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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON __________ 1998
Registration No. ____________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------------
TELULAR CORPORATION
(Exact name of Registrant as specified in its charter)
---------------------------
<TABLE>
<S> <C>
DELAWARE 36-3885440
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
---------------------------
647 NORTH LAKEVIEW PARKWAY
VERNON HILLS, IL 60061
(847) 465-4500
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
---------------------------
KENNETH E. MILLARD
CHIEF EXECUTIVE OFFICER
TELULAR CORPORATION
647 NORTH LAKEVIEW PARKWAY
VERNON HILLS, IL 60061
(847) 465-4500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------------------
COPY TO:
MICHAEL E. CUTLER, ESQ.
COVINGTON & BURLING
1201 PENNSYLVANIA AVENUE, N.W.
WASHINGTON, D.C. 20004
(202) 662-6000
---------------------------
Approximate date of commencement of proposed sale to public:
From time to time after this Registration Statement becomes effective.
---------------------------
If the only securities being registered on this Form are to be 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 offer. [ ]
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 on 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. [ ]
---------------------------
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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 SECURITIES AND EXCHANGE COMMISSION
(THE "COMMISSION"), ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR
AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN
FILED WITH THE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO
BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN
WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION
OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PROSPECTUS SUBJECT TO COMPLETION
________, 1998
TELULAR CORPORATION
COMMON STOCK
(par value $.01 per share)
---------------------------
This Prospectus relates to the resale of up to one million
(1,000,000) shares of common stock, par value $.01 per share (the "Common
Stock"), of Telular Corporation, a Delaware corporation (the "Company") issued
or issuable to Dan Giacopelli, Jeffrey Hickey, Rex Nathanson, Alvin Taylor and
Frank Bianchini and their respective assigns, as holders of the Company's
Common Stock ("Common Stock" and such holders the "Selling Shareholders") in
connection with the transaction described herein. All of the shares offered
hereby will be offered and sold by the Selling Shareholders. Although the
Company received consideration from the purchase by the Selling Shareholders of
the Preferred Stock, the Company will not receive any proceeds from the sale of
the shares of Common Stock offered hereby. See "Selling Shareholders."
The Common Stock is listed on the Nasdaq National Market under
the symbol WRLS. On March 24, 1998, the last sale price of the Common
Stock, as reported on the Nasdaq National Market, was $2.5625 per share.
The Common Stock may be offered from time to time by the
Selling Shareholders to or through brokers, dealers or other agents or directly
to other purchasers in one or more market transactions, in one or more private
transactions or in a combination of such methods of sale, at prices then
prevailing, at prices related to such prices, or at negotiated prices. In
effecting sales, brokers, dealers or other agents engaged by the Selling
Shareholders may arrange for other brokers, dealers or agents to participate.
Such brokers, dealers or agents may receive commissions, discounts or
concessions from the Selling Shareholders in amounts to be negotiated. Such
brokers or dealers and any other participating brokers or dealers may be deemed
to be "underwriters" within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"), and any such commissions, discounts or
concessions may be deemed to be underwriting discounts or commissions under the
Securities Act.
Certain costs, expenses and fees in connection with the
registration of the Common Stock will be borne by the Company. Commissions,
discounts and transfer taxes, if any, attributable to the sales of the Common
Stock will be borne by the Selling Shareholders.
INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH
DEGREE OF RISK. SEE "RISK FACTORS" ON PAGE 3.
---------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS _______________, 1998
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NO DEALER, SALESMAN OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH
THE OFFER MADE HEREBY. AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, THE SELLING SHAREHOLDER(S) OR ANY UNDERWRITER. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE
SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY STATE OR OTHER JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE DELIVERY OF THIS
PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THIS INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
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 REPORTS, PROXY STATEMENTS AND OTHER INFORMATION WITH
THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION"). SUCH REPORTS, PROXY
STATEMENTS AND OTHER INFORMATION FILED BY THE COMPANY CAN BE INSPECTED AND
COPIED AT THE PUBLIC REFERENCE FACILITIES MAINTAINED BY THE COMMISSION AT 450
FIFTH STREET, N.W., WASHINGTON, D.C. 20549; AND THE PUBLIC REFERENCE
FACILITIES LOCATED AT THE REGIONAL OFFICES OF THE COMMISSION AT THE FOLLOWING
ADDRESSES: NEW YORK REGIONAL OFFICE, 7 WORLD TRADE CENTER, SUITE 1300, NEW
YORK, NEW YORK 10048 AND CHICAGO REGIONAL OFFICE, CITICORP CENTER, 500 WEST
MADISON STREET, CHICAGO, ILLINOIS 60661-2511. COPIES OF SUCH MATERIAL ALSO
CAN BE OBTAINED FROM THE PUBLIC REFERENCE SECTION OF THE COMMISSION AT 450
FIFTH STREET, N.W., WASHINGTON, D.C. 20549, AT PRESCRIBED RATES.
The Commission maintains a web site that contains reports,
proxy and information statements and other information regarding registrants
that file electronically. The address of that site is http://www.sec.gov.
THIS PROSPECTUS CONSTITUTES A PART OF A REGISTRATION STATEMENT
ON FORM S-3 FILED BY THE COMPANY WITH THE COMMISSION UNDER THE SECURITIES ACT
WITH RESPECT TO THE COMMON STOCK BEING OFFERED BY THIS PROSPECTUS. THIS
PROSPECTUS DOES NOT CONTAIN ALL OF THE INFORMATION SET FORTH IN THE
REGISTRATION STATEMENT, CERTAIN PORTIONS OF WHICH HAVE BEEN OMITTED AS
PERMITTED BY THE RULES AND REGULATIONS OF THE COMMISSION. FOR FURTHER
INFORMATION, REFERENCE IS MADE TO THE REGISTRATION STATEMENT, AND TO THE
EXHIBITS INCORPORATED THEREIN BY REFERENCE OR FILED AS A PART THEREOF. ANY
STATEMENTS CONTAINED HEREIN CONCERNING THE PROVISIONS OF ANY SUCH EXHIBITS ARE
NOT NECESSARILY COMPLETE AND, IN EACH INSTANCE, REFERENCE IS MADE TO THE COPY
OF SUCH EXHIBIT FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT OR OTHERWISE
FILED WITH THE COMMISSION. EACH SUCH STATEMENT IS QUALIFIED IN ITS ENTIRETY BY
SUCH REFERENCE.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
THE FOLLOWING DOCUMENTS FILED BY THE COMPANY WITH THE
COMMISSION ARE HEREBY INCORPORATED BY REFERENCE IN THIS PROSPECTUS:
(a) THE ANNUAL REPORT OF THE COMPANY ON FORM 10-K FOR THE
FISCAL YEAR ENDED SEPTEMBER 30, 1997.
