<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 23, 1996
REGISTRATION NO. 333-05183
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
METRO ONE TELECOMMUNICATIONS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
OREGON 7389 93-0995165
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR
ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
8405 S.W. NIMBUS AVENUE
BEAVERTON, OREGON 97008
(503) 643-9500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
TIMOTHY A. TIMMINS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
8405 S.W. NIMBUS AVENUE
BEAVERTON, OREGON 97008
(503) 643-9500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
BYRON W. MILSTEAD, ESQ. TODD A. BAUMAN, ESQ.
ATER WYNNE HEWITT DODSON & SKERRITT, LLP STOEL RIVES LLP
222 S.W. COLUMBIA, SUITE 1800 900 S.W. FIFTH AVENUE, SUITE 2300
PORTLAND, OREGON 97201-6618 PORTLAND, OREGON 97204
(503) 226-1191 (503) 294-9812
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
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, check the following box: / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 426(b) under the Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the same offering. / / ________.
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / ________.
If delivery of this prospectus is expected to be made pursuant to Rule 434,
check the following box. / /
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
METRO ONE TELECOMMUNICATIONS, INC.
CROSS REFERENCE SHEET SHOWING LOCATION
IN PROSPECTUS OF INFORMATION
REQUIRED BY ITEMS OF FORM S-1
<TABLE>
<CAPTION>
REGISTRATION STATEMENT CAPTION OR LOCATION
ITEM NUMBER AND HEADING IN PROSPECTUS
---------------------------------------- ----------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement
and Outside Front Cover Page of
Prospectus.............................. Outside Front Cover Page of the Prospectus
2. Inside Front and Outside Back Cover
Pages of Prospectus..................... Inside Front and Outside Back Cover Pages of
the Prospectus
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges...... Prospectus Summary; The Company; Risk Factors
4. Use of Proceeds......................... Prospectus Summary; Use of Proceeds
5. Determination of Offering Price......... Underwriting
6. Dilution................................ Not Applicable
7. Selling Security Holders................ Principal and Selling Shareholders
8. Plan of Distribution.................... Underwriting
9. Description of Securities to be
Registered.............................. Description of Capital Stock
10. Interests of Named Experts and
Counsel................................. Not Applicable
11. Information with Respect to the
Registrant.............................. Prospectus Summary; The Company; Risk Factors;
Selected Financial Data; Management's
Discussion and Analysis of Financial Condition
and Results of Operations; Business;
Management; Principal and Selling
Shareholders; Description of Capital Stock;
Shares Eligible for Future Sale; Financial
Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................. Not Applicable
</TABLE>
<PAGE> 3
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.
SUBJECT TO COMPLETION, DATED JULY 23, 1996
PROSPECTUS
2,000,000 Shares
LOGO
Common Stock
Of the 2,000,000 shares of Common Stock ("Common Stock") offered hereby,
1,000,000 shares are being sold by Metro One Telecommunications, Inc. ("Metro
One" or the "Company") and 1,000,000 shares are being sold by certain
shareholders of the Company (the "Selling Shareholders"). The Company will not
receive any proceeds from the sale of shares by the Selling Shareholders. See
"Principal and Selling Shareholders." Prior to this offering, there has been no
public market for the Common Stock of the Company. It is currently estimated
that the initial public offering price will be between $8.00 and $10.00 per
share. See "Underwriting" for information relating to the determination of the
initial public offering price. The Company has applied to have the Common Stock
quoted on the Nasdaq National Market under the symbol "MTON."
---------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 5 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.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) SHAREHOLDERS(3)
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Per Share........................ $ $ $ $
- ------------------------------------------------------------------------------------------------------
Total(3)......................... $ $ $ $
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company, estimated at $800,000.
(3) The Company and the Selling Shareholders have granted to the Underwriters a
30-day option to purchase up to 300,000 additional shares on the same terms,
solely to cover over-allotments, if any. If the Underwriters exercise this
option in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Company will be $ , $ and
$ , respectively.
---------------------
The shares of Common Stock offered by this Prospectus are offered by the
several Underwriters, subject to prior sale, when, as and if delivered to and
accepted by them and subject to the right of the Underwriters to reject any
order in whole or in part. It is expected that certificates for the shares of
Common Stock will be available for delivery in New York, New York, on or about
, 1996.
---------------------
BLACK & COMPANY, INC. CRUTTENDEN ROTH
INCORPORATED
The date of this Prospectus is , 1996
<PAGE> 4
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE> 5
Diagram description
Map of the United States with all of Metro One's call center locations
indicated by Metro One logo in the appropriate cities. Representative photos of
Metro One's operations are superimposed on the map. Descriptions of the photos
follow:
Photo 1 - A call center with modular work centers.
Photo 2 - A personal computer and a Detroit training manual.
Photo 3 - A training session with three people.
Photo 4 - An Excel LNX 2000 switch and a Sun workstation.
Photo 5 - A Metro One operator.
<PAGE> 6
Caption 1 -- Providing Enhanced Directory Assistance (EDA) through its national
network of call centers. Strategic locations enable EDA on both a
local and national basis.
Caption 2 -- Customized call center database systems and operator training in
each geographic area allow operators to provide local information
to callers.
<PAGE> 7
Caption 3 -- On-going operator training in advanced search techniques, spelling
and etiquette leads to consistent, high-quality service.
Caption 4 -- Advanced technology -- Sun Microsystems servers (shown here) and
Excel LNX 2000 switches -- coupled with customized software.
Delivering EDA solutions with enhanced content and greater
connectivity.
Caption 5 -- Live friendly operators are available to assist callers throughout
each call. Just press the star (*) key to return to the operator at
any time.
<PAGE> 8
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements and
notes thereto appearing elsewhere in this Prospectus. Except as otherwise
indicated, all information in this Prospectus (i) assumes no exercise of the
Underwriters' over-allotment option and (ii) gives retroactive effect to a
reverse split of the Common Stock of approximately 1-for-3.5 effected in
December 1995. See "Risk Factors" for a discussion of certain factors that
should be considered in connection with an investment in the Company.
THE COMPANY
The Company is a leading independent developer and provider of enhanced
directory assistance ("EDA") for the wireless telecommunications industry. The
Company contracts with wireless communications carriers to provide EDA to a
carrier's subscribers. The Company established its first EDA call center in 1989
in Portland, Oregon and presently operates call centers that serve the
Baltimore/Washington D.C., Chicago, Denver, Detroit, Miami, Minneapolis,
Philadelphia, Phoenix, San Diego, Seattle and Portland, Oregon metropolitan
areas. Additionally, the Company has contracted to provide EDA to carrier
subscribers in Milwaukee and St. Louis. Service is provided to seven wireless
telecommunications carriers, including cellular and personal communications
services ("PCS") providers, under 12 multiyear contracts. In 1995, the Company
handled over 20 million requests for directory assistance on behalf of its
carrier customers.
In the competitive wireless telecommunications environment, carriers
confront increasing pressures to differentiate their products, establish brand
loyalty and increase usage. Enhanced directory assistance is a value-added
product that can differentiate a wireless provider's service. The Company's
delivery of quality enhanced directory assistance with a high level of personal
service represents a substantially different approach from the trend in
traditional directory assistance to minimize call processing times through
increased automation and less personalized service. Metro One gives wireless
carriers the ability to deliver feature-rich, personalized enhanced directory
assistance to their subscribers while providing features that promote increased
usage and airtime.
The Company's EDA offers enhancements to traditional directory assistance,
including an array of connectivity features and the ability to supply wireless
consumers with a broader range of information, including categorical search and
local event information. With the Company's EDA, carriers can offer customized
configurations of these value-added connectivity and content features. These
custom features are marketed and delivered with private label branding, enabling
the carrier to establish a distinct identity for its services. In addition, the
Company believes that its connectivity features increase the call completion
rate, producing additional revenue for carriers through increased billable
airtime. The Company believes that carriers offering its EDA experience greater
wireless service usage and higher subscriber satisfaction and retention.
The Company's operating competencies, derived from the establishment and
operation of 11 call centers, allow it to provide carriers with a reliable,
quality directory assistance product. The Company's contracts with carriers
impose stringent performance standards. The Company strives to maintain this
high quality of service through various quality assurance programs, including
employee training, operator monitoring and periodic carrier quality evaluations.
The Company's national call center network enables carriers that operate in
multiple markets to offer a consistent EDA, which promotes greater system-wide
marketing and brand identification.
Wireless telecommunications has been among the fastest growing segments of
the telecommunications industry during the 1990s. One industry source, Northern
Business Information, predicts annual revenues in the wireless
telecommunications industry to increase from less than $10 billion in 1990 to
$50 billion by 1999. Metro One's mission is to be the leading provider of EDA in
this marketplace. To achieve this, the Company intends to offer value-added EDA
products and features that set ever-increasing caller expectations for EDA,
expand into new geographic markets through existing and new carrier
relationships, leverage its existing infrastructure of call centers to provide
service to additional carriers and regional subscribers, achieve greater
operating efficiencies through the introduction of productivity enhancing
hardware and software and pursue opportunities to provide additional
operator-assisted products.
3
<PAGE> 9
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company....... 1,000,000 shares
Common Stock offered by the Selling
Shareholders............................ 1,000,000 shares
Common Stock outstanding after the
offering................................ 9,801,544(1)
Use of Proceeds........................... For working capital and other general corporate
purposes, including expansion of the Company's
call center network and sales and marketing
activities. See "Use of Proceeds."
Proposed Nasdaq National Market symbol.... MTON
</TABLE>
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AMOUNTS AND PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------------------------------------------ ----------------------
1991 1992 1993 1994 1995 1995 1996
--------- -------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues....................... $ 752 $ 959 $ 1,442 $ 5,050 $ 13,074 $ 5,680 $ 8,744
Operating income (loss)........ (1,047) (1,932) (4,021) (4,011) (82) (784) 1,218
Net income (loss).............. (1,697) (2,112) (4,073) (5,035) (1,724) (1,272) 727
Net income (loss) per share.... $ (1.34) $ (0.85) $ (1.01) $ (1.00) $ (0.31) $ (0.24) $ 0.09
Shares used in per share
calculations(1).............. 1,269,355 2,474,989 4,023,233 5,039,272 5,562,959 5,220,497 7,410,632
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996
------------------------
ACTUAL AS ADJUSTED(2)
------ --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents......... $2,190 $ 10,755
Current assets.................... 5,242 13,807
Furniture, fixtures and
equipment....................... 4,559 4,559
Total assets...................... 10,229 18,794
Current liabilities............... 2,805 2,805
Long-term debt, less current
portion......................... 1,625 1,625
Shareholders' equity(3)........... 5,799 14,364
</TABLE>
- ---------------
(1) Excludes 1,802,745 shares of Common Stock issuable upon the exercise of
options and warrants outstanding on July 19, 1996, with an average exercise
price of $6.28 per share (including options issued under the Company's 1994
Stock Incentive Plan (the "Stock Incentive Plan") with an exercise price of
$8.05 per share), of which options and warrants to purchase 1,486,544 shares
were exercisable on that date.
(2) Adjusted for the effect of the sale of 1,000,000 shares of Common Stock
offered hereby at an assumed initial public offering price of $9.00 per
share, and the application of the net proceeds therefrom. See "Use of
Proceeds." Assumes no options or warrants to purchase shares of Common Stock
are exercised after the date of this Prospectus and prior to the completion
of the offering other than warrants for the purchase of 288,171 shares of
Common Stock exercised by the Selling Shareholders.
(3) The Company has never declared or paid cash dividends on its Common Stock.
FORWARD-LOOKING STATEMENTS
The Company believes the information set forth in this Prospectus under the
captions "Prospectus Summary," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business" includes
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended (the "Securities Act"), and is subject to the safe
harbor created by that section. Certain factors that could cause results to
differ materially from those projected in the forward-looking statements are set
forth in "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business."
4
<PAGE> 10
RISK FACTORS
The Common Stock offered hereby involves a high degree of risk. The Company
believes that the information set forth in this Prospectus under the captions
"Prospectus Summary," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business" includes "forward-looking
statements" within the meaning of Section 27A of the Securities Act and is
subject to the safe harbor created by that section. Certain factors that could
cause results to differ materially from those projected in the forward-looking
statements are set forth in "Risk Factors," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business." In
addition to the other information in this Prospectus, the following risk factors
should be considered carefully in evaluating an investment in the shares of
Common Stock offered by this Prospectus.
LIMITED OPERATING HISTORY; PRIOR LOSSES
The Company was formed in 1989 and to date has focused on developing,
test-marketing and refining EDA services that it believes possess significant
long-term market potential as well as expanding into new markets. Accordingly,
the Company's financial results have been characterized by low but increasing
revenues, relatively high levels of expenses, and net losses. The Company
incurred net losses of $1,724,067, $5,035,090, and $4,072,646 for the years
ended December 31, 1995, 1994, and 1993, respectively. The three months ended
March 31, 1996 was the first fiscal quarter in which the Company reported net
income, and as of June 30, 1996, although the Company had shareholders' equity
of approximately $5,799,199, it had an accumulated deficit of approximately
$15,709,908. The Company's operations continue to be subject to all the risks
inherent in the establishment of a new business enterprise. These include, but
are not limited to, factors relating to competition, complications and setbacks
in the further development of its EDA and other services and the cost of
establishing call centers to service new markets. No assurance can be given that
the Company will be profitable in the future or that past revenue growth rates
will continue or be repeated in any future period.
NEED FOR EXPANSION OF SERVICES TO ADDITIONAL LOCATIONS AND MULTIPLE CUSTOMERS
The Company believes that achievement of a substantial and sustainable
level of profitability is dependent on its ability to deliver EDA to additional
customers in new markets and multiple customers at each call center. Although
the Company has a number of contracts for delivery of its EDA and other
services, there is no assurance that the Company will be successful in expanding
its services to a sufficient number of new customers or markets to achieve
substantial and sustainable profitability or that it will be able to sustain
past growth rates. Additionally, there is no assurance that the Company will
retain its customers for extended periods of time or at existing price levels.
See "Expiration of Enhanced Directory Assistance Agreements."
CONCENTRATION OF BUSINESS; LIMITED CUSTOMER BASE
Although the Company seeks to increase the number of its EDA contracts with
cellular and other wireless carriers, the nature of ownership and/or operational
control of the major cellular markets limits the Company's potential customers
in those markets. Only two cellular carriers, one owned or controlled by a
landline telephone company and one originally owned or controlled by a
non-landline company, generally serve each geographic cellular market.
Furthermore, 10 entities dominate the national cellular market, including AT&T
Wireless Services, GTE Mobilnet, the Regional Bell Operating Companies ("RBOCs")
owned or affiliated cellular companies and several independents. Three of these
10 dominant entities represented approximately 72% and 81% of the Company's
revenues in fiscal 1995 and 1994, respectively. There is no assurance that the
Company will maintain satisfactory relationships with these significant
customers. Any failure of the Company to maintain a satisfactory relationship
with any of these significant customers could have a material adverse effect on
the Company's business, financial conditions and results of operation. See
"Business -- Customers and Markets."
5
<PAGE> 11
EXPIRATION OF ENHANCED DIRECTORY ASSISTANCE AGREEMENTS
The Company has 12 significant EDA contracts with seven different carriers
to provide EDA in 13 metropolitan markets. Of these contracts, four expire in
1997, seven expire in 1998, and one expires in 2000. There is no assurance that
any of these contracts will be renewed. During the first quarter of 1996, the
Company's contract with AirTouch Cellular in the San Diego market expired.
During 1995, this contract amounted for approximately seven percent of the
Company's revenues. Although the Company participated in a competitive bidding
process, the Company was unable to secure renewal on terms and conditions that
were acceptable to the Company. During the negotiations, the carrier sought
rates below prior contract rates and an exclusivity commitment in markets served
by the carrier.
In July 1994, AirTouch Cellular and US West NewVector announced their
intention to combine their cellular properties in a multi-phase transaction.
AirTouch Cellular has also formed a partnership, called TOMCOM, L.P., with Bell
Atlantic and NYNEX to develop common service standards, pursue national
marketing strategies, develop information technology, create a national
distribution strategy and implement joint purchasing arrangements. Unlike the
AirTouch Cellular/US West NewVector partnership, however, TOMCOM does not
contemplate a merger of cellular properties. Two of the Company's contracts with
certain of those TOMCOM participants are up for renewal in 1997, with four up
for renewal in subsequent years.
While the implications of the non-renewal of the AirTouch Cellular EDA
contract for its San Diego market are unclear, the Company believes this
decision may serve as a precedent for AirTouch Cellular and the other TOMCOM
participants as they establish or consider the renewal of EDA contracts in other
markets in the future. Accordingly, there can be no assurance that the Company
will renew its contracts with US West NewVector or any other TOMCOM participant
or that the Company will have the opportunity to obtain new contracts with any
of these carriers in the future. If these contracts are not renewed, there is no
assurance that the Company will be able to replace these contracts with
contracts with other carriers. Contracts with TOMCOM participants accounted for
approximately 56% of the Company's revenues in 1995. Consequently, the failure
of the Company to obtain the renewal of these contracts or to obtain replacement
contracts would have a material adverse effect on the Company's business,
financial condition and results of operation. The Company intends to provide its
EDA under its current contracts with TOMCOM participants through their
respective termination dates upon which it will seek renewal on acceptable
terms. See "Business -- Customers and Markets."
RAPIDLY CHANGING TELECOMMUNICATIONS MARKET
Recent events, including the PCS license auctions and the passage of the
Telecommunications Act of 1996, are expected to result in an increasing number
of telecommunications providers operating in each market. This may result in
competitive situations which could unfavorably impact the Company, such as the
withdrawal of a customer from a market that the Company services or the
acquisition or merger of a major customer, where the acquiror or surviving
entity provides its directory assistance or enhanced directory assistance
through arrangements other than with the Company or exerts substantial influence
on the contract negotiation process. In addition, the creation of alliances and
joint ventures among telecommunications providers, such as the TOMCOM, L.P.
alliance discussed above, may increase the negotiating leverage for these
carriers as they deal with providers of enhanced directory assistance such as
the Company. Although the Company believes that an increase in the number of
providers generally will be beneficial to the Company as the providers look for
ways to differentiate their services, no assurance can be given that the
Company, either directly or indirectly, will not be adversely impacted by the
potential changes in the marketplace.
COMPETITION
The Company expects competition in the enhanced directory assistance market
to intensify as the public's demand for more comprehensive, easy-to-use
directory assistance information increases and as new technologies and systems
are developed to deliver this information in a cost-effective and convenient
manner. The Company faces current or potential competition from RBOC and
non-RBOC owned or affiliated landline and cellular carriers, and independent
companies. Although the Company believes that none of these competitors
presently offers enhanced directory assistance that incorporates all the
connectivity and content
6
<PAGE> 12
features of the Company's EDA, these competitors and some entities with which
the Company may compete in the future have substantially greater financial,
technical and marketing resources than the Company. In addition, although the
Company believes that it has implemented various computer hardware-, software-
and telecommunications-based tools that provide it certain competitive
advantages, barriers to entry in the EDA market are relatively low and the
Company may face competition in the future from new market entrants. There is no
assurance that the Company will be able to compete effectively against such
competitors. There is also no assurance that the Company will be able to
continue to price its EDA services competitively in the EDA marketplace. See
"Business -- Competition."
TECHNOLOGICAL CHANGE
Telecommunications and the related directory assistance market are
currently characterized by rapid technological change, frequent introductions of
new and enhanced products and services, and changing consumer demands. As
competition in this industry from a broader range of competitors increases, the
pace of technological change will accelerate. Although the Company is not aware
of any existing enhanced directory assistance services that it believes are
superior to the Company's EDA, new telecommunications services may be developed,
or existing telecommunications services may be refined, so as to render the
Company's EDA technologically or economically obsolete or less marketable.
Additionally, information services provided by others, no matter how dissimilar
to the Company's EDA, may be perceived by end users as being equal or superior
to the Company's product offerings. The Company's success will be dependent, in
part, upon its ability to anticipate changes in technology and industry
standards and to successfully develop and introduce new and improved EDA and
other telecommunications services, which may require substantial expenditures.
There is no assurance that the Company will be able to do so, that it will have
adequate financial resources to undertake such development, or that it will not
encounter technical or other difficulties that could delay the introduction of
its services or enhancements thereof.
UNCERTAINTY OF MARKET ACCEPTANCE OF ENHANCED DIRECTORY ASSISTANCE
Traditional directory assistance simply provides callers with the phone
numbers of specific parties listed in the directory assistance provider's
database. By contrast, enhanced directory assistance supplies a broader range of
information. The EDA market is relatively new and evolving and it is difficult
to predict the future growth rate and size of the market. Market acceptance of
the Company's EDA will depend in part on the Company's ability to demonstrate to
carriers the benefits to be derived by them from providing EDA to carrier
subscribers, on the marketing efforts of carriers to promote EDA usage and on
the subscribers' acceptance of EDA in volumes and at rates that render the
service profitable. No assurance can be given that present levels of market
acceptance will be sustained, that the carriers' subscribers will not prefer
traditional directory assistance at a lower price, that markets for enhanced
directory assistance will develop further or, if they do, that the Company's EDA
will achieve further market acceptance. The Company's operating revenues have
been and can be expected to continue to be derived exclusively from EDA. Failure
of the Company's EDA to achieve further market acceptance could have a material
adverse effect on the Company's business, financial condition and results of
operation.
INTELLECTUAL PROPERTY
The Company believes that its success in the enhanced directory assistance
market is due in part to its significant emphasis on the development and
implementation of various computer, hardware-, software- and
telecommunications-based tools. To a limited extent, the Company relies upon a
combination of trade secret, patent and other intellectual property law,
non-disclosure agreements and other protective measures to preserve its rights
pertaining to its EDA, but there is no assurance that the Company can
meaningfully protect its intellectual property. Thus, such protection may not
preclude competitors from developing services competitive with those of the
Company. In the general telecommunications environment where patents cannot
easily be obtained, the Company depends primarily on its development and
marketing capabilities and its ability to configure and maintain available
software and hardware technologies to its strategic advantage.
In the wireless market, the Company also relies on the technologies of
carriers and on their technical interface with landline carriers. To remain
competitive, the Company must adapt and improve upon its current
7
<PAGE> 13
technology in response to changes in the technologies in both the wireless and
general landline telecommunications systems. There is no assurance that the
Company will be successful in making such improvements or adaptations on a
timely basis or at all. In addition, the Company also relies on third party
programmers. See "Reliance on Third Party Programmers."
The Company is not aware of any pending or threatened claims that affect
any of the Company's intellectual property rights. If any infringement claim is
asserted against the Company, the Company may seek to obtain a license of the
other party's intellectual property rights. There is no assurance that a license
would be available on reasonable terms or at all. Litigation with respect to
patents or other intellectual property matters could result in substantial costs
and diversion of management and other resources and could have a material
adverse effect on the Company's business, financial condition and results of
operations.
RELIANCE ON THIRD PARTY PROGRAMMERS
The Company provides its EDA services through the use of sophisticated
switching equipment. Currently, the Company retains the services of one
engineering firm to assist in programming the host server for these switches. As
a result, this firm has significant familiarity with the technological method by
which the Company delivers its EDA. Although the Company believes that such
programming services are available from multiple sources, if the Company were
unable to obtain the services of this firm, the Company might be required to
obtain similar services from other parties or devote its own resources to such
programming. The development of such an alternative approach could involve
significant time and expense and diminish the Company's ability to provide
quality service or even delay the Company's ability to provide its EDA to its
customers. Any such decrease or delay in service could have a material adverse
effect on the Company's business, financial condition and results of operations.
DEPENDENCE ON KEY PERSONNEL
The success of the Company will depend to a large extent on the abilities
and continued participation of certain key employees. The loss of these key
employees could have a material adverse effect on the business of the Company.
Although the Company holds key person life insurance on the lives of its
President, Timothy A. Timmins, and its Executive Vice President, Patrick M. Cox,
and has entered into employment contracts with each of them, no assurance can be
given that the Company will not be materially and adversely impacted in the
future by the loss of one or more of these or other key employees. The Company's
future success and ability to manage future growth will also depend in part upon
its ability to attract and retain additional qualified employees. As the Company
competes with other organizations for such employees, there is no assurance that
it will be successful in hiring or retaining such employees.
QUALITY AND AVAILABILITY OF DATA
The Company's operations are dependent upon its access to names, telephone
numbers and other information supplied to callers directly or used in providing
call completion. The Company obtains such data from a variety of sources,
including by license from RBOCs, purchase from commercial vendors, electronic
access for a fee and printed material. Such data vary widely across geographic
regions as to availability, quality and usefulness for the Company's purposes.
Inadequate data may delay operator responsiveness to a caller inquiry or prevent
that inquiry from being serviced effectively. Additionally, due to individual
and business mobility or address or telephone number changes, such data degrade
over time and need to be updated periodically. The frequency and completeness of
such updating may also affect the quality of the Company's EDA services and its
operational efficiency. Ultimately, satisfaction of the Company's carrier
customers is dependent upon the quality of service being provided to the
carrier's subscribers. Although the Company believes that it obtains its data in
a manner that allows it to provide quality service to its customers, there is no
assurance that the Company will have access to sufficient and quality data or
that the Company can obtain and update data in a manner and at prices that allow
the Company to successfully and economically maintain or improve current service
levels.
POTENTIAL FOR UNIONIZATION; STAFFING
The telecommunications industry, particularly with respect to larger
telecommunications companies, is characterized by widespread union membership
among its operators and other workers. Although the
8
<PAGE> 14
Company believes that its relations with its employees are good, no assurance
can be given that unionization will not occur in the future. The occurrence of
such an event would likely have a material adverse effect on the Company's
business, financial condition, and results of operations. Furthermore, the
Company is dependent upon the available labor pool for its operators and no
assurance can be given that the Company will be able to continue to attract
qualified staff at competitive wages.
POTENTIAL LIABILITIES ARISING FROM RESCISSION RIGHTS OF CERTAIN SHAREHOLDERS
Between 1989 and December 31, 1993, the Company financed its activities
through sales of 3,529,994 shares of Common Stock and debt securities that were
converted into 1,462,494 shares of its Common Stock, which securities were sold
directly to approximately 560 persons. During a review of these past financing
activities in 1993, the Company's management was unable to conclude that all
applicable state and federal securities laws had been complied with in all
material respects in connection with these offerings.
In 1994, the Company voluntarily executed a Consent Order (the "Consent
Order") with the State of Oregon Division of Finance and Corporate Securities
(the "Division") in which the Company agreed to cease and desist from
participating in any violations of Oregon securities laws and paid a civil
penalty of $20,000. In 1995, the Company offered to each holder of its Common
Stock as of March 31, 1995 who resided in Oregon the right to rescind the
holder's purchase of shares of the Company's Common Stock. Sales of 135,414
shares of the Company's Common Stock were rescinded pursuant to the rescission
offering, resulting in payment by the Company of approximately $738,660 to
certain of its former shareholders, which included interest of approximately
$124,900.
The Company believes that its potential rescission liability to
shareholders who received the rescission offer for possible violations of Oregon
and federal law has been effectively eliminated as a result of the rescission
offer or the running of applicable statutes of limitation. However, the
Securities and Exchange Commission ("SEC") takes the position that liabilities
under the federal securities laws are not terminated by the making of a
rescission offering.
In addition, the rescission offer was made to holders of 119,843 shares of
the Company's Common Stock who resided in states in which the Company did not
register its rescission offer, and the rescission offer was not made to holders
of 528,215 shares of the Company's Common Stock who resided in states whose
securities laws do not permit rescission offerings or impose terms and
conditions on such offerings which were unacceptable to the Company. These
holders of 648,058 shares of Common Stock originally purchased such shares from
the Company at prices ranging from $0.88 to $8.05 a share; 515,064 of these
shares were purchased for $4.38 a share or less. Although the Company also
believes that its potential rescission liability to many of these shareholders
may have been eliminated by the running of applicable statutes of limitations,
there can be no assurance that claims asserting violations of federal or state
securities laws will not be asserted by any of these shareholders against the
Company or that certain holders will not prevail against the Company in the
assertion of such claims, thereby compelling the Company to repurchase their
shares. If all of these holders successfully asserted claims that the Company
repurchase their shares, the Company could be required to pay to these holders
approximately $2,049,162, plus approximately $525,000 in statutory interest, to
repurchase 648,058 shares of the Company's Common Stock, representing an average
repurchase price of approximately $3.97 a share. Even if the Company were
successful in defending any securities law claims, the assertion of such claims
against the Company additionally could result in costly litigation and
significant diversions of effort by the Company's management. See
"Business -- Securities Law Issues" and "-- Legal Proceedings."
On May 20, 1996, Richard and John Budinich, two of the Company's
shareholders, filed a civil action in the Superior Court of the State of
Washington for King County in which the plaintiffs allege that the Company
violated securities laws of the State of Washington by selling the plaintiffs
44,532 shares of the Common Stock of the Company in 1993 which had not been
registered under Washington law and by omitting material facts and making untrue
statements in connection with those sales. In their complaint, the plaintiffs
seek damages in the amount of the consideration paid for the shares, $332,560,
together with interest at the Washington statutory rate of 8% per annum.
Although the Company believes that it has meritorious
9
<PAGE> 15
defenses to the plaintiffs' claims and intends to vigorously defend the
litigation, there can be no assurance that the Company will prevail in the
litigation.
POTENTIAL LIABILITIES ARISING FROM SECURITIES SALES OF FORMER OFFICER
Between September 1994 and December 1994, Steven A. Posey, then the Vice
President-Sales and Marketing for the Company, purchased 171,420 shares of the
Common Stock pursuant to the exercise of options, at exercise prices of $1.75
per share. Mr. Posey died in October 1995. The Company has recently been
informed by representatives of Mr. Posey's estate that Mr. Posey entered into
transactions contemporaneously with his option exercises pursuant to which he
either sold, agreed to sell or pledged approximately 80,000 of these shares (the
"Posey Shares") to third parties at effective prices per share ranging from
$7.00 to $10.50.
Such transactions may not have been undertaken in compliance with
applicable federal and state securities laws and, under those laws, Mr. Posey
could be deemed an "underwriter" with respect to his sale or pledge of the
shares of Common Stock he acquired. Consequently, certain of the purchasers and
lenders may possess claims against Mr. Posey to rescind their respective
transactions with him.
The Company believes it exercised reasonable care to assure that Mr. Posey
was not an "underwriter" within the meaning of the federal and state securities
laws in connection with his option exercises in 1994. The Company informed Mr.
Posey in writing during the time he exercised the options that the shares were
not transferable except in accordance with federal and state securities laws.
The stock certificates delivered to Mr. Posey also contained a legend stating
that the shares were not transferable except in accordance with federal and
state securities laws. Accordingly, the Company believes that none of the
individuals who acquired shares from Mr. Posey has a valid claim against the
Company as a result of those transactions.
Notwithstanding the foregoing, there can be no assurance that a party
asserting claims against Mr. Posey or his estate as a result of any of those
transactions will not also assert claims against the Company, alleging the
Company's participation in the transactions. If it were ultimately determined
that the Company participated in those transactions, acquirors of Posey Shares
might have the right under state or federal securities laws to rescind their
purchases and obtain their original purchase price from the Company, plus
interest from the date of purchase at the statutory rate, in exchange for their
shares.
In 1994 and 1995, the Company offered and sold its 10% Subordinated Notes
and its 8% Convertible Secured Notes (the "Notes") in private transactions.
During the fourth quarter of 1995, $5,000,000 in principal amount of the Notes
were converted into 2,164,402 shares of the Company's Common Stock, at an
effective conversion rate of $2.31 a share. In 1995 and 1996, $3,210,000 in
principal amount of Notes was exchanged for 611,440 shares of the Company's
Common Stock, at an effective exchange rate of $5.25 a share. One remaining Note
in the principal amount of $100,000 is due in September 1996. In addition,
between January 1994 and March 1996, warrants issued in connection with certain
of the Notes (the "Warrants") were exercised to purchase an aggregate of 293,131
shares of the Company's Common Stock for an aggregate purchase price of
$1,003,080, or a weighted average exercise price of $3.42 a share.
If in a civil or regulatory action or proceeding it is ultimately
determined that the Company participated in the distribution of the Posey
Shares, parties who purchased Notes or exercised Warrants might assert that the
offer and sale of the Notes and the Warrants should be integrated with the
distribution of the Posey Shares and, accordingly, should have been registered
under the Securities Act. If it were ultimately determined that the offer and
sale of the Notes and Warrants should have been registered as a result of
integration with the distribution of the Posey Shares, the holders of the Notes
and Warrants might have the right to rescind their original investment and (i)
obtain from the Company the difference between the amount of their original
investment and the value of the shares received upon exchange or conversion,
(ii) exchange the shares acquired upon the exercise of Warrants for the exercise
price, and (iii) receive accrued interest at the statutory rate on the amount
provided for in (i) and (ii). In addition, there is no assurance in this event
that the distribution of the Posey Shares would not be deemed by the Division to
be a violation of the Consent Order, in which case the Division might seek to
impose civil and criminal penalties against the Company. Such a rescission or
penalties could have a material adverse effect on the Company's financial
condition and results of operations. Even if the Company were successful in
defending any securities law claims, the assertion of such
10
<PAGE> 16
claims against the Company additionally could result in costly litigation and
significant diversions of effort by the Company's management.
UNCERTAIN ABILITY TO MANAGE FUTURE GROWTH
Future growth by the Company will require it to increase the scale of its
operations and to address infrastructure and other requirements. Additionally,
each new market the Company enters or each new carrier which contracts for the
Company's EDA may present new and different challenges to the Company's growth.
Even if the Company successfully anticipates these challenges, there is no
assurance that the Company can accomplish the measures necessary for successful
growth. Moreover, technological change and customer demand may require the
Company to expand and develop other products and services. As the Company
expands, it may encounter various constraints that detrimentally affect its
ability to satisfy such demand. Failure to manage growth effectively could
adversely affect the Company's business, financial condition and results of
operation.
REGULATION
The services provided by the Company to its carrier customers are not
presently subject to direct government regulation. The Company's business
depends upon relationships with companies that are regulated by the Federal
Communications Commission ("FCC") or state public utility commissions ("PUCs").
Such regulation applies to all communications common carriers, including AT&T,
other long distance carriers, the RBOCs, and other local exchange carriers.
Enhanced service companies such as the Company are either unregulated or subject
to various levels of regulation on a state-by-state basis. In order to conduct
business, the Company must send information over the regulated public switched
network. The FCC regulates the telecommunications industry pursuant to the
Communications Act of 1934, as amended, and its authority extends to all
interstate and foreign communication by wire or radio. The FCC requires common
carriers to furnish communication service for a fee upon reasonable request in a
nondiscriminatory manner to any member of the public who requests it and is
qualified to receive it. The FCC also regulates rates of common carriers by
tariff to ensure that charges for telecommunication services are "fair and
reasonable." The FCC licenses common carriers, and state PUCs license carriers
for intrastate activities. Thus, the FCC and state PUCs have tremendous
influence over the suppression or promotion of competition. No assurance can be
given that the Company's business may not become subject to direct government
regulation in the future. See "Business -- Regulation."
ABSENCE OF PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to this offering, there has been no public market for the Company's
Common Stock. There is no assurance that an active trading market will be
sustained after completion of this offering or that the market price of the
Common Stock will not decline below the initial public offering price. The
initial public offering price of the Common Stock will be determined through
negotiations between the Company and the representatives of the Underwriters.
The market for securities of small market capitalization companies has been
highly volatile in recent years, often as a result of factors unrelated to those
companies' operations. The Company believes quarterly fluctuations in its
financial results and factors not directly related to the Company's operating
performance, such as announcements of new developments relating to the
telecommunications market, could contribute to the volatility of the price of
its Common Stock, causing it to fluctuate significantly. These factors, as well
as general economic conditions, such as recessions or high interest rates, may
adversely affect the market price of the Common Stock. See "Underwriting."
ADVERSE EFFECT ON MARKET PRICE DUE TO SHARES ELIGIBLE FOR FUTURE SALE;
REGISTRATION RIGHTS
Sales of a substantial number of shares of the Common Stock in the public
market following this offering could adversely affect the market price of the
Common Stock and the Company's ability to raise capital in the future in the
equity markets. Upon completion of this offering, there will be 9,801,544 shares
of Common Stock outstanding, assuming no exercise of the Underwriters'
over-allotment option or of outstanding warrants
11
<PAGE> 17
or outstanding options under the Company's Stock Incentive Plan after the date
of this Prospectus. In addition to the 2,000,000 shares sold in this offering,
approximately 1,168,466 shares not subject to lock-up agreements will be
eligible for immediate resale without restriction under Rule 144(k) of the
Securities Act. An additional 144,596 shares held for more than two but less
than three years by shareholders who are not affiliates of the Company and who
are not subject to lock-up agreements are eligible for sale under Rule 144 of
the Securities Act, subject to the volume and other limitations thereunder. Upon
expiration of lock-up agreements with the representatives of the Underwriters
180 days after the date of this Prospectus (or earlier with the consent of Black
& Company, Inc.), 2,038,201 shares will be eligible for immediate resale subject
to the limitations of Rule 144 and 3,238,695 shares will be eligible for resale
immediately without restriction pursuant to Rule 144(k). In addition, after this
offering, holders of 1,620,507 shares of Common Stock will have the right to
require the Company to register their shares of Common Stock under the
Securities Act, which would under certain circumstances permit such holders to
resell their shares without complying with Rule 144. If the Company registers
any of its securities under the Securities Act, holders of options and warrants
to purchase 475,872 shares of its Common Stock will have the right to require
the Company to register under the Securities Act their shares of Common Stock
purchasable upon the exercise of their options or warrants subject to certain
conditions and limitations, which would under certain circumstances permit such
holders to resell their shares without restriction. As of the date of this
Prospectus, options to purchase 1,162,598 shares of Common Stock have been
granted under the Stock Incentive Plan, which shares, if acquired pursuant to
the exercise of options, are subject to lock-up agreements which expire 180 days
after the date of this Prospectus (or earlier with the consent of Black &
Company, Inc.). The Company intends to file a registration statement on Form S-8
under the Securities Act to register the shares of Common Stock issuable under
the Company's Stock Incentive Plan. See "Management -- Stock Incentive Plan,"
"Description of Capital Stock" and "Shares Eligible for Future Sale."
POTENTIAL ISSUANCE OF PREFERRED STOCK; ANTI-TAKEOVER EFFECT OF OREGON LAW
The Company is authorized to issue up to 10,000,000 shares of Preferred
Stock, and the Board of Directors has the authority to fix the preferences,
limitations and relative rights of those shares without any vote or action by
the shareholders. The potential issuance of Preferred Stock may delay or prevent
a change in control of the Company, may discourage bids for the Common Stock at
a premium over the market price of the Common Stock and may adversely affect the
market price of, and the voting and other rights of the holders of, Common
Stock. The Oregon Control Share Act and the Business Combination Act limit the
ability of parties who acquire a significant amount of voting stock to exercise
control over the Company. These provisions may have the effect of lengthening
the time required for a person to acquire control of the Company through a proxy
contest or the election of a majority of the Board of Directors and may deter
efforts to obtain control of the Company. See "Description of Capital Stock."
DISCRETION AS TO USE OF PROCEEDS
As of the date of this Prospectus, the Company has not allocated to
specific uses a significant portion of the estimated net proceeds of this
offering. Accordingly, the Company's management will retain broad discretion to
allocate the net proceeds of this offering to uses that the shareholders may not
deem desirable, and there is no assurance that the proceeds can or will yield a
significant return. See "Use of Proceeds."
12
<PAGE> 18
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of 1,000,000
shares of Common Stock offered hereby (assuming an initial public offering price
of $9.00 per share and after deducting estimated underwriting discounts and
commissions and estimated offering expenses) are estimated to be $7,570,000.
The Company intends to use the net proceeds from this offering for working
capital and other general corporate purposes, including expansion of its call
center network and sales and marketing activities. The Company expects to use
approximately $2,800,000 to develop and establish new call centers,
approximately $3,000,000 for capital expenditures including the acquisition of
new equipment for existing and new call centers and approximately $300,000 to
expand the Company's sales and marketing activities as well as for other working
capital and general corporate purposes. The actual amount and timing of
expenditures will be determined by management of the Company, which retains
broad discretion over the amount allocated to any specific purpose.
