<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 8, 1998.
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
TRANSACTION NETWORK SERVICES, INC.
(Exact name of Registrant as Specified in its Charter)
<TABLE>
<S> <C>
DELAWARE 54-1555332
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
</TABLE>
--------------------------
1939 ROLAND CLARKE PLACE
RESTON, VIRGINIA 20191-1406
(703) 453-8300
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
--------------------------
JOHN J. MCDONNELL III, ESQ.
TRANSACTION NETWORK SERVICES, INC.
1939 ROLAND CLARKE PLACE
RESTON, VIRGINIA 20191-1406
(703) 453-8300
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------
COPY TO:
JEFFREY E. JORDAN, ESQ.
ARENT FOX KINTNER PLOTKIN & KAHN, PLLC
1050 CONNECTICUT AVENUE, N.W.
WASHINGTON, DC 20036-5339
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable on or after the effective date of this Registration Statement.
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 earliest
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 earliest effective registration statement
for the same offering. / /
If the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE AGGREGATE PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT (1) OFFERING PRICE (1) FEE
<S> <C> <C> <C> <C>
Common Stock, $.01 par value...................... 287,474 shares $19.78125 $5,686,596 $1,678
</TABLE>
(1) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457(c).
------------------------------
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE 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.
<PAGE>
SUBJECT TO COMPLETION, DATED MAY , 1998
PROSPECTUS
TRANSACTION NETWORK SERVICES, INC.
287,474 SHARES OF COMMON STOCK
The Common Stock of Transaction Network Services, Inc. (the "Company" or
"TNS"), par value $0.01 per share (the "Common Stock"), offered hereby is held
by the Selling Stockholder (as defined herein) who may from time to time offer
for sale such shares of Common Stock. See "Selling Stockholder." The Company
will not receive any proceeds from the sale by the Selling Stockholder of the
Common Stock.
The Common Stock is listed on the Nasdaq Stock Market--National Market under
the symbol "TNSI." On May , 1998, the last reported sale price of the Common
Stock reported by the Nasdaq Stock Market was $ per share. See "Market
for the Common Stock and Related Stockholder Matters."
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR CERTAIN INFORMATION THAT SHOULD
BE CONSIDERED BY PROSPECTIVE INVESTORS.
---------------------
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.
------------------------
Any or all of the Common Stock offered hereby may be sold from time to time
to purchasers directly by the Selling Stockholder. Alternatively, the Selling
Stockholder may from time to time offer any or all of the Common Stock to or
through underwriters, dealers, brokers or other agents. In addition, the Selling
Stockholder and/or any underwriter, broker, dealer or other agent may engage in
hedging transactions with respect to the Common Stock. In connection with such
transactions, shares of Common Stock offered hereby may be sold or delivered to
cover any short positions resulting from such transactions. The Common Stock
offered hereby may be sold from time to time in one or more transactions at a
fixed offering 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
Selling Stockholder or by agreement between the Selling Stockholder and its
underwriters, dealers, brokers or other agents. The Company will pay the
expenses of this offering estimated at $ .
Any underwriters, dealers, brokers or other agents to or through whom Common
Stock offered hereby is sold may receive compensation in the form of
underwriting discounts, concessions, commissions or fees from the Selling
Stockholder and/or purchasers of Common Stock for whom they may act. In
addition, the Selling Stockholder and any such underwriters, dealers, brokers or
other agents as agent or to whom they may sell as principal, or both (which
compensation to a particular underwriter, broker, dealer or other agent might be
in excess of customary commissions) may be deemed to be underwriters under the
Securities Act, and any profits on the sale of Common Stock by them and any
discounts, commissions or concessions received by any of such persons may be
deemed to be underwriting discounts and commissions under the Securities Act.
