Continued...Part 2 of 2
Competition. Ampex encounters significant competition in all its product
markets. Ampex competes in the mass data storage market with a number of
well-established competitors, such as IBM, Storage Technology Corporation,
Exabyte Corporation and Quantum Corporation, as well as smaller companies. In
addition, other manufacturers of scanning video recorders may seek to enter the
mass data storage market in competition with the Company. For example, in 1995
Sony Corporation entered this market with storage products based on its video
recording technology. In addition, price declines in competitive storage
systems, such as magnetic or optical disk drives, can negatively impact the
Company's sales of its DST products. In the instrumentation market, the Company
competes primarily with companies that depend on government contracts for a
major portion of their sales in this market, including Sony Corporation, Loral
Data Systems, Datatape Incorporated and Metrum Incorporated. The number of
competitors in this market has decreased in recent years as the level of
government spending in many areas has declined. In the professional video
recorder market, Sony and Panasonic are the leading competitors of the Company.
There is no assurance that the Company will be able to compete successfully in
these markets in the future.
Dependence On Certain Suppliers. Ampex purchases certain components, such
as customized integrated circuits, from a single domestic or foreign
manufacturer. Significant delays in deliveries or defects in such components
could adversely affect Ampex's manufacturing operations, pending qualification
of an alternative supplier. In addition, the Company produces highly engineered
products in relatively small quantities. As a result, its ability to cause
suppliers to continue production of certain products on which the Company may
depend may be limited. The Company does not generally enter into long-term raw
materials or components supply contracts.
Risks Related to International Operations. Although the Company
significantly curtailed its international operations in connection with the
restructuring of its operations in 1993, sales to foreign customers (including
U.S. export sales) continue to be significant to the Company's results of
operations. International operations are subject to a number of special risks,
including limitations on repatriation of earnings, restrictive actions by local
governments, fluctuations in foreign currency exchange rates and
nationalization. Additionally, export sales are subject to export regulation and
restrictions imposed by U.S. government agencies. Fluctuations in the value of
foreign currencies can affect Ampex's results of operations. The Company does
not normally seek to mitigate its exposure to exchange rate fluctuations by
hedging its foreign currency positions.
Dependence On Key Employees. The Company is dependent upon the performance
of certain key members of management and key technical personnel. The Company
has not entered into employment agreements with any such persons. Edward J.
Bramson, who since January 1991 has served as chief executive of the Company, is
also engaged in the management of certain companies affiliated with Sherborne
Holdings Incorporated, a privately owned Delaware holding company ("SHI"). Mr.
Bramson currently devotes most of his time to the management of the Company. The
loss of the services of Mr. Bramson and/or such managers or other key
personnel could have a material adverse effect on the Company.
Anti-Takeover Consequences of Certain Governing Instruments. The
Company's Certificate of Incorporation provides for a classified Board of
Directors, with members of each class elected for a three-year term. The
Certificate of Incorporation provides for nullification of voting rights of
certain foreign stockholders in certain circumstances involving possible
violations of security regulations of the United States Department of Defense.
The instruments governing the Company's outstanding Noncumulative Preferred
Stock require mandatory offers by the Company to redeem such securities in the
event of a Change of Control (as defined). The Certificate of Incorporation
authorizes the Board of Directors of the Company to issue additional shares of
Preferred Stock without the vote of stockholders. Such provisions could have
anti-takeover effects by making an acquisition of the Company by a third party
more difficult or expensive in certain circumstances.
Non-payment of Dividends. The Company has not declared dividends on its
Common Stock since its incorporation in 1992 and has no present intention of
paying dividends on its Common Stock. The Company is also restricted by the
terms of certain agreements and of its outstanding Noncumulative Preferred Stock
as to the declaration of dividends.
Redemption of Preferred Stock. In December 1997, the Company is scheduled
to redeem its outstanding Noncumulative Preferred Stock, having a redemption
price of approximately $70 million, out of funds legally available therefor
(which, in general, means the excess of the fair value of assets over
liabilities of the Company). In certain circumstances the Company may redeem the
Noncumulative Preferred Stock by issuing Common Stock at 90% of fair market
value. As of September 30, 1996, the Company did not have sufficient funds
legally available to redeem the Noncumulative Preferred Stock in full. In the
event the Company does not have sufficient funds legally available to redeem the
Noncumulative Preferred Stock in full on the redemption date, the Company would
remain obligated to redeem such shares from time to time to the extent funds
become legally available for redemption, and would generally be precluded from
declaring cash dividends on, or repurchasing shares of, its Common Stock, until
the Noncumulative Preferred Stock has been redeemed in full. There can be no
assurance the Company will have adequate liquidity or have funds legally
available to redeem the Noncumulative Preferred Stock. Although the Company has
no current plans for redemption of the Noncumulative Preferred Stock prior to
maturity, it will continue to evaluate this possibility in light of market
conditions, its liquidity, and other factors. Any such redemption could involve
the issuance of additional debt or equity securities or other actions that might
result in dilution of current stockholders' equity interests in the Company or
adversely affect the market price of the Common Stock.