(b) THE QUARTERLY REPORT OF THE COMPANY ON FORM 10-Q FOR
THE QUARTER ENDED DECEMBER 31, 1997.
(c) THE DESCRIPTION OF THE COMPANY'S COMMON STOCK
CONTAINED IN THE COMPANY'S REGISTRATION STATEMENT ON
FORM 8-A, DATED JANUARY 13, 1994, FILED PURSUANT TO
SECTION 12 OF THE EXCHANGE ACT, WHICH INCORPORATES BY
REFERENCE THE DESCRIPTION CONTAINED IN THE COMPANY'S
REGISTRATION STATEMENT ON FORM S-1 UNDER THE
SECURITIES ACT, NO. 33-72096, AS AMENDED, AND IN ANY
AMENDMENTS OR REPORTS THAT ARE FILED FOR THE PURPOSE
OF UPDATING SUCH DESCRIPTION.
ALL DOCUMENTS FILED BY THE COMPANY PURSUANT TO SECTION 13(a),
13(c), 14 OR 15(d) OF THE EXCHANGE ACT, SUBSEQUENT TO THE DATE OF THIS
PROSPECTUS AND PRIOR TO THE TERMINATION OF THE OFFERINGS TO WHICH THIS
PROSPECTUS RELATES SHALL BE DEEMED TO BE INCORPORATED BY REFERENCE IN THIS
PROSPECTUS AND TO BE A PART HEREOF FROM THE DATE OF FILING OF SUCH DOCUMENTS.
ANY STATEMENT IN A DOCUMENT INCORPORATED OR DEEMED TO BE INCORPORATED BY
REFERENCE HEREIN SHALL BE DEEMED TO BE MODIFIED OR SUPERSEDED BY THIS
PROSPECTUS TO THE EXTENT THAT A STATEMENT CONTAINED HEREIN OR IN ANY OTHER
SUBSEQUENTLY FILED DOCUMENT WHICH ALSO IS OR IS DEEMED TO BE INCORPORATED BY
REFERENCE HEREIN MODIFIES OR SUPERSEDES SUCH STATEMENT. ANY SUCH STATEMENT SO
MODIFIED OR SUPERSEDED SHALL NOT BE DEEMED, EXCEPT AS SO MODIFIED OR
SUPERSEDED, TO CONSTITUTE A PART OF THIS PROSPECTUS.
THE COMPANY HEREBY UNDERTAKES TO PROVIDE WITHOUT CHARGE COPIES
OF ALL DOCUMENTS INCORPORATED HEREIN BY REFERENCE (OTHER THAN EXHIBITS TO SUCH
DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE IN
SUCH DOCUMENTS) TO EACH PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM A COPY
OF THIS PROSPECTUS HAS BEEN DELIVERED ON THE WRITTEN OR ORAL REQUEST OF SUCH
PERSON TO:
JEFFREY HERRMANN, CHIEF FINANCIAL OFFICER
TELULAR CORPORATION
647 NORTH LAKEVIEW PARKWAY
VERNON HILLS, IL 60061
(847) 465-4500
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RISK FACTORS
Prospective purchasers of Common Stock of the Company should
carefully consider the following factors in conjunction with the information
contained in the materials in the Company's reports on Forms 10-K, 10-Q and 8-K
and proxy materials, as filed with the Commission (the "SEC Filings").
LIMITED OPERATING HISTORY AND EXPECTATION OF CONTINUED LOSSES
The Company commenced operations in 1986 and although it
reported a profit for the fourth quarter of fiscal year 1996, and the first
quarter of fiscal year 1997, it has yet to report an annual profit. The
development of the Company's business has required significant expenditures in
connection with the defense of the Company's patents, research and development
of its technology and marketing of its products. Substantial costs related to
these activities have been and will continue to be incurred by the Company
before the realization of associated revenues.
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING
At September 30, 1997, the Company had $28.5 million in cash
and cash equivalents with a working capital surplus of approximately $39.0
million. Expansion of the Company's business, including the development of new
products and markets for the Company's existing products, will require
significant product development expenditures. In addition, the Company is
expected at least in the near term to continue to operate at a loss. Based on
its current operating plan, the Company believes its existing capital
resources, including a credit facility and proceeds from its issuance of
Preferred Stock, should enable it to maintain its current and planned
operations. Expected future uses of cash include working capital requirements,
marketing programs and product development in anticipation of future revenues.
Cash requirements may vary and are difficult to predict given the nature of the
developing markets targeted by the Company. The amount of royalty income from
the Company's licensees is unpredictable, but could have an impact on the
Company's actual cash flow. Unanticipated events such as litigation could
increase capital requirements. To the extent that additional funds are needed
subsequently, the Company may need to raise additional funds through public or
private financings. No assurance can be given that additional financing will
be available or that, if available, it will be obtained on terms favorable to
the Company.
In 1996, the Company has now completed a major corporate
restructuring as part of a program to balance expenditure levels with revenues,
and to improve working capital. In connection with that restructuring, the
Company incurred approximately $11.0 million in restructuring and impairment
charges, phased out its manufacturing operations in Puerto Rico and Illinois,
consolidated its manufacturing operations at the Company's Atlanta, Georgia
facility, and reduced its workforce from approximately 250 employees in January
1996 to approximately 110 employees at the end of November 1996. Details of
the restructuring are set forth in the Company's SEC Filings. The Company is
continuing to monitor expenditure levels in light of timing of market expansion
and revenues and anticipates taking further actions from time to time as it
deems appropriate.
Faced with terminating leases at its Buffalo Grove and
Atlanta, Georgia facilities, on May 1, 1997, the Company consolidated its
Buffalo Grove and Atlanta, Georgia operations into a new facility in Vernon
Hills, Illinois. This has resulted in the Company's manufacturing,
engineering, and administration operations being located at a single site. The
Company anticipates this development will enhance the quality of its products
and speed the introduction of such products to market.
