AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 9, 2000
REGISTRATION NO. 333-94691
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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COMMSCOPE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 13-4135495
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION)
1375 Lenoir-Rhyne Boulevard
Hickory, North Carolina 28601
(828) 323-2200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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Frank B. Wyatt, II, Esq.
Vice President, General Counsel and Secretary
COMMSCOPE, INC.
1375 Lenoir-Rhyne Boulevard
Hickory, North Carolina 28601
(828) 323-2200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
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COPIES TO:
Lois Herzeca, Esq.
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
One New York Plaza
New York, New York 10004
(212) 859-8000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
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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 THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND
EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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PROSPECTUS
COMMSCOPE, INC.
$172,500,000 of 4% Convertible Subordinated Notes due 2006 and
3,579,581 Shares of Common Stock Issuable upon Conversion of the Notes
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This prospectus relates to 4% Convertible Subordinated Notes due
December 15, 2006 of CommScope, Inc., a Delaware corporation, held by
certain security holders who may offer for sale the notes and the shares of
our common stock into which the notes are convertible at any time at market
prices prevailing at the time of sale or at privately negotiated prices.
The selling security holders may sell the notes or the common stock
directly to purchasers or through underwriters, broker-dealers or agents,
who may receive compensation in the form of discounts, concessions or
commissions.
The holders of the notes may convert the notes into shares of our
common stock at any time at a conversion rate of 20.7512 shares per $1,000
principal amount of notes. On or after December 15, 2002, we may redeem the
notes, in whole or in part, at the redemption prices set forth in the
section entitled "Description of Notes--Redemption at the Option of the
Company."
In the event of a Change of Control, as defined in the section
entitled "Description of Notes--Change in Control Permits Purchase of Notes
at the Option of the Holder," each holder of the notes may require us to
repurchase the notes at 100% of the principal amount of the notes plus
accrued interest.
The notes are general, unsecured obligations that are subordinated in
right of payment to all of our existing and future senior indebtedness and
senior subordinated indebtedness. In addition, the notes will effectively
rank junior to our subsidiaries' liabilities. See "Description of
Notes--Subordination of Notes."
On February 8, 2000 the last reported sale price of our common stock,
listed under the symbol "CTV", on the New York Stock Exchange ("NYSE") was
$32 9/16 per share.
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INVESTING IN OUR COMMON STOCK OR OUR CONVERTIBLE SUBORDINATED NOTES
INVOLVES RISKS THAT ARE DESCRIBED IN THE "RISK FACTORS" SECTION BEGINNING
ON PAGE 5 OF THIS PROSPECTUS.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
-----------------
THE DATE OF THIS PROSPECTUS IS FEBRUARY 9, 2000
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TABLE OF CONTENTS
PAGE
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Summary............................................................... 1
Risk Factors.......................................................... 5
Use of Proceeds....................................................... 12
Price Range of Common Stock........................................... 12
Dividend Policy....................................................... 12
Ratio of Earnings to Fixed Charges.................................... 13
Business.............................................................. 14
Description of Notes.................................................. 24
Description of Capital Stock.......................................... 39
Description of Other Indebtedness..................................... 43
Certain United States Federal Tax Consequences........................ 46
Selling Securityholders............................................... 53
Plan of Distribution.................................................. 59
Experts............................................................... 60
Validity of Securities................................................ 60
Where You Can Find More Information................................... 60
Incorporation by Reference............................................ 61
Forward-Looking Statements............................................ 61
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SUMMARY
The following is a summary of more detailed information appearing
elsewhere in this prospectus. This summary is not complete, and does not
contain all the information you should consider. You should read this
entire document carefully, including the "Risk Factors". On July 28, 1997,
General Instrument Corporation spun-off CommScope, Inc., its coaxial and
other cable business, and NextLevel Systems, Inc., its broadband
communication business, as two independent public companies. At the time of
the spin-off, General Instrument Corporation changed its name to General
Semiconductor, Inc. and effected a one for four reverse stock split.
Thereafter, NextLevel Systems, Inc. changed its name to General Instrument
Corporation. Except as otherwise provided in "Description of Notes,"
references in this prospectus to "CommScope, Inc.," or "we," "us," or "our"
are to CommScope, Inc. and its direct and indirect subsidiaries on a
consolidated basis since the spin-off and to the coaxial and other cable
business conducted by General Instrument Corporation prior to the spin-off.
This prospectus includes data regarding the cable industry and other
industries which was obtained from industry publications. These industry
organizations generally indicate that they have obtained information from
sources believed to be reliable, but do not guarantee the accuracy and
completeness of their information. While we believe these industry
publications to be reliable, we have not independently verified their data,
and we do not guarantee the accuracy or completeness of the information,
nor can we provide any assurance that our future performance will follow
industry projections.
COMMSCOPE
We are a leading worldwide designer, manufacturer and marketer of
a broad line of coaxial cables and other high-performance electronic and
fiber-optic cable products for cable television, telephony, Internet access
and wireless communications. We believe that we supplied over 50% of all
coaxial cable purchased in the U.S. in 1998 for broadband cable networks
using Hybrid Fiber Coaxial (HFC) architecture. We believe we are also the
largest manufacturer and supplier of coaxial cable for HFC cable networks
in Europe. We are a leading supplier of coaxial cable for telephone central
office switching and transmission applications, as well as video
distribution applications such as satellite television and security
surveillance. In addition, we have developed an innovative line of coaxial
cables for wireless communication infrastructure applications that have
superior performance characteristics compared to traditional cables. This
line of coaxial cables continues to gain market recognition, as evidenced
by the nearly twofold increase in sales of these products in the third
quarter of 1999 from the second quarter of 1999. We are a leading provider
of high-performance premise wiring for local area networks and have
developed a new patent-pending foaming process for unshielded twisted-pair
cables that significantly reduces cost and improves electrical performance.
We sell our products to approximately 2,400 customers in more than 85
countries.
For the nine months ended September 30, 1999 our revenues were
$537.3 million and our net income was $47.6 million. During this period,
approximately 77% of our revenues were for HFC cable networks and other
video applications, 12% were for wireless, central office and other
telecommunications applications and 11% were for local area network premise
wiring applications. International sales were 24.6% of our revenues during
this period.
We believe that we are the world's most technologically advanced,
low-cost provider of coaxial cable. With our leading product offerings,
cost-efficient manufacturing and economies of scale, we believe we will
benefit from the convergence of video, voice and high-speed Internet access
and the resulting demand for enhanced HFC broadband networks.
We believe that the following industry trends will drive demand
for our products:
o endorsement of the HFC architecture by major cable,
telephone and technology companies;
o increasing use of the Internet;
o increasing need for additional bandwidth to accommodate new
applications;
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o increasing maintenance requirements for HFC cable networks
as operators improve reliability for telephony, data and
other two-way services;
o expansion of telephone central offices to accommodate
digital subscriber line (DSL) growth and growing alternate
access providers of telephony and data services;
o the continuing rapid deployment of wireless communications
systems worldwide; and
o increasing demand for higher speed and bandwidth for local
area networks.
BUSINESS STRATEGY
We have adopted a growth strategy to expand and strengthen our
current market position as the leading worldwide supplier of coaxial cable
for broadband communications. The principal elements of our growth strategy
are:
BENEFIT FROM HFC PARADIGM SHIFT. A vast majority of video
networks worldwide, such as cable service provider networks, have adopted
the HFC cable network architecture for video service delivery. Recent
events involving major telecommunications and cable service providers
create the potential to expand the role of HFC cable networks from a
video-centric focus to a key platform for delivery of a variety of
broadband services. These events include AT&T Corporation's acquisition of
Tele-Communications, Inc. (TCI), AT&T Corporation's pending acquisition of
MediaOne Group, Inc., the strategic relationship between AT&T Corporation
and Time Warner, Inc. to offer cable telephony to residential and small
business customers in 33 states and to develop the next-generation
broadband services, Microsoft Corporation's $1 billion investment in
Comcast Corporation and investments in cable television in Europe and the
United Kingdom, Paul Allen's acquisitions of Marcus Cable Company, L.L.C.,
Charter Communications, Inc. and other cable companies, and the recent
success of high-speed cable data services such as those offered by
Excite@Home Corporation and others. We believe that the HFC cable network
architecture provides the most cost-effective bandwidth for multi-channel
video, voice and data into homes around the world. This architecture
enables both cable and telecommunications service providers to offer new
products and services such as high-speed Internet access, video on demand,
Internet protocol telephony and high-definition television. As the leading
provider of coaxial cable for HFC cable networks, we believe we are well
positioned to benefit from the build out, upgrade and maintenance of these
networks in both domestic and international markets.
DEVELOP PROPRIETARY PRODUCTS AND EXPAND MARKET OPPORTUNITIES. We
maintain an active program to identify new market opportunities and develop
and commercialize products that use our core technology and manufacturing
competencies. We have developed new products and entered new markets,
including coaxial cable for wireless applications, satellite cables, local
area network cables, specialized coaxial based telecommunication cables,
broadcast audio and video cables and coaxial cables in conduit. We have
developed specialized coaxial (Power Feeder [registered trademark]) and
fiber optic (Fiber Feeder [trademark]) cables for distribution and
telephony applications in HFC cable networks.
We used our expertise in aluminum coaxial cable technology to
develop Cell Reach [registered trademark], a patented copper coaxial cable
solution for the wireless antenna market. We believe Cell Reach [registered
trademark] is a technologically superior product with a lower total
lifetime cost of ownership than the current industry standard. Cell Reach
[registered trademark] has been installed in thousands of cellular and
personal communications services antenna sites with leading service
providers such as Nextel Communications, Inc., Sprint Corporation and
certain Sprint affiliates, certain AT&T Corporation affiliates and
Metricom, Inc.
We have used our coaxial cable technology to enter the local area
network cable market and developed UltraMedia, a high-end local area
network cable product targeted for high-speed local area network
applications. We have also recently developed a thin-wall foam design
(Isolite [trademark]) for twisted-pair cables on which a patent is pending.
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CONTINUOUSLY IMPROVE OPERATING EFFICIENCIES. We invested
approximately $113 million in state-of-the-art manufacturing facilities and
new technologies during the past four fiscal years. These investments have
increased our capacity and operating efficiencies, improved management
control and provided more consistent product quality. As a result, we
believe we are one of the few manufacturers capable of satisfying volume
production, time-to-market, and technology requirements of customers for
coaxial cable in the communications industry. We believe that our breadth
and scale permit us to cost-effectively invest in improving our operating
efficiency through investments in engineering and cost-management programs.
We intend to capture value in the supply chain through vertical integration
projects.
EXPAND OUR GLOBAL PLATFORM. We believe that the worldwide demand
for video and data services, the large number of television households
outside the U.S. and relatively low penetration rates for cable television
in most countries provide significant long-term opportunities. We have
become a major supplier of coaxial cable for the cable television and
broadband services industries in international markets, principally Europe,
Latin America and the Pacific Rim. In 1998 we had approximately 350
international customers in more than 85 countries, representing
approximately $139.8 million or 24.4% of our 1998 revenue. We support our
international sales efforts with sales representatives based in Europe,
Latin America and the Pacific Rim. In addition, we are able to benefit from
our domestic cable customer base because some of those customers are also
equity investors in international cable service providers. Although there
is current uncertainty in international markets, we believe that we are
well positioned to benefit over the long term from future international
growth opportunities. We believe we became the largest manufacturer and
supplier of coaxial cable for HFC cable networks in Europe with our
acquisition in January 1999 of Alcatel's coaxial cable business in Seneffe,
Belgium. This acquisition also gave us access to established European
distribution channels and complementary coaxial cable technologies.
In addition, we recently purchased an existing 455,000
square-foot facility in North Carolina to expand our wireless business,
support growth in other markets and house engineering, research and
development functions. We are also in the process of adding 130,000 square
feet at one of our existing facilities. We intend to establish or acquire
international distribution and/or manufacturing facilities to further
improve our ability to service international customers as well as reduce
shipping and importation costs.
LEVERAGE SUPERIOR CUSTOMER SERVICE. We believe that our coaxial
cable manufacturing capacity is greater than that of any other
manufacturer. This enables us to provide our customers with a unique
high-volume service capability. As a result of our 24-hour, seven days per
week continuous manufacturing operations, we are able to offer quick order
turnaround services. In addition, we believe that our ability to offer
rapid delivery services, materials management and logistics services to
customers through our private truck fleet is an important competitive
advantage.
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THE OFFERING
Issuer..................... CommScope, Inc.
Offering................... $172,500,000 in principal amount of 4%
convertible subordinated notes due 2006 (and
3,579,581 shares of common stock issuable
upon conversion of the notes) by selling
securityholders.
Maturity.................. December 15, 2006
Interest payment dates.... June 15 and December 15, beginning June 15, 2000.
Conversion rights......... The notes are convertible, at the option of
the holder, at any time on or prior to maturity,
into shares of our common stock at a
conversion price of $48.19 per share, which
is equal to a conversion rate of 20.7512
shares for each $1,000 principal amount of
notes. This conversion price is subject to
adjustment. Subject to certain exceptions,
upon conversion, the holder will not receive
any cash payment representing any further
interest; this accrued interest will be
deemed paid by the shares of common stock
received by the holder on conversion. See
"Description of Notes--Conversion Rights."
Ranking.................... The notes are subordinated, unsecured general
indebtedness. They will be subordinated to
all of our existing and future senior
indebtedness and senior subordinated
indebtedness. The notes will effectively rank
junior to all existing and future liabilities
of our subsidiaries.
At December 31, 1999, the notes were
subordinated to $15.1 million of senior
indebtedness and effectively subordinated to
$10.8 million of other indebtedness of our
subsidiaries.
Optional redemption........ We may redeem some or all of the notes at
any time on or after December 15, 2002, at
the redemption prices described in this
prospectus.
Change of control.......... When a change of control event occurs, each
holder of notes may require us to repurchase
some or all of its notes at a purchase price
equal to 100% of the principal amount of the
notes, plus accrued interest.
Use of proceeds............ We will not receive any proceeds from the
sale of the notes or the shares of common
stock offered in this prospectus. See
"Selling Securityholders."
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RISK FACTORS
OUR SALES AND PROFITABILITY MAY BE ADVERSELY AFFECTED BY CHANGES IN CABLE
TELEVISION CAPITAL SPENDING.
Most of our revenues come from sales to the cable television
industry. Demand for our products depends primarily on capital spending by
cable television operators for maintaining, constructing, rebuilding or
upgrading their systems. The amount of this capital spending, and,
therefore, our sales and profitability, will be affected by a variety of
factors, including:
o general economic conditions;
o acquisitions of cable television operators by non-cable
television operators;
o cable system consolidation within the industry;
o the financial condition of domestic cable television
operators and their access to financing;
o competition from satellite and wireless television providers
and telephone companies;
o technological developments; and
o new legislation and regulation of cable television
operators.
We cannot assure you that cable television capital spending will
increase from historical levels or that existing levels of cable television
capital spending will be maintained.
