Ohio Carpenters' Pension Trust............... 6,872** * 100,000 6,872
Philip Morris Master Trust................... 34,364** * 500,000 34,364
State Retirement and Pension Plan of
Maryland................................... 51,546** * 750,000 51,546
Bechtel Trust & Thrift Plan.................. 6,872** * 100,000 6,872
North Pole Capital Investments Limited....... 34,364** * 500,000 34,364
KA Trading L.P............................... 150,378** 1% 2,188,000 150,378
KA Management Limited........................ 53,402** * 777,000 53,402
</TABLE>
- ---------------
* Less than one percent.
** Represents Conversion Shares.
(1) Beneficial ownership is determined in accordance with the Rules of the SEC
and generally includes voting or investment power with respect to
securities. Except as otherwise indicated by footnote, and subject to
community property laws where applicable, the persons named in the table
have sole voting and investment power with respect to all shares of Common
Stock shown as beneficially owned by them.
(2) Based on 13,506,174 shares of Common Stock outstanding on December 9, 1996
and assuming 3,092,783 Conversion Shares.
(3) Assumes a conversion price of $14.55 per share and a cash payment in lieu of
any fractional interest.
(4) Assuming the conversion of all the Notes and the sale by the Selling
Securityholders of all of the Conversion Shares, (a) none of the Selling
Securityholders will beneficially own shares of Common Stock following the
offering except shares of Common Stock other than Conversion Shares set
forth in notes 5, 6 and 7 below, and (b) none of the Selling
Securityholders will beneficially own more than one percent of the
16,594,122 shares of Common Stock outstanding (based on the number of
shares outstanding on December 9, 1996 and 3,092,783 Conversion Shares)
except Joseph J. Ritchie (1%), Lindner Growth Fund (8%) and Lindner
Dividend Fund (4%).
(5) Includes 219,000 shares of the Company's Common Stock held by Mr. Ritchie.
(6) Includes 1,000 shares of the Company's Common Stock held by Marcia Diamond,
Trustee, The Marcia Diamond Trust of 1995.
(7) A total of 3,932,891 shares are held by entities affiliated with Ryback
Management Corporation, including 1,861,464 shares (of which 515,463 are
Conversion Shares) held by Lindner Growth Fund, 1,716,427 shares (of which
1,030,927 are Conversion Shares) held by Lindner Dividend Fund and 355,000
shares held by other entities affiliated with Ryback Management
Corporation. Ryback Management Corporation has sole voting and dispositive
power over 3,922,891 of such shares, including all of those held by Lindner
Growth Fund and Lindner Dividend Fund. Ryback Management Corporation
disclaims beneficial ownership of the shares in which it has no pecuniary
interest.
Other than as set forth in the table, none of the Selling Securityholders
listed above had any material relationship with the Company other than as a
result of ownership of the Notes or Common Stock, within the three-year period
ending on the date of this Prospectus. Additional Selling Securityholders or
other information concerning Selling Securityholders may be set forth in
Supplements to this Prospectus from time to time. Up to $45,000,000 aggregate
principal amount of Notes may be offered hereby.
Because the Selling Securityholders may offer all or some of the Notes that
they hold and/or Conversion Shares pursuant to the offering contemplated by this
Prospectus, and because there are currently no agreements, arrangements or
understandings with respect to the sale of any of the Notes or Conversion Shares
by the Selling Securityholders, no estimate can be given as to the principal
amount of Notes or Conversion Shares that will be held by the Selling
Securityholders after completion of this offering.
29
<PAGE> 31
PLAN OF DISTRIBUTION
The Company will not receive any of the proceeds from this offering. The
Selling Securityholders may sell all or a portion of the Notes and the
Conversion Shares beneficially owned by them and offered hereby from time to
time on any exchange or quotation system on which the securities are listed or
quoted on terms to be determined at the times of such sales. The Selling
Securityholders may also make private sales directly or through a broker or
brokers. Alternatively, any of the Selling Securityholders may from time to time
offer the Notes or Conversion Shares through underwriters, dealers or agents,
who may receive compensation in the form of underwriting discounts, commissions
or concessions from the Selling Securityholders and the purchasers of the Notes
or Conversion Shares for whom they may act as agent. Each Selling Securityholder
will be responsible for payment of commissions, concessions and discounts of
underwriters, dealers or agents. The aggregate proceeds to the Selling
Securityholders from the sale of the Notes or Conversion Shares offered by them
hereby will be the purchase price of such Notes or Conversion Shares less
discounts and commissions, if any.
