Filed pursuant to Rule 424(b)(3)
Registration No. 333-71690
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES, AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED NOVEMBER 2, 2001
13,650,800 SHARES
INTERNET PICTURES CORPORATION
COMMON STOCK
The selling stockholders listed on page 9 are offering up to 13,650,800 shares
of our common stock. The shares are issuable upon conversion of our Series B
preferred stock, which the selling stockholders purchased from us in a private
placement in September, 2001. iPIX will not receive any proceeds from the sale
of the shares of common stock by the selling stockholders.
Our common stock is traded on the Nasdaq National Market under the symbol
"IPIX." On November 1, 2001, the reported last sale price of our common stock
was $2.10 per share.
We will not pay any underwriting discounts or commissions in this offering.
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 2.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
November 2, 2001
We have not authorized anyone to give you any information that differs from the
information in this prospectus. If you receive any different information, you
should not rely on it. We are offering to sell, and seeking offers to buy,
shares of our common stock only in jurisdictions where offers and sales are
permitted.
TABLE OF CONTENTS
Internet Pictures Corporation...............................................2
Risk Factors................................................................2
Forward-Looking Statements..................................................8
Use of Proceeds.............................................................8
Information about iPIX and this offering....................................8
Selling Stockholders........................................................9
Plan of Distribution.......................................................11
Legal Matters..............................................................13
Experts....................................................................14
-1-
INTERNET PICTURES CORPORATION
Internet Pictures Corporation, or iPIX, is a technology provider and the leader
in the delivery of dynamic imaging. Our end-to-end solutions include
full-service and self-service options for the capture, processing, hosting and
distribution of immersive, still and motion pictures. Our products and services
include Rimfire, an open imaging platform that enables Internet site end-users
to easily publish still digital media to the Internet with simple drag-and-drop
image submission. iPIX has developed patented technology for the creation of 360
degree by 360 degree immersive images in both still and video formats that
provide a complete field of view.
iPIX was incorporated in the state of Delaware on January 1, 1999. Our
headquarters are located at 3160 Crow Canyon Road, 4th Floor, San Ramon,
California 94583 with co-headquarters at 1009 Commerce Park Drive, Oak Ridge,
Tennessee 37830. Our telephone number is (925) 242-4000. We can be found on the
Internet at www.ipix.com. Information contained on our website is not a part of
this prospectus.
RISK FACTORS
You should carefully consider the risks and uncertainties described below and
all other information contained in this prospectus and incorporated by reference
before deciding to purchase shares of our common stock. The risks described
below are not the only risks we face. Additional risks that we do not yet know
or that we currently believe are immaterial may also impair our business
operations. If any of the events or circumstances described in the following
risks actually occurs, our business may suffer, the trading price of our common
stock may decline and you may lose all or a part of your investment.
OUR LIMITED OPERATING HISTORY AND CHANGE IN BUSINESS STRATEGY MAKES IT DIFFICULT
TO EVALUATE OUR BUSINESS
During the quarter ended March 31, 2001, we sold our full-service,
residential real estate business and completed a significant restructuring of
our company. We focused our business on generating higher margin revenue from
our Rimfire and iPIX immersive solutions and significantly reduced our operating
expenses and number of employees. As a result, we have a limited operating
history on which you can base an evaluation of our business and prospects. Our
prospects must be considered in the light of the risks, uncertainties, expenses
and difficulties frequently encountered by companies in their early stages of
development. To address these risks and uncertainties, we must, among other
things:
- increase our customer base for Rimfire services;
- maintain and enhance our brand and expand our immersive
product and service offerings;
-2-
- attract, integrate, retain and motivate qualified personnel;
and
- adapt to meet changes in our markets and competitive
developments.
We may not be successful in accomplishing these objectives.
WE ARE NOT PROFITABLE, AND WE WILL CONTINUE TO INCUR LOSSES
As of September 30, 2001, we had an accumulated deficit of $501
million. We have not achieved profitability, and we will continue to incur
losses. A substantial portion of our revenues for the quarter ended September
30, 2001 and our future revenues will be derived from transaction fees and
license fees from our Rimfire customers, particularly eBay Inc. In the future,
we may introduce new products and services and enhancements and improvements to
our current product and service offerings. We may have to increase our operating
expenses in order to increase our customer base, enhance our brand image and
support our growing infrastructure. In order for us to become profitable, we
must increase our revenues and gross profit margins sufficiently to cover
current and future operating expenses. If we fail to do so, we may never achieve
profitability or positive cash flows from operations. Although we believe our
current cash balances will provide adequate liquidity to fund our operations and
meet our other cash requirements until we can generate positive cash flows from
operations, there can be no assurance that our cash balances will be adequate
should unanticipated events occur.