MANAGEMENT TRANSITION
The Company has experienced several significant changes in
management over the past two years. Richard Gerstner served as Chief Executive
Officer from November 1993 to November 1995. From November 1995 until April
1996, William L. De Nicolo served as Chief Executive Officer. Mr. De Nicolo,
the founder of the Company, served as CEO prior to Mr. Gerstner's appointment
and has served as Chairman of the Board since the Company was founded. Kenneth
E. Millard became President and Chief Executive Officer in April 1996. Mr.
Millard also serves as a member of the Board of Directors. Robert L.
Montgomery was appointed Executive Vice-President and Chief Operating Officer
during March, 1997. Jeffrey Herrmann joined the Company as Controller in April
1997, then was promoted to Senior Vice President and Chief Financial Officer in
July 1997. Mr. Herrmann replaced Thomas M. Mason who had been Senior Vice
President and Chief Financial Officer since joining the Company in March, 1997.
As noted above, the Company has experienced a number of other
changes in its executives over the past year, and has substantially reduced its
workforce. These changes may have an adverse effect on the Company's ability
to implement its plans and manage its operations in a consistent manner.
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RELIANCE ON KEY CUSTOMER
In the near term the Company's success may depend on a number
of large orders from a small group of companies, which creates a risk that the
loss of any one customer may have a significant impact on the Company's
financial results. During fiscal year 1997, sales by the Company to Motorola
represented approximately 44% of total sales. The Company has a substantial
contract with Motorola to sell fixed wireless terminals to Motorola for its
construction of a cellular system in Hungary. The contract includes a
commitment by Motorola to purchase $100 million of the Company's fixed wireless
terminals over a three-year period commencing January 1, 1996. As of September
30, 1997, Motorola had purchased approximately $27 million of product under
this contract. The commitment by Motorola to purchase the Company's product
over a three-year period is not guaranteed.
INTELLECTUAL PROPERTY RIGHTS
The Company's success in the United States will depend to a
considerable extent upon its ability to obtain and enforce intellectual
property protection for its technology in the United States. No assurance can
be given that the Company's existing patents or any future patents obtained by
the Company will not be challenged, invalidated or circumvented, or that the
Company's competitors will not independently develop or patent technologies
that are substantially equivalent to or superior to the Company's technology.
The nature and status of litigation that involves the Company's intellectual
property rights are set forth in the SEC Filings.
Although the Company believes that its intelligent interface
can be adapted to accommodate emerging wireless services, there can be no
assurance that these new services will fall within the boundaries of the
Company's existing patent protection.
In some countries, patent protection is not available.
Moreover, some countries that grant patents do not afford meaningful protection
or redress for violations. Neither the Company nor its competitors have
established, and both are now legally barred form establishing, patent
protection for core technology in many other countries, including the principal
countries of Western Europe. In the absence of patent protection, the Company
has relied upon other competitive factors including: (a) product functionality,
(b) the quality of its products, and (c) the desirability of using products
that meet the same specifications as those in the United States and in other
countries where the Company has obtained patent protection.
There can be no assurance that patent protection can be
obtained, in the United States or elsewhere, for new products or applications,
or that such patent protection, if obtained, will afford meaningful protection.
INTENSE COMPETITION IN INDUSTRY
Competition in the wireless telecommunications equipment
industry is intense. The industry includes major domestic and international
companies, such as Motorola, Ericsson, Nokia, Qualcom and Nextel many of which
have substantially greater financial, technical, marketing, sales,
manufacturing, distribution and other resources than those of the Company. The
Company faces competition in various areas from certain of its licensees and
those customers who may purchase the licensees' products. It has granted a
non-exclusive royalty-bearing license to Motorola and Ericsson which enables
these companies to produce and sell products which compete with the Company's
products.
To the extent that expansion of the Company's product line or
the development of new uses or applications for its products are outside of the
protection provided by the Company's patents and other intellectual property
rights, the Company may encounter increased competition from a variety of
sources.
RELIANCE UPON GROWTH AND PRICING OF WIRELESS SERVICE
The market for basic telephone service in developing
countries, which at present are the Company's principal markets, is an emerging
one. The timing related to purchases of equipment for the provision of
telephone service is affected by regulatory, macroeconomic, capital
availability and competitive factors which make the timing of such awards
difficult to predict.
The success of the Company depends to a considerable extent
upon the continued growth and increased availability of cellular and other
wireless telecommunications services internationally and, to a lesser extent at
least in the short term, in the United States.
ANTI-TAKEOVER PROVISIONS; MOTOROLA PURCHASE RIGHTS
The Company's Board of Directors can, without obtaining
stockholder approval, issue shares of preferred stock having rights that could
adversely affect the voting power of holders of the Common Stock. The issuance
of preferred stock may delay, defer or prevent a change in control of the
Company. In addition, Section 203 of the Delaware General Corporation Law
restricts certain business combinations with any "interested stockholder" as
defined in such law. The current stockholders of the Company are not,
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by virtue of their current holdings, deemed to be "interested stockholders"
under this statute. This statute may delay, deter or prevent a change in
control of the Company.
Under the terms and conditions of the Company's Preferred
Stock, the merger, consolidation, or sale of substantially all of the assets of
the Company, or the purchase of more than 50% of the outstanding shares of
Common Stock of the Company, prior to conversion of all of the shares of the
Preferred Stock may trigger a right of redemption on the part of the holders of
the Preferred Stock.
Under the Shareholders' Agreement among certain of the
Company's stockholders, the Company and its principal stockholders are required
to notify Motorola prior to any solicitation of purchase offers for, or the
acceptance of any unsolicited offer for, all or substantially all of the assets
of the Company or a majority of its voting stock. Motorola has the right to
submit a bid at that time, and the Company and its principal stockholders have
agreed not to make any such sale at a valuation lower than that of Motorola's
bid, if any. Motorola's rights will terminate upon any sale by Motorola of
shares of Common Stock, unless after such sale Motorola owns 20% or more of the
outstanding Common Stock, on a fully diluted basis. The existence of this
contractual provision may delay, deter or prevent a change in control of the
Company.