In recent years, cable television capital spending has been
affected by new legislation and regulation, on the federal, state and local
level. Many aspects of government regulation are currently the subject of
judicial proceedings and administrative or legislative proposals. The
Federal Communications Commission is continuing its implementation of the
Telecommunications Act of 1996 (the "Telecom Act") which, when fully
implemented, may significantly impact the communications industry and alter
federal, state and local laws and regulations regarding the provision of
cable and telephony services. The Telecom Act eliminates substantially all
restrictions on the entry of telephone companies and certain public
utilities into the cable television business. Telephone companies may now
enter the cable television business as traditional cable operators, as
common carrier conduits for programming supplied by others, as operators of
wireless distribution systems, or as hybrid common carrier/cable operator
providers of programming on so-called "open video systems." The economic
impact of the Telecom Act, other federal legislation, and the rules
implementing these laws on the cable television industry and our business
is still uncertain.
THE LOSS OF SOME OF OUR PRINCIPAL CABLE TELEVISION CUSTOMERS COULD
MATERIALLY ADVERSELY AFFECT US.
Although the domestic cable television industry is comprised of
thousands of cable systems, a small number of cable television operators
own a majority of cable television systems and account for a majority of
the capital expenditures made by cable television operators. The loss of
some or all of our principal cable television customers could have a
material adverse effect on our business and financial condition.
OUR FAILURE TO INTRODUCE NEW PRODUCTS SUCCESSFULLY, AND CHANGES IN
TECHNOLOGY, COULD ADVERSELY AFFECT US.
Many of our markets are characterized by advances in information
processing and communications capabilities which require increased
transmission speeds and greater capacity, or "bandwidth," for carrying
information. These advances require ongoing improvements in the
capabilities of wire and cable products. We believe that our future success
will depend in part upon our ability to enhance existing products and to
develop and manufacture new products that meet or anticipate these changes.
The failure to introduce successful new or
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enhanced products on a timely and cost-competitive basis could adversely
affect our business and financial condition.
Fiber optic technology presents a potential substitute for the
products that comprise most of our sales. Fiber optic cables have
penetrated the cable television and local area network markets we serve in
high-bandwidth point-to-point and trunking applications. Fiber optic cables
have not yet significantly penetrated the local distribution and
residential application markets we serve because of the high relative cost
of electro-optic interfaces and the high cost of fiber termination and
connection. At the same time, advances in data transmission equipment and
copper cable technologies have increased the relative performance of
copper-based cables which are our principal products. However, a
significant decrease in the cost of fiber optic systems could make these
systems superior on a price/performance basis to copper systems. While we
are a fiber optic cable manufacturer and supplier to a small portion of the
cable television market and certain specialty markets, a significant
decrease in the cost of fiber optic systems would likely have an adverse
effect on us.
OUR INDUSTRY IS HIGHLY COMPETITIVE AND RAPID TECHNOLOGICAL CHANGE MAY LEAD
TO FURTHER COMPETITION.
Our coaxial, fiber optic and electronic cable products compete
with those of a substantial number of foreign and domestic companies, some
of which have greater resources, financial or otherwise, than we have. The
rapid technological changes occurring in the telecommunications industry
could lead to the entry of new competitors. Existing competitors' actions
and new entrants may have an adverse impact on our sales and profitability.
We believe that we enjoy a strong competitive position in the coaxial cable
market because of our position as a low-cost, high-volume coaxial cable
producer and our reputation as a high-quality provider of state-of-the-art
cables, along with our strong orientation toward customer service. However,
we cannot assure you that we will continue to compete successfully with our
existing competitors or that we will be able to compete successfully with
new competitors.
OUR DEPENDENCE ON COMMODITIES SUBJECTS US TO PRICE FLUCTUATIONS WHICH COULD
ADVERSELY AFFECT US.
The principal raw materials we purchase are fabricated aluminum,
plastics, bi-metals, copper and optical fiber. Our profitability may be
affected by changes in the market price of these materials, which are
linked to the commodity markets. Although we have generally been able to
pass on increases in the price of these materials to our customers, we
cannot assure you that we will be able to do so in the future.
Additionally, significant increases in the price of our products due to
increases in the cost of raw materials could have a negative effect on
demand for our products.
DIFFICULTIES WITH OUR KEY SUPPLIERS COULD ADVERSELY AFFECT US.
A significant portion of our raw material purchases are
bi-metallic center conductors for coaxial cables. Almost all of these
supplies are purchased from Copperweld Corporation under a long-term supply
arrangement expiring in March 2000. Copperweld has agreed to continue to
supply us with bi-metallic center conductors after expiration of this
agreement, but this continued supply arrangement is indefinite in duration.
If we are unable to continue to purchase bi-metallic center conductors from
this supplier, either before or after expiration of this arrangement, we
may be unable to obtain these raw materials on commercially acceptable
terms from another source. There are few, and limited, alternative sources
of supply for these raw materials. In February 1999, we purchased the clad
wire fabrication equipment and technology of Texas Instruments Incorporated
for manufacturing copper-clad aluminum wire and copper-clad steel wire. We
anticipate that in 2000 we will begin to produce a significant portion of
the bi-metallic center conductors we use. However, the loss of Copperweld
as a supplier of bi-metallic center conductors, either during the term of
the current supply contract, or after the expiration of that agreement,
and/or our failure to vertically integrate these products, could have a
material adverse effect on our business and financial condition. In
addition, we purchase fine aluminum wire primarily from a single source.
Fine aluminum wire is a smaller raw material purchase than bi-metallic
wire. Neither of these major raw materials could be readily replaced in
sufficient quantities if all supplies from the respective primary sources
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were disrupted for an extended period and we were unable to vertically
integrate the production of these products. In such event, there could be a
materially adverse impact on our financial results.
Additionally, fluorinated-ethylene-propylene (FEP) is the primary
raw material used throughout the industry for producing flame-retarding
cables for local area network applications. There are few worldwide
producers of FEP and market supplies have been periodically limited over
the past several years. Availability of adequate supplies of FEP will be
critical to future local area network cable sales growth.
OUR BUSINESS IS SUBJECT TO THE ECONOMIC UNCERTAINTIES AND POLITICAL RISKS
OF SELLING OUR PRODUCTS IN FOREIGN COUNTRIES.
We believe that growth in international markets, including the
developing markets in Asia, the Middle East and Latin America, and the
expected privatization of the telecommunications structure in many European
countries, represents significant future opportunities for us. However, we
cannot predict with certainty the outlook for international sales in 2000
and beyond due to political and economic uncertainties.
Our international operations are subject to the usual risks
inherent in sales abroad, including risks with respect to currency exchange
rates, economic and political destabilization, restrictive actions by
foreign governments, nationalizations, the laws and policies of the U.S.
affecting trade, foreign investment and loans, and foreign tax laws.
POTENTIAL ENVIRONMENTAL LIABILITIES MAY ARISE IN THE FUTURE AND ADVERSELY
IMPACT OUR FINANCIAL POSITION.
We are subject to various federal, state, local and foreign laws
and regulations governing the use, discharge and disposal of hazardous
materials. We believe that our manufacturing facilities are in substantial
compliance with current laws and regulations. Compliance with current laws
and regulations has not had and is not expected to have a material adverse
effect on our financial condition.
Our present and past facilities have been in operation for many
years, and over that time in the course of those operations, these
facilities have used substances which are or might be considered hazardous,
and we have generated and disposed of wastes which are or might be
considered hazardous. Therefore, it is possible that environmental issues
may arise in the future which we cannot now predict.
OUR INDEBTEDNESS COULD RESTRICT OUR OPERATIONS, MAKE US MORE VULNERABLE TO
ADVERSE ECONOMIC CONDITIONS AND MAKE IT MORE DIFFICULT FOR US TO MAKE
PAYMENTS ON THE NOTES.
As of December 31, 1999, our total long-term debt was
approximately $198.4 million or 41% of our combined long-term debt and
total stockholders' equity.
Our current and future indebtedness could have important
consequences to you. For example, it could:
o impair our ability to obtain additional financing in the
future;
o reduce funds available to us for other purposes, including
working capital, capital expenditures, research and
development, strategic acquisitions and other general
corporate purposes;
o restrict our ability to introduce new products or exploit
business opportunities;
o increase our vulnerability to economic downturns and
competitive pressures in the industry we operate in;
o increase our vulnerability to interest rate increases to the
extent variable-rate debt is not effectively hedged;
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o limit, along with the financial and other restrictive
covenants in our indebtedness, our ability to dispose of
assets or borrow additional funds;
o make it more difficult for us to satisfy our obligations
with respect to the notes; and
o place us at a competitive disadvantage.
WE MAY BE ABLE TO INCUR SIGNIFICANTLY MORE DEBT IN THE FUTURE, WHICH WILL
INCREASE THE RISKS RELATED TO OUR INDEBTEDNESS.
We may be able to incur substantial additional indebtedness in
the future. The terms of the indenture do not prohibit us or our
subsidiaries from incurring indebtedness. Our revolving credit facility
permitted additional borrowings of up to $350 million as of December 31,
1999, subject to customary borrowing conditions.
Based on our current level of operations, we believe that our
cash flow from operations and our available financing will be adequate to
meet our anticipated requirements for operating our business and servicing
our debt. Our ability to generate cash flow depends upon, among other
things, our future operating performance. To a large extent, this depends
upon economic, financial, competitive and other factors beyond our control.
If we cannot generate enough cash from operations to make payments on our
indebtedness, we will need to refinance our indebtedness, obtain additional
financing or sell assets. We cannot assure you that we would be able to do
so or do so without additional expense.
HOLDERS OF SENIOR INDEBTEDNESS WILL BE PAID BEFORE HOLDERS OF THE NOTES ARE
PAID.
The notes will be subordinated to our existing and future senior
indebtedness and will be structurally subordinate to all liabilities of our
subsidiaries. As of December 31, 1999, the notes were subordinated to $15.1
million of senior indebtedness and effectively subordinated to $10.8
million of other indebtedness of our subsidiaries. If we become bankrupt,
liquidate, or dissolve, our assets would be available to pay obligations on
the notes only after our senior indebtedness has been paid. We cannot
assure you that there will be sufficient assets to pay amounts due on the
notes. See "Description of Notes--Subordination of Notes."
If we fail to pay any of our senior indebtedness, we may make
payments on the notes only if we cure the default or the holders of the
senior indebtedness waive the default. Moreover, if any non-payment default
exists under our designated senior indebtedness, we may not make any cash
payments on the notes for a period of up to 179 days in any 365 day period,
unless we cure the default, the holders of the senior indebtedness waive
the default or rescind acceleration of the indebtedness, or we repay the
indebtedness in full. See "Description of Notes--Subordination of Notes."
THE RESTRICTIONS IMPOSED BY OUR EXISTING DEBT COULD NEGATIVELY AFFECT OUR
BUSINESS AND OUR FAILURE TO COMPLY WITH THESE RESTRICTIONS COULD RESULT IN
A DEFAULT UNDER OUR DEBT INSTRUMENTS.
Our existing debt agreements contain covenants that restrict our
ability and our subsidiaries' ability to:
o dispose of assets;
o incur additional indebtedness;
o incur liens on property or assets;
o repay other indebtedness;
o pay dividends;
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o enter into certain investments or transactions;
o repurchase or redeem capital stock;
o engage in mergers or consolidations; or
o engage in certain transactions with subsidiaries and
affiliates and otherwise restrict corporate activities.
In addition, our existing debt agreements contain financial
covenants, including:
o a total debt to EBITDA ratio;
o a net worth maintenance; and
o an interest expense coverage ratio.
Our compliance with our covenants in the future may be affected
by events beyond our control. Our breach of or failure to comply with any
of the covenants could result in a default under the debt agreements or the
indenture. If we default under the debt agreements, our senior lenders
could cause all of our outstanding debt obligations to become due and
payable, require us to apply all of our available cash to repay the
indebtedness or prevent us from making debt service payments on any other
indebtedness we owe. If a default under the indenture occurs, the holders
of the notes could elect to declare the notes due and payable. A
significant payment default under our debt agreements or any event of
default under the indenture would be a cross default under the other
instrument and could result in the acceleration of the indebtedness under
both instruments. If the indebtedness under our existing debt agreements or
these notes is accelerated, we may not have sufficient assets to repay
amounts due under our existing debt agreements, these notes or on other
debt securities then outstanding.
WE MAY NOT BE ABLE TO REPURCHASE NOTES UPON A CHANGE OF CONTROL WHICH WOULD
BE AN EVENT OF DEFAULT UNDER THE INDENTURE.
Upon the occurrence of certain specified change of control
events, each holder of notes will have the right at the holder's option to
require us to purchase all or any part of the holder's notes at a cash
price equal to 100% of the principal amount of such holder's notes, plus
accrued interest to the repurchase date. Under our debt agreements, a
change of control is an event of default, and therefore, it restricts us
from repurchasing the notes without the approval of our senior lenders. We
cannot assure you that we will have sufficient funds available or will be
permitted by our senior lenders to repurchase the notes upon a change of
control. Our failure to repurchase the notes would constitute an event of
default under the indenture. See "Description of Notes--Change in Control
Permits Purchase of Notes at Option of the Holder."
WE DEPEND ON THE CASH FLOW OF OUR SUBSIDIARIES TO SATISFY OUR OBLIGATIONS
INCLUDING OUR OBLIGATIONS UNDER THE NOTES.
Our subsidiaries conduct all of our operations and own all of our
consolidated assets. Consequently, our operating cash flow and our ability
to service our debt, including the notes, depends upon the operating cash
flow of our subsidiaries and the payment of funds by them to us in the form
of loans, dividends or otherwise. These payments may not be adequate to pay
interest and principal on the notes when due. In addition, the ability of
our subsidiaries to make payments to us depends on applicable law and
restrictions under our current and future debt agreements and on the terms
of other present and future debt instruments to which our subsidiaries are
or may be a party. These debt agreements and instruments may include
requirements to maintain minimum levels of working capital and other
assets. Our current debt agreements restrict the ability of our
subsidiaries to make loans, pay dividends or make other distributions to us
in the event that there is a payment default under our debt agreements.
9
<PAGE>
YOU MAY BE UNABLE TO SELL YOUR NOTES IF A TRADING MARKET FOR THE NOTES DOES
NOT DEVELOP.
The liquidity of any market for the notes will depend on the
number of holders of the notes, the interest of securities dealers in
making a market in the notes and other factors. Accordingly, we cannot
assure you as to the development or liquidity of any market for the notes.
If an active trading market for the notes does not develop, the market
price and liquidity of the notes may be adversely affected. If the notes
are traded, they may trade at a discount from their initial offering price
depending upon prevailing interest rates, the market for similar
securities, our performance and certain other factors.
THERE MAY BE VOLATILITY OF THE MARKET PRICE OF THE NOTES AND OUR COMMON
STOCK.
The market price of our common stock has fluctuated in the past
and may continue to fluctuate. In addition, the securities markets have
experienced significant price and volume fluctuations. Factors such as
political and economic conditions in foreign countries, quarterly
fluctuations in our operating results and the operating results of our
competitors and changes in our industry may have a significant impact on
the market price of the notes and common stock into which the notes are
convertible. In particular, if we were to report operating results which
did not meet the expectations of research analysts, the market price of the
notes and our common stock could be materially adversely affected.
WE DO NOT ANTICIPATE THAT WE WILL PAY CASH DIVIDENDS.
We have never declared or paid any cash dividends on our capital
stock. We do not currently intend to pay cash dividends in the foreseeable
future but intend to reinvest earnings in our business. Our debt agreements
contain limits on our ability to declare and pay cash dividends on our
common stock.
WE CANNOT PREDICT THE EFFECT FUTURE SALES OF NOTES OR SHARES OF COMMON
STOCK WILL HAVE ON THE MARKET PRICE OF COMMON STOCK.