OUR QUARTERLY RESULTS MAY FLUCTUATE, WHICH COULD MAKE FINANCIAL FORECASTING
DIFFICULT AND INCREASE VOLATILITY IN OUR COMMON STOCK
We expect our revenues and operating results to vary significantly from
quarter-to-quarter. As a result, quarter-to-quarter comparisons of our revenues
and operating results may not be meaningful. In addition, due to our limited
operating history and shift in business strategy, it may be difficult to predict
our future revenues and results of operations accurately. It is likely that, in
one or more future quarters, our operating results will fall below the
expectations of securities analysts and investors. If this happens, the trading
price of our common stock is likely to be materially and adversely affected.
WE RELY ON THIRD PARTY SYSTEMS TO PROVIDE OUR RIMFIRE SERVICE
We rely on certain third-party computer systems and third-party service
providers, including a third party Internet service provider, to host and
maintain our production services for all of our Rimfire customers. The
performance and availability of our Internet systems is critical to our business
and reputation. Any system failure, including network, software or hardware
failure that interrupts the delivery of Rimfire services or decreases our
responsiveness to our customers could be disruptive to our business. Our
Internet service provider does not guarantee that its Internet access will be
uninterrupted, error free or secure. Because our revenue from our Rimfire
service is transaction based, any interruption in Internet access will result in
a loss of revenue for the period that Internet access is unavailable.
OUR OPERATING RESULTS ARE HIGHLY DEPENDENT ON GENERATING RECURRING REVENUE FROM
OUR RIMFIRE SERVICE AND REVENUE FROM NEW MARKETS, AND WE MUST BE SUCCESSFUL IN
ADDING NEW RIMFIRE SERVICE CUSTOMERS
-3-
Substantially all of our recurring revenue is derived from transaction
fees generated by our Rimfire service. In particular, eBay is our largest
Rimfire customer and represented approximately 16% of total revenue and 59% of
total Rimfire service revenue for the nine months ended September 30, 2001. We
believe that transaction fees from eBay will continue to increase as more eBay
customers utilize our service on the eBay auction website. We must continue to
add Rimfire customers in order to increase revenues and diversify our sources of
revenue. We will also be dependent on our ability to successfully develop our
product and service offerings for new markets, such as security and observation,
business-to-business (B2B) and classified advertising. In order to achieve and
maintain profitability, we must be successful in generating revenue from sales
of our product and service offerings into existing and new markets. In addition,
any significant decrease in demand for our picture services on the eBay auction
site could have material adverse effect on our revenue and our ability to
achieve profitability. We must also continue to improve and enhance our Rimfire
service. If we fail to do so in a timely manner, or if we suffer a decrease in
demand for our products and services, our revenue will decrease.
OUR SUCCESS DEPENDS ON OUR ABILITY TO PROTECT OUR INTELLECTUAL PROPERTY
We regard our intellectual property as critical to our success, and we
rely on trademark, copyright and patent law, trade secret protection and
confidentiality and/or license agreements with our employees, customers,
partners and others to protect our proprietary rights. If we are not successful
in protecting our intellectual property, there could be a material adverse
effect on our business.
While we believe that our issued patents and pending patent
applications help to protect our business, there can be no assurance that:
- any patent can be successfully defended against challenges by
third parties;
- pending patent applications will result in the issuance of
patents;
- our competitors or potential competitors will not devise new
methods of competing with us that are not covered by our
patents or patent applications;
- new prior art will not be discovered which may diminish the
value of or invalidate an issued patent; or
- a third party will not have or obtain one or more patents that
prevent us from practicing features of our business or will
require us to pay for a license to use those features.
Also, our patents, service marks or trademarks may be challenged and
invalidated or circumvented. In addition, we are exposed to infringement of our
intellectual property in foreign markets because our intellectual property is
protected under United States laws that may not extend to foreign uses.