Those who act as underwriter, broker, dealer or other agent in connection with
the sale of the Common Stock will be selected by the Selling Stockholder and may
have other business relationships with the Company and its subsidiaries or
affiliates in the ordinary course of business. The Company cannot presently
estimate the amount of any such discounts, commissions or concessions. The
Company knows of no existing arrangements between the Selling Stockholder and
any underwriter, dealer, broker or other agent. See "Plan of Distribution."
The date of this Prospectus is May , 1998
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES
OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES OR AN OFFER TO ANY
PERSON IN ANY JURISDICTION WHERE SUCH OFFER WOULD BE UNLAWFUL. THE DELIVERY OF
THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Available Information................................................................. 2
Documents Incorporated by Reference................................................... 3
Risk Factors.......................................................................... 3
Market for the Common Stock and Related Stockholder Matters........................... 6
Use of Proceeds....................................................................... 7
Selling Stockholder................................................................... 7
Plan of Distribution.................................................................. 7
Legal Matters......................................................................... 9
Experts............................................................................... 9
</TABLE>
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 with the Commission,
including the Registration Statement on Form S-3 of which this Prospectus is a
part, may be inspected and copied at the public reference facilities maintained
by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, Seven World
Trade Center, New York, New York 10048 and 500 West Madison Street, Chicago,
Illinois 60661. Copies of such material can also 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 also maintains a Web site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission at the
address http://www.sec.gov. The Common Stock is listed on the National Market of
the Nasdaq Stock Market. Copies of the Company's reports, proxy statements and
other information filed with the Commission can also be inspected at the offices
of the National Association of Securities Dealers, Inc. at 1735 K Street, N.W.,
Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the securities offered hereby. This Prospectus does not contain all
of the information set forth in the Registration Statement and the exhibits
thereto, certain parts of which are omitted as permitted by the rules and
regulations of the Commission. Statements contained in this Prospectus as to the
contents of any contract or other document are not necessarily complete, and in
each instance reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference. For further information regarding
the Company and the securities offered hereby, reference is made to the
Registration Statement and to the exhibits thereto.
2
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
The following documents previously filed by the Company with the Commission
pursuant to the Exchange Act are incorporated herein by this reference:
(1) The Company's Annual Report on Form 10-K for the year ended December
31, 1997, as amended by Amendment No. 1 filed on May 4, 1998.
(2) The Company's Current Report on Form 8-K filed on March 9, 1998.
(3) The description of the Common Stock contained in the Company's
Registration Statement on Form 8-A filed under Section 12 of the Exchange
Act, dated August 16, 1995.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to
termination of the offering of the Common Stock shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date any such document is filed. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be modified
or superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any subsequently filed document which is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon written or oral request, a copy of any and
all of the documents incorporated by reference herein, other than exhibits to
such documents unless such exhibits are specifically incorporated by reference
into such documents. Any such request may be directed to Transaction Network
Services, Inc., Attention: Investor Relations, at the Company's principal
executive offices, which are located at 1939 Roland Clarke Place, Reston,
Virginia 20191-1406, telephone number (703) 453-8406.
RISK FACTORS
THE FOLLOWING RISK FACTORS SHOULD BE CONSIDERED CAREFULLY IN ADDITION TO THE
OTHER INFORMATION CONTAINED IN THIS PROSPECTUS BEFORE PURCHASING THE COMMON
STOCK OFFERED HEREBY.
RELIANCE ON MAJOR CUSTOMERS. For the year ended December 31, 1997
approximately 48% of the Company's total revenues were derived from five major
customers. The loss of any one or more of these customers would have a material
adverse effect on the Company. The Company has multi-year contracts with these
customers which expire between July 2000 and December 2000. There can be no
assurance that these contracts will be renewed.