A portion of the net proceeds may also be used to acquire or invest in
complementary businesses or to obtain the right to use complementary
technologies, although the Company has no understandings, commitments or
agreements, and has no current plans or intentions, regarding any such
acquisitions or investments. Pending the use of the net proceeds for the above
purposes, the Company intends to invest the funds in investment-grade
obligations, including interest-bearing investment grade securities with
maturities of one year or less. The Company will not receive the proceeds from
the sale of Common Stock by the Selling Shareholders. The Company anticipates
that 288,171 shares of the Common Stock to be sold by Selling Shareholders will
be obtained by the exercise of warrants held by the Selling Shareholders. The
Company anticipates that it will receive proceeds in the amount of $994,809 from
the exercise of those warrants. See "Principal and Selling Shareholders."
DIVIDEND POLICY
The Company has never declared or paid cash dividends on its Common Stock.
The Company intends to retain earnings from operations for use in the operation
and expansion of its business and does not anticipate paying cash dividends with
respect to the Common Stock in the foreseeable future. Furthermore, the
Company's existing line of credit agreement prohibits the payment of cash
dividends during the term thereof.
13
<PAGE> 19
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1996 and as adjusted to reflect the issuance of 288,171 shares of Common
Stock upon the exercise of certain of the Company's outstanding stock purchase
warrants on or prior to the offering in consideration of $994,809 in cash and
pro forma as adjusted to further reflect the sale of the 1,000,000 shares of
Common Stock offered hereby by the Company at an assumed initial public offering
price of $9.00 per share and the receipt of the estimated net proceeds
therefrom.
<TABLE>
<CAPTION>
JUNE 30, 1996
-------------------------------------
AS PRO FORMA
ACTUAL ADJUSTED AS ADJUSTED
-------- -------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt, less current portion...................... $ 1,625 $ 1,625 $ 1,625
Shareholders' equity:
Preferred Stock, no par value; 10,000,000 shares
authorized; none issued and outstanding.............. -- -- --
Common Stock, no par value; 490,000,000 shares
authorized; 8,513,373 shares issued and outstanding
actual; 8,801,544 issued and outstanding, as
adjusted; 9,801,544 shares issued and outstanding,
pro forma as adjusted(1)............................. 21,509 22,504 30,074
Accumulated deficit..................................... (15,710) (15,710) (15,710)
-------- -------- --------
Total shareholders' equity.............................. 5,799 6,794 14,364
-------- -------- --------
Total capitalization............................ $ 7,424 $ 8,419 $ 15,989
======== ======== ========
</TABLE>
- ---------------
(1) Does not include 1,428,500 shares of Common Stock reserved for issuance
pursuant to the Company's Stock Incentive Plan. See "Management -- 1994
Stock Incentive Plan."
14
<PAGE> 20
SELECTED FINANCIAL DATA
The statement of operations data presented below for each of the years in
the five-year period ended December 31, 1995 and the balance sheet data as of
December 31, 1991, 1992, 1993, 1994 and 1995 are derived from the audited
financial statements of the Company. The statement of operations data for the
six month periods ended June 30, 1995 and 1996 and the balance sheet data as of
June 30, 1996 are unaudited and have been derived from the Company's books and
records. In the opinion of management of the Company, such unaudited financial
data has been prepared on the same basis as the audited financial data and
reflect all adjustments, which are of a normal recurring nature, necessary for a
fair presentation in accordance with generally accepted accounting principles.
The selected financial data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements and notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
--------------------------------------------------------- ------------------------
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- --------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues................. $ 752 $ 959 $ 1,442 $ 5,050 $ 13,074 $ 5,680 $ 8,744
--------- --------- --------- --------- --------- --------- ---------
Costs and expenses:
Direct operating....... 373 621 2,141 4,793 7,157 3,611 3,971
General and
administrative....... 1,425 2,270 3,322 4,268 6,001 2,853 3,555
Operating income
(loss)................. (1,046) (1,932) (4,021) (4,011) (82) (784) 1,218
Other income (expense),
net.................... (651) (180) (52) (1,024) (1,642) (488) (491)
--------- --------- --------- --------- --------- --------- ---------
Net income (loss)........ (1,697) (2,112) (4,073) (5,035) (1,724) (1,272) 727
========= ========= ========= ========= ========= ========= =========
Net income (loss) per
common share........... $ (1.34) $ (0.85) $ (1.01) $ (1.00) $ (0.31) $ (0.24) $ 0.09
========= ========= ========= ========= ========= ========= =========
Shares used in computing
net income (loss) per
common share........... 1,269,355 2,474,989 4,023,233 5,039,272 5,562,959 5,220,497 7,410,632
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------- JUNE 30,
1991 1992 1993 1994 1995 1996
--------- --------- --------- --------- --------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............. $ 32 $ 497 $ 300 $ 310 $ 1,149 $ 2,190
Current assets........................ 309 1,008 830 1,915 4,126 5,242
Furniture, fixtures and equipment,
net................................. 98 855 1,926 4,068 4,188 4,559
Total assets.......................... 530 2,136 3,143 6,299 8,716 10,229
Current liabilities................... 2,542 2,085 796 2,265 3,976 2,805
Long-term debt, less current
portion............................. 3 -- 49 6,432 1,466 1,625
Common stock subject to rescission.... 1,477 5,656 11,976 12,314 -- --
Accumulated deficit................... (3,493) (5,605) (9,678) (14,713) (16,437) (15,710)
Net shareholders' equity
(deficit)(1)........................ $ (3,493) $ (5,605) $ (9,678) $ (14,713) $ 3,274 $ 5,799
</TABLE>
- ---------------
(1) The Company has never declared or paid cash dividends on its Common Stock.
15
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company is a leading independent provider of EDA for the wireless
telecommunications industry. In 1989, the Company was incorporated, opened its
first call center and began testing and offering EDA services. In 1991, the
Company entered into its first contract to provide EDA services to a cellular
carrier's subscribers on a charge per call basis. The Company currently has 12
significant EDA contracts with seven different carriers to provide EDA in 13
metropolitan markets from 12 call centers, one of which is under development.
The Company provides EDA under contracts with terms ranging from one to
five years. Under the EDA contracts, carriers generally agree to route all local
directory assistance calls to the Company, bill its subscribers for EDA calls
and market the service. These contracts generally permit the Company to offer
its EDA services to competing carriers in the same market. Metro One provides
EDA to a carrier's subscribers under a brand name designated by the carrier,
such as "AT&T Connect." Although each carrier establishes its own EDA fee
structure for its subscribers, Metro One charges carriers directly for its
service on a per call basis and the carrier is obligated for the charges
regardless of whether it is paid by its subscriber. Generally, these per call
charges remain fixed for the term of the contract, subject only to consumer
price index adjustments.
The Company derives substantially all of its revenues from its 12 contracts
with wireless carriers. Revenue growth for the Company principally has resulted
from three factors: growth in call volumes from existing customer's subscribers
served by existing call centers, new carrier customers served by existing call
centers, and new customers served by new call centers. The Company's direct
operating costs are comprised entirely of costs associated with call center
operators and supervisory personnel and data costs. The Company's general and
administrative costs include corporate and call center management personnel,
facilities expenses including rental and maintenance costs, and depreciation.
The Company typically opens a new call center to service a carrier customer
in a new geographic market. The Company historically has experienced significant
costs in connection with the establishment of a new call center, including costs
associated with hiring and training of operators and facility preparation.
Initial call volumes at new call centers are typically low relative to the
subscriber base. Call volumes usually increase rapidly in the first year of
operation. Personnel productivity is generally low during initial months of a
call center's operation but improves as operators become more experienced and
efficient. In addition, personnel utilization improves at a call center as call
volumes rise due principally to increased scheduling efficiencies. Consequently,
as call volumes and labor productivity increase over time, a call center's
profitability improves.
The Company presently anticipates that it will open at least four new call
centers by the end of 1997. The Company typically opens a new call center only
if it has entered into a contract with an existing carrier customer to provide
service to a new geographic market or entered into a contract with a new carrier
to serve a geographic market where the Company presently does not maintain a
call center. Because the Company presently has not entered into any such
additional contracts, there can be no assurance that the Company will establish
new call centers during that period or that contracts to provide service, if
entered into, will require the establishment of call centers in new geographic
markets. See "Risk Factors -- Need for Expansion of Services to Additional
Locations and Multiple Customers." Based on the Company's historical experience,
establishment of a call center typically costs approximately $500,000 to
$700,000, exclusive of initial operating losses. There can be no assurance,
however, that costs associated with the establishment of new call centers will
be consistent with costs experienced by the Company on a historical basis.
During the first quarter of 1996, the Company's contract with AirTouch
Cellular in the San Diego market expired. During 1995, this contract accounted
for approximately seven percent of the Company's revenues. Although the Company
participated in a competitive bidding process, the Company was unable to secure
renewal on terms and conditions that were acceptable to the Company. During the
negotiations, the carrier sought rates below prior contract rates and an
exclusivity commitment in markets served by the carrier.
16
<PAGE> 22
In July 1994, AirTouch Cellular and US West NewVector announced their
intention to combine their cellular properties in a multi-phase transaction.
AirTouch Cellular has also formed a partnership, called TOMCOM, L.P., with Bell
Atlantic and NYNEX to develop common service standards, pursue national
marketing strategies, development information technology, create a national
distribution strategy and implement joint purchasing arrangement. Unlike the
AirTouch Cellular/US West NewVector partnership, however, TOMCOM does not
contemplate a merger of cellular properties. Two of the Company's contracts with
certain of those TOMCOM participants are up for renewal in 1997, with four other
contracts up for renewal in subsequent years.
While the implications of the non-renewal of the AirTouch Cellular EDA
contract for its San Diego market are unclear, the Company believes this
decision may serve as a precedent for AirTouch Cellular and the other TOMCOM
participants as they establish or consider the renewal of EDA contracts in other
markets in the future. Accordingly, there can be no assurance that the Company
will renew its contracts with US West NewVector or any other TOMCOM participant
or that the Company will have the opportunity to obtain new contracts with any
of these carriers in the future. If these contracts are not renewed, there is no
assurance that the Company will be able to replace these contracts with
contracts with other carriers. Contracts with TOMCOM participants accounted for
approximately 56% of the Company's revenues in 1995. Consequently, the failure
of the Company to obtain the renewal of these contracts or to obtain replacement
contracts would have a material adverse effect on the Company's business,
financial condition and results of operation. The Company intends to provide its
EDA under its current contracts with TOMCOM participants through their
respective termination dates upon which it will seek renewal on terms acceptable
to the Company.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated selected items of
the Company's statements of operations as a percentage of its revenues:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
---------------------------- -----------------
1993 1994 1995 1995 1996
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Revenues...................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Direct operating costs........................ 148.4 94.9 54.7 63.6 45.4
General and administrative costs.............. 230.4 84.5 45.9 50.2 40.7
Operating profit (loss)....................... (278.8) (79.4) (.6) (13.8) 13.9
Interest and loan fees........................ 5.9% 16.7% 10.5% (10.3)% (3.5)%
New call centers opened....................... 3 6 1 0 0
Call centers in operation..................... 5 10 11 11 11
</TABLE>
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
Revenues
Revenues increased 53.9% to $8.7 million for the six months ended June 30,
1996 from $5.7 million for the same period in the prior year. Revenues from
existing call centers grew 40.6% and accounted for $2.3 million of this increase
while revenues from one new call center accounted for $.7 million of revenues in
the first six months of 1996. The revenue growth at existing call centers was
due exclusively to increases in call volumes at these centers.
Direct Operating Costs
Direct operating costs increased 10.0% to $4.0 million for the six months
ended June 30, 1996 from $3.6 million for the same period in the prior year. The
increase in direct operating costs was due primarily to the cost of operating an
additional call center during the first six months of 1996. As a percentage of
revenues, direct operating costs declined to 45.4% for the three months ended
June 30, 1996 from 63.6% for the same period in the prior year. This decline
primarily resulted from higher call volumes and operating efficiencies due to
improved personnel utilization and the introduction of new technology designed
to enhance productivity.
17
<PAGE> 23
General and Administrative Costs
General and administrative costs increased 24.6% to $3.6 million for the
six months ended June 30, 1996 from $2.9 million for the same period in the
prior year. This increase in costs was due primarily to higher overall salary
expenses and costs associated with the operation of an additional call center
during the first six months of 1996. As a percentage of revenues, general and
administrative costs declined to 40.7% for the six months ended June 30, 1996
from 50.2% for the same period in the prior year. This decline resulted
primarily from the achievement of substantially higher revenues in the first six
months of 1996 compared with the same period in the prior year. Depreciation and
amortization increased by 12.7% to $553,475 for the six months ended June 30,
1996 from $490,973 for the same period in the prior year due primarily to the
acquisition of new equipment for the new call center.
Net Interest Expense
Net interest expense declined 49.2% to $309,685 for the six months ended
June 30, 1996 from $609,647 for the same period in the prior year. This decline
was attributable solely to the reduction in average debt outstanding to $3.4
million from $9.2 million for the six months ended June 30, 1996 and 1995,
respectively.
Other Income (Expense)
Other expense for the six months ended June 30, 1996, was $180,954, and
consisted primarily of estimated tax expense of $22,000, estimated litigation
settlement expenses of approximately $155,000 and a $33,195 expense for the
remaining value of certain miscellaneous assets, offset by interest income of
approximately $29,710. Other income, for the six months ended June 30, 1995, was
$123,681, and consisted primarily of interest income of $23,350 and
approximately $98,900 of income resulting from the settlement of a vendor claim.
YEARS ENDED DECEMBER 31, 1995 AND 1994
Revenues
Revenues increased 158.8% to $13.1 million for fiscal 1995 from $5.1
million for fiscal 1994. Revenues from the six call centers opened during 1994
grew to $8.2 million for fiscal 1995 from $1.8 million for fiscal 1994,
accounting for $6.4 million of this increase. Revenues from the four call
centers opened prior to 1994 grew 48.0% and accounted for $1.5 million of this
increase. Revenues from the one call center opened during 1995 accounted for $.1
million of revenues for 1995. The revenue growth at existing call centers was
due exclusively to increases in call volumes at those centers.
Direct Operating Costs
Direct operating costs increased 49.3% to $7.2 million for fiscal 1995 from
$4.8 million for fiscal 1994. This increase in direct operating costs was
primarily due to the greater number of call centers in operation for a full year
in 1995 as compared to 1994. As a percentage of revenues, direct operating costs
declined to 54.7% for fiscal 1995 from 94.9% for fiscal 1994. This decline
resulted primarily from increased call volumes generating higher revenues, while
costs increased less rapidly due to operating efficiencies arising from improved
personnel utilization and the introduction of new technology.
General and Administrative Costs
General and administrative costs increased 40.6% to $6.0 million for fiscal
1995 from $4.3 million for fiscal 1994. This increase in general and
administrative costs was due primarily to higher expenses associated with the
operation for the full year in 1995 of additional call centers opened during
1994. As a percentage of revenues, general and administrative costs declined to
45.9% for fiscal 1995 from 84.5% for fiscal 1994. This decline resulted
primarily from the achievement of substantially higher revenues in fiscal 1995
as compared with the prior year without a commensurate increase in general and
administrative costs. Depreciation and
18
<PAGE> 24
amortization increased by 34.3% for fiscal 1995 to $996,834 from $742,135 for
fiscal 1994 due primarily to the acquisition of new equipment for new call
centers.
Net Interest Expense
Net interest expense increased 63.1% to $1,371,936 for fiscal 1995 from
$841,407 for fiscal 1994. This increase was attributable to the increase of
average debt outstanding to $5,816,615 from $3,816,078 for fiscal 1995 and 1994,
respectively, resulting primarily from the Company's completion of an offering
of its 8% Convertible Secured Notes during 1995 and interest paid in connection
with the Company's 1995 rescission offering. See "Risk Factors -- Rescission
Rights of Certain Shareholders" and "Business -- Securities Law Issues."
Debt Conversion Expense
The Company recognized $384,071 of expenses related to the conversion of
its 8% Convertible Secured Notes during 1995. No similar expenses were
recognized during the prior year.
Other Income (Expense)
Other income for the year ended December 31, 1995, was $122,670, and
consisted primarily of interest income of $47,918, approximately $98,900 of
income resulting from the settlement of a vendor claim, offset by estimated
litigation settlement expense of approximately $24,000. Other expense, for the
year ended December 31, 1994, was $131,310, and consisted primarily of estimated
litigation settlement expenses of $200,000, offset by interest income of
$56,055, and a refund of moving expenses of approximately $10,948.
YEARS ENDED DECEMBER 31, 1994 AND 1993
Revenues
Revenues increased 250.2% to $5.1 million for fiscal 1994 from $1.4 million
for fiscal 1993. Revenues from the call centers opened prior to 1994 grew to
$3.2 million for fiscal 1994 from $1.1 million for fiscal 1993, accounting for
$2.1 million of this increase. Revenues from the call centers opened during 1994
accounted for $1.8 million of revenues in fiscal 1994. The revenue growth at
existing call centers was due exclusively to increases in call volumes at these
centers.
Direct Operating Costs
Direct operating costs increased 123.9% to $4.8 million for fiscal 1994
from $2.1 million for fiscal 1993. This increase in direct operating costs was
due primarily to the greater number of call centers in operation during 1994 as
compared to 1993. As a percentage of revenues, direct operating costs declined
to 94.9% for fiscal 1994 from 148.4% for fiscal 1993. This decline resulted
primarily from higher revenues and operating efficiencies due to improved
personnel utilization and higher call volumes.
General and Administrative Costs
General and administrative costs increased 28.5% to $4.3 million for fiscal
1994 from $3.3 million for fiscal 1993. This increase in general and
administrative costs was due primarily to higher expenses associated with the
operation of the new call centers opened in 1994 and the operation for the full
year in 1994 of the call centers opened during 1993. As a percentage of
revenues, general and administrative costs declined to 84.5% for fiscal 1994
from 230.4% for fiscal 1993. This decline resulted primarily from the
achievement of substantially higher revenues for fiscal 1994 as compared with
the prior year without a commensurate increase in general and administrative
costs. Depreciation and amortization increased by 95.3% to $742,135 for fiscal
1994 from $379,904 for fiscal 1993 primarily due to the acquisition of new
equipment for new call centers.
19
<PAGE> 25
Net Interest Expense
Net interest expense increased 889.9% to $841,407 for fiscal 1994 from
$85,003 for fiscal 1993. This increase was primarily attributable to the
increase of average debt outstanding to $3,816,078 from $780,915 for 1994 and
1993, respectively, resulting from the Company's completion of an offering of
its 10% Subordinated Notes, completion of an offering of its 8% Convertible
Secured Notes and an increase in equipment lease financing associated with the
opening of new call centers.
Other Income (Expense)
Other expense for the year ended December 31, 1994, was $131,310, and
consisted primarily of estimated litigation settlement expenses of $200,000,
offset by interest income of $56,055, and a refund of moving expenses of
approximately $10,948. Other income for the year ended December 31, 1993, was
$44,345 and consisted primarily of interest income of approximately $33,752.
QUARTERLY INFORMATION
The following tables set forth certain unaudited quarterly statement of
operations data for the six quarters ended June 30, 1996, as well as data
expressed as a percentage of the Company's revenues for the periods indicated.
These data have been derived from unaudited financial statements, and in the
opinion of management, include all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of such information.
Such statement of operations data should be read in conjunction with the
Company's audited financial statements and notes thereto.
<TABLE>
<CAPTION>
QUARTERS ENDED
------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30,
1995 1995 1995 1995 1996 1996
--------- -------- --------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenues.......................... $ 2,638 $3,042 $ 3,479 $3,916 $ 4,228 $4,516
Direct operating costs............ 1,787 1,824 1,634 1,912 1,994 1,977
General and administrative
costs........................... 1,486 1,367 1,503 1,644 1,740 1,816
Income (loss) from operations..... (635) (149) 342 360 494 724
Interest and loan fees............ 276 334 474 289 162 131
Net income (loss)................. $ (908) $ (364) $ (127) $ (325) $ 285 $ 442
</TABLE>
The following table sets forth certain quarterly financial information of
the Company for each of the Company's last five fiscal quarters expressed as a
percent of total revenues for the periods indicated.
<TABLE>
<CAPTION>
QUARTERS ENDED
------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30,
1995 1995 1995 1995 1996 1996
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues.......................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Direct operating costs............ 67.7 60.0 47.0 48.8 47.2 43.8
General and administrative
costs........................... 56.3 44.9 43.2 42.0 41.2 40.2
Income (loss) from operations..... (24.1) (4.9) 9.8 9.2 11.7 16.0
Interest and loan fees............ 10.5 11.0 13.6 7.4 3.8 2.9
Net income (loss)................. (34.4)% (12.0)% (3.7)% (8.3)% 6.7% 9.8%
</TABLE>
Variable Operating Results
The Company's results of operations have fluctuated and may continue to do
so in the future depending upon a variety of factors, including opening of new
call centers, timing of expenditures in anticipation of future contracts or
product enhancements and renewal or expiration of existing contracts. Total
revenue of the Company increased in each quarter presented, primarily as a
result of growth in call volumes from existing call centers. Over the quarterly
periods shown, direct operating costs have generally declined as a percentage of
revenue as the Company has increased personnel productivity. In the third
quarter of 1995, personnel
20
<PAGE> 26
productivity measured on a Company-wide basis increased approximately 23%, the
largest quarterly increase for the periods presented. In the fourth quarter of
1995, the Company recognized certain costs related to the conversion of its 8%
Convertible Secured Notes, contributing to the loss for that period.
LIQUIDITY AND CAPITAL RESOURCES
The Company has consistently used external sources of funds, primarily from
the issuance of equity and debt securities, to fund the Company's operating
needs and capital expenditures. For the six months ended June 30, 1996, the
Company generated net income of $727,368; however, the Company generated net
losses of $1,724,067, $5,035,090, and $4,072,646 in fiscal 1995, 1994, and 1993,
respectively. As of June 30, 1996, the Company's accumulated deficit was
approximately $15.7 million. Cash flow solely from operations has been
insufficient to fund all of the Company's capital and other non-operating needs.
As of June 30, 1996, the Company had approximately $2,189,521 in cash and cash
equivalents and approximately $2,436,335 in working capital.
In addition to cash from operations, the Company's principal source of
liquidity is a $3.0 million bank line of credit. Availability under the line of
credit is subject to borrowing base requirements and compliance with loan
covenants. Under the terms of the agreement, outstanding borrowings bear
interest at the prime rate plus 1.25 percent and all assets of the Company are
pledged to the bank as collateral. The agreement contains minimum net worth and
working capital requirements as well as certain other restrictive covenants and
prohibits the payment of cash dividends by the Company. As of June 30, 1996, the
Company was eligible to borrow $1,822,000 under the line of credit and had
$550,000 of borrowings against this line of credit. The Company also has a
credit facility under which the Company may borrow up to $1.0 million to finance
purchases of capital equipment. Borrowings bear interest at the prime rate plus
1.75 percent and are secured by the purchased equipment. As of June 30, 1996,
the Company had $67,200 of borrowings against this line of credit.
Cash Flow from Operations. Net cash from operations for the six months
ended June 30, 1996 was $1,450,854, resulting primarily from the operating and
net income for that period. No new call centers were opened and most existing
call centers operated profitably and contributed to cash flow from operations
during the six months ended June 30, 1996.
Net cash used by operations was $2,255,035, $4,403,703 and $3,653,316 in
fiscal 1995, 1994, and 1993, respectively. In fiscal 1994 and 1993, the Company
expanded its operations into six and three new markets, respectively, which
required the use of cash to fund start-up costs for new call centers. The
reduction in use of cash by operations in 1995 was primarily due to the
Company's efforts to reduce costs and increase efficiency through more effective
personnel utilization and technology enhancements, which allowed faster call
processing without compromising quality of service, and to the opening of only
one new call center and the growth in revenues from existing call centers in
that year. Additionally, revenues grew in existing markets, further improving
the Company's liquidity and capital resources. Although the Company continues
its focus on efficient operations, quality of service remains a high priority
and, if necessary, the efficiencies of scheduling will be adjusted in order to
maintain the desired quality, which could have an adverse effect on cash flow
from operations and liquidity.
Cash Flow from Investing Activities. Cash used in investing activities was
$303,873 for the six months ended June 30, 1996 related primarily to capital
expenditures for system redundancy capabilities and equipment upgrades for
certain existing locations. In the six months ended June 30, 1996, additional
capital equipment for the same purposes was acquired through lease financing in
the amount of $678,877.
Net cash provided or (used) by investing activities was $100,616,
$(914,974), and $(1,293,289) in fiscal 1995, 1994, and 1993, respectively. The
Company's call center expansion in 1994 and 1993 required the use of proceeds
for capital equipment. In 1995, 1994 and 1993, capital equipment acquired
through lease financing was $1,066,249, $1,929,810 and $95,680, respectively.
Cash Flow from Financing Activities. Net cash used by financing activities
for the six months ended June 30, 1996 was $106,282, resulting primarily from
the exercise of warrants to purchase 328,948 shares of
21
<PAGE> 27
the Company's Common Stock resulting in net cash proceeds to the Company of
$497,397 and proceeds from borrowing on the line of credit and the secured
equipment term loan of $617,200, offset by $745,897 in principal payments
related to current notes payable and $474,980 in payments related to existing
capital lease obligations.
Net cash provided by financing activities was $2,993,050, $5,328,596, and
$4,749,679 in fiscal 1995, 1994, and 1993, respectively.
In 1995, the Company issued $3,860,000 in principal amount of its 10%
Subordinated Notes to certain private investors to refinance similar notes
maturing in 1995, resulting in net cash proceeds to the Company of $250,000. In
1995, the Company also issued $3,050,000 in principal amount of its 8%
Convertible Secured Notes to certain private investors, resulting in net cash
proceeds to the Company of $3,050,000. During 1995, warrants for the purchase of
327,412 shares of the Company's Common Stock were exercised, resulting in net
cash proceeds to the Company of approximately $1,088,080. In 1995, the Company
also repurchased 135,414 shares of its Common Stock pursuant to a rescission
offer, which resulted in the use of $738,660 in cash.
In 1994, the issuance of debt and equity resulted in the following net cash
proceeds to the Company: (i) the 1994 10% Subordinated Notes provided $3,610,000
in net cash proceeds; (ii) the initial offering of the Company's 8% Convertible
Secured Notes resulted in $1,950,000 in net cash proceeds; and (iii) warrants
and options to purchase shares of Common Stock were exercised resulting in
proceeds to the Company of $338,089.
In 1993, the Company issued and sold 667,062 shares of its Common Stock to
various private investors, resulting in net cash proceeds to the Company of
$4,733,534.
Future Capital Needs and Resources. The primary uses of capital are
expected to be the expansion of existing call centers, funding of start-up
operating losses for newly opened call centers, principal and interest payments
on indebtedness, and the purchase of equipment for the improvement of existing
and furnishing of new call centers.
In late 1995 and in the first three months of 1996, the debt obligations of
the Company were significantly reduced through the exchange of $3,210,000 in
principal amount of its 10% Subordinated Notes for 611,440 shares of Common
Stock and conversion of $5,000,000 in principal amount of its 8% Convertible
Secured Notes into 2,164,402 shares of Common Stock. In the second quarter of
1996, the Company paid $550,000 in principal amount of the 10% Subordinated
Notes. In September 1996, the remaining 10% Subordinated Note will mature,
resulting in an obligation of the Company to make a principal payment of
$100,000, to the extent that the Note is not converted into Common Stock of the
Company.
Although the Company currently has no material commitments for capital
expenditures, it anticipates that its capital expenditures will be up to
approximately $3,000,000 through the end of 1996, resulting primarily from
projected expansion and discretionary planned improvements. The Company believes
its existing cash and cash equivalents, credit facilities and cash from
operations, together with the net proceeds of this offering, will be sufficient
to fund its operations through the end of fiscal 1997. However, because the
Company's growth may require the opening of new call centers in addition to
those projected, the Company's capital requirements cannot be predicted with
certainty and there is no assurance that the Company will not require additional
financing during this period. There is no assurance that any required additional
financing will be available on terms satisfactory to the Company or not
disadvantageous to the Company's shareholders, including those purchasing shares
in this offering.
Effect of Inflation. The effect of inflation was not a material factor
affecting the Company's business during fiscal 1995, 1994, or 1993 or the six
months ended June 30, 1996.
22
<PAGE> 28
BUSINESS
The Company is a leading independent developer and provider of EDA for the
wireless telecommunications industry. The Company contracts with wireless
telecommunications carriers to provide enhanced directory assistance to a
carrier's subscribers. In 1989, the Company was incorporated under the name
Metro One Direct Information Services, Inc., opened its first call center and
began testing and offering EDA services. In 1991, the Company entered into its
first contract to provide EDA services to a cellular carrier's subscribers on a
charge-per-call basis. The Company changed its name to Metro One
Telecommunications, Inc. in 1995. The Company presently operates call centers in
the Baltimore/Washington D.C., Chicago, Denver, Detroit, Miami, Minneapolis,
Philadelphia, Phoenix, San Diego, Seattle and Portland, Oregon metropolitan
areas. The Company additionally has contracted to provide EDA to carrier
subscribers in Milwaukee and St. Louis. Service is provided to seven wireless
telecommunications carriers, including cellular and PCS providers, under 12
multiyear contracts. In 1995, the Company handled over 20 million requests for
directory assistance on behalf of carriers.
The Company's EDA provides callers with personalized, easy-to-use directory
assistance. The Company's operators provide EDA with a high level of efficient,
personalized service. The Company's EDA includes several features in addition to
those provided by traditional directory assistance, including call completion,
categorical search and local event information. Call completion allows a caller
to be directly connected with the number requested, thus completing the call
without the need for redialing. The Company's StarBack feature enables a
subscriber to return to an operator at any time during a call. The Company is
developing additional EDA features including a broader array of connectivity
features and increased content. The Company believes that its EDA offers the
wireless consumer a feature-rich, user-friendly alternative to traditional
directory assistance.
In addition to addressing the needs of the wireless subscriber, the Company
believes that its EDA offers wireless carriers the opportunity to differentiate
their service by providing a high quality, value-added product to subscribers,
thereby assisting carriers in meeting heightened competition in the
telecommunications industry. The Company's array of connectivity features and
informational content, which can be offered to subscribers in various
configurations, allow the wireless carrier to distinguish its services from
competitors and establish a separate identity in the marketplace. The Company
believes that its EDA also increases carriers' revenues through expanded call
volumes and from the increased billable air time attributable to its EDA's
connectivity features. The Company has contracts with six of the 10 largest
domestic cellular carriers to deliver EDA to their subscribers in one or more of
their service areas, and with one of the nation's first PCS providers.
INDUSTRY BACKGROUND
Wireless telecommunications has been among the fastest growing segments of
the telecommunications industry during the 1990s. One industry source, Northern
Business Information, predicts annual revenues in the wireless
telecommunications industry to increase from less than $10 billion in 1990 to
$50 billion by 1999. This growth stems largely from technological advances that
provide customers with affordable, high quality mobile services. According to
the Cellular Telecommunications Industry Association ("CTIA"), cellular is
currently the most widespread wireless technology with more than 33 million
domestic subscribers at the end of 1995, and is projected to grow to 47 million
subscribers by the year 2000. Other types of wireless communications
technologies, such as PCS and specialized mobile radio ("SMR"), are expected to
compete with cellular in the near future and enjoy rapid expansion. For example,
the number of PCS subscribers is projected to reach almost 15 million by the
year 2000.
Telecommunications carriers face increasing competitive pressures arising
from the deregulation of the domestic telecommunications industry. Landline
carriers which once enjoyed monopoly status in local markets now confront
competition from multiple providers. For example, the enactment of the
Telecommunications Act of 1996 effectively allows AT&T and other long-distance
providers to compete in local markets or Local Access Transport Areas ("LATAs").
Competition is especially pervasive in the wireless telecommunications
marketplace. The FCC has issued licenses to two cellular providers in every
domestic market and may issue as many as six licenses in each market to PCS
providers.
23
<PAGE> 29
Because of this increasingly competitive environment, local, regional and
national telecommunications carriers confront intense pressure to differentiate
their products and establish brand loyalty. These pressures are particularly
acute for wireless carriers who seek to increase market penetration of their
services and increase revenues while confronting competition from rival carriers
and new technologies. As the quality of wireless services improves and achieves
relative parity with competing services, wireless providers must differentiate
themselves by incorporating value-added features into their services.
Carriers additionally face increased competitive pressures with respect to
the pricing of their services. In response to these pressures, carriers have
reduced airtime rates and increased their call volumes by targeting new
subscribers who use wireless services on a more limited basis. These trends are
reflected in the decline, as reported by the CTIA, of average monthly service
revenue per subscriber from $74.10 in 1991 to $59.08 in 1995, causing carriers
to pursue strategies that increase the frequency and duration of use.
Increasingly, carriers are re-evaluating their existing services and
seeking opportunities that will allow them to compete more effectively and
increase usage. Directory assistance is one such feature that wireless carriers
can offer to differentiate their services. Traditional landline directory
assistance provides a customer with a requested party's phone number, but only
if specific identifying information, including name, spelling, and possibly
address, are supplied by the caller. To reduce labor costs and to achieve
greater operating efficiencies, carriers in recent years have consolidated
directory assistance operations and reduced reliance on operators through the
increased use of automated systems. These directory assistance operations strive
to decrease call processing times by limiting customer connect time.
Wireless subscribers need convenient and practical directory assistance in
which they are not hampered by the limited functionality of automated operators
or required to write down or memorize phone numbers. Wireless subscribers
benefit from an enhanced directory assistance that can deliver features beyond
mere phone listings, such as call connectivity and helpful information such as
categorical searches, local events and movie listings. In turn, carriers benefit
from increased subscriber loyalty and the revenues derived from more frequent
usage.
THE METRO ONE SOLUTION
Metro One gives wireless carriers the ability to deliver feature-rich,
easy-to-use and personalized enhanced directory assistance to their subscribers.
The Company's EDA offers enhancements to traditional directory assistance,
including an array of connectivity features and the ability to supply wireless
consumers with a broader range of information, including categorical search and
local event information. With the Company's EDA, carriers can offer customized
configurations of these value-added connectivity and content features. These
custom feature sets are marketed and delivered with private label branding,
enabling the carrier to establish a distinct identity for its services. In
addition, the Company's connectivity features can increase the call completion
rate, producing additional revenue for carriers through increased billable
airtime. The Company believes that carriers offering its EDA experience greater
service use and higher subscriber satisfaction and retention.
The Company's operating competencies, derived from the establishment and
operation of 11 call centers, allow it to provide carriers with a reliable,
high-quality directory assistance product. The Company's contracts with carriers
impose stringent performance standards. The Company strives to maintain its high
quality of service through various quality assurance programs, including
employee training, operator monitoring and periodic carrier quality evaluations.
The Company's national call center network enables carriers which operate in
multiple markets to offer a consistent EDA, which promotes greater system-wide
marketing and brand identification.
24
<PAGE> 30
METRO ONE'S STRATEGY
Metro One's mission is to be the leading provider of operator-assisted
information services. The key elements of Metro One's strategy for fulfilling
that mission are:
Continuously offer value-added products and features. Metro One endeavors
to define a new standard for directory assistance by delivering directory
assistance solutions which meet the particular needs of wireless
telecommunications consumers. Metro One is working to enhance and expand its
feature offerings to include new advanced connectivity capabilities, including
operator return and messaging, and is working to improve its database systems to
include additional local event information and more and different types of
useful information. Through continuous expansion of its features, enrichment of
its database and enhancement of its search capabilities, Metro One believes it
can attract and retain carriers and set an ever increasing expectation for
value-added enhanced directory assistance. See "Principal Product and Product
Features."
Expand into new geographic markets. Metro One expects to continue to
expand its national network of call centers into new geographic markets served
by existing carrier customers, which increasingly demand consistent service
across their national networks. Metro One intends to build on these existing
carrier relationships to increase its share of the wireless telecommunications
directory assistance market. The Company also plans to offer enhanced directory
assistance from these new call centers to additional cellular carriers and to
PCS carriers as that technology is introduced. Metro One believes its
operational competencies and extensive experience developing and maintaining its
existing call center network will help the Company to penetrate these new
geographic markets successfully.
Leverage existing infrastructure. Metro One intends to exploit its
national call center network to provide service to additional wireless carriers
and subscribers from existing call centers. By leveraging its established call
center network, Metro One expects to expand call volumes particularly by
providing EDA to subscribers who can now be served more readily as a result of
the deregulation of the telecommunications industry. Metro One also intends to
further leverage its directory assistance database systems to provide national
directory assistance and national call connectivity.
Achieve greater operating efficiencies. Metro One is developing and
implementing software enhancements and adding new hardware to its EDA systems
that are intended to increase the productivity of its operators. These
improvements are expected to give operators the ability to perform more
sophisticated information searches with faster data retrieval, and provide them
with the ability to efficiently query multiple data bases. Coupled with improved
personnel training programs and operator monitoring capabilities, these
enhancements are expected to permit the Company to deliver its EDA to carrier
subscribers more efficiently while increasing call center profitability.
Pursue opportunities to provide additional operator-assisted
services. Metro One intends to expand its product offerings to include
information services that complement its enhanced directory assistance. The
Company is exploring such offerings as direction services, messaging and
concierge services. The development and implementation of these services are
intended to generate incremental revenue for the Company while raising consumer
expectation for operator assisted information services.
25
<PAGE> 31
CUSTOMERS AND MARKETS
The Company provides its EDA to six of the nation's largest cellular
carriers in a portion of their service areas and to one of the first carriers to
establish domestic PCS service.
The following table identifies the 25 largest domestic cellular markets,
based on estimated total subscribers, and sets forth the two licensed cellular
carriers in those markets. Carriers who have contracted with Metro One to
provide EDA services in those markets are indicated in bold-faced type.
<TABLE>
<CAPTION>
ESTIMATED CELLULAR LICENSEE
TOTAL CELLULAR --------------------------------------------------
RANK METROPOLITAN MARKET SUBSCRIBERS A B
- ---- ----------------------- -------------- ------------------------ ------------------------
<C> <S> <C> <C> <C>
1 Los Angeles, CA........ 1,640,946 Bell South AirTouch Cellular
2 New York, NY........... 1,260,885 AT&T Wireless Bell Atlantic NYNEX
Mobile
3 Chicago, IL............ 1,188,043 Southwestern Bell Mobile AMERITECH CELLULAR
4 Washington, D.C./
Baltimore, MD.......... 935,529 Southwestern Bell Mobile BELL ATLANTIC NYNEX
MOBILE
5 Miami, FL/West Palm
Beach, FL.............. 863,645 AT&T Wireless BELLSOUTH CELLULAR
6 Detroit, MI............ 746,113 AirTouch Cellular/AT&T AMERITECH CELLULAR
Wireless
7 San Francisco, CA/
San Jose, CA........... 744,135 AT&T Wireless/AirTouch GTE Mobilnet
Cellular
8 Boston, MA............. 686,384 Southwestern Bell Mobile Bell Atlantic NYNEX
Mobile
9 Philadelphia, PA....... 654,617 Comcast Cellular BELL ATLANTIC NYNEX
Communications MOBILE
10 Atlanta, GA............ 609,145 AirTouch Cellular BellSouth Cellular
11 Dallas, TX............. 583,191 AT&T Wireless Southwestern Bell Mobile
12 Houston, TX............ 560,691 AT&T Wireless/Bell South GTE Mobilnet
13 Seattle, WA............ 425,975 AT&T WIRELESS US WEST NEWVECTOR
14 San Diego, CA.......... 380,545 GTE MOBILNET AirTouch Cellular
15 Tampa, FL.............. 349,251 AT&T Wireless GTE Mobilnet
16 Minneapolis, MN........ 347,999 AT&T WIRELESS US WEST NEWVECTOR
17 Phoenix, AZ............ 346,017 Bell Atlantic NYNEX US WEST NEWVECTOR
Mobile
18 St. Louis, MO.......... 328,658 AMERITECH CELLULAR Southwestern Bell Mobile
19 Denver, CO............. 324,904 AT&T WIRELESS US WEST NEWVECTOR
20 Sacramento, CA......... 309,395 AT&T Wireless AirTouch Cellular
21 San Antonio, TX........ 293,141 AT&T Wireless Southwestern Bell Mobile
22 Cleveland, OH.......... 292,888 New Par GTE Mobilnet
23 Portland, OR........... 276,779 AT&T WIRELESS US West NewVector
24 Orlando, FL............ 272,390 AT&T Wireless BellSouth Cellular
25 Kansas City, MO........ 250,250 AT&T Wireless Southwestern Bell Mobile
</TABLE>
- ---------------
Source for market rankings, estimated subscribers and licensees: RCR
The Company believes that these major metropolitan areas represent its
greatest opportunities for future growth. Cellular usage in these markets has
attained sufficient levels to provide profitable call volumes. Competition among
carriers for these subscribers increases carrier need for features that can
differentiate their services. The Company targets all domestic cellular carriers
and carriers developing and offering emerging
26
<PAGE> 32
telecommunications technologies in market areas where it presently offers EDA.