-4-
We have been involved in litigation relating to the protection of
intellectual property rights and could be involved in future litigation as third
parties develop products that we believe infringe on our patents and other
intellectual property rights. We have experienced attempts to misappropriate our
technology, and we expect those attempts may continue. We are currently involved
in litigation in which our rights to technology have been challenged. The cost
of such litigation or the determination against us in this type of lawsuit could
have a material adverse effect on our business.
IF WE LOSE KEY MEMBERS OF OUR PERSONNEL, OUR FUTURE SUCCESS COULD BE LIMITED
Our future success depends on our ability to attract and retain key
management, engineering, technical and other personnel. In addition, we must
recruit additional qualified management, engineering, technical and marketing
and sales and support personnel for our operations. Competition for this type of
personnel is intense, and we may not be successful in attracting or retaining
personnel. The loss of the services of one or more members of our management
group or other key employees or the inability to hire additional qualified
personnel will limit our ability to grow our business.
OUR SUCCESS IS DEPENDENT UPON OUR ABILITY TO ADAPT TO TECHNOLOGICAL CHANGES, AND
IF WE FAIL TO DO SO, OUR OFFERINGS MAY BECOME OBSOLETE
We compete in a market characterized by rapidly changing technology,
evolving industry standards, frequent new service and product announcements,
introductions and enhancements and changing customer demands. These market
characteristics are intensified by the emerging nature of the Internet and the
multitude of companies offering Internet-based products and services. Thus, our
success depends on our ability to adapt to rapidly changing technologies, to
adapt our offerings to evolving industry standards and to continually improve
the performance, features and reliability of our offerings in response to
competitive products and shifting demands of the marketplace. In addition,
widespread changes in Internet, networking or telecommunications technologies or
other technological alterations could require substantial expenditures to modify
our products, services or infrastructure. Failure to adapt to new technology in
any of these areas could have a material adverse effect on our business, results
of operations and financial condition.
WE MAY NOT BE SUCCESSFUL IN EXPANDING OUR BUSINESS INTO INTERNATIONAL MARKETS
A part of our long-term strategy has been to expand into international
markets. The success of any additional foreign operations will be substantially
dependent upon our entering and succeeding in those markets. We may experience
difficulty in managing international operations as a result of competition,
technical problems, distance, language or cultural differences.
As we manage our international efforts, we will be subject to a number
of risks, including the following:
-5-
- failure of foreign countries to rapidly adopt the Internet,
digital imaging or other required technologies;
- unexpected changes in regulatory requirements, especially
regarding the Internet;
- slower payment and collection of accounts receivable than in
our domestic market; and
- political and economic instability.
We cannot assure you that we will be able to successfully market our products in
foreign markets.
WE ARE SUSCEPTIBLE TO BREACHES OF ONLINE COMMERCE SECURITY
A party able to circumvent our security measures could misappropriate
proprietary database information or cause interruptions in operations. As a
result, we may need to expend significant capital and other resources to protect
against security breaches or to alleviate problems caused by security breaches.
This additional expense could harm our business, financial condition and results
of operation.
OUR CERTIFICATE OF INCORPORATION AND BYLAWS CONTAIN ANTI-TAKEOVER PROVISIONS
THAT MAY MAKE IT MORE DIFFICULT OR EXPENSIVE TO ACQUIRE US IN THE FUTURE, WHICH
COULD NEGATIVELY AFFECT OUR STOCK PRICE
Our amended and restated certificate of incorporation and amended and
restated bylaws and applicable provisions of Delaware law contain several
provisions that may make it more difficult for a third party to acquire control
of us without the approval of our board of directors. In addition, in October of
2000, our board of directors approved a shareholder rights plan that has the
effect of making an acquisition of us prohibitively expensive unless our board
of directors approves of the acquisition. The provisions of our certificate and
bylaws and the Delaware General Corporation Law may make it more difficult or
expensive for a third party to acquire a majority of our outstanding voting
common stock or delay, prevent or deter a merger, acquisition, tender offer or
proxy contest, which may negatively affect our stock price.