We cannot predict the effect, if any, that future sales of notes
or shares of common stock will have on the market price of our common stock
prevailing from time to time. Sales of substantial amounts of common stock,
including shares issued upon the conversion of the notes, or the perception
that such sales could occur, may adversely affect prevailing market prices
for common stock.
YEAR 2000 AND SYSTEMS FAILURES MAY ADVERSELY IMPACT OUR OPERATIONS.
Our businesses could be adversely affected by information
technology issues related to the Year 2000 issue. The Year 2000 issue is a
broad business issue, whose impact extends to possible failure of our
financial, distribution and manufacturing systems, as well as to those of
third parties. None of our products contain date sensitive or date
processing logic. The ability of third parties with whom we do business to
address adequately their Year 2000 issues is outside our control. However,
if any of our systems are not Year 2000 compliant or if our customers, our
suppliers or government agencies fail to achieve Year 2000 compliance, and
our contingency plans fail to mitigate any Year 2000 compliance failures,
we may experience adverse consequences, including:
o our customers may be unable to place orders with us due
either to our or their system failures;
o we may be unable to maintain adequate production scheduling,
inventory cost accounting and other elements of our business
that are dependent upon computer systems; and
o we may be unable to deliver our products on a timely basis.
In addition, if our information systems were to fail, the areas
of customer service, warehousing, order fulfillment and other areas could
be adversely affected. The failure of our information systems could result
in lost
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sales, longer turnaround times, significantly increased freight and
warehousing costs, higher levels of inventories and accounts receivable,
extended order lead times and customer service difficulties.
ANTI-TAKEOVER PROVISIONS COULD DELAY OR PREVENT A CHANGE IN CONTROL OR
ADVERSELY IMPACT THE PRICE OF OUR COMMON STOCK.
Provisions in our certificate of incorporation and provisions of
the Delaware General Corporation Law could have the effect of deterring
hostile takeovers or delaying, deterring, or preventing a change of control
of our company, including transactions in which stockholders might
otherwise receive a premium for their shares over current market prices.
See "Description of Capital Stock."
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USE OF PROCEEDS
We will not receive any proceeds from the sale of the notes or
the shares of common stock offered hereby. See "Selling Securityholders."
PRICE RANGE OF COMMON STOCK
Since the spin-off in July 1997, our common stock has been traded
on the New York Stock Exchange under the symbol "CTV." The following table
sets forth the high and low sale prices as reported by the New York Stock
Exchange for the periods indicated. The stock price information shown below
does not include "when-issued" trading prior to the spin-off.
High Low
---- ---
Common Stock Price Range
------------------------
1997
Third Quarter (beginning July 28)...... $19 $12 3/4
Fourth Quarter......................... $14 7/16 $10 3/8
1998
First Quarter.......................... $15 3/16 $11 5/8
Second Quarter......................... $17 7/16 $13 5/16
Third Quarter.......................... $20 11/16 $9 3/8
Fourth Quarter......................... $17 1/4 $8 3/4
1999
First Quarter.......................... $21 9/16 $15 7/8
Second Quarter......................... $31 3/16 $19 1/4
Third Quarter.......................... $40 $29 1/4
Fourth Quarter......................... $46 3/8 $31 11/16
2000
First Quarter (through February 8) $43 3/8 $32
As of December 31, 1999, the approximate number of registered
stockholders of record of our common stock was 755.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital
stock. We do not currently intend to pay cash dividends in the foreseeable
future, but intend to reinvest earnings in our business. Our debt
agreements contain limits on our ability to declare and pay cash dividends
on our common stock.
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RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the actual and pro forma ratio of
earnings to fixed charges for each of the years ended December 31, 1994,
1995, 1996, 1997 and 1998 and for the nine months ended September 30, 1998
and 1999.
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
--------------------------------------------- ---------------------
1994 1995 1996 1997 1998 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C>
Actual ratio of earnings to
fixed charges (1).............. 7.15 9.63 10.13 5.49 4.90 4.39 10.70
Pro forma ratio of earnings to
fixed charges (2).............. - - - - 5.94 - 11.62
</TABLE>
(1) For purposes of computing the actual ratio of earnings to fixed
charges, earnings are divided by fixed charges. Earnings represent the
aggregate of income beflre income taxes plus fixed charges. Fixed
charges represent interest plus amortization of deferred financing
fees.
(2) For purposes of computing the pro forma ratio of earnings to fixed
charges, earnings and fixed charges (as defined in (1) above) have
been adjusted for the assumed issuance of the convertible notes and
use of proceeds to extinguish outstanding debt on the revolving credit
agreement as of the beginning of each period. For both periods shown,
earnings were increased and fixed charges were decreased based on the
pro forma net decrease in interest expense and amortization of
deferred financing fees.
Nine Months
Year Ended Ended
December 31, September 30,
1998 1999
---------- ----------
Pro forma decrease in interest expense $3,427,265 $1,161,102
Pro forma increase in deferred financing
fees 720,357 540,268
---------- ----------
Pro forma net increase in earnings
and decrease in fixed charges $2,706,908 $ 620,834
========== ==========
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BUSINESS
GENERAL
We are a leading worldwide designer, manufacturer and marketer of
a broad line of coaxial cables and other high-performance electronic and
fiber-optic cable products for cable television, telephony, Internet access
and wireless communications. We believe that we supplied over 50% of all
coaxial cable purchased in the U.S. in 1998 for broadband cable networks
using Hybrid Fiber Coaxial (HFC) architecture. We believe we are also the
largest manufacturer and supplier of coaxial cable for HFC cable networks
in Europe. We are a leading supplier of coaxial cable for telephone central
office switching and transmission applications, as well as video
distribution applications such as satellite television and security
surveillance. In addition, we have developed an innovative line of coaxial
cables for wireless communication infrastructure applications that have
superior performance characteristics compared to traditional cables. This
line of coaxial cables continues to gain market recognition, as evidenced
by the nearly twofold increase in sales of these products in the third
quarter of 1999 from the second quarter of 1999. We are a leading provider
of high-performance premise wiring for local area networks and have
developed a new patent-pending foaming process for unshielded twisted-pair
cables that significantly reduces cost and improves electrical performance.
We sell our products to approximately 2,400 customers in more than 85
countries.
For the nine months ended September 30, 1999 our revenues were
$537.3 million and our net income was $47.6 million. During this period,
approximately 77% of our revenues were for HFC cable networks and other
video applications, 12% were for wireless, central office and other
telecommunications applications and 11% were for local area network premise
wiring applications. International sales were 24.6% of our revenues during
this period.
We believe that we are the world's most technologically advanced,
low-cost provider of coaxial cable. With our leading product offerings,
cost-efficient manufacturing and economies of scale, we believe we will
benefit from the convergence of video, voice and high-speed Internet access
and the resulting demand for enhanced HFC broadband networks.
We believe that the following industry trends will drive demand
for our products:
o endorsement of the HFC architecture by major cable,
telephone and technology companies;
o increasing use of the Internet;
o increasing need for additional bandwidth to accommodate new
applications;
o increasing maintenance requirements for HFC cable networks
as operators improve reliability for telephony, data and
other two-way services;
o expansion of telephone central offices to accommodate
digital subscriber line (DSL) growth and growing alternate
access providers of telephony and data services;
o the continuing rapid deployment of wireless communications
systems worldwide; and
o increasing demand for higher speed and bandwidth for local
area networks.
BUSINESS STRATEGY
We have adopted a growth strategy to expand and strengthen our
current market position as the leading worldwide supplier of coaxial cable
for broadband communications. The principal elements of our growth strategy
are:
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BENEFIT FROM HFC PARADIGM SHIFT. A vast majority of video
networks worldwide, such as cable service provider networks, have adopted
the HFC cable network architecture for video service delivery. Recent
events involving major telecommunications and cable service providers
create the potential to expand the role of HFC cable networks from a
video-centric focus to a key platform for delivery of a variety of
broadband services. These events include AT&T Corporation's acquisition of
Tele-Communications, Inc. (TCI), AT&T Corporation's pending
acquisition of MediaOne Group, Inc., the strategic relationship between
AT&T Corporation and Time Warner, Inc. to offer cable telephony to
residential and small business customers in 33 states and to develop the
next-generation broadband services, Microsoft Corporation's $1 billion
investment in Comcast Corporation and investments in cable television in
Europe and the United Kingdom, Paul Allen's acquisitions of Marcus Cable
Company, L.L.C., Charter Communications, Inc. and other cable companies,
and the recent success of high-speed cable data services such as those
offered by Excite@Home Corporation and others. We believe that the HFC
cable network architecture provides the most cost-effective bandwidth for
multi-channel video, voice and data into homes around the world. This
architecture enables both cable and telecommunications service providers to
offer new products and services such as high-speed Internet access, video
on demand, Internet protocol telephony and high-definition television. As
the leading provider of coaxial cable for HFC cable networks, we believe we
are well positioned to benefit from the build out, upgrade and maintenance
of these networks in both domestic and international markets.
DEVELOP PROPRIETARY PRODUCTS AND EXPAND MARKET OPPORTUNITIES. We
maintain an active program to identify new market opportunities and develop
and commercialize products that use our core technology and manufacturing
competencies. We have developed new products and entered new markets,
including coaxial cable for wireless applications, satellite cables, local
area network cables, specialized coaxial based telecommunication cables,
broadcast audio and video cables and coaxial cables in conduit. We have
developed specialized coaxial (Power Feeder [registered trademark]) and
fiber optic (Fiber Feeder [trademark]) cables for distribution and
telephony applications in HFC cable networks.
We used our expertise in aluminum coaxial cable technology to
develop Cell Reach [registered trademark], a patented copper coaxial cable
solution for the wireless antenna market. We believe Cell Reach [registered
trademark] is a technologically superior product with a lower total
lifetime cost of ownership than the current industry standard. Cell Reach
[registered trademark] has been installed in thousands of cellular and
personal communications services antenna sites with leading service
providers such as Nextel Communications, Inc., Sprint Corporation and
certain Sprint affiliates, certain AT&T Corporation affiliates and
Metricom, Inc.
We have used our coaxial cable technology to enter the local area
network cable market and developed UltraMedia, a high-end local area
network cable product targeted for high-speed local area network
applications. We have also recently developed a thin-wall foam design
(Isolite [trademark]) for twisted-pair cables on which a patent is pending.
CONTINUOUSLY IMPROVE OPERATING EFFICIENCIES. We invested
approximately $113 million in state-of-the-art manufacturing facilities and
new technologies during the past four fiscal years. These investments have
increased our capacity and operating efficiencies, improved management
control and provided more consistent product quality. As a result, we
believe we are one of the few manufacturers capable of satisfying volume
production, time-to-market, and technology requirements of customers for
coaxial cable in the communications industry. We believe that our breadth
and scale permit us to cost-effectively invest in improving our operating
efficiency through investments in engineering and cost-management programs.
We intend to capture value in the supply chain through vertical integration
projects.
EXPAND OUR GLOBAL PLATFORM. We believe that the worldwide demand
for video and data services, the large number of television households
outside the U.S. and relatively low penetration rates for cable television
in most countries provide significant long-term opportunities. We have
become a major supplier of coaxial cable for the cable television and
broadband services industries in international markets, principally Europe,
Latin America and the Pacific Rim. In 1998 we had approximately 350
international customers in more than 85 countries, representing
approximately $139.8 million or 24.4% of our 1998 revenue. We support our
international sales
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efforts with sales representatives based in Europe, Latin America and the
Pacific Rim. In addition, we are able to benefit from our domestic cable
customer base because some of those customers are also equity investors in
international cable service providers. Although there is current
uncertainty in international markets, we believe that we are well
positioned to benefit over the long term from future international growth
opportunities. We believe we became the largest manufacturer and supplier
of coaxial cable for HFC cable networks in Europe with our acquisition in
January 1999 of Alcatel's coaxial cable business in Seneffe, Belgium. This
acquisition also gave us access to established European distribution
channels and complementary coaxial cable technologies.
In addition, we recently purchased an existing 455,000
square-foot facility in North Carolina to expand our wireless business,
support growth in other markets and house engineering, research and
development functions. We are also in the process of adding 130,000 square
feet at one of our existing facilities. We intend to establish or acquire
international distribution and/or manufacturing facilities to further
improve our ability to service international customers as well as reduce
shipping and importation costs.
LEVERAGE SUPERIOR CUSTOMER SERVICE. We believe that our coaxial
cable manufacturing capacity is greater than that of any other
manufacturer. This enables us to provide our customers with a unique
high-volume service capability. As a result of our 24-hour, seven days per
week continuous manufacturing operations, we are able to offer quick order
turnaround services. In addition, we believe that our ability to offer
rapid delivery services, materials management and logistics services to
customers through our private truck fleet is an important competitive
advantage.
BUSINESS UNITS
We manufacture and sell cable for three broad product categories:
o cable television and other video applications;
o local area network applications; and
o wireless and other telecommunications applications.
DOMESTIC HFC CABLE TV MARKET. We design, manufacture and market
primarily coaxial cable, most of which is used in the cable television
industry. We manufacture two primary types of coaxial cable:
o semi-flexible, which has an aluminum or copper outer tubular
shield or outer conductor; and
o flexible, which is typically smaller in diameter than
semi-flexible coaxial cable and has a more flexible outer
conductor typically made of metallic tapes and braided fine
wires.
Semi-flexible coaxial cables are used in the trunk and feeder
distribution portion of cable television systems, and flexible coaxial
cables, also known as drop cables, are used for connecting the feeder cable
to a residence or business or for some other communications applications.
We also manufacture fiber optic cable primarily for the cable television
industry.
Cable television service traditionally has been provided
primarily by cable television system operators that have been awarded
franchises from the municipalities they serve. In response to increasing
competitive pressures, cable television systems operators have been
expanding the variety of their service offerings not only for video, but
for Internet access and telephony, which generally requires increasing
amounts of cable and system bandwidth. Cable television systems operators
have generally adopted, and we believe that for the foreseeable future will
continue to adopt, HFC cable system designs when seeking to increase system
bandwidth. These systems combine the advantages of fiber optic cable in
transmitting clear signals over a long distance without amplification, and
the
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advantages of high-bandwidth coaxial cable in ease of installation, low
cost and compatibility with the receiving components of the customer's
communications devices. We believe that:
o cable television systems operators are likely to increase
their use of fiber optic cable for the trunk and feeder
portions of their cable systems;
o there will be an ongoing need for high-capacity coaxial
cable for the local distribution and street-to-the-home
portions of the cable system; and
o coaxial cable will remain the most cost effective means for
the transmission of broadband signals to the home or
business over shorter distances in cable networks.
For local distribution purposes, coaxial cable has the necessary
signal carrying capacity or bandwidth to handle upstream and downstream
signal transmission.