The Company strives to expand relationships with existing carrier customers and
to establish relationships with new carrier customers in markets where the
Company's EDA presently is not offered.
The Company provides substantially all of its EDA services under 12
separate contracts that have terms that range from two to five years. Under the
EDA contracts, the carrier generally agrees to route all local directory
assistance calls to the Company. However, these contracts generally allow the
Company to offer EDA services to competing carriers. The Company contractually
agrees to staff its EDA operations centers 24 hours a day, seven days a week,
365 days a year, with a sufficient number of operators to perform the contracted
services within specified performance requirements.
The Company offers its services on behalf of the carrier under a brand name
selected by that carrier. For example, the Company presently offers its EDA to
AT&T Wireless subscribers in various markets as "AT&T Connect." The carrier is
responsible for all aspects of marketing, including advertising and related
costs. Although each carrier establishes its own fee structure with its
subscribers, Metro One charges carriers for its service on a per call basis and
the carrier is obligated for the charges regardless of whether it is paid by the
subscriber. Generally, these per call charges remain fixed for the term of the
contract, subject only to consumer price index adjustments. During 1995, the
Company's per-call charges to its carrier customers averaged $.61.
The Company typically enters into a separate contract with a carrier for
each geographic market to be served by the Company. The Company is a party to a
single contract with Ameritech Cellular, however, providing for the Company to
deliver enhanced directory assistance to Ameritech Cellular's subscribers in
Chicago, Milwaukee, St. Louis, and Detroit. The agreement provides for the
Company to supply directory assistance to each of those markets for a term of
three years commencing on the date enhanced directory assistance is made
commercially available to subscribers in the market. The additional terms of the
agreement do not differ materially from the Company's general EDA contracts.
In 1995, seven customers accounted for substantially all of the Company's
$13.0 million in revenues. The Company's three largest customers, US West
NewVector, Ameritech Cellular and Bell Atlantic NYNEX Mobile, accounted for
approximately 29, 23, and 20 percent of revenues, respectively, in 1995. In
1994, six customers accounted for all of the Company's revenues, and the top
three customers, US West NewVector, Bell South Cellular and AirTouch Cellular,
accounted for approximately 53, 15, and 13 percent of revenues, respectively.
During the first quarter of 1996, the Company's contract with AirTouch
Cellular in the San Diego market expired. During 1995, the contract accounted
for approximately seven percent of the Company's revenues. Although the Company
participated in a competitive bidding process, the Company was unable to secure
renewal on terms and conditions that were acceptable to the Company. During the
negotiations, the carrier sought rates below prior contract rates and an
exclusivity commitment in markets served by the carrier. As of May 6, 1996,
another vendor began handling calls for the carrier in the San Diego market from
remote call centers. The Company continues to serve a competing carrier in the
San Diego market.
In July 1994, AirTouch Cellular and US West NewVector announced their
intention to combine their cellular properties in a multi-phase transaction.
AirTouch Cellular has also formed a partnership, called TOMCOM, L.P., with Bell
Atlantic and NYNEX to develop common service standards, pursue national
marketing strategies, develop information technology, create a national
distribution strategy and implement joint purchasing arrangements. Unlike the
AirTouch Cellular/US West NewVector partnership, however, TOMCOM does not
contemplate a merger of cellular properties. Two of the Company's contracts with
certain of those TOMCOM participants are up for renewal in 1997, with four up
for renewal in subsequent years.
While the implications of the non-renewal of the AirTouch Cellular EDA
contract for its San Diego market are unclear, the Company believes this
decision may serve as a precedent for AirTouch Cellular and the other TOMCOM
participants as they establish or consider the renewal of EDA contracts in other
markets in the future. Accordingly, there can be no assurance that the Company
will be provided the opportunity to renew its contracts with US West NewVector
or any other TOMCOM participant or that the Company will
27
<PAGE> 33
have the opportunity to obtain new contracts with any of these carriers in the
future. If these contracts are not renewed, there is no assurance that the
Company will be able to replace these contracts with contracts with other
carriers. Contracts with TOMCOM participants accounted for approximately 56% of
the Company's revenues in 1995. The failure of the Company to obtain renewal of
those contracts or to obtain replacement contracts would have a material adverse
effect on the Company's business, financial condition and results of operation.
PRINCIPAL PRODUCT AND PRODUCT FEATURES
Enhanced Directory Assistance. Metro One delivers its EDA using a
customized array of hardware and software and the Company's database and search
engines. The Company receives incoming calls by means of contractually assigned
directory assistance numbers, typically 411 or 555-1212. Calls are answered by
the Company's operators, identifying the EDA service using the carrier's brand
name. Upon receiving information requests from subscribers, Company operators
search the Company's local database utilizing various search engines. The
Company's EDA system allows the operator to connect the caller to a party or, if
requested, supply the subscriber with a telephone number, address, or other
information, including local events or businesses of a certain type within a
specific locality. The fee for this service is fixed by the carrier, and
typically ranges from $.50 to $.75 plus airtime charges. The Company's system
compiles billing information that is, in some cases, furnished to the carrier
for subscriber billing and collection.
Connectivity features. The Company's EDA incorporates connectivity
features at no additional charge to carriers, which are engineered to
address specific needs of mobile users. The Company's call completion
feature directly connects a subscriber to a requested business or residence
without the requirement of additional dialing. This feature is particularly
useful to the mobile consumer because it eliminates the need to write down
or memorize a phone number. Metro One's StarBack feature allows a caller to
return immediately to an operator simply by pressing the (*) key once on
the caller's telephone. This feature allows a caller immediate access to an
operator if a call is unanswered or if the number is busy, permitting the
caller to request alternate connections.
Content features. The Company's database and search engine
development activities have focused on the creation of valuable features
which distinguish the Company's EDA from traditional directory assistance.
The Company's database system is derived from a variety of sources,
including data licensed from RBOCs, independent telephone companies and
other commercial sources. Most RBOCs and independent telephone companies
historically have made their listing information available for license by
the Company in accordance with tariffs established with state regulatory
authorities or through license agreements. Under the Telecommunications Act
of 1996, all telecommunications carriers that provide telephone exchange
service are obligated to provide subscriber list information under
nondiscriminatory and reasonable rates, terms, and conditions. The Company
supplements this information with localized information, including
information relating to local events and amenities. Unlike traditional
directory assistance, the Company's EDA permits categorical searches of its
database, allowing operators to provide more comprehensive information to
callers. For example, a party may request the identities, addresses and
telephone numbers of a business of a certain type in a specific locale. The
Company has the capability to customize a local database to include
specialized information at the request of a carrier customer. The Company
believes that these features are of particular value to wireless
subscribers who often seek information while in transit.
New features and products. The Company is developing features which
complement the Company's current array of connectivity and content features
while providing additional utility and value to the wireless subscriber. The
Company believes that the development of new features is an important component
of its strategy to define a new standard for directory assistance and to thereby
widen customer acceptance of and demand for enhanced directory assistance. The
Company has experienced delays in the development of new features in the past,
including delays attributable to the failure of vendors to timely deliver
software and equipment and delays attributable to the Company's limited
technical staff. Although the Company has sought to prevent future delays by
supplementing the efforts of technical staff through technical consulting
contracts and through contracting with alternate sources for certain aspects of
feature development, there can
28
<PAGE> 34
be no assurance that the Company will successfully complete the development or
introduction of new features and products on a timely basis or that such
features and products will achieve market acceptance.
Search engines. The Company is upgrading its database system and
search engines to broaden the categorical search capabilities of its
operators. When implemented, these search engines are intended to permit
additional keyword, phonetic and logical search capabilities. It is
anticipated that these new software tools will be introduced in the
Company's call centers throughout 1996. The Company believes that these
tools will improve EDA search times, resulting in faster call processing.
Connectivity features. The Company plans to introduce several new
connectivity features during 1996 which will further differentiate its EDA
from traditional directory assistance. These additional features are
expected to include AutoBack--the ability to automatically return a caller
to an operator if a busy signal or no answer is detected; NumberBack--the
ability to obtain on demand a recording of the last phone number requested
by a caller; MessageBack--the ability to deliver a caller's message to the
called party at a later time if connection is not initially established;
and CallBack--the ability to connect the called party to the calling party
at a later time.
National database access and inter-LATA connectivity. The Company is
upgrading its call center work stations to allow operators to more efficiently
query both their local database and a national directory assistance database
licensed by the Company from commercial sources. In addition, these workstation
upgrades, coupled with the networking of the Company's call centers, will allow
operators to also query both their local enhanced directory assistance database
and other local enhanced directory assistance databases throughout the Company's
call center network. When completed, each of the Company's local databases are
expected to be accessible from any call center. This development, coupled with
the ability of operators to more effectively connect calls to any domestic phone
number in its database, will allow carriers to provide their subscribers with a
national EDA.
Operator-assisted services. The Company also intends to expand its product
offerings to include information services that complement its EDA. The Company
is exploring such offerings as direction services -- providing point-to-point
directional information to callers; messaging -- delivering alpha-numeric
messages to the desired party's digital handset; and concierge
services -- providing operator-assisted concierge information for the
hospitality industry and other corporate customers.
OPERATIONS
Call centers. The Company presently maintains call centers in the
Baltimore, Chicago, Denver, Detroit, Miami, Minneapolis, Philadelphia, Phoenix,
San Diego, Seattle and Portland, Oregon metropolitan areas. Call center premises
are leased by the Company and range in size from approximately 3,000 to 11,000
square feet. The Company seeks to match the terms of these leases to the terms
of its contracts with carriers at each site, obtaining renewal rights where
possible. In its call center site selection process, the Company works with
carriers to identify locations which provide easy access to T1 and T3
transmission facilities. In addition, the Company seeks to obtain locations that
are readily accessible to its workforce.
Call centers typically are configured using modular work stations, so that
each operator has a station for their terminal and related database materials.
Because the Company's call centers are operational 24 hours a day, work stations
may be used by three or more operators during a business day.
Database, database management system and search engines. The Company
develops a principal database for each call center, obtaining data from a
variety of sources including RBOCs, independent telephone companies and other
commercial sources. The Company's local database is augmented by access to
supplemental databases on a subscription basis. The Company has developed a
database management system that it uses to maintain and update directory
listings in its database. The Company receives periodic updates from certain of
its data sources which are incorporated into its databases on a regular basis.
The Company has developed search engines to access information within its
databases. The Company currently is upgrading its database management system and
search engines to broaden the categorical search capabilities of its operators.
When implemented, the search engines are expected to enable additional key
29
<PAGE> 35
word, phonetic and logical search capabilities. The Company anticipates that
these software enhancements will be introduced in its call centers throughout
1996.
EDA system. Metro One's EDA system incorporates programmable switching
equipment, host computers, voice response units and database servers. The
Company contracts with value-added resellers to assist in programming its
switches and host computer systems. This software enhances its call handling and
billing capabilities and provides the basis for the Company's connectivity
features.
[GRAPH]
Graph of a typical Metro One EDA system including the database management
system (DBMS), the server, the router, the voice response unit (VRU), the
switch, the electronic white pages (EWP), and the interconnections between
these subsystems and Metro One's operators and a carrier customer.
Interconnects include T1 and T3 transmission facilities, a wide area network
(WAN) and a data network.
A subscriber call is routed to a Metro One call center over T1 or T3
transmission facilities between a carrier's switching center and the call
center. The call is processed by Metro One's switch and routed to an operator. A
voice response unit greets the caller with a message recorded by the specific
operator to whom the call is routed. At the conclusion of the greeting, the
operator attends to the caller's directory assistance request, generally by
utilizing Metro One's computerized database system and search engines.
Once the requested information is provided to the caller, the caller is
connected directly to the requested number. Because the subscriber's call is
routed through Metro One's switch, the caller can use the StarBack feature to be
immediately returned to an operator at any time during the call. This call
processing configuration permits the Company to offer additional connectivity
features through the programming of its switch and host computer.
Quality assurance. Particularly because the Company's EDA is provided to
subscribers on a branded basis, the Company believes that the quality and
reliability of its EDA services are important considerations in a carrier's
decision to offer the Company's EDA. The Company provides carriers with broad
EDA options, including system design, configuration and features. Once a new
call center is operational, the Company and carrier subject the center to
extensive testing before service is initiated.
In addition to supplying billing information to carriers, the Company
monitors call center performance for compliance with contract performance
standards and reports this information to carriers on a periodic basis. The
Company conducts weekly, monthly and quarterly reviews of call center
performance, including operator monitoring. The Company has centralized its
employee training which allows it to achieve more uniform performance throughout
its call center network. Metro One solicits performance evaluations from its
customers on a quarterly basis. The Company's systems maintenance and support
personnel are accessible to customers on a 24-hour basis.
30
<PAGE> 36
Reliance on Third Party Vendor. Currently the Company retains the services
of one value-added reseller to assist in programming the Company's
telecommunications switching equipment. As a result, this firm has significant
familiarity with the technological method by which the Company delivers its EDA.
Although the Company believes that such programming services are available from
multiple sources, if the Company were unable to obtain the services of this
firm, the Company might be required to obtain similar services from other
parties or devote its own resources to such programming. The development of such
an alternative approach could involve significant time and expense and diminish
the Company's ability to provide quality service or even delay the Company's
ability to provide its EDA to its customers.
MARKETING
The Company markets directly to telecommunications carriers. Sales and
technical support personnel are based at the Company's corporate headquarters in
Beaverton, Oregon. In addition, the Company's regional managers, who oversee the
Company's call center network, are also a key element in the maintenance and
development of carrier relationships.
The Company's major marketing programs focus on product awareness
principally through trade shows, marketing materials, including brochures and
videotape presentations, and direct contacts with telecommunications carriers.
There are several major industry conferences that are keystones to the Company's
marketing program. These include the annual Cellular Telecommunications Industry
Association and the annual Personal Communications Industry Association
conferences. The Company maintains communications with its existing carrier
customers through its quality assurance and customer service programs, which
afford the Company the opportunity to receive information regarding evolving
carrier needs.
By receiving input from carriers, the Company is able to design its
products to effectively serve their needs and those of their subscribers. If
carriers have particular needs which cannot be met by the Company's standard
system configuration, the Company strives to customize the system and its EDA
product to meet their specific needs.
COMPETITION
The enhanced directory assistance market is characterized by rapidly
changing market forces, technological advancements and increasing competition
from large carrier-affiliated companies and small, independent companies. The
Company's principal competitors include RBOC-owned or -affiliated carriers or
non-RBOC affiliated carriers, including GTE. In addition to traditional
directory assistance, many of these competitors offer a directory assistance
call completion feature. Although the Company believes that none of these
competitors presently offers a form of enhanced directory assistance that
incorporates all the connectivity and content features of the Company's EDA,
these competitors have substantially greater financial, technical and marketing
resources than the Company and may be able to do so in the future. The Company
also faces competition in various markets from independent companies seeking to
offer forms of enhanced directory assistance.
The Company believes that the principal competitive factors in the enhanced
directory assistance market are quality of product, available features,
technological innovation, experience, responsiveness to customers, and price.
Historically, the Company has sought to distinguish itself from competitors
based on the quality of its product, the development of useful features and its
experience derived from successfully establishing a national network of call
centers. Although the Company has not experienced widespread competitive
pressures with respect to the pricing of its product, there can be no assurance
that the Company will not experience price or margin pressures in the future.
The Company believes, however, that its future growth will depend on its ability
to maintain and improve the quality of its product, and to develop and
successfully introduce new connectivity features and content.
INTELLECTUAL PROPERTY
The Company regards certain aspects of its products and their features and
processes as proprietary and relies on a combination of trademark, patent and
trade secrets laws and confidentiality procedures to protect
31
<PAGE> 37
its proprietary rights. The Company has applied for five patents covering
certain aspects of the Company's product features and processes. There can be no
assurance that patents will issue with respect to any of these applications. The
Company's policy has been to enter into confidentiality agreements with all
employees and limit access to its documentation and other information related to
its intellectual property. Despite these activities, however, no assurance can
be given that the steps taken by the Company will provide adequate protection of
its proprietary product features or processes or that competitors will not
develop similar or functionally equivalent product features or processes.
The Company believes that its product development and marketing
capabilities have been of greater importance to the Company's business than
legal intellectual property protection. Likewise, although the Company believes
that obtaining patent protection may provide benefits to the Company, the
Company does not believe that its business is dependent on obtaining patent
protection or successfully defending any such patents that may be obtained
against infringement by others.
The Company has obtained service mark registrations in the United States
for the names "StarBack," "Metro One," "EDA," "Enhanced Directory Assistance,"
and "the Enhanced Directory Assistance People." "AutoBack," "NumberBack,"
"SureConnect," "MessageBack," "CallBack," and "TeleConcierge" are also service
marks of the Company. Service mark registration applications are pending in the
United States with respect to these marks used by the Company. This Prospectus
also includes trademarks and tradenames of companies other than Metro One.
GOVERNMENT REGULATION
The Company's business depends upon relationships with companies that are
regulated by the FCC or state PUCs. Such regulation applies to all
communications common carriers, such as AT&T, RBOCs and other long distance and
local exchange carriers. Enhanced service companies such as the Company may be
subject to various levels of regulation or are completely unregulated on a
state-by-state basis.
EMPLOYEES
As of June 30, 1996, the Company had approximately 493 employees. None of
the Company's employees are subject to a collective bargaining agreement.
Management of the Company considers its relationship with its employees to be
good.
PROPERTIES
The Company leases its principal executive and administrative offices at
8405 S.W. Nimbus Avenue, Beaverton, Oregon, comprising approximately 15,400
square feet, for a remaining term of six years with a renewal option. The
Company also leases office facilities for its EDA operations in the Baltimore,
Chicago, Denver, Detroit, Miami, Minneapolis, Philadelphia, Phoenix, St. Louis,
San Diego, Seattle and Portland, Oregon metropolitan areas. There are 13
facility leases in effect at May 31, 1996 with remaining terms ranging from one
to six years.
The Company believes that its facilities are suitable and adequate for its
presently anticipated requirements and that it is not dependent upon any
individual leased premises.
SECURITIES LAW ISSUES
Between 1989 and December 31, 1993, the Company financed its activities
through sales of 3,529,944 shares of its Common Stock and debt securities that
were converted into 1,462,494 of its Common Stock. Such securities were sold
directly to approximately 560 persons. During a review of these past financing
activities in 1993, the Company's management was unable to conclude that all
applicable state and federal securities laws had been complied with in all
material respects in connection with these offerings. A violation of state or
federal securities laws in connection with an offering of securities generally
gives the purchaser the right to rescind the transaction and obtain from the
issuer the original purchase price for the securities or, if the securities have
been subsequently disposed of, the difference between the price paid for the
securities and
32
<PAGE> 38
the amount obtained on disposition, plus interest at a statutory rate from the
date of purchase. The blue sky laws of Oregon and some other states permit an
issuer to extinguish the rights of a purchaser of securities to bring a suit
based on violation of the state's blue sky laws by offering to rescind the
transaction and pay the purchaser the amount of damages that he would have been
entitled to receive, as explained in the previous sentence. However, the SEC
takes the position that liabilities under the federal securities laws are not
terminated by the making of a rescission offering.
In 1994, the Company voluntarily executed the Consent Order with the
Division in which the Company agreed to cease and desist from participating in
any violations of Oregon securities laws and paid a civil penalty of $20,000.
In 1995, the Company offered to each holder of its Common Stock as of March
31, 1995 who resided in Oregon the right to rescind the holder's purchase of
shares of the Company's Common Stock. Sales of 135,414 shares of the Company's
Common Stock were rescinded pursuant to the rescission offering, resulting in
payment by the Company of approximately $738,660 to certain of its former
shareholders, which included interest of approximately $124,900.
The Company believes that its potential rescission liability to
shareholders who received the rescission offer for possible violations of Oregon
and federal law has been effectively eliminated as a result of the rescission
offer or the running of applicable statutes of limitation.
In addition, the rescission offer was made to holders of 119,843 shares of
the Company's Common Stock who resided in states in which the Company did not
register its rescission offer, and the rescission offer was not made to holders
of 528,215 shares of the Company's Common Stock who resided in states whose
securities laws do not permit rescission offerings or impose terms and
conditions on such offerings which were unacceptable to the Company. These
holders of 648,058 shares of Common Stock originally purchased such shares of
Common Stock from the Company at prices ranging from $0.88 to $8.05 a share;
515,064 of these shares were purchased for $4.38 a share or less. Although the
Company also believes that its potential rescission liability to many of these
shareholders may have been eliminated by the running of applicable statutes of
limitation, there can be no assurance that claims asserting violations of
federal or state securities laws will not be asserted against the Company by any
of these shareholders or that certain holders will not prevail against the
Company in the assertion of such claims, thereby compelling the Company to
repurchase their shares. If all of these holders successfully asserted claims
that the Company repurchase their shares, the Company could be required to pay
to these holders approximately $2,049,162, plus approximately $525,000 in
statutory interest, to repurchase $648,358 shares of the Company's Common Stock,
representing an average repurchase price of approximately $3.97 a share. Even if
the Company were successful in defending any securities law claims, the
assertion of such claims against the Company additionally could result in costly
litigation and significant diversions of effort by the Company's management. See
"Legal Proceedings."
Between September 1994 and December 1994, Steven A. Posey, then the Vice
President-Sales and Marketing for the Company, purchased 171,420 shares of the
Common Stock pursuant to the exercise of options, at exercise prices of $1.75
per share. Mr. Posey died in October 1995. The Company has recently been
informed by representatives of Mr. Posey's estate that Mr. Posey entered into
transactions contemporaneously with his option exercises pursuant to which he
either sold, agreed to sell or pledged approximately 80,000 of these shares (the
"Posey Shares") to third parties at effective prices per share ranging from
$7.00 to $10.50.
Such transactions may not have been undertaken in compliance with
applicable federal and state securities laws and, under those laws, Mr. Posey
could be deemed an "underwriter" with respect to his sale or pledge of the
shares of Common Stock he acquired. Consequently, certain of the purchasers and
lenders may possess claims against Mr. Posey to rescind their respective
transactions with him.
The Company believes it exercised reasonable care to assure that Mr. Posey
was not an "underwriter" within the meaning of the federal and state securities
laws in connection with his option exercises in 1994. The Company informed Mr.
Posey in writing during the time he exercised the options that the shares were
not transferable except in accordance with federal and state securities laws.
The stock certificates delivered to Mr. Posey also contained a legend stating
that the shares were not transferable except in accordance with
33
<PAGE> 39
federal and state securities laws. Accordingly, the Company believes that none
of the individuals who acquired shares from Mr. Posey has a valid claim against
the Company as a result of those transactions.
Notwithstanding the foregoing, there can be no assurance that a party
asserting claims against Mr. Posey or his estate as a result of any of those
transactions will not also assert claims against the Company, alleging the
Company's participation in the transactions. If it were ultimately determined
that the Company participated in those transactions, acquirors of Posey Shares
might have the right under state or federal securities laws to rescind their
purchases and obtain their original purchase price from the Company, plus
interest from the date of purchase at the statutory rate, in exchange for their
shares.
In 1994 and 1995, the Company offered and sold its Notes in private
transactions. During the fourth quarter of 1995, $5,000,000 in principal amount
of the Notes were converted into 2,164,402 shares of the Company's Common Stock,
at an effective conversion rate of $2.31 a share. In 1995 and 1996, $3,210,000
in principal amount of Notes was exchanged for 611,440 shares of the Company's
Common Stock, at an effective exchange rate of $5.25 a share. One remaining Note
in the principal amount of $100,000 is due in September 1996. In addition,
between January 1994 and March 1996, the Warrants were exercised to purchase an
aggregate of 293,131 shares of the Company's Common Stock for an aggregate
purchase price of $1,003,080, or a weighted average exercise price of $3.42 a
share.
If in a civil or regulatory action or proceeding it is ultimately
determined that the Company participated in the distribution of the Posey
Shares, parties who purchased Notes or exercised Warrants might assert that the
offer and sale of the Notes and the Warrants should be integrated with the
distribution of the Posey Shares and, accordingly, should have been registered
under the Securities Act. If it were ultimately determined that the offer and
sale of the Notes and Warrants should have been registered as a result of
integration with the distribution of the Posey Shares, the holders of the Notes
and Warrants might have the right to rescind their original investment and (i)
obtain from the Company the difference between the amount of the original
investment and the value of the shares received upon exchange or conversion,
(ii) exchange the shares acquired upon the exercise of Warrants for the exercise
price, (iii) receive accrued interest at the statutory rate on the amount
provided for in (i) and (ii). In addition, there is no assurance in this event
that the distribution of the Posey Shares would not be deemed by the Division to
be a violation of the Consent Order, in which case the Division might seek to
impose civil and criminal penalties against the Company. Such a rescission or
penalties could have a material adverse effect on the Company's financial
condition and results of operations. Even if the Company were successful in
defending any securities law claims, the assertion of such claims against the
Company additionally could result in costly litigation and significant
diversions of effort by the Company's management.
LEGAL PROCEEDINGS
In May 1993, as a means of rapidly responding to a market opportunity in
Arizona with US West NewVector, the Company entered into a Leasing and Business
Transfer Agreement (the "Leasing Agreement") with Metro Direct Information
Services of Phoenix ("Arizona Direct"), an unaffiliated third party and former
licensee of the Company's initial value-added EDA product. The Leasing Agreement
provided financing for the Company of substantially all required equipment and
furniture in its Arizona operations center and is similar, in some respects, to
a joint venture agreement. Equipment with the approximate value of $200,000 was
financed and obtained by the Company under the Leasing Agreement, which amount
was not repaid by the Company. The Leasing Agreement provided for a
formula-based profit sharing arrangement between the Company and Arizona Direct,
which was to become effective after the Company had recouped all start-up costs
from the Arizona operation. At the earliest appropriate time, at the Company's
discretion, the Company was obligated to request that its rights under the US
West NewVector contract for Arizona be transferred to Arizona Direct. If such a
transfer had occurred, the profit sharing arrangement was to be replaced by a
royalty arrangement under which the Company would have received a royalty for
each cellular call handled by Arizona Direct. If the transfer had been denied or
otherwise did not occur, the formula-based profit sharing arrangement was to
govern the business relationship between the Company and Arizona Direct until
the transfer or the end of the US West NewVector agreement. In December, 1994,
the Company notified Arizona Direct that it believed Arizona Direct was in
default of its obligations under the Leasing Agreement.
34
<PAGE> 40
The Company has declared the Leasing Agreement terminated. Arizona Direct has
given the Company notice of its belief that the Company has breached the Leasing
Agreement as well. The Company has denied those allegations.
In connection with the Leasing Agreement, the Company and several of its
officers have been named as defendants in a complaint filed in U.S. District
Court for the District of Arizona in June 1994 by Arizona Direct (and the
purported principal shareholders of Arizona Direct). The complaint alleges,
among other things, that the Company and its officers defrauded the plaintiffs
by entering into the Leasing Agreement and, further, violated securities laws as
the plaintiffs believe the Leasing Agreement to constitute a security as that
term is used in state and federal securities regulations. Additionally, the
complaint alleges that the Company and several of its officers violated
securities laws by selling securities in the plaintiff company to the individual
plaintiffs in the amount of $507,000 and otherwise causing the individual
plaintiffs to invest in Arizona Direct. The complaint seeks damages, including
punitive damages, in an amount to be determined by the court. The Company and
its officers answered the complaint denying liability, and moved to dismiss
certain aspects of the suit and to change the venue from Arizona to Oregon. The
court granted these motions, transferred the case to the U.S. District Court for
the District of Oregon and gave Arizona Direct leave to re-plead. Arizona Direct
filed an amended complaint in March, 1995 which did not substantially alter the
claims previously made. The Company moved to dismiss certain claims, which
motions were granted in part. The Company has counterclaimed for breach of the
Leasing Agreement and for tortious interference with the Leasing Agreement
against Arizona Direct's principal shareholders. In October 1995, Arizona Direct
filed an action against the Company in the U.S. District Court for the District
of Oregon seeking, among other things, damages for alleged breach of the Leasing
Agreement. This action has been consolidated with the pending case originally
filed in Arizona and subsequently transferred to Oregon. Discovery is ongoing in
both cases. The Company believes the allegations to be without merit because it
does not believe the Leasing Agreement constituted a security for purposes of
applicable federal and state securities laws. The Company further believes that
even if such Leasing Agreement constituted a security, it was exempt from
registration under such securities laws. The Company further believes that it
did not make material misrepresentations or omit to state material facts in
connection with the negotiation of the Leasing Agreement, and at all such times
it intended to perform the Leasing Agreement. Finally, the Company believes that
the litigation commenced by the plaintiffs against the Company constituted a
repudiation of the contract, precluding the plaintiffs from seeking its
enforcement. Notwithstanding the foregoing, there can be no assurance that the
Company or any of its officers will be successful in defending this legal
action. No assurance can be given that the Company or any of its officers will
be successful in defending this legal action.
On May 20, 1996, Richard and John Budinich, two of the Company's
shareholders, filed a civil action in the Superior Court of the State of
Washington for King County in which the plaintiffs allege that the Company
violated securities laws of the State of Washington by selling to the plaintiffs
44,532 shares of the Common Stock of the Company in 1993 which had not been
registered under Washington law and by omitting material facts and making untrue
statements in connection with those sales. See "Risk Factors -- Rescission
Rights of Certain Shareholders" and "Securities Law Issues." In its complaint,
the plaintiffs seek damages in the amount of the consideration paid for the
shares, $332,560, together with interest at the Washington statutory rate of 8%
per annum. The Company believes that it has meritorious defenses to the
plaintiffs' claims and intends to vigorously defend the litigation.
35
<PAGE> 41
MANAGEMENT
The following table sets forth certain information with respect to the
directors and executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Timothy A. Timmins....................... 39 President, Chief Executive Officer and Director
Patrick M. Cox........................... 34 Executive Vice President, Chief Operating
Officer, Secretary and Director
Kevin S. Anderson........................ 32 Senior Vice President -- Directory Assistance
Services
Stebbins B. Chandor, Jr.................. 36 Senior Vice President and Chief Financial
Officer
Gary E. Henry............................ 39 Vice President -- Field Operations
Karen L. Johnson......................... 46 Vice President -- Controller
Michael A. Kepler........................ 33 Vice President -- Information Systems
A. Jean de Grandpre...................... 75 Chairman of the Board
G. Raymond Doucet........................ 53 Director
William D. Rutherford.................... 57 Director
</TABLE>
TIMOTHY A. TIMMINS has served as President and Chief Executive Officer of
the Company since 1995 and Director of the Company since 1994. He served as the
Company's Executive Vice President and Chief Financial Officer from 1993 to
1995. From 1985 to 1993, Mr. Timmins served in various capacities within the
Investment Banking Division of Kemper Securities, Inc. and predecessor firms,
ultimately as Senior Vice President. Mr. Timmins is a certified public
accountant and holds a Bachelor of Science degree in Business Administration
from Portland State University and a Masters degree in Business Administration
from the University of Southern California.
PATRICK M. COX has served as Executive Vice President and Chief Operating
Officer since 1993, Secretary of the Company since 1995 and Director of the
Company since 1989. Since the Company's inception in 1989 through October 1993,
Mr. Cox served as Chairman of the Board of Directors, President and Chief
Executive Officer or similar positions. From 1986 to 1989, Mr. Cox was a
Director and Vice President of Line One Telecommunications, Inc., a company that
installed and serviced private communications networks and served as a sales,
service and repair center for Cellular One. Mr. Cox is a member of the National
Association of Radio and Telecommunications Engineers and is a NARTE Certified
Engineer Class One.
KEVIN S. ANDERSON has served as Senior Vice President -- Directory
Assistance Services of the Company since 1995. Since the Company's inception in
1989, Mr. Anderson has served in various capacities including President and
Executive Vice President. From 1988 to 1989, Mr. Anderson served as Vice
President of Operations for Line One Telecommunications, Inc. Mr. Anderson holds
a Bachelor of Science degree in Business Administration from Oregon State
University.
STEBBINS B. CHANDOR, JR. joined the Company in September 1995 and serves as
Senior Vice President and Chief Financial Officer of the Company. From 1985 to
1995, Mr. Chandor served in various corporate finance capacities with BA
Securities, Inc., a wholly-owned subsidiary of BankAmerica Corporation, and
affiliated or predecessor firms including Bank of America N.A. and Continental
Bank N.A. He specialized in structured finance/asset securitization and
mezzanine debt financing. Mr. Chandor holds a Bachelor of Science degree in
Chemical Engineering from Tufts University and a Masters degree in Business
Administration from the University of Southern California.
GARY E. HENRY joined the Company in 1993 and serves as Vice
President -- Field Operations. Prior to joining the Company, Mr. Henry was
Senior Vice President, Corporate Services Director for Imperial Corporation of
America, Inc., a financial institution, with whom he had been employed since
1985. He holds a Bachelor of Arts degree in Public Administration from San Diego
State University.
36
<PAGE> 42
KAREN L. JOHNSON joined the Company in November 1993 as Controller. From
1989 to 1993, she was Financial Operations Manager for Care Medical Equipment,
Inc. and Care Ambulance, Inc. Ms. Johnson is a certified public accountant with
a Bachelor of Arts degree from St. Olaf College, and she performed post-graduate
work in accounting and business administration at Portland State University.
MICHAEL A. KEPLER has served as Vice President of Information Systems for
the Company since 1993. From 1989 to 1993 he held a similar position as Director
of Information Systems. From March 1989 until joining the Company, Mr. Kepler
was a programmer with ComLink West, a computer services company that performed
contract programming for the Company. During 1988 and early 1989, he was an
Engineering Technician with Single Board Systems and an Assembly and Testing
Technician with Hewlett-Packard.
A. JEAN DE GRANDPRE is Chairman of the Board of Directors of the Company
and has served as a director since 1995. Mr. de Grandpre is the founding
Director and Chairman Emeritus of Bell Canada Enterprises from which he retired
in 1989. He has served on the Canadian Advisory Board of BJB International
Management since 1993, and the boards of Textron Canada Ltd. since 1992 and
Thera Technologies since 1993. He is a former Director of Bell Canada, Northern
Telecom Limited, Chrysler Corporation, Chrysler Canada Ltd., and the
International Advisory Board of The Chemical Bank, New York. Mr. de Grandpre is
a Life Member of the Canadian Bar Association, Emeritus Member of the Canadian
Association of Canadian General Counsel, Member of the Bar of the Province of
Quebec and former Chancellor of McGill University. Mr. de Grandpre is a lawyer,
appointed Queen's Counsel, a Companion of the Order of Canada, the highest
honour granted a private citizen. Mr. de Grandpre is the recipient of the
Honourary Associate Award of the Conference Board of Canada and is an inductee
into the Canadian Business Hall of Fame.
G. RAYMOND DOUCET has served as a director of the Company since 1995. Mr.
Doucet is the President and Chief Executive Officer of TeleZone Corporation, a
Toronto-based telecommunications company. He is also is President and Chief
Executive Officer of Douserv Management Inc., a Montreal-based holding Company.
From 1984 to 1991, he was the Chairman and Chief Executive Officer of Radcel
Communications Inc. which was purchased by Rogers Communications, Inc. Prior to
that, he was President of Douserv Group Inc., a company offering consulting,
marketing and operational services to the telecommunications industry. From 1965
to 1974, Mr. Doucet was the Director of Technical Services with Bell Canada
where he was responsible for the planning and development of transmission and
distribution networks. Mr. Doucet serves on the boards of directors of Doucet &
Associates Consultants Inc., Servco Quebec Inc. and TeleZone Inc.
WILLIAM D. RUTHERFORD was elected to the Board of Directors of the Company
at a Special Meeting of the Shareholders on November 29, 1995. Mr. Rutherford
was a principal with Macadam Partners, a Portland-based investment firm. He was
formerly the Treasurer of the State of Oregon, where he was responsible for the
State's then $14 billion investment program and the state's then $7.5 billion in
indebtedness and during which service he was elected Chairman of the Oregon
Investment Council. He also served for seven years as a Member of the Oregon
House of Representatives. From 1994 to 1995, Mr. Rutherford served as Director
of Special Projects for Metallgesellschaft Corp., a multi-billion dollar
international trading company. From 1990 through 1993, Mr. Rutherford was
President and a director of Societe Generale Touche Remnant Corporation (U.S.),
an international asset management company. From 1987 to 1990, Mr. Rutherford was
President and Chief Executive Officer of ABD International Management
Corporation, an international asset management company. Mr. Rutherford formerly
practiced law and served as the Chief Executive Officer of a regional investment
firm. A U.S. Army veteran, Mr. Rutherford received a Bachelor of Science in
History from the University of Oregon in 1961 and an LL.B. from Harvard
University Law School in 1964.
Pursuant to the Company's Second Restated Articles of Incorporation, at any
time when the Board of Directors consists of six or more members, the Board of
Directors is divided into three classes serving staggered three-year terms.
Directors are otherwise elected to serve one-year terms. Executive officers are
appointed by and serve at the discretion of the Board of Directors.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors appointed a Compensation Committee in 1995. The
Compensation Committee reviews executive compensation and makes recommendations
to the full Board regarding changes in
37
<PAGE> 43
compensation, and also administers the Company's stock option plans. The members
of the Compensation Committee are Messrs. de Grandpre and Doucet. The Board of
Directors appointed a standing Audit Committee in 1996. The Audit Committee
reviews the scope of the independent annual audit, the independent public
accountants' letter to the Board of Directors concerning the effectiveness of
the Company's internal financial and accounting controls and facilitates the
preparation of the Board of Directors' response to that letter, if deemed
necessary. The members of the Audit Committee are Messrs. de Grandpre, Doucet
and Rutherford. The Board of Directors acts as a nominating committee for
selecting nominees for election as directors.
LIMITATION OF LIABILITY AND INDEMNIFICATION
The Company's Restated Articles of Incorporation eliminate, to the fullest
extent permitted by Oregon law, liability of a director to the Company or its
shareholders for monetary damages for conduct as a director. While liability for
monetary damages has been eliminated, equitable remedies such as injunctive
relief or rescission remain available. In addition, a director is not relieved
of his or her responsibilities under any other law, including the federal
securities laws.
The Company's Restated Articles of Incorporation require the Company to
indemnify its directors to the fullest extent not prohibited by law. The Company
has also entered into indemnification agreements with each of the Company's
directors. The Company believes that the limitation of liability provisions in
its Restated Articles and indemnity agreements may enhance the Company's ability
to attract and retain qualified individuals to serve as directors.
DIRECTORS' COMPENSATION AND OTHER ARRANGEMENTS
Generally, directors who are not employees of the Company receive $500 plus
expenses for each Board meeting attended locally or via telephone and $2,500
plus expenses for each meeting attended in person for which substantial travel
is required. Directors who are not employees of the Company each have been
granted non-qualified options to purchase 57,140 shares of Common Stock of the
Company at a price of $8.05 per share; such options vest over a four-year
period, which vesting may be accelerated under certain conditions. In addition,
Mr. de Grandpre receives $2,000 a month for his service as Chairman of the
Board.
The Company entered into a two-year consulting agreement with G. Raymond
Doucet, a director, in December 1994, pursuant to which Mr. Doucet will advise
the Company on (i) enhancing the profitability of its EDA, (ii) technical and
personnel matters, and (iii) financial and budgetary matters. In addition to
receiving a consulting fee of $5,000 per month, the Company has granted Mr.
Doucet an option to purchase up to 85,710 shares of its Common Stock at an
exercise price of $2.31 per share.