The Notes and the Conversion Shares offered hereby may be sold from time to
time by the Selling Securityholders to purchasers directly by any of the Selling
Securityholders acting as principal for its own account in one or more
transactions at a fixed price, which may be changed, or at varying prices
determined at the time of sale or at negotiated prices. Such prices will be
determined by the holders of such securities or by agreement between such
holders and the purchasers.
The Company's outstanding Common Stock is quoted on the Nasdaq National
Market. The Company does not intend to apply for listing of the Notes on any
securities exchange or quotation on an automated quotation system. Accordingly,
no assurance can be given as to the development of any active trading market for
the Notes. See "Risk Factors -- Absence of a Public Market for the Notes."
In order to comply with the securities laws of certain states, if
applicable, the Notes and Conversion Shares may be sold in such jurisdictions
only through registered or licensed brokers or dealers.
The Selling Securityholders and any underwriters, dealers or agents that
participate in the distribution of the Notes and Conversion Shares offered
hereby may be deemed to be underwriters within the meaning of the Act, and any
discounts, commissions or concessions received by them and any provided pursuant
to the sale of securities by them might be deemed to be underwriting discounts
and commissions under the Act.
In addition, any securities covered by this Prospectus that qualify for
sale pursuant to Rule 144 or Rule 144A of the Securities Act may be sold under
Rule 144 or Rule 144A rather than pursuant to this Prospectus. There is no
assurance that any Selling Securityholder will sell any or all of the Notes or
Conversion Shares described herein, and any Selling Securityholder may transfer,
devise or gift such securities by other means not described herein.
The Notes were originally issued by the Company and sold to the initial
purchasers in August 1996 in a private placement. The Company agreed to
indemnify and hold the Placement Agents harmless against certain liabilities
that they may incur under the Securities Act, the Exchange Act or otherwise that
could arise in connection with the offering of the Notes by the Placement
Agents.
The Company entered into a Registration Rights Agreement with the Placement
Agents for the benefit of holders of the Notes to register their Notes and
Conversion Shares under applicable Federal and state securities laws under
certain circumstances and at certain times. The Registration Rights Agreement
provides for cross-indemnification of the Selling Securityholders and the
Company to the extent permitted by law, for losses, claims, damages, liabilities
and expenses arising, under certain circumstances, out of any registration of
the Notes and Conversion Shares.
The Company will use its best efforts to cause the registration statement
to which this Prospectus relates to become effective as soon as practicable and
to keep the registration statement effective for a period of three years from
August 28, 1996 (the latest date of original issuance of the Notes), or until
the registration statement is no longer required for transfer of the Notes or
the Conversion Shares. The Company is permitted to suspend the use of this
Prospectus in connection with the sales of Notes and the Conversion Shares by
30
<PAGE> 32
holders upon the happening of certain events or if there exists any fact that
makes any statement of material fact made in this Prospectus untrue or that
requires the making of additions to or changes in the Prospectus in order to
make the statements herein not misleading until such time as the Company advises
the Selling Securityholders that use of the Prospectus may be resumed. Expenses
of preparing and filing the registration statement and all post-effective
amendments will be borne by the Company. Such expenses are estimated to be
$75,000.
NOTICE TO INVESTORS
The following provisions do not apply to persons purchasing Notes or Common
Stock pursuant to this Registration Statement or their subsequent transferees.
Each holder of Notes has agreed, and each purchaser of Notes other than
pursuant to this Registration Statement or another effective registration
statement covering the sale of Notes to such purchaser, by its acceptance of the
Notes, will be deemed to have acknowledged, represented to and agreed with the
Company and the Placement Agents as follows:
1. It understands and acknowledges that the Notes were or are being offered
and sold pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act or any other securities laws,
that the Notes and the Common Stock issuable upon conversion of the Notes (the
Notes and such Common Stock are collectively referred to herein as the
"Restricted Securities") have not been registered under the Securities Act or
any other applicable securities laws and, unless so registered, may not be
offered, sold or otherwise transferred except in compliance with the
registration requirements of the Securities Act or any other applicable
securities laws, pursuant to an exemption therefrom or in a transaction not
subject thereto and in each case in compliance with the conditions for transfer
set forth in paragraph (4) below.