DEPENDENCE ON MARKET EXPANSION AND ON EXPANSION INTO NEW MARKETS. Although
the Company has grown rapidly since becoming operational in June 1991, its
future growth and profitability will depend, in part, upon the further expansion
of the Point-of-Sale/Point-of-Service ("POS") transaction network services
market, the telecommunications services market, the financial services industry,
the emergence of other markets for electronic transaction network services, such
as the financial services industry, services for ATM processing, healthcare
claims processing and electronic benefits transfer, and the Company's ability to
penetrate these other markets both domestically and internationally. Further
market expansion is dependent upon the continued growth in the number of
transactions and the continued automation of traditional paper-based processing
systems. There can be no assurance that markets for the Company's network and
telecommunications services will continue to expand and develop or that the
Company will be successful in its efforts to penetrate new markets.
COMPETITION. The POS transaction network services market and the
telecommunications services market are highly competitive, and the Company
expects competition to increase. The Company's competitors include public data
networks and major interexchange carriers. Several of these competitors
3
<PAGE>
have recently introduced new products competitive with those of the Company.
Increased competition could result in price reductions, reduced margins and loss
of market share, all of which could materially and adversely affect the
Company's business, operating results and financial condition. Many of the
Company's current and potential competitors have significantly greater
financial, technical, marketing and other resources than the Company. As the POS
transaction network services market and the telecommunications services market
continue to grow, the Company's competitors may devote greater resources to the
development and marketing of new competitive services and the marketing of
existing competitive services. Recent federal legislation relaxes current
regulations that restrict the regional Bell operating companies from competing
in this industry. There can be no assurance that the Company will be able to
compete successfully with existing or new competitors or that competitive
pressure faced by the Company will not materially and adversely affect its
business, operating results and financial condition.
TECHNOLOGICAL CHANGE AND NEED TO DEVELOP NEW SERVICES. The markets for the
Company's services are characterized by rapidly changing technology and frequent
new service offerings. The introduction of services utilizing new technologies
can render existing services obsolete or unmarketable. The Company's continued
success will depend on its ability to enhance its existing services and to
develop and introduce, on a timely and cost-effective basis, new services that
keep pace with technological developments and address increasingly sophisticated
customer requirements. There can be no assurance that the Company will be
successful in identifying, developing and marketing service enhancements or new
services that respond to technological change, that the Company will not
experience difficulties that could delay or prevent the successful development,
introduction and marketing of service enhancements or new services, or that its
service enhancements and new services will adequately meet the requirements of
the marketplace and achieve market acceptance. The Company's business, operating
results and financial condition could be materially and adversely affected if
the Company were to incur delays in developing service enhancements or new
services or if such service enhancements or new services were to not gain market
acceptance.
DEPENDENCE ON KEY PERSONNEL. The Company's success depends to a significant
extent upon a number of key technical and management employees, including its
President and Chief Executive Officer, John J. McDonnell, Jr. The loss of the
services of any of the Company's key employees could have a material adverse
effect on the Company. The Company maintains a $1 million key-man life insurance
policy on the life of Mr. John J. McDonnell, Jr. Employees do not enter into
non-competition agreements with the Company, but every employee enters into a
confidentiality agreement. The Company's success also depends in large part upon
its ability to attract and retain highly-skilled managerial, sales and marketing
personnel, and the Company believes that it will need to hire additional
technical personnel in order to enhance its existing services and to develop new
services. However, competition for highly skilled technical, managerial, sales
and marketing personnel is intense, and if the Company is unable to hire the
necessary personnel, the development of service enhancements and new services
would likely be delayed or prevented. Furthermore, certain of the Company's
senior management personnel have recently joined the Company. There can be no
assurance that the Company will be successful in retaining its key personnel and
in attracting and retaining the personnel it requires to continue its growth
strategy.
DEPENDENCE ON PROPRIETARY RIGHTS. The Company's success is heavily
dependent upon its proprietary technology. The Company relies principally upon
trade secret and copyright law to protect its proprietary technology. The
Company enters into confidentiality or license agreements with its employees,
distributors, customers and potential customers and limits access to and
distribution of its software, documentation or other proprietary information.