38
<PAGE> 44
EXECUTIVE COMPENSATION
The following table sets forth, for the fiscal year ended December 31,
1995, certain summary information concerning compensation of the persons serving
as the Company's Chief Executive Officer (the "Named Executive Officers"). No
other executive officer received compensation exceeding $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES
----------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS/SARS COMPENSATION
- --------------------------- ---- -------- ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Timothy A. Timmins............................ 1995 $ 96,750 -- 399,981 --
President and Chief Executive Officer(1) 1994 79,961 -- -- --
Robert J. Cymbala............................. 1995 79,615 -- 208,919 $ 58,385(2)
President and Chief Executive Officer(1) 1994 135,923 -- -- --
</TABLE>
- ---------------
(1) Mr. Cymbala resigned as the Company's President and Chief Executive Officer
on July 20, 1995. Mr. Timmins was elected as the Company's President and
Chief Executive Officer on July 28, 1995.
(2) These amounts were paid to Mr. Cymbala during 1995 pursuant to an agreement
with the Company entered upon Mr. Cymbala's resignation which provided for
the payment to Mr. Cymbala of nine months compensation in biweekly
installments. The amount of $39,808 was paid to Mr. Cymbala during 1996.
OPTION GRANT TABLE
The following table provides information regarding options to purchase
Common Stock granted to the Named Executive Officers pursuant to the Company's
Stock Incentive Plan (the "Stock Incentive Plan") during the year ended December
31, 1995.
OPTIONS GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE OF
ASSUMED ANNUAL
RATES OF STOCK
PRICE
PERCENT OF APPRECIATION
TOTAL OPTIONS FOR OPTION
NUMBER OF SECURITIES GRANTED TO TERM(1)
UNDERLYING OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION --------------
NAME GRANTED FISCAL YEAR ($/SHARE) DATE(2) 5%($) 10%($)
- ---- -------------------- --------------- -------------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Timothy A. Timmins......... 399,981 33.4% $ 8.05 7/28/05 0 0
Robert J. Cymbala.......... 208,919 17.4% 8.05 (3) (3) (3)
</TABLE>
- ---------------
(1) The potential realizable value is based on the term of the option at the
time of grant (ten years). Potential gains are net of the exercise price but
before taxes associated with the exercise. Amounts represent hypothetical
gains that could be achieved for the respective options if exercised at the
end of the relevant option term. The assumed 5% and 10% rates of stock
appreciation are based on appreciation from the exercise price per share
established at the relevant grant date. These rates are provided in
accordance with the rules of the SEC and do not represent the Company's
estimate or projection of the future Common Stock price. Actual gains, if
any, on the stock option exercises are dependent on the future financial
performance of the Company, overall market conditions and the option
holders' continued employment through the vesting period. This table does
not take into account any appreciation in the price of the Common Stock from
the date of grant to the date of this Prospectus, other than the columns
reflecting assumed rates of appreciation of 5% and 10%.
39
<PAGE> 45
(2) The options vest over a period of four years and the term of each option is
10 years. The options may terminate before their expiration dates if the
optionee's status as an employee is terminated or upon the optionee's death
or disability.
(3) Mr. Cymbala resigned as the Company's President and Chief Executive Officer
on July 20, 1995. Mr. Cymbala's options expired on November 20, 1995.
YEAR-END OPTION TABLE
The following table provides information regarding exercises of options
during 1995 and unexercised options held as of December 31, 1995, by the Named
Executive Officers.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUE
<TABLE>
<CAPTION>
SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-
ACQUIRED UNDERLYING UNEXERCISED THE-MONEY OPTIONS AT
ON VALUE OPTIONS AT YEAR-END YEAR-END
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Timothy A. Timmins......... -- -- 249,988/149,993 (1)
Robert J. Cymbala.......... -- -- (2) (1)(2)
</TABLE>
- ---------------
(1) There is no established public trading market for the Company's Common
Stock. The Value of Unexercised In-the-Money Options is the difference
between the fair market value of the Common Stock at December 31, 1995 and
the applicable exercise price. This difference was estimated to be less than
or equal to zero.
(2) Mr. Cymbala resigned as the Company's President and Chief Executive Officer
on July 20, 1995. Mr. Cymbala's options expired on November 20, 1995.
The Company has entered into employment contracts with Messrs. Timmins and
Cox that allow for a base annual compensation and increases based upon
achievement of certain corporate goals and upon a formula tied to the
profitability of the Company and for employment of them for five-year periods
ending in July of 2000. The agreements provide for annual base salaries for
Messrs. Timmins and Cox of $120,000 and $110,000, respectively, that are
eligible for a one-time increase of $30,000 and $25,000, respectively, based
upon the occurrence of (i) a public offering of the Company's Common Stock at a
price of $10.50 per share resulting in aggregate gross proceeds to the Company
of $10,000,000 or (ii) sale or merger of the Company resulting in $10.50
consideration per share or (iii) upon the achievement of three consecutive
calendar quarters of earnings by the Company before interest, taxes and
depreciation of $250,000 in addition to the trading of the Company's Common
Stock at $10.50 per share for a specified period. The employment agreements
provide for annual bonuses from 2 percent up to 100 percent of adjusted base
salary based upon the Company's achievement of earnings per share from $.07 to
$4.45 in the year in which net earnings are first achieved and annual bonuses
from 2 percent to 100 percent of adjusted base salary for earnings per share
growth from 8 percent to 30 percent growth in earnings per share in subsequent
years. The employment agreements also provide for payment to Messrs. Timmins and
Cox of one additional year of base salary in the event of the termination of
their respective employment for reasons other than cause and six months
additional salary if for cause, for disability or upon their death. Under the
employment agreements, Messrs. Timmins and Cox have been granted certain
indemnification rights. In addition, the employment agreements prevent Messrs.
Timmins and Cox from competing with the Company or soliciting the employment of
other individuals employed by the Company during Messrs. Timmins' and Cox's
respective employment and for a period of one year thereafter. Under the
employment agreements, Messrs. Timmins or Cox may not disclose the Company's
confidential information to outsiders during their respective employment and for
a period of two years thereafter.
40
<PAGE> 46
1994 STOCK INCENTIVE PLAN
The Stock Incentive Plan was adopted by the Board of Directors on November
30, 1994 for a 10-year term. The Stock Incentive Plan was approved by a vote of
the shareholders at a Special Meeting of the Shareholders of Record on November
29, 1995. The purposes of the Stock Incentive Plan are to attract and retain the
best available personnel for positions of substantial responsibility, to provide
additional incentive to the employees and Consultants of the Company and to
promote the success of the Company's business.
The Stock Incentive Plan is administered by the Compensation Committee (the
"Committee"). Transactions under the Stock Incentive Plan are intended to comply
with all applicable conditions of Rule 16b-3 under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). In addition to determining who will be
granted options, the Committee has the authority and discretion to determine
when options will be granted and the number of options to be granted. The
Committee may determine which options may be intended to qualify ("Incentive
Stock Options") for special treatment under the Internal Revenue Code of 1986,
as amended from time to time (the "Code") or whether options are Non-Qualified
Options ("Non-Qualified Stock Options") which are not intended to so qualify.
The Committee also may determine the time or times when each option becomes
exercisable, the duration of the exercise period for options and the form or
forms of the instruments evidencing options granted under the Stock Incentive
Plan. The Committee may adopt, amend and rescind such rules and regulations as
in its opinion may be advisable for the administration of the Stock Incentive
Plan. The Committee also may construe the Stock Incentive Plan and the
provisions in the instruments evidencing option granted under the Stock
Incentive Plan to employee and officer participants and is empowered to make all
other determinations deemed necessary or advisable for the administration of the
Stock Incentive Plan
The Stock Incentive Plan contains provisions for proportionate adjustment
of the number of shares for outstanding options and the option price per share
in the event of stock dividends, recapitalizations resulting in stock splits or
combinations or exchanges of shares. In addition, the Stock Incentive Plan
provides for adjustments in the purchase price and exercise period by the
Committee in the event of a proposed dissolution or liquidation of the Company,
or any corporate separation or division, including, but not limited to,
split-up, split-off or spin-off, or a merger or consolidation of the Company
with another corporation, or in the event there is a change in constitution of
the Common Stock of the Company.
Participants in the Stock Incentive Plan may be selected by the Committee
from employees, officers, directors and consultants of the Company. In
determining the persons to whom options will be granted and the number of shares
to be covered by each option, the Committee will take into account the duties of
the respective persons, their present and potential contributions to the success
of the Company and such other factors as the Committee deems relevant to
accomplish the purposes of the Stock Incentive Plan.
Only employees of the Company as the term "employees" is defined for the
purposes of Code will be entitled to receive Incentive Stock Options. Incentive
Stock Options granted under the Stock Incentive Plan are intended to satisfy all
requirements for incentive stock options under Section 422 of the Code and the
Treasury Regulations thereunder.
Each option granted under the Stock Incentive Plan will be evidenced by a
written option agreement between the Company and the optionee. The option price
of any Incentive Stock Option may be not less than 100% of the fair market value
per share on the date of grant of the option; provided, however, that any
Incentive Stock Option granted under the Stock Incentive Plan to a person owning
more than ten percent of the total combined voting power of the Common Stock
will have an option price of not less than 110% of the fair market value per
share on the date of grant of the Incentive Stock Option. Each Non-Qualified
Stock Option granted under the Stock Incentive Plan will be at an exercise price
no less than 85% of the fair market value per share on the date of grant or
authorization of sale thereof, unless otherwise expressly determined by the
Board of Directors. Fair market value on the date of grant is defined as a value
determined in the discretion of the Board; provided, however, that where there
is a public market for the Common Stock, the fair market value per share shall
be the closing price of the Common Stock for the date of grant or authorization
of sale, as reported in The Wall Street Journal (or, if not so reported, as
otherwise reported by the National Association of Securities Dealers Automated
Quotation (NASDAQ) System) or, in the event the Common
41
<PAGE> 47
Stock is listed on a stock exchange, the fair market value per share shall be
the closing price on such exchange on the date of grant of the option or
authorization of sale, as reported in The Wall Street Journal.
The exercise period of options granted under the Stock Incentive Plan
generally may not exceed 10 years from the date of grant thereof. Incentive
Stock Options granted to a person owning more than 10 percent of the total
combined voting power of the Common Stock of the Company will be for no more
than five years. The Committee will have the authority to accelerate or extend
the exercisability of any outstanding option at such time and under such
circumstances as it, in its sole discretion, deems appropriate. However, no
exercise period may be extended to increase the term of the option beyond 10
years from the date of grant.
To exercise an option, the optionee must pay the full exercise price in
whole or in part consisting of (i) cash; (ii) check; (iii) promissory note; (iv)
transfer to the Company of shares having a fair market value at the time of such
exercise equal to the option exercise price; or (v) delivery of instructions to
the Company to withhold from the shares that would otherwise be issued on the
exercise of that number of shares having a fair market value at the time of such
exercise equal to the option exercise price, subject to determination by the
Board.
An option may not be exercised unless the optionee then is an employee,
officer, director or consultant of the Company, and unless the optionee has
remained continuously as an employee, officer, director or consultant of the
Company since the date of grant of the option. If the optionee ceases to be an
employee, officer, director or consultant of the Company, all options which are
not vested under the Stock Incentive Plan by the time of death, disability,
retirement or termination of employment, immediately terminate. All options
granted to such optionee that are fully vested to such optionee but not yet
exercised, will terminate (i) 12 months after the date the optionee ceases to be
an employee, officer or director of the Company by reason of death or
disability; or (ii) three months after termination of employment for any other
reason.
If an optionee dies while an employee, officer, director or consultant, or
is terminated by reason of disability, all options theretofore granted to such
optionee, unless earlier terminated in accordance with their terms, may be
exercised at any time within one year after the date of death or disability of
said optionee, by the optionee or by the optionee's estate or by a person who
acquired the right to exercise such options by request or inheritance, but only
to the extent of the right to exercise as of the date of death or disability.
Options granted under the Stock Incentive Plan are not transferable other
than by will or by the laws of descent and distribution. Options may be
exercised during the lifetime of the optionee or, in the event of
incapacitation, only by the optionee's legal guardian or legal representative.
An optionee has no rights as a shareholder with respect to any shares covered by
an option until the option has been exercised.
The Company, to the extent permitted or required by law, will deduct a
sufficient number of shares due to the optionee upon exercise of the option to
allow the Company to pay federal, state and local taxes of any kind required by
law to be withheld upon the exercise otherwise due to the optionee. The Company
is not obligated to advise any optionee of the existence of any tax or the
amount which the Company will be required to withhold.
As of the date of this Prospectus, options to purchase 1,162,598 shares of
the Company's Common Stock have been granted under the Stock Incentive Plan, all
of which have an exercise price of $8.05 per share, and 265,902 shares were
available for future grants.
42
<PAGE> 48
CERTAIN TRANSACTIONS
During 1994, G. Raymond Doucet and A. Jean de Grandpre, both of whom are
now directors of the Company, purchased 8% Convertible Secured Notes ("8%
Notes") of the Company in the principal amounts of $275,000 and $150,000,
respectively, through investment companies controlled by them, as part of a
convertible secured note financing of the Company (the "Secured Note
Financing"). The 8% Notes beneficially held by Messrs. Doucet and de Grandpre
were converted into 119,042 and 64,932 shares of the Common Stock of the
Company, respectively, during the fourth quarter of 1995.
On May 31, 1996, the lenders in the Secured Note Financing, including MDL
Investments, Mr. Doucet and Mr. de Grandpre (the "Lenders"), and the Company
entered into a Shareholder Rights Agreement, pursuant to which the Company
granted to the Lenders certain registration rights with respect to shares of
Common Stock of the Company held by the Lenders and a right of first refusal
with respect to future sales of Common Stock, preferred stock or other
securities issued by the Company. The Shareholder Rights Agreement provides for
the termination of this right of first refusal upon the consummation of an
underwritten public offering of the Common Stock of the Company in which the
Company receives cash proceeds of not less than $10 million based on a per share
price of at least $10.50.
The Company has entered into a two-year consulting agreement with Mr.
Doucet and granted him a five-year option to purchase up to 85,710 shares of its
Common Stock at an exercise price of $2.31 per share. See
"Management -- Directors' Compensation and Other Arrangements."
On July 20, 1995, Robert J. Cymbala resigned as the Company's President and
Chief Executive Officer. In connection with that resignation, the Company and
Mr. Cymbala entered into an agreement, dated July 20, 1995, wherein the Company
agreed to pay Mr. Cymbala the amount of $108,000, representing nine months
compensation which amount was paid to Mr. Cymbala in biweekly installments
ending April 19, 1996. The agreement also included a release of claims by Mr.
Cymbala and a covenant prohibiting Mr. Cymbala from competing with the Company
for a period of one year.
From time to time the Company has made cash advances to its officers,
employees and consultants. At December 31, 1995, the Company carried several
unsecured notes receivable, bearing interest at rates ranging from 7.89% to
9.01%, from certain of its officers, employees, consultants and a former
employee. The following table lists individuals for whom the Company carried
aggregate outstanding balances greater than $60,000 at any time during 1994 or
1995.
<TABLE>
<CAPTION>
NAME BALANCE AT DECEMBER 31, 1995
---- ----------------------------
<S> <C>
Kevin S. Anderson.................................... $ 64,441
Patrick M. Cox....................................... 62,177
</TABLE>
The loans to Mr. Anderson are evidenced by 44 promissory notes with
maturities from June, 1992 to December, 1994, and bear interest at rates ranging
from 7.89% to 9.01%. The loans to Mr. Cox are evidenced by 38 promissory notes
with maturities from June, 1992 to December, 1994, and bear interest at rates
ranging from 7.89% to 9.01%. These loans were extended by the Company to Messrs.
Anderson and Cox for personal purposes during periods when the Company's
financial position did not permit significant compensation increases to officers
and when the Company's future capital needs were uncertain. The Company believed
that making these cash advances allowed it to retain key personnel while
maintaining the ability to secure repayment at later dates if required by the
Company's capital needs. Although these notes have matured and are due, some of
these notes may be forgiven at future dates, resulting in additional payroll tax
liability for the Company and additional income tax liability for the makers of
the notes.
43
<PAGE> 49
During 1992, the Company loaned to Daniel M. Smith, for personal purposes,
then a beneficial owner of at least 5% of the outstanding shares of Common Stock
of the Company and an officer of a former subsidiary of the Company, the amount
of $175,000, represented by a demand note bearing interest at 7.89%, and
collateralized by shares of the Company's Common Stock. Mr. Smith paid this
principal balance plus accrued interest in 1994.
The Company believes all of the foregoing transactions were fair to the
Company and in its best interests. As a matter of policy, all future
transactions between the Company and any of its officers, directors or principal
shareholders or their affiliates will continue to be approved by a majority of
the disinterested members of the Board of Directors, on terms no less favorable
to the Company than could be obtained from unaffiliated third parties, and be
for bona fide business purposes of the Company.
44
<PAGE> 50
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth as of July 19, 1996, certain information
regarding the ownership of the Company's Common Stock by (i) each person known
by the Company to own beneficially more than 5% of the Common Stock, (ii) each
director of the Company, (iii) each Named Executive Officer, (iv) all executive
officers and directors as a group and (v) each Selling Shareholder. Except as
otherwise indicated, the Company believes the that persons listed below have
sole investment and voting power with respect to the shares of Common Stock
owned by them.
<TABLE>
<CAPTION>
BENEFICIAL
OWNERSHIP
PRIOR TO BENEFICIAL OWNERSHIP
OFFERING (1) NUMBER OF SHARES AFTER OFFERING (1)(2)
------------------- BEING SOLD IN ---------------------
NUMBER PERCENT OFFERING NUMBER PERCENT
---------- ------- ---------------- --------- -------
<S> <C> <C> <C> <C> <C>
NAMED EXECUTIVE OFFICERS, DIRECTORS AND 5%
SHAREHOLDERS
Patrick M. Cox............................ 466,644 5.4 0 466,644 4.7
8405 S.W. Nimbus Avenue
Beaverton, Oregon 97008
Robert J. Cymbala (3)..................... 0 0 0 0 0
G. Raymond Doucet (4)..................... 219,038 2.6 0 219,038 2.2
8405 S.W. Nimbus Avenue
Beaverton, Oregon 97008
A. Jean de Grandpre....................... 79,218 * 0 79,218 *
8405 S.W. Nimbus Avenue
Beaverton, Oregon 97008
William D. Rutherford..................... 30,905 * 0 30,905 *
8405 S.W. Nimbus Avenue
Beaverton, Oregon 97008
Timothy A. Timmins........................ 328,414 3.7 0 328,414 3.2
8405 S.W. Nimbus Avenue
Beaverton, Oregon 97008
MDL Investments, Inc...................... 545,219 6.4 0 545,219 5.6
999 de Maisonneuve Blvd West, Suite 1775
Montreal, Quebec Canada H3A 3L4
All directors and officers as a group (11 1,582,177 17.0 0 1,582,177 14.9
persons)................................
SELLING SHAREHOLDERS
Banque Scandinave en Suisse............... 285,700 3.3 167,934 117,766 1.2
Bank of Copenhagen........................ 216,440 2.5 216,440 0 0
Ed Perlenfein............................. 199,568 2.0 32,544 167,024 1.7
Shane Smith............................... 123,730 1.4 41,999 81,731 *
Dore Smith................................ 117,716 1.4 35,093 82,623 *
Richard Boudreau.......................... 72,540 * 25,190 47,350 *
Avalon Enterprises, Inc................... 70,001 * 20,000 50,001 *
Wayne Levi................................ 68,179 * 68,179 0 0
Starjay Holdings, Inc..................... 64,932 * 30,000 34,932 *
Robert Brown.............................. 61,686 * 61,686 0 0
Brian Levitt in Trust..................... 54,110 * 49,110 5,000 *
William Clark............................. 50,475 * 16,793 33,682 *
John Cavanaugh............................ 48,951 * 735 48,216 *
FAMINO, Inc............................... 47,617 * 11,904 35,713 *
</TABLE>
45
<PAGE> 51
<TABLE>
<CAPTION>
BENEFICIAL
OWNERSHIP
PRIOR TO BENEFICIAL OWNERSHIP
OFFERING (1) NUMBER OF SHARES AFTER OFFERING (1)(2)
------------------- BEING SOLD IN ---------------------
NUMBER PERCENT OFFERING NUMBER PERCENT
---------- ------- ---------------- --------- -------
<S> <C> <C> <C> <C> <C>
Schrager...43,288*43,2880CODA Inc. Defined 43,288 * 43,288 0
Benefits Pension Plan...................
Ken Chamberlin............................ 41,904 * 16,793 25,111 *
David Hartman............................. 41,904 * 16,793 25,111 *
Richards Family Trust..................... 36,190 * 12,595 23,595 *
Steve Perlenfein.......................... 35,230 * 4,198 31,032 *
William MacHugh........................... 31,459 * 4,198 27,261 *
David Rosencrantz......................... 28,570 * 8,397 20,173 *
James Huddart............................. 25,143 * 10,076 15,067 *
Harold and Marilyn Fogelquist............. 22,856 * 16,793 6,063 *
Harold Roitenberg Trust................... 22,856 * 7,347 15,509 *
Virginia Bolin............................ 20,952 * 8,397 12,555 *
Sharon L. Kimbell Family Trust............ 20,952 * 8,397 12,555 *
David and Susan Lindsey................... 20,952 * 8,397 12,555 *
Jerry J. Dragovich........................ 14,285 * 4,198 10,087 *
Sagax Investment Fund, Ltd................ 11,428 * 8,397 3,031 *
John Bolin................................ 2,094 * 841 1,253 *
</TABLE>
- ---------------
* Less than one percent of the outstanding Common Stock
(1) Beneficial ownership is determined in accordance with rules of the
Securities and Exchange Commission, and includes voting power and investment
power with respect to shares. Shares issuable upon the exercise of
outstanding stock options that are currently exercisable or become
exercisable within 60 days from June 30, 1996 are considered outstanding for
the purpose of calculating the percentage of Common Stock owned by such
person but not for the purpose of calculating the percentage of Common Stock
owned by any other person. The number of shares that are issuable upon the
exercise of options that are currently exercisable or exercisable within 60
days of June 30, 1996 is as follows: Patrick M. Cox -- 199,991 shares; G.
Raymond Doucet -- 99,996 shares; A. Jean de Grandpre -- 14,286 shares;
William D. Rutherford -- 10,714 shares; Timothy A. Timmins -- 324,985
shares; and All directors and officers as a group -- 837,466 shares. The
number of shares that are issuable upon the exercise of warrants and options
that are currently exercisable or exercisable within 60 days of June 30,
1996 by Selling Shareholders is as follows: Banque Scandinave en
Suisse -- 57,140 shares; Ed Perlenfein -- 85,715 shares; Shane
Smith -- 100,016 shares; Dore Smith -- 90,317 shares; Richard
Boudreau -- 34,284 shares; William Clark -- 22,856 shares; John
Cavanaugh -- 5,714 shares; Ken Chamberlin -- 22,856 shares; Richards Family
Trust -- 17,142 shares; Steve Perlenfein -- 11,428 shares; William
MacHugh -- 11,428 shares; David Rosencrantz -- 11,428 shares; James
Huddart -- 13,714 shares; Harold and Marilyn Fogelquist -- 22,856 shares;
Harold Roitenberg Trust -- 22,856 shares; Virginia Bolin -- 11,428 shares;
Sharon L. Kimbell Family Trust -- 11,428 shares; David and Susan
Lindsey -- 11,428 shares; Jerry J. Dragovich -- 5,714 shares; Sagax
Investment Fund, Ltd. -- 11,428 shares; and John Bolin -- 1,144 shares.
(2) Assumes that the Underwriters' over-allotment option is not exercised. If
the Underwriters' over-allotment option is exercised in full, the following
shareholders will sell the additional shares indicated: Banque Scandinave en
Suisse -- 60,626 shares, Ed Perlenfein -- 11,748, Shane Smith -- 15,162,
Dore Smith -- 12,669, Richard Boudreau -- 9,094, William Clark -- 6,063,
Richards Family Trust -- 4,547, John Cavanaugh -- 265, Ken
Chamberlin -- 6,063, David Hartman -- 6,063, David Rosencrantz -- 3,031,
James Huddart -- 3,638, William MacHugh -- 1,516, Harold and Marilyn
Fogelquist -- 6,063, Harold Roitenberg Trust -- 2,653, Virginia
Bolin -- 3,031, Sharon L. Kimball Family Trust -- 3,301, David
46
<PAGE> 52
and Susan Lindsey -- 3,031, Jerry J. Dragovich -- 1,516, Steve
Perlenfein -- 1,516, Sagax Investment Fund, Ltd. -- 3,031, John
Bolin -- 303. In addition if the Underwriters' over-allotment option is
exercised in full, the Hill Family Trust will sell 11,428 shares, National
Securities Corp. as custodian for William Schwartz, IRA will sell 22,856
shares, Dolphin Pointe, Inc. will sell 70,000 shares, and the Company will
sell an additional 31,056 shares. Based upon information provided to the
Company by Dolphin Pointe, Inc., the Company believes that Mr. Steven Posey
was the owner of 100 percent of the issued and outstanding stock of Dolphin
Pointe, Inc. prior to his death in October, 1995. Prior to his death, Mr.
Posey was the Vice President -- Sales and Marketing of the Company.
(3) Mr. Cymbala resigned as the Company's President and Chief Executive Officer
on July 20, 1995.
(4) Includes 85,710 shares of Common Stock issuable upon exercise of an
outstanding stock option exercisable at a price of $2.31 per share granted
to G. Raymond Doucet as part of his consulting agreement with the Company.
47
<PAGE> 53
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 490,000,000 shares
of Common Stock and 10,000,000 shares of Preferred Stock.
COMMON STOCK
As of July 19, 1995, 8,513,373 shares of Common Stock were outstanding,
held of record by approximately 564 shareholders. After this offering, 9,801,544
shares will be outstanding. Holders of Common Stock are entitled to receive
dividends as may from time to time be declared by the Board of Directors of the
Company out of funds legally available therefor. See "Dividend Policy." Holders
of Common Stock are entitled to one vote per share on all matters on which the
holders of Common Stock are entitled to vote and do not have any cumulative
voting rights. Holders of Common Stock have no preemptive, conversion,
redemption or sinking fund rights. In the event of a liquidation, dissolution or
winding up of the Company, holders of Common Stock are entitled to share equally
and ratably in the assets of the Company, if any, remaining after the payment of
all liabilities of the Company and the liquidation preference of any outstanding
class or series of Preferred Stock. The outstanding shares of Common Stock are,
and the shares of Common Stock offered by the Company hereby when issued will
be, fully paid and non-assessable.
The rights, preferences and privileges of holders of Common Stock are
subject to any series of Preferred Stock that the Company may issue in the
future, as described below.
PREFERRED STOCK
The Board of Directors has the authority to issue Preferred Stock in one or
more series and to fix the number of shares constituting any such series and the
preferences, limitation and relative rights, including dividend rights, dividend
rate, voting rights, terms of redemption, redemption price or prices, conversion
rights and liquidation preferences of the shares constituting any series,
without any further vote or action by the shareholders of the Company. The
issuance of Preferred Stock by the Board of Directors could adversely affect the
rights of holders of Common Stock.
The potential issuance of Preferred Stock may have the effect of delaying
or preventing a change in control of the Company, may discourage bids for the
Common Stock at a premium over the market price of the Common Stock and may
adversely affect the market price of, and the voting and other rights of the
holders of, Common Stock. The Company has no plans to issue shares of Preferred
Stock.
WARRANTS
The Company has outstanding warrants to purchase 563,408 shares of Common
Stock, 301,702 of which are exercisable through June 30, 1997 at an exercise
price of $5.25 per share, and 261,706 of which are exercisable through March 31,
1998 at an exercise price of $2.31 per share. The warrants were issued in
connection with the issuance of the Company's 10% Subordinated Notes to 32
purchasers of the Notes. To prevent dilution of the rights of the warrant
holders, the exercise price and the number of shares of Common Stock issuable
upon the exercise of the warrants are subject to the adjustment. The Company has
committed to register for resale the shares issuable on exercise of the
warrants. See "-- Registration Rights."
The Company also has outstanding a warrant to purchase 104,923 shares of
Common Stock, exercisable through September 10, 1996 at an exercise price of
$1.75 per share, which price is subject to adjustment to prevent dilution. The
warrant was issued in connection with consulting services provided to the
Company by Daniel M. Smith, and the Company has agreed to register the shares
underlying these warrants. See "-- Registration Rights."
The Company anticipates that 288,171 shares of the Common Stock to be sold
by Selling Shareholders will be obtained by the exercise of warrants held by the
Selling Shareholders.
48
<PAGE> 54
REGISTRATION RIGHTS
As of the date of this Prospectus, holders of 2,928,444 shares of Common
Stock (including shares of Common Stock issuable upon conversion or exercise of
outstanding warrants and options) are entitled to certain rights with respect to
the registration of such shares for offer and sale under the Securities Act.
Under the terms of the Shareholder Rights Agreement dated as of May 28,
1996 between the Company and the purchasers of its 8% Convertible Secured Notes
(the "8% Noteholders"), all of which Notes have been converted into Common
Stock, if the Company proposes to register any of its securities under the
Securities Act, the 8% Noteholders may require the Company to include in such
registration any shares of common stock resulting from the conversion of the 8%
Notes subject to certain conditions and limitations. The 8% Noteholders may
demand that the Company register their shares an unlimited number of times on
Form S-3, provided that the Company is eligible to use Form S-3 and that such
shares would have an aggregate expected selling price of at least $500,000. The
Company will not be obligated to effect more than one demand S-3 registration in
any 12-month period. As of the date of this Prospectus, these rights are held by
holders of 2,164,402 shares of the Company's Common Stock.
Under the terms of warrants issued to purchasers of the Company's 10%
Subordinated Notes, and to Silicon Valley Bank, Daniel M. Smith, and G. Raymond
Doucet (the "Warrant Holders"), if the Company proposes to register any of its
securities under the Securities Act, the Warrant Holders may require the Company
to include in such registration any shares owned by them pursuant to the
exercise of the warrants subject to certain conditions and limitations. All
expenses incurred in connection with the registration of any Common Stock of the
Company shall be borne by the Company except for underwriting discounts and
commissions and the fees of Warrant Holders' counsel. As of the date of this
Prospectus, these rights are enjoyed by holders of options and warrants to
purchase 764,041 shares of the Company's Common Stock. The Company anticipates
that 288,171 shares of the Common Stock to be sold by Selling Shareholders will
be obtained by the exercise of warrants held by the Selling Shareholders.
OREGON CONTROL SHARE AND BUSINESS COMBINATION STATUTES
Upon completion of this offering, the Company will become subject to the
Oregon Control Share Act (the "Control Share Act"). The Control Share Act
generally provides that a person (the "Acquiror") who acquires voting stock of
an Oregon corporation in a transaction that results in the Acquiror holding more
than 20%, 33 1/3% or 50% of the total voting power of the corporation (a
"Control Share Acquisition") cannot vote the shares it acquires in the Control
Share Acquisition ("control shares") unless voting rights are accorded to the
control shares by (i) a majority of each voting group entitled to vote and (ii)
the holders of a majority of the outstanding voting shares, excluding the
control shares held by the Acquiror and shares held by the Company's officers
and inside directors. The term "Acquiror" is broadly defined to include persons
acting as a group.
The Acquiror may, but is not required to, submit to the Company a statement
setting forth certain information about the Acquiror and its plans with respect
to the Company. The statement may also request that the Company call a special
meeting of shareholders to determine whether voting rights will be accorded to
the control shares. If the Acquiror does not request a special meeting of
shareholders, the issue of voting rights of control shares will be considered at
the next annual meeting or special meeting of shareholders. If the Acquiror's
control shares are accorded voting rights and represent a majority or more of
all voting power, shareholders who do not vote in favor of voting rights for the
control shares will have the right to receive the appraised "fair value" of
their shares, which may not be less than the highest price paid per share by the
Acquiror for the control shares.
Upon completion of this offering, the Company will become subject to
certain provision of the Oregon Business Corporation Act that govern business
combinations between corporations and interested shareholders (the "Business
Combination Act"). The Business Combination Act generally provides that if a
person or entity acquires 15% or more of the voting stock of an Oregon
corporation (an "Interested Shareholder"), the corporation and the Interested
Shareholder, or any affiliated entity of the Interested Shareholder, may not
engage in certain business combination transactions for three years following
the date the person became an
49
<PAGE> 55
Interested Shareholder. Business combination transactions for this purpose
include (a) a merger or plan of share exchange, (b) any sales, lease, mortgage
or other disposition of 10% or more of the assets of the corporation and (c)
certain transactions that result in the issuance of capital stock of the
corporation to the Interested Shareholder. These restrictions do not apply if
(i) the Interested Shareholder, as a result of the transaction in which such
person became an Interested Shareholder, owns at least 85% of the outstanding
voting stock of the corporation (disregarding shares owned by directors who are
also officers and certain employee benefit plans), (ii) the board of directors
approves the share acquisition or business combination before the Interested
Shareholder acquires 15% or more of the corporation's voting stock or (iii) the
board of directors and the holders of at least two-thirds of the outstanding
voting stock of the corporation (disregarding shares owned by the Interested
Shareholder) approve the transaction after the Interested Shareholder acquires
15% or more of the corporation's voting stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is First Interstate
Bank of Oregon, N.A., Seattle, Washington.
50
<PAGE> 56
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has not been any public market for the Common
Stock. Future sales of substantial amounts of Common Stock in the public market
could adversely affect prevailing market prices.
Upon completion of this offering, there will be 9,801,544 shares of Common
Stock outstanding. Of these shares, the 2,000,000 shares sold in this offering
(or 2,300,000 shares if the over-allotment option is exercised in full) will be
freely tradeable without restriction under the Securities Act, unless purchased
by an "affiliate" of the Company, as that term is defined in Rule 144 under the
Securities Act. Approximately 7,801,544 shares outstanding upon completion of
this offering will be "restricted securities" ("Restricted Shares") within the
meaning of Rule 144 and will be eligible for sale pursuant to Rule 144 or Rule
701 subject to certain lock-up agreements described below. Sales of shares in
the public market, or the availability of such shares for sale, could adversely
affect the market price of the common share.
Upon completion of this offering, approximately 1,168,466 shares held for
more than three years by shareholders who are not affiliates of the Company and
who are not subject to the lock-up agreements described below will be eligible
for immediate sale in the public market without restriction pursuant to Rule
144(k). Approximately 144,596 shares held for more than two but less than three
years by shareholders who are not affiliates of the Company and who are not
subject to the lock-up agreements described below are eligible for immediate
sale in the public market subject to Rule 144, and approximately 28,823
additional shares held for more than two years by shareholders who are not
affiliates of the Company and who are not subject to the lock-up agreements
described below will become eligible for immediate sale in the public market
without restriction subject to Rule 144 during the 180 days following the
completion of this offering.
The holders of approximately 6,397,356 shares of Common Stock have agreed
with the Underwriters pursuant to lock-up agreements not to offer to sell,
contract to sell or otherwise sell or dispose of Common Stock for a period of
180 days after the date of this Prospectus without the prior written consent of
Black & Company, Inc. Upon expiration of these lock-up agreements, approximately
3,238,695 of those shares will be eligible for sale in the public market without
restriction pursuant to Rule 144(k) and approximately 2,038,201 will be eligible
for sale subject to the limitations of Rule 144.
Upon the completion of this offering, there will be approximately 885,595
options granted under the Stock Incentive Plan and 475,872 warrants and other
options immediately exercisable for shares of Common Stock. Holders of stock
options granted under the Stock Incentive Plan could exercise their options and
sell certain of the shares issued upon exercise as described below. Shares of
Common Stock issued on the exercise of warrants and other options would be
subject to the limitations of Rule 144. However, the holders of these warrants
could, under certain circumstances, require the Company to register the shares
underlying these warrants for resale under the Securities Act. See "Description
of Capital Stock -- Registration Rights."
In general under Rule 144, a person, including an affiliate, who has
beneficially owned restricted shares for at least two years is entitled to sell
within any three-month period a number of shares that does not exceed the
greater of 1% of the then outstanding shares of Common Stock (approximately
98,015 shares immediately following this offering) or the average weekly trading
volume of the Common Stock during the four calendar weeks preceding such sale.
Sales under Rule 144 are subject to certain manner of sale limitations, notice
requirements and the availability of current public information about the
Company. Rule 144(k) provides that a person who is not an "affiliate" of the
issuer at any time during the three months preceding a sale and who has
beneficially owned shares for at least three years is entitled to sell those
shares at any time without compliance with the public information, volume
limitation, manner of sale and notice provisions of Rule 144.
As of the date of the Prospectus, options to purchase 1,162,598 shares of
Common Stock were outstanding under the Stock Incentive Plan. Holders of options
granted pursuant to the Stock Incentive Plan may be entitled to rely on the
resale provisions of Rule 701 ("Rule 701") under the Securities Act in
connection with the resale of shares issued upon exercise of these options. Rule
701 permits affiliates to sell Rule 701 shares under Rule 144 without compliance
with the holding period requirements of Rule 144. Rule 701 provides that
non-affiliates may sell such shares in reliance on Rule 144 without compliance
with the
51
<PAGE> 57
public information, volume limitation or notice provisions of Rule 144. In both
cases, a holder of Rule 701 shares is required to wait 90 days after the date of
this Prospectus before selling such shares.
The Company intends to file a registration statement on Form S-8 under the
Securities Act covering shares of Common Stock reserved for issuance under the
Stock Incentive Plan. Based on the number of options expected to be outstanding
upon completion of this offering and shares reserved for issuance under the
Stock Incentive Plan, such registration statement would cover approximately
1,428,500 shares. See "Management -- Stock Option Plans." Such registration
statement is expected to be filed approximately 180 days after the date of this
Prospectus and will automatically become effective upon filing. Accordingly,
shares registered under such registration statement will, subject to Rule 144
volume limitations applicable to affiliates, be available for sale in the public
market, unless such shares are subject to limitations on the ability to exercise
or the lockup agreement described above.
52
<PAGE> 58
UNDERWRITING
Under the terms and subject to the conditions of the Underwriting
Agreement, the Underwriters named below, for whom Black & Company, Inc. and
Cruttenden Roth Incorporated are acting as representatives (the
"Representatives"), have severally agreed to purchase from the Company and the
Selling Shareholders, and the Company and the Selling Shareholders have agreed
to sell to each Underwriter, the aggregate number of shares of Common Stock set
forth opposite their respective names in the table below. The Underwriting
Agreement provides that the obligations of the Underwriters to pay for and
accept delivery of the shares of Common Stock are subject to certain conditions
precedent and that the Underwriters are committed to purchase and pay for all
shares if any shares are purchased.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
------------------------------------------------------------ ----------
<S> <C>
Black & Company, Inc........................................
Cruttenden Roth Incorporated................................
---------
Total............................................. 2,000,000
=========
</TABLE>
The Company has been advised by the Representatives that the Underwriters
propose initially to offer the shares of Common Stock to the public at the
offering price set forth on the cover page of this Prospectus and to certain
dealers (who may include the Underwriters) at such price less a concession not
in excess of $ per share. The Underwriters may allow, and such dealers
may reallow, a concession to certain other dealers (who may include the
Underwriters) not in excess of $ per share. After the initial offering
to the public, the offering price and other selling terms may be changed by the
Representatives.
The Selling Shareholders and the Company have granted an option to the
Underwriters, exercisable during the 30-day period after the date of this
Prospectus, to purchase up to a maximum of 300,000 shares of Common Stock at the
initial public offering price per share, less the underwriting discounts and
commissions, set forth on the cover page of this Prospectus. The Underwriters
may exercise such option only to cover over-allotments made in connection with
the sale of the Common Stock offered hereby. To the extent the Underwriters
exercise such option, each of the Underwriters will be committed, subject to
certain conditions, to purchase approximately the same percentage of such
additional shares as the number of shares of Common Stock to be purchased by
such underwriter as shown in the above table bears to the total shown.
In the Underwriting Agreement, the Company and the Selling Shareholders
have agreed to indemnify the Underwriters against certain liabilities that may
be incurred in connection with this offering, including liabilities under the
Securities Act, or to contribute payments that the Underwriters may be required
to make in respect thereof.
The Representatives have advised the Company that the Underwriters do not
intend to confirm sales to any accounts over which they exercise discretionary
authority.