REDEMPTION OF PREFERRED STOCK
A right of redemption on the part of the holders of the
Company's Preferred Stock may be triggered by a number of events in addition to
the merger, consolidation or sale of substantially all of the assets of the
Company, including the purchase of more than 50% of the outstanding shares of
Common Stock of the Company, the failure by the Company to convert Preferred
Stock when required to do so, the delisting of the Company's Common Stock from
a national securities exchange, or the failure by the Company to timely
register and keep in effect the Common Stock to be issued upon conversion of
the Preferred Stock.
VOLATILITY OF QUARTERLY OPERATING RESULTS
The Company's quarterly operating results may fluctuate based
on a number of factors, including variations in the Company's distribution
channels and the mix of products it sells, the timing of final product
approvals from any major distributor or end user, the timing of orders from and
shipments to major customers, the timing of new product introductions by the
Company or its competitors, changes in pricing policies by the Company's
suppliers, the availability and cost of key components, the timing of personnel
hirings and the market acceptance of new and enhanced versions of the Company's
products.
VOLATILITY OF STOCK PRICE
Factors such as announcements of the results of trials or the
introduction of new products by the Company or its competitors, market
conditions in the telecommunications, technology and emerging growth sectors
and rumors relating to the Company or its competitors may have a significant
impact on the market price of the Common Stock. Furthermore, the stock market
has experienced volatility that has particularly affected the market prices of
equity securities of many high technology and emerging growth companies such as
those in the telecommunications industry. This volatility has often been
unrelated to the operating performance of such companies. These market
fluctuations could adversely affect the price of the Common Stock.
The Company's stock price was particularly volatile during
fiscal 1996. The Company believes that this volatility may have been
attributable in part to the timing of the conversion of a $18 million issue of
convertible debentures issued by the Company in December 1995. All of the
debentures have been converted, and a total of 7.0 million shares of Common
Stock have been issued.
The Preferred Stock issued by the Company in fiscal 1997 is
convertible into Common Stock at a price equal to the lower of the 110% of the
30-day average trading price prior to the time the Common Stock was issued and
85% (subject to certain adjustments) of the 30-day average trading price prior
to conversion, subject to certain minimum price provisions. Under the terms of
the purchase agreement for the Preferred Stock, the holders thereof have
covenanted, not to engage in short sales (other than short sales no more than
three days prior to conversion in an amount which does not exceed the number of
shares to be received upon such conversion) or to engage in transactions in
violation of Section 9 of the 1934 Act, relating to the manipulation of the
trading price of the Common Stock. While these limitations are intended to
minimize volatility that may result from the conversion of the Preferred Stock,
there can be no assurance that such volatility will not occur.
DILUTION
Upon conversion of the Company's Preferred Stock, Common Stock
may be issued at a discount relative to the market price of Common Stock at
that time. Issuance at a discount could result in a dilution in the net
tangible book value of the Company per share and in the stockholders' equity
per share. The magnitude of any dilution will depend on the size of the
discount
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and the number of shares to be issued. These variables will depend on a
variety of factors, including the timing of conversion and the market price at
the time of conversion.
RAPID TECHNOLOGICAL CHANGE
The telecommunications equipment industry is characterized by
rapid technological advances, evolving industry standards, changes in end-user
requirements and frequent new product introduction and enhancements. The
wireless telecommunications industry is experiencing significant technological
change, such as the transformation of cellular systems from analog to digital.
The rate at which this change occurs and the success of such new technologies
may have a material effect on the rate at which the Company expands its
business and on its ability to achieve profitability. Moreover, there can be
no assurance that continuing developments in technology will not result in the
establishment of wireless or wireline technologies for which the Company's
interface technology is not required or in the development of equipment equal
or superior to that provided by the Company.
RISK OF LITIGATION
Litigation in the telecommunications equipment and other high
technology industries has increasingly been used as a competitive tactic both
by established companies seeking to protect their existing position in the
market and by emerging companies attempting to gain access to the market. In
such litigation, complaints may be filed on a variety of grounds, including
antitrust, breach of contract, trade secret, patent or copyright infringement,
patent or copyright invalidity, and unfair business practices. If the Company
is forced to defend itself against such claims, whether or not meritorious, the
Company is likely to incur substantial expense and diversion of management
attention, and may encounter market confusion and the reluctance of licensees
and distributors to commit resources to the Company's products. In the event
that the Company's patents or other intellectual property rights were deemed
invalid or were determined not to prohibit competing technologies, the Company
could face additional competition. See "Risk Factors -- Intellectual Property
Rights."
DEPENDENCE ON ABILITY TO DEVELOP MARKETS
The Company's success depends on its ability to develop both
domestic and international markets for its products. There can be no
assurances that the Company will continue to market its products successfully
or that a larger market for its products will continue to develop.
DEPENDENCE ON ABILITY TO MANAGE GROWTH
The Company's ability to produce and market large volumes of
competitively priced quality products depends on its ability to implement and
continually expand its operational and financial systems, recruit additional
employees and train, manage and motivate both current and new employees.
Failure to effectively manage the growth of the Company or the transition in
officers of the Company would have a material adverse effect on the business of
the Company.
DEPENDENCE ON CONTRACTORS FOR MANUFACTURING AND DISTRIBUTION
The Company uses subcontractors for the manufacture of certain
of its components and for the assembly of some of its products. In the past,
the Company has experienced delays in the receipt of interface components and
products, which have resulted in delays in product deliveries. The Company may
experience similar delays in the future.
The inability to obtain sufficient quantities of key
components as required, or to develop alternative sources if and as required in
the future, could result in delays or reductions in product shipments. In
addition, shortages of raw materials or production capacity constraints at the
Company or its subcontractors could negatively affect the Company's ability to
meet its production obligations and result in increased prices for affected
parts. These events could have a material adverse effect on the Company's
customer relationships and operating results.
The Company uses third parties, in addition to its direct
sales force, to distribute and market some of its products. In particular, the
Company plans to use interconnect companies and cellular carriers to market,
distribute, install and service certain of its products. Although the Company
has entered into contracts with several major interconnect companies and
cellular carriers, the Company is only in the early stages of developing these
relationships. In addition, these third parties are not contractually
obligated to perform any of the activities on which the Company depends to meet
its business objectives.