2. It is either:
a. "a qualified institutional buyer" ("QIB") as defined in Rule 144A
promulgated under the Securities Act and is aware that any sale of the
Notes to it will be made in reliance on Rule 144A. Such acquisition will be
for its own account or for the account of another QIB; or
b. an "accredited investor" within the meaning of Rule 501(a) under
the Securities Act or, if the Notes are to be purchased for one or more
accounts ("investor accounts") for which it is acting as a fiduciary or
agent, each such account is an accredited investor on a like basis. In the
normal course of its business, it invests in or purchases securities
similar to the Notes and it has such knowledge and experience in financial
and business matters that it is capable of evaluating the merits and risks
of purchasing the Notes. It is aware that it (or any investor account) may
be required to bear the economic risk of an investment in the Notes for an
indefinite period of time, and it (or such account) is able to bear such
risk for an indefinite period; or
c. an institution that, at the time the buy order for the Notes was
originated, was outside the United States and was not a U.S. person (and
was not purchasing for the account or benefit of a U.S. person) within the
meaning of Regulation S under the Securities Act.
3. It acknowledges that none of the Company or the Placement Agents or any
person representing the Company or the Placement Agents has made any
representation to it with respect to the Company or the offering or sale of any
Notes, other than the information contained in the Offering Memorandum dated
August 20, 1996, which has been delivered to it and upon which it is relying in
making its investment decision with respect to the Notes. It has had access to
such financial and other information concerning the Company and the Notes as it
has deemed necessary in connection with its decision to purchase the Notes,
including an opportunity to ask questions of and request information from the
Company and the Placement Agents.
4. It is purchasing the Notes for its own account, or for one or more
investor accounts for which it is acting as a fiduciary or agent, in each case
for investment, and not with a view to, or for offer or sale in connection with,
any distribution thereof in violation of the Securities Act, subject to any
requirement of law that the disposition of its property or the property of such
investor account or accounts be at all times within its
31
<PAGE> 33
or their control and subject to its or their ability to resell the Restricted
Securities pursuant to Rule 144A, Regulation S or any exemption from
registration available under the Securities Act. It agrees on its own behalf and
on behalf of any investor account for which it is purchasing the Notes and each
subsequent holder of the Restricted Securities by its acceptance thereof will
agree to offer, sell or otherwise transfer such Restricted Securities prior to
the date which is three years after the date of original issue of such
Restricted Securities (or any predecessor thereto) (the "Resale Restriction
Termination Date") only (a) to the Company, (b) pursuant to a registration
statement that has been declared effective under the Securities Act, (c) for so
long as the Restricted Securities are eligible for resale pursuant to Rule 144A,
to a person it reasonably believes is a QIB that purchases for its own account
or for the account of a QIB to whom notice is given that the transfer is being
made in reliance on Rule 144A, (d) to an "accredited investor" within the
meaning of Rule 501(a) under the Securities Act that is purchasing for his own
account or for the account of such an "accredited investor" that delivers an
opinion of counsel, certifications and other information in form reasonably
satisfactory to the Company that such transferee is an "Accredited Investor"
within the meaning of Rule 501(a) under the Securities Act, that such transfer
is for investment purposes and not with a view to, or for offer sale in
connection with any distribution in violating of the Securities Act, and that
such transfer compiles with the requirements of the Securities Act, (e) pursuant
to offers and sales that occur outside the United States within the meaning of
Regulation S under the Securities Act and are in compliance with Regulation S
under the Securities Act, or (f) pursuant to any other available exemption from
her registration requirements of the Securities Act subject in each of the
foregoing cases to any requirement of law that the disposition of its property
or the property of such investor account or accounts be at all times within its
or their control. The foregoing restrictions on resale will not apply subsequent
to the Resale Restriction Termination Date. Each purchaser acknowledges that the
Company and the Trustee reserve the right prior to any offer, sale or other
transfer prior to the Resale Restriction Termination Date of the Restricted
Securities pursuant to clauses (d), (e) or (f) above the require the delivery of
an opinion of counsel, certificates and other information satisfactory to the
Company and the Trustee. Each purchaser acknowledges that each Restricted
Security will contain a legend substantially to the following effect.