The Company, its directors, officers and certain shareholders have agreed
that, without the prior written consent of Black & Company, Inc., they will not
directly or indirectly offer to sell, sell, or otherwise dispose of shares of
Common Stock or any securities convertible or exchangeable therefor, for a
period of 180 days after the date of this Prospectus, subject to certain limited
exceptions.
Prior to this offering, there has been no public market for the Common
Stock. Consequently, the initial public offering price will be determined by
negotiations between the Company and the Representatives. Among the factors to
be considered in such negotiations are the history of and prospects for the
Company and the industry in which it competes, an assessment of the Company's
management, its past and present operations and financial performance, the
present state of the Company's development, the general condition of the
securities markets at the time of the offering and the market prices of and
demand for publicly traded common stock of comparable companies in recent
periods.
LEGAL MATTERS
The validity of the issuance of the Common Stock offered hereby will be
passed upon for the Company by Ater Wynne Hewitt Dodson & Skerritt, LLP,
Portland, Oregon. Certain legal matters in connection with the offering will be
passed upon for the Underwriters by Stoel Rives LLP, Portland, Oregon. Certain
legal
53
<PAGE> 59
matters in connection with the offering will be passed upon for the Selling
Shareholders by Perkins Coie, Portland, Oregon.
EXPERTS
The financial statements of Metro One Telecommunications, Inc. as of
December 31, 1995 and for the year ended December 31, 1995 included in this
Prospectus have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report appearing herein, and are included in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing. The financial statements of Metro One Telecommunications, Inc. as of
December 31, 1994 and for each of the two years in the period ended December 31,
1994 included in this Prospectus have been so included in reliance on the report
(which contains an explanatory paragraph relating to the Company's ability to
continue as a going concern) of Price Waterhouse LLP, independent accountants,
given on the authority of said firm as experts in accounting and auditing.
The Company replaced its previous auditors, Price Waterhouse LLP, with
Deloitte & Touche LLP in November 1995. The decision to change accounting firms
was approved by the Company's Board of Directors. During the Company's two most
recent fiscal years preceding the replacement of Price Waterhouse LLP, the
report of Price Waterhouse LLP on the Company's financial statements expressed
an unqualified opinion on the financial statements for those years and included
an explanatory paragraph describing that the financial statements had been
prepared assuming that the Company would continue as a going concern. There were
no disagreements with Price Waterhouse LLP on any matter of accounting
principles or practices, financial statement disclosure or auditing scope of
procedure, which disagreements, if not resolved to the satisfaction of such
accountants, would have caused them to make reference to the subject matter of
the disagreements in connection with their report. Before engaging Deloitte &
Touche LLP as its new independent auditors, the Company did not previously
consult with them regarding any matters related to the application of accounting
principles, the type of audit opinion that might be rendered on the Company's
financial statements or any other such matters.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. 20549, a Registration Statement on Form S-1
under the Securities Act with respect to the Common Stock offered hereby. This
Prospectus omits certain information set forth in the Registration Statement and
the exhibits and schedules thereto. For further information with respect to the
Company and the Common Stock offered hereby, reference is made to such
Registration Statement, exhibits and schedules. Statements contained in this
Prospectus as to the contents of any contract or other document referred to are
not necessarily complete, and in each instance reference is made to the copy of
such contract or other document files as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference. The Registration Statement, including the exhibits and schedules
filed therewith, may be inspected without charge at the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W. Washington, D.C. 20549 and at the regional offices of the
Commission located at Seven World Trade Center, Suite 1300, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such materials may be obtained at prescribed rates from the Public
Reference Section of the commission, Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W. Judiciary Plaza, Washington, D.C. 20549. The Commission also
maintains a site on the World Wide Web that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The address of such site is
http://www.sec.gov.
The Company is currently subject to the periodic reporting requirement of
the Securities Exchange Act of 1934. The Company intends to furnish to its
shareholders annual reports containing financial statements audited by an
independent public accounting firm and quarterly reports for the first three
quarters of each fiscal year containing unaudited financial information.
54
<PAGE> 60
METRO ONE TELECOMMUNICATIONS, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Independent Auditors' Reports......................................................... F-2
Balance Sheets as of December 31, 1994 and 1995 and June 30, 1996..................... F-4
Statements of Operations for the three years ended December 31, 1995 and the six
months ended June 30, 1995 and 1996................................................. F-5
Statements of Shareholders' Equity (Deficit) for the three years ended December 31,
1995 and the six months ended June 30, 1996......................................... F-6
Statements of Cash Flows for the three years ended December 31, 1995 and the six
months ended June 30, 1995 and 1996................................................. F-7
Notes to Financial Statements......................................................... F-8
</TABLE>
F-1
<PAGE> 61
INDEPENDENT AUDITORS' REPORT
To The Board of Directors and Shareholders of
Metro One Telecommunications, Inc.
Portland, Oregon
We have audited the accompanying balance sheet of Metro One
Telecommunications, Inc. (formerly Metro One Direct Information Services, Inc.)
as of December 31, 1995 and the related statement of operations, shareholders'
equity (deficit), and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company at December 31, 1995, and the
results of its operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Portland, Oregon
March 18, 1996
F-2
<PAGE> 62
REPORT OF INDEPENDENT ACCOUNTANTS
February 6, 1995
To the Board of Directors and Shareholders of
Metro One Telecommunications, Inc.
In our opinion, the accompanying balance sheet and the related statements
of operations, of common stock subject to rescission and shareholders' deficit,
and of cash flows present fairly, in all material respects, the financial
position of Metro One Telecommunications, Inc. (formerly Metro One Direct
Information Services, Inc.) at December 31, 1994, and the results of its
operations and its cash flows for each of the two years in the period ended
December 31, 1994, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above. We have not audited the financial statements of Metro One
Telecommunications, Inc. for any period subsequent to December 31, 1994.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has suffered recurring
losses from operations and, at December 31, 1994, has an accumulated deficit of
$14,713,210. In addition, as more fully discussed in Note 11 to the financial
statements, the Company has filed with certain securities regulators
registration statements pertaining to a planned rescission offering for certain
purchasers' equity securities because Company management cannot draw a
conclusion with certainty that all applicable state and federal securities laws
were complied with in all material respects in connection with the issuance of
such securities. Such factors raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regard to these
matters are also described in the accompanying financial statements. The
financial statements do not include any adjustments that might result from the
outcome of these uncertainties.
PRICE WATERHOUSE LLP
Portland, Oregon
F-3
<PAGE> 63
METRO ONE TELECOMMUNICATIONS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------- JUNE 30,
1994 1995 1996
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................... $ 310,191 $ 1,148,822 $ 2,189,521
Accounts receivable................................ 1,357,925 2,617,465 2,430,569
Notes receivable................................... 174,555 -- --
Current portion of notes receivable from
officers/shareholders........................... 903 2,900 3,181
Deferred offering costs............................ -- -- 277,208
Prepaid costs and other current assets............. 71,048 357,197 341,237
------------ ------------ ------------
Total current assets....................... 1,914,622 4,126,384 5,241,716
Furniture, fixtures and equipment, net............... 4,067,928 4,187,554 4,559,474
Notes receivable from officers/shareholders,
less current portion............................... 32,315 25,858 23,916
Other assets......................................... 283,917 376,682 404,381
------------ ------------ ------------
$ 6,298,782 $ 8,716,478 $ 10,229,487
============ ============ ============
LIABILITIES, COMMON STOCK SUBJECT TO POTENTIAL
RESCISSION AND ACCUMULATED DEFICITS
Current liabilities:
Current portion of capital lease obligations....... $ 518,849 $ 769,892 $ 782,289
Current portion of long-term debt.................. 400,000 2,045,897 100,000
Note payable, bank................................. -- -- 550,000
Accounts payable................................... 452,628 258,135 146,031
Accrued payroll and related costs.................. 383,797 422,900 415,832
Accrued liabilities................................ 510,139 479,014 811,230
------------ ------------ ------------
Total current liabilities.................. 2,265,413 3,975,838 2,805,382
Capital lease obligations, less current portion...... 1,272,387 1,366,205 1,557,706
Long-term debt, less current portion................. 5,160,000 100,000 67,200
------------ ------------ ------------
8,697,800 5,442,043 4,430,288
------------ ------------ ------------
Commitments and contingencies (Notes 9 and 11)
Common stock subject to potential rescission;
5,210,871 shares issued and outstanding............ 12,314,191 -- --
------------ ------------ ------------
Shareholders' equity:
Preferred stock, no par value; 10,000,000 shares
authorized, no shares issued or outstanding........ -- -- --
Common stock, no par value; 490,000,000 shares
authorized, 7,936,804 and 8,513,373 issued and
outstanding at December 31, 1995 and June 30, 1996,
respectively....................................... -- 19,711,711 21,509,107
Accumulated deficit.................................. (14,713,209) (16,437,276) (15,709,908)
------------ ------------ ------------
Net shareholders' equity (deficit)................... (14,713,209) 3,274,435 5,799,199
------------ ------------ ------------
$ 6,298,782 $ 8,716,478 $ 10,229,487
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 64
METRO ONE TELECOMMUNICATIONS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
--------------------------------------- -------------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues........................ $ 1,442,071 $ 5,050,202 $13,074,206 $ 5,679,815 $ 8,744,436
----------- ----------- ----------- ----------- -----------
Costs and expenses:
Direct operating.............. 2,140,711 4,793,416 7,156,855 3,611,162 3,970,739
General and administrative.... 3,322,290 4,267,585 5,999,548 2,852,391 3,555,371
----------- ----------- ----------- ----------- -----------
5,463,001 9,061,001 13,156,403 6,463,553 7,526,110
----------- ----------- ----------- ----------- -----------
Income (loss) from operations... (4,020,930) (4,010,799) (82,197) (783,738) 1,218,326
Other income (expense).......... 44,345 (131,310) 122,670 123,681 (180,954)
Loss on asset dispositions...... (11,058) (51,574) (8,533) (2,299) (319)
Debt conversion expense......... -- -- (384,071) -- --
Interest and loan fees.......... (85,003) (841,407) (1,371,936) (609,646) (309,685)
----------- ----------- ----------- ----------- -----------
Net income (loss)............... $(4,072,646) $(5,035,090) $(1,724,067) $(1,272,002) $ 727,368
========== ========== ========== ========== ==========
Weighted average number of
common shares outstanding..... 4,023,233 5,039,272 5,562,959 5,220,497 7,410,632
Net income (loss) per common
share......................... $ (1.01) $ (1.00) $ (.31) $ (.24) $ .09
========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE> 65
METRO ONE TELECOMMUNICATIONS, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
SHAREHOLDERS' EQUITY (DEFICIT)
COMMON STOCK ----------------------------------------------------------
SUBJECT TO POTENTIAL
RESCISSION COMMON STOCK
------------------------- ----------------------- (ACCUMULATED NET SHAREHOLDERS'
SHARES AMOUNT SHARES AMOUNT DEFICIT) EQUITY (DEFICIT)
---------- ------------ --------- ----------- ------------ -----------------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1992...... 2,862,187 $ 5,655,920 -- -- $(5,605,473 ) $ (5,605,473)
Common stock issued for cash..... 581,774 4,579,273 -- -- -- --
Stock options/warrants
exercised...................... 85,288 154,261 -- -- -- --
Common stock issued for
services....................... 745 6,000 -- -- -- --
Common stock issued upon
conversion of debentures and
related accrued interest....... 1,462,494 1,584,281 -- -- -- --
Stock options issued for
services....................... -- 22,050 -- -- -- --
Stock issuance fees.............. -- (25,683) -- -- -- --
Net loss.................. -- -- -- -- (4,072,646 ) (4,072,646)
---------- ------------ ---------- ----------- ------------ ------------
Balances at December 31, 1993...... 4,992,488 11,976,102 -- -- (9,678,119 ) (9,678,119)
Stock options/warrants
exercised, net................. 218,383 338,089 -- -- -- --
Net loss.................. -- -- -- -- (5,035,090 ) (5,035,090)
---------- ------------ ---------- ----------- ------------ ------------
Balances at December 31, 1994...... 5,210,871 12,314,191 -- -- (14,713,209 ) (14,713,209)
Common stock purchased in
rescission offering............ (135,414) (613,760) -- -- -- --
Reclassified upon completion of
rescission offering............ (5,075,457) (11,700,431) 5,075,457 $11,700,431 -- 11,700,431
Stock options/warrants
exercised...................... -- -- 327,412 1,088,080 -- 1,088,080
Stock issued for services........ -- -- 5,714 13,200 -- 13,200
Conversion of long-term debt to
common stock................... -- -- 2,528,221 6,910,000 -- 6,910,000
Net loss.................. -- -- -- -- (1,724,067 ) (1,724,067)
---------- ------------ ---------- ----------- ------------ ------------
Balances at December 31, 1995...... 0 0 7,936,804 19,711,711 (16,437,276 ) 3,274,435
Stock options/warrants
exercised, net (Unaudited)..... -- -- 328,948 497,396 -- 497,396
Conversion of long-term debt to
common stock (Unaudited)....... -- -- 247,621 1,300,000 -- 1,300,000
Net income (Unaudited).... -- -- -- -- 727,368 727,368
---------- ------------ ---------- ----------- ------------ ------------
Balances at June 30, 1996
(Unaudited)...................... 0 $ 0 8,513,373 $21,509,107 $(15,709,908) $ 5,799,199
========== ============ ========== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE> 66
METRO ONE TELECOMMUNICATIONS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
--------------------------------------- ------------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)............................. $(4,072,646) $(5,035,090) $(1,724,067) $(1,272,002) $ 727,368
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Depreciation and amortization............... 379,904 742,135 996,834 490,973 553,475
Loss on disposal of fixed assets............ 11,058 51,574 8,533 2,299 319
Gain on settlement of disputed payable...... -- -- (98,918) (98,918) --
Reduction of notes receivable............... -- -- 4,400 -- --
Services paid with debt and equity
instruments............................... 28,050 150,000 13,200 -- --
Debt conversion expense..................... -- -- 255,780 -- --
Changes in certain assets and liabilities:
Accounts receivable......................... (174,725) (921,528) (1,259,540) (726,767) 186,896
Prepaid expenses and other assets........... (45,171) (173,754) (393,707) (133,456) (230,248)
Accounts payable and accrued expenses....... 220,214 782,960 (57,550) (120,972) 213,044
------------ ------------ ------------ ----------- -----------
Net cash provided by (used in)
operating activities................. (3,653,316) (4,403,703) (2,255,035) (1,858,843) 1,450,854
------------ ------------ ------------ ----------- -----------
Cash flows from investing activities:
Capital expenditures.......................... (1,314,070) (955,963) (74,422) (56,131) (305,533)
Issuance of notes receivable from
shareholders................................ (22,200) -- -- -- --
Issuance of notes receivable.................. (61,406) (150,000) -- -- --
Collections on notes receivable from
shareholders................................ 38,146 175,806 3,398 -- 1,660
Collections on notes receivable............... 66,241 15,183 171,640 170,565 --
------------ ------------ ------------ ----------- -----------
Net cash provided by (used in)
investing activities................. (1,293,289) (914,974) 100,616 114,434 (303,873)
------------ ------------ ------------ ----------- -----------
Cash flows from financing activities:
Debt issue costs, net......................... -- -- -- (209,781) --
Proceeds from issuance of bank debt........... -- 470,000 -- -- 550,000
Repayment of bank debt........................ -- (470,000) -- -- --
Repayment of capital lease obligations........ (1,491) (234,254) (721,387) (312,159) (474,980)
Proceeds from issuance of notes payable....... 236,431 -- -- -- --
Repayment of debt............................. (193,112) (185,239) (309,883) (250,000) (745,897)
Proceeds from issuance of long-term debt...... -- 5,410,000 3,550,000 3,425,000 67,200
Proceeds from issuance of common stock and
exercise of warrants and stock options...... 4,707,851 338,089 1,088,080 80,000 497,395
Common stock purchased in rescission
offering.................................... -- -- (613,760) -- --
------------ ------------ ------------ ----------- -----------
Net cash provided by (used in)
financing activities................. 4,749,679 5,328,596 2,993,050 2,733,060 (106,282)
------------ ------------ ------------ ----------- -----------
Net increase (decrease) in cash and cash
equivalents................................... (196,926) 9,919 838,631 988,651 1,040,699
Cash and cash equivalents, beginning of
period........................................ 497,198 300,272 310,191 310,191 1,148,822
------------ ------------ ------------ ----------- -----------
Cash and cash equivalents, end of period........ $ 300,272 $ 310,191 $ 1,148,822 $ 1,298,842 $2,189,521
============ ============ ============ =========== ===========
Supplemental information:
Interest...................................... $ 41,566 $ 468,155 $ 1,477,860 $ 536,150 $ 326,706
Conversion of debt into common stock.......... -- -- 6,910,000 -- 1,300,000
Equipment acquired by capital lease........... 95,680 1,929,810 1,066,249 326,900 678,877
Conversion of debentures and related accrued
interest into common stock.................. 1,584,281 -- -- -- --
</TABLE>
The accompanying notes are an integral part of these statements.
F-7
<PAGE> 67
METRO ONE TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION. These financial statements and related footnote
information as of June 30, 1996 and for the six months ended June 30, 1995 and
1996 are unaudited and in the opinion of management reflect all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of the Company's financial position as of such date and results of
operations for such periods. The results of operations for the interim periods
are not necessarily indicative of the results that may be expected for any other
interim period or for the full year.
NAME CHANGE. In 1995, the Board of Directors and shareholders approved an
amendment to the Restated Articles of Incorporation changing the name of the
Company to Metro One Telecommunications, Inc. (the "Company"). The former name
of the Company was Metro One Direct Information Services, Inc.
NATURE OF OPERATIONS. The Company provides enhanced directory assistance
services to telecommunications carriers and their customers. Revenues are
derived principally through fees charged to telecommunications carriers. The
Company has call centers located throughout the United States in or near
metropolitan areas, such as Chicago; Baltimore; San Diego; Seattle; Ft.
Lauderdale; Detroit; Denver; and others.
CASH AND CASH EQUIVALENTS. Cash and cash equivalents includes cash
deposits in banks and highly liquid investments maturing within approximately 90
days of purchase.
REVENUE RECOGNITION. Under existing contracts with telecommunications
carriers, the Company records as revenue charges for the amount of
telecommunications services rendered, generally as measured by the number of
calls processed. Revenue is recognized as services are provided.
MAJOR CUSTOMERS. In the six months ended June 30, 1996, twelve customers
accounted for substantially all revenue reported and comprised substantially the
entire accounts receivable balance at June 30, 1996. In 1995, twelve customers
accounted for substantially all revenue reported and comprised the entire
accounts receivable balance at December 31. The Company's three largest
customers accounted for approximately 29%, 23%, and 20%, respectively, of
revenue in 1995. In 1994, six customers accounted for all revenue reported and
comprised the entire accounts receivable balance at December 31. In 1993, four
customers accounted for approximately 78% of revenue and also comprised the
entire accounts receivable balance at December 31, 1993. Historically the
Company has not incurred significant losses related to its accounts receivable.
FURNITURE, FIXTURES AND EQUIPMENT. Furniture, fixtures and equipment are
stated at cost and are depreciated over their estimated useful lives of three to
seven years using the straight-line method. Leasehold improvements are amortized
over the lesser of the remaining lease term or the useful life. Expenses for
repairs and maintenance are expensed as incurred, and renewals and betterments
are capitalized. When assets are sold or otherwise disposed of, the cost and
related accumulated depreciation are eliminated from the accounts and the
resulting gains or losses are reflected in the statement of operations.
PER SHARE AMOUNTS. All share and per share amounts have been restated to
reflect a .2857-for-one (approximately a one-for-three and one-half) reverse
stock split. The effective date of the reverse stock split was December 12,
1995. The per share amounts are based on the weighted average number of shares
of common stock outstanding during the period of computation. Common stock
equivalents, including shares subject to debt conversion, warrants and options,
have been excluded from the computation because their effect would be
antidilutive, except that pursuant to the Securities and Exchange Commission
Staff Accounting Bulletins, common and common equivalent shares issued at prices
below the anticipated public offering price during the twelve months immediately
preceding the initial filing date have been included in the calculation as if
they were outstanding for all periods presented (using the treasury stock method
and the anticipated initial public offering price).
PATENTS AND TRADEMARKS. Patents and trademarks are carried at cost less
accumulated amortization. Costs are amortized over the estimated useful lives of
the related assets of five to ten years. In the event that
F-8
<PAGE> 68
METRO ONE TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
facts and circumstances indicate that the cost of patents, or trademarks may be
impaired, an evaluation of recoverability would be performed and the asset's
carrying amount would be reduced to market value or discounted cash flow value.
FAIR VALUE OF FINANCIAL INSTRUMENTS. Accounts receivable and payable as
reported on the accompanying balance sheets are collectible and payable,
respectively, within 60 days and, as a result, approximate fair value. The
Company's notes receivable and payable and subordinated notes bear interest
rates that approximate current market rates; thus, the recorded value of these
notes is considered to be at fair value.
USE OF ESTIMATES. The preparation of financial statements in conformity
with generally accepted accounting principals requires management to make
estimates and assumptions that effect reported amounts of assets and liabilities
at the date of the financial statements and the reported amounts of revenue and
expenses during the fiscal year. Actual results could differ from those
estimates.
RECLASSIFICATION. Certain balances in the 1993, 1994 and 1995 financial
statements have been reclassified to conform with 1996 presentations. Such
reclassifications had no effect on results of operations or accumulated earnings
(deficit).
2. ACCRUED LIABILITIES
Accrued liabilities consist of:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- JUNE 30,
1994 1995 1996
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Accrued financing fees.................................... $134,700 -- --
Accrued settlement costs.................................. 200,000 $249,214 $ 329,678
Deferred offering costs................................... -- -- 203,000
Accrued expenses.......................................... 175,439 229,800 278,552
------- ------- -------
$510,139 $479,014 $ 811,230
======= ======= =======
</TABLE>
3. FURNITURE, FIXTURES AND EQUIPMENT
Furniture, fixtures and equipment by major classification are summarized as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------------------------------
1994 1995 JUNE 30, 1996
------------------------------------ -------------------------------------- --------------------------------------
LEASED OWNED TOTAL LEASED OWNED TOTAL LEASED OWNED TOTAL
---------- ----------- ---------- ---------- ----------- ----------- ---------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equipment..... $1,788,388 $ 2,047,065 $ 3,835,453 $2,461,270 $ 2,213,755 $ 4,675,025 $2,825,631 $ 2,650,662 $ 5,476,293
Furniture
and
fixtures..... 360,823 862,936 1,223,759 594,186 879,749 1,473,935 600,487 966,507 1,566,994
Leasehold
improvements. -- 185,609 185,609 -- 110,958 110,958 -- 120,118 120,118
---------- --------- --------- ---------- ----------- ----------- ---------- ----------- -----------
2,149,211 3,095,610 5,244,821 3,055,456 3,204,462 6,259,918 3,426,118 3,737,287 7,163,405
Less
accumulated
depreciation
and
amortization.. (197,346) (979,547) (1,176,893) (614,803) (1,457,561) (2,072,364) (757,264) (1,846,667) (2,603,931)
---------- ----------- ----------- ---------- ----------- ----------- ---------- ----------- -----------
$1,951,865 $ 2,116,063 $ 4,067,928 $2,440,653 $ 1,746,901 $ 4,187,554 $2,668,854 $ 1,890,620 $ 4,559,474
========== =========== =========== ========== =========== =========== ========== =========== ===========
</TABLE>
F-9
<PAGE> 69
METRO ONE TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. NOTES RECEIVABLE FROM OFFICERS/SHAREHOLDERS
Notes receivable from officers/shareholders are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- JUNE 30,
1994 1995 1996
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Unsecured notes receivable including interest at 7.89% per
annum..................................................... $33,218 $28,758 $27,097
Less current portion........................................ 903 2,900 3,181
------- ------- -------
Notes receivable from officers/shareholders, less current
portion................................................... $32,315 $25,858 $23,916
======= ======= =======
</TABLE>
5. LONG-TERM DEBT
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- JUNE 30,
1994 1995 1996
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Secured Equipment Term Loan for up to $1,000,000, 10%
at June 30, 1996, interest rate varies at prime plus
1.75%, interest only payable monthly through March
1997. Balance at March 1997 converted to 3 year note
payable.............................................. $ 67,200
8% Convertible Secured Notes, interest payable monthly,
due June 1996........................................ $1,950,000 -- --
10% Subordinated Notes, unsecured, interest payable
monthly, due July 1996 through January 1997.......... 3,610,000 $1,950,000 $ 100,000
Unsecured notes, payable in monthly installments of
$33,415, due through June 1996, including interest at
8%................................................... -- 195,897 --
---------- ---------- --------
5,560,000 2,145,897 167,200
Less current portion................................... 400,000 2,045,897 100,000
---------- ---------- --------
Long-term debt, less current portion................... $5,160,000 $ 100,000 $ 67,200
========== ========== ========
</TABLE>
8% CONVERTIBLE SECURED NOTES. In 1994 and 1995, the Company issued
$5,000,000 in 8% Convertible Secured Notes. The Convertible Secured Notes bore
interest at 8% per annum and were (i) secured by the Company's assets, (ii)
payable on June 30, 1996, and (iii) convertible into the Company's common stock
at a rate of $2.31 per share. During the fourth quarter of 1995, these
Convertible Secured Notes were converted into 2,164,402 shares of the Company's
common stock.
In connection with the conversion, the Company recognized a charge for
early conversion in the amount of $384,071, including the write-off of
approximately $128,000 in offering costs previously capitalized.
10% SUBORDINATED NOTES. In 1995, the Company issued $3,860,000 of new 10%
subordinated notes with warrants (the "1995 Subordinated Notes"), the proceeds
of which were primarily used to refinance $3,610,000 in subordinated notes
("1994 Subordinated Notes"). The 1995 Subordinated Notes have maturities of no
less than 18 months and bear interest at 10% per annum payable monthly. These
1995 Subordinated Notes can be paid before maturity at the option of the
Company, with no penalty. In the event of an initial public offering, the then
outstanding 1995 Subordinated Notes are convertible, at the option of the
holder, into common stock at a price equal to 80% of the initial public offering
price.
Issued with each note was a warrant for the purchase of that number of
shares of the Company's common stock equal to the principal amount of the note
divided by $8.75. The exercise prices of the warrants related to the 1994
Subordinated Notes and the 1995 Subordinated Notes are $5.25 and $2.31,
respectively, and the warrants are exercisable at any time on or before three
years from the date of issuance.
F-10
<PAGE> 70
METRO ONE TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
In 1995, a certain noteholder exercised warrants for the purchase of
293,130 shares of the Company's common stock.
In 1996 and 1995, the Company extended an offer to holders of 1995
Subordinated Notes to convert their notes to common stock of the Company at
$5.25 per share. Principal in the amount of $3,210,000 was converted into
611,440 shares of the Company's common stock. The remaining 1995 Subordinated
Notes are due as follows: $550,000 in 1996 and $100,000 in 1996.
6. LEASE OBLIGATIONS
The Company entered into $1,929,810, $1,066,249, $326,900 and $678,877 of
new capital leases for the years ended 1994, 1995, and during the six months
ended June 30, 1995 and 1996, respectively. Interest paid for capital lease
obligations was approximately $0, $117,933, $405,120, $193,390 and $229,710 in
1993, 1994, 1995 and the six months ended June 30, 1995 and 1996, respectively.
The Company also leases office, operating facilities and equipment under
operating leases with unexpired terms of one to six years. Rental expense for
operating leases was approximately $313,000, $528,000 $780,000, $372,410 and
$448,845 for 1993, 1994, 1995 and the six months ended June 30, 1995 and 1996,
respectively. Minimum annual rentals for the five years subsequent to 1995 and
in the aggregate thereafter are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995 JUNE 30, 1996
----------------------------------- -----------------------------------
YEAR ENDING CAPITAL LEASES OPERATING LEASES CAPITAL LEASES OPERATING LEASES
- ---------------------------------- -------------- ---------------- -------------- ----------------
(UNAUDITED)
<S> <C> <C> <C> <C>
1996............................ $1,127,956 $ 820,810 -- --
1997............................ 785,646 849,687 $1,182,316 $ 847,509
1998............................ 525,871 742,270 928,744 816,936
1999............................ 377,450 632,405 659,674 694,238
2000............................ 56,547 494,901 276,366 610,493
2001............................ -- 270,081 63,448 274,006
Thereafter........................ -- -- -- 192,915
---------- ---------- ---------- ----------
Total minimum lease payments...... 2,873,470 $3,810,154 $3,110,548 $3,436,097
========== ==========
Less interest portion............. 737,373 770,553
---------- ----------
Present value of net minimum lease
payments, capital leases........ 2,136,097 2,339,995
Less portion due within one
year............................ 769,892 782,289
---------- ----------
$1,366,205 $1,557,706
========== ==========
</TABLE>
7. SHAREHOLDERS' EQUITY (DEFICIT)
COMMON STOCK. In 1995, the Company's Board of Directors and shareholders
approved a .2857-for-one (approximately a one-for-three and one-half) reverse
split of the Company's common stock. All share and per share amounts have been
restated to retroactively reflect the reverse stock split.
PREFERRED STOCK. In 1995, the Board of Directors and the shareholders
approved an amendment to the Restated Articles of Incorporation to increase the
number of authorized shares of preferred stock, without par value, from 10,000
to 10,000,000.
COMMON STOCK OPTIONS AND WARRANTS. The Company has issued nonqualified
stock options and/or warrants to certain shareholders, consultants and other
parties. Generally, these options and warrants vested immediately upon grant and
are exercisable at prices determined by the Board of Directors.
F-11
<PAGE> 71
METRO ONE TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
In 1994 and 1995, the Board of Directors and shareholders, respectively,
approved a Stock Incentive Plan (the "Plan"). The Plan provides for the award of
incentive stock options to key employees and the award of non-qualified stock
options, stock sales and grants to employees, outside directors, independent
contractors and consultants, with 1,428,500 shares of common stock reserved for
issuance under the Plan. It is intended that the Plan will be used principally
to attract and retain key employees of the Company.
The option price per share of an incentive stock option may not be less
than the fair market value of a share of common stock as of the date such option
is granted. The option price per share of a non-qualified stock option may be at
any price established by the Board of Directors or a committee thereof
established for purposes of administering the plan. Options become exercisable
at the times and subject to the conditions prescribed by the Board of Directors.
Generally, options vest over a period of four years and the term of each option
may not exceed ten years. Payment for shares purchased pursuant to options may
be made in cash or by delivery of shares of common stock having a market value
equal to the exercise of the option. As of June 30, 1996, 365,230 incentive
options and 797,368 non-qualified options had been granted under the Plan, at an
exercise price of $8.05 per share of common stock. At December 31, 1995 and June
30, 1996, approximately 758,009 and 846,397, respectively, of the options
granted under the Plan were exercisable.
Common stock options and warrants exercisable at December 31, 1994 and 1995
and June 30, 1996 were 1,153,114, 2,027,689, and 1,774,715, respectively.
Stock option and warrant activity is summarized as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES PRICE RANGE
---------------- -------------
<S> <C> <C>
Balance at December 31,1992.................... 802,816 $.04 - 5.25
Granted...................................... 92,853 1.75 - 8.05
Canceled/Expired............................. -- --
Exercised.................................... (85,288) 1.75 - 3.50
---------------- -------------
Balance at December 31, 1993................... 810,381 .04 - 8.05
Granted...................................... 561,116 5.25 - 8.05
Canceled/Expired............................. -- --
Exercised.................................... (218,383) .04 - 1.75
---------------- -------------
Balance at December 31,1994.................... 1,153,114 1.75 - 8.05
Granted...................................... 1,756,340 8.05
Canceled/Expired............................. (208,918) 8.05
Exercised.................................... (327,412) 1.75 - 5.25
---------------- -------------
Balance at December 31, 1995................... 2,373,124 $1.75 - 8.05
---------------- -------------
Granted (Unaudited).......................... 60,020 8.05
Canceled/Expired (Unaudited)................. 858 8.05
Exercised (Unaudited)........................ 341,370 1.75
---------------- -------------
Balance at June 30, 1996 (Unaudited)........... 2,090,916 $1.75 - 8.05
============= ==========
</TABLE>
8. RELATED PARTIES
During 1994, 1995 and 1996, the Company entered into various capital lease
arrangements for furniture, fixtures and equipment with a company owned by a
shareholder of the Company. Minimum capital lease obligations to this related
party totaled $1,017,759, $1,024,380, and $1,071,863 at December 31, 1994 and
1995 and June 30, 1996, respectively.
F-12
<PAGE> 72
METRO ONE TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
9. OTHER INCOME (EXPENSE)
Included in other income (expense) are certain items which do not relate
directly to current ongoing business activity. Included in this classification
for the six month period ended June 30, 1996 are estimated litigation settlement
expenses of approximately $155,000. For the six month period ended June 30,
1995, other income consisted primarily of gain of approximately $98,904,
resulting from settlement of a dispute with a vendor.
For the year ended December 31, 1993, other income consisted primarily of
interest income of $33,752. For the year ended December 31, 1994, other expense
consisted primarily of interest income of $56,055 and litigation settlement
expenses of $200,000. For the year ended December 31, 1995, other income
consisted primarily of interest income of $47,918; litigation settlement expense
of $24,000; and gain of approximately $98,904, resulting from settlement of a
dispute with a vendor.
10. INCOME TAXES
In 1993, the Company adopted Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes" ("FAS 109"). The Company recognizes
deferred tax liabilities and assets for the expected future tax consequences of
temporary differences between the book basis and tax basis of the Company's
assets and liabilities. The adoption of this statement had no effect on pre-tax
loss from continuing operations.
Deferred taxes are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------- JUNE 30,
1993 1994 1995 1996
----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Tax depreciation in excess of book.... $ 120,734 $ 280,999 $ 456,353 $ 477,153
----------- ----------- ----------- -----------
Gross deferred tax liabilities........ 120,734 280,999 456,353 477,153
----------- ----------- ----------- -----------
Net operating loss carryforwards...... (3,594,814) (6,178,885) (6,492,802) (5,259,788)
Expenses not currently deductible..... (98,306) (56,706) (142,566) (13,822)
Tax credit carryforwards.............. -- -- (7,221) (7,221)
----------- ----------- ----------- -----------
Gross deferred tax assets............. (3,693,120) (6,235,591) (6,642,589) (5,280,831)
Deferred tax asset valuation
allowance........................... 3,572,386 5,954,592 6,186,236 4,803,678
----------- ----------- ----------- -----------
Net deferred tax asset................ $ -- $ -- $ -- $ --
=========== =========== =========== ===========
</TABLE>
For financial reporting and income tax purposes, the Company has net
operating loss carryforwards aggregating approximately $14.5 million at June 30,
1996. Such carryforwards are available to offset taxable income in future years
through their expiration in 2004 to 2011. The issuance of common stock since the
Company's inception has resulted in changes in ownership which limit the annual
utilization of these net operating loss carryforwards.
11. POTENTIAL RESCISSION LIABILITY
In 1995, the Company filed a registration statement with the Securities and
Exchange Commission and certain state securities regulators for a rescission
offering whereby it offered to certain holders of its common stock the right to
rescind their purchase of shares of the Company's common stock and to receive,
in exchange for the common stock relinquished to the Company, a payment equal to
the purchase price of such securities plus interest from the date of purchase at
the applicable statutory rate of the state in which they reside. The securities
intended to be the subject of the Rescission Offer included 4,699,539 shares of
common stock outstanding at March 31, 1995 and purchased or converted from debt
securities by persons who resided in Oregon and certain other states.
F-13
<PAGE> 73
METRO ONE TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The rescission offer closed in July 1995. As a result of the rescission
offer, the sales of 135,414 shares of common stock were rescinded and such
shares were purchased by the Company for approximately $738,660, including
interest of approximately $124,900. In total, shareholders representing
approximately $1,877,500 and 528,215 shares of common stock outstanding at March
31, 1995 did not receive a rescission offer.
12. BENEFIT PLANS
During 1992, the Company established a deferred compensation savings plan
for the benefit of its eligible employees. The plan permits certain voluntary
employee contributions to be excluded from the employees' current taxable income
under the provisions of Internal Revenue Code Section 401(k). Upon reaching the
age of twenty-one, each employee becomes eligible to participate in the savings
plan six months following the initial date of employment. The employee must also
complete 1,000 hours of service in any twelve-month period. Under the plan, the
Company can make discretionary contributions to the plan as approved by the
Board of Directors. Participants' interest in Company contributions to the plan
vest over a four-year period. The Company made no contributions in 1993, 1994
and 1995 and has made $3,692 in contributions for the six months ended June 30,
1996.
13. COMMITMENTS AND CONTINGENCIES
The Company is party to various legal actions and administrative
proceedings arising in the ordinary course of business. The Company believes
that the disposition of these matters will not have a material adverse effect on
its financial position, results of its operations, or net cash flows.
14. BANK LINE OF CREDIT
The Company entered into a $3,000,000 Secured Operating Line of Credit with
a commercial bank. Under the terms of the agreement, outstanding borrowings bear
interest at prime rate plus 1.25 percent and all assets of the Company are
pledged as collateral. At June 30, 1996 the average interest rate was 9.5
percent. The agreement contains minimum net worth and working capital
requirements as well as certain other restrictive covenants, as defined by the
agreement, and prohibits the payment of cash dividends. Availability of the
unused line of credit is subject to borrowing base requirements and compliance
with loan covenants. At June 30, 1996, the Company had $550,000 in borrowings
against this line of credit.
15. ACCOUNTING PRONOUNCEMENTS
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-Based Compensation." SFAS No. 123 requires expanded
disclosures of stock-based compensation arrangements with employees and
encourages (but does not require) compensation cost to be measured based on the
fair market value of the equity instrument awarded. Companies are permitted,
however, to continue to apply Accounting Principles Board (APB) Opinion No. 25,
"Accounting for Stock Issued to Employees," which recognizes compensation cost
based on the intrinsic value of the equity instrument awarded. The Company will
continue to apply APB Opinion No. 25 to its stock based compensation awards to
employees and will disclose the required pro forma effect on net income and
earnings per share in its 1996 annual report.
F-14
<PAGE> 74
METRO ONE TELECOMMUNICATIONS -- DELIVERING INNOVATIVE
SOLUTIONS FOR CALLERS WHO DESIRE ACCURATE, TIMELY INFORMATION
<TABLE>
<CAPTION>
"AUTOBACK" "MESSAGEBACK" "NUMBERBACK"
<S> <C> <C>
Automatically returns the Delivers the caller's Callers receive the called
caller to a live operator recorded message to the number by simply pressing
upon a "busy" signal or called party or any other the [#] key once.
"ring-no answer" desired party. Configured Configuration options
situation -- there are no with AutoBack, a potent provide automatic delivery
keys to press at all. tool for ensuring of called number at
communication with a initiation and/or
desired party. completion of a call.
<CAPTION>
"STARBACK" "CALLBACK"
<S> <C>
Metro One created an Called party is connected
industry standard that back to the calling party
allows the caller to at a later time. Effective
return to a live operator tool for connecting two
by simply pressing the [*] parties with heavy phone
key once at any time usage patterns.
during the call. Allows
for additional caller
requests at no extra
charge to the carrier.
</TABLE>
<PAGE> 75
- ------------------------------------------------------
- ------------------------------------------------------
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS 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, BY THE SELLING
SHAREHOLDERS OR BY ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES BY ANY PERSON IN ANY
JURISDICTION WHERE SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCE CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 5
Use of Proceeds....................... 13
Dividend Policy....................... 13
Capitalization........................ 14
Selected Financial Data............... 15
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 16
Business.............................. 23
Management............................ 36
Certain Transactions.................. 43
Principal and Selling Shareholders.... 45
Description of Capital Stock.......... 48
Shares Eligible for Future Sale....... 51
Underwriting.......................... 53
Legal Matters......................... 53
Experts............................... 54
Additional Information................ 54
Index to Financial Statements......... F-1
</TABLE>
------------------------------------------------------
------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
2,000,000 Shares
LOGO
Common Stock
-------------------
PROSPECTUS
-------------------
BLACK & COMPANY, INC.
CRUTTENDEN ROTH
INCORPORATED
, 1996
------------------------------------------------------
------------------------------------------------------
<PAGE> 76
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, expected to be incurred by the
Registrant in connection with the offering described in this Registration
Statement. All amounts, except the SEC registration fee, the NASD filing fee and
the NASDAQ National Market System listing fee are estimates.