DEPENDENCE ON MOTOROLA FOR TRANSCEIVERS
The Company currently procures most of its cellular
transceivers from Motorola, a principal stockholder of the Company. Pursuant
to the stock purchase agreement between Motorola and the Company, Motorola has
agreed to provide the Company with an opportunity to purchase transceivers
based on any transmission technology that Motorola's Cellular Subscriber Group
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offers, when, as and if such products are made available to the public. Under
this agreement, Motorola has a right of first refusal to supply on competitive
terms the Company's transceiver needs provided, among other things, that
Motorola manufactures a comparable product and that the customer does not
specifically request another manufacturer's transceiver product. If sufficient
quantities of Motorola transceivers were not available, the Company might have
to redesign its products and could experience increased costs and shipment
delays.
QUALITY CONTROL PROBLEMS
From time to time, the Company has experienced quality control
problems with components provided by certain of its subcontractors. The
Company has instituted quality monitoring procedures for its components to
address these problems and to comply with ISO-9001. However, there can be no
assurance that future quality control problems will not occur.
RISKS OF DOING BUSINESS IN DEVELOPING MARKETS
Among the Company's largest potential markets are developing
countries that may deploy wireless communications networks as an alternative to
the construction of wireline infrastructure. Such countries may decline to
construct wireless telecommunications systems or construction of such systems
may be delayed for a variety of reasons, in which event the development of
demand for the Company's products in those countries will be similarly limited
or delayed. In doing business in developing markets, the Company may also face
economic, political and hard currency conditions that are more volatile than
those commonly experienced in the United States and other areas.
DIVIDEND POLICY
To date, the Company has paid no cash dividends on its Common
Stock. The Company currently intends to retain all future earnings, if any, to
fund the development and growth of its business and, therefore, does not
anticipate paying any cash dividends in the foreseeable future.
The terms of the Preferred Stock prohibit the Company from
paying dividends except out of retained earnings of the Company generated after
April 1, 1997. Under the terms of the Loan and Security Agreement with Sanwa
Business Credit Corporation that provides a revolving credit facility of up to
Twenty Million Dollars ($20,000,000) (the "Loan"), the Company is prohibited
from paying dividends during the term of the Loan.
THE COMPANY
OVERVIEW
The Company is in the fixed wireless telecommunications
industry. The Company designs, develops, manufactures and markets products
based on its proprietary interface technologies, which provide the capability
to bridge wireline telecommunications customer premises equipment ("CPE") with
cellular-type transceivers for use in wireless communication networks, whether
cellular, enhanced specialized mobile radio ("ESMR"), personal communications
services ("PCS"), or satellite-based. Applications of the Company's technology
include fixed wireless telecommunications as a primary service where wireline
systems are unavailable, unreliable or uneconomical and as wireless backup
systems for wireline telephone systems and wireless security alarm transmission
systems. The Company's principal product lines -- PHONECELL(R) and TELGUARD(R)
- -- allow CPE designed for traditional wireline networks to send and receive
voice, data and facsimile signals over wireless networks.
The Company was founded in June 1986 coincident with the
acquisition of title to the intellectual property rights of a pending patent
application dealing with a "cellular interface" concept and methodology. The
patent not only describes a simple physical circuit or device, but also the
very concept and principles underlying the use of intelligent interface device
(the "invention") in conjunction with cellular-type transceivers and systems.
In January 1994, the Company completed an initial public
offering of its common stock and is traded on the NASDAQ National Market System
under the ticker symbol "WRLS".
COMPANY STRATEGY
The Company's strategy is to leverage its market experience,
internationally-accepted products, and patents into a leadership position in
the rapidly developing Wireless Alternate Access ("WAA") and Wireless Local
Loop ("WLL") subscriber terminal equipment industry. Global telecommunications
equipment manufacturers together with national and international service
providers are increasingly sharing the Company's vision that wireless systems
in both developed and developing countries are well
7
<PAGE> 9
suited for use as basic telephone service networks. The key trends that are
fueling the worldwide adoption of WAA/WLL programs include the following:
- Rapid acceptance of cellular mobile communications;
- An accelerating trend toward privatization of
telecommunication service in both developed and
developing countries;
- Development and adoption of digital wireless
transmission standards (e.g., Time Divisional
Multiple Access ("TDMA"), Group Special Mobile
("GSM") and Code Division Multiple Access ("CDMA"))
which enhance network capacity and service capability
while significantly reducing the effective cost per
subscriber served;
- Service network providers acceptance of wireless
network solutions as fast, cost effective answers to
their customers' unmet demand for telecommunications;
and,
- PCS licensing and the proposed telecommunications
legislation within the U.S. should intensify
competition by wireless service providers to capture
wireless minutes of usage.
Based upon its proprietary interface technology, the Company
designs, manufacturers and markets a full line of WAA/WLL products which allow
cost-effective, innovative communications solutions where wired facilities are
(1) of substandard quality, (2) unavailable on a timely basis, (3) too costly,
or, (4) in need of alternative access or backup/diverse routing capability for
local telephone service exists.
CAPITAL RESOURCES
The Company has issued 20,000 shares of Preferred Stock. On
April 16, 1997, the Company issued to each of Nelson Partners and Olympus
Securities, Ltd. 5,000 shares of Preferred Stock (collectively a total of
10,000 shares) in exchange for Ten Million Dollars ($10,000,000) pursuant to a
private placement. On June 6, 1997, the Company issued to each of Stark
International and Shepard International Investments, Ltd. 5,000 shares of
Preferred Stock (collectively, 10,000 shares) in exchange for Ten Million
Dollars ($10,000,000) pursuant to a private placement. The conversion terms of
the Preferred Stock reflect the equivalent of a 5% annual stock dividend. The
Preferred Stock automatically converts to shares of the Company's Common Stock
on April 16, 1999, or October 16, 1999, depending upon the conversion price.
Prior to maturity, the Preferred Stock is convertible by the holders of the
Preferred Stock under specific terms and conditions which include "collars" on
the conversion price and limitations on related stock trading. In both cases,
the conversion formula is based upon the Nasdaq closing bid prices for the
Company's Common Stock. The Company also has the right to redeem the Preferred
Stock for cash at defined terms. Senior management anticipates that the funds
will be used for the development of new products for the worldwide fixed
wireless terminal business.
On April 23, 1997, the Company entered into a Loan and
Security Agreement with Sanwa Business Credit Corporation for a revolving
credit facility of up to Twenty Million Dollars ($20,000,000) (the "Loan").