BECAUSE OUR PRODUCT AND SERVICE OFFERINGS ARE INTENDED TO ENHANCE INTERNET
COMMERCIAL TRANSACTIONS, THE SUCCESS OF OUR BUSINESS WILL BE DEPENDENT UPON
CONTINUED GROWTH OF INTERNET COMMERCE
Our products and services are intended to enhance and facilitate
commercial transactions over the Internet. Our future revenues are substantially
dependent upon the widespread acceptance and use of the Internet and other
online services as a medium for commerce by consumers and sellers. If continued
acceptance and growth of Internet use does not occur, it could have a material
adverse effect on our business.
-6-
The Internet has experienced, and is expected to continue to
experience, significant growth in the number of users and in the amount of
traffic. Continued development and maintenance of the Internet's infrastructure
to handle this increased traffic must continue. In addition, timely development
of complimentary products, such as high-speed modems, providing reliable
Internet access and services will also be required.
The Internet has experienced a variety of outages and other delays as a
result of computer viruses and other damages to portions of its infrastructure.
Outages and delays, and infections by computer viruses, are likely to continue
and affect the level of Internet usage generally. Such outages and delays will
affect processing of transactions on Rimfire integrated websites. We will
experience reduction in revenues and increased expenses as a result of such
outages and delays. We will be required to continually make capital investments
to enhance our infrastructure and protect our services from computer viruses and
other outages and delays on the Internet. The cost of such improvements could
have a material adverse effect on our business.
OUR MARKET IS HIGHLY COMPETITIVE, AND OUR BUSINESS MAY SUFFER IF WE ARE UNABLE
TO COMPETE SUCCESSFULLY
The market for our immersive products and our Rimfire products and
services are new and rapidly evolving. We currently compete with other providers
of image management services, such as Kodak and MGI Software. The market for
immersive products and services is intensely competitive. We compete with other
providers of immersive imaging technology, such as Apple and BeHere Corporation.
Each of these companies develops and markets products and services similar to
ours. We expect additional competition from other emerging and established
companies. There can be no assurance that the Company's current and potential
competitors will not develop products that are more effective than our current
or future products, or that our products and technology will not be rendered
obsolete by such developments. Some of our competitors have longer operating
histories, greater name recognition and significantly greater financial,
technical and marketing resources. As a result, they may be able to adapt more
quickly to new or emerging technologies and changes in customer requirements or
devote greater resources to promotion and sale of their products than us. Our
business will suffer if we are unable to compete effectively.
CONCENTRATED CONTROL OVER OUR VOTING STOCK COULD ADVERSELY AFFECT STOCKHOLDERS
As of September 30, 2001, the holders of our Series B Preferred Stock
beneficially owned approximately 62% of our outstanding voting stock, assuming
an eight-to-one conversion ratio. As a result, these stockholders are able to
exercise control over certain matters requiring stockholder approval, including
the election of directors and approval of significant corporate transactions.
Such control could discourage others from initiating potential merger, takeover
or other change of control transactions. As a result, the market price of our
common stock could be adversely affected.
-7-
THE IMPACT OF CHANGES IN GLOBAL ECONOMIC CONDITIONS ON OUR CUSTOMERS MAY CAUSE
US TO FAIL TO MEET EXPECTATIONS, WHICH WOULD NEGATIVELY IMPACT THE PRICE OF OUR
STOCK
Our operating results can vary significantly based upon the impact of
changes in global and domestic economic conditions on our customers. The
domestic and economic environment in 2001 is more uncertain than in recent
periods. Additionally, the September 11, 2001 terrorist attacks in New York
City, Washington, D.C. and Pennsylvania, and the United States' military
response, has further affected the economic environment. At the time of the
attacks, capital investment by businesses, particularly investments in new
technology, had been experiencing substantial weakness. This weakness was
aggravated by the September 11 attacks. Economic and a political uncertainty
resulting from the attacks and the U.S. military response could result in
further decline in new technology investments. The effects of these actions
could cause customers to defer or reconsider purchasing products or services if
they experience a downturn in their business or if there is a downturn in the
general economy. Such events could have a material adverse effect on our
business.
FORWARD-LOOKING STATEMENTS
This prospectus contains statements about future events and expectations which
are characterized as forward-looking statements. Forward-looking statements are
based upon management's beliefs, assumptions and expectations of our future
economic performance, taking into account the information currently available to
them. These statements are not statements of historical fact. Forward-looking
statements involve risks and uncertainties that may cause actual results,
performance or financial condition to be materially different from the
expectations of future results, performance or financial condition we express or
imply in any forward-looking statements. Factors that could contribute to these
differences include those discussed in "Risk Factors" and other sections of this
prospectus.