The construction, expansion and upgrade of cable systems require
significant capital investment by cable operators. Cable television systems
operators have been significant borrowers from the credit and capital
markets. Therefore, capital spending within the domestic cable television
industry has historically been cyclical, depending to a significant degree
on the availability of credit and capital. The cable television industry
has also been subject to varying degrees of both national and local
government regulation, most recently the Telecom Act and the 1992 Cable
Act, and their implementing regulations adopted in 1993 and 1994. The
regional Bell operating companies and other telephone service providers
have generally been subject to regulatory restrictions which prevented them
from offering cable television service within their franchise telephone
areas. However, the Telecom Act removes or phases out many of the
regulatory and sale restrictions affecting cable television systems
operators and telephone operating companies in the offering of video and
telephone services. We believe that the Telecom Act will encourage
competition among cable television systems operators, telephone operating
companies and other communications companies in offering video, telephone
and data services such as Internet access to consumers, and that providers
of such services will upgrade their present communications delivery
systems. We have provided coaxial cables to most major U.S. telephone
operating companies. Several of these companies are installing broadband
networks for the delivery of video, telephone and other services to some
portion of their telephone service areas. The broadband networks proposed
by some of the telephone companies use HFC technologies similar to those
employed by many cable television operators.
INTERNATIONAL MARKETS. Cable system designs using HFC technology
are increasingly being used in international markets with low cable
television penetration. Based upon industry trade publications and reports
from telecommunications industry analysts, we estimate that approximately
32% of the television households in Europe subscribe to some form of
multichannel television service as compared to a subscription rate of
approximately 75% in the U.S. Based upon such sources, we estimate that
subscription rates in the Asia/Pacific Rim and Latin American/Caribbean
markets are even lower at approximately 28% and 19%, respectively. In terms
of television households, it is estimated that there are approximately 263
million television households in Europe, approximately 440 million in
Asia/Pacific Rim and approximately 96 million in Latin America and the
Caribbean. This compares to approximately 100 million television households
in the U.S.
As of September 30, 1999, we had sales in more than 85 countries.
We have penetrated the international marketplace through a network of
distributors and agents located in major countries where we do business. In
addition to new customers developed by our network of distributors and
sales representatives, many large U.S. cable television operators, with
whom we have had long established business relationships, are active
investors in cable television systems outside the U.S.
VIDEO AND BROADCAST APPLICATIONS (NON-CABLE TELEVISION). Many
specialized markets or applications are served by multiple cable media such
as coaxial, twisted pair, fiber optic or combinations of each. We are a
leading producer of composite cables made of flexible coaxial and twisted
copper pairs for full service communications providers worldwide. In the
satellite direct-to-home cable market, where specialized composite coaxial
and copper
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cables transmit satellite-delivered video signals and antenna
positioning/control signals, we have developed a leading market position.
We market an array of premium metallic and optical cable products directed
at the broadcasting and video production studio market. Because of our
position in other video transport markets and access to distribution
channels within the market, we view these products as a growth opportunity,
although we cannot assure you that we will be able to penetrate this market
successfully.
LOCAL AREA NETWORK MARKET. The proliferation of personal
computers, and more broadly the practice of distributed computing, has
created a need for products which enable users to share files, applications
and peripheral equipment such as printers and data storage devices. Local
area networks, typically consisting of at least one dedicated computer (a
"server"), peripheral devices, network software and interconnecting cables,
were developed in response to this demand. We manufacture a variety of
twisted pair, coaxial and fiber optic cables to transmit data for local
area network applications. The most widely used cable design for this
application consists of four high-performance twisted pairs that are
capable of transmitting data at rates in excess of 100 mbps. We focus our
products and marketing on cables with enhanced electrical and physical
performance such as our UltraMedia unshielded twisted pair. We believe that
UltraMedia cable is among the highest performing unshielded twisted pair
cables in the industry. Copper and fiber optic composite cables are
frequently combined in a single cable to reduce installation costs and
support multimedia applications.
WIRELESS COMMUNICATION APPLICATIONS. We believe that the rapid
deployment of cellular or "wireless" communication systems throughout the
U.S. and the rest of the world presents a growth opportunity for us.
Semi-flexible coaxial cables are used to connect the antennae located at
the top of cellular antenna towers to the radios and power sources located
adjacent to or near the antenna site. In 1996 and 1997, we developed Cell
Reach [registered trademark] products, a line of copper shielded
semi-flexible coaxial cables and related connectors and accessories to
address this market. We are expanding manufacturing capacity for this
product line and we are developing additional products and marketing
programs for Cell Reach [registered trademark] for both the U.S. and
certain international markets. Cell Reach [registered trademark] has been
installed in thousands of cellular and personal communications services
sites with leading service providers such as Nextel Communications, Inc.,
Sprint Corporation and certain Sprint affiliates, certain AT&T Corporation
affiliates and Metricom, Inc. There are, however, larger, well established
companies with significant financial resources and brand recognition in the
cellular market which have established marketing channels for coaxial
cables and accessories.
OTHER MARKETS. We have developed a strategy for addressing
additional cable consuming markets. By combining narrowly focused product
and market management with our cable manufacturing and operational skills,
we are entering new markets for broadcast, home automation, telephone
central office switching and transmission, and other high-performance
communications applications.
MANUFACTURING
We employ advanced cable manufacturing processes, the most
important of which are:
o thermoplastic extrusion for insulating wires and cables;
o high-speed welding and swaging of metallic shields or outer
conductors;
o braiding;
o cabling; and
o automated testing.
Many of these processes, some of which are proprietary and/or
trade secret information, are performed on equipment that has been modified
for our purposes or specifically built to our specifications, often
internally in our own machine shop facilities. We fabricate very few of the
raw material components used in making most of our
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cables, such as wires, tapes, tubes and similar materials. We believe,
however, that fabrication, to the extent economically feasible, could be
done by us instead of being outsourced.
For example, we acquired the clad wire fabrication equipment and
technology of Texas Instruments Incorporated for manufacturing copper-clad
aluminum wire and copper-clad steel wire that we use as center conductors
for our cable. This acquisition allows us to further vertically integrate
our processes, providing an opportunity to significantly reduce cost. We
are also pursuing fine wire drawing to produce wires to be braided for
flexible coaxial cables. The manufacturing processes of the three principal
types of cable we manufacture are further described below.
COAXIAL CABLES. We employ a number of advanced plastic and metal
forming processes in the manufacture of coaxial cable. Three fundamental
process sequences are common to almost all coaxial cables:
o First, a plastic insulation material, called the dielectric,
is melt extruded around a metallic wire or center conductor.
Current state-of-the-art dielectrics consist of foamed
plastics to enhance the electrical properties of the cable.
Precise control of the foaming process is critical to
achieve the mechanical and electrical performance required
for broadband services and cellular communications
applications. We believe that plastic foam extrusion, using
proprietary materials, equipment and control systems, is one
of our core competencies.
o The second step involves sheathing the dielectric material
with a metallic shield or outer conductor. Three basic
shield designs and processes are used. For semi-flexible
coaxial cables, we apply solid aluminum or copper shields
over the dielectric by either pulling the dielectric
insulated wire into a long, hollow metallic tube or welding
the metallic tube directly over the dielectric. Welding
allows the use of thinner metal, resulting in more flexible
products. We use a proprietary welding process that achieves
significantly higher process speeds than those achievable
using other cable welding methods. The same welding process
has led to extremely efficient manufacturing processes of
copper shielded products for cellular communications. For
both hollow and welded tubes, the cable is passed through
tools that form the metallic shield tightly around the
dielectric.
o Flexible coaxial cables, which are usually smaller in
diameter than semi-flexible coaxial cables, generally are
made with the third shield design. Flexible outer shield
designs typically involve laminated metallic foils and
braided fine wires which are used to enhance flexibility
which is more desirable for indoor wiring or for connecting
subscribers in drop cable applications.
o The third and usually final process sequence is the melt
extrusion of thermoplastic jackets to protect the coaxial
cable. A large number of variations are produced during this
sequence including: incorporating an integral strength
member; customer specified extruded stripes and printing for
identification; abrasion and crush resistant jackets; and
adding moisture blocking fillers.
TWISTED COPPER PAIRS. We insulate single copper wires using
high-speed thermoplastic extrusion techniques. Two insulated copper singles
are then twinned by twisting them into an electrically balanced pair unit
in a separate process. They are then bunched or cabled by grouping two or
more pair units into larger units for further processing in one or more
further processes depending on the number of pairs desired within the
completed cable. The cabled units are then shielded and jacketed or simply
jacketed without applying a metallic shield in the jacketing process. The
jacketing process involves extrusion of a plastic jacket over a shielded or
unshielded cable core. The majority of sales of our twisted copper pairs
come from plenum rated unshielded twisted pair cables for local area
network applications. Plenum cables are cables rated under the National
Electrical Code as safe for installation within the air plenum areas of
office buildings due to their flame retarding and low smoke generating
characteristics when heated. Plenum cables are made from more costly
thermoplastic insulating materials, such as FEP. These materials have
significantly higher extrusion temperature profiles that require more
costly extrusion equipment than non-plenum rated cables. We believe that
the processing of plenum rated materials is one of our core competencies.
In addition, we recently announced an engineering breakthrough for the
extrusion of FEP. The
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patent pending thin-wall foam FEP process improves signal velocity and uses
significantly less raw material in a smaller diameter cable in typical
applications. We believe that this process enhances our ability to grow and
serve customers in all local area network segments.
FIBER OPTIC CABLES. We manufacture fiber optic cables by
purchasing bulk uncabled optical fiber singles and colors and buffering
them before cabling them into unjacketed core units. We then apply
protective outer jackets and, sometimes, shields and jackets in a final
process before testing. The manufacturing and test equipment for fiber
optic cables are different from those used to manufacture coaxial and
copper twisted pair cables. Most of the fiber optic cables we produce are
sold to the cable television and local area network industry. Some of these
fiber optic cables are produced under licenses acquired from other fiber
and fiber optic cable manufacturers.
COMPOSITE CABLES. We also produce cables that are combinations of
some or all of coaxial cables, copper singles or twisted copper pairs and
fiber optic cables within a single cable for a variety of applications. The
most significant of the composite cables we manufacture are combination
coaxial and copper twisted pairs within a common outer jacket which are
being used by some telephone companies and cable operators to provide both
cable television services and telephone services to the same households
over HFC cable networks. Nearly all of our current markets have
applications for composite cables which we can manufacture.
RESEARCH AND DEVELOPMENT
Our research, development and engineering expenditures for the
creation and application of new and improved products and processes were $6
million, $6 million and $5 million for the years ended December 31, 1998,
1997 and 1996, respectively, and $6 million for the nine months ended
September 30, 1999. We focus our research and development efforts primarily
on those product areas that we believe have the potential for broad market
applications and significant sales within a one-to-three year period. We
anticipate that the level of spending on product development activities
will accelerate in future years. The widespread deployment of broadband
services and HFC cable systems is expected to provide opportunities for us
to enhance our coaxial cable product lines and to improve our manufacturing
processes. Additionally, we expect that our participation in the local area
network, wireless communications and other new markets now identified will
require higher rates of product development spending in relation to sales
generated than has been the case in recent years.
SALES AND DISTRIBUTION
We market our products worldwide through a combination of more
than 100 direct sales, territory managers and manufacturers' representative
personnel. We support our sales organization with regional service centers
in: North Carolina; California; Alabama; Seneffe, Belgium; Birmingham,
England; and Melbourne, Australia. In addition, we utilize local
inventories, sales literature, internal sales service support, design
engineering services and a group of product engineers who travel with sales
personnel and territory managers and assist in product application issues,
and conduct technical seminars at customer locations to support our sales
organization. We have expanded our global presence through our acquisition
of Europe's largest manufacturer of cable television coaxial cable.
A key aspect of our customer support and distribution chain is
the use of our private truck fleet. We believe that the ability to offer
rapid delivery services, materials management and logistics services to
customers through our private truck fleet is an important competitive
advantage.
Our products are sold and used in a wide variety of applications.
Our products primarily are sold directly to cable system operators,
telecommunications companies, original equipment manufacturers and
indirectly through distributors. There has been a trend on the part of
original equipment manufacturer customers to consolidate their lists of
qualified suppliers to companies that have a global presence, can meet
quality and delivery standards, have a broad product portfolio and design
capability, and have competitive prices. We have concentrated our efforts
on service and productivity improvements including advanced computer aided
design and manufacturing systems, statistical process controls and
just-in-time inventory programs to increase product quality and shorten
product delivery schedules. Our strategy is to provide a broad selection of
products in the areas in
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which we compete. We have achieved a preferred supplier designation from
many of our cable television, telephone and original equipment manufacturer
customers.
Cable television services in the U.S. are provided primarily by
cable television systems operators. It is estimated that the five largest
cable television systems operators account for more than 50% of the cable
television subscribers in the U.S. The major cable television systems
operators include such companies as AT&T, Time Warner Cable, MediaOne,
Comcast and Cablevision Systems Corporation. Many of the major cable
television systems operators are our customers, including those listed
above. During the nine months ended September 30, 1999, AT&T accounted for
approximately 11% of our net sales. During 1998 and 1997, sales to no
single customer accounted for 10% or more of our net sales and TCI (now
part of AT&T) was the only customer which accounted for 10% or more of our
net sales during 1996.
PATENTS
We pursue an active policy of seeking intellectual property
protection, namely patents, for new products and designs. We hold 45
patents worldwide and have 80 pending applications. We consider our patents
to be valuable assets, but no single patent is material to our operations
as a whole. We intend to rely on our proprietary knowledge, trade secrets
and continuing technological innovation to develop and maintain our
competitive position.
BACKLOG
At December 31, 1998, 1997 and 1996, we had an order backlog of
approximately $43 million, $55 million and $36 million, respectively.
Orders typically fluctuate from quarter to quarter based on customer demand
and general business conditions. Backlog includes only orders for products
scheduled to be shipped within six months. Unfilled orders may be canceled
prior to shipment of goods; however, cancellations historically have not
been material. However, significant elements of our business, such as sales
to the cable television industry, distributors, the computer industry and
other commercial customers, generally have short lead times. Therefore, our
current order backlog may not be indicative of future demand.
COMPETITION
We encounter competition in substantially all areas of our
business. We compete primarily on the basis of product specifications,
quality, price, engineering, customer service and delivery time.
Competitors include large, diversified companies, some of which have
substantially greater assets and financial resources than we do, as well as
medium to small companies. We also face competition from certain smaller
companies that have concentrated their efforts in one or more areas of the
coaxial cable market. We believe that we enjoy a strong competitive
position in the coaxial cable market due to our position as a low-cost,
high-volume coaxial cable producer and reputation as a high-quality
provider of state-of-the-art cables with a strong orientation toward
customer service. We also believe that we enjoy a strong competitive
position in the electronic cable market due to our large direct field sales
organization within the local area network segment, the comprehensive
nature of our product line and our long established reputation for quality.
RAW MATERIALS
In the manufacture of coaxial and twisted-pair cables, we process
metal tubes, tapes and wires including bi-metallic wires (wires made of
aluminum or steel with thin outer skins of copper) that are fabricated from
high-grade aluminum, copper and steel. Most of these fabricated metal
components are purchased under supply arrangements with some portion of the
unit pricing indexed to commodity market prices for these metals. We have
adopted a hedging policy pursuant to which we may, from time to time,
attempt to match futures contracts or option contracts for a specific metal
with some portion of the anticipated metal purchases for the same periods.