Borrowings under the Loan are subject to borrowing base requirements and other
restrictions. Under the Loan, the Company is required to comply with certain
affirmative and negative covenants. This Agreement replaces a prior credit
facility. Senior management anticipates that the Loan will be used to meet
demands on working capital requirements associated with certain large wireless
local loop projects that the Company intends to bid on.
RESEARCH AND DEVELOPMENT
The Company believes that its future success depends on its
ability to adapt to the rapidly changing telecommunications environment and to
continue to meet customers' needs. The Company is currently adapting its
products to new wireless technologies and is working closely with several
companies, including long-distance carriers, cellular service providers and
telecommunications infrastructure providers and equipment manufacturers, to
develop new FWTs products.
As of September 30, 1997, the Company's research and
development staff was comprised of 19 engineers segregated into four teams.
Each team is responsible for a specific standard such as GSM, CDMA or AMPS.
Additionally, the research area continually investigates methods by which the
Company can reduce the costs of its products. During 1996 and 1997 the Company
acquired a 50% interest in Wireless Domain, Inc. which has 29 engineers
available for research and development projects on a contract basis. On
November 10, 1997, the Company acquired the remaining 50% of Wireless Domain.
The Company expects to achieve more rapid deployment of new products now that
it has nearly 50 full-time engineers.
The Company is currently adapting and developing new
generations of its products to wireless standards such as AMPS, ETACS, GSM, DCS
1800, PCS 1900, TDMA and CDMA as well as multi-line systems.
8
<PAGE> 10
MANUFACTURING
Fabrication of the Company's products is accomplished through
a combination of in-house manufacturing and subcontracting. The assembly of
printed circuit board interfaces for both FWTs and WAS products is performed at
the Company's facility in Vernon Hills, Illinois. The Company has developed
proprietary testing equipment and procedures to conduct comprehensive quality
control and quality assurance throughout the manufacturing and assembly
process. Quality programs are a high priority at the Company. The Vernon
Hills facility expects to become ISO 9001 certified during fiscal year 1998.
The Company utilizes contract manufacturers to augment its manufacturing
capability, thereby enabling it to more rapidly expand capacity when required
to meet large orders. The Company's quality assurance department works closely
with contract manufacturers to ensure compliance to the strict quality
standards of the Company.
RECENT DEVELOPMENTS
On March 2, 1998, the Company entered into a settlement
agreement with ORA Electronics, Inc., resolving a patent infringement suit that
had been brought by the Company against ORA. Under the settlement, ORA is
enjoined from selling its "CDL" line of products, and is required to pay to the
Company 300,000 shares of ORA common stock, plus $1.5 million payable in
installments over a two-year period. The agreement provides that the Company
will be entitled to receive additional shares on February 1, 2000, if the ORA
shares received by the Company do not, on that date, have a market value of at
least $1.5 million.
The Company has received the first installment of $500,000.
Its ability to collect additional payments, and to realize value from the ORA
shares that it receives, will depend on the financial condition of ORA. At
present, there is no active trading market for ORA shares, which are traded
over the counter.
SELLING SHAREHOLDERS
All of the shares offered hereby were issued by the Company to
the Selling Shareholders. The shares were issued to the Selling Shareholders
pursuant to the Agreement and Plan of Merger of November 10, 1997, which is
incorporated by reference to Exhibit 10.21 to Form 10-K filed on December 19,
1997. The shares constituted the consideration for the Selling Shareholders'
transfer to the Company for the Selling Shareholders' interest in Wireless
Domain, Inc., which was merged into Telular-WD, then a subsidiary of the
Company.
Pursuant to the Agreement and Plan of Merger, the Company
agreed to register the Common Stock issued to the Selling Shareholders under
the Securities Act and to use its best efforts to cause such Registration
Statement or Registration Statements to become effective within 90 days after
the date upon which it is filed with the SEC, and to remain in effect
thereafter until the earlier of (a) the second anniversary of the date upon
which it becomes effective and (b) the sale by the Selling Shareholders of all
of the Telular Shares covered thereby.
The following table sets forth certain information regarding
the hypothetical beneficial ownership of the Company's Common Stock that would
be held by the Selling Shareholders as of the date hereof (unless otherwise
noted) held by the Selling Shareholder. Unless otherwise indicated below, to
the knowledge of the Company, all persons listed below have sole voting and
investment power with respect to their shares of Common Stock. Mr. Giacopelli
became a member of the Board of Directors of the Company on October 28, 1997
and Executive Vice President and Chief Technology Officer on November 10, 1997.
Each of the other Selling Shareholders became an employee of the Company on
November 10, 1997. Each Selling Shareholder was an officer or director of
Wireless Domain, Inc. but has not had any other material relationship with the
Company during the last three years.
<TABLE>
<CAPTION>
Shares of Common Stock
Beneficially
Shares of Common Shares of Owned
Stock Beneficially Common Stock After the Offering
Owned Prior to the Being ---------------------
Offering(1) Offered Number Percent
----------------------- ------------ ------ -------
<S> <C> <C> <C> <C>
Dan Giacopelli 620,000 620,000 0 0
Jeffrey Hickey 180,000 180,000 0 0
Rex Nathanson 100,000 100,000 0 0
Alvin Taylor 50,000 50,000 0 0
Frank Bianchini 50,000 50,000 0 0
</TABLE>
- ------------------------
(1)BENEFICIAL OWNERSHIP IS DETERMINED IN ACCORDANCE WITH THE
RULES OF THE SECURITIES AND EXCHANGE COMMISSION AND GENERALLY INCLUDES VOTING
OR INVESTMENT POWER WITH RESPECT TO SECURITIES. SHARES OF COMMON STOCK SUBJECT
TO OPTIONS, WARRANTS AND CONVERTIBLE SECURITIES CURRENTLY EXERCISABLE OR
CONVERTIBLE, OR EXERCISABLE OR CONVERTIBLE WITHIN 60 DAYS, ARE DEEMED
OUTSTANDING, INCLUDING FOR PURPOSES OF COMPUTING THE PERCENTAGE OWNERSHIP OF
THE PERSON HOLDING SUCH OPTION, WARRANT OR CONVERTIBLE SECURITY, BUT NOT FOR
PURPOSES OF COMPUTING THE PERCENTAGE OF ANY OTHER HOLDER.
