-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Neci0ofFd+sYkvD64Vk6fEgkhc3Jr3mhgRKHehg1FjiGMIMuy2Dn1hl4yodvDKFA L38iXfDxRNZS6J4s9yl2kA== 0000922409-95-000034.txt : 19951130 0000922409-95-000034.hdr.sgml : 19951130 ACCESSION NUMBER: 0000922409-95-000034 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 19951127 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MICROCOM INC CENTRAL INDEX KEY: 0000795571 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE & TELEGRAPH APPARATUS [3661] IRS NUMBER: 042710644 STATE OF INCORPORATION: MA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 033-64587 FILM NUMBER: 95596386 BUSINESS ADDRESS: STREET 1: 500 RIVER RIDGE DR CITY: NORWOOD STATE: MA ZIP: 02062 BUSINESS PHONE: 6175511000 S-3 1 As filed with the Securities and Exchange Commission on November 27, 1995 Registration No. 33- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 MICROCOM, INC. (Exact name of registrant as specified in its charter) Massachusetts No. 04-2710644 (State or other (IRS Employer jurisdiction of Identification No.) incorporation or organization) 500 River Ridge Drive Norwood, Massachusetts 02062-5028 (617) 551-1000 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) Roland D. Pampel President and Chief Executive Officer MICROCOM, INC. 500 River Ridge Drive Norwood, Massachusetts 02062-5028 (617) 551-1000 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copy to: WILLIAM C. ROGERS, ESQ. Choate, Hall & Stewart Exchange Place 53 State Street Boston, Massachusetts 02109 (617) 248-5000 Approximate date of commencement of proposed sale to the public: From time to time or at one time after effective date of this Registration Statement. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, check the following box. / / If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. / X / If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of earlier effective registration statement for the same offering. / / ______________ If this Form is a post-effective amendment filed pursuant to a 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 the prospectus is expected to be made pursuant to Rule 434, please check the following box. / / CALCULATION OF REGISTRATION FEE Proposed Proposed Title of Each Maximum Maximum Class of Offering Aggregate Amount of Securities to Amount to be Price Per Offering Registration be Registered Registered Unit(1) Price(1) Fee _____________ ____________ __________ __________ _____________ Common Stock, par value $.01 308,469 $23.9375 $7,383,976.69 $2,546.20 per share shares (1) Estimated solely for the purposes of calculating the registration fee pursuant to Rule 457(c) based on the average of the high and low sales prices of Microcom, Inc. Common Stock as reported on the Nasdaq National Market on November 17, 1995. 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. PROSPECTUS SUBJECT TO COMPLETION 308,469 Shares MICROCOM, INC. Common Stock The Prospectus relates to the resale of up to 308,469 shares (the "Shares") of Common Stock, $.01 par value per share, of Microcom, Inc. (the "Company" or "Microcom") held by certain shareholders of the Company (the "Selling Shareholders"). _____________________ THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. FOR A DISCUSSION OF CERTAIN FACTORS WHICH SHOULD BE CONSIDERED IN CONNECTION WITH THE PURCHASE OF THESE SECURITIES, SEE "RISK FACTORS" BEGINNING ON PAGE 5. _____________________ It is anticipated that the 266,429 Shares held by The Parthenon Group, Inc. ("Parthenon"), one of the Selling Shareholders, will be distributed to certain of Parthenon's current and former employees as soon as practicable after the date of this Prospectus as compensation for employment services rendered. The Selling Shareholders and their agents, donees, distributees, pledgees and other successors in interest may offer and sell the remainder of the Shares from time to time in one or more transactions on The Nasdaq Stock Market, or otherwise, at market prices then prevailing or in negotiated transactions. The Shares may also be sold pursuant to option, hedging or other transactions with broker-dealers. The Shares may also be offered in one or more underwritten offerings. The underwriters in an underwritten offering, if any, and the terms and conditions of any such offering will be described in a supplement to this Prospectus. See "Selling Shareholders" and "Plan of Distribution." The Company will not receive any of the proceeds from the sale of the Shares by the Selling Shareholders. See "Use of Proceeds". The Common Stock of the Company is traded on the National Market of The Nasdaq Stock Market (the "Nasdaq National Market") under the symbol "MNPI". On November ___, 1995, the last reported sale price of Common Stock on the Nasdaq National Market was $___ per share. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ___________________ The date of this Prospectus is November __, 1995. AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Such reports, proxy statements and other information filed by the Company with the Commission pursuant to the informational requirements of the Exchange Act may be inspected and copied at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's regional offices located at Seven World Trade Center, 13th Floor, New York, New York 10048, and at Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials also may be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The Common Stock of the Company is traded on the Nasdaq National Market. Reports, proxy statements and other information concerning the Company also may be inspected at the National Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006. The Company has filed with the Commission a Registration Statement on Form S-3 under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the Common Stock offered hereby. This Prospectus does not contain all of the information set forth in the Registration Statement and the exhibits and schedules filed therewith. For further information with respect to the Company and the Common Stock offered hereby, reference is hereby made to such Registration Statement and to the exhibits and schedules filed therewith. Statements contained in this Prospectus regarding the contents of any agreement or other document are not necessarily complete, and in each instance reference is made to the copy of such agreement or document filed 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 thereto, may be inspected without charge at the principal office of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of all or any part thereof may be obtained from such office upon payment of the prescribed fees. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed by the Company with the Commission (File No. 0-14805) are incorporated herein by reference: (1) the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1995; (2) the Company's interim reports on Form 10-Q for the fiscal quarters ended June 30, 1995 and September 30, 1995; and (3) the Company's Registration 2 Statement on Form 8-A filed on April 28, 1987 registering the Company's Common Stock under Section 12(g) of the Exchange Act. All documents filed by the Company with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date hereof and prior to the termination of the offering of the Common Stock registered hereby shall be deemed to be incorporated by reference into this Prospectus and to be a part hereof from the date of filing of such documents. Any statements contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. The Company will provide without charge to each person to whom this Prospectus is delivered, upon a written request of such person, a copy of any or all of the foregoing documents incorporated by reference into this Prospectus (other than exhibits to such documents, unless such exhibits are specifically incorporated by reference into such documents). Requests for such copies should be directed to the Chief Financial Officer of the Company, 500 River Ridge Drive, Norwood, Massachusetts 02062-5028, Telephone: (617) 551-1000. THE COMPANY The Company is a leading provider of remote network access solutions. The Company's products enable users to access and communicate with on-line computer networks, such as the Internet, America Online, CompuServe and Prodigy, and corporate networks from remote locations. Microcom provides its customers with remote network access management and security capabilities, and high quality, reliable products that are easy to install and use. The Company was founded in 1980 as a developer of data communications software, high performance modems and related technologies. In the early 1990s, the Company responded to changes in the data communications industry by undertaking a series of strategic initiatives and restructurings designed to reposition the Company to address the needs of the emerging remote network access markets. These initiatives included the development of products with remote network access functionality, divestitures of non-core products, a restructuring of the worldwide sales organization, the hiring of a new Chief Executive Officer and the acquisition of Integrated Services Digital Network (ISDN) product technologies. By implementing these initiatives and by leveraging its technology and expertise, the Company has developed a broad range of remote network access 3 products for central site network managers and remote users. The Company believes that its recent results of operations reflect the ongoing implementation of these initiatives. Microcom's products serve both central site network managers and individual remote users. Products designed for the central site include the High Density Management System (HDMS) -- a dial-up access management system; and LANexpress -- remote local area network (LAN) access systems which include expressWATCH, a comprehensive remote network access management solution. Products designed for the individual remote user include high performance V.34 (28.8 Kbps) PCMCIA, desktop and other modems; Carbon Copy remote control/remote PC access software; LANexpress Remote client software, a remote node and remote control LAN access product; and ISDN terminal adapters. The Company's customers include (i) Internet and on-line service network access providers, such as Sprint Corporation, (ii) "Corporate 2000" companies such as American Airlines, Inc., Blockbuster Entertainment Corporation, NYNEX Corporation and State Farm Insurance Company, (iii) large international corporations, (iv) governmental agencies and universities and (v) individual remote users seeking to access the Internet, on-line services and corporate networks. The Company distributes its products through direct sales and multiple indirect channels, including value added resellers (VARs), distributors and original equipment manufacturers (OEMs) in the United States and international markets. Microcom's strategy is to continue to be a leading provider of remote network access solutions and to capitalize on the emerging trends in this market. The key components of the Company's strategy are as follows: Continue Focus on Remote Network Access Market by developing new products and enhancements to existing products to meet or exceed the evolving requirements of both the central site network manager and the remote user. Maintain Technology Leadership by investing in research and development to enhance existing products, develop new products, and respond to emerging technologies in a cost effective and timely manner. Leverage Existing Customer Base by aggressively marketing new products and enhancements to existing customers and utilizing this installed base as references for new customers, particularly telecommunications companies. 4 Develop and Expand Strategic Relationships with telecommunications companies, equipment providers, OEMs and software vendors to enhance the Company's product development activities and leverage shared technologies and joint marketing efforts. Expand Worldwide Distribution to develop further demand for remote network access products both domestically and internationally. MICROCOM, the Microcom logo, MNP and TravelPorte are registered trademarks of the Company and Advanced Parallel Technology, APT, Carbon Copy, DeskPorte, DeskPorte FAST, expressWATCH, High Density Management System, HDMS, Intelligent Network Controller, INC, LANexpress, Microcom Networking Protocol and TravelPorte FAST are trademarks of the Company. This Prospectus and the documents incorporated by reference herein also include trade names and trademarks of companies other than Microcom. The Company's principal executive offices are located at 500 River Ridge Drive, Norwood, Massachusetts 02062-5028, and its telephone number is (617) 551-1000. RISK FACTORS In addition to the other information contained in this Prospectus and in the documents incorporated herein by reference (see "Incorporation of Certain Documents by Reference" above), the following factors should be considered carefully in evaluating an investment in the Common Stock. New Product Development and Rapid Technological Change The market for Microcom's products is characterized by rapidly changing technology, evolving industry standards and frequent introductions of new products and enhancements. Microcom's future success will depend in part on its ability to enhance its existing products and to introduce new products on a timely basis to meet and adapt to changing customer requirements, evolving industry standards and emerging technologies. There can be no assurance that Microcom will be successful in developing, manufacturing and marketing new products or product enhancements that respond to technological changes or evolving industry standards, that the Company will not experience difficulties that could delay or prevent the successful development, introduction and marketing of these products or that its new products will adequately meet the requirements of the marketplace and achieve market acceptance. If the Company is unable, for