The words believe, may, will, should, anticipate, estimate, expect, intends,
objective or similar words or the negatives of these words are intended to
identify forward-looking statements. We qualify any forward-looking statements
entirely by these cautionary factors.
USE OF PROCEEDS
We will not receive any of the net proceeds from the sale of shares of common
stock in this offering by the selling stockholders.
INFORMATION ABOUT IPIX AND THIS OFFERING
You should rely only on the information provided or incorporated by reference in
this prospectus. We have not authorized any person to provide you with different
information. No offer of these securities is being made in any state where the
offer is not permitted. You should not assume that the information in this
prospectus or any prospectus supplement is accurate as of any date other than
the date on the front of the document.
-8-
We have filed with the SEC a resale registration statement on Form S-3 to
register the common stock offered by this prospectus. However, this prospectus
does not contain all of the information contained in the registration statement
and the exhibits to the registration statement. We strongly encourage you to
carefully read the registration statement and the exhibits to the registration
statement.
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. You can request copies of these documents by contacting the
SEC and paying a fee for the copying cost. You may call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. Our SEC
filings are also available to the public from the SEC's website at www.sec.gov.
The SEC allows us to "incorporate by reference" the information contained in
documents that we file with them, which means that we can disclose important
information to you by referring to those documents. The information incorporated
by reference is considered to be part of this prospectus. Information in this
prospectus supersedes information incorporated by reference that we filed with
the SEC prior to the date of this prospectus, while information that we file
later with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings we
will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934.
The following documents filed with the SEC are incorporated by reference in this
prospectus:
1. Our Annual Report, as amended, on Form 10-K for the year ended
December 31, 2000;
2. Our Quarterly Reports on Form 10-Q for the quarters ended
March 31, 2001, June 30, 2001 and September 30, 2001;
3. Our Current Reports, on Form 8-K filed on January 29, 2001,
May 14, 2001, May 29, 2001 and October 3, 2001; and
4. The description of our common stock set forth in our
registration statement on Form 8-A, filed with the SEC on June
14, 1999.
We will furnish without charge to you, on written or oral request, a copy of any
or all of the documents incorporated by reference, including exhibits to these
documents. You should direct any requests for documents to Internet Pictures
Corporation, Attention; Investor Relations Officer, 3160 Crow Canyon Road, 4th
Floor, San Ramon, California 94583; telephone: (925) 242-4000.
SELLING STOCKHOLDERS
We are registering the shares covered by this prospectus on behalf of the
selling stockholders named in the table below. We issued our Series B preferred
stock, which preferred stock is convertible into our common stock, to the
selling stockholders in a private placement transaction. We have registered the
shares of common stock to permit the selling stockholders and their pledgees,
donees, transferees or other successors-in-interest that receive their shares
from the
-9-
selling stockholders as a gift, partnership distribution or other non-sale
related transfer after the date of this prospectus to resell the shares.
The following table sets forth the name of the selling stockholders, the number
of shares owned by each of them, the number of shares that may be offered under
this prospectus and the number of shares of our common stock beneficially owned
by each of the selling stockholders as of October 1, 2001. After this offering
is completed and assuming all of the shares are sold, none of the selling
stockholders will own any shares of our common stock, except eBay, which will
beneficially own 40,000 shares of our common stock (which is less than 1% of our
total outstanding shares). During the years 2000 and 2001, we provided eBay with
Rimfire services pursuant to a written visual content services agreement. The
number of shares in the column "Number of Shares Being Offered" represents all
of the shares that the selling stockholders may offer under this prospectus and
is based on a ten-for-one conversion ratio of common stock to Series B preferred
stock. The selling stockholders may sell some, all or none of their shares. We
do not know how long the selling stockholders will hold the shares before
selling them, and we currently have no agreements, arrangements or understanding
with the selling stockholders regarding the sale of any of their shares. The
shares offered by this prospectus may be offered from time to time by the
selling stockholders.