There can be no assurance that these measures will be adequate to prevent
misappropriation of its technology or that the Company's competitors will not
independently develop technologies that are substantially equivalent or superior
to the Company's technology. In addition, the laws of some foreign countries do
not protect the Company's proprietary rights to the same extent as do the laws
of the United States. The Company is subject to the risk of adverse claims and
litigation alleging infringement of intellectual property rights. There can be
no assurance that third parties
4
<PAGE>
will not assert infringement claims in the future with respect to the Company's
current or future services or that any such claims will not require the Company
to enter into royalty arrangements or result in costly litigation. While the
Company believes that it currently has all licenses necessary to conduct its
business, no assurance can be given that additional licenses will not be
required in the future. Furthermore, no assurance can be given that, if any
additional licenses are required, such licenses could be obtained on
commercially reasonable terms.
DEPENDENCE ON LIMITED NUMBER OF SUPPLIERS AND ABSENCE OF SUPPLY
CONTRACTS. Certain key components used in the Company's network are currently
available only from limited sources. The Company does not have long-term supply
contracts with these or any other limited source vendors and purchases this
network equipment on a purchase order basis. The inability to obtain sufficient
quantities of limited source equipment as required, or to develop alternative
sources as required in the future, could result in delays or reductions in the
Company's development and deployment of network equipment, which could adversely
affect the Company's business, operating results and financial condition.
GOVERNMENT REGULATION. Although the Federal Communications Commission
("FCC") retains general regulatory jurisdiction over the Company's sale of
interstate services, the Company, as a provider of enhanced communications
services, is not required to maintain a certificate of public convenience and
necessity with the FCC or to file tariffs with the FCC covering its services.
State regulators may regulate purely intrastate enhanced services and may
regulate mixed intrastate/interstate enhanced services to the extent their
regulation does not impede federal policies. The Company is not currently
subject to any state regulation for its existing services but believes that even
if subjected to state regulation the Company could obtain all necessary
approvals. However, FCC and state regulations can affect the costs of business
for the Company and its competitors by changing the rate structure for access
services purchased from local exchange carriers to originate and terminate
calls.
Pursuant to the Telecommunications Act of 1996 (the "1996 Act"), the FCC
instituted a rulemaking proceeding in December 1996 referred to as Access Charge
Reform ("Access Reform") that seeks to reform the current system of interstate
access charges and make it compatible with the competitive paradigm established
by the 1996 Act. The initial phase of Access Reform was implemented in July
1997. The initial phase of Access Reform resulted in a decrease in certain
components of the Company's variable cost per transaction and as a result,
lowered its network costs. The second phase of Access Reform took place in
January 1998. The second phase of Access Reform resulted in an additional
decrease in certain components of the Company's variable cost per transaction;
however, the second phase increased certain fixed monthly recurring charges and
instituted certain new fixed monthly recurring charges. As a result, the Company
may experience an increase in its network costs at least until the next phase of
Access Reform is instituted in July 1998. The Company believes that future
revisions to its costs under Access Reform may reduce its network costs since
the Company believes that it is not subject to certain of the new charges
instituted by Access Reform and that, in any event, the increased charges are
not in accordance with the spirit of Access Reform which is intended to reduce
overall access charges. However, there can be no assurance that the future
phases of Access Reform will result in reductions to the Company's network costs
and in fact, they may increase. Accordingly, the impact of Access Reform on the
Company's future network access costs is unknown, and the Company cannot predict
the timing, outcome or effects of the FCC's orders or of any future tariff
matters.
The 1996 Act also removes current restrictions on the ability of the
regional Bell operating companies to provide inter-LATA enhanced services,
specifically including credit card verification services. Under the legislation,
the regional Bell operating companies ultimately will be permitted to provide
inter-LATA long distance telecommunications, out-of-region immediately and
in-region after satisfaction of certain network unbundling and related
requirements. As a result, the Company and its telecommunications services
customers likely will face additional competition. In addition, the Company is
considering an expansion of
5
<PAGE>
its services into markets which may involve the provision of voice-grade or data
common carrier telecommunications services. To the extent that the Company
enters into any such service offerings, it will be required to comply with
applicable FCC and/or state authorization and tariffing regulations.