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED
OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES NOT TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE
"RESALE RESTRICTION TERMINATION DATE") THAT IS THREE YEARS AFTER THE
ORIGINAL ISSUE DATE HEREOF (OR ANY PREDECESSOR OF SUCH SECURITY) EXCEPT
(A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS
BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) PURSUANT TO RULE
144A, FOR SO LONG AS IT IS AVAILABLE, TO A PERSON IT REASONABLY BELIEVES
IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF
A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) TO AN "ACCREDITED
INVESTOR," WITHIN THE MEANING OF RULE 501(a) UNDER THE SECURITIES ACT
THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT
OF SUCH AN "ACCREDITED INVESTOR," THAT PRIOR TO SUCH TRANSFER DELIVERS
AN OPINION OF COUNSEL. CERTIFICATION AND OTHER INFORMATION IN FORM
REASONABLE SATISFACTORY TO THE COMPANY THAT SUCH TRANSFEREE IS AN
"ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a) UNDER THE
SECURITIES ACT, THAT SUCH ACCREDITED INVESTOR IS ACQUIRING THE
32
<PAGE> 34
SECURITY FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR
SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES
ACT AND THAT SUCH TRANSFER COMPLIES WITH THE SECURITIES ACT, (E)
PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN
THE MEANING OF REGULATION S UNDER THE SECURITIES ACT AND ARE IN
COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (F) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR
TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D), (E) OR (F)
TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND
OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE
FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS
SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE.
THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE
RESALE RESTRICTION TERMINATION DATE.
5. It acknowledges that the Company, the Placement Agents and others will
rely upon the truth and accuracy of the foregoing acknowledgments,
representations and agreements and agrees that, if any of the acknowledgments,
representations or warranties deemed to have been made by it by its purchase of
Notes are no longer accurate, it shall promptly notify the Placement Agents and
the Company. If it is acquiring any Notes as a fiduciary or agent for one or
more investor accounts, it represents that it has sold investment discretion
with respect to each such account and that it has full power to make the
foregoing acknowledgments, representations and agreements on behalf of each such
account.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of certain United States federal
income tax considerations relevant to holders of the Notes. This discussion is
based upon the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Regulations, Internal Revenue Service ("IRS") rulings and judicial decisions now
in effect, all of which are subject to change (possibly with retroactive effect)
or different interpretations. This discussion does not purport to deal with all
aspects of federal income taxation that may be relevant to a particular
investor's decision to purchase the Notes, and it is not intended to be wholly
applicable to all categories of investors, some of which, such as dealers in
securities, banks, insurance companies, tax-exempt organizations and non-United
States persons, may be subject to special rules. In addition, this discussion is
limited to persons that will hold the Notes represented thereby as a "capital
asset" within the meaning of section 1221 of the Code.
ALL PROSPECTIVE PURCHASERS OF THE NOTES ARE ADVISED TO CONSULT THEIR OWN
TAX ADVISORS REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF
THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES AND THE COMMON STOCK.
Interest Income. A holder of a Note will generally be required to report
as income for federal income tax purposes interest earned on the Note in
accordance with the holder's method of tax accounting. A holder of a Note using
the accrual method of accounting for tax purposes is required to include
interest in ordinary income as such interest accrues, while a cash basis holder
must include interest in income when payments are received (or made available
for receipt).
Conversion of Notes into Common Stock. In general, no gain or loss will be
recognized for federal income tax purposes on a conversion of the Notes into
shares of Common Stock. However, cash paid in lieu of a fractional share of
Common Stock will likely result in taxable gain (or loss), which will be capital
gain (or loss), to the extent that the amount of such cash exceeds (or is
exceeded by) the portion of the adjusted basis of the Note allocable to such
fractional share. The adjusted basis of shares of Common Stock received on
conversion will equal the adjusted basis of the Note converted, reduced by the
portion of adjusted basis
33
<PAGE> 35
allocated to any fractional share of Common Stock exchanged for cash. The
holding period of an investor in the Common Stock received on conversion will
include the period during which the converted Notes were held.