The following table presents information regarding the beneficial ownership of
the common stock as of October 1, 2001 by each of the selling stockholders. The
table includes all shares of common stock issuable within 60 days of October 1,
2001 upon the exercise of options and other rights beneficially owned by the
indicated stockholders on that date. Beneficial ownership is determined under
the rules of the Securities and Exchange Commission and includes voting and
investment power with regard to the shares. To our knowledge, except under
applicable community property laws or as otherwise indicated, the persons named
in the table have sole voting and sole investment control with regard to all
shares beneficially owned. The applicable percent ownership for each stockholder
before the offering is based on 6,669,201 shares of common stock outstanding as
of October 1, 2001, together with applicable ownership of securities for that
stockholder. Shares of common stock issuable upon conversion of Series B
preferred stock and exercise of warrants and options which are convertible or
exercisable within 60 days of October 1, 2001 are deemed outstanding for the
purpose of computing the percent ownership of the person holding those
securities but are not deemed outstanding for computing the percent ownership of
any other person.
-10-
Maximum Shares
Beneficially Owned
Prior to Offering
--------------------
-----------------------------------------------------------------------------
Name Number Percent(%) Number of
Shares
Being
Offered
-----------------------------------------------------------------------------
Image Investor Portfolio, a 8,780,300 56.7 8,780,300
separate series of Memphis Angels, LLC
-----------------------------------------------------------------------------
National Fire & Casualty 125,000 1.8 125,000
-----------------------------------------------------------------------------
New South Capital Management, Inc., 75,000 1.1 75,000
Profit Sharing Plan
-----------------------------------------------------------------------------
PhotoOp, LLC 875,000 11.6 875,000
-----------------------------------------------------------------------------
New South Special Equities, L.P. 925,000 12.1 925,000
-----------------------------------------------------------------------------
First Avenue Partners, L.P. 1,750,000 20.7 1,750,000
-----------------------------------------------------------------------------
eBay Inc. 1,040,000 13.4 1,000,000
-----------------------------------------------------------------------------
1995 Dalton Trust 50,000 * 50,000
-----------------------------------------------------------------------------
John S. Cannon 50,000 * 50,000
-----------------------------------------------------------------------------
Brian Walsh 12,500 * 12,500
-----------------------------------------------------------------------------
Cooley Godward, LLP 8,000 * 8,000
-----------------------------------------------------------------------------
TOTALS 13,690,800 13,650,800
* less than 1%
PLAN OF DISTRIBUTION
The selling stockholders may sell the shares from time to time. The selling
stockholders will act independently of us in making decisions regarding the
timing, manner and size of each sale. The sales may be made on one or more
exchanges or in the over-the-counter market or otherwise, at prices and at terms
then prevailing or at prices related to the then current market price, or in
privately negotiated transactions. The selling stockholders may effect these
transactions by selling the shares to or through broker-dealers. The selling
stockholders may sell their shares in one or more of, or a combination of:
- a block trade in which the broker-dealer will attempt to sell
the shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction;
- purchase by a broker-dealer as principal and resale by a
broker-dealer for its account under this prospectus;
- an exchange distribution in accordance with the rules of an
exchange;
- ordinary brokerage transactions and transactions in which the
broker solicits purchasers; and
- privately negotiated transactions.
-11-
To the extent required, this prospectus may be amended or supplemented from time
to time to describe a specific plan of distribution. If the plan of distribution
involves an arrangement with a broker-dealer for the sale of shares through a
block trade, special offering, exchange distribution or secondary distribution
or a purchase by a broker or dealer, the amendment or supplement will disclose,
if required at the time:
- the name of the selling stockholder and of the participating
broker-dealer(s);
- the number of shares involved;
- the price at which the shares were sold;
- the commissions paid or discounts or concessions allowed to
the broker-dealer(s), where applicable;
- that such broker-dealer(s) did not conduct any investigation
to verify the information set out or incorporated by reference
in this prospectus; and
- other facts material to the transaction.
From time to time, the selling stockholders may transfer, pledge, donate or
assign their shares of common stock to lenders or others and each of such
persons will be deemed to be a "selling stockholder" for purposes of this
prospectus. The number of shares of common stock beneficially owned by each of
the selling stockholders will decrease as and when one takes such actions. The
plan of distribution for a selling stockholder's shares of common stock sold
under this prospectus will otherwise remain unchanged, except that the
transferees, pledgees, donees or other successors will be selling stockholders
hereunder. In this instance, we will file a supplement to this prospectus
including the transferee as a selling stockholder.