SEASONALITY AND POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS. Merchant
credit card transactions account for a major percentage of the transaction
volume processed by the Company's customers. The volume of such transactions on
the Company's network is expected to be greater in the fourth quarter holiday
season that during the rest of the year. Consequently, revenues and earnings
from merchant credit card transactions in the first quarter generally are
expected to be lower than revenues and earnings from merchant credit card
transactions in the fourth quarter of the immediately preceding year. Although
the financial services, healthcare claims processing and electronic benefits
transfer markets, as well as other potential markets targeted by the Company for
future expansion, are anticipated to be less seasonal, the Company expects that
its operating results in the foreseeable future will be significantly affected
by seasonal trends in its merchant credit card transaction market. Quarterly
results can be affected by a number of factors, including costs incurred for
network expansion, the impact of Access Reform on network costs, general
economic conditions, weather and changes in pricing policy by the Company and
its competitors.
MANAGEMENT OF GROWTH. The Company is currently experiencing a period of
rapid growth and expansion. Certain of the Company's key employees have not had
experience in managing companies of the Company's size or larger. In addition,
certain of the Company's senior management personnel have recently joined the
Company. The Company's ability to manage growth successfully will require the
Company to continue to improve its operational, management and financial systems
and controls. If the Company's management is unable to manage growth
effectively, the Company's business, results of operations and financial
condition could be materially and adversely affected.
POSSIBLE VOLATILITY OF STOCK PRICE. Future announcements concerning the
Company or its competitors, quarterly variations in operating results,
technological innovations, the introduction of new services or changes in
pricing policies by the Company or its competitors, proprietary rights or
changes in earning estimates by analysts, among other factors, could cause the
market price of the Common Stock to fluctuate substantially. In addition, stock
prices for many technology companies fluctuate widely for reasons which may be
unrelated to operating results. These fluctuations, as well as general economic,
political and market conditions, such as recessions or military conflicts, may
materially and adversely affect the market price of the Common Stock.
EFFECT OF DELAWARE LAW AND CERTAIN CHARTER PROVISIONS. Certain provisions
of Delaware law and of the Company's Certificate of Incorporation could have the
effect of making it more difficult for a third party to acquire, or of
discouraging a third party from attempting to acquire, control of the Company.
Such provisions could limit the price that certain investors might be willing to
pay in the future for shares of Common Stock. Certain of these provisions could
make it more difficult for stockholders to effect certain corporate actions or
could also have the effect of delaying or preventing a change in control of the
Company.
MARKET FOR THE COMMON STOCK AND
RELATED STOCKHOLDER MATTERS
The Common Stock has been traded on the Nasdaq Stock Market--National Market
under the symbol "TNSI" since the Company's initial public offering in April
1994. The following table reflects the range of high and low closing sale prices
for each period indicated as reported by the Nasdaq Stock Market. This table
reflects inter-dealer prices, without retail mark-up, mark-down or commission.
In
6
<PAGE>
April 1996, the Company declared a 3-for-2 stock split. All price per share
amounts have been retroactively adjusted to reflect the stock split.