9
<PAGE> 11
PLAN OF DISTRIBUTION
The purpose of this Prospectus is to permit each Selling
Shareholder, if he desires, to dispose of some or all of the shares at such
times and at such prices as he may choose. Whether sales of shares will be
made, and the timing and amount of any sale made, is within the sole discretion
of the Selling Shareholders.
The Common Stock covered by this Prospectus may be offered for
sale from time to time by the Selling Shareholders to or through underwriters
or directly to other purchasers or through agents in one or more market
transactions, in one or more private transactions or in a combination of such
methods of sale, at prices then prevailing, at prices related to such prices or
at negotiated prices. Such methods of distribution may include, without
limitation: (a) a block trade in which the broker-dealer so engaged will
attempt to sell the Common Stock as agent but may position and resell a portion
of the block as a principal to facilitate the transaction; (b) purchases by a
broker-dealer as a principal and resale by such broker-dealer for its own
account pursuant to this Registration Statement; (c) ordinary brokerage
transactions and transactions in which the broker solicits purchasers; and (d)
face-to-face transactions between sellers and purchasers without a broker or
dealer. This Prospectus may be amended and supplemented from time to time to
describe a specific plan of distribution.
In connection with distributions of the Common Stock or
otherwise, the Selling Shareholders may enter into hedging transactions with
broker-dealers or other financial institutions. In connection with such
transactions, broker-dealers or other financial institutions may engage in
short sales of Common Stock in the course of hedging the positions they assume
with the Selling Shareholders. The Selling Shareholders may also sell Common
Stock short and redeliver the shares to close out such short positions. The
Selling Shareholders may also enter into options or other transactions with
broker-dealers or other financial institutions which require the delivery to
such broker-dealer or financial institution of the Common Stock offered hereby,
which Common Stock such broker-dealer or other financial institutions may
resell pursuant to this Prospectus (as supplemented or amended to reflect such
transaction). The Selling Shareholders may also pledge the shares registered
hereunder to a broker-dealer or other financial institution and, upon a
default, such broker-dealer or other financial institution may effect sales of
the pledged Common Stock pursuant to this Prospectus (as supplemented or
amended to reflect such transaction). In addition, any Common Stock covered by
this Prospectus that qualifies for sale pursuant to Rule 144 under the
Securities Act may be sold under Rule 144 rather than pursuant to this
Prospectus.
Brokers, dealers or agents may receive compensation in the
form of commissions, discounts or concessions from the Selling Shareholders in
amounts to be negotiated in connection with sales pursuant thereto. Such
brokers or dealers and any other participating brokers or dealers may be deemed
to be "underwriters" within the meaning of the Securities Act, in connection
with such sales and any such commission, discount or concession may be deemed
to be underwriting discounts or commissions under the Securities Act.
Certain costs, expenses and fees in connection with the
registration of the Common Stock will be borne by the Company. Commissions,
discounts and transfer taxes, if any, attributable to the sales of the Common
Stock will be borne by the Selling Shareholders. The Selling Shareholders have
agreed or may agree to indemnify the Company or any underwriter, as the case
may be, and any of their respective affiliates, directors, officers and
controlling persons, against certain liabilities in connection with the
offering of the Common Stock pursuant to this Registration Statement, including
liabilities arising under the Securities Act. In addition, the Company has
agreed to indemnify the Selling Shareholders or any underwriter, as the case
may be, and against certain liabilities in connection with the offering of the
Common Stock pursuant to this Prospectus, including liabilities arising under
the Securities Act.
The Company has agreed to supply each Selling Shareholder with
such number of copies of this Prospectus as he may reasonably request. The
Selling Shareholders will in all cases be responsible for complying with the
prospectus delivery requirements of Section 5(b)(2) of the Securities Act in
connection with the offering and sale of the shares.
LEGAL MATTERS
Certain legal matters in connection with the securities
offered hereby are being passed upon for the Company by Covington & Burling,
Washington, D.C.
10
<PAGE> 12
EXPERTS
The consolidated financial statements of Telular Corporation
appearing in Telular Corporation's Form 10-K for the year ended September 30,
1997, have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
11
<PAGE> 13
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution*
The expenses payable by the Registrant in connection with the issuance
and distribution of the securities being registered hereby (other than
underwriting discounts and commissions) are set forth below:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee . . . . . . . . . .$ 659
-------
Nasdaq Listing Fee . . . . . . . . . . . . . . . . . . . . . . . . . . .$20,000
-------
Blue Sky Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . 0
-------
Accounting Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . 2,000
-------
Legal Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . 25,000
-------
Registrar and Transfer Agent's Fees and Expenses . . . . . . . . . . . . 0
-------
Miscellaneous Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 0
-------
Printing Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
-------
Total $52,659*
-------
</TABLE>
- ----------------------------------
* Except for the Securities and Exchange Commission registration fee and
the Nasdaq listing fee all expenses are estimated.
Item 15. Indemnification of Officers and Directors
Section 145 of the General Corporation Law of the State of
Delaware (the "DGCL") provides that a corporation may indemnify any person,
including any officer or director, who was or is a party or who is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation), by reason of the fact
that he is or was a director, officer, employee or agent of the corporation or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise ("such Person"), against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement, actually and reasonable
incurred by such Person, if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. In any threatened,
pending or completed action by or in the right of the corporation, a
corporation also may indemnify any such Person for costs actually and
reasonably incurred by him in connection with that action's defense or
settlement, if he acted in good faith and in a manner reasonably believed to be
in or not opposed to the best interests of the corporation; however, no
indemnification shall be made with respect to any claim, issue or matter as to
which such Person shall have been adjudged to be liable to the corporation,
unless and only to the extent that a court shall determine that such indemnity
is proper. Where a director, officer, employee or agent is successful on the
merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses (including attorneys' fees)
that such officer or director actually and reasonably incurred.