technological or other reasons, to develop new products or enhancements of existing products in a timely manner in response to changing market conditions or 5 customer requirements, the Company's business, results of operations and financial condition would be materially and adversely affected. In addition, there can be no assurance that services, products or technologies developed by others will not render Microcom's products or technologies uncompetitive or obsolete. The introduction of new or enhanced products also requires the Company to manage the transition from older products in order to minimize disruption in customer ordering patterns, avoid excessive levels of older product inventories and ensure that adequate supplies of new products can be delivered to meet customer demand. There can be no assurance that the Company will successfully manage the transition to new products. The failure to manage any such transition successfully could have a material adverse effect on the Company's business, results of operations and financial condition. Highly Competitive Environment The market for remote network access products is highly competitive. In the central site remote network access market, the Company competes with remote LAN access server vendors such as Shiva Corporation, Digital Communications Associates, Inc., Novell, Inc. and 3Com Corporation and vendors of dial-up access management systems such as U.S. Robotics Corporation, Primary Access Corporation (recently acquired by 3Com Corporation) and Motorola, Inc. The Company also faces increasing competition from operating system (OS) and network operating system (NOS) vendors such as Microsoft Corporation, Novell, Inc. and International Business Machines Corporation who are including remote access capabilities in their products. In the remote site personal computer (PC) communications software market, the Company competes with a number of providers of remote control, file transfer and remote LAN access software, including Symantec Corporation, Stac Electronics, Inc. and Shiva Corporation. The Company's remote site modems compete with those of U.S. Robotics Corporation, Hayes Microcomputer Products, Inc. and Practical Peripherals, Inc. Increased competition could result in price reductions and loss of market share which would materially and adversely affect Microcom's business, results of operations and financial condition. The Company believes that its ability to compete successfully depends on a number of factors, including price, product features, product quality, performance and reliability, name recognition, international certification, experienced sales, marketing and service organizations, development of new products and enhancements, evolving industry standards and announcements by competitors. Many of Microcom's current and potential competitors have significantly greater financial, marketing, technical and other resources than Microcom. As a result, they may be able to respond more quickly to new or emerging technologies and changes in customer requirements, or to devote greater resources to the development, promotion and sale of their products than the 6 Company. The Company also expects competition to increase as a result of industry consolidations. In addition, current and potential competitors have established or may establish cooperative relationships among themselves or with third parties to address the remote network access needs of the Company's prospective customers. Accordingly, it is possible that new competitors or alliances among competitors may emerge and rapidly acquire significant market share. There can be no assurance that Microcom will be able to continue to compete successfully with existing or new competitors or that competitive pressures faced by the Company would not materially and adversely affect its business, results of operations or financial condition. Sales to Telecommunications Carriers; Customer Concentration As part of its sales and marketing strategy, Microcom is seeking to increase the sales of its central site remote network access products to telecommunications carriers and affiliated entities. These entities usually have long purchasing cycles and extensive vendor qualification requirements. Accordingly, sales efforts to such entities typically require significant investments of time and resources with no assurance that such efforts will be successful. Sales by Microcom to Sprint Corporation ("Sprint") accounted for 13% and 24% of net sales in fiscal 1994 and 1995, respectively, and 15% in the first six months of fiscal 1996. Sprint is not obligated to make any minimum level of future purchases from the Company or to provide the Company with binding forecasts of product purchases for any future period. While the Company expects that Sprint will continue to be a significant customer, the Company anticipates that net sales to Sprint in fiscal 1996 will be significantly less than in fiscal 1995. Although the Company has recently established a relationship with another major telecommunications carrier, there can be no assurance that the Company will make any significant sales to such carrier or that sales to it and other telecommunications carriers will offset any decline in sales to Sprint. The failure to achieve and maintain significant sales to telecommunications carriers or to offset any decline in sales to Sprint would have a material adverse effect on the Company's business, results of operations and financial condition. Fluctuations in Quarterly Results Microcom's quarterly operating results have fluctuated significantly in the past and may fluctuate significantly in the future. Such fluctuations may result in volatility in the price of the Company's Common Stock. Quarterly revenues and operating results may fluctuate as a result of a variety of factors including the timing of significant orders, the timing of product enhancements and new product introductions by Microcom and its competitors, the pricing of the Company's products, changes in product mix, changes in customers' budgets, 7 competitive conditions, the proportion of international sales to total net sales, the proportion of sales made pursuant to the Company's various distribution channels and general economic conditions. The Company has historically operated with limited backlog because its products are shipped shortly after orders are received. The Company has often recognized a substantial portion of its net sales in the last month of the quarter. As a result, net sales in any quarter are substantially dependent on orders booked and shipped in the last month of a quarter. A small variation in the timing of orders is likely to adversely and disproportionately affect the Company's results of operations as the Company's expense levels are based, in part, on its expectations as to future net sales and only a small portion of the Company's expenses vary with its net sales. Moreover, Microcom's net sales may fluctuate based on the level of inventories of the Company's products