<TABLE>
<S> <C>
SEC Registration Fee...................................................... $ 7,932
NASD Filing Fee........................................................... 2,800
NASDAQ Listing Fee........................................................ 41,284
Printing and Engraving Expenses........................................... 100,000
Accounting Fees and Expenses.............................................. 80,000
Legal Fees and Expenses................................................... 250,000
Blue Sky Fees and Expenses (including fees of Counsel).................... 10,000
Transfer Agent and Registrar Fees......................................... 10,000
Directors and Officer Insurance........................................... 260,000
Miscellaneous Expenses.................................................... 37,984
--------
Total........................................................... $800,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As an Oregon corporation the Company is subject to the Oregon Business
Corporation Act ("OBCA") and the exculpation from liability and indemnification
provisions contained therein. Pursuant to Section 60.047(2)(d) of the OBCA,
Article X of the Company's Second Restated Articles of Incorporation (the
"Articles") eliminates the liability of the Company's directors to the Company
or its stockholders, except for any liability related to breach of the duty of
loyalty, actions not in good faith and certain other liabilities.
Section 60.387 et seq. of the OBCA allows corporations to indemnify their
directors and officers against liability where the director or officer has acted
in good faith and with a reasonable belief that actions taken were in the best
interests of the corporation or at least not adverse to the corporation's best
interests and, if in a criminal proceeding, the individual had no reasonable
cause to believe the conduct in question was unlawful. Under the OBCA,
corporations may not indemnify against liability in connection with a claim by
or in the right of the corporation but may indemnify against the reasonable
expenses associated with such claims. Corporations may not indemnify against
breaches of the duty of loyalty. The OBCA provides for mandatory indemnification
of directors against all reasonable expenses incurred in the successful defense
of any claim made or threatened whether or not such claim was by or in the right
of the corporation. Finally, a court may order indemnification if it determines
that the director or officer is fairly and reasonably entitled to
indemnification in view of all the relevant circumstances whether or not the
director or officer met the good faith and reasonable belief standards of
conduct set out in the statute.
The OBCA also provides that the statutory indemnification provisions are
not deemed exclusive of any other rights to which directors or officers may be
entitled under a corporation's articles of incorporation or bylaws, any
agreement, general or specific action of the board of directors, vote of
stockholders or otherwise.
Article X of the Articles requires the Company to indemnify its directors
and officers to the fullest extent not prohibited by law. The Bylaws of the
Company (the "Bylaws") also require the Company to indemnify its directors and
officers to the fullest extent permitted by the OBCA.
II-1
<PAGE> 77
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Within the last three years, the Company has sold securities without
registration under the Securities Act in the transactions and in reliance on the
exemptions from registration described below.
(a) The Company completed a recapitalization and reverse stock split
effective December 12, 1995, in which each share of Common Stock, without
par value, then outstanding was converted to .2857 Shares of Common Stock
(approximately a 1 for 3.5 reverse split). The issuance of shares in the
recapitalization was exempt from registration pursuant to Section 3(a)(9)
of the Securities Act and did not involve a sale of securities.
(b) Between June 1993 and October 1993, the Company sold an aggregate
of 325,137 shares of its Common Stock at $8.05 per share to 173 purchasers.
The sales of these shares may not have complied in all material respects
with all applicable state and federal securities laws and the exemptions
available under such laws. See "Business -- Securities Law Issues."
(c) Between June 1993 and February 1996, 64 holders of warrants and
options exercised such warrants and options to purchase an aggregate of
665,220 shares of the Company's Common Stock for an aggregate purchase
price of $1,144,747, at exercise prices ranging from $.04 to $5.25 per
share. The issuance of the Common Stock upon the exercise of the options
and warrants was exempt from registration pursuant to Section 4(2) of the
Securities Act.
(d) Between January 1994 and July 1994, the Company sold an aggregate
of $3,610,000 of its 10% Subordinated Notes with Warrants (the "1994
Subordinated Notes") in private transactions with 28 purchasers, each of
whom the Company believes was on "accredited investor" within the meaning
of Rule 501 of the Securities Act. The sale of the 1994 Subordinated Notes
was exempt from registration pursuant to Section 4(2) of the Securities
Act.
(e) In September 1994, the Company sold 5,714 shares of its Common
Stock to one purchaser in exchange for services to the Company with a value
of $13,200. The sale of these shares was exempt from registration pursuant
to Section 4(2) of the Securities Act.
(f) Between November 1994 and July 1995, the Company sold an aggregate
of $5,000,000 of its 8% Convertible Secured Notes in private transactions
with 22 purchasers, each of whom the Company believes was an "accredited
investor" within the meaning of Rule 501 of the Securities Act. The sale of
the 8% Notes was exempt from registration pursuant to Section 4(2) of the
Securities Act.
(g) Between January 1995 and March 1995, the Company sold $3,860,000
of its 10% Subordinated Notes with Warrants (the "1995 Subordinated Notes")
in private transactions with 27 purchasers, each of whom the Company
believes was an "accredited investor" within the meaning of Rule 501 of the
Securities Act. The sale of the 1995 Subordinated Notes was exempt from
registration pursuant to Section 4(2) of the Securities Act.
(h) Between October 1995 and November 1995, the holders of the
Company's 8% Convertible Secured Notes converted an aggregate of $5,000,000
principal amount of such Notes into 2,164,402 shares of the Company's
Common Stock. The issuance of the Common Stock in the conversion was exempt
from registration pursuant to Section 4(2) of the Securities Act.
(i) In October 1995, certain holders of the 1994 and 1995 Subordinated
Notes exercised warrants to purchase an aggregate of 293,131 shares of the
Company's Common Stock for an aggregate purchase price of $1,003,080. The
issuance of the Common Stock upon the exercise of the warrants was exempt
from registration pursuant to Section 4(2) of the Securities Act.
(j) Between December 1995 and March 1996, $3,210,000 in principal
amount of the Company's 1995 Subordinated Notes were exchanged with the
Company for 611,440 shares of the Company's Common Stock. The issuance of
the Common Stock in the exchange was exempt from registration pursuant to
Section 3(a)(9) of the Securities Act.
II-2
<PAGE> 78
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ ----------------------------------------------------------------------------------
<C> <C> <S>
1.0 -- Form of Underwriting Agreement
3.1 -- Second Restated Articles of Incorporation of Metro One Telecommunications, Inc.(2)
3.2 -- Amended and Restated Bylaws of Metro One Telecommunications, Inc.+
4.0 -- Form of Common Stock Certificate of Metro One Telecommunications, Inc.*
5.0 -- Opinion of Ater Wynne Hewitt Dodson & Skerritt, LLP as to the legality of the
securities being registered*
10.1 -- Form of Enhanced Directory Assistance Agreement(1)
10.2 -- Enhanced Directory Assistance Agreement between Ameritech Mobile Communications,
Inc. and the Company dated June 16, 1994.
10.3 -- 1994 Stock Incentive Plan(2)
10.4 -- Consulting Agreement with G. Raymond Doucet(1)
10.5 -- Loan and Security Agreement between Silicon Valley Bank and the Company dated
March 15, 1996(2)
10.6 -- 1995 Employment Agreement with Timothy A. Timmins(2)
10.7 -- 1995 Employment Agreement with Patrick M. Cox(2)
10.8 -- Lease Agreement between and among Petula Associates, Ltd., Koll Creekside
Associates and the Company(1)
23.1 -- Consent of Ater Wynne Hewitt Dodson & Skerritt, LLP (included in legal opinion
filed as Exhibit 5.0)*
23.2 -- Consent of Deloitte & Touche LLP (See page II-7)
23.3 -- Consent of Price Waterhouse LLP (See page II-8)
24.0 -- Powers of Attorney (included in signature page in Part II of the Registration
Statement)
</TABLE>
- ---------------
* To be filed by amendment.
+ Previously filed as an Exhibit to this Registration Statement.
(1) Filed as an Exhibit to the Company's Registration Statement on Form SB-2
(Commission File No. 33-88926-LA) and incorporated herein by reference.
(2) Filed as an Exhibit to the Company's Annual Report on Form 10-KSB
(Commission File No. 0-27024) and incorporated herein by reference.
(b) Financial Statement Schedules
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting agreement certificates
in such denominations and registered in such names as required by the
underwriters to permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to 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
II-3
<PAGE> 79
the securities being registered hereunder, 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.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A
and contained in a form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities
Act shall be deemed to be part of this registration statement as
of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-4
<PAGE> 80
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Portland, State of
Oregon, on the 4th day of June, 1996.
METRO ONE TELECOMMUNICATIONS, INC.
By: /s/ TIMOTHY A. TIMMINS
------------------------------------
Timothy A. Timmins
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Timothy A. Timmins and Stebbins B. Chandor, Jr.
and each of them singly, as true and lawful attorneys-in-fact and agents with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities to sign the Registration Statement filed
herewith and any or all amendments to said Registration Statement (including
post-effective amendments), and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission granting unto said attorneys-in-fact and agents and full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the foregoing, as full to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or his substitute, may
lawfully do or cause to be done by virtue hereof.
Witness our hands on the date set forth below.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been duly signed by the following persons in the
capacities indicated on June 4, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ----------------------------------------------
<S> <C>
/s/ TIMOTHY A. TIMMINS President, Chief Executive Officer and
- --------------------------------------------- Director (Principal Executive Officer)
Timothy A. Timmins
/s/ PATRICK M. COX Executive Vice President, Chief Operating
- --------------------------------------------- Officer, Secretary and Director
Patrick M. Cox
/s/ STEBBINS B. CHANDOR, JR. Senior Vice President and Chief Financial
- --------------------------------------------- Officer (Principal Financial Officer)
Stebbins B. Chandor, Jr.
/s/ KEVIN S. ANDERSON Senior Vice President-Directory Assistance
- --------------------------------------------- Services
Kevin S. Anderson
/s/ GARY E. HENRY Vice President-Field Operations
- ---------------------------------------------
Gary E. Henry
</TABLE>
II-5
<PAGE> 81
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ----------------------------------------------
<S> <C>
/s/ KAREN L. JOHNSON Vice President and Controller (Principal
- --------------------------------------------- Accounting Officer)
Karen L. Johnson
/s/ MICHAEL A. KEPLER Vice President-Information Systems
- ---------------------------------------------
Michael A. Kepler
/s/ A. JEAN DE GRANDPRE Chairman of the Board
- ---------------------------------------------
A. Jean de Grandpre
/s/ G. RAYMOND DOUCET Director
- ---------------------------------------------
G. Raymond Doucet
/s/ WILLIAM D. RUTHERFORD Director
- ---------------------------------------------
William D. Rutherford
</TABLE>
II-6
<PAGE> 82
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 1 to Registration Statement No.
333-05183 of Metro One Telecommunications, Inc. on Form S-1 of our report dated
March 18, 1996, appearing in the Prospectus, which is part of this Registration
Statement and to the reference to us under the heading "Experts" in such
Prospectus.
/s/
DELOITTE & TOUCHE LLP
Portland, Oregon
July 22, 1996
II-7
<PAGE> 83
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Amendment No. 1 to Registration Statement on Form S-1 of our report dated
February 6, 1995, relating to the financial statements of Metro One
Telecommunications, Inc. (formerly Metro One Direct Information Services, Inc.),
which appears in such Prospectus. We also consent to the reference to us under
the heading "Experts" in such Prospectus.
/s/
PRICE WATERHOUSE LLP
Portland, Oregon
July 22, 1996
II-8
<PAGE> 84
METRO ONE TELECOMMUNICATIONS, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER IDENTIFICATION OF EXHIBITS PAGE NO.
- ------ -------------------------------------------------------------------------- --------
<C> <C> <S> <C>
1.0 -- Form of Underwriting Agreement............................................
3.1 -- Second Restated Articles of Incorporation of Metro One Telecommunications,
Inc.(2)...................................................................
3.2 -- Amended and Restated Bylaws of Metro One Telecommunications, Inc.+........
4.0 -- Form of Common Stock Certificate of Metro One Telecommunications, Inc.*...
5.0 -- Opinion of Ater Wynne Hewitt Dodson & Skerritt, LLP as to the legality of
the securities being registered*..........................................
10.1 -- Form of Enhanced Directory Assistance Agreement(1)........................
10.2 -- Enhanced Directory Assistance Agreement between Ameritech Mobile
Communications, Inc. and the Company dated June 16, 1994..................
10.3 -- 1994 Stock Incentive Plan(2)..............................................
10.4 -- Consulting Agreement with G. Raymond Doucet(1)............................
10.5 -- Loan and Security Agreement between Silicon Valley Bank and the Company
dated March 15, 1996(2)...................................................
10.6 -- 1995 Employment Agreement with Timothy A. Timmins(2)......................
10.7 -- 1995 Employment Agreement with Patrick M. Cox(2)..........................
10.8 -- Lease Agreement between and among Petula Associates, Ltd., Koll Creekside
Associates and the Company(1)
23.1 -- Consent of Ater Wynne Hewitt Dodson & Skerritt, LLP (included in legal
opinion filed as Exhibit 5.0)*............................................
23.2 -- Consent of Deloitte & Touche LLP (See page II-7)..........................
23.3 -- Consent of Price Waterhouse LLP (See page II-8)...........................
24.0 -- Powers of Attorney (included in signature page in Part II of the
Registration Statement)...................................................
</TABLE>
- ---------------
* To be filed by amendment.
+ Previously filed as an Exhibit to this Registration Statement.
(1) Filed as an Exhibit to the Company's Registration Statement on Form SB-2
(Commission File No. 33-88926-LA) and incorporated herein by reference.
(2) Filed as an Exhibit to the Company's Annual Report on Form 10-KSB
(Commission File No. 0-27024) and incorporated herein by reference.
<PAGE> 1
EXHIBIT 1.0
2,000,000 SHARES*
METRO ONE TELECOMMUNICATIONS, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
August __, 1996
BLACK & COMPANY, INC.
CRUTTENDEN ROTH INCORPORATED
As Representatives of the several Underwriters
c/o Black & Company, Inc.
One S.W. Columbia, Suite 1200
Portland, OR 97258
Ladies and Gentlemen:
Metro One Telecommunications, Inc., an Oregon corporation (the
"Company"), and certain shareholders of the Company (together with certain
selling shareholders selling the Option Shares (as described below), the
"Selling Shareholders"), propose to sell an aggregate of 2,000,000 shares (the
"Firm Shares") of the Company's common stock, no par value per share (the
"Common Stock"), to you and to the several other underwriters named in Schedule
I hereto (collectively, the "Underwriters"), for whom you are acting as the
representatives (the "Representatives"), of which 1,000,000 shares will be sold
by the Company and 1,000,000 shares will be sold by the Selling Shareholders.
The Company and the Selling Shareholders are sometimes referred to herein
collectively as the "Sellers." The Company and the Selling Shareholders also
propose to sell at the Underwriters' option (the "Option") an aggregate of up
to 300,000 additional shares of Common Stock (the "Option Shares") on the terms
and for the purposes set forth in Section 1(b). The Firm Shares and the Option
Shares are referred to collectively herein as the "Shares."
__________________________________
* Plus an option to purchase up to an additional 300,000 shares to cover
over-allotments.
<PAGE> 2
The Company confirms as follows its agreement with the Representatives
and the several other Underwriters.
1. Agreement to Sell and Purchase.
(a) On the basis of the representations, warranties and
agreements of the parties herein contained and subject to all of the terms and
conditions of this Agreement, (i) the Sellers agree to sell an aggregate of
2,000,000 shares of Common Stock to the several Underwriters and (ii) each of
the Underwriters, severally and not jointly, agrees to purchase from the
Sellers the respective number of Firm Shares set forth opposite that
Underwriter's name in Schedule I hereto, at the purchase price of $______ for
each Firm Share, subject to adjustments in accordance with Section 8 hereof.
The number of Firm Shares to be purchased by each Underwriter from each Seller
shall be as nearly as practicable in the same proportion to the total number of
Firm Shares being sold by each Seller as the number of Firm Shares being
purchased by each Underwriter bears to the total number of Firm Shares to be
sold hereunder.
(b) Subject to all the terms and conditions of this
Agreement, the Selling Shareholders grant the Option to the several
Underwriters to purchase, severally and not jointly, up to the maximum number
of Option Shares at the same price per share as the Underwriters shall pay for
the Firm Shares. The Option may be exercised only to cover over-allotments in
the sale of the Firm Shares by the Underwriters and may be exercised in whole
or in part at any time (but not more than once) on or before the 30th day after
the date of this Agreement upon written or telegraphic notice (the "Option
Shares Notice") by the Representatives to the Custodian (as defined below) no
later than 12:00 noon, New York City time, at least two and no more than five
business days before the date specified for the closing in the Option Shares
Notice (the "Option Closing Date") setting forth the aggregate number of Option
Shares to be purchased and the time and date for such purchase. The number of
Option Shares to be purchased by each Underwriter shall be in the same
proportion to the total number of Option Shares being purchased as the number
of Firm Shares being purchased by such Underwriter bears to the total number of
Firm Shares, adjusted by you in such manner as to avoid fractional shares. The
number of Option Shares to be purchased by each Underwriter from each Selling
Shareholder shall be as nearly as practicable in the same proportion to the
total number of Option Shares being sold by each Seller as the number of Option
Shares being purchased by each Underwriter bears to the total number of Option
Shares to be sold hereunder.
2. Delivery and Payment.
(a) Certificates in negotiable form for the total number
of the Shares to be sold hereunder by the Selling Shareholders have been placed
in custody with Timothy A. Timmins, as custodian (the "Custodian") pursuant to
the Custody Agreement (as defined below) executed by each Selling Shareholder
for delivery of all Shares to be sold hereunder by
2
<PAGE> 3
the Selling Shareholders. Each of the Selling Shareholders specifically agrees
that the Shares represented by the certificates held in custody for the Selling
Shareholders under the Custody Agreement are subject to the interests of the
Underwriters hereunder, that the arrangements made by the Selling Shareholders
for such custody are to that extent irrevocable and that the obligations of the
Selling Shareholders hereunder shall not be terminable by any act or deed of
the Selling Shareholders (or by any other person, firm or corporation,
including the Company, the Custodian or the Underwriters) or by operation of
law (including the death of an individual Selling Shareholder or the
dissolution of a corporate Selling Shareholder) or by the occurrence of any
other event or events, except as set forth in the Custody Agreement. If any
such event occurs prior to the delivery to the Underwriters of the Shares,
certificates for the Shares shall be delivered by the Custodian in accordance
with the terms and conditions of this Agreement as if such event had not
occurred. The Custodian is authorized to receive and acknowledge receipt of
the proceeds of sale of the Shares held by it against delivery of such Shares.
(b) Payment for the Firm Shares to be sold hereunder is
to be made in New York Clearing House funds by wire transfers to an account
designated in writing by the Company for the Shares to be sold by it and to an
account designated in writing by Metro One Telecommunications, Inc. "as
Custodian" for the Shares to be sold by the Selling Shareholders, in each case
against delivery of certificates therefor to the Representatives for the
several accounts of the Underwriters. Such payment and delivery are to be made
at the offices of Ater Wynne Hewitt Dodson & Skerritt LLP, 222 S.W. Columbia,
Portland, Oregon, at 7:00 a.m., Portland time, on the fourth business day after
the date of this Agreement or at such other time and date not later than four
business days thereafter as you and the Company shall agree upon, such time and
date being herein referred to as the "Closing Date." (As used herein,
"business day" means a day on which the New York Stock Exchange is open for
trading and on which banks in New York are open for business and not permitted
by law or executive order to be closed.)
(c) To the extent the Option is exercised, delivery of
the Option Shares against payment by the Underwriters (in the manner specified
above) will take place at the offices specified above at the time and date
(which may be the Closing Date) specified in the Option Shares Notice.
(d) Certificates evidencing the Shares shall be in
definitive form and shall be registered in such names and such denominations as
the Representatives shall request at least two business days prior to the
Closing Date or the Option Closing Date, as the case may be, by written notice
to the Company. For the purpose of expediting the checking and packaging of
certificates for the Shares, the Company agrees to make such certificates
available for inspection at 10:00 a.m. on the business day preceding the
Closing Date or the Option Closing Date, as the case may be.
(e) The cost of any original issue tax stamps and any
transfer or other taxes in connection with the issuance and delivery of the
Firm Shares and Option Shares by the
3
<PAGE> 4
Company to the respective Underwriters shall be borne by the Company. The cost
of any transfer or other tax in connection with the sale and delivery of Firm
Shares and Option Shares by a Selling Shareholder to the Underwriters shall be
borne by such Selling Shareholder. The Company will save each Underwriter and
any subsequent holder of the Shares harmless from any and all liabilities with
respect to or resulting from any failure or delay by the Company or any Selling
Shareholder in paying federal and state stamp and other transfer taxes, if any,
that may be payable or determined to be payable in connection with the original
issuance, transfer or sale to such Underwriter of the Firm Shares and Option
Shares.
(f) If on the Closing Date or the Option Closing Date, as
the case may be, any Selling Shareholder fails to sell the Shares that such
Selling Shareholder has agreed to sell on such date as set forth in Schedule II
hereto, the Company agrees that it will sell or arrange for the sale of that
number of shares of Common Stock to the Underwriters that represents Shares
which such Selling Shareholder has failed to so sell, as set forth in Schedule
II hereto, or such lesser number as may be requested by the Representatives.
3. Representations and Warranties of the Company and Selling
Shareholders.
(a) The Company represents, warrants and covenants to
each Underwriter that:
(i) A registration statement on Form S-1 (File
No. 333-05183) with respect to the Shares has been carefully prepared by the
Company in conformity with the requirements of the Securities Act of 1933, as
amended (the "Act"), and the Rules and Regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission")
thereunder and has been filed with the Commission. Copies of such registration
statement, including any amendments thereto, the preliminary prospectuses
(meeting the requirements of the Rules and Regulations) contained therein and
the exhibits, financial statements and schedules, as finally amended and
revised, have heretofore been delivered by the Company to you. Such
registration statement, as amended, together with any registration statement
filed by the Company pursuant to Rule 462(b) of the Act, herein referred to as
the "Registration Statement," which shall be deemed to include all information
omitted therefrom in reliance upon Rule 430A and contained in the Prospectus
referred to below, has been declared effective by the Commission under the Act
and no post-effective amendment to the Registration Statement has been filed as
of the date of this Agreement. "Prospectus" means (a) the form of prospectus
first filed with the Commission pursuant to Rule 424(b), or (b) the last
preliminary prospectus included in the Registration Statement filed prior to
the time it becomes effective or filed pursuant to Rule 424(a) under the Act
that is delivered by the Company to the Underwriters for delivery to purchasers
of the Shares, together with the term sheet or abbreviated term sheet filed
with the Commission pursuant to Rule 424(b)(7) under the Act. Each preliminary
prospectus included in the Registration Statement prior to the time it becomes
effective is herein referred to as a "Preliminary Prospectus."
4
<PAGE> 5
(ii) The Company has been duly organized and is an
active corporation under the laws of the state of Oregon, with corporate power
and authority to own or lease its properties and conduct its business as
described in the Registration Statement. There are no subsidiaries, direct or
indirect, of the Company. The Company is duly qualified to transact business
in all jurisdictions in which the failure so to qualify would have a material
adverse effect on the earnings, business, properties, assets, rights,
operations, condition (financial or other) or prospects of the Company.
(iii) The outstanding shares of Common Stock of the
Company, including all Shares to be sold by the Selling Shareholders have been
duly authorized and validly issued, are fully paid and nonassessable, and were
not issued in violation of or subject to any preemptive rights or other rights
to subscribe for or purchase securities; the portion of the Shares to be issued
and sold by the Company have been duly authorized and when issued and paid for
as contemplated herein will be validly issued, fully paid and non-assessable;
and no preemptive rights of shareholders exist with respect to any of the
Shares or the issue and sale thereof. The outstanding shares of the Company's
Common Stock issued after October 15, 1993 were issued in compliance with the
registration and qualification provisions of applicable federal and state
securities laws. Neither the filing of the Registration Statement nor the
offering or sale of the Shares as contemplated by this Agreement gives rise to
any rights, other than those that have been waived or satisfied, for or
relating to the registration of any shares of Common Stock. Except for the
right of first refusal provided for in the Shareholder Rights Agreement dated
May 28, 1996 among the Company and certain of its shareholders, no options,
warrants or other rights to purchase, agreements or other obligations to issue
or other rights to convert any obligations into shares of capital stock or
ownership interests in the Company are outstanding except as set forth in the
Prospectus.
(iv) The rescission offer to certain shareholders
of the Company pursuant to a prospectus dated June 14, 1995 (the "Rescission
Offer") was effective pursuant to ORS 59.125 to bar any claims against the
Company under ORS 59.115 with regard to shares of the Company's Common Stock
issued on or before October 15, 1993.
(v) The offer and sale of securities pursuant to
the Rescission Offer was made in compliance with the registration and
qualification provisions of federal and Oregon securities laws.
(vi) All of the Shares conform to the description
thereof contained in the Registration Statement. The form of certificates for
the Shares conforms to the corporate law of the jurisdiction of the Company's
incorporation.
(vii) The Commission has not issued an order
preventing or suspending the use of any Preliminary Prospectus relating to the
proposed offering of the Shares or instituted proceedings for that purpose.
The Registration Statement contains, and the Prospectus and any amendments or
supplements thereto will contain, all statements that are
5
<PAGE> 6
required to be stated therein by, and will conform to, the requirements of the
Act and the Rules and Regulations. The Registration Statement and any
amendment thereto do not contain, and through the Closing Date will not
contain, any untrue statement of a material fact and do not omit, and through
the Closing Date will not omit, to state any material fact required to be
stated therein or necessary to make the statements therein not misleading. The
Prospectus and any amendments and supplements thereto do not contain, and will
not contain, any untrue statement of material fact and do not omit, and will
not omit, to state any material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading; provided, however, that the Company makes no
representations or warranties as to information contained in or omitted from
the Registration Statement or the Prospectus, or any such amendment or
supplement, in reliance upon, and in conformity with, written information
furnished to the Company by or on behalf of any Underwriter through the
Representatives, specifically for use in the preparation thereof.
(viii) The financial statements of the Company,
together with related notes and schedules as set forth in the Registration
Statement, present fairly the financial position and the results of operations
and cash flows of the Company at the indicated dates and for the indicated
periods. Such financial statements and related schedules have been prepared in
accordance with generally accepted accounting principles, consistently applied
throughout the periods involved, except as disclosed therein, and all
adjustments necessary for a fair presentation of results for such periods have
been made. The summary financial and statistical data included in the
Registration Statement present fairly the information shown therein, and such
data have been compiled on a basis consistent with the financial statements
presented therein.
(ix) Deloitte Touche LLP (the "Accountants") and
Price Waterhouse LLP, who have certified certain of the financial statements
filed with the Commission as part of the Registration Statement, are
independent public accountants as required by the Act and the Rules and
Regulations.
(x) There is no action, suit, claim or proceeding
pending or, to the knowledge of the Company, threatened against the Company
before any court or administrative agency or otherwise that if determined
adversely to the Company might (A) result in any change in the earnings,
business, properties, assets, rights, operations, condition (financial or
other) or prospects of the Company that is materially adverse to the Company,
or (B) prevent the consummation of the transactions contemplated hereby, except
as set forth in the Registration Statement, and there are no contracts or
documents of the Company that would be required to be filed as exhibits to the
Registration Statement by the Act or by the Rules and Regulations that have not
been filed as exhibits to the Registration Statement.
6
<PAGE> 7
(xi) The Company has good and marketable title to
all of the properties and assets reflected as owned in the financial statements
(or as described in the Registration Statement) hereinabove described, subject
to no lien, mortgage, pledge, charge or encumbrance of any kind except those
reflected in such financial statements (or as described in the Registration
Statement) or that are not material in amount. The Company occupies its leased
properties under valid and binding leases conforming in all material respects
to the description thereof set forth in the Registration Statement.
(xii) The Company has filed all federal, state,
local and foreign income tax returns that have been required to be filed and
have paid all taxes indicated by said returns and all assessments received by
them or any of them to the extent that such taxes have become due and are not
being contested in good faith. All tax liabilities have been adequately
provided for in the financial statements of the Company.
(xiii) Since the respective dates as of which
information is given in the Registration Statement, as it may be amended or
supplemented, there has not been any change or, to the Company's knowledge, any
development involving a prospective change in or affecting the earnings,
business, properties, assets, rights, operations, condition (financial or
other), or prospects of the Company that is materially adverse to the Company,
whether or not occurring in the ordinary course of business, and there has not
been any transaction entered into or any transaction that is probable of being
entered into by the Company that is material to the Company other than
transactions in the ordinary course of business and changes and transactions
contemplated by the Registration Statement, as it may be amended or
supplemented. The Company has no material contingent obligations that are not
disclosed in the Company's financial statements that are included in the
Registration Statement, as it may be amended or supplemented.
(xiv) The Company is not, and with the giving of
notice or lapse of time or both, will not be in violation of or in default
under its articles of incorporation or bylaws or under any agreement, lease,
contract, indenture or other instrument or obligation to which it is a party or
by which it, or any of its properties, is bound and which default is of
material significance in respect of the condition (financial or other) of the
Company or the business, properties, assets, rights, operations, condition
(financial or other) or prospects of the Company. The execution and delivery
of this Agreement and the consummation of the transactions herein contemplated
and the fulfillment of the terms hereof will not conflict with or result in a
breach of any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust or other agreement or instrument to which
the Company is a party, or of the articles of incorporation, charter or bylaws
of the Company or any order, rule or regulation applicable to the Company of
any court or of any regulatory body or administrative agency or other
governmental body having jurisdiction.
(xv) The Company has full legal right, power and
authority to enter into this Agreement and perform the transactions
contemplated hereby and to file the
7
<PAGE> 8
Registration Statement, and each has been duly authorized, executed and
delivered by the Company, and this Agreement constitutes a valid and binding
obligation of the Company in accordance with its terms, except as may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting creditors' rights generally, to the extent that
rights of indemnity or contribution under this Agreement may be limited by
federal or state securities laws or the public policies underlying such laws or
by general equitable principles. Each approval, consent, order, authorization,
designation, declaration or filing by or with any regulatory, administrative or
other governmental body necessary in connection with the execution and delivery
by the Company of this Agreement and the consummation of the transactions
herein contemplated (except such additional steps as may be required by the
Commission, the National Association of Securities Dealers, Inc. (the "NASD")
or such additional steps as may be necessary to qualify the Shares for public
offering by the Underwriters under state securities or Blue Sky laws) has been
obtained or made and is in full force and effect.
(xvi) The Company holds all material licenses,
certificates and permits from governmental authorities that are necessary to
the conduct of their respective businesses, and the Company has not infringed
any patents, patent rights, trade names, trademarks or copyrights, which
infringement is material to the business of the Company. The Company knows of
no current infringement by others of material patents, patent rights, trade
names, trademarks or copyrights owned by or licensed to the Company.
(xvii) The Company has not taken, directly or
indirectly, any action designed to cause or result in, or which has constituted
or which might reasonably be expected to constitute, the stabilization or
manipulation of the price of the shares of Common Stock to facilitate the sale
or resale of the Shares.
(xviii) The Company is not an "investment company"
within the meaning of such term under the Investment Company Act of 1940, as
amended (the "1940 Act") and the rules and regulations of the Commission
thereunder.
(xix) The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or specific
authorization, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets, (iii) access
to assets is permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(xx) The Company carries, or is covered by,
insurance in such amounts and covering such risks as is adequate for the
conduct of their respective businesses and the
8
<PAGE> 9
value of their respective properties and as is customary for companies engaged
in similar industries.
(xxi) The Company is in compliance in all material
respects with all presently applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended, including the regulations and
published interpretations thereunder ("ERISA"); no "reportable event" (as
defined in ERISA) has occurred with respect to any "pension plan" (as defined
in ERISA) for which the Company would have any liability; the Company has not
incurred and does not expect to incur liability under (i) Title IV of ERISA
with respect to termination of, or withdrawal from, any "pension plan" or (ii)
Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended,
including the regulations and published interpretations thereunder (the
"Code"); and each "pension plan" for which the Company would have any liability
that is intended to be qualified under Section 401(a) of the Code is so
qualified in all material respects and nothing has occurred, whether by action
or by failure to act, that would cause the loss of such qualification.
(xxii) The Company confirms as of the date hereof
that it is in compliance with all provisions of Section 1 of Florida Laws,
Chapter 92-198, An Act Relating to Disclosure of Doing Business with Cuba.
(b) Each of the Selling Shareholders severally (but not
jointly) represents and warrants as follows:
(i) Such Selling Shareholder now has (or, in the
case of any Selling Shareholder selling Shares to be acquired pursuant to the
exercise of a warrant, has the right to acquire) and at the Closing Date (as
such date is hereinafter defined) will have good and marketable title to the
Shares to be sold by such Selling Shareholder, free and clear of any liens,
encumbrances and claims, and full right, power and authority to effect the sale
and delivery of such Shares, and upon the delivery of, against payment for,
such Shares pursuant to this Agreement, the Underwriters (assuming that they,
severally, acquire the Shares in good faith and without notice of any adverse
claims within the meaning of Oregon Revised Statutes 78.1020 and 78.1050) will,
severally, acquire good and marketable title thereto, free and clear of any
liens, encumbrances and claims.
(ii) Such Selling Shareholder has full legal
right, power and authority to execute and deliver this Agreement, the Power of
Attorney, the Custody Agreement and the Lock-up Agreement (collectively
referred to herein as the "Custody Agreements") and to perform its obligations
thereunder. The execution and delivery of this Agreement and the consummation
by such Selling Shareholder of the transactions herein contemplated and the
fulfillment by such Selling Shareholder of the terms hereof will not require
any consent, approval, authorization or other order of any court, regulatory
body, administrative agency or other governmental body (except as may be
required under the Act, state securities laws or Blue Sky laws) and will not
result in a breach of any of the terms and provisions of, or
9
<PAGE> 10
constitute a default under, organizational documents of such Selling
Shareholder, if not an individual, or any indenture, mortgage, deed of trust or
other agreement or instrument to which such Selling Shareholder is a party, or
of any order, rule or regulation applicable to such Selling Shareholder of any
court or of any regulatory body or administrative agency or other governmental
body having jurisdiction.
(iii) Such Selling Shareholder has not taken,
directly or indirectly, any action designed to, or which has constituted or
which might reasonably be expected to cause or result in the stabilization or
manipulation of the price of the Common Stock of the Company and, other than as
permitted by the Act, the Selling Shareholder will not distribute any
prospectus or other offering material in connection with the offering of the
Shares.
(iv) The sale of Shares by such Selling
Shareholder pursuant hereto is not prompted by any information concerning the
Company that is not set forth in the Registration Statement. The information
pertaining to such Selling Shareholder under the caption "Selling Shareholders"
in the Prospectus is complete and accurate in all material respects.
4. Agreements of the Company and the Selling Shareholders.
(a) The Company agrees with the several Underwriters and
the Selling Shareholders as follows:
(i) The Company will not, either prior to the
date on which the Registration Statement is declared effective (the "Effective
Date") or thereafter during such period as the Prospectus is required by law to
be delivered in connection with sales of the Shares by an Underwriter or
dealer, file any amendment or supplement to the Registration Statement or the
Prospectus, unless a copy thereof shall first have been submitted to the
Representatives within a reasonable period of time prior to the filing thereof
and the Representatives shall not have objected thereto in good faith.
(ii) The Company will use its best efforts to
cause the Registration Statement to become effective and will notify the
Representatives and counsel for the Selling Shareholders promptly, and will
confirm such advice in writing, (1) when the Registration Statement has become
effective and when any post-effective amendment thereto becomes effective, (2)
of any request by the Commission for amendments or supplements to the
Registration Statement or the Prospectus or for additional information, (3) of
the issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement or the initiation of any proceedings for that
purpose or the threat thereof, (4) of the happening of any event during the
period mentioned in the second sentence of Section 4(a)(v) that in the judgment
of the Company makes any statement made in the Registration Statement or the
Prospectus untrue or that requires the making of any changes in the
Registration Statement or the Prospectus in order to make the statements
therein, in light of the circumstances in which
10
<PAGE> 11
they are made, not misleading and (5) of receipt by the Company or any
representative or attorney of the Company of any other communication from the
Commission relating to the Company, the Registration Statement, any preliminary
prospectus or the Prospectus. If at any time the Commission issues any order
suspending the effectiveness of the Registration Statement, the Company will
make every reasonable effort to obtain the withdrawal of such order at the
earliest possible moment. If the Company has omitted any information from the
Registration Statement pursuant to Rule 430A of the Rules and Regulations, the
Company will use its best efforts to comply with the provisions of and make all
requisite filings with the Commission pursuant to said Rule 430A and to notify
the Representatives promptly of all such filings.
(iii) The Company will furnish to the
Representatives or counsel for the Representatives and counsel for the Selling
Shareholders, without charge, two signed copies of the Registration Statement
and any post-effective amendment thereto, including financial statements and
schedules, and all exhibits thereto and will furnish to the Representatives,
without charge, for transmittal to each of the other Underwriters, a copy of
the Registration Statement and any post-effective amendment thereto, including
financial statements and schedules but without exhibits.
(iv) The Company will comply with all the
provisions of any undertakings contained in the Registration Statement.
(v) On the Effective Date, and thereafter from
time to time, the Company will deliver to each of the Underwriters, without
charge, as many copies of the Prospectus or any amendment or supplement thereto
as the Representatives may reasonably request. The Company consents to the use
of the Prospectus or any amendment or supplement thereto by the several
Underwriters and by all dealers to whom the Shares may be sold, both in
connection with the offering or sale of the Shares and for any period of time
thereafter during which the Prospectus is required by law to be delivered in
connection therewith. If during such period of time any event shall occur that
in the judgment of the Company or counsel to the Underwriters should be set
forth in the Prospectus in order to make any statement therein, in the light of
the circumstances under which it was made, not misleading, or if it is
necessary to supplement or amend the Prospectus to comply with law, the Company
will forthwith prepare and duly file with the Commission an appropriate
supplement or amendment thereto and will deliver to each of the Underwriters,
without charge, such number of copies of such supplement or amendment to the
Prospectus as the Representatives may reasonably request.
(vi) Prior to any public offering of the Shares,
the Company will cooperate with the Representatives and counsel to the
Underwriters in connection with the registration or qualification of the Shares
for offer and sale under the securities or Blue Sky laws of such jurisdictions
as the Representatives may reasonably request; provided, that in no event shall
the Company be obligated to qualify to do business in any jurisdiction where it
is
11
<PAGE> 12
not now so qualified or to take any action that would subject it to general
service of process in any jurisdiction where it is not now so subject.
(vii) During the period of five years commencing on
the Effective Date, the Company will furnish to the Representatives and each
other Underwriter who may so request copies of such financial statements and
other periodic and special reports as the Company may from time to time
distribute generally to the holders of any class of its capital stock and will
furnish to the Representatives and each other Underwriter who may so request a
copy of each annual or other report it shall be required to file with the
Commission.
(viii) The Company will make generally available to
holders of its securities as soon as may be practicable but in no event later
than the last day of the fifteenth full calendar month following the calendar
quarter in which the Effective Date falls, an earnings statement (which need
not be audited but shall be in reasonable detail) for a period of 12 months
ended commencing after the Effective Date and satisfying the provisions of
Section 11(a) of the Act (including Rule 158 of the Rules and Regulations).
(ix) Whether or not the transactions contemplated
by this Agreement are consummated or this Agreement is terminated, the Company
will pay, or reimburse if paid by the Representatives, all costs and expenses
incident to the performance of the obligations of the Company under this
Agreement, including but not limited to costs and expenses of or relating to
(1) the preparation, printing and filing of the Registration Statement and
exhibits to it, each preliminary prospectus, Prospectus and any amendment or
supplement to the Registration Statement or Prospectus, (2) the preparation and
delivery of certificates representing the Shares, (3) the printing of this
Agreement, the Agreement Among Underwriters, any Dealer Agreements and any
Underwriters' Questionnaires, (4) furnishing (including costs of shipping and
mailing) such copies of the Registration Statement, the Prospectus and any
preliminary prospectus, and all amendments and supplements thereto, as may be
requested for use in connection with the offering and sale of the Shares by the
Underwriters or by dealers to whom Shares may be sold, (5) the quotation of the
Shares on the Nasdaq National Market System, (6) any filings required to be
made by the Underwriters with the NASD and the fees, disbursements and other
charges of counsel for the Underwriters in connection therewith, (7) the
registration or qualification of the Shares for offer and sale under the
securities or Blue Sky laws of such jurisdictions designated pursuant to
Section 4(a)(vi), including the fees, disbursements and other charges of
counsel to the Underwriters in connection therewith, and the preparation and
printing of preliminary, supplemental and final Blue Sky memoranda, (8) fees,
disbursements and other charges of counsel to the Company (but not those of
counsel for the Underwriters, except as otherwise provided herein) and (9) the
transfer agent for the Shares.