Volatility of Stock Price. The trading price of the Company's Common Stock
has been and can be expected to be subject to significant volatility, reflecting
a variety of factors, including quarterly variations in operating results,
announcements of new product introductions by the Company or its competitors,
reports and predictions concerning the Company by analysts and other members of
the media, and general economic or market conditions. The stock market in
general and technology companies in particular have experienced a high degree of
price volatility, which has had a substantial effect on the market prices of
many technology companies for reasons that often are unrelated or
disproportionate to operating performance. In addition, since 1993, the Company
has maintained effective registration statements covering securities of the
Company held by its stockholders, including, at the date of this Prospectus,
approximately 8.8 million shares of Common Stock (representing approximately 18%
of the outstanding Common Stock on a fully diluted basis) held by certain
affiliates of the Company and related parties. The sale, or the offer for sale,
of substantial numbers of such shares could adversely affect the market price
for the Common Stock.
Uncertainty as to Commercialization of Keepered Media. The successful
commercialization of the Company's proprietary keepered media technology, which
potentially could increase the storage capacity of hard disk drives used in most
personal computers, involves a number of risks. Although Ampex has held
discussions and negotiations with several disk drive manufacturers, it is not
possible at present to determine whether any of these companies, or others that
Ampex may approach in the future, will in fact undertake a commercial product
program or purchase any material quantities of keepered media. Also, there can
be no assurance that Ampex would be able to obtain prices or other terms that it
considers favorable or acceptable. The Company does not presently have
manufacturing facilities suitable for producing keepered media in quantity, and
the Company does not presently intend to license the technology to third
parties. Although the Company has held discussions with several U.S. and foreign
producers of disk drive platters concerning the supply of such platters, no
commitments with respect to availability, price or other terms have been made by
such platter manufacturers. If the Company commences commercial production,
capital requirements could be significant and the Company would probably be
required to issue debt or equity securities, which would increase the Company's
financial leverage or dilute earnings. It is possible that further analysis by
the Company, or by potential customers, will identify technical or economic
issues of which Ampex, at present, is unaware. Ampex is familiar with other
technologies, including magneto-resistive heads, that potential customers might
prefer over keepered media. Although Ampex believes, based on recent test
results, that keepered media can operate with magneto-resistive heads, it has
not yet conducted sufficient performance and other testing to ensure that the
two technologies can in fact be compatible in commercial production. In a high
technology industry such as data storage, other technology may be under
development, or may be developed in the future, that could be technically or
economically superior to keepered media.
If the Company's keepered media technology becomes commercially
successful, that portion of the Company's business may be materially dependent
on the Company's patents covering the technology. However, there can be no
assurance that patents currently held by Ampex, or that may be issued pursuant
to pending and future patent applications filed by Ampex, will not be
challenged, or that patent protection, in itself, would ensure the commercial
success of this program or would provide adequate protection against similar or
other technologies independently developed by industry competitors.
In view of the uncertainties associated with the development and
commercialization of keepered media, some of which are described above, it is
impossible to forecast when, or if, any commercial benefit will be realized by
the Company. Since prospects for keepered media are highly speculative, there is
a material risk that the market price of the Company's securities may experience
increased volatility, in addition to volatility that may result from factors
discussed above under "Volatility of Stock Price."
USE OF PROCEEDS
Unless otherwise indicated in the applicable Prospectus Supplement,
proceeds to the Company from the sale of the Common Stock offered hereby will be
added to the working capital of the Company and used for general corporate
purposes, which may include the acquisition of specialized testing and
production equipment for use in the Company's keepered media research and
development program, if required.