Other major raw materials we use include polyethelenes, polyvinylchlorides,
FEP and other plastic insulating materials, optical fibers, and wood and
cardboard shipping and packaging materials. In 1998, approximately 13% of
our raw material purchases were for bi-metallic center conductors for
coaxial cables, nearly all of which were
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purchased from Copperweld Corporation under a long-term supply arrangement
expiring in March 2000. Copperweld has agreed to continue to supply us with
bi-metallic center conducts after expiration of this agreement, but this
continued supply arrangement is indefinite in duration. If we are unable to
continue to purchase bi-metallic center conductors from this supplier,
either before or after expiration of this arrangement, we may be unable to
obtain these raw materials on commercially acceptable terms from another
source. There are few, and limited, alternative sources of supply for these
raw materials. In February 1999, we purchased the clad wire fabrication
equipment and technology of Texas Instruments Incorporated for
manufacturing copper-clad aluminum wire and copper-clad steel wire. We
anticipate that in 2000 we will begin to produce a significant portion of
the bi-metallic center conductors we use. However, the loss of Copperweld
as a supplier of bi-metal center conductors, either during the term of the
current supply contract, or after the expiration of that agreement, and/or
our failure to vertically integrate these products, could have a material
adverse effect on our business and financial condition. In addition, we
purchase fine aluminum wire primarily from a single source. Fine Aluminum
wire is a smaller raw material purchase than bi-metallic wire. Neither of
these major raw materials could be readily replaced in sufficient
quantities if all supplies from the respective primary sources were
disrupted for an extended period and we were unable to vertically integrate
the production of these products. In such event, there could be a
materially adverse impact on our financial results.
Additionally, FEP is the primary raw material used throughout the
industry for producing flame-retarding cables for local area network
applications. There are few worldwide producers of FEP and market supplies
have been periodically limited over the past several years. Availability of
adequate supplies of FEP will be critical to future local area network
cable sales growth.
We have demonstrated an ability to successfully foam FEP. Our
ability to expand foaming of FEP on a larger scale would help moderate the
impact of any limitation of the FEP supply. Alternative sources of supply
or access to alternative materials are generally available for all other
major raw materials we use. Supplies of all other material raw materials we
use are generally adequate and expected to remain so for the foreseeable
future.
ENVIRONMENT
We use some hazardous substances and generate some solid and
hazardous waste in the ordinary course of our business. As a result, we are
subject to various federal, state, local and foreign laws and regulations
governing the use, discharge and disposal of hazardous materials. Because
of the nature of our business, we have incurred, and will continue to
incur, costs relating to compliance with these environmental laws. Although
we believe that we are in substantial compliance with such environmental
requirements, and we have not in the past been required to incur material
costs in connection with this compliance, there can be no assurance that
our cost to comply with these requirements will not increase in the future.
Although we are unable to predict what legislation or regulations may be
adopted in the future with respect to environmental protection and waste
disposal, compliance with existing legislation and regulations has not had
and is not expected to have a material adverse effect on our operations or
financial condition.
EMPLOYEES
At November 30, 1999, we employed approximately 3,200 people.
Substantially all employees are located in the U.S. We also have employees
in foreign countries, including those in our Seneffe, Belgium operations.
We believe that our relations with our employees are satisfactory.
PROPERTIES
Our principal administrative, production and research and
development facilities are located in the following locations:
The Hickory, North Carolina facility occupies approximately
40,000 square feet under a lease expiring in December 2001. Our executive
offices, sales office and customer service department are located at this
facility.
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The Catawba, North Carolina facility occupies approximately
1,000,000 square feet and is owned by us. The Catawba facility manufactures
coaxial cables, is the major distribution facility for our products and
houses certain administrative and engineering activities.
The Claremont, North Carolina facility occupies approximately
450,000 square feet and is owned by us. We are in the process of adding
130,000 square feet of capacity at this facility. The Claremont facility
manufactures coaxial, copper twisted pair and fiber optic cables and houses
certain of our administrative, sales and engineering activities.
The Scottsboro, Alabama facility occupies 150,000 square feet and
is owned by us. The Scottsboro facility manufactures coaxial cables.
The Statesville, North Carolina facility occupies approximately
315,000 square feet and is owned by us. The Statesville facility houses
certain local area network cable manufacturing, cable-in-conduit
manufacturing, wire fabrication, recycling activities, research and
development, and engineering activities.
During 1999, we purchased an approximately 120,000 square-foot
facility in Seneffe, Belgium, which houses certain coaxial cable
manufacturing and sales activities.
We recently purchased a facility in Newton, North Carolina with
455,000 square feet of manufacturing, office and warehouse space. We intend
to renovate the facility and establish the new CommScope Cable Technology
Center at the location. Once renovated, we expect the facility to house the
majority of our engineering, research and development functions as well as
manufacturing of wireless products.
We do not believe there is any material long-term excess capacity
in our facilities, although utilization is subject to change based on
customer demand. We believe that our facilities and equipment generally are
well maintained, in good operating condition and suitable for our purposes
and adequate for our present operations.
LEGAL PROCEEDINGS
We are not involved in any pending legal proceedings other than
various claims and lawsuits arising in the normal course of business. We do
not believe that any such claims or lawsuits will have a material adverse
effect on our financial statements.
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DESCRIPTION OF NOTES
The Notes were issued under an indenture dated as of December 15,
1999 (the "Indenture"), between us and First Union National Bank, as
trustee (the "Trustee"). A copy of the Indenture and Registration Rights
Agreement are filed as exhibits to the Registration Statement of which this
prospectus is a part. The following summaries of certain provisions of the
Notes, the Indenture and the Registration Rights Agreement do not purport
to be complete and are subject to, and are qualified in their entirety by
reference to, all of the provisions of the Notes, the Indenture and the
Registration Rights Agreement including the definitions therein of certain
terms which are not otherwise defined in this prospectus. Wherever
particular provisions or defined terms of the Indenture (or of the form of
Note which is a part thereof) or the Registration Rights Agreement are
referred to, such provisions or defined terms are incorporated herein by
reference. Unless the context suggests otherwise, references in this
"Description of Notes" to the "Company" refer to CommScope and not to its
subsidiaries.
GENERAL
The Notes are unsecured, subordinated obligations of the Company
limited to $172,500,000 aggregate principal amount and mature on December
15, 2006. The principal amount of each Note is $1,000 and is payable at the
office of the Paying Agent, which initially is the Trustee, or an office or
agency maintained by the Company for such purpose in the Borough of
Manhattan, City of New York. The Notes are subordinated in right of payment
to all existing and future Senior Indebtedness as described under
"--Subordination of Notes" below.
The Notes bear interest at the rate of 4% per annum on the
principal amount from December 15, 1999, or from the most recent date to
which interest has been paid or provided for until the Notes are paid in
full or funds are made available for payment in full of the Notes in
accordance with the Indenture. Interest is payable at maturity (or earlier
purchase, redemption or, in certain circumstances, conversion) and
semiannually on June 15 and December 15 of each year (each an "Interest
Payment Date"), commencing on June 15, 2000, to holders of record at the
close of business on June 1 or December 1 (whether or not a business day)
immediately preceding each Interest Payment Date (each a "Regular Record
Date"). Each payment of interest on the Notes will include interest accrued
through the day before the applicable Interest Payment Date or the date of
maturity (or earlier purchase, redemption or, in certain circumstances,
conversion), as the case may be. Any payment of principal and interest
required to be made on any day that is not a business day will be made on
the next succeeding business day.
In the event of the maturity, conversion, purchase by us at the
option of a holder or redemption of a Note, interest will cease to accrue
on such Note, under the terms and subject to the conditions of the
Indenture. We may not reissue a Note that has matured or been converted,
redeemed or otherwise canceled (except for registration of transfer,
exchange or replacement thereof).
You may present Notes for conversion at the office of the
Conversion Agent and for exchange or registration of transfer at the office
of the Registrar. Each such agent shall initially be the Trustee.
FORM, DENOMINATION AND REGISTRATION
The Notes were issued in registered book-entry form, without
coupons, in denominations of $1,000 principal amount at maturity and
integral multiples thereof. The Notes are represented by one or more global
Notes without coupons (each, a "Global Note") which were deposited with a
custodian for and registered in the name of a nominee of The Depository
Trust Company ("DTC") in New York, New York. Beneficial interests in any
such Global Note will be shown on, and transfers thereof will be effected
only through, records maintained by DTC and its direct and indirect
participants, and any such interest may not be exchanged for Notes in
certificated form except in the limited circumstances described herein.
No service charge will be made for any registration of transfer
or exchange of Notes, but we may require payment by a holder of a sum
sufficient to cover any tax, assessment or other governmental charge
payable in connection therewith.
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Ownership of beneficial interests in a Global Note will be
limited to persons who have accounts with DTC ("participants") or persons
who hold interests directly or indirectly through DTC participants.
Ownership of beneficial interests in the Global Notes will be shown on, and
the transfer of that ownership will be effected through DTC participants
and will be shown on, records maintained by DTC (with respect to interests
of participants) and the records of participants (with respect to interests
of persons other than participants).
So long as DTC, or its nominee, is the registered owner or holder
of a Global Note, DTC or such nominee, as the case may be, will be
considered the sole owner or holder of the Notes represented by such Global
Note for all purposes under the Indenture and the Notes. No beneficial
owner of an interest in a Global Note will be able to transfer that
interest except in accordance with DTC's applicable procedures (in addition
to those under the Indenture referred to herein). If DTC or any successor
depository notifies us that it is unwilling or unable to continue as
depository for a Global Note or ceases to be a "Clearing Agency" registered
or in good standing under the Exchange Act or other applicable statute or
regulation and a successor depository is not appointed by us within 90
days, or an Event of Default has occurred and is continuing, DTC
participants in such Global Note will receive physical delivery of Notes in
certificated form and will be considered to be the owners or Holders of
such Notes under the Indenture or the Notes.
Payments on Global Notes will be made to DTC or its nominee, as
the registered owner thereof. None of the Company, the Trustee or any
Paying Agent will have any responsibility or liability for any aspect of
the records relating to or payments made on account of beneficial ownership
interests in the Global Notes or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests.
We expect that DTC or its nominee, upon receipt of any payment in
respect of a Global Note held by it or its nominee, will credit
participants' accounts with payment in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Note
as shown on the records of DTC or its nominee. We also expect that payments
by participants to owners of beneficial interests in such Global Note held
through such participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the
accounts of customers registered in the names of nominees for such
customers. Such payments, however, will be the responsibility of such
participants.
Transfers between participants in DTC will be effected in
accordance with DTC rules and will be settled in same-day funds. The laws
of some states, however, require that certain persons take physical
delivery of securities in definitive form. Notes will only be delivered in
certificated form in the limited circumstances described therein.
Consequently, the ability to transfer Notes evidenced by the Global Note
will be limited to such extent.
DTC will take any action permitted to be taken by a holder of
Notes (including the presentation of Notes for exchange as described below)
only at the direction of one or more participants to whose account
interests in the Global Notes are credited and only in respect of such
portion of the aggregate principal amount of the Notes as to which such
participant or participants has or have given such direction. However, if
there is an Event of Default under the Notes, DTC will exchange the Global
Notes for Notes in certificated form, which it will distribute to its
participants.
In case any Note shall become mutilated, defaced, destroyed, lost
or stolen, we will execute and upon the Company's request the Trustee will
authenticate and deliver a new Note, of like tenor (including the same date
of issuance) and equal principal amount at maturity, registered in the same
manner, dated the date of its authentication in exchange and substitution
for such Note (upon surrender and cancellation thereof) or in lieu of and
substitution for such Note. In case such Note is destroyed, lost or stolen,
the applicant for a substituted Note shall furnish to us and the Trustee
such security or indemnity as may be required by them to hold each of them
harmless, and, in every case of destruction, loss or theft of such Note,
the applicant shall also furnish to us satisfactory evidence of the
destruction, loss or theft of such Note and of the ownership thereof. Upon
the issuance of any substituted Note, we may require the payment by the
registered holder thereof of a sum sufficient to cover fees and expenses
connected therewith.
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Holders who desire to convert their Notes into common stock
pursuant to the terms of the Notes should contact their brokers or other
participants to obtain information on procedures, including proper forms
and cut-off times, for submitting such requests.
SUBORDINATION OF NOTES
The Notes are unsecured obligations of the Company and are
subordinated in right of payment to the prior payment in full in cash or
other payment satisfactory to holders of Senior Indebtedness of all our
existing and future Senior Indebtedness.
At December 31, 1999 the notes were subordinated to $15.1 million
of Senior Indebtedness and effectively subordinated to $10.8 million of
other indebtedness of our subsidiaries. The Indenture does not restrict the
incurrence by us or our subsidiaries of indebtedness or other obligations.
The term "Senior Indebtedness" means:
(1) the principal, premium, if any, interest and all other
amounts owed in respect of all the Company's (A)
indebtedness for money borrowed and (B) indebtedness
evidenced by securities, debentures, bonds or other similar
instruments;
(2) all obligations of the Company (including all interest
accruing after the commencement of any bankruptcy or similar
proceeding, whether or not a claim for post-petition
interest is allowed as a claim in any such proceeding)
payable under the Credit Agreement, whether outstanding on
the date of the Indenture or thereafter created, incurred,
assumed, guaranteed or in effect guaranteed by the Company;
(3) all of the Company's capital lease obligations;
(4) all obligations issued or assumed by the Company as the
deferred purchase price of property, all of the Company's
conditional sale obligations and all of the Company's
obligations under any title retention agreement (but
excluding trade accounts payable arising in the ordinary
course of business);
(5) all of the Company's obligations for the reimbursement of
any letter of credit, banker's acceptance, security purchase
facility or similar credit transaction;
(6) all obligations of the type referred to in clauses (1)
through (5) above of other persons for the payment of which
the Company is responsible or liable as obligor, guarantor
or otherwise; and
(7) all obligations of the type referred to in clauses (1)
through (6) above of other persons secured by any lien on
any of the Company's properties or assets (whether or not
such obligation is assumed by the Company),
except for (x) any such indebtedness that is by its terms subordinated to
or pari passu with the Notes and (y) any indebtedness between or among the
Company or affiliates of the Company, including all other debt securities
and guarantees in respect of those debt securities issued to any trust, or
trustees of such trust, partnership or other entity affiliated with the
Company that is, directly or indirectly, a financing vehicle of the Company
(a "Financing Entity") in connection with the issuance by such Financing
Entity of preferred securities or other securities that rank pari passu
with, or junior to, the Notes.
"Credit Agreement" means that certain Credit Agreement dated as
of July 23, 1997 by and among the Company and the lenders party thereto
from time to time and The Chase Manhattan Bank, as Administrative Agent,
and the other financial institutions named therein as Co-Agents, including
any related notes, guarantees, collateral documents, instruments and
agreements executed in connection therewith, and in each case as amended,
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restated, modified, increased, renewed, refunded, replaced or refinanced
from time to time, whether or not with the same parties.
Such Senior Indebtedness shall continue to be Senior Indebtedness
and entitled to the benefits of the subordination provisions irrespective
of any amendment, modification or waiver of any term of such Senior
Indebtedness.
By reason of such subordination, in the event of dissolution,
insolvency, bankruptcy or other similar proceedings, or upon any winding
up, liquidation or dissolution, in each case whether voluntary or
involuntary, upon any payment or distribution of our assets or securities,
(1) the holders of the Notes are required to pay over their
share of such payment or distribution to the holders of
Senior Indebtedness or their representative for application
to the payment of all Senior Indebtedness remaining unpaid,
to the extent necessary to pay all holders of Senior
Indebtedness in full in cash or other payment satisfactory
to the holders of Senior Indebtedness; and
(2) unsecured creditors of ours who are not holders of Notes or
Senior Indebtedness may recover less, ratably, than holders
of Senior Indebtedness of ours and may recover more,
ratably, than the holders of Notes.