<TABLE>
<CAPTION>
MARKET PRICE FOR
COMMON STOCK
------------------
FISCAL YEAR QUARTER HIGH LOW
- ------------------------------------------- ---------------------------- ------- -------
<S> <C> <C> <C>
1996....................................... First 23 3/8 15 1/2
Second 26 3/8 21 1/2
Third 22 1/2 13 3/4
Fourth 16 1/2 11
1997....................................... First 14 5/8 9 5/8
Second 16 1/2 9 7/8
Third 18 3/8 13
Fourth 22 1/2 15 1/8
1998....................................... First 20 3/4 16 1/8
Second (through 5/ /98) 23 3/8 18 5/8
</TABLE>
As of February 16, 1998, there were 70 stockholders of record of the Common
Stock, including shares held in street name by various brokerage firms. In
addition, the Company estimates that there are approximately 2,000 beneficial
owners of the Common Stock. The Company has never declared or paid any cash
dividends on its capital stock. The Company currently intends to retain its
earnings for future growth and, therefore, does not anticipate paying any cash
dividends in the foreseeable future. Under a bank line of credit agreement, the
Company is restricted from paying any dividends on its stock without the prior
written consent of the lender.
USE OF PROCEEDS
The Common Stock offered hereby will be sold by the Selling Stockholder, and
the Company will not receive any of the proceeds of such sales.
SELLING STOCKHOLDER
The Common Stock offered by this Prospectus was initially issued by the
Company to SunTech Processing Systems, LLC ("SunTech") on February 27, 1998 in
connection with the acquisition of certain assets of SunTech. The table below
sets forth information regarding the beneficial ownership of the Common Stock by
the Selling Stockholder as of May , 1998 and as adjusted to reflect the
sale of Common Stock offered hereby.
<TABLE>
<CAPTION>
SHARES OWNED BEFORE MAXIMUM SHARES
THE OFFERING BEING OFFERED
---------------------- ----------------------
NAME NUMBER PERCENT NUMBER PERCENT
- ------------------------------------------------------------------------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C>
SunTech Processing Systems, LLC.......................................... 287,474 2.2% 287,474 2.2%
</TABLE>
Because the Selling Stockholder may offer by this Prospectus all or some
part of the Common Stock which it holds, no estimate can be given as of the date
hereof as to the amount of Common Stock actually to be offered for sale by the
Selling Stockholder or as to the amount of Common Stock that will be held by the
Selling Stockholder upon the termination of such offering. See "Plan of
Distribution."
7
<PAGE>
PLAN OF DISTRIBUTION
Any or all of the Common Stock offered hereby may be sold from time to time
to purchasers directly by the Selling Stockholder. Alternatively, the Selling
Stockholder may from time to time offer any or all of the Common Stock to or
through underwriters, dealers, brokers or other agents. In addition, the Selling
Stockholder and/or any underwriter, broker, dealer or other agent may engage in
hedging transactions with respect to the Common Stock. In connection with such
transactions, shares of Common Stock offered hereby may be sold or delivered to
cover any short positions resulting from such transactions. The Company will
receive no proceeds from the sale of the Common Stock offered hereby.
The Common Stock offered hereby may be sold from time to time in one or more
transactions at a fixed offering 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 Selling Stockholder or by agreement between the Selling
Stockholder and its underwriters, dealers, brokers or other agents.
Any underwriters, dealers, brokers or other agents to or through whom Common
Stock offered hereby is sold may receive compensation in the form of
underwriting discounts, concessions, commissions or fees from the Selling
Stockholder and/or purchasers of Common Stock for whom they may act as agent or
to whom they may sell as principal, or both (which compensation to a particular
underwriter, broker, dealer or other agent might be in excess of customary
commissions). In addition, the Selling Stockholder and any such underwriters,
dealers, brokers or other agents may be deemed to be underwriters under the
Securities Act, and any profits on the sale of Common Stock by them and any
discounts and commissions or concessions received by any of such persons may be
deemed to be underwriting discounts and commissions under the Securities Act.
Those who act as underwriter, broker, dealer or other agent in connection with
the sale of the Common Stock will be selected by the Selling Stockholder and may
have other business relationships with the Company and its subsidiaries or
affiliates in the ordinary course of business. The company cannot presently
estimate the amount of any such discounts, commissions or concessions. The
Company knows of no existing arrangements between the Selling Stockholder and
any underwriter, dealer, broker or other agent.