maintained by the Company's resellers in any particular quarter. Accordingly, the Company believes that period to period comparisons of results of operations are not necessarily meaningful and should not be relied upon as indicative of future performance. Although the Company's net sales have increased and the Company has been profitable in recent quarterly periods, there can be no assurance that the Company's net sales will increase in future quarters or that the Company will remain profitable on a quarterly basis, if at all. Due to the foregoing factors, it is possible that in some future quarters the Company's results of operations will be below the expectations of public market analysts and investors. In such event, the price of the Company's Common Stock would be materially and adversely affected. Limited History of Profitable Operations Although the Company's net income was $5,761,000, in fiscal 1995 and $5,203,000 in the first six months of fiscal 1996, the Company incurred net losses of $10,913,000 and $10,694,000 for fiscal 1994 and 1993, respectively, which net losses included restructuring and other costs of $7,875,000 and $4,268,000 in those years, respectively. At September 30, 1995, the Company had an accumulated deficit of $16,386,000. There can be no assurance that the net sales and net income growth Microcom has experienced in recent quarters can be sustained or that in the future Microcom will be profitable and not incur additional restructuring charges. Dependence on Suppliers and Subcontractors The Company is dependent on a small number of subcontractors for the manufacture and assembly of all of its remote network access products. In the event that any of these subcontractors were to become unable or unwilling to manufacture Microcom's products in required volumes, Microcom would have to identify and qualify additional subcontractors. The 8 identification and qualification process could be lengthy and no assurances can be given that any replacement subcontractors will be available to the Company on a timely basis. The failure to identify and qualify replacement subcontractors on a timely basis would have a material and adverse effect on the Company's business, results of operations and financial condition. In addition, certain components used in the Company's products are only available from a single supplier or a limited number of suppliers. Components for the Company's products which are only available from a single supplier include certain semiconductor components used in the Company's modems sourced from Rockwell International Corporation ("Rockwell") and the power supply component obtained from TDK for the Company's PCMCIA modem. It was recently reported that Rockwell would be required to allocate among its customers, including Microcom, the supply of a certain component incorporated into V.34 modems. This component is included in the Company's HDMS, LANexpress and modem products. If Rockwell is unable to supply sufficient quantities of this component to the Company on a timely basis, it would cause a delay in Microcom's product shipments and such delay would have a material adverse effect on the Company's business, results of operations and financial condition. The Company believes, however, that it will be able to obtain from Rockwell sufficient quantities of the component to satisfy its anticipated requirements. The Company generally purchases single or limited source components pursuant to purchase orders and has no guaranteed supply arrangements with its suppliers. Further, the availability of many of these components is dependent in part on the Company's ability to provide its suppliers with accurate forecasts of its future requirements. A reduction or interruption in supply of these components could result in delays or reductions in product shipments which would materially and adversely affect the Company's business, results of operations and financial condition and could damage customer relationships. The Company may also be subject to increases in component costs, which could also have a material adverse effect on the Company's business, results of operations or financial condition. Dependence on Proprietary Technology The Company's success and ability to compete is dependent in part upon its ability to protect its proprietary technology. The Company relies on a combination of patent, copyright and trade secret laws and non-disclosure agreements to protect its proprietary technology. The Company currently holds fourteen United States patents, three of them involving ISDN technology, and has five United States patent applications and two foreign patent applications pending in a number of jurisdictions. There can be no assurance that patents will be issued with respect to pending or future patent applications or that the Company's patents will be upheld as valid or will prevent the development of competitive products. The Company's 9 United States patents expire between 2004 and 2011. The Company has not sought foreign patents for some of its technologies, including technologies which have been patented in the United States, which may adversely effect the Company's ability to protect its technologies and products in foreign countries. The Company generally enters into confidentiality or license agreements with its employees, distributors, customers and potential customers and limits access to and distribution of its software, documentation and other proprietary information. There can be no assurance that the steps taken by the Company to protect its proprietary rights will be adequate to prevent misappropriation of its technology or that the Company's competitors will not independently develop technologies that are substantially equivalent or superior to the Company's technology. In addition, the laws of some foreign countries do not protect the Company's proprietary rights to the same extent as do the laws of the United States. The Company is also subject to the risk of adverse claims and litigation alleging infringement of the proprietary rights of others. From time to time the Company has received claims of infringement of other parties' proprietary rights. In addition, the Company periodically reviews recent patents that have been issued to third parties. As a result of such reviews, the Company has from time to time identified and investigated the validity and scope of issued patents for technologies similar to, or related to, the Company's technologies. Although the Company believes that it does not infringe the valid patents of others, there can be no assurance that third parties will not assert infringement claims in the future with respect to the Company's current or future products or that any such claims will not require the Company to enter into license arrangements or result in protracted and costly litigation, regardless of the merits of such claims. No assurance can be given that any necessary licenses will be available or that, if available, such licenses can be obtained on commercially