In addition, no payment of the principal amount, Redemption
Price, Change in Control Purchase Price, conversion consideration or
interest or other obligations with respect to any Notes may be made by us,
nor may we redeem, acquire or defease any Notes, if:
(1) any payment default on any Senior Indebtedness has occurred
and is continuing; or
(2) any default (other than a payment default) with respect to
Senior Indebtedness occurs and is continuing that permits
the acceleration of the maturity thereof and either such
default is the subject of judicial proceedings or we receive
a written notice of such default (a "Senior Indebtedness
Default Notice"); provided, however, that only a holder of
more than $10 million of Senior Indebtedness can provide a
Senior Indebtedness Default Notice.
Notwithstanding the foregoing, payments with respect to the Notes
may resume and we may acquire Notes for cash when:
(a) the default with respect to the Senior Indebtedness is cured
or waived or ceases to exist; or
(b) in the case of a default described in (2) above, 179 or more
days pass after the Senior Indebtedness Default Notice is
received by us, provided that the terms of the Indenture
otherwise permit the payment or acquisition of the Notes at
that time.
If we receive a Senior Indebtedness Default Notice, then a
similar notice received within nine months thereafter relating to the same
default on the same issue of Senior Indebtedness shall not be effective to
prevent the payment or acquisition of the Notes as provided above. In
addition, no payment or distribution may be made on the Notes if any Notes
are declared due and payable prior to their Stated Maturity by reason of
the occurrence of an Event of Default until the earlier of:
(1) 120 days after the date of such acceleration; or
(2) the payment in full in cash of all Senior Indebtedness,
but only if such payment or distribution is then otherwise
permitted under the terms of the Indenture.
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Upon any payment or distribution of our assets or securities to
creditors upon any dissolution, winding up, liquidation or reorganization
of us, whether voluntary or involuntary, or in bankruptcy, insolvency,
receivership or other similar proceedings, the holders of all Senior
Indebtedness shall first be entitled to receive payment in full, in cash or
other payment satisfactory to the holders of Senior Indebtedness, of all
amounts due or to become due thereon before the holders of the Notes shall
be entitled to receive any payment or distribution with respect to any
Notes.
The Notes are effectively subordinated to all existing and future
liabilities of our subsidiaries. Any right of ours to receive assets of any
of our subsidiaries upon their liquidation or reorganization (and the
consequent right of the holders of the Notes to participate in those
assets) will be subject to the claims of that subsidiary's creditors
(including trade creditors), except to the extent that we ourselves are
recognized as a creditor of that subsidiary, in which case our claims would
still be subordinate to any security interests in the assets of that
subsidiary and any indebtedness of that subsidiary senior to that held by
us.
CONVERSION RIGHTS
A holder of a Note is entitled to convert it into shares of
common stock at any time before the close of business on December 15, 2006,
provided, however, that if a Note is called for redemption, the holder is
entitled to convert it at any time before the close of business on the
Redemption Date. A Note in respect of which a holder has delivered a Change
in Control Purchase Notice (as defined below) exercising the option of such
holder to require the Company to purchase such Note may be converted only
if such notice is withdrawn by a written notice of withdrawal delivered by
the holder to the Paying Agent prior to the close of business on the Change
in Control Purchase Date, in accordance with the terms of the Indenture.
The initial Conversion Rate for the Notes is 20.7512 shares of
common stock per $1,000 principal amount (equivalent to a conversion price
of $48.19 per share of common stock), subject to adjustment upon the
occurrence of certain events described below. See "Price Range of Common
Stock." A holder otherwise entitled to a fractional share of common stock
will receive cash in an amount equal to the market value of such fractional
share based on the closing sale price on the trading day immediately
preceding the Conversion Date, subject to the subordination provisions. A
holder may convert a portion of such holder's Notes so long as such portion
is $1,000 principal amount or an integral multiple thereof.
To convert a Note, a holder must:
(1) complete and manually sign the conversion notice on the back
of the Note (or complete and manually sign a facsimile
thereof) and deliver such notice to the Conversion Agent
(initially the Trustee) at the office maintained by the
Conversion Agent for such purpose;
(2) surrender the Note to the Conversion Agent;
(3) if required, furnish appropriate endorsements and transfer
documents; and
(4) if required, pay all transfer or similar taxes.
Pursuant to the Indenture, the date on which all of the foregoing
requirements have been satisfied is the Conversion Date.
Upon conversion of a Note, a holder will not receive (except as
provided below) any cash payment representing accrued interest thereon. The
Company's delivery to the holder of the fixed number of shares of common
stock into which the Note is convertible (together with the cash payment,
if any, in lieu of any fractional shares) will satisfy the Company's
obligation to pay the principal amount of the Note, and the accrued and
unpaid interest to the Conversion Date. Thus, such accrued interest will be
deemed to be paid in full rather than cancelled, extinguished or forfeited.
Notwithstanding the foregoing, accrued but unpaid cash interest will be
payable upon any conversion of Notes at the option of the holder made
concurrently with or after acceleration of the Notes following
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an Event of Default described under "--Events of Default; Notice and
Waiver" below, subject to the subordination provisions. Notes surrendered
for conversion during the period from the close of business on any Regular
Record Date next preceding any Interest Payment Date to the opening of
business on such Interest Payment Date (except Notes to be redeemed on a
date within such period) must be accompanied by payment of an amount equal
to the interest thereon that the registered holder is to receive. Except
where Notes surrendered for conversion must be accompanied by payment as
described above, no interest on converted Notes will be payable by us on
any Interest Payment Date subsequent to the date of conversion. The
Conversion Rate will not be adjusted at any time during the term of the
Notes for accrued interest.
A certificate for the number of full shares of common stock into
which any Note is converted (and cash in lieu of any fractional shares)
will be delivered as soon as practicable, but in any event no later than
the seventh Business Day following the Conversion Date. For a summary of
the U.S. federal income tax treatment of a holder receiving common stock
upon conversion, see "Certain United States Federal Tax
Consequences--Certain Federal Income Tax Consequences to U.S.
Holders--Conversion of the Notes."
The Conversion Rate is subject to adjustment in certain events,
including
(a) the issuance of shares of common stock as a dividend or a
distribution with respect to common stock;
(b) subdivisions, combinations and reclassification of common
stock;
(c) the issuance to all holders of common stock of rights or
warrants entitling them (for a period not exceeding 45 days)
to subscribe for shares of common stock at less than the
then Market Price (as defined below) of the common stock;
(d) the distribution to holders of common stock of evidences of
our indebtedness, securities or capital stock, cash or
assets (including securities, but excluding those rights,
warrants, dividends and distributions referred to above and
dividends and distributions paid exclusively in cash);
(e) the payment of dividends (and other distributions) on common
stock paid exclusively in cash, excluding cash dividends if
the aggregate amount thereof, when taken together with (1)
other all-cash distributions made within the preceding 12
months not triggering a Conversion Rate adjustment and (2)
any cash and the fair market value, as of the expiration of
the tender or exchange offer referred to below, of
consideration payable in respect of any tender or exchange
offer by us or one of our subsidiaries for the common stock
concluded within the preceding 12 months not triggering a
Conversion Rate adjustment, does not exceed 10% of our
aggregate market capitalization (such aggregate market
capitalization being the product of the current market price
of common stock as of the trading day immediately preceding
the date of declaration of such dividend multiplied by the
number of shares of common stock then outstanding) on the
date of such distribution; and
(f) payment to holders of common stock in respect of a tender or
exchange offer (other than an odd-lot offer) by us or one of
our subsidiaries for common stock as of the trading day next
succeeding the last date tenders or exchanges may be made
pursuant to such tender or exchange offer which involves an
aggregate consideration that, together with (1) any cash and
the fair market value of other consideration payable in
respect of any tender or exchange offer by us or one of our
subsidiaries for the common stock concluded within the
preceding 12 months and (2) the aggregate amount of any
all-cash distributions to all holders of our common stock
made within the preceding 12 months, exceeds 10% of our
aggregate market capitalization.
However, no adjustment need be made if holders may participate in
the transactions otherwise giving rise to an adjustment on a basis and with
notice that our Board of Directors determines to be fair and appropriate,
or in certain other cases specified in the Indenture. Any adjustment that
would otherwise be required to be made shall be
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carried forward and taken into account in a subsequent adjustment. No
adjustment of the conversion price will result in zero or in a negative
number or will reduce the conversion price below the then par value of the
common stock (in which case the conversion price would be reduced to such
par value), unless the common stock has no par value at such time (in which
case the conversion price would be reduced to $.01 per share). In cases
where the fair market value of the portion of assets, debt securities or
rights, warrants or options to purchase our securities applicable to one
share of common stock distributed to stockholders exceeds the Average Sale
Price per share of common stock, or such Average Sale Price exceeds such
fair market value of such portion of assets, debt securities or rights,
warrants or options so distributed by less than $1.00, rather than being
entitled to an adjustment in the Conversion Rate, the holder of a Note upon
conversion thereof will be entitled to receive, in addition to the shares
of common stock into which such Note is convertible, the kind and amounts
of assets, debt securities or rights, options or warrants comprising the
distribution that such holder would have received if such holder had
converted such Note immediately prior to the record date for determining
the stockholders entitled to receive the distribution, subject to the
subordination provisions. The Indenture permits us to increase the
Conversion Rate from time to time. "Market Price" means, on any date in
question, subject to certain adjustments, the average of the daily closing
prices for the 10 consecutive trading days immediately preceding the date
in question.
In the event that we become a party to any transaction
(including, and with certain exceptions,
(a) any recapitalization or reclassification of the common
stock;
(b) any consolidation of us with, or merger of us into, any
other Person, or any merger of another Person into us;
(c) any sale, transfer or lease of all or substantially all of
our assets; or
(d) any compulsory share exchange),
in which the common stock is converted into the right to receive other
securities, cash or other property (each of the foregoing being referred to
as a "Transaction"), then the holders of Notes then outstanding will have
the right to convert the Notes into the kind and amount of securities, cash
or other property receivable upon the consummation of such Transaction by a
holder of the number of shares of common stock issuable upon conversion of
such Notes immediately prior to such Transaction, subject to the
subordination provisions.
In the case of a Transaction, each Note will become convertible
into the securities, cash or property receivable by a holder of the number
of shares of the common stock into which such Note was convertible
immediately prior to such Transaction, subject to the subordination
provisions. This change could substantially lessen or eliminate the value
of the conversion privilege associated with the Notes in the future. For
example, if we were acquired in a cash merger, each Note would become
convertible solely into cash and would no longer be convertible into
securities whose value would vary depending on our future prospects and
other factors.
In the event of a taxable distribution to holders of common stock
which results in an adjustment of the Conversion Rate (or in which holders
otherwise participate) or in the event the Conversion Rate is increased at
our discretion, the holders of the Notes may, in certain circumstances, be
deemed to have received a distribution subject to United States federal
income tax as a dividend. Moreover, in certain other circumstances, the
absence of such an adjustment to the Conversion Rate may result in a
taxable dividend to holders of common stock. See "Certain United States
Federal Tax Consequences--Certain Federal Income Tax Consequences to U.S.
Holders--Adjustment of Conversion Price."
REDEMPTION OF NOTES AT THE OPTION OF THE COMPANY
No sinking fund is provided for the Notes. Prior to December 15,
2002, we are not entitled at our option to redeem the Notes. On and after
that date, we will be entitled to redeem the Notes for cash as a whole at
any time, or from time to time in part, upon not less than 30 days' nor
more than 60 days' notice of redemption given by mail to holders of Notes
(unless a shorter notice shall be satisfactory to the Trustee) at the
Redemption Prices set forth
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below plus accrued cash interest to the Redemption Date. Any such
redemption must be in integral multiples of $1,000 principal amount.
The table below shows Redemption Prices of a Note per $1,000
principal amount if redeemed during the twelve-month periods set forth
below.
PERIOD REDEMPTION
------ ----------
PRICE
-----
December 15, 2002 through December 14, 2003............ 102.2857%
December 15, 2003 through December 14, 2004............ 101.7143%
December 15, 2004 through December 14, 2005............ 101.1429%
December 15, 2005 and thereafter....................... 100.5714%
If fewer than all of the Notes are to be redeemed, the Trustee
will select the Notes to be redeemed in principal amounts at maturity of
$1,000 or integral multiples thereof by lot, pro rata or by another method
the Trustee considers fair and appropriate. If a portion of a holder's
Notes is selected for partial redemption and that holder converts a portion
of those Notes prior to the redemption, the converted portion shall be
deemed, solely for purposes of determining the aggregate principal amount
of the Notes to be redeemed by the Company, to be of the portion selected
for redemption.
CHANGE IN CONTROL PERMITS PURCHASE OF NOTES AT THE OPTION OF THE HOLDER
In the event of any Change in Control (as defined below) of the
Company, each holder of Notes will have the right, at the holder's option,
subject to the terms and conditions of the Indenture, to require us to
purchase all or any part (provided that the principal amount must be $1,000
or an integral multiple thereof) of the holder's Notes on the date that is
45 business days after the occurrence of such Change in Control (the
"Change in Control Purchase Date") at a cash price equal to 100% of the
principal amount of such holder's Notes plus accrued cash interest to the
Change in Control Purchase Date (the "Change in Control Purchase Price").
Within 25 business days after the Change in Control, we will mail
to the Trustee and to each holder (and to beneficial owners as required by
applicable law) a notice regarding the Change in Control, which notice
shall state, among other things:
(1) the date of such Change in Control and, briefly, the events
causing such Change in Control;
(2) the date by which the Change in Control Purchase Notice (as
defined below) must be given;
(3) the Change in Control Purchase Date;
(4) the Change in Control Purchase Price;
(5) the name and address of the Paying Agent and the Conversion
Agent;
(6) the Conversion Rate and any adjustments thereto;
(7) the procedures that holders must follow to exercise these
rights;
(8) the procedures for withdrawing a Change in Control Purchase
Notice;
(9) that holders who want to convert Notes must satisfy the
requirements set forth in the Notes; and
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(10) briefly, the conversion rights of holders of Notes.
To exercise the purchase right, the holder must deliver written
notice of the exercise of such right (a "Change in Control Purchase
Notice") to the Paying Agent or an office or agency maintained by us for
such purpose in the Borough of Manhattan, The City of New York, prior to
the close of business, on the Change in Control Purchase Date. Any Change
in Control Purchase Notice must state
(1) the certificate numbers of the Notes to be delivered by the
holder thereof for purchase by us;
(2) the portion of the principal amount of Notes to be
purchased, which portion must be $1,000 or an integral
multiple thereof; and
(3) that such Notes are to be purchased by us pursuant to the
applicable provisions of the Notes.
Any Change in Control Purchase Notice may be withdrawn by the
holder by a written notice of withdrawal delivered to the Paying Agent
prior to the close of business on the Change in Control Purchase Date. The
notice of withdrawal shall state the principal amount and the certificate
numbers of the Notes as to which the withdrawal notice relates and the
principal amount, if any, which remains subject to a Change in Control
Purchase Notice.