At any time a particular offer of Common Stock is made by the Selling
Stockholder, if required, a Prospectus Supplement will be distributed which will
set forth the identity of, and certain information relating to, such Selling
Stockholder, the aggregate amounts of Common Stock being offered and the terms
of the offering, including the name or names of any underwriters, dealers,
brokers or other agents, any discounts, commissions and other items constituting
compensation from such Selling Stockholder and any discounts, commissions or
concessions allowed or reallowed or paid to dealers. Such Prospectus Supplement
and, if necessary, a post-effective amendment to the Registration Statement of
which this Prospectus is a part will be filled with the Commission to reflect
the disclosure of additional information with respect to the distribution of the
Common Stock.
To comply with certain states' securities laws, if applicable, the Common
Stock offered hereby may be sold in such states only through brokers or dealers.
In addition, in certain states the Common Stock may not be sold unless it has
been registered or qualified for sale in such state or an exemption from
registration or qualification is available and complied with.
The Company has agreed to pay all of the expenses incurred in connection
with the preparation and filing of this Prospectus and the related Registration
Statement, including the fees and expenses in connection with the registration
or qualification of the Common Stock offered hereby for sale under state
securities laws.
8
<PAGE>
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Arent Fox Kintner Plotkin & Kahn, PLLC, Washington, D.C.
EXPERTS
The consolidated financial statements and financial statement schedule of
the Company as of December 31, 1996 and 1997 and for the three years ended
December 31, 1997 included in the Company's Annual Report on Form 10-K,
incorporated by reference herein, have been audited by Arthur Andersen, LLP,
independent public accountants as indicated in their reports with respect
thereto, and have been incorporated by reference herein in reliance upon the
authority of said firm as experts in giving said reports.
9
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below is an estimate of the approximate amount of the fees and
expenses payable by the Registrant.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee................ $ 1,678
*Accounting fees and expenses...................................... 2,500
*Legal fees and expenses........................................... 5,000
*Printing and engraving............................................ 1,000
*Transfer agent and registrar fees................................. 800
*Miscellaneous..................................................... 500
---------
Total............................................................ $ 11,478
</TABLE>
- ------------------------
* Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law, as amended, provides
that a corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
proceeding, whether civil, criminal, administrative or investigative, 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 its request in such capacity in another
corporation or business association, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding 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.
Section 102(b)(7) or the Delaware General Corporation Law, as amended, permits a
corporation to provide in its certificate of incorporation that a director of
the corporation shall not be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for any transaction
from which the director derived an improper personal benefit. Article Fourteenth
of the Registrant's Restated Certificate of Incorporation, as amended, provides
for the elimination of personal liability of a director for breach of fiduciary
duty as permitted by Section 102(b)(7) of the Delaware General Corporation Law,
and Article Thirteenth provides that the Registrant shall indemnify its
directors and officers to the fullest extent permitted by the Delaware General
Corporation Law.
The Registrant has in effect a directors and officers liability insurance
policy under which the directors and officers of the Registrant are insured
against loss arising from claims made against them due to wrongful acts while
acting in their individual and collective capacities as directors and officers,
subject to certain exclusions.
II-1
<PAGE>
ITEM 16. EXHIBITS.
<TABLE>
<S> <C>
5 Opinion of Arent Fox Kintner Plotkin & Kahn, PLLC concerning legality of
securities being registered.
23 Consents of:
(a) Arent Fox Kintner Plotkin & Kahn, PLLC (included in Exhibit 5).
(b) Arthur Andersen, LLP.
24 Power of Attorney: included in Part II.
</TABLE>
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;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(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;
(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.
(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 that 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 the directors, officers and controlling persons of
the Registrant pursuant to the provisions referred to 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 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 Act and will
be governed by the final adjudication of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant certifies
that it has reasonable grounds to believe that it meets all of the requirements
for filing on Form S-3 and has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Reston, State of Virginia, on the day of May, 1998.