reasonable terms. The failure to obtain such royalty or licensing agreements on a timely basis would have a material adverse effect upon the Company's business, results of operations and financial conditions. Risks Associated with International Operations The Company expects that sales outside North America, which accounted for approximately 28% of net sales in fiscal 1995 and 38% in the first six months of fiscal 1996, will continue to represent a significant portion of its total net sales. In addition, the Company uses subcontractors in China, Malaysia, Singapore and Hong Kong to manufacture a substantial portion of its products and obtains certain components from foreign suppliers. Sales to customers outside the United States and reliance on foreign manufacturers and suppliers involve a number of risks, including unexpected changes in regulatory requirements and tariffs, difficulties enforcing agreements and 10 collecting receivables, longer payment cycles, exchange rate fluctuations, difficulties enforcing intellectual property rights, difficulties obtaining export licenses, the imposition of withholding or other taxes, embargoes or exchange controls or the adoption of other restrictions on foreign trade. Reliance on Remote Network Access Market Microcom currently devotes virtually all of its research and development, manufacturing, marketing and sales resources to service the remote network access market. The Company's future financial performance will depend in large part on continued growth in the remote network access market, which in turn will depend in part on the growth in the number of organizations utilizing remote network access products and the number of applications developed for use with those products. There can be no assurance that this market will continue to grow or that the Company will be able to respond effectively to the evolving requirements of this market. If this market fails to grow or grows more slowly than the Company currently anticipates, the Company's business, results of operations and financial condition would be materially and adversely affected. Reliance on Indirect Distribution Channels Sales through indirect distribution channels accounted for approximately 69% of the Company's net sales in fiscal 1995 and 60% in the first six months of fiscal 1996. The Company's agreements with VARs, distributors and OEMs are typically non-exclusive and in many cases may be terminated by either party without cause, and many of the Company's VARs, distributors and OEMs carry competing product lines. Therefore, there can be no assurance that any VAR, distributor or OEM will continue to represent the Company's products and the loss of important VARs, distributors or OEMs could adversely affect the Company's business, results of operations and financial condition. Dependence on Personnel Microcom believes that its future success will depend in large part upon its ability to attract and retain highly skilled engineering, managerial, sales, marketing and product development personnel. Except with respect to the President and Chief Executive Officer, the Company does not have employment contracts with its key personnel and does not maintain any key person life insurance policies. Competition for such personnel is intense, especially in the areas of engineering and sales and marketing. The loss of key management or technical personnel could materially and adversely affect the Company's business, results of operations and financial condition, and there can be no assurance that Microcom will be able to attract 11 and retain the personnel required to engineer, manage, market or develop its products and conduct its operations successfully. Management of Growth Microcom has recently experienced rapid growth which has placed, and could continue to place, a significant strain on the Company's management and operations. If Microcom's management is unable to manage future growth effectively, Microcom's business, results of operations and financial condition could be materially and adversely affected. Potential Volatility of Stock Price The market price of the Company's Common Stock has been, and could be, subject to wide fluctuations in response to, among other things, quarterly fluctuations in operating results, adverse circumstances affecting the introduction or market acceptance of new products or enhancements offered by the Company, announcements of new products or enhancements by competitors, changes in earnings estimates by analysts, changes in accounting principles, sales of Common Stock by existing holders, loss of key personnel and market conditions in the industry, shortages of key components as well as general economic conditions. In addition, stock prices for many technology companies, including the Company, have experienced significant volatility for reasons unrelated to operating results. These fluctuations may adversely affect the market price of the Company's Common Stock. Potential Adverse Effects of Anti-Takeover Provisions The Company's Restated Articles of Organization and By-laws contain provisions that may make it more difficult for a third party to acquire, or discourage acquisition bids for, a majority of the outstanding Common Stock of the Company. These provisions include the classification of the Company's Board of Directors and super-majority voting requirements to remove directors and to amend the provisions relating to the classification of the Board of Directors and the removal of directors. In addition, the Company's Restated Articles of Organization prohibit a holder of 10% or more of the Common Stock from engaging in certain transactions with the Company, including a merger or sale of stock or assets, without the approval of the holders of at least 80% of the Common Stock. These provisions could delay or make more difficult a merger, tender offer or proxy contest involving the Company, and may limit or reduce the price that investors might be willing to pay in the future for shares of the Company's Common Stock. 12 USE OF PROCEEDS The Company will not receive any of the proceeds from the sale of the Shares by the Selling Shareholders. 13 SELLING SHAREHOLDERS Set forth below, with respect to each Selling Shareholder, is the number of shares of Common Stock beneficially owned on November 21, 1995, the number of Shares offered pursuant to this Prospectus and the number of shares to be owned after completion of the offering (assuming the sale of all the Shares offered hereunder). Total Number of Number of Shares Owned on Shares to be Number of Shares November 21, Offered or to be Owned After Name 1995 Sold the Offering (1) ______ ________________ _____________ _________________ The Parthenon Group, Inc. 311,429 266,429(2) 45,000 Walter Y.C. Chang & Sylvia 21,256 21,256(3) 0 S.W. Chang Sinn Tai Chinn & Sylvia S.W. 2,682 2,682(3) 0 Chang David Y. Chin & Pauline C. 4,930 4,930(3) 0 Chin Robert G. Segel 308 308(3) 0 Joanne S. Chertok 304 154(3) 150 Walter C.J. Pang & Carol L. 2,533 2,033(3) 500 Pang Jimin Ling & Hanna S.H. Ling 1,479 1,479(3) 0 Clarence S. Chinn & Agatha Y. 1,788 1,788(3) 0 Chinn Franklin K.S. Leong & Darlene 1,448 1,448(3) 0 D. Leong Kwock Y. Leong 1,448 1,448(3) 0 Gerald W.S. Ching & Gladys 616 616(3) 0 K.S. Ching James J.L. Fitzgerald & Ida M. 616 616(3) 0 Fitzgerald Leor Zolman & Lisa Zolman 771 771(3) 0 William M.H. Dung & Daisy P. 1,685 1,685(3) 0 Dung Steven G. Finn 826 826(3) 0 _________________________ (1) Assumes that the respective Selling Shareholders will each sell all of the Shares registered hereunder. Each Selling Shareholder may sell all or any part of his, her or its Shares pursuant to this Prospectus. 