Payment of the Change in Control Purchase Price for a Note for
which a Change in Control Purchase Notice has been delivered and not
withdrawn is conditioned upon delivery of the Note (together with necessary
endorsements) to the Paying Agent or an office or agency maintained by us
for such purpose in the Borough of Manhattan, The City of New York, at any
time (whether prior to, on or after the Change in Control Purchase Date)
after the delivery of such Change in Control Purchase Notice. Payment of
the Change in Control Purchase Price for the Note will be made promptly
following the later of the business day following the Change in Control
Purchase Date and the time of delivery of the Note. If the Paying Agent
holds, in accordance with the terms of the Indenture, money sufficient to
pay the Change in Control Purchase Price of such Note on the business day
following the Change in Control Purchase Date, then, immediately after the
Change in Control Purchase Date, such Note will cease to be outstanding and
interest on such Note will cease to accrue and will be deemed paid, whether
or not such Note is delivered to the Paying Agent, and all other rights of
the holder shall terminate (other than the right to receive the Change in
Control Purchase Price upon delivery of such Note).
Under the Indenture, a "Change in Control" of the Company is
deemed to have occurred upon the occurrence of any of the following events:
(1) any "person" or "group" (as such terms are used in Sections
13(d) and 14(d) of the Exchange Act) is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5
under the Exchange Act, except that a Person shall be deemed
to have "beneficial ownership" of all securities that such
Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time),
directly or indirectly, of more than 50% of the total
outstanding voting stock of the Company;
(2) the Company consolidates with, or merges with or into
another Person or conveys, transfers, leases or otherwise
disposes of all or substantially all of the Company's assets
to any Person, or any Person consolidates with or merges
with or into the Company, in any such event pursuant to a
transaction in which the outstanding voting stock of the
Company is converted into or exchanged for cash, securities
or other property, other than any such transaction where:
(a) the voting stock of the Company is not converted or
exchanged at all (except to the extent necessary to
reflect a change in our jurisdiction of incorporation)
or is converted into or exchanged for (i) voting stock
(other than Redeemable Capital
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Stock) of the surviving or transferee corporation or
(ii) voting stock (other than Redeemable Capital Stock)
of the surviving or transferee corporation and cash,
securities and other property (other than capital stock
of the surviving entity); and
(b) immediately after such transaction, no "person" or
"group" (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act) is the "beneficial owner"
(as defined in Rules 13d-3 and 13d-5 under the Exchange
Act, except that a Person shall be deemed to have
"beneficial ownership" of all securities that such
Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of
time), directly or indirectly, of more than 50% of the
total outstanding voting stock of the surviving or
transferee corporation;
(3) during any consecutive two-year period, individuals who at
the beginning of such period constituted the Company's Board
of Directors (together with any new directors whose election
to such Board of Directors, or whose nomination for election
by the Company's stockholders, was approved by a vote of 66
2/3% of the directors then still in office who were either
directors at the beginning of such period or whose election
or nomination for election was previously so approved) cease
for any reason to constitute a majority of the Company's
Board of Directors then in office; or
(4) the Company is liquidated or dissolved or a special
resolution is passed by the Company's stockholders approving
the plan of liquidation or dissolution other than in a
transaction which complies with the provisions described
under "Consolidation, Merger and Sale or Lease of Assets."
"Redeemable Capital Stock" means any class or series of capital
stock that, either by its terms, by the terms of any security into which it
is convertible or exchangeable or by contract or otherwise, is, or upon the
happening of an event or passage of time would be, required to be redeemed
prior to the final stated maturity of the Notes or is redeemable at the
option of the holder hereof at any time prior to such final stated
maturity, or is convertible into or exchangeable for debt securities at any
time prior to such final stated maturity; provided, however, that
Redeemable Capital Stock shall not include any common stock the holder of
which has a right to be put to us upon certain terminations of employment;
and provided further, however, that any class or series of capital stock
that would not constitute Redeemable Capital Stock but for provisions
thereof giving holder thereof the right to require the issuer of such
capital stock to repurchase or redeem such capital stock upon the
occurrence of an "asset sale" or "change of control" occurring prior to the
final stated maturity of the Notes shall not constitute Redeemable Capital
Stock if the "asset sale" or "change of control" provisions applicable to
such class or series of capital stock are no more favorable to the holders
of such capital stock in any material respect than the provisions contained
herein under this caption and such class or series of capital stock
specifically provides that the issuer of such capital stock will not
repurchase or redeem any such stock pursuant to such provision prior to our
repurchase of such notes as required pursuant to the provisions contained
herein under this caption.
The Indenture does not permit the Board of Directors to waive our
obligation to purchase Notes at the option of a holder in the event of a
Change in Control of our Company.
We will comply with the provisions of Rule 13e-4, Rule 14e-1 and
any other tender offer rules under the Exchange Act which may then be
applicable, and will file Schedule 13E-4 or any other schedule required
thereunder in connection with any offer by us to purchase Notes at the
option of the holders thereof upon a Change in Control. In certain
circumstances, the Change in Control purchase feature of the Notes may make
more difficult or discourage a takeover of our company and, thus, the
removal of incumbent management. The Change in Control purchase feature,
however, is not the result of our knowledge of any specific effort to
accumulate shares of common stock or to obtain control of our company by
means of a merger, tender offer, solicitation or otherwise, or part of a
plan by us to adopt a series of anti-takeover provisions. Instead, the
Change in Control purchase feature is the result from negotiations between
us and the Initial Purchasers.
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The Company's debt agreements contain "change in control"
provisions that in relevant part are similar to the provision in the
Indenture relating to a Change in Control, and the occurrence of such a
"change of control" would constitute a default under the debt agreements.
The Company's obligations under the debt agreements are senior in right of
payment to the notes and the debt agreements will not permit the purchase
of the notes absent consent of the lenders under the debt agreements in the
event of a Change in Control, even though the failure by the Company to
comply with its obligations in the event of a Change in Control would
constitute an Event of Default under the Indenture. In addition, the
exercise by the Holders of their right to require the Company to repurchase
the notes could cause a default under the debt agreements, even if the
Change in Control itself does not, due to the financial effect of such
repurchase on the Company. If the Company is unable to obtain the requisite
consents and/or repay all Indebtedness which prohibits the repurchase of
the notes upon the occurrence of a Change in Control, the Company would
remain prohibited by such Indebtedness from purchasing any notes and, as a
result, the Company could not purchase the Notes, which would constitute an
Event of Default under the Indenture. Such an Event of Default under the
Indenture would also constitute an Event of Default under the debt
agreements which would permit the lenders thereunder to accelerate all of
the Company's Indebtedness under the debt agreements. If a Change in
Control were to occur, there can be no assurance that the Company would
have sufficient assets to first satisfy its obligations under the debt
agreements or other agreements relating to any Indebtedness, if
accelerated, and then to purchase all of the notes that might be delivered
by Holders seeking to exercise the purchase right.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
We entered into a registration rights agreement with the Initial
Purchasers (the "Registration Rights Agreement") pursuant to which, for the
benefit of the holders, we agreed to file with the SEC the Shelf
Registration Statement at our expense covering resale of the Registrable
Securities as soon as practicable, but in any event within 90 days after
the first date of original issuance of the Notes. We will use all
reasonable efforts to keep the Shelf Registration Statement effective until
the earlier of:
o the sale pursuant to the Shelf Registration Statement of all
the securities registered thereunder and
o the expiration of the holding period applicable to such
securities held by persons that are not affiliates of the
Company under Rule 144(k) under the Securities Act or any
successor provision, subject to certain permitted
exceptions.
We are permitted to suspend the use of the prospectus that is
part of the Shelf Registration Statement under certain circumstances
relating to pending corporate developments, public filings with the SEC and
similar events for a period not to exceed an aggregate of 90 days in any
12-month period. We agreed to pay predetermined liquidated damages as
described herein ("Liquidated Damages") to holders of Notes and holders of
common stock issued upon conversion of the Notes if the prospectus is
unavailable for the periods in excess of those permitted above. Such
Liquidated Damages shall accrue until such failure to file or become
effective or unavailability is cured:
o in respect of any Note, at a rate per annum equal to 0.25%
of the principal amount of the Notes for the first 90 day
period after the occurrence of such event and 0.25% for each
90 day period thereafter, provided that the maximum amount
of Liquidated Damages will in no event exceed 1.0% per annum
of the principal amount of the Notes,
o in respect of any shares of common stock into which the
Notes have been converted, at a rate per annum equal to
$2.50 per 20.7512 shares of common stock (subject to
adjustment in certain circumstances) for the first 90 day
period after the occurrence of such event and $2.50 per
20.7512 shares of common stock (subject to adjustment) for
each 90 day period thereafter,
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provided that the maximum amount of Liquidated Damages will
in no event exceed $10.00 per 20.7512 shares of common stock
(subject to adjustment).
A holder who elects to sell any Notes and common stock issued
upon conversion of the Notes pursuant to the Shelf Registration Statement
generally will be required to be named as a selling stockholder in the
related prospectus, may be required to deliver a prospectus to purchasers,
may be subject to certain civil liability provisions under the Securities
Act in connection with those sales and will be bound by certain provisions
of the Registration Rights Agreement that are applicable to such holder
(including certain indemnification provisions). We will pay all expenses of
the Shelf Registration Statement, provide to each registered holder copies
of such prospectus, notify each registered holder when the Shelf
Registration Statement has become effective and take certain other actions
as are required to permit, subject to the foregoing, unrestricted resales
of the Notes and the common stock issued upon conversion of the Notes.
We have agreed to pay Liquidated Damages in the amount set forth
above to such holder if the Company fails to make such filing in the time
required or, if such filing is a post-effective amendment to the Shelf
Registration Statement required to be declared effective under the
Securities Act, if such amendment is not declared effective within 45 days
of the filing thereof, subject to certain exceptions. By acquiring
Registrable Securities, a Holder will be deemed to have agreed to indemnify
the Company against certain losses arising out of information furnished by
such holder in writing for inclusion in any Shelf Registration Statement.
Holders of Notes will also be required to suspend their use of the
prospectus included in the Shelf Registration Statement under certain
circumstances upon receipt of written notice to that effect from the
Company.
The summary herein of certain provisions of the Registration
Rights Agreement is subject to, and is qualified in its entirety by
reference to, all the provisions of the Registration Rights Agreement, a
copy of which is filed as an exhibit to the Registration Statement of which
this prospectus is a part.
CONSOLIDATION, MERGER AND SALE OR LEASE OF ASSETS
We, without the consent of any holders of outstanding Notes, are
entitled to consolidate with or merge into or transfer or lease our assets
substantially as an entirety to, any individual, corporation, partnership,
limited liability company, joint venture, association, joint-stock company,
trust, unincorporated organization or government or any agency or political
subdivision thereof (each a "Person"), and any Person is entitled to
consolidate with or merge into, or transfer or lease its assets
substantially as an entirety to us, provided that:
(1) the Person (if other than us) formed by such consolidation
or into which we are merged or the Person which acquires or
leases our assets substantially as an entirety is a
corporation, partnership, limited liability company or trust
organized and existing under the laws of any United States
jurisdiction and expressly assumes our obligations on the
Notes and under the Indenture;
(2) immediately after giving effect to such transaction no Event
of Default (as defined below), and no event which, after
notice or lapse of time or both, would become an Event of
Default, happened and is continuing; and
(3) certain other conditions described in the Indenture are met.
EVENTS OF DEFAULT; NOTICE AND WAIVER
The Indenture provides that, if an Event of Default specified
therein occurs and is continuing, either the Trustee or the holders of not
less than 25% in aggregate principal amount of the Notes then outstanding
may declare the principal amount of and accrued interest to the date of
such declaration on all the Notes to be immediately due and payable. In the
case of certain events of bankruptcy or insolvency, the principal amount of
and accrued interest on all the Notes to the date of the occurrence of such
event shall automatically become and be
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immediately due and payable. Upon any such acceleration, the subordination
provisions of the Indenture preclude any payment being made to holders of
Notes until the earlier of:
(1) 120 days or more after the date of such acceleration; and
(2) the payment in full in cash of all Senior Indebtedness,
but only if such payment is then otherwise permitted under the
terms of the Indenture. See "--Subordination of Notes" above.
Under certain circumstances, the holders of a majority in
aggregate principal amount of the outstanding Notes may rescind any such
acceleration with respect to the Notes and its consequences. Interest shall
accrue and be payable on demand upon a default in the payment of principal
interest when due, Redemption Price, Change in Control Purchase Price or
shares of common stock (or cash in lieu of fractional shares) to be
delivered on conversion of Notes, in each case to the extent that the
payment of such interest shall be legally enforceable.
Under the Indenture, Events of Default include:
(1) default in payment of the principal amount, interest when
due (if such default in payment of interest shall continue
for 31 days), Redemption Price, or Change in Control
Purchase Price with respect to any Note, when the same
becomes due and payable (whether or not any such payment is
prohibited by the provisions of the Indenture);
(2) failure by the Company to deliver shares of common stock
(together with cash in lieu of fractional shares) when such
common stock (or cash in lieu of fractional shares) is
required to be delivered following conversion of a Note and
continuation of such default for 10 days;
(3) failure by the Company to comply with any of its other
agreements in the Notes or the Indenture upon the receipt by
the Company of notice of such default from the Trustee or
from holders of not less than 25% in aggregate principal
amount of the Notes then outstanding and the Company's
failure to cure such default within 90 days after receipt by
the Company of such notice;
(4) default under any bond, note or other evidence of
indebtedness for money borrowed of the Company having an
aggregate outstanding principal amount of in excess of $12.5
million, which default shall have resulted in such
indebtedness being accelerated, without such indebtedness
being discharged or such acceleration having been rescinded
or annulled within 60 days after receipt of notice thereof
by the Company from the Trustee or the Company and the
Trustee from the holders of not less than 25% in aggregate
principal amount of the Notes then outstanding (unless such
default has been cured or waived); or
(5) certain events of bankruptcy or insolvency.
The Trustee will, within 90 days after the occurrence of any
default, mail to all holders of the Notes notice of all defaults of which
the Trustee shall be aware, unless such defaults shall have been cured or
waived before the giving of such notice; provided that the Trustee may
withhold such notice as to any default other than a payment default, if it
determines in good faith that withholding the notice is in the interests of
the holders.
The holders of a majority in aggregate principal amount of the
outstanding Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust
or power conferred on the Trustee, provided that such direction shall not
be in conflict with any law or the Indenture and subject to certain other
limitations. The Trustee may refuse to perform any duty or exercise any
right or power or extend or risk its own funds or otherwise incur any
financial liability unless it receives indemnity satisfactory to it against
any loss, liability or expense. No holder of any Note will have any right
to pursue any remedy with respect to the Indenture or the Notes, unless:
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(1) such holder shall have previously given the Trustee written
notice of a continuing Event of Default;
(2) the holders of at least 25% in aggregate principal amount of
the outstanding Notes shall have made a written request to
the Trustee to pursue such remedy;
(3) such holder or holders shall have offered to the Trustee
reasonable security or indemnity against any loss, liability
or expense satisfactory to it;
(4) the Trustee shall have failed to comply with the request
within 60 days after receipt of such notice, request and
offer of security or indemnity; and
(5) the holders of a majority in aggregate principal amount of
the outstanding Notes shall not have given the Trustee a
direction inconsistent with such request within 60 days
after receipt of such request.
The right of any holder (a) to receive payment of principal, the
Redemption Price, Change in Control Purchase Price or interest in respect
of the Notes held by such holder on or after the respective due dates
expressed in the Notes, (b) to convert such Notes, or (c) to bring suit for
the enforcement of any such payment on or after such respective dates or
the right to convert, shall not be impaired or adversely affected without
such holder's consent.