(x) If this Agreement is terminated by the
Company pursuant to any of the provisions hereof (other than pursuant to
Section 8 hereof) or if for any reason the Company is unable to perform its
obligations hereunder, the Company will reimburse the
12
<PAGE> 13
several Underwriters for all out-of-pocket expenses (including the fees,
disbursements and other charges of counsel to the Underwriters) reasonably
incurred by them in connection herewith.
(xi) The Company will not at any time, directly or
indirectly, take any action designed, or that might reasonably be expected, to
cause or result in, or that will constitute, stabilization of the price of the
shares of Common Stock to facilitate the sale or resale of any of the Shares.
(xii) The Company will apply the net proceeds from
the offering and sale of the Shares to be sold by the Company in the manner set
forth in the Prospectus under "Use of Proceeds" and shall file such reports
with the Commission with respect to the sale of the Shares and the application
of the proceeds therefrom as may be required in accordance with Rule 463 under
the Act.
(xiii) The Company will not, and will cause each of
its officers, directors and certain shareholders designated by the
Representatives to enter into agreement (the "Lockup Agreements") with the
Representatives to the effect that they will not, without the prior written
consent of Black & Company, Inc., offer, sell, offer to sell, contract to sell,
assign, grant any option to purchase, or otherwise dispose of or transfer any
Common Stock of the Company or any other security of the Company, convertible
into, or exchangeable or exercisable for, Common Stock for a period of 180 days
after the date of the Prospectus except (i) directors, officers and
shareholders may make bona fide gifts to donees who agree to be bound by such
restrictions and (ii) the Company may issue Common Stock or options to purchase
Common Stock under the Company's stock option plans described in the
Prospectus.
(b) Each of the Selling Shareholders covenants and agrees
with the several Underwriters that:
(i) In order to document the Underwriters'
compliance with the reporting and withholding provisions of the Tax Equity and
Fiscal Responsibility Act of 1982 and the Interest and Dividend Tax Compliance
Act of 1983 with respect to the transactions herein contemplated, each of the
Selling Shareholders agrees to deliver to you prior to or at the Closing Date a
properly completed and executed U.S. Treasury Department Form W-9 or W-8 (or
other applicable form or statement specified by Treasury Department regulations
in lieu thereof).
(ii) Such Selling Shareholder will not take,
directly or indirectly, any action designed to cause or result in, or that has
constituted or might reasonably be expected to constitute, the stabilization or
manipulation of the price of any securities of the Company.
5. Conditions of the Obligations of the Underwriters. The
obligations of each Underwriter hereunder are subject to the following
conditions:
13
<PAGE> 14
(a) Notification that the Registration Statement has
become effective shall be received by the Representatives not later than 5:00
p.m., New York City time, on the date of this Agreement or at such later date
and time as shall be consented to in writing by the Representatives and all
filings required by Rule 424 and Rule 430A of the Rules and Regulations shall
have been made, and the Shares shall be qualified or registered for sale in
such jurisdictions as the Representatives shall request, except where the
failure to qualify or register Shares would not, in the reasonable judgment of
the Representatives, have a material adverse effect on its ability to market
the Shares.
(b) (i) No stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall be pending or threatened by the Commission, (ii) no order
suspending the effectiveness of the Registration Statement or the qualification
or registration of the Shares under the securities or Blue Sky laws of any
jurisdiction shall be in effect, and no proceeding for such purpose shall be
pending before or threatened or contemplated by the authorities of any such
jurisdiction, except where the failure to qualify or register Shares in such
jurisdiction would not, in the reasonable judgment of the Representatives, have
a material adverse effect on its ability to market the Shares, (iii) any
request for additional information on the part of the staff of the Commission
or any such authorities shall have been complied with to the satisfaction of
the staff of the Commission or such authorities and (iv) after the date hereof
no amendment or supplement to the Registration Statement or the Prospectus
shall have been filed unless a copy thereof was first submitted to the
Representatives and the Representatives do not object thereto in good faith,
and the Representatives shall have received certificates, dated the Closing
Date and the Option Closing Date and signed by the Chief Executive Officer or
the Chairman of the Board of Directors of the Company and the Chief Financial
Officer of the Company (who may, as to proceedings threatened, rely upon the
best of their information and belief) to the effect of clauses (i), (ii) and
(iii).
(c) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, (i) there shall not
have been a material adverse change in the general affairs, business, business
prospects, properties, management, condition (financial or other) or results of
operations of the Company, whether or not arising from transactions in the
ordinary course of business, in each case other than as set forth in or
contemplated by the Registration Statement and the Prospectus and (ii) the
Company shall not have sustained any material loss or interference with its
business or properties from fire, explosion, flood or other casualty, whether
or not covered by insurance, or from any labor dispute or any court or
legislative or other governmental action, order or decree, that is not set
forth in the Registration Statement and the Prospectus, if in the reasonable
judgment of the Representatives any such development makes it impracticable or
inadvisable to consummate the sale and delivery of the Shares by the
Underwriters at the public offering price.
(d) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there shall have been
no litigation or other
14
<PAGE> 15
proceeding instituted against the Company or any of its officers or directors
in their capacities as such, before or by any federal, state or local court,
commission, regulatory body, administrative agency or other governmental body,
domestic or foreign, in which litigation or proceeding an unfavorable ruling,
decision or finding would materially and adversely affect the business,
properties, business prospects, condition (financial or other) or results of
operations of the Company.
(e) Each of the representations and warranties of the
Company and the Selling Shareholders contained herein shall be true and correct
in all material respects at the Closing Date and, with respect to the Option
Shares, at the Option Closing Date, and all covenants and agreements contained
herein to be performed on the part of the Company and the Selling Shareholders
and all conditions contained herein to be fulfilled or complied with by the
Company and the Selling Shareholders at or prior to the Closing Date and, with
respect to the Option Shares, at or prior to the Option Closing Date, shall
have been duly performed, fulfilled or complied with.
(f) The Representatives shall have received on the
Closing Date or the Option Closing Date, as the case may be, the opinion of
Ater Wynne Hewitt Dodson & Skerritt, counsel for the Company dated the Closing
Date or the Option Closing Date, as the case may be, addressed to the
Underwriters (and stating that it may be relied upon by counsel to the
Underwriters) to the effect that:
(i) The Company has been duly organized and is an
active corporation under the laws of the state of Oregon, with corporate power
and authority to own or lease its properties and conduct its business as
described in the Registration Statement; the Company is duly qualified to
transact business in all jurisdictions in which the failure so to qualify would
have a materially adverse effect upon the business of the Company.
(ii) The Company has authorized and outstanding
capital stock as set forth under the caption "Capitalization" in the
Prospectus; the authorized shares of the Company's Common Stock have been duly
authorized. The outstanding shares of the Company's Common Stock, including
the Shares to be sold by the Selling Shareholders, have been duly authorized
and validly issued, are fully paid and non- assessable, and to the actual
knowledge of such counsel were not issued in violation of or subject to any
preemptive rights or other rights to subscribe for or purchase securities. The
outstanding shares of the Company's Common Stock issued after October 15, 1993
were issued in compliance with the registration and qualification provisions of
applicable federal and state securities laws. All of the Shares conform to the
description thereof contained in the Prospectus; the certificates for the
Shares comply as to form with the requirements of Oregon law; the Shares of
Common Stock to be sold by the Company pursuant to this Agreement have been
duly authorized and will be validly issued, fully paid and non-assessable when
issued and paid for as contemplated by this Agreement; and no preemptive rights
of shareholders exist under any statute or, to the
15
<PAGE> 16
actual knowledge of such counsel, otherwise with respect to any of the Shares
or the issue or sale thereof.
(iii) The rescission offer to certain shareholders
of the Company pursuant to a prospectus dated June 14, 1995 (the "Rescission
Offer") was effective pursuant to ORS 59.125 to bar any claims against the
Company under ORS 59.115 with regard to shares of the Company's Common Stock
issued on or before October 15, 1993.
(iv) The offer and sale of securities pursuant to
the Rescission Offer was made in compliance with the registration and
qualification provisions of federal and Oregon securities laws.
(v) Except as described in or contemplated by the
Prospectus, to the actual knowledge of such counsel, there are no (a)
outstanding securities of the Company convertible or exchangeable into or
evidencing the right to purchase or subscribe for, any shares of capital stock
of the Company or (b) outstanding or authorized options, warrants or rights of
any character obligating the Company to issue any shares of its capital stock
or any securities convertible or exchangeable into or evidencing the right to
purchase or subscribe for any shares of such stock, and, except as described in
the Prospectus, to the actual knowledge of such counsel, no holder of any
securities of the Company or any other person has the right, contractual or
otherwise, which has not been satisfied or effectively waived to cause the
Company to sell or otherwise issue to them, or to permit them to underwrite the
sale of, any of the Shares or the right to have any shares of Common Stock or
other securities of the Company included in the Registration Statement or the
right, as a result of the filing of the Registration Statement, to require
registration under the Act of any shares of Common Stock or other securities of
the Company.
(vi) The Registration Statement has been declared
effective under the Act and, to the actual knowledge of such counsel, no stop
order proceedings with respect thereto have been instituted or are pending or
threatened under the Act.
(vii) The Registration Statement, the Prospectus
and each amendment or supplement thereto comply as to form in all material
respects with the requirements of the Act and the Rules and Regulations (except
that such counsel need express no opinion as to the financial statements and
related schedules thereto).
(viii) The statements under the captions "Risk
Factors--Expiration of Enhanced Directory Assistance Agreements," "Risk
Factors--Rescission Rights of Certain Shareholders," "Risk
Factors--Regulation," "Risk Factors--Potential Issuance of Preferred Stock;
Anti-Takeover Effect of Oregon Law," "Risk Factors--Shares Eligible for Future
Sale; Registration Rights," "Business--Government Regulation,"
"Business--Securities Law Issues," "Management--Limitation of Liability and
Indemnification," "Management--1994 Stock Incentive Plan," "Certain
Transactions," "Description of Capital Stock," and "Shares Eligible
16
<PAGE> 17
for Future Sale" in the Prospectus, insofar as such statements constitute a
summary of documents referred to therein or matters of law, fairly summarize in
all material respects the information called for with respect to such documents
and matters.
(ix) Such counsel does not know of any contracts
or documents required to be filed as exhibits to the Registration Statement or
described in the Registration Statement or the Prospectus that are not so filed
or described as required, and such contracts and documents as are summarized in
the Registration Statement or the Prospectus are fairly summarized in all
material respects.
(x) Such counsel knows of no material legal or
governmental proceedings pending or threatened against the Company or any of
the Subsidiaries except as set forth in the Prospectus.
(xi) The execution and delivery of this Agreement
and the consummation of the transactions herein contemplated do not and will
not conflict with or result in a breach of any of the terms or provisions of,
or constitute a default under, the articles of incorporation or bylaws of the
Company or any agreement or instrument known to such counsel to which the
Company is a party or by which the Company may be bound.
(xii) This Agreement has been duly and validly
authorized by all necessary corporate action by the Company, has been duly and
validly executed and delivered by and on behalf of the Company and is a valid,
binding and enforceable agreement of the Company in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting the rights of creditors generally and
subject to general principles of equity and except as to those provisions
relating to indemnity or contribution for liabilities arising under the Act as
to which no opinion need be expressed.
(xiii) No approval, consent, order, authorization,
designation, declaration or filing by or with any regulatory, administrative or
other governmental body is necessary in connection with the execution and
delivery of this Agreement and the consummation of the transactions herein
contemplated (other than as may be required by the NASD or as required by state
securities and Blue Sky laws as to which such counsel need express no opinion),
except such as have been obtained or made specifying the same.
(xiv) The Company is not, and will not become, as a
result of the consummation of the transactions contemplated by this Agreement
and application of the net proceeds therefrom as described in the Prospectus,
required to register as an investment company under the 1940 Act.
(g) The Representatives shall have received on the
Closing Date or the Option Closing Date, as the case may be, the opinion of
Perkins Coie, counsel for the Selling Shareholders, dated the Closing Date or
the Option Closing Date, as the case may be,
17
<PAGE> 18
addressed to the Underwriters (and stating that it may be relied upon by
counsel to the Underwriters) to the effect that:
(i) This Agreement has been duly authorized,
executed and delivered on behalf of the Selling Shareholders and is a valid,
binding and enforceable agreement of each Selling Shareholder in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting the rights of creditors
generally and subject to general principles of equity and except as to those
provisions relating to indemnity or contribution for liabilities arising under
the Act, as to which no opinion need be expressed.
(ii) Each Selling Shareholder has full legal
right, power and authority, and any approval required by law (other than as
required by state securities and Blue Sky laws as to which such counsel need
express no opinion), to sell, assign, transfer and deliver the portion of the
Shares to be sold by such Selling Shareholder.
(iii) The Custody Agreement has been executed and
delivered by each Selling Shareholder and, assuming legal capacity and due
authorization, execution and delivery by the other parties thereto, is a valid
and binding agreement of such Selling Shareholder.
(iv) Based solely upon delivery of the Shares as
provided in ORS section 78.3010 pursuant to this Agreement and payment therefor
as contemplated herein, the Underwriters (assuming that they, severally,
acquire the Shares in good faith and without notice of any adverse claims
within the meaning of Oregon Revised Statutes sections 78.1020 and 78.1050)
will, be "protected purchasers" within the meaning of ORS 78.3030 with respect
to Shares being sold by each Selling Shareholder on the Closing Date or Option
Closing Date, as the case may be, free and clear of all liens, encumbrances and
claims.
In rendering such opinion, counsel for the Company may rely as
to matters governed by the laws of states other than Oregon or federal laws on
local counsel in such jurisdictions, provided that in each case counsel for the
Company shall state that they believe that they and the Underwriters are
justified in relying on such other counsel. In addition to the matters set
forth above, such opinion shall also include a statement to the effect that
nothing has come to the attention of such counsel which leads it to believe
that (i) the Registration Statement, at the time it became effective under the
Act (but after giving effect to any modifications incorporated therein pursuant
to Rule 430A under the Act) and as of the Closing Date or the Option Closing
Date, as the case may be, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and (ii) the Prospectus, or any
supplement thereto, on the date it was filed pursuant to the Rules and
Regulations and as of the Closing Date or the Option Closing Date, as the case
may be, contained an untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements, in the light of the
circumstances under which they are made, not misleading (except that such
counsel need
18
<PAGE> 19
express no view as to financial statements, financial data schedules and
statistical information therein). With respect to such statement, counsel for
the Company may state that their belief is based upon the procedures set forth
therein but is without independent check and verification.
(h) The Representatives shall have received from Stoel Rives
LLP, counsel for the Underwriters, an opinion dated the Closing Date or the
Option Closing Date, as the case may be, substantially to the effect specified
in the second sentence of subparagraph (iii) and subparagraphs (vi) and (vii)
of Paragraph (f) of this Section 5 and that the Company is a duly organized and
validly existing corporation under the laws of the state of Oregon. In
rendering such opinion, counsel for the Underwriters may rely as to all matters
governed other than by the laws of the state of Oregon or federal laws on the
opinion of counsel referred to in Paragraph (f) of this Section 5. In addition
to the matters set forth above, such opinion shall also include a statement to
the effect that nothing has come to the attention of such counsel that leads
them to believe that (i) the Registration Statement, or any amendment thereto,
as of the time it became effective under the Act (but after giving effect to
any modifications incorporated therein pursuant to Rule 430A under the Act) as
of the Closing Date or the Option Closing Date, as the case may be, contained
an untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading and (ii) the Prospectus, or any supplement thereto, on the date it
was filed pursuant to the Rules and Regulations and as of the Closing Date or
the Option Closing Date, as the case may be, contained an untrue statement of a
material fact or omitted to state a material fact necessary in order to make
the statements, in the light of the circumstances under which they are made,
not misleading (except that such counsel need express no view as to financial
statements, schedules and statistical information therein). With respect to
such statement, counsel for the Underwriters may state that their belief is
based upon the procedures set forth therein but is without independent check
and verification.
(i) The Representatives shall have received at or prior to
the Closing Date from counsel for the Underwriters a memorandum or summary, in
form and substance satisfactory to the Representatives, with respect to the
qualification for offering and sale by the Underwriters of the Shares under the
state securities or Blue Sky laws of such jurisdictions as the Representatives
may reasonably have designated to the Company.
(j) Concurrently with the execution and delivery of this
Agreement, the Accountants shall have furnished to the Representatives a
letter, dated the date of its delivery, addressed to the Representatives and in
form and substance satisfactory to the Representatives, confirming that they
are independent accountants with respect to the Company as required by the Act
and the Rules and Regulations and with respect to certain financial and other
statistical and numerical information contained in the Registration Statement.
At the Closing Date and, as to the Option Shares, the Option Closing Date, the
Accountants shall have furnished to the Representatives a letter, dated the
date of its delivery, that shall confirm, on the basis of a review in
accordance with the procedures set forth in the letter from the Accountants,
that
19
<PAGE> 20
nothing has come to their attention during the period from the date of the
letter referred to in the prior sentence to a date (specified in the letter) not
more than five days prior to the Closing Date and the Option Closing Date, as
the case may be, that would require any change in their letter dated the date
hereof if it were required to be dated and delivered at the Closing Date and the
Option Closing Date.
(k) Concurrently with the execution and delivery of this
Agreement and at the Closing Date and, as to the Option Shares, the Option
Closing Date, there shall be furnished to the Representatives an accurate
certificate of the Company, dated the date of its delivery, signed by each of
the Chief Executive Officer , the Chief Financial Officer and the Chief
Operating Officer of the Company on behalf of the Company, in form and
substance satisfactory to the Representatives, to the effect that:
(i) Each signer of such certificate has carefully
examined the Registration Statement and the Prospectus on behalf of the
Company. As of the date of such certificate, such documents are true and
correct in all material respects and do not omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein not untrue or misleading. In the case of the certificate delivered at
the Closing Date and the Option Closing Date, since the Effective Date no event
has occurred as a result of which it is necessary to amend or supplement the
Prospectus in order to make the statements therein not untrue or misleading in
any material respect.
(ii) Each of the representations and warranties of
the Company contained in this Agreement were, when originally made, and are, at
the time such certificate is delivered, true and correct in all material
respects.
(iii) Each of the covenants required to be
performed by the Company herein on or prior to the date of such certificate has
been duly, timely and fully performed, and each condition herein required to be
satisfied or fulfilled on or prior to the date of such certificate has been
duly, timely and fully satisfied or fulfilled.
(k) On or prior to the Closing Date, the Representatives
shall have received the executed agreements referred to in Section 4(a)(xiii).
(l) Prior to the Closing Date, the Shares shall have been
duly authorized for listing on the Nasdaq National Market System upon notice of
issuance.
(m) The Company and the Selling Shareholders shall have
furnished to the Representatives such certificates, in addition to those
specifically mentioned herein, as the Representatives may have reasonably
requested as to the accuracy and completeness at the Closing Date and the
Option Closing Date of any statement in the Registration Statement or the
Prospectus, as to the accuracy at the Closing Date and the Option Closing Date
of the representations and warranties of the Company or the Selling
Shareholders herein, as to the
20
<PAGE> 21
performance by the Company or the Selling Shareholders of its or their
obligations hereunder, or as to the fulfillment of the conditions concurrent
and precedent to the obligations hereunder of the Representatives.
6. Indemnification.
(a) The Company will indemnify and hold harmless each
Underwriter, the directors, officers, employees and agents of each Underwriter
and each person, if any, who controls each Underwriter within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act from and against any
and all losses, claims, liabilities, expenses and damages (including any and
all investigative, legal and other expenses reasonably incurred in connection
with, and any amount paid in settlement of, any action, suit or proceeding or
any claim asserted) to which they, or any of them, may become subject under the
Act, the Exchange Act or other federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, liabilities, expenses
or damages arise out of or are based on any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus, the
Registration Statement or the Prospectus or any amendment or supplement to the
Registration Statement or the Prospectus, or the omission or alleged omission
to state in such document a material fact required to be stated in it or
necessary to make the statements in it not misleading in light of the
circumstances in which they were made, provided that the Company will not be
liable to the extent that such loss, claim, liability, expense or damage arises
from the sale of the Shares in the public offering to any person by an
Underwriter and is based on an untrue statement or omission or alleged untrue
statement or omission made in reliance on and in conformity with information
relating to any Underwriter furnished in writing to the Company by the
Representatives on behalf of any Underwriter expressly for inclusion in the
Registration Statement, the preliminary prospectus or the Prospectus, and
provided further that the Company will not be liable to any Underwriter, the
directors, officers, employees or agents of such Underwriter or any person
controlling such Underwriter with respect to any loss, claim, liability,
expense, charge or damage arising out of or based on any untrue statement or
omission or alleged untrue statement or omission or alleged omission to state a
material fact in the preliminary prospectus that is corrected in the Prospectus
if the person asserting any such loss, claim, liability, charge or damage
purchased Shares from such Underwriter but was not sent or given a copy of the
Prospectus at or prior to the written confirmation of the sale of such Shares
to such person. This indemnity agreement will be in addition to any liability
that the Company might otherwise have.
(b) Each of the Selling Shareholders, severally and not
jointly, will indemnify and hold harmless each Underwriter, the directors,
officers, employees and agents of each Underwriter and each person, if any, who
controls each Underwriter within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act from and against any and all losses, claims,
liabilities, expenses and damages (including any and all investigative, legal
and other expenses reasonably incurred in connection with, and any amount paid
in settlement
21
<PAGE> 22
of, any action, suit or proceeding or any claim asserted) to which they, or any
of them, may become subject under the Act, the Exchange Act or other federal or
state statutory law or regulation, at common law or otherwise, insofar, but
only insofar, as such losses, claims, liabilities, expenses or damages arise
out of or are based on (i) any untrue statement or alleged untrue statement of
a material fact relating to such Selling Shareholder contained in any
preliminary prospectus, the Registration Statement or the Prospectus or any
amendment or supplement to the Registration Statement or the Prospectus, or the
omission or alleged omission to state in such document a material fact with
respect to such Selling Shareholder required to be stated in it or necessary to
make the statements in it not misleading in light of the circumstances in which
they were made, but only with respect to the information furnished in writing
by or on behalf of such Selling Shareholder expressly for use in the
Registration Statement, the preliminary prospectus or the Prospectus or (ii)
any breach of any representation, warranty or covenant of such Selling
Shareholder herein contained; provided that no Selling Shareholder will be
liable to any Underwriter, the directors, officers, employees or agents of such
Underwriter or any person controlling such Underwriter with respect to any
loss, claim, liability, expense, charge or damage arising out of or based on
any untrue statement or omission or alleged untrue statement or omission or
alleged omission to state a material fact in the preliminary prospectus that is
corrected in the Prospectus if the person asserting any such loss, claim,
liability, charge or damage purchased Shares from such Underwriter but was not
sent or given a copy of the Prospectus at or prior to the written confirmation
of the sale of such Shares to such person. The Underwriters and the Selling
Shareholders acknowledge that the statements set forth under the heading
"Principal and Selling Shareholders" in the preliminary prospectus and the
Prospectus constitute information, and constitute the only information,
relating to any Selling Shareholders furnished in writing to the Company by or
on behalf of the Selling Shareholder expressly for inclusion in the
Registration Statement, the preliminary prospectus or the Prospectus. This
indemnity agreement will be in addition to any liability that the Selling
Shareholders might otherwise have. In no event, however, shall the liability
of any Selling Shareholder for indemnification under this Section 6(b) exceed
the proceeds received by such Selling Shareholder from the Underwriters in the
offering.
(c) Each Underwriter will indemnify and hold harmless the
Company, each Selling Shareholder, each person, if any, who controls the
Company or a Selling Shareholder within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, each director of the Company and each officer
of the Company who signs the Registration Statement to the same extent as the
foregoing indemnity from the Company to each Underwriter, but only insofar as
losses, claims, liabilities, expenses or damages arise out of or are based on
any untrue statement or omission or alleged untrue statement or omission made
in reliance on and in conformity with information relating to any Underwriter
furnished in writing to the Company by the Representatives on behalf of such
Underwriter expressly for use in the Registration Statement, the preliminary
prospectus or the Prospectus. The Company and the Selling Shareholders
acknowledge that the statements set forth in the last paragraph of the front
cover page of the Prospectus and under the heading "Underwriting" in the
preliminary
22
<PAGE> 23
prospectus and the Prospectus constitute the only information relating to any
Underwriter furnished in writing to the Company by the Representatives on
behalf of the Underwriters expressly for inclusion in the Registration
Statement, the preliminary prospectus or the Prospectus. This indemnity will
be in addition to any liability that each Underwriter might otherwise have.
(d) Any party that proposes to assert the right to be
indemnified under this Section 6 will, promptly after receipt of notice of
commencement of any action against such party in respect of which a claim is to
be made against an indemnifying party or parties under this Section 6, notify
each such indemnifying party of the commencement of such action, enclosing a
copy of all papers served, but the omission so to notify any such indemnifying
party will not relieve it from any liability that it may have to any
indemnified party under the foregoing provisions of this Section unless, and
only to the extent that, such omission results in the loss of substantive
rights or defenses by the indemnifying party. If any such action is brought
against any indemnified party and it notifies the indemnifying party of its
commencement, the indemnifying party will be entitled to participate in and, to
the extent that it elects by delivering written notice to the indemnified party
promptly after receiving notice of the commencement of the action from the
indemnified party, jointly with any other indemnifying party similarly
notified, to assume the defense of the action, with counsel reasonably
satisfactory to the indemnified party, and after notice from the indemnifying
party to the indemnified party of its election to assume the defense, the
indemnifying party will not be liable to the indemnified party for any legal or
other expenses except as provided below and except for the reasonable costs of
investigation subsequently incurred by the indemnified party in connection with
the defense. The indemnified party will have the right to employ its own
counsel in any such action, but the fees, expenses and other charges of such
counsel will be at the expense of such indemnified party unless (1) the
employment of counsel by the indemnified party has been authorized in writing
by the indemnifying party, (2) the indemnified party has reasonably concluded
(based on advice of counsel) that there may be legal defenses available to it
or other indemnified parties that are different from or in addition to those
available to the indemnifying party, (3) a conflict or potential conflict
exists (based on advice of counsel to the indemnified party) between the
indemnified party and the indemnifying party (in which case the indemnifying
party will not have the right to direct the defense of such action on behalf of
the indemnified party) or (4) the indemnifying party has not in fact employed
counsel to assume the defense of such action within a reasonable time after
receiving notice of the commencement of the action, in each of which cases the
reasonable fees, disbursements and other charges of counsel will be at the
expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable
fees, disbursements and other charges of more than one separate firm admitted
to practice in such jurisdiction at any one time for all such indemnified party
or parties. All such fees, disbursements and other charges will be reimbursed
by the indemnifying party promptly as they are incurred. Any indemnifying
party will not be liable for any settlement of any action or claim effected
without its written consent (which consent will not be unreasonably withheld).
23
<PAGE> 24
(e) In order to provide for just and equitable
contribution in circumstances in which the indemnification provided for in the
foregoing paragraphs of this Section 6 is applicable in accordance with its
terms but for any reason is held to be unavailable from the Company, the
Selling Shareholders or the Underwriters, the Company, the Selling Shareholders
and the Underwriters will contribute to the total losses, claims, liabilities,
expenses and damages (including any investigative, legal and other expenses
reasonably incurred in connection with, and any amount paid in settlement of,
any action, suit or proceeding or any claim asserted, but after deducting any
contribution received by the Company from persons other than the Underwriters,
such as persons who control the Company within the meaning of the Act, officers
of the Company who signed the Registration Statement and directors of the
Company, who also may be liable for contribution) to which the Company and any
one or more of the Selling Shareholders or one or more of the Underwriters may
be subject in such proportion as shall be appropriate to reflect the relative
benefits received by the Company, the Selling Shareholders and the
Underwriters. The relative benefits received by the Company, the Selling
Shareholders and the Underwriters shall be deemed to be in the same proportion
as the total net proceeds from the offering (before deducting expenses)
received by the Company and the Selling Shareholders bear to the total
underwriting discounts and commissions received by the Underwriters, in each
case as set forth in the table on the cover page of the Prospectus. If, but
only if, the allocation provided by the foregoing sentence is not permitted by
applicable law, the allocation of contribution shall be made in such proportion
as is appropriate to reflect not only the relative benefits referred to in the
foregoing sentence but also the relative fault of the Company, the Selling
Shareholders, and the Underwriters, with respect to the statements or omissions
that resulted in such loss, claim, liability, expenses or damage, or action in
respect thereof, as well as any other relevant equitable considerations with
respect to such offering. Such relative fault shall be determined by reference
to whether the untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to information
supplied by the Company, the Selling Shareholders or the Representatives on
behalf of the Underwriters, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company, the Selling Shareholders and the
Underwriters agree that it would not be just and equitable if contributions
pursuant to this Section 6(e) were to be determined by pro rata allocation
(even if the Underwriters were treated as one entity for such purpose) or by
any other method of allocation that does not take into account the equitable
considerations referred to herein. The amount paid or payable by an
indemnified party as a result of the loss, claim, liability, expense or damage,
or action in respect thereof, referred to above in this Section 6(e) shall be
deemed to include, for purposes of this Section 6(e), any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 6(e), (i) no Underwriter shall be required to
contribute any amount in excess of the underwriting discounts received by it,
(ii) no person found guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) will be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation and (iii) no Selling
Shareholder shall be required to contribute any amount in excess of the
proceeds
24
<PAGE> 25
received by such Selling Shareholder from the Underwriters in the offering.
The Underwriters' obligations to contribute as provided in this Section 6(e)
are several in proportion to their respective underwriting obligations and not
joint. For purposes of this Section 6(e), any person who controls a party to
this Agreement within the meaning of the Act will have the same rights to
contribution as that party, and each director and officer of the Company who
signed the Registration Statement will have the same rights to contribution as
the Company, subject in each case to the provisions hereof. Any party entitled
to contribution, promptly after receipt of notice of commencement of any action
against any such party in respect of which a claim for contribution may be made
under this Section 6(e), will notify any such party or parties from whom
contribution may be sought, but the omission so to notify will not relieve the
party or parties from whom contribution may be sought from any other obligation
it or they may have under this Section 6(e). No party will be liable for
contribution with respect to any action or claim settled without its written
consent (which consent will not be unreasonably withheld).
(f) The indemnity and contribution agreements contained
in this Section 6 and the representations and warranties of the Company and the
Selling Shareholders contained in this Agreement shall remain operative and in
full force and effect regardless of (i) any investigation made by or on behalf
of the Underwriters or the Company, (ii) acceptance of any of the Shares and
payment therefor or (iii) any termination of this Agreement.
7. Termination. The obligations of the several Underwriters
under this Agreement may be terminated at any time on or prior to the Closing
Date (or, with respect to the Option Shares, on or prior to the Option Closing
Date) by notice to the Company from the Representatives, without liability on
the part of any Underwriter to the Company if, prior to delivery and payment
for the Shares, as the case may be, (i) trading in any of the equity securities
of the Company shall have been suspended by the Commission, by an exchange that
lists the Shares or by the Nasdaq National Market System, (ii) trading in
securities generally on the New York Stock Exchange shall have been suspended
or limited or minimum or maximum prices shall have been generally established
on such exchange, or additional material governmental restrictions, not in
force on the date of this Agreement, shall have been imposed upon trading in
securities generally by such exchange or by order of the Commission or any
court or other governmental authority, (iii) a general banking moratorium shall
have been declared by either federal or New York State authorities or (iv) in
the reasonable opinion of the Representatives, there is any material adverse
change in the financial or securities markets in the United States or in
political, financial or economic conditions in the United States or any
outbreak or material escalation of hostilities or other calamity or crisis
shall have occurred, the effect of which is such as to make it, in the
reasonable judgment of the Representatives, impracticable to market the Shares.
8. Substitution of Underwriters. If any one or more of the
Underwriters shall fail or refuse to purchase any of the Firm Shares that it or
they have agreed to purchase hereunder, and the aggregate number of Firm Shares
that such defaulting Underwriter or Underwriters
25
<PAGE> 26
agreed but failed or refused to purchase is not more than one-tenth of the
aggregate number of Firm Shares, the other Underwriters shall be obligated,
severally, to purchase the Firm Shares that such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase in the proportions that
the number of Firm Shares that they have respectively agreed to purchase
pursuant to Section 1 bears to the aggregate number of Firm Shares that all
such nondefaulting Underwriters have so agreed to purchase, or in such other
proportions as the Representatives may specify; provided that in no event shall
the maximum number of Firm Shares that any Underwriter has become obligated to
purchase pursuant to Section 1 be increased pursuant to this Section 8 by more
than one-ninth of such number of Firm Shares without the prior written consent
of such Underwriter. If any Underwriter or Underwriters shall fail or refuse
to purchase any Firm Shares and the aggregate number of Firm Shares that such
defaulting Underwriter or Underwriters agreed but failed or refused to purchase
exceeds one-tenth of the aggregate number of the Firm Shares and arrangements
satisfactory to the Representatives and the Company for the purchase of such
Firm Shares are not made within 48 hours after such default, this Agreement
will terminate without liability on the part of any nondefaulting Underwriter
or the Company for the purchase or sale of any Shares under this Agreement. In
any such case either the Representatives or the Company shall have the right to
postpone the Closing Date, but in no event for longer than seven days, in order
that the required changes, if any, in the Registration Statement and the
Prospectus or in any other documents or arrangements may be effected. Any
action taken pursuant to this Section 8 shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
9. Miscellaneous. Notice given pursuant to any of the provisions
of this Agreement shall be in writing and, unless otherwise specified, shall be
mailed or delivered (a) if to the Company, at the office of the Company, 8405
SW Nimbus, Beaverton, Oregon 97008, Attention: Chief Financial Officer, with a
copy to Byron W. Milstead, Ater Wynne Hewitt Dodson & Skerritt LLP, 222 SW
Columbia, Suite 1800, Portland, Oregon 97201 or (b) is to the Selling
Shareholders, at the office of the Company, 8405 SW Nimbus, Beaverton, Oregon,
97008, Attention: Timothy A. Timmins, with a copy to Patrick J. Simpson,
Perkins Coie, 1211 SW Fifth Avenue, Suite 1500, Portland Oregon, 97204, or (c)
if to the Underwriters, to the Representatives at the offices of Black &
Company, Inc., One S.W. Columbia, Suite 1200, Portland, Oregon 97258,
Attention: Corporate Finance Department with a copy to Todd A. Bauman, Stoel
Rives LLP, 900 SW Fifth Avenue, Suite 2300, Portland, Oregon 97204. Any such
notice shall be effective only upon receipt. Any notice may be made by telex,
telephone or facsimile, but if so made shall be subsequently confirmed in
writing.
This Agreement has been and is made solely for the benefit of
the several Underwriters, the Company and the Selling Shareholders and of the
controlling persons, directors and officers referred to in Section 6, and their
respective successors and assigns, and no other person shall acquire or have
any right under or by virtue of this Agreement. The
26
<PAGE> 27
term "successors and assigns" as used in this Agreement shall not include a
purchaser, as such purchaser, of Shares from any of the several Underwriters.
This Agreement shall be governed by and construed in
accordance with the laws of the state of Oregon applicable to contracts made
and to be performed entirely within such state.
This Agreement may be signed in two or more counterparts with
the same effect as if the signatures thereto and hereto were upon the same
instrument.
In case any provision in this Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
The Company, the Selling Shareholders and the Underwriters
each hereby waive any right they may have to a trial by jury in respect of any
claim based upon or arising out of this Agreement or the transactions
contemplated hereby.
Please confirm that the foregoing correctly sets forth the
agreement among the Company, the Selling Shareholders and the several
Underwriters.
Very truly yours,
METRO ONE TELECOMMUNICATIONS, INC.
By:
--------------------------------------
Timothy A. Timmins
President
SELLING SHAREHOLDERS
By:
--------------------------------------
Timothy A. Timmins
Attorney-in-Fact
Confirmed as of the date first above mentioned:
BLACK & COMPANY, INC.
CRUTTENDEN ROTH INCORPORATED
Acting on behalf of themselves and as the
Representatives of the other several
Underwriters named in Schedule I hereof.
27
<PAGE> 28
By: BLACK & COMPANY, INC.
By:
---------------------------------
28
<PAGE> 29
SCHEDULE I
UNDERWRITERS
<TABLE>
<CAPTION>
Number of
Firm Shares To Be
Underwriter Purchased
----------- -------------------
<S> <C>
Black & Company, Inc.
Cruttenden Roth Incorporated
Total 2,000,000
=========
</TABLE>
<PAGE> 30
SCHEDULE II
SCHEDULE OF SELLING SHAREHOLDERS
<TABLE>
<CAPTION>
Number of
Number of Firm Option Shares
Selling Shareholder Shares To Be Sold to be Sold
- ------------------- ----------------- -------------
<S> <C> <C>
Total 1,000,000 300,000
========= =======
</TABLE>
1
<PAGE> 1
EXHIBIT 10.2
ENHANCED DIRECTORY
ASSISTANCE (EDA)
AGREEMENT
BY AND BETWEEN
AMERITECH MOBILE
COMMUNICATIONS, INC.
AND
METRO ONE DIRECT
INFORMATION SERVICES, INC.
FOR
CHICAGO, IL, MILWAUKEE, WI,
ST. LOUIS, MO AND DETROIT, MI
JUNE 20,1994
<PAGE> 2
ENHANCED DIRECTORY ASSISTANCE AGREEMENT
THIS AGREEMENT ("Agreement") is made as of this 16th day of June, 1994
by and between Ameritech Mobile Communications, Inc. ("Company"), and Metro
One Direct Information Services, Inc., an Oregon corporation ("Metro One").
WHEREAS, Company is actively involved in numerous aspects of the
wireless communications industry; and
WHEREAS, Metro One operates a business which provides Enhanced
Directory Assistance (EDA) services and desires to provide such services to
Company and its wireless phone customers in the Areas listed in Exhibit 1.
NOW THEREFORE, the parties hereby agree as follows:
1. Definitions
a. Area means the geographic region served by the Metro One
System described in Section 4a, which consists of the areas
represented in Exhibit 1. Company may from time to time
increase the geographic size of the Area, provided Company
first gives written notice to Metro One not less than sixty
(60) days prior to such increase becoming effective. Metro
One will implement the requested increase provided it is
commercially reasonable to do so.
b. Call Completion Area means the geographic region which Company
defines as its cellular local calling area which consists of
the MSAs and/or RSAs represented by Exhibit 1. Company may
from time to time increase the geographic size of the Call
Completion Area, provided Company first gives written notice
to Metro One not less than sixty (60) days prior to such
increase becoming effective. Metro One will implement the
requested increase provided it is commercially reasonable to
do so.
c. Confidential Information means all information, not generally
known to the public, that relates to the business, technology
and network-related systems, Subscribers, customers, finances,
plans (including marketing plans), proposals or practices of
the parties to this Agreement, and it includes, (without
limitation), information relating to the System described in
Section 4 hereof and the number, destination, duration, or
other call-related information, the identities of all
Subscribers, customers and prospects, all reports or other
records provided pursuant to this Agreement, all business
plans and proposals, all marketing plans and proposals, all
technical plans and proposals, all research and development,
all budgets and projections, all nonpublic
Metro One Telecommunications
Ameritech Mobile Communications
EDA Contract Agreement
1
<PAGE> 3
financial information, all confidential and/or proprietary
information, and all other information and matters not generally
known to the public. In using the term "Confidential
Information", the provisions of this subsection shall apply to
every form whatsoever, including, without limitation, information
that exists, whether written, oral or electronically stored on
film, tape, computer disk or other form of media.
d. EDA means Enhanced Directory Assistance.
e. EDA Services means the live-operator residential, governmental
and business enhanced directory assistance services provided by
Metro One to Company and its Subscribers pursuant to this
Agreement. Such services are described as follows:
(1) Standard Directory Assistance Service. Through Standard
Directory Assistance Service, Metro One operators, when
requested by Subscribers, will provide Subscribers with
the name, address and telephone number of a requested
business, government or residence.