PLAN OF DISTRIBUTION
The Company may sell the Common Stock directly to one or more
purchasers or through one or more underwriters, brokers, dealers or agents from
time to time in one or more transactions on any exchange, in the
over-the-counter market, through third party trading systems or otherwise, at a
fixed price or prices, which may be changed, or at market prices prevailing at
the time of sale, at prices related to such prevailing market prices or at
negotiated prices. The Company may sell Common Stock as soon as practicable
after effectiveness of the Registration Statement, subject to market conditions
and other factors.
The Prospectus Supplement will set forth the terms of the offering of
the Common Stock, including (i) the name or names of any underwriters or agents
with whom the Company has entered into arrangements with respect to the sale or
issuance of Common Stock, (ii) the initial public offering or purchase price of
the Common Stock, (iii) any underwriting discounts, commissions and other items
constituting underwriters' compensation from the Company and any other
discounts, concessions or commissions allowed or reallowed or paid by any
underwriters to other dealers, (iv) any commissions paid to any agents, (v) the
net proceeds to the Company and (vi) any over-allotment options granted to such
underwriters or agents. In connection with the sale of shares of Common Stock,
underwriters may receive compensation from the Company or from purchasers of
shares of Common Stock, for whom they may act as agents, in the form of
discounts, concessions, or commissions. Underwriters may sell shares of Common
Stock to or through dealers, and such dealers may receive compensation in the
form of discounts, concessions, or commissions from the underwriters and/or
commissions from the purchasers for whom they may act as agents. Underwriters,
dealers, and agents that participate in the distribution of shares of Common
Stock may be deemed to be underwriters, and any discounts or commissions they
receive from the Company, and any profit on the resale of shares of Common Stock
they realize, may be deemed to be underwriting discounts and commissions under
the Securities Act.
Any shares of Common Stock sold pursuant to a Prospectus Supplement
will be listed on the American Stock Exchange, subject to official notice of
issuance.
Under agreements the Company may enter into, underwriters, dealers and
agents who participate in the distribution of shares of Common Stock may be
entitled to indemnification by the Company against certain liabilities,
including liabilities under the Securities Act.
Underwriters, dealers and agents may engage in transactions with, or
perform services for, or be customers of, the Company or affiliates of the
Company in the ordinary course of business.
Unless otherwise set forth in the Prospectus Supplement relating to the
issuance of Common Stock, the obligations of the underwriters to purchase such
Common Stock will be subject to certain conditions precedent and each of the
underwriters with respect to such Common Stock will be obligated to purchase all
of the Common Stock allocated to it if any such Common Stock is purchased. Any
initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
If so indicated in the applicable Prospectus Supplement, the Company
will authorize underwriters or other persons acting as the Company's agents to
solicit offers by certain institutions to purchase shares of Common Stock from
the Company pursuant to contracts providing for payment and delivery on a future
date. Institutions with which such contracts may be made include commercial and
savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and others, but in all cases such
institutions must be approved by the Company. The obligations of any purchaser
under any such contract will be subject to the condition that the purchase of
the shares of Common Stock shall not at the time of delivery be prohibited under
the laws of the jurisdiction to which such purchaser is subject. The
underwriters and such other agents will not have any responsibility in respect
of the validity or performance of such contracts.
LEGAL MATTERS
The validity, authorization and issuance of the Common Stock offered
hereby will be passed upon for the Company by Battle Fowler LLP (a limited
liability partnership which includes professional corporations), New York, New
York, who may rely, as to questions of California law and certain other matters,
upon an opinion of General Counsel to the Company. Battle Fowler LLP regularly
provides legal services to the Company and its affiliates. David D. Griffin, who
is of counsel to Battle Fowler LLP, holds 515,000 shares of Common Stock
directly, and is a limited partner in Newhill Partners, L.P., a partnership
which, through SHI, owns shares of Common Stock.
EXPERTS
The consolidated balance sheets as of December 31, 1995 and 1994 and
the consolidated statements of operations, stockholders' deficit and cash flows
for each of the three years in the period ended December 31, 1995, and
supplemental schedule, included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1995, have been audited by Coopers & Lybrand L.L.P.,
independent accountants, as set forth in their report included in such Annual
Report, and are incorporated herein by reference in reliance upon such report,
given upon the authority of said firm as experts in accounting and auditing.
No dealer, salesman or other person has been authorized to give any information
or to make any representation not contained or incorporated by reference in this
Prospectus. If given or made, such information or representation must not be
relied upon as having been authorized by the Company. This Prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, Common Stock
in any jurisdiction. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create an implication that there has
been no change in the affairs of the Company since the date hereof.
END
(Part 2 of 2) |