The holders of a majority in aggregate principal amount of Notes
at the time outstanding may waive any existing default and its consequences
except:
(1) any default in any payment on the Notes,
(2) any default with respect to the conversion rights of the
Notes, or
(3) any default in respect of certain covenants or provisions in
the Indenture which may not be modified without the consent
of the holder of each Note as described in "--Modification"
below.
When a default is waived, it is deemed cured and will cease to
exist, but no such waiver shall extend to any subsequent or other default
or impair any consequent right.
We are required to furnish to the Trustee annually a statement as
to any default by the Company in the performance and observance of our
obligations under the Indenture. In addition, we are required to file with
the Trustee written notice of the occurrence of any default or Event of
Default within five business days of our becoming aware of such default or
Event of Default.
MODIFICATION
The Indenture or the Notes may be modified or amended by the
Company and the Trustee with the consent of the holders of not less than a
majority in aggregate principal amount of the Notes then outstanding.
However, without the consent of each holder affected thereby, no amendment
may, among other things:
(1) reduce the principal amount, Change in Control Purchase
Price or Redemption Price with respect to any Note, or
extend the stated maturity of any Note or alter the manner
of payment or rate of interest on any Note or make any Note
payable in money or securities other than that stated in the
Note;
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(2) make any reduction in the principal amount of Notes whose
holders must consent to an amendment or any waiver under the
Indenture or modify the Indenture provisions relating to
such amendments or waivers;
(3) make any change that adversely affects the right of a holder
to convert any Note;
(4) modify the provisions of the Indenture relating to the
ranking of the Notes in a manner adverse to the holders of
the Notes; or
(5) impair the right to institute suit for the enforcement of
any payment with respect to, or conversion of, the Notes.
Without the consent of any holder of Notes, the Company and the
Trustee may amend the Indenture to:
(1) cure any ambiguity, defect or inconsistency, provided,
however, that such amendment does not materially adversely
affect the rights of any holder of Notes;
(2) provide for the assumption by a successor to the Company of
the obligations of the Company under the Indenture;
(3) provide for uncertificated Notes in addition to certificated
Notes, as long as such uncertificated Notes are in
registered form for United States federal income tax
purposes;
(4) make any change that does not adversely affect the rights of
any holder of Notes;
(5) make any change to comply with any requirement of the
Commission in connection with the qualification of the
Indenture under the Trust Indenture Act of 1939, as amended;
or
(6) add to the covenants or obligations of the Company under the
Indenture for the protection of holders of the Notes or
surrender any right, power or option conferred by the
Indenture on the Company.
NO RECOURSE AGAINST OTHERS
The Indenture provides that a director, officer, employee or
stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Notes or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation.
THE TRUSTEE
First Union National Bank is the Trustee, Registrar, Paying Agent
and Conversion Agent under the Indenture. First Union National Bank is also
the lender under our Euro credit agreement.
The Indenture contains certain limitations on the rights of the
Trustee, as a creditor of the Company, to obtain payment of claims in
certain cases (including in the event of an Event of Default), or to
realize on certain property received in respect of any such claims as
security or otherwise. The Trustee will be permitted to engage in other
transactions with the Company and its subsidiaries; provided, however, that
if it acquires any conflicting interest (as defined), it must eliminate
such conflict or resign.
In case an Event of Default shall occur and shall not be cured or
waived, the Trustee will be required to use the degree of care of a prudent
person in the conduct of its own affairs in the exercise of its powers.
Subject to such provisions, the Trustee will be under no obligation to
exercise any of its rights or powers under the Indenture at the request of
any of the Holders of notes, unless they shall have offered to the Trustee
reasonable security or indemnity.
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GOVERNING LAW
The Indenture, the Notes and the Registration Rights Agreement
provide that they are to be governed in accordance with the laws of the
State of New York, without regard to choice of law provisions.
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DESCRIPTION OF CAPITAL STOCK
GENERAL
This summary highlights certain provisions of our certificate of
incorporation and our by-laws. The following description of our capital
stock is not complete and is qualified in its entirety by the provisions of
our certificate of incorporation, our by-laws, our stockholder rights plan
and applicable law. See "Where You Can Find More Information."
Our certificate of incorporation provides that our authorized
capital stock consists of 300,000,000 shares of common stock, of which
50,889,208 shares were issued and outstanding as of December 31, 1999, and
20,000,000 shares of preferred stock, $.01 par value per share, none of
which were issued and outstanding as of that date. All our outstanding
shares of common stock are validly issued, fully paid and nonassessable.
The common stock issuable upon conversion of the notes will be, when issued
and paid for, fully paid and nonassessable.
COMMON STOCK
Each holder of our common stock is entitled to one vote for each
share owned of record on all matters submitted to a vote of stockholders.
There are no cumulative voting rights. Accordingly, the holders of a
majority of the shares voting for the election of directors can elect all
the directors if they choose to do so, subject to any voting rights of
holders of preferred stock to elect directors. Subject to the preferential
rights of any outstanding series of preferred stock, and to any
restrictions on payment of dividends imposed by our debt agreements, the
holders of common stock will be entitled to those dividends as may be
declared from time to time by our board of directors from funds legally
available therefor, and will be entitled, after payment of all prior
claims, to receive pro rata all of our assets upon our liquidation,
dissolution or winding up. Holders of common stock have no redemption or
conversion rights or preemptive rights to purchase or subscribe for our
securities. Certain provisions of our certificate of incorporation and
by-laws have the effect of making more difficult an acquisition of control
of us in a transaction not approved by our board of directors.
PREFERRED STOCK
Our authorized capital stock includes 20,000,000 shares of
preferred stock, none of which are currently issued or outstanding. Our
board of directors is authorized to divide the preferred stock into series
and, with respect to each series, to determine the preferences and rights
and the qualifications, limitations or restrictions thereof, including the
dividend rights, conversion rights, voting rights, redemption rights and
terms, liquidation preferences, sinking fund provisions, the number of
shares constituting the series and the designation of such series. Our
board of directors could, without stockholder approval, issue preferred
stock with voting and other rights that could adversely affect the voting
power of the holders of common stock and which could have certain
anti-takeover effects.
In connection with the Rights Plan (as defined below), our board
of directors has authorized 400,000 shares of Series A Participating
Preferred Stock (the "Series A Preferred"). No shares of Series A Preferred
are outstanding. For a description of the rights, powers and preferences of
the Series A Preferred, see "--Rights Plan."
RIGHTS PLAN
On June 10, 1997, our board of directors adopted a stockholder
rights plan (the "Rights Plan") pursuant to which one right (collectively,
the "Rights") to purchase one one-thousandth of a share of Series A
Preferred would be distributed as a dividend for each outstanding share of
common stock at a purchase price of $60.00 per one one-thousandth of a
share of Series A Preferred, subject to adjustment. The Rights are issuable
on the terms and subject to the conditions set forth in the Rights Plan.
The Rights will expire no later than June 10, 2007. The Rights will be
exercisable on the earlier to occur of
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o the first date of public announcement that a person or
"group" has acquired beneficial ownership of 15% or more of
the outstanding common stock (except pursuant to a Permitted
Offer, as defined in the Rights Plan) (an "Acquiring
Person"); and
o ten business days (or such later date as the board may
determine) following the commencement of, or announcement of
an intention to commence, a tender offer or exchange offer
the consummation of which would result in a person or group
becoming an Acquiring Person.
If any person or group becomes an Acquiring Person or commences a
tender offer upon consummation of which such person or group would become
an Acquiring Person, each Right not owned by such Acquiring Person or
certain related parties would entitle its holder to purchase, at the
Right's then current exercise price, shares of common stock, or, in the
discretion of the board, the number of one one-thousandths of a share of
Series A Preferred having a value of twice the Right's exercise price. In
addition, if, after a person or group becomes an Acquiring Person, we are
involved in a merger or other business combination transaction in which the
holders of all of the outstanding common stock immediately prior to the
consummation of the transaction are not the holders of the surviving
corporation's voting power or more than 50% of our assets or earning power
is sold or transferred, each Right will entitle its holder to purchase
common shares of the acquiring company having a value equal to two times
the Right's then current exercise price.
The purchase price payable, and the shares issuable, upon
exercise of the Rights will be subject to adjustment from time to time as
specified in the Rights Plan. We will generally be entitled to redeem the
Rights in whole, but not in part, at $.01 per Right at any time prior to
the earlier to occur of a person becoming an Acquiring Person or expiration
of the Rights.
Shares of Series A Preferred purchasable upon exercise of the
Rights will not be redeemable. Each Share of Series A Preferred will be
entitled to a minimum preferential quarterly dividend payment of $10.00 per
share but, if greater, will be entitled to an aggregate dividend per share
of 1,000 times the dividend declared per share of common stock. In the
event of our liquidation, the holders of Series A Preferred will be
entitled to a minimum preferential liquidation payment of $100.00, provided
that they will be entitled to an aggregate payment per share of at least
1,000 times the aggregate payment made per share of common stock. Each
share of Series A Preferred will have one thousand votes, voting together
with the common stock. These rights are protected by customary antidilution
provisions. In the event that the amount of accrued and unpaid dividends on
the Series A Preferred is equivalent to at least six full quarterly
dividends, the holders of the Series A Preferred will have the right,
voting as a class, to elect two directors in addition to the directors
elected by the holders of common stock until all dividends in default on
the Series A Preferred have been paid in full and dividends for the current
dividend period declared and funds therefor set apart.
CLASSIFIED BOARD OF DIRECTORS
Our board of directors is divided into three classes with each
class elected in staggered elections and serving a three year term.
Classification of directors makes it more difficult for stockholders to
change the composition of the board of directors. At least two annual
meetings of stockholders, instead of one, will generally be required to
change who represents the majority of the board of directors. If we are
confronted by a holder attempting to force a proxy contest, a tender or
exchange offer or other extraordinary corporate transaction, this
classification and time period would allow the board sufficient time to
review the proposal. The board would also have the opportunity to review
any available alternatives to the proposal and to act in what it believes
to be the best interests of the stockholders.
LIMITATION OF DIRECTOR LIABILITY
Our certificate of incorporation limits the liability of our
directors to us and our stockholders to the fullest extent permitted by
Delaware law. Specifically, our directors will not be personally liable for
money damages for breach of fiduciary duty as a director, except for
liability
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o for any breach of the director's duty of loyalty to us or
our stockholders;
o for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law;
o under Section 174 of the Delaware General Corporation Law,
which concerns unlawful payments of dividends, stock
purchases or redemptions; and
o for any transaction from which the director derived an
improper personal benefit.
DELAWARE ANTI-TAKEOVER LAW AND CHARTER AND BY-LAWS PROVISIONS
DELAWARE LAW. We must comply with the provisions of Section 203
of the Delaware General Corporation Law. In general, Section 203 prohibits
a publicly held Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years
after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed
manner.
A "business combination" includes a merger, asset sale or other
transaction resulting in a financial benefit to the interested stockholder.
An "interested stockholder" is a person who, together with affiliates and
associates, owns, or, in some cases, within three years prior, did own, 15%
or more of the corporation's voting stock. Under Section 203, a business
combination between us and an interested stockholder is prohibited unless
it satisfies one of the following three conditions:
o our board of directors must have previously approved either
the business combination or the transaction that resulted in
the stockholder becoming an interested stockholder;
o upon consummation of the transaction that resulted in the
stockholder becoming an interested stockholder, the
interested stockholder owned at least 85% of our voting
stock outstanding at the time the transaction commenced,
excluding, for purposes of determining the number of shares
outstanding, shares owned by persons who are directors and
also officers and employee stock plans, in some instances;
and
o the business combination is approved by our board of
directors and authorized at an annual or special meeting of
the stockholders by the affirmative vote of the holders of
at least 66 2'3% of the outstanding voting stock that is not
owned by the interested stockholder.
SPECIAL MEETINGS. Our by-laws provide that special meetings of
stockholders for any purpose or purposes can be called only upon the
request of our chairman of the board, our president, our board of
directors, or the holders of shares entitled to at least a majority of the
votes at the meeting.
AMENDMENT OF OUR BY-LAWS. To adopt, repeal, alter or amend the
provisions of our by-laws, our by-laws require the affirmative vote of
either the holders of at least a majority of the voting power of all of the
issued and outstanding shares of our capital stock entitled to vote on the
matter or our board of directors.
ADVANCE NOTICE PROVISIONS FOR STOCKHOLDER NOMINATIONS AND
PROPOSALS. Our by-laws establish advance notice procedures for stockholders
to make nominations of candidates for election as directors, or bring other
business before an annual meeting of our stockholders.
These procedures provide that only persons who are nominated by
or at the direction of our board of directors, or by a stockholder who has
given timely written notice to our secretary before the meeting at which
directors are to be elected, will be eligible for election as one of our
directors. Further, these procedures provide that at an annual meeting, the
only business that may be conducted is the business that has been specified
in the
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notice of the meeting given by, or at the direction of, our board or
by a stockholder who has given timely written notice to our secretary of
such stockholder's intention to bring that business before the meeting.
Under these procedures, notice of stockholder nominations to be
made or business to be conducted at an annual meeting must be received by
us not less than 60 days nor more than 90 days before the date of the
meeting, or, if less than 70 days' notice or prior public disclosure of the
date of the meeting is given or made to the stockholders, the 10th day
following the earlier of the day notice was mailed or the day public
disclosure was made. Under these procedures, notice of a stockholder
nomination to be made at a special meeting at which directors are to be
elected must be received by us not later than the close of business on the
tenth day following the day on which notice of the date of the special
meeting was mailed or public disclosure of the date of the special meeting
was made, whichever occurs first.
Under our by-laws, a stockholder's notice nominating a person for
election as a director must contain specific information about the proposed
nominee and the nominating stockholder. If our chairman of the board
determines that a nomination was not made in the manner described in our
by-laws, the nomination will be disregarded. Similarly, a stockholder's
notice proposing the conduct of business must contain specific information
about the business and about the proposing stockholder. If our chairman of
the board determines that business was not properly brought before the
meeting in the manner described in our by-laws, the business will not be
conducted.
By requiring advance notice of nominations by stockholders, our
by-laws afford our board of directors an opportunity to consider the
qualifications of the proposed nominee and, to the extent deemed necessary
or desirable by our board of directors, to inform stockholders about these
qualifications. By requiring advance notice of other proposed business, our
by-laws also provide an orderly procedure for conducting annual meetings of
stockholders and, to the extent deemed necessary or desirable by our board
of directors, provides our board of directors with an opportunity to inform
stockholders, before meetings, of any business proposed to be conducted at
the meetings, together with any recommendations as to our board of
directors' position regarding action to be taken with respect to the
business, so that stockholders can better decide whether to attend a
meeting or to grant a proxy regarding the disposition of any business.
The foregoing provisions may have the effect of precluding a
contest for the election of directors or the consideration of stockholder
proposals if the proper procedures are not followed, and of discouraging or
deterring a third party from conducting a solicitation of proxies to elect
its own slate of directors or to approve its own proposal, without regard
to whether consideration of these nominees or proposals might be harmful or
beneficial to us and our stockholders.
Written Consent Provisions. Our by-laws provide that any action
required or permitted to be taken by the holders of capital stock at any
meeting of our stockholders may be taken without a meeting only by the
holders of outstanding capital stock having not less than the minimum
number of votes that would be necessary to authorize or take the action at
a meeting at which all shares entitled to vote were present and voted.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