The conversion price of the Notes is subject to adjustment under certain
circumstances. Section 305 of the Code and the Treasury Regulations issued
thereunder may treat the holders of the Notes as having received a constructive
distribution resulting in ordinary income (subject to a possible
dividends-received deduction in the case of corporate holders) to the extent of
the Company's current and/or accumulated earnings and profits, if, and to the
extent that certain adjustments in the conversion price that may occur in
limited circumstances (particularly an adjustment to reflect a taxable dividend
to holders of Common Stock) increase the proportionate interest of a holder of
Notes in the fully diluted Common Stock, whether or not such holder ever
exercises its conversion privilege. Moreover, if there is not a full adjustment
to the conversion ratio of the Notes to reflect a stock dividend or other event
increasing the proportionate interest of the holders of outstanding Common Stock
in the assets or earnings and profits of the Company, then such increase in the
proportionate interest of the holders of the Common Stock generally will be
treated as a distribution to such holders, taxable as ordinary income (subject
to a possible dividends received deduction in the case of corporate holders) to
the extent of the Company's current and/or accumulated earnings and profits.
Market Discount. Investors acquiring Notes pursuant to this Offering
Memorandum should note that the resale of those Notes may be adversely affected
by the market discount provisions of sections 1276 through 1278 of the Code.
Under the market discount rules, if a holder of a Note purchases it at a market
discount (i.e., at a price below its stated redemption price at maturity) in
excess of a statutorily-defined de minimis amount and thereafter recognizes gain
upon a disposition or retirement of the Note, then the lesser of the gain
recognized or the portion of the market discount that accrued on a ratable basis
(or, if elected, on a constant interest rate basis) generally will be treated as
ordinary income at the time of the disposition. Moreover, any market discount on
a Note may be taxable to an investor to the extent of appreciation at the time
of certain otherwise non-taxable transactions (e.g., gifts). Any accrued market
discount not previously taken into income prior to a conversion of a Note,
however, should (under Treasury Regulations not yet issued) carry over to the
Common Stock received on conversion and be treated as ordinary income upon a
subsequent disposition of such Common Stock, to the extent of any gain
recognized on such disposition. In addition, absent an election to include
market discount in income as it accrues, a holder of a market discount debt
instrument may be required to defer a portion of any interest expense that
otherwise may be deductible on any indebtedness incurred or maintained to
purchase or carry such debt instrument until the holder disposes of the debt
instrument in a taxable transaction.
Sale, Exchange or Retirement of Notes. Each holder of Notes generally will
recognize gain or loss upon the sale, exchange, redemption, retirement or other
disposition of those Notes measured by the difference (if any) between (i) the
amount of cash and the fair market value of any property received (except to the
extent that such cash or other property is attributable to the payment of
accrued interest not previously included in income, which amount will be taxable
as ordinary income) and (ii) the holder's adjusted tax basis in those Notes
(including any market discount previously included in income by the holder).
Each holder of Common Stock into which the Notes are converted, in general, will
recognize gain or loss upon the sale, exchange, redemption or other disposition
of the Common Stock measured under rules similar to those described in the
preceding sentence for the Notes. Any such gain or loss recognized on the sale,
exchange, redemption, retirement or other disposition of a Note or share of
Common Stock should be capital gain or loss (except as discussed under "Market
Discount" above), and would be long-term capital gain or loss if the Note or the
Common Stock had been held for more than one year at the time of the sale or
exchange. Special rules may apply to redemptions of Common Stock, which may
result in different treatment. An investor's initial basis in a Note will be the
cash price paid therefor.
Back-Up Withholding. A holder of Notes or Common Stock may be subject to
"back-up withholding" at a rate of 31% with respect to certain "reportable
payments," including interest payments, dividend payments and, under certain
circumstances, principal payments on the Notes. These back-up withholding rules
apply if the holder, among other things, (i) fails to furnish a social security
number or other taxpayer identification number ("TIN") certified under penalty
of perjury within a reasonable time after the request
34
<PAGE> 36
therefor, (ii) furnishes an incorrect TIN, (iii) fails to report properly
interest or dividends, or (iv) under certain circumstances, fails to provide a
certified statement, signed under penalty of perjury, that the TIN furnished is
the correct number and that such holder is not subject to back-up withholding. A
holder who does not provide the Company with its correct TIN also may be subject
to penalties imposed by the IRS. Any amount withheld from a payment to a holder
under the back-up withholding rules is creditable against the holder's federal
income tax liability, provided the required information is furnished to the IRS.
Back-up withholding will not apply, however, with respect to payments made to
certain holders, including corporations, tax-exempt organizations and certain
foreign persons, provided their exemption from back-up withholding is properly
established.