The Registrant's Bylaws provide that the Registrant will
indemnify such Persons against all liability and expense arising out of such
Person's connection with the business of the Registrant, provided that the
Board of
II-1
<PAGE> 14
Directors determines that such Person acted in good faith and reasonably
believed that his actions were not opposed to the best interests of the
Registrant; and with respect to any criminal action or proceeding, that such
Person had no reasonable cause to believe his conduct was unlawful. In the
case of any action, suit or proceeding by or in the right of the Registrant in
which such Person is adjudged liable to the Registrant, the Registrant will
indemnify such Person for expenses only to the extent that the court in which
such action is brought determines, upon application, that such Person is
entitled to indemnity for reasonable expenses, and in no case shall such
indemnification extend to liability. Advances against reasonable expenses may
be made by the Registrant on terms fixed by the Board of Directors subject to
an obligation to repay if indemnification proves unwarranted.
The Registrant's Certificate of Incorporation provides that,
to the fullest extent permitted by Delaware law, its directors shall not be
liable for monetary damages for breach of the directors' fiduciary duty to the
Registrant and its stockholders. This provision in the Certificate of
Incorporation does not eliminate the duty of care. In appropriate
circumstances, equitable remedies such as injunctive or other forms of
non-monetary relief will remain available under Delaware law. In addition,
each director will continue to be subject to 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 actions leading to improper personal benefit to the
director, and for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Delaware law. The provision also does not
affect a director's responsibilities under any other law, such as the federal
securities laws or state or federal environmental laws.
Directors and officers of the Registrant are covered by a
directors' and officers' liability insurance policy of the Registrant.
Item 16. Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description Reference
- ------- ----------- ---------
<S> <C> <C>
Instruments defining the rights
of Security Holders
4.1 Certificate of Incorporation Incorporated by reference to
Exhibit 3.1 to the Registration State-
ment of Telular Corporation on Form
S-1, Registration No. 33-72096, as
amended ("Form S-1")
4.2 Amendment No. 1 to Incorporated by reference to
Certificate of Incorporation Exhibit 3.2 to Form S-1
4.3 Amendment No. 2 to Incorporated by reference to
Certificate of Incorporation Exhibit 3.3 to Form S-1
4.4 Amendment No. 3 to Certificate Incorporated by reference to
of Incorporation Exhibit 3.4 to Form 10-Q filed
on May 16, 1997
4.5 Bylaws Incorporated by reference to
Exhibit 3.4 to Form S-1
</TABLE>
II-2
<PAGE> 15
<TABLE>
<S> <C> <C>
4.6 Certificate of Designations, Incorporated by reference
Rights and Preferences of to Exhibit 99.2 to
Series A Convertible Preferred Form 8-K filed on
Stock April 25, 1997
Opinion on legality of Common
Stock being registered
Consents of experts and counsel
23.1 Consent of Ernst & Young LLP Filed herewith as Exhibit 23.1
Additional Exhibits
99.1 Agreement and Plan of Merger Incorporated by reference to Exhibit
10.21 to Form 10-K filed on December
19, 1997.
</TABLE>
Item 17. Undertakings
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or
sales are being made, a post-effective
amendment to the Registration Statement:
(i) To include any prospectus required by
Section 10(a)(3) of the Securities
Act;
(ii) To reflect in the prospectus any
facts or events arising after the
effective date of the Registration
Statement (or the most recent
post-effective amendment thereof)
which, individually or in the
aggregate, represent a fundamental
change in the information set forth
in the Registration Statement;
(iii) To include any material information
with respect to the plan of
distribution not previously
disclosed in the Registration
Statement or any material change to
such information in the Registration
Statement;
Provided, however, that paragraphs (a)(1)(i)
and (a)(1)(ii) do not apply if the
information required to be included in a
post-effective amendment by those paragraphs
is contained in periodic reports filed by the
Registrant pursuant to Section 13 or Section
15(d) of the Exchange Act that are
incorporated by reference in the Registration
Statement.
(2) That, for the purpose of determining any
liability under the Securities Act, each such
post-effective amendment shall be deemed to
be a new registration
II-3
<PAGE> 16
statement relating to the securities offered
therein, and the offering of such securities
at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the
securities registered which remain unsold at
the termination of the offering.
(b) The Registrant hereby undertakes that, for purposes
of determining any liability under the Securities
Act, each filing of the Registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in the
Registration Statement shall be deemed to be a new
Registration Statement relating to the Common Stock
therein, and the offering of such Common Stock at
that time shall be deemed to be the initial bona fide
offering thereof.
(c) Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to
directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission
such indemnification is against public policy as
expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for
indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of
the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such
director, officer or controlling person in connection
with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question
whether such indemnification by it is against public
policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
II-4
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized in Vernon Hills, State of Illinois, on the ____ day of , 1998.
TELULAR CORPORATION
(Registrant)
By /s/ Kenneth E. Millard
----------------------------
Kenneth E. Millard
Chief Executive Officer
Pursuant to the requirements of the Securities Act, this Amendment to
the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ William L. De Nicolo * Chairman of the Board March ___, 1998
------------------------
William L. De Nicolo
/s/ Kenneth E. Millard President, Chief Executive Officer and March ___, 1998
---------------------- Director (principal executive officer)
Kenneth E. Millard
/s/ Robert C. Montgomery * Chief Operating Officer, Executive Vice March ___, 1998
------------------------ President and Director
Robert C. Montgomery
/s/ Daniel D. Giacopelli * Chief Technology Officer, Executive Vice March ___, 1998
------------------------ President and Director
Daniel D. Giacopelli
/s/ Jeffrey L. Herrmann Chief Financial Officer, Secretary March ___, 1998
-------------------- and Senior Vice President (principal
Jeffrey L. Herrmann financial officer)
* By Jeffrey L. Herrmann, Attorney-in-fact
</TABLE>
II-5
<PAGE> 18
<TABLE>
<S> <C> <C>
/s/ John E. Berndt Director March ___, 1998
------------------
John E. Berndt
/s/ Larry J. Ford Director March ___, 1998
-----------------
Larry J. Ford
/s/ Richard D. Haning Director March ___, 1998
---------------------
Richard D. Haning
/s/ Mark R. Warner Director March ___, 1998
------------------
Mark R. Warner
</TABLE>
II-6
<PAGE> 1
EXHIBIT 23.1
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement Form S-3 and related Prospectus of Telular Corporation
for the registration of 1,000,000 shares of its common stock and to the
incorporation by reference therein of our report dated November 7, 1997, with
respect to the consolidated financial statements and schedules of Telular
Corporation included in its Form 10-K for the year ended September 30, 1997,
filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
Chicago, Illinois
March 25, 1998