Except as prohibited by a preferred stockholders' agreement entered into by the
selling stockholders, the selling stockholders may enter into hedging
transactions with broker-dealers in connection with distributions of the shares
or otherwise. In these transactions, broker-dealers may engage in short sales of
the shares in the course of hedging the positions they assume with a selling
stockholder. The selling stockholders also may sell shares short and redeliver
the shares to close out short positions. The selling stockholders may enter into
option or other transactions with broker-dealers that require the delivery to
the broker-dealer of the shares. The broker-dealer may then resell or otherwise
transfer the shares under this prospectus. The selling stockholders also may
loan or pledge the shares to a broker-dealer. The broker-dealer may sell the
loaned shares, or upon a default, the broker-dealer may sell the pledged shares
under this prospectus.
In effecting sales, broker-dealers engaged by a selling stockholder may arrange
for other broker-dealers to participate in the resales. Broker-dealers or agents
may receive compensation in the form of commissions, discounts or concessions
from a selling stockholder. Broker-dealers or agents may also receive
compensation from the purchasers of the shares for whom they act as agents or to
whom they sell as principals, or both. Compensation as to a particular
broker-dealer might be in excess of customary commissions and will be in amounts
to be negotiated in connection with the sale. A broker-dealer or agent and any
other participating broker-dealer or a selling stockholder may be deemed to be
an "underwriter" within the meaning of Section 2(11) of the Securities Act, in
connection with sales of the shares. Accordingly, any commission,
-12-
discount or concession received by them and any profit on the resale of the
shares purchased by them may be deemed to be underwriting discounts or
commissions under the Securities Act. The selling stockholders may agree to
indemnify any broker-dealer that participates in transactions involving sales of
shares against certain liabilities, including liabilities arising under the
Securities Act. Because a selling stockholder may be deemed to be an
"underwriter" within the meaning of Section 2(11) of the Securities Act, the
selling stockholder will be subject to the prospectus delivery requirements of
the Securities Act. In addition, any securities covered by this prospectus that
qualify for sale under Rule 144 promulgated under the Securities Act may be sold
under Rule 144 rather than under this prospectus. The selling stockholders do
not have arrangements with any underwriters or broker-dealers regarding the sale
of their securities. There is no underwriter or coordinating broker acting in
connection with the proposed sale of shares by the selling stockholders.
The shares will be sold only through registered or licensed brokers or dealers
if required under applicable state securities laws. In addition, in some states
the shares may not be sold unless they have been registered or qualified for
sale in the applicable state or an exemption from the registration or
qualification requirement is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the shares may not simultaneously engage in
market making activities with respect to our common stock for a period of two
business days prior to the commencement of the distribution. In addition, the
selling stockholders will be subject to applicable provisions of the Exchange
Act and the associated rules and regulations under the Exchange Act, including
Regulation M, which provisions may limit the timing of purchases and sales of
shares of our common stock by the selling stockholders. We will make copies of
this prospectus available to the selling stockholders and have informed the
selling stockholders of the need to deliver copies of this prospectus to
purchasers at or prior to the time of any sale of the shares.
We will bear all costs, expenses and fees in connection with the registration of
the shares. The selling stockholders will pay all commissions and discounts, if
any, attributable to the sales of the shares. The selling stockholders may agree
to indemnify any broker-dealer or agent that participates in transactions
involving sales of the shares against specific liabilities, including
liabilities arising under the Securities Act. Pursuant to a registration rights
agreement, we have agreed to indemnify the selling stockholders against specific
liabilities in connection with the offering of the shares, including liabilities
arising under the Securities Act.
We have agreed to maintain the effectiveness of this registration statement
until the time as all the shares have been sold by the selling stockholders
pursuant to a registration statement or pursuant to Rule 144 under the
Securities Act. The selling stockholders may sell all, some or none of the
shares offered by this prospectus.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for us by
Baker, Donelson, Bearman & Caldwell, a professional corporation.
-13-
EXPERTS
The financial statements as of December 31, 2000 and 1999 and for each of the
three years in the period ended December 31, 2000 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 as
described in Note 1 to the financial statements) of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
-14-