The Company will report to the holders of Notes and Common Stock and to the
IRS the amount of any "reportable payments" for each calendar year and the
amount of tax withheld, if any, with respect to such payments.
LEGAL MATTERS
The validity of the issuance of the Notes and Conversion Shares offered
hereby will be passed upon for the Company by Cooley Godward LLP, San Francisco,
California. Certain legal matters in connection with the offering hereby will be
passed upon for the Holders by Wilson, Sonsini, Goodrich & Rosati, Professional
Corporation, Palo Alto, California.
EXPERTS
The financial statements incorporated by reference in this Prospectus and
elsewhere in the Registration Statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.
35
<PAGE> 37
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus and, if given or made, such other information and representations
must not be relied upon as having been authorized by the Company. This
Prospectus does not constitute an offer or solicitation by anyone in any state
in which such offer or solicitation is not authorized, or in which the person
making such offer or solicitation is not qualified to do so, or to any person to
whom it is unlawful to make such offer or solicitation. The delivery of this
Prospectus at any time does not imply that the information herein is correct as
of any time subsequent to the date hereof.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
AVAILABLE INFORMATION.......................................................... 2
ADDITIONAL INFORMATION......................................................... 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE................................ 2
SUMMARY........................................................................ 4
RISK FACTORS................................................................... 6
RATIO OF EARNINGS TO FIXED CHARGES............................................. 14
USE OF PROCEEDS................................................................ 14
DESCRIPTION OF THE NOTES....................................................... 15
SELLING SECURITYHOLDERS........................................................ 28
PLAN OF DISTRIBUTION........................................................... 30
NOTICE TO INVESTORS............................................................ 31
CERTAIN FEDERAL INCOME TAX CONSEQUENCES........................................ 33
LEGAL MATTERS.................................................................. 35
EXPERTS........................................................................ 35
</TABLE>
------------------------
36
<PAGE> 38
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of the Notes and Conversion Shares being registered. All the amounts shown are
estimates except for the registration fee.
<TABLE>
<S> <C>
Registration fee......................................................... $13,637
Nasdaq NMS Additional Share Listing Fee.................................. 17,500
Blue sky qualification fees and expenses................................. 500
Printing and engraving expenses.......................................... 5,000
Legal fees and expenses.................................................. 25,000
Accounting fees and expenses............................................. 5,000
Fees of Trustee.......................................................... 2,500
Miscellaneous............................................................ 5,863
-------
TOTAL............................................................... $75,000
=======
</TABLE>
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
The Registrant's Certificate of Incorporation and Bylaws include provisions
to (i) eliminate the personal liability of its directors for monetary damages
resulting from breaches of their fiduciary duty to the extent permitted by
Section 102(b)(7) of the General Corporation Law of Delaware (the "Delaware
Law") and (ii) require the Registrant to indemnify its directors and officers to
the fullest extent permitted by Section 145 of the Delaware Law, including
circumstances in which indemnification is otherwise discretionary. Pursuant to
Section 145 of the Delaware Law, a corporation generally has the power to
indemnify its present and former directors, officers, employees and agents
against expenses incurred by them in connection with any suit to which they are,
or are threatened to be made, a party by reason of their serving in such
positions so long as they acted in good faith and in a manner they reasonably
believed to be in, or not opposed to, the best interests of a corporation, and,
with respect to any criminal action, they had no reasonable cause to believe
their conduct was unlawful. The Registrant believes that these provisions are
necessary to attract and retain qualified persons as directors and officers.
These provisions do not eliminate liability for breach of the director's duty of
loyalty to the Registrant or its stockholders, for acts or omissions not in good
faith or involving intentional misconduct or knowing violations of law, for any
transaction from which the director derived an improper personal benefit or for
any willful or negligent payment of any unlawful dividend or any unlawful stock
purchase agreement or redemption.
The Registrant has entered into agreements with its directors and executive
officers that require the Registrant to indemnify such persons against expenses,
judgments, fines, settlements and other amounts actually and reasonably incurred
(including expenses of a derivative action) in connection with any proceeding,
whether actual or threatened, to which any such person may be made a party by
reason of the fact that such person is or was a director or officer of the
Registrant or any of its listed enterprises, provided such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed to
the best interests of the Registrant and, with respect to any criminal
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
The indemnification agreements also set forth certain procedures that will apply
in the event of a claim for indemnification thereunder.