14 (2) Such Shares were acquired by Parthenon, a management and consulting company of which John C. Rutherford, a director of the Company, is a managing director and fifty percent shareholder, as compensation for various consulting services rendered to the Company. (3) Such Shares were issued by the Company to such Selling Stockholders in exchange for their shares of preferred stock of Extension Technology Corp., a Delaware corporation ("Extension"), on January 5, 1995 in connection with the merger of Extension with and into a wholly-owned subsidiary of the Company. PLAN OF DISTRIBUTION Parthenon has advised the Company that it intends to distribute the 266,429 of its Shares covered by this Prospectus to certain of its current and former employees (approximately 62 persons total) as compensation for employment services rendered as soon as practicable after the date of this Prospectus. The remaining Shares, and any of the Shares which may not be distributed by Parthenon as described in the preceding sentence, will be distributed as described below. The Selling Shareholders and their agents, donees, distributees, pledgees and other successors in interest may, from time to time, offer for sale and sell or distribute the Shares to be offered by them hereby (a) in transactions executed on the Nasdaq National Market, or any securities exchange on which the shares may be traded, through registered broker-dealers (who may act as principals, pledgees or agents) pursuant to unsolicited orders or offers to buy, (b) in negotiated transactions, or (c) through other means. The Shares may be sold from time to time in one or more transactions at market prices prevailing at the time of sale or a fixed offering price, which may be changed, or at varying prices determined at the time of sale or at negotiated prices. Such prices will be determined by the Selling Shareholders or by agreement between the Selling Shareholders and their underwriters, dealers, brokers or agents. The Shares may also be offered in one or more underwritten offerings. The underwriters in an underwritten offering, if any, and the terms and conditions of any such offering will be described in a supplement to this Prospectus. In connection with distribution of the Shares, the Selling Shareholders may enter into hedging or other option transactions with broker-dealers in connection with which, among other things, such broker-dealers may engage in short sales of 15 the Shares pursuant to this Prospectus in the course of hedging the positions they may assume with one or more of the Selling Shareholders. The Selling Shareholders may also sell Shares short pursuant to this Prospectus and deliver the Shares to close out such short positions. The Selling Shareholders may also enter into option or other transactions with broker-dealers which may result in the delivery of Shares to such broker-dealers who may sell such Shares pursuant to this Prospectus. The Selling Shareholders may also pledge the Shares to a broker-dealer and upon default the broker-dealer may effect the sales of the pledged Shares pursuant to this Prospectus. The distribution of the Shares by the Selling Shareholders is not subject to any underwriting agreement. Any underwriters, dealers, brokers or agents participating in the distribution of the Shares may receive compensation in the form of underwriting discounts, concessions, commissions or fees from the Selling Shareholders and/or purchasers of Shares, for whom they may act. Such discounts, concessions, commissions or fees will not exceed those customary for the type of transactions involved. In addition, the Selling Shareholders and any such underwriters, dealers, brokers or agents that participate in the distribution of Shares may be deemed to be underwriters under the Securities Act, and any profits on the sale of Shares by them and any discounts, commissions or concessions received by any of such persons may be deemed to be underwriting discounts and commissions under the Securities Act. Those who act as underwriter, broker, dealer or agent in connection with the sale of the Shares will be selected by the Selling Shareholders and may have other business relationships with the Company and its subsidiaries or affiliates in the ordinary course of business. The aggregate proceeds to the Selling Shareholders from the sale of the Shares offered by the Selling Shareholders hereby will be the purchase price of such Shares less any broker s commissions. In order to comply with the securities laws of certain states, if applicable, the Shares will be sold in such jurisdiction only through registered or licensed brokers or dealers. In addition, in certain 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 of qualification requirement is available and is complied with. The Selling Shareholders and any broker-dealer, agent or underwriter that participates with the Selling Shareholders in the distribution of the Shares may be deemed to be "underwriters" within the meaning of the Securities Act, in which event any commissions received by such broker-dealers, agents or underwriters and any profit on the resale of the Shares purchased 16 by them may be deemed to be underwriting commissions or discounts under the Securities Act. Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the Shares offered hereby may not simultaneously engage in market making activities with respect to the Shares for a period of two business days prior to the commencement of such distribution. In addition, and without limiting the foregoing, the Selling Shareholders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including, without limitation, Rules 10b-2, 10b-5, 10b-6 and 10b-7, which provisions may limit the timing of sales of the Shares by the Selling Shareholders. There is no assurance that the Selling Shareholders will sell any or all of the Shares described herein and may transfer, devise or gift such securities by other means not described herein. The Company is permitted to suspend the use of this Prospectus in connection with sales of the Shares by holders during certain periods of time under certain circumstances relating to pending corporate developments and public filings with the Commission and similar events. Expenses of preparing and filing the registration statement all post-effective amendments will be borne by the Company. INTERESTS OF NAMED EXPERTS AND COUNSEL The legality of the Common Stock offered hereby is being passed upon for the Company by Choate, Hall & Stewart, Boston, Massachusetts. William C. Rogers, a partner of Choate, Hall & Stewart, is the Clerk of the Company. 