(2) Call Completion Service. Through Call Completion
Service, Metro One operators will directly connect the
Subscriber to the requested business, government or
residence by outpulsing to Company's MTSO the digits of
the requested business, government or residence
telephone.
(3) Value-Added Services. Metro One has developed certain
Value-Added Services. Value-Added Services will include:
a. Movie information, movie times, locations and
ratings.
b. Local event information to include commercial
and/or professional sporting events (if none
available, local college/university sporting
events), major conventions, Taste Of Chicago,
Milwaukee and like major local events, major music
festivals (Jazz Festival in Chicago, etc.), major
auto shows, the Consumer Electronics Show, major
current events (Ice show, Air Show, etc.), major
concerts, school closing related to weather
conditions, major parades and any additional
offerings as defined subsequent to this Agreement
and mutually agreeable to the parties e.g.
concierge service.
f. LATA means local access and transport area.
g. LEC means the Local Exchange Carrier providing service in the
Area.
Metro One Telecommunications
Ameritech Mobile Communications
EDA Contract Agreement
2
<PAGE> 4
h. MFJ means the Modification of Final Judgment entered in United
States v. Western Electric Company, et al., C.A. #82-0192, U.S.
District Court, District of Columbia, August 24, 1982, as
amended and interpreted from time to time.
i. MTSO means mobile telephone switching office.
j. Subscriber means a person or entity to whom Company provides
wireless service in the Call Completion Area, including
customers of other cellular service providers when such
customers are roaming in the Call Completion Area.
k. Starback(sm) is a proprietary technology developed by Metro One
that allows Subscribers access to Metro One's operators at any
time during a call by pressing the star key for one second.
l. Exhibits. Exhibits are numbered by corresponding section and
paragraph of the Agreement, i.e. Exhibit 1A refers to Section
1, paragraph a.
2. EDA Services Numbers
a. Company shall route to Metro One all 411, 1-411, 555-1212,
1-555-1212 and Area (NPA) 555-1212 calls or any other standard
Directory Assistance routing method that may be assigned
and/or used as its successor. In the event national numbering
standards or direction from competent jurisdiction should
mandate a change to the above listed directory assistance
access numbers, Company shall route all calls to such
successor numbers as described above. Each party agrees to
provide the other timely notice (minimum of 90 days notice)
prior to employing new technologies or processes which
directly affect customer access to or service from Metro One's
EDA service environment.
3. Provision of EDA Services
In evaluating Metro One's performance under this Agreement, Company
acknowledges that such factors as mechanical, electronic, software,
third party vendor and human failures, can effect and degrade any
performance standards. The parties further acknowledge that
occasional and infrequent deviations from the performance standards as
described below will not constitute material breach or default under
this Agreement. Metro One shall provide EDA services in the following
manner:
Metro One Telecommunications
Ameritech Mobile Communications
FDA Contract Agreement
3
<PAGE> 5
a. Metro One shall answer all calls made to the EDA Services
Numbers with a greeting and closing to be determined by
Company.
b. Metro One shall staff the EDA lines 24 hours a day, 7 days a
week, 365 days a year, with a sufficient number of operators
to perform the services required hereunder.
c. Metro One shall provide sufficient operators and equipment to
ensure that [ ]% of the EDA calls, excluding abandoned calls
within a given calendar month, will be answered in [ ] seconds
or less.
d. In performing the Call Completion Service, Metro One shall
remain accessible to the Subscriber throughout the call using
the System as outlined in Section 4. Metro One shall not
otherwise monitor, record, listen to or divulge the contents
of any communication, or any other information regarding
Subscribers or calls.
e. At a Subscriber's request, Metro One shall perform the EDA
Services, provided the residence, government or business
relating to the requested service is located within the Area
and is contained within the Metro One System as described in
Section 4 below.
f. Metro One's System (as defined in Section 4a) of residential,
business and governmental telephone listings will be kept
current and accurate to the same degree as the database of the
LEC for listings within the Area as listed in Exhibit 1. In the
event Metro One does not have sufficient information in its
database to connect the call, it will utilize such other
sources as necessary to complete the call, which may include
but not be limited to the back-up database provided as an
on-line service by the LEC.
g. Metro One agrees to route Subscriber calls to any number
requested by Subscriber within the Call Completion Area,
provided however, that such number or service is not expressly
prohibited by Company. Such calls shall be routed as though
the result of an EDA request. Under no circumstance shall
Metro One honor subscriber credit card requests or route calls
to "premium" call services (e.g. "900" (NPA) or premium "976"
(NXX) numbers or services) without specific written
authorization from Company. In the event Metro One should
direct a call to a "premium" call service, Metro One shall be
solely liable for fees associated with such call.
Company understands that "911" emergency calls will not be
routed to Metro One. Subscribers requesting credit or
"calling" card service shall be asked to hang-up and dial the
appropriate operator for such services.
Metro One Telecommunications
Ameritech Mobile Communications
EDA Contract Agreement
4
<PAGE> 6
h. Metro One will follow Company 911 procedures upon reasonable
written notice including but not limited to those shown in
Exhibit 3i.
4. System
a. Proprietary System
Metro One has developed a proprietary system to enable it to
perform the EDA Services (the "System"). The System uses
business, residential and government databases and a backup
database connection to the LEC's database. The System (i)
presents operators with interactive menus allowing searches by
business, governmental or residential name, category, and/or
regional searches; and (ii) allows rapid scrolling of listings
by operators to locate multiple listings once the basic search
criteria have been established.
b. Uninterrupted Service
The System shall be designed to allow for uninterrupted
service.
c. System and Software Maintenance
Metro One will maintain the System in such manner as to ensure
an annual System availability of [ ] within a given
service year for the provision of the EDA Services. Without
limiting the generality of the foregoing, Metro One will
maintain and update the System (including, without limitation,
the databases) as needed. All such maintenance and updates of
the system will be performed during the lowest historical
inbound call volume periods so as to minimize possible impact
on the EDA services. Metro One will also maintain appropriate
System backup procedures.
5. Interface and Support
a. Metro One will maintain adequate and appropriate office
facilities, support facilities and other facilities and
equipment necessary to enable Metro One to perform its
obligations under this Agreement.
b. Company will, at its expense, establish and maintain all T-1
trunk lines and other telecommunications facilities and
equipment needed for adequate performance between Company's
MTSO and Metro One's building minimum point of termination for
purposes of performing the EDA Services. Metro One shall be
responsible for establishing, maintaining, and paying for all
other telecommunications facilities and equipment necessary to
perform the EDA Services, including but
Metro One Telecommunications
Ameritech Mobile Communications
EDA Contract Agreement
5
<PAGE> 7
not limited to those required for interconnection from Metro One to
the LEC's database.
6. Personnel
Company may notify Metro One in writing if, in Company's opinion, any
Metro One employee performing EDA Services is unqualified,
discourteous or fails to conform to Company's standards for customer
service. Metro One shall take such prompt action as outlined in
Exhibit 6.
7. Commencement of Service; [ ]
a. Metro One and Company shall mutually cooperate and support one
another to accomplish the tasks as outlined in Exhibit 7. Upon
mutual written a agreement, the time line schedule as outlined
in Exhibit 7 may change with respect to any specified task.
Such written agreement will not be unreasonably withheld.
b. Metro One will give Company thirty (30) days advance written
notice of the date it is ready to provide EDA Services to
Subscribers. The Company will have three (3) business days to
sign the notice and return it to Metro One. If the notice is
not returned timely, then the parties must mutually agree to a
new timeline for initiation of services.
c.
d.
8. Compensation
a. Company will pay Metro One for the EDA Services at [
] per call for all calls coming to Metro One from
Company's MTSO [ ].
Metro One Telecommunications
Ameritech Mobile Communications
EDA Contract Agreement
6
<PAGE> 8
b. Metro One shall provide Company with EDA call count volume
records in the format shown in Exhibit 8c by the tenth of each
month for the previous month's calls, which records shall be
made part of Metro One's invoice to Company.
c. Metro One shall submit an invoice to Company on or before the
fifth (5) calendar day of each calendar month. Company shall
pay Metro One within [ ] of that date in the form
of Exhibit 8c. Any payments received after such [ ]
days will incur interest in the amount of 1.5% monthly.
d.
e. Right To Audit. Metro One shall maintain complete and
accurate records relating to all services rendered and
invoiced to Company pursuant to this Agreement. Such records
shall be in a form and in accordance with Metro One's standard
accounting and business practices so as to permit
substantiation of Metro One's charges. Metro One relies upon
such records sent by Company to Metro One.
The parties may, at any time and from time to time, upon
reasonable notice and at the expense of the requesting party,
audit such records for the Area(s) specified in this
Agreement, to verify the accuracy. Such records are of the
type discussed in Section 13. Access to such records will be
during normal business hours and at a location mutually agreed
to by the parties. Such records will be so maintained for two
(2) years from the date of invoice.
9. Marketing
Company will have sole and exclusive control of the manner of selling,
publicizing, advertising and marketing the EDA Services in the Call
Completion Area. Without limiting the generality of the foregoing:
Metro One Telecommunications
Ameritech Mobile Communications
EDA Contract Agreement
7
<PAGE> 9
a. Company will be responsible for all billing to Subscribers
and collections from Subscribers with respect to the EDA
Services.
b. Company may conduct promotional programs and advertising of
the EDA Services. Company will use its best efforts to
provide Metro One advance notice of fourteen (14) days of
any promotion or advertising campaign regarding EDA
services.
10. Trademark
a. Each party acknowledges the goodwill associated with the
other's trademarks. Neither party will use any trademarks
of the other without the other's prior written consent, which
may be withheld for any reason. Metro One agrees to the
Company's non-exclusive use of Metro One's Starbacksm Service
mark in the Company's marketing of the EDA Services within
the Call Completion Area for the duration of this agreement.
b. Company will own its trademarks for the EDA Services in the
Call Completion Area and Metro One will acquire no rights in
such trademarks.
c. Metro One will own its trademarks for the EDA Services in
the Call Completion Area and Company will acquire no rights
in such trademarks.
11. Compliance with Laws
a. This Agreement and the parties' action under this Agreement
shall comply with all applicable federal, state and local
laws, rules, regulations, court orders, and governmental
agency orders including the Modification of Final Judgment (
MFJ") as issued in United States v. Western Electric Co., et
al., Civil Action No. 82-0192, U.S. District Court for the
District of Columbia, and all subsequent orders issued in or
related to that proceeding. If a court or governmental
agency with proper jurisdiction determines that this
Agreement or a provision of this Agreement is unlawful, or if
Company determines in good faith that this Agreement or a
provision of this Agreement is inconsistent with, or
contradictory to, the MFJ, this Agreement or that provision of
this Agreement shall terminate. If a provision of this
Agreement is so terminated but the Company in its reasonable
discretion legally, commercially, and practicably can
continue this Agreement without the terminated provision, the
remainder of this Agreement will continue in effect.
Metro One Telecommunications
Ameritech Mobile Communications
EDA Contract Agreement
8
<PAGE> 10
b. If a court or governmental agency determines this Agreement is
unlawful, or if Company determines this Agreement or a
provision of this Agreement is inconsistent with, or
contradictory to, the MFJ, then the parties will rewrite the
terms of this Agreement and, if necessary, restructure the EDA
Services provided hereunder, so that each of the parties
are able to receive the intended commercial benefits of this
Agreement in a manner that complies with all applicable
federal, state and local laws, rules, regulations, court
orders, and governmental agency orders including the MFJ.
12. Assistance
Each party will provide the other reasonable assistance in any matters
affecting this Agreement.
13. Reports
During the term of this Agreement and for twenty four (24) months
thereafter, Metro One shall maintain complete and accurate records for
two (2) years from date of invoice of each call using the EDA
Services, and shall provide the Company access to such records upon
request. The records will be made available in a location designated
by Metro One. Company acknowledges that mechanical, electronic,
software, and human error, for example, can effect the production and
maintenance of complete and accurate records. The parties acknowledge
that complete and accurate records is not an absolute standard, given
occasional and infrequent system failures.
Reports shall be in a mutually agreed upon format. The records may
include at a minimum but not limited to the following:
a. The time the call is received by Metro One;
b. The number to which the call is connected;
c. Sufficient information for Company to determine each
Subscriber's intraLATA toll charges and long distance charges
for billing purposes;
14. Complaints
Both parties will refrain from any action that may tend to discredit
or damage the name, reputation, goodwill or good public relations of
the other. Each party will investigate and respond within two (2)
business days to all oral or written complaints received from any
Subscriber arising out of or in connection with such party's
obligations under this Agreement. Each party will promptly notify the
other of all such complaints and of any action taken (or to be taken)
in connection with such complaints. In handling any
Metro One Telecommunications
Ameritech Mobile Communications
EDA Contract Agreement
9
<PAGE> 11
complaints, each party will maintain and promote the goodwill of and
good public relations of the other party. In addition, each party
will respond promptly (and in any event within twenty-four (24) hours)
to address any problems in the EDA Services or the System identified
by the other party in writing.
15. Confidential Information
a. With respect to Confidential Information provided to the
receiving party under this Agreement, the receiving party
agrees to (i) hold the Confidential Information in confidence
and to protect it; (ii) restrict disclosure of the
Confidential Information solely to those employees,
contractors and agents of the receiving party with a
need-to-know to carry out the respective obligations under
this Agreement and not disclose it to any third party
(including corporate affiliates not a party to this
Agreement); (iii) advise the employees, contractors and agents
of their obligations with respect to the Confidential
Information; and (iv) use the Confidential Information only
for the purposes set forth in this Agreement, except as may
otherwise be mutually agreed upon in writing. In any event,
Metro One and Company expressly agree not to sell, license,
release or disclose the other party's Confidential Information
to any competitor or potential competitor of the other or to
any LEC or affiliate thereof.
b. Confidential Information shall not include information which
(i) was previously known to the receiving party free of any
obligation to keep it confidential; (ii) is disclosed to third
parties by the disclosing party without restriction; (iii) is
or becomes publicly available by other than unauthorized
disclosure; or (iv) is independently developed by the
receiving party without use of the Confidential Information
and is so documented.
c. In the event either party is requested or required by oral
question, interrogatories, requests for information or
documents, subpoena or other lawful process, civil
investigative demand or similar process, to disclose
Confidential Information of the other to any lawfully
constituted authority, it is agreed that the party requested
or required to furnish the Confidential Information will
provide the other party with timely notice in order for that
party to seek a protective order or otherwise object.
d. The provisions of this Section 15 shall survive the
termination of this Agreement, and, at the time of
termination, the receiving party shall upon request, return
the Confidential Information of the disclosing party which is
in tangible form or certify destruction of such Confidential
Information.
Metro One Telecommunications
Ameritech Mobile Communications
EDA Contract Agreement
10
<PAGE> 12
e. All Confidential Information will be considered trade secrets
and shall be entitled to all protections given by law to trade
secrets. In no event shall either party use the Confidential
Information of the other party to reverse engineer or
otherwise develop products or services functionally equivalent
to the products or services of the disclosing party.
f. The parties agree that it would be difficult to measure the
monetary damages that would be incurred by the other party by
reason of the failure of the other party to comply with the
terms of this Section. The parties therefore agree that
either party may seek injunctive relief which the parties
agree is appropriate for enforcement of this Section 15.
16. Indemnification
Each of Company and Metro One (the "Indemnifying Party") shall defend,
indemnify, and hold harmless the other (the "Indemnified Party"), its
employees and agents, its affiliates and its successors and assigns
from and against all losses, damages, and liability (including all
claims, actions, suits, fines, interest, penalties, costs and
expenses) including reasonable attorney's fees incurred on account
thereof, incident, relative to or arising from (i) any
misrepresentation or breach of covenant, representation or warranty of
the Indemnifying Party contained herein, and (ii) any injury to any
Indemnifying Party employee or agent, including death to persons, or
damage to property, including theft, resulting from the acts or
omissions of the Indemnifying Party, its employees or agents whether
negligent or otherwise, and (iii) any injury to any person, (including
death) or damage to tangible property, (including theft) resulting
from the acts or omissions of the Indemnifying Party, its employees or
agents, whether negligent or otherwise.
17. Term
Subject to the provisions of Section 18, Termination, this Agreement
shall be for a three (3) year term commencing on the date EDA Services
are made commercially available to Subscribers.
The parties may extend the term of this Agreement by one to five
years, in increments of one year, by providing written notice to the
other party no less than 180 days prior to termination date of this
Agreement. The parties shall negotiate in good faith with respect to
an extended term and any modifications to the terms and conditions
hereof.
Metro One Telecommunications
Ameritech Mobile Communications
EDA Contract Agreement
11
<PAGE> 13
18. Termination
a. Company may terminate this Aggreement immediately if Metro One
is in material breach of and default under this Agreement by
giving Metro One written notice of such termination. The
occurence of an of the following shall constitute a material
breach of and default under this Agreement by Metro One:
(1) any failure by Metro One to perform any of its
material obligations in accordance with this
Agreement, where such failure continues for thirty
(30) days after written notice of default to Metro
One; or
(2) the filing by Metro One of a petition in bankruptcy
or the making of any general assignment for the
benefit of creditors; OR
b. Metro One may terminate this Agreement immediately if Company
is in material breach of and default under this Agreement by
delivering written notice of such breach or default ot
Company. The occurrence any of the following events shall
constitute a material breach of and default under this
Agreement by Company:
(1) any failure by Company to perform any of its material
obligations in accordance with this Agreement, where
such failure continues for thirty (30) days after
written notice of default to Company; or
c. Either party may terminate this Agreement upon the occurrence
of any of the following events by giving thirty (30) days
written notice to the other:
(1) if, at any time the average monthly call volume for
the preceding three (3) months is less than seventy
percent (70%) of the average monthly call volume for
the same three (3) month period in the preceding
year; or
(2) if any circumstance would render the continued
performance of this Agreement by either party in
violation of any applicable law, statute, rule or
regulation despite the parties' good faith efforts to
rewrite the terms of this Agreement.
d. Upon termination or expiration of this Agreement, in addition
to any other rights or remedies of Company, Metro One will:
(1) cease to provide the EDA Services to Subscribers; and
Metro One Telecommunications
Ameritech Mobile Communications
EDA Contract Agreement
12
<PAGE> 14
(2) deliver to Company a final invoice for amounts
payable under Section 10 of this Agreement.
e. Upon termination of this Agreement both parties shall:
(1) promptly return to the other party all materials
containing any Confidential Information of such
party; and
(2) cease all use of the other party's trademarks.
19. Assignment
Neither party may assign or transfer this Agreement or any of its
obligations hereunder without the prior written consent of the other,
which consent win not be reasonably withheld. Notwithstanding the
foregoing, either party may, upon five (5) days prior written notice
to the other, assign all of its rights, duties and obligations under
this Agreement to an affiliate or affiliates of that party or to a
partnership or partnerships in which that party or its affiliate has
an interest.
20. Notices
Notices required by this Agreement must be sent fax, overnight or if
by registered mail, return receipt requested, to the address listed
below, or to such address as the parties may from time to time by
notice provide.
To Metro One: Metro One Direct Information Services, Inc.
8405 S.W. Nimbus Avenue
Beaverton, OR 97005
Attn: Patrick M. Cox
FAX: (503) 643-9600
To Company: Ameritech Mobile Communications, Inc.
2000 W. Ameritech Center Drive, 3H45B
Hoffman Estates, IL 60195-5000
Attn: Michelle Kluver, Product Mgr.
Product Development
FAX: (708)765-3702
cc: Thea Pazen, Attorney
Notice shall be deemed effective on the date the return receipt shows the
notice was accepted, refused, or returned undeliverable.
Metro One Telecommunications
Ameritech Mobile Communications
EDA Contract Agreement
13
<PAGE> 15
21. Cellular Service
Unless Company is prohibited by law, Company shall provide Metro One,
at Company expense, unlimited cellular airtime excluding toll, taxes
and auxiliary services for each of two (2) phones per month for
technical support and quality control on the Company's System
throughout the term of this Agreement.
22. Mediation
Should any dispute arise between the parties to this Agreement, it is
agreed that the dispute will be submitted to a mediator, agreed to and
compensated equally by both parties, prior to commencement of
litigation. Mediation will be conducted in Chicago, Illinois unless
both parties agree otherwise. Both parties agree to exercise their
best efforts in good faith to resolve all disputes in mediation.
23. Entire Agreement
This Agreement and the Exhibits attached hereto constitute the entire
agreement between the parties, and supersedes any and all prior
negotiations, representations, correspondence, understandings and
agreements with respect to the subject matter hereof. No amendment or
modification of any of the terms of this Agreement will be effective
unless in writing signed by both parties.
24. Severability
In the event that one or more of the provisions, or any portion
thereof, contained in this Agreement, is for any reason held invalid,
unenforceable or void in any respect under the applicable laws of the
jurisdiction governing the entire Agreement, to that extent which it
is not inconsistent, vague or unintelligible as the result of the
severed portion, this Agreement shall remain in full force and effect
and this Agreement shall be construed as if such unenforceable
provision or provisions had never been contained herein.
25. Force Majeure
Neither party is responsible for delays in performance caused by wars,
fires, strike, embargoes, priority exclusion of either party's
business by government authorities, transportation conditions
(including telecommunication transmission failures), material
shortages, natural disasters, or other causes beyond its reasonable
control.
Metro One Telecommunications
Ameritech mobile Communications
EDA Contract Agreement
14
<PAGE> 16
26. Limitation of Liability
In no event shall either party be liable to the other for any
indirect, incidental, special or consequential damages or lost profits
arising out of or related to this Agreement or the performance or
breach thereof.
27. Waiver
Waiver of any breach of any term or condition of this Agreement shall
not be deemed to waive any prior or subsequent breach.
28. Applicable Law
This Agreement will be governed by the laws of the State of Illinois.
Entered into as of the date first above written.
METRO ONE DIRECT AMERITECH MOBILE
INFORMATION SERVICES, INC. COMMUNICATIONS,INC.
By: [SIG] By: [SIG]
------------------------ -------------------------
Name: Robert T. Cymbala Name: ???????
Its: President & Chief Executive Officer Its: President
Date: June 20, 1994 Date: ???????
Metro One Telecommunications
Ameritech Mobile Communications
EDA Contract Agreement
15
<PAGE> 17
Addendum dated June 29, 1994 to that certain Enhanced Directory Assistance
Agreement dated June 20, 1994 ("Agreement") by and between Metro One Direct
Information Services, Inc., an Oregon corporation ("Metro One") and Ameritech
Mobile Communications, Inc., a Delaware corporation ("Company")
Metro One and Company hereby agree to amend Section 18 of the
Agreement, as follows:
Section 18.a.(2) of the Agreement is amended by deleting the period
(.) at the end of the sentence and inserting in its place and stead a
semi-colon (;) and the word "or"; and
New Sections 18.a.(3) and 18.a.(4) are added, as follows:
18.a.(4). Failure of Metro One to provide the System for provision of
all EDA Services (as defined in Sections 1(e) and 4)
New Section 18.f. is added, as follows:
18.f. In any litigation arising out of any termination and/or
attempted termination of this Agreement, the losing party shall pay the
prevailing party's actual, reasonable costs and attorneys' fees (including but
not limited to witness fees, paralegals' fees, and travel costs) in addition to
any damages awarded.
Agreed to and acknowledged this 29th day of June, 1994:
METRO ONE DIRECT AMERITECH MOBILE
INFORMATION SERVICES, INC. COMMUNICATIONS, INC.
By: [SIG] By: [SIG]
------------------------- -------------------------
Name: Patrick M. Cox Name: John E. Rooney
Its: Vice-President Its: President
Date: June 29, 1994 Date: June 29,1994
<PAGE> 18
ADDENDUM TO THE JUNE 20, 1994 ENHANCED DIRECTORY ASSISTANCE (EDA) AGREEMENT
BETWEEN
AMERITECH MOBILE COMMUNICATIONS, INC.
AND
METRO ONE DIRECT INFORMATION SERVICES, INC.
This Addendum, dated 27th April, 1995, to the Enhanced Directory Assistance
Agreement dated June 20, 1994 ("Agreement") by and between Metro One Direct
Information Services, Inc., an Oregon Corporation ("Metro One") and Ameritech
Mobile Communications, Inc., a Delaware Corporation ("Company") collectively,
referred to as the "Parties" is hereby incorporated into and made a part of
said Agreement. Subsequent to the April 11, 1995 Notice of default and
material breach of the Agreement sent to Metro One by the Company (the Default
Notice), the Parties have reconciled their differences and the Company
withdraws its Default Notice. In consideration of this withdrawal, the Parties
hereby agree to amend the Agreement as follows:
1. SECTION 3(C) is amended by deleting the present language and replacing
it with the following:
2. SECTION 3(F) is amended by adding the following after the last period
(.):
<PAGE> 19
3. SECTION 7(C) is amended by adding after the last period (.) the
following:
4. SECTION 8(A) is amended by adding the following language to the first
sentence after "commercially available service":
in a specific area code.
and by deleting the following language:
5. SECTION 9 is amended by adding the following new section:
C.
1.
2.
<PAGE> 20
6. SECTION 15(C) is amended by adding the following at the end of that
Section:
Metro One may disclose this Addendum and the Agreement with
the Securities and Exchange Commission or as required by law,
regulation or valid court order but Metro One shall first give
written notice to the Company of such disclosure prior to
completion so as to permit the Company to seek a Protective
Order.
7. SECTION 17 is amended by adding the following language at the end of
the first paragraph after "available to Subscribers":
in each specific area code.
8. SECTION 18(A)(3) is deleted.
9. Metro One shall follow the policies and procedures set forth in the
attached Exhibit 1, which is incorporated into and made a part of this
Addendum. Additional policies and procedures, if any, when agreed to
by the Parties, will be made part of the Agreement as additional
Exhibits.
10. In all other aspects the Agreement between Metro One and the Company
shall remain in full force and effect.
Agreed to and acknowledged this 28th day of April, 1995:
METRO ONE DIRECT AMERITECH MOBILE
INFORMATION SERVICES, INC. COMMUNICATIONS, INC.
By: Patrick M. Cox By: Dennis L. Myers
------------------------------- --------------------------
Name: Patrick M. Cox Name: Dennis L. Myers
Title: Vice President/COO Title: Vice President
Dated: 1/??/95 Dated: 5/1/95
---------------------- --------------------
3
<PAGE> 21
EXHIBIT 1
Area
The Area includes all residential, business and government listings for the
NPA's listed below:
[ ] - Chicago
[ ] St. Louis
[ ] Detroit
[ ] Milwaukee
(Company to provide additional NPA's)
Call Completion Area
Include NPA + NXX listings
(Provided by Company)
[ ] - Chicago
[ ] - St. Louis
[ ] Detroit
[ ] Milwaukee
EXHIBIT 1
<PAGE> 22
June 3, 1994
Metro One Direct
Mr. Steve Posey
8405 S.W. Nimbus Avenue
Beaverton, OR 97005
Dear Steve,
Attached is a listing of all NPA-NXXs for Ameritech's footprint (calling area)
and Metro One's database size (area). They are identical. The listing is both
numerical and alphabetical.
You will notice that the Chicago market includes NPAs of [ ].
The Milwaukee market includes all NXXs in the [ ] NPA, as listed. Some
headings on this report may not say specifically "Chicago" or 'Milwaukee",
however, the NPAs will show as the above listed. Follow these NPA listings.
If you have any questions, please call me at 708/765-3639.
Sincerely,
Michelle Kluver
Ameritech Cellular
MK:394
<PAGE> 23
Exhibit 31.
EMERGENCY CALL
When a customer calls with an emergency situation, a consultant will transfer
the call for the customer to the operator (dial "O") with the customer on the
line.
<PAGE> 24
EXHIBIT 6
OPERATOR SERVICES
welcome to Metro One Direct operator Services. We Want your tenure
with us to be rewarding and enjoyable. In order to provide this we ask that you
follow these guidelines that have been developed specifically to ensure you the
best possible working environment. Please follow these guidelines carefully and
if you have any questions or concerns communicate them to your supervisor.
1. All operators are responsible for leaving their work areas neat and
orderly at the end of their shift. This includes straightening
terminal and keyboard. replacing directories. discarding unnecessary
papers. etc.
2. Because of the nature of our business and the value of the equipment
we ask that you not bring food into the Operator Services area. This
includes chewing gum. Drinks will be allowed if they are in
spillproof containers. In addition. we have provided ergonomically
sound chairs and modular units in order to provide each of you with
the best and most comfortable working environment. Please do not rest
your feet on your desk top. the walls of your unit or on an empty
chair.
3. Any Operator who has a problem with a caller. or who observes another
Operator having a problem with a caller. should notify the Supervisor.
Although we encourage our Operators to cooperate with each other in
order to ensure consistency in instruction it is important to seek
technical or Customer service assistance from your Supervisor.
4. Because your main duty is to answer information and direct connect
calls. and because we must protect the privacy of all of our
employees, any calls you receive regarding Metro One's business or its
employees must be referred to your Supervisor. No personal calls
should be made or received on our phone. The phone in the lunchroom
is available to You to make outgoing local calls. Please inform your
family and friends to call your main office number. If it is an
emergency the call will be immediately transferred to you. If it is
not an emergency. a message will be taken and delivered to you so you
can return the call on your next break.
5. Metro One's terminals are designed to retrieve information as quickly
as possible. Any unauthorized use or tampering with your terminal
jeopardizes this priority. This includes "exiting" the terminal.
turning off the terminal. changing the keyboard programming. and/or
the misuse of any equipment or source information that is used to
process calls.
6. Although it is acceptable for Operators to trade shifts occasionally
to accommodate their personal schedules. all such trades should be
approved in advance by your Supervisor.
7. For health reasons. each Operator is assigned a personal headset. It
is your responsibility to keep the headset clean and in good
condition. If You have a problem with your headset. please notify,
your Supervisor as soon as possible.
8. If it is necessary that you leave your terminal at times other than
breaks or lunches.
9. The "MUTE" button on your phone is there for your convenience. but
should only be used when you need assistance or advice from your
Supervisor regarding your current call.
10. Excessive conversation. even in normal tones. in the Operator Services
room is disruptive and discourteous. Therefore. all conversation
should be kept at a minimum and conducted quickly. always keeping in
mind the first priority of answering phones as quickly as possible.
Any use of racial and or ethnic comments. or the use of profanity or
vulgarism is unacceptable.
13. In order for any business to be successful it is necessary that
employees are at work and on time. For this reason. excessive
absenteeism and tardiness is unacceptable. However. if you must be
absent or tardy. please call your supervisor to inform him/her Of the
date and/or time you will be arriving, at work.
14. All operators must be aware that customer service and telephone
manners are Metro One's most important products. If any operator is
found to be impolite. vulgar. ungracious. discourteous. brusque. or in
any other way rude to a customer. immediate disciplinary action will
be taken.
----------------------------
Signature
----------------------------
Date
<PAGE> 25
___________________________________________________________________________809
DISCIPLINARY PROCEDURE
Policy:
It is the policy of Metro one Telecommunications that all employees are
expected to comply with the company's standards of behavior and performance and
that any noncompliance with these standards must be remedied.
Comment:
1. Under normal circumstances, Metro One endorses a policy of progressive
discipline in which it attempts to provide employees with notice of
deficiencies and an opportunity to improve. It does, however, retain
the right to administer discipline in any manner it sees fit.
2. The normal application of progressive discipline should be:
a. If an employee is not meeting Metro One's standards of
behavior or performance, the employee's supervisor should take
the following action:
i. Meet with the employee to discuss the matter.
ii. inform the employee of the nature of the problem and
the action necessary to correct it.
iii. Prepare a memorandum for the supervisor's own records
indicating that the meeting has taken place.
b. If there is a second occurrence, the supervisor should hold
another meeting with the employee and take the following
action:
i. Issue a written reprimand to the employee.
ii. Warn the employee that a third incident will result
in more severe disciplinary action.
iii. Prepare and forward to the Department of Human
Resources a written report describing the first and
second incidents and summarizing the action taken
during the meeting with the employee.
c. Depending upon the seriousness of the offense, a third
incident would lead to either another written warning prior to
termination or immediate termination.
<PAGE> 26
___________________________________________________________________________809
3. Because the nature of Metro One's business is Customer Service, any
employee found to be in violation of basic customer service standards
will fall immediately into the disciplinary process. Any time a
complaint is lodged against an employee by Metro Ones customer
company, that employee will be removed from the phones, counseled and
retrained to the satisfaction of the General Manager prior to being
placed back on the phone lines. Progressive discipline will be
implemented beginning with step 2,b,i and the operator's performance
will be tracked to ensure that similar incidents do not re-occur. If
the behavior is repeated at anytime during the operator's employment,
he/she will be terminated. If in the opinion of the General Manager,
the initial offense is so serious that termination is necessary, such
action will be taken immediately.
4. The progressive disciplinary procedures described in Comment 2 above,
may also be applied to an employee who is experiencing a series of
unrelated problems, involving job performance and/or behavior.
5. In cases involving serious misconduct, such as a major breach of
policy or violation of law, the procedures contained in Comment 2 may
be disregarded. The supervisor should suspend the employee
immediately and, if appropriate, recommend termination of the
employee. Employees suspended from work will not receive or accrue
any employee benefits during the suspension, unless management grants
an exception.
6. The Human Resources Department under normal circumstances should
review and approve all recommendations for termination before any
final action is taken.
7. An investigatory interview will be conducted for the purpose of
determining the facts involved in any suspected violation of Company
rules and regulations. The employee who is suspected of violating
Company rules and regulations should be told in general terms what the
interview is about.
8. Employees who believe they have been disciplined too severely or
without good cause are encouraged to contact the Director of Human
Resources.
9. An employee's record will normally be cleared of any disciplinary
incidents if the employee works a full year without further action
being instituted under this policy.
<PAGE> 27
____________________________________________________________________________801
BEHAVIOR OF EMPLOYEES
Policy:
It is the policy of Metro One Telecommunications that certain rules and
regulations regarding employee behavior are necessary for the efficient
operation of the Company and for the benefit and safety of all employees.
Conduct that interferes with operations, discredits the Company, or is
offensive to customers or fellow employees will not be tolerated.
Comment:
1. Employees are expected at all times to conduct themselves in a
positive manner so as to promote the best interest of the Company.
Such conduct includes:
a. Reporting to work punctually as scheduled and being at the
proper work station, ready for work, at the assigned starting
time.
b. Giving proper advance notice whenever unable to work on report
on time.
c. Complying with all Company safety and security regulations.
d. Smoking only at times and in places not prohibited by Company
rules.
e. Wearing clothing appropriate for the work being performed.
f Eating meals only during meal periods and only in the
designated eating areas.
g. Maintaining work place and work area cleanliness and
orderliness.
h. Treating all customers, visitors and fellow employees in a
courteous manner.
i. Refraining from behavior or conduct deemed offensive or
undesirable, or which is contrary to the Company's best
interests.
j. Performing assigned tasks efficiently and in accordance with
established quality standards.
k. Reporting to management suspicious, unethical, or illegal
conduct by fellow employees, customers, or suppliers.
2. The following conduct is prohibited and will subject the individual
involved to disciplinary action up to and including termination
a. The reporting to work under the influence of alcoholic beverages
and/or illegal drugs and narcotics or the use, sale, dispensing,
or possession of alcoholic beverages and/or illegal drugs and
narcotics on the Company premises.
b. The use of profanity, abusive language or any other form of
behavior not generally accepted as excellent customer service to
our customers or their subscribers.
c. The possession of firearms or other weapons on Company property.
d. Insubordination or the refusal by an employee to follow
management's instructions concerning a job-related matter.
e. Fighting or assault on a fellow employee or customer.
f Theft, destruction, defacement, or misuse of Company property or
of another employee's property.
<PAGE> 28
____________________________________________________________________________801
g. Gambling on Company property.
h. Falsifying or altering any Company record or report, such as an
application for employment, a medical report, a production
record, a time record, an expense account, an absentee report,
or shipping and receiving records.
i. Threatening or intimidating management, supervisors, security
guards, or fellow workers.
j. Unauthorized sleeping on the job.
k. Failure to abide by safety rules and policies.
l. Improper attire or inappropriate personal appearance.
m. Engaging in any form of sexual harassment.
n. Improper disclosure of trade secrets or confidential
information.
3. The examples in (2) above are illustrative of the type of behavior
that will not be permitted, but are not intended to be an all-
inclusive listing. Any questions in connection with this policy
should be directed to your General Manager or the Director of Human
Resources.
<PAGE> 29
<TABLE>
<CAPTION>
EXHIBIT 7
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
| --------------- ----------------- -------------- ------------
Project: AMERITECH-CHICAGO | | Critical | | Noncritical | | Progress | * Milestone | Summary | + Rolled Up
Date: 6/8/94 | --------------- ------------------ -------------- -------------
- ---------------------------------------------------------------------------------------------------------------------------
Page 1
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 30
<TABLE>
<CAPTION>
EXHIBIT 7
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
| --------------- ----------------- -------------- ------------
Project: AMERITECH-ST. LOUIS| | Critical | | Noncritical | | Progress | * Milestone | Summary | + Rolled Up
Date: 6/8/94 | --------------- ------------------ -------------- -------------
- ---------------------------------------------------------------------------------------------------------------------------
Page 1
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 31
<TABLE>
<CAPTION>
EXHIBIT 7
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
| --------------- ----------------- -------------- ------------
Project: AMERITECH-DETROIT | | Critical | | Noncritical | | Progress | * Milestone | Summary | + Rolled Up
Date: 6/8/94 | --------------- ------------------ -------------- -------------
- ---------------------------------------------------------------------------------------------------------------------------
Page 1
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 32
[METRO ONE LOGO]
Exhibit 8C
Company Customer Account No. 901
INVOICE SUMMARY
COMPANY
MARCH 3,1993
SITE LOCATION:__________
<TABLE>
<S> <C>
Previous Balance $0.00
Payments 0.00
Interest Charges 0.00
Current Charges 0.00
--------
Total Due $0.00
========
</TABLE>
Charges are due upon receipt. A charge
of 1.5% per month will be assessed on accounts past 45 days.
Page 1 of 2
8405 S.W Nimbus Avenue . Beaverton, Oregon 97005 . (503) 643-9500 . Facsimile
(503) 643-9600
<PAGE> 33
DETAIL OF CURRENT MONTH'S CHARGES
<TABLE>
<CAPTION>
CALL CALL NET CALL NET
DAY DATE VOLUME CREDIT VOLUME CHARGE
- ----------------- ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Mon 02/01 0 (0) 000 $000.00
Tue 02/02 0 (0) 000 000.00
Wed 02/03 0 (0) 000 000.00
Thu 02/04 0 (0) 000 000.00
Fri 02/05 0 (0) 000 000.00
Sat 02/06 0 (0) 000 000.00
Sun 02/07 0 (0) 000 000.00
Mon 02/08 0 (0) 000 000.00
Tue 02/09 0 (0) 000 000.00
Wed 02/10 0 (0) 000 000.00
Thu 02/11 0 (0) 000 000.00
Fri 02/12 0 (0) 000 000.00
Sat 02/13 0 (0) 000 000.00
Sun 02/14 0 (0) 000 000.00
Mon 02/15 0 (0) 000 000.00
Tue 02/16 0 (0) 000 000.00
Wed 02/17 0 (0) 000 000.00
Thu 02/18 0 (0) 000 000.00
Fri 02/19 0 (0) 000 000.00
Sat 02/20 0 (0) 000 000.00
Sun 02/21 0 (0) 000 000.00
Fri 02/22 0 (0) 000 000.00
Tue 02/23 0 (0) 000 000.00
Wed 02/24 0 (0) 000 000.00
Thu 02/25 0 (0) 000 000.00
Fri 02/26 0 (0) 000 000.00
Sat 02/27 0 (0) 000 000.00
Sun 02/28 0 (0) 000 000.00
Total Current
--------------------------------------------------------------------------------------------
Monthly Charges: 0 (0) 0 $0,000.00
=========================================================================================
</TABLE>
Page 2 of 2