The Registrant has purchased an insurance policy covering the officers and
directors of the Registrant with respect to certain liabilities arising under
the Securities Act or otherwise.
II-1
<PAGE> 39
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------ -------------------------------------------------------------------------------
<C> <S>
4.1(1) Specimen Stock Certificate
4.2(2) Form of Note
4.3(2) Indenture dated as of August 15, 1996, between the Company and United States
Trust Company of California, N.A.
5.1 Opinion of Cooley Godward LLP.+
10.1(2) Registration Rights Agreement dated August 28, 1996, among the Company, Furman
Selz LLC and Feshbach Brothers Investor Services Inc.
10.2(2) Placement Agreement dated August 20, 1996 among the Company, Furman Selz LLC
and Feshbach Brothers Investor Services Inc.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.+
24.1 Power of Attorney.+
25.1 Statement of Eligibility of Indenture Trustee on Form T-1.+
</TABLE>
- ---------------
(1) Incorporated by reference from the Company's Registration Statement on Form
S-1 (File No. 33-46050), as amended.
(2) Incorporated by reference from the Company's Current Report on Form 8-K
filed September 11, 1996.
+ Previously filed.
ITEM 17. UNDERTAKINGS.
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 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.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, 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; and
(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.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or 15(d) of the Securities
Exchange Act of 1934 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 the time
shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to provisions described in Item 15, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 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.
II-2
<PAGE> 40
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Los Gatos, County of Santa Clara, State of
California, on the 18th day of December, 1996.
METRICOM, INC.
/s/ ROBERT P. DILWORTH
By:
Robert P. Dilworth
President and Chief Executive
Officer
(Principal Executive Officer)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------- -------------------------------------- ------------------
<C> <S> <C>
/s/ ROBERT P. DILWORTH President, Chief Executive Officer and December 18, 1996
- --------------------------------------- Director
(Robert P. Dilworth) (Principal Executive Officer)
/s/ WILLIAM D. SWAIN Chief Financial Officer and Secretary December 18, 1996
- --------------------------------------- (Principal Financial and Accounting
(William D. Swain) Officer)
/s/ CORNELIUS C. BOND, JR.* Director December 18, 1996
- ---------------------------------------
(Cornelius C. Bond, Jr.)
/s/ ROBERT S. CLINE* Director December 18, 1996
- ---------------------------------------
(Robert S. Cline)
/s/ JUSTIN L. JASCHKE* Director December 18, 1996
- ---------------------------------------
(Justin L. Jaschke)
/s/ GEORGE W. LEVERT* Director December 18, 1996
- ---------------------------------------
(George W. Levert)
/s/ DONALD RUMSFELD* Director December 18, 1996
- ---------------------------------------
(Donald Rumsfeld)
/s/ ROBERT M. SMELICK* Director December 18, 1996
- ---------------------------------------
(Robert M. Smelick)
/s/ JERRY YANG* Director December 18, 1996
- ---------------------------------------
(Jerry Yang)
*By: /s/ ROBERT P. DILWORTH
- ---------------------------------------
Robert P. Dilworth
Attorney-in-fact
</TABLE>
II-3
<PAGE> 41
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- ----------------------------------------------------------------------------------
<C> <S>
4.1(1) Specimen Stock Certificate
4.2(2) Form of Note
4.3(2) Indenture dated as of August 15, 1996, between the Company and United States Trust
Company of California, N.A.
5.1 Opinion of Cooley Godward LLP+
10.1(2) Registration Rights Agreement dated August 28, 1996, among the Company, Furman
Selz LLC and Feshbach Brothers Investor Services Inc.
10.2(2) Placement Agreement dated August 20, 1996 among the Company, Furman Selz LLC and
Feshbach Brothers Investor Services Inc.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.+
24.1 Power of Attorney.+
25.1 Statement of Eligibility of Indenture Trustee on Form T-1.+
</TABLE>
- ---------------
(1) Incorporated by reference from the Company's Registration Statement on Form
S-1 (File No. 33-46050), as amended.
(2) Incorporated by reference from the Company's Current Report on Form 8-K
filed September 11, 1996.
+ Previously filed.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our reports dated January 24.
1996 included in the Company's Form 10-K for the year ended December 31, 1995,
as amended by Form 10-K/A, and all references to our Firm included in this
registration statement.
ARTHUR ANDERSEN LLP
San Jose, California
December 16, 1996