17 No dealer, salesman or any other person has been authorized to give any information or to make any representations not contained in this Prospectus, and, if given or made, such information or representations must not be relied upon as having been authorized by the Company or any of the Underwriters. This Prospectus does not constitute an offer of any securities other than those to which it relates or an offer to sell, or a solicitation of an offer to buy, to any person in any jurisdiction where such an offer or solicitation would be unlawful. Neither the delivery of this Prospectus nor any sale hereunder shall, under any circumstances, create any implication that the information contained herein is correct as of any time subsequent to the date hereof. TABLE OF CONTENTS Page Available Information . . . 2 Incorporation of Certain Documents by Reference . 2 The Company . . . . . . . . 3 Risk Factors . . . . . . . 5 Use of Proceeds . . . . . . 13 Selling Shareholders . . . 14 Plan of Distribution . . . 15 Interests of Named Experts and Counsel . . . . . . . 17 ____________________ 308,469 SHARES MICROCOM, INC. COMMON STOCK _____________________ PROSPECTUS NOVEMBER__, 1995 ______________________ PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. Other Expenses of Issuance and Distribution The following table sets forth the costs and expenses payable by the registrant in connection with the distribution of the securities being registered hereunder. All of the amounts shown are estimates, except the Securities and Exchange Commission registration fee. Securities and Exchange Commission Registration Fee . . . . . . . . . . . . $ 2,546 Legal Fees and Expenses . . . . . . . . . 15,000 Accountants' Fees and Expenses . . . . . 2,500 Total . . . . . . . . . . . . . . $20,046 Item 15. Indemnification of Directors and Officers Article 6 of the Registrant's Restated Articles of Organization provides as follows: No director of this corporation shall be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director notwithstanding any provision of law imposing such liability; provided, however, that this Article shall not eliminate or limit any liability of a director (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 61 and 62 of the Massachusetts Business Corporation Law, or (iv) with respect to any transaction from which director derived an improper personal benefit. The provisions of this Article shall not eliminate or limit the liability of a director of this corporation for any act or omission occurring prior to the date on which this Article became effective. No amendment or repeal of this Article shall adversely affect the rights and protection afforded to a director of this corporation under this Article for acts or omissions occurring while this Article is in effect. Article VII of the Registrant's By-Laws, as amended, provides as follows: The corporation shall, to the extent legally permissible, indemnify any person serving or who has served as a Director or officer of the corporation, or at its request as a Director, Trustee, Officer, Employee or other Agent of any organization in which the corporation owns shares or of which it is a creditor, against all liabilities and expenses, including amounts paid in II-1 satisfaction of judgments, in compromise or settlement or as fines and penalties, and counsel fees, reasonably incurred by him in connection with the defense or disposition of any action, suit or other proceeding or investigation (internal or external), whether civil or criminal, in which he may be involved or with which he may be threatened, while serving or thereafter, by reason of his being or having been such a Director, Officer, Trustee, Employee or Agent, except with respect to any matter as to which he shall have been adjudicated in any proceeding not to have acted in good faith in the reasonable belief that his action was in the best interests of the corporation or, to the extent that such matter relates to service with respect to an employee benefit plan, in the best interest of the participants or beneficiaries of such employee benefit plan. Expenses including counsel fees, reasonably incurred by any such Director, Officer, Trustee, Employee or Agent in connection with the defense or disposition of any such action, suit or other proceeding or investigation may be paid from time to time by the corporation in advance of the final disposition thereof with respect to such individual upon receipt of an undertaking by such individual to repay the amounts so paid to the corporation if it is ultimately determined that indemnification for such expenses is not authorized under this section. Any indemnification or advance pursuant to this Article shall be made no later than forty-five (45) days after receipt of the written request of such Director, Officer, Trustee, Employee or Agent, unless a determination is made within said forty-five (45) day period by (i) the Board of Directors by a majority vote of a quorum consisting of directors who are not parties to such action, suit, or other proceeding or investigation, or (ii) independent legal counsel in a written opinion (which counsel shall be appointed if such a quorum is not obtainable), that such individual has not met the relevant standards for indemnification set forth in this Article. The right to indemnification or advances as provided by this Article shall be enforceable by such Director, Officer, Trustee, Employee or Agent in any court of competent jurisdiction. The burden of proving that indemnification or advances are not appropriate shall be on the corporation. Neither the failure of the corporation (including its Board of Directors or independent legal counsel) to have made a determination prior to the commencement of such action, suit or other proceeding or investigation that indemnification or advances are proper in the circumstances because such individual has bet the applicable standard of conduct, or an actual determination by the corporation (including its Board of Directors, or independent legal counsel) that such individual has not met such applicable standard of conduct, shall be a defense to the action, suit or other proceeding or investigation or create a presumption that such individual has not met the applicable standard of conduct. II-2 The expenses of such Director, Officer, Trustee, Employee or Agent incurred in connection with successfully establishing his right to indemnification or advances, in whole or in part, shall also be indemnified by the corporation. The indemnification provided by this Article shall be deemed to be a contract between each Director, Trustee, Officer, Employee or other Agent of the corporation and the corporation while such individual serves the corporation, and shall not be diminished