TRANSACTION NETWORK SERVICES, INC.
By: /s/ JOHN J. MCDONNELL III
-----------------------------------------
John J. McDonnell III
VICE PRESIDENT--GENERAL COUNSEL
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints John J. McDonnell, Jr. and John J. McDonnell III,
and each of them his true and lawful attorney-in-fact and agent with power of
substitution and resubstitution, for him, and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post effective
amendments) to this Registration Statement on Form S-3, and to file the same,
with all exhibits thereto, and all documents in connection therewith, with the
Commission, granting unto said attorney-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done to comply with the provisions of the
Securities Act and all requirements of the Commission, hereby ratifying and
confirming all that said attorney-in-fact or any of them, or their or his or her
substitutes, may lawfully do or cause to be done by virtue hereof.
II-3
<PAGE>
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities and
on the date indicated:
SIGNATURES TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ JOHN J. MCDONNELL, JR. President and Chief
- ------------------------------ Executive Officer, May 2, 1998
John J. McDonnell, Jr. Director
/s/ THADDEUS G. WEED Chief Financial Officer
- ------------------------------ and Treasurer May 2, 1998
Thaddeus G. Weed
/s/ JURGEN MANCHOT Director
- ------------------------------ May 1, 1998
Jurgen Manchot
/s/ WILLIAM N. MELTON Director
- ------------------------------ May 4, 1998
William N. Melton
/s/ JOHN S. MCCARTHY Director
- ------------------------------ May 1, 1998
John S. McCarthy
/s/ HENRY R. NICHOLS Director
- ------------------------------ May 4, 1998
Henry R. Nichols
/s/ PAOLO L. GUIDI Director
- ------------------------------ May 1, 1998
Paolo L. Guidi
/s/ JOSEPH SQUARZINI, JR. Director
- ------------------------------ May 2, 1998
Joseph Squarzini, Jr.
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
- ----------- -----
<S> <C> <C> <C>
5. Opinion of Arent Fox Kintner Plotkin & Kahn, PLLC
re: validity of securities registered
23. Consents of:
(a) Consent of Arent Fox Kintner
Plotkin & Kahn, PLLC: included in exhibit 5
(b) Consent of Arthur Andersen, LLP
24. Power of Attorney: included on signature page.
</TABLE>
II-5
<PAGE>
Exhibit 5
[LETTERHEAD OF ARENT FOX KINTNER PLOTKIN & KAHN, PLLC]
May 4, 1998
The Board of Directors
Transaction Network Services, Inc.
1939 Roland Clarke Place
Reston, Virginia 20191-1406
Gentlemen:
We have acted as counsel to Transaction Network Services, Inc. (the
"Company") with respect to the Company's Registration Statement on Form S-3 to
be filed by the Company with the Securities and Exchange Commission in
connection with the registration under the Securities Act of 1933 of 287,474
shares of Common Stock, $.01 par value (the "Shares").
As counsel to the Company, we have examined the Company's Certificate
of Incorporation and such records, certificates and other documents of the
Company, as well as relevant statutes, regulations, published rulings and such
questions of law, as we considered necessary or appropriate for the purpose of
this opinion.
Based on the foregoing, we are of the opinion that the 287,474
Shares subject to the registration statement have been validly issued, and
are fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to all references to our firm in the Registration
Statement. In giving this consent, we do not hereby admit that we come within
the category of persons whose consent is required under Section 7 of the
Securities Act of 1933 or the General Rules and Regulations thereunder.
Very truly yours,
ARENT FOX KINTNER PLOTKIN & KAHN, PLLC
By: /s/ Jeffrey E. Jordan
----------------------------------
Jeffrey E. Jordan
<PAGE>
Exhibit 23(b)
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in or made a part of Transaction
Network Services, Inc.'s registration statement on Form S-3.
ARTHUR ANDERSEN LLP
Washington, D.C.,
May 5, 1998