by any subsequent repeal or modification of this Article. The right of indemnification hereby provided shall not be exclusive of or affect any other rights to which any such Director, Officer, Trustee, Employee or Agent may be entitled. Nothing contained in this Article shall affect any rights to indemnification to which corporate personnel other than such Directors, Officers, Trustees, Employees or Agents may be entitled by contract or otherwise under law. As used in this Article, the terms "Director", "Officer", "Trustee", "Employee" and "Agent" include their respective heirs, executors and administrators, and an "interested" Director, Officer, Trustee, Employee or Agent is one against whom in such capacity the proceedings in question or other proceedings on the same or similar grounds is then pending. This Article may be amended only by the affirmative vote of the stockholders, provided that any reduction in the indemnification provided by this Article shall be prospective in effect. II-3 Item 16. Exhibits * 4.1 Article 6 of Restated Articles of Organization of the Registrant. ** 4.2 Articles III and VIII of By-Laws of the Registrant, as amended. * 4.3 Registration Rights Agreement dated as of December 30, 1994 by and between the Registrant and Extension Technology Corp. 5.1 Opinion of Choate, Hall & Stewart as to validity of shares being registered and Consent. 23.1 Consent of Arthur Anderson LLP. 23.2 Consent of Choate, Hall & Stewart (included in Exhibit 5.1). 25.1 Power of Attorney (part of Signature Page). _________________________ * Filed as an exhibit to the registrant's Registration Statement on Form S-3 (No. 33-59471) ** Filed as an exhibit to the registrant's Registration Statement on Form S-1 (No. 33-28399) Item 17. Undertakings The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit II-4 plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. 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. Insofar as indemnification of liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions described under Item 15 above, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with any of the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-5 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the Town of Norwood, The Commonwealth of Massachusetts, on the 17th day of November, 1995. MICROCOM, INC. By:/s/ Roland D. Pampel Roland D. Pampel President and Chief Executive Officer II-6 POWER OF ATTORNEY We, the undersigned officers and directors of Microcom, Inc., hereby severally constitute and appoint Roland D. Pampel, Peter J. Minihane, William C. Rogers and Robert V. Jahrling, and each of them singly, our true and lawful attorneys with full power to them, and each of them singly, to sign for us and in our names in the capacities indicated below, the Registration Statement on Form S-3 filed herewith and any and all pre- effective and post-effective amendments to said Registration Statement, and generally to do all such things in our names and on our behalf in our capacities as officers and directors to enable Microcom, Inc. to comply with the provisions of the Securities Act of 1933, as amended, and all requirements of the Securities and Exchange Commission, hereby ratifying and confirming our signatures as they may be signed by our said attorneys or any of them, to said Registration Statement and any and all amendments thereto. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below on November 17, 1995 by the following persons in the capacities indicated. Signature Capacity /s/ Roland D. Pampel President, Chief Executive Roland D. Pampel Officer and Director (Principal Executive Officer) /s/ Peter J. Minihane Executive Vice President, Peter J. Minihane Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer) /s/ James M. Dow Chairman of the Board James M. Dow /s/ Donald G. Kennedy Director Donald G. Kennedy /s/ John C. Rutherford Director John C. Rutherford /s/ Michael I. Schneider Director Michael I. Schneider II-7 Index to Exhibits Exhibit Number * 4.1 Article 6 of Restated Articles of Organization of the Registrant. ** 4.2 Articles III and VIII of By-Laws of the Registrant, as amended. * 4.3 Registration Rights Agreement dated as of December 30, 1994 by and between the Registrant and Extension Technology Corp. 5.1 Opinion of Choate, Hall & Stewart as to validity of shares being registered and Consent. 23.1 Consent of Arthur Anderson LLP. 23.2 Consent of Choate, Hall & Stewart (included in Exhibit 5.1). 25.1 Power of Attorney (part of Signature Page). _________________________ * Filed as an exhibit to the registrant's Registration Statement on Form S-3 (No. 33-59471) ** Filed as an exhibit to the registrant's Registration Statement on Form S-1 (No. 33-28399) II-8 EX-5 2 Exhibit 5.1 CHOATE, HALL & STEWART A Partnership Including Professional Corporations EXCHANGE PLACE 53 STATE STREET BOSTON, MASSACHUSETTS 02109-2891 TELEPHONE (617) 248-5000 FACSIMILE (617) 248-4000 TELEX 49615860 November 27, 1995 Microcom, Inc. 500 River Ridge Drive Norwood, MA 02062-5028 Gentlemen: This opinion is delivered to you in connection with a registration statement on Form S-3 (the "Registration Statement") to be filed on November 27, 1995, by Microcom, Inc. (the "Company") under the Securities Act of 1933, as amended, for registration under said Act of 308,469 shares of Common Stock, $.01 par value per share (the "Common Stock") of the Company. Terms not otherwise defined herein shall be deemed to have the meaning ascribed such term in the Registration Statement. In connection with rendering this opinion, we have examined such corporate records, certificates and other documents as we have considered necessary for the purposes of this opinion. In such examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to the original documents of all documents submitted to us as copies and the authenticity of the originals of such latter documents. As to any facts material to our opinion, we have, when relevant facts were not independently established, relied upon the aforesaid records, certificates and documents. Based upon the foregoing, we are of the opinion that the shares of Common Stock to be sold by the Selling Shareholders are and, when sold by the Selling Shareholders, will be, legally issued, fully paid and non-assessable. We hereby consent to be named in the Registration Statement and in any amendments thereto as counsel for the Company, to the statements with reference to our firm made in the Registration Statement, and to the filing and use of this opinion as an exhibit to the Registration Statement. Very truly yours, CHOATE, HALL & STEWART EX-23 3 Exhibit 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in this registration statement of our report dated April 11, 1995 included in Microcom, Inc.'s 1995 Annual Report to Stockholders for the year ended March 31, 1995 and all references to our firm included in this registration statement. Arthur Andersen LLP Boston, Massachusetts November 20, 1995 -----END PRIVACY-ENHANCED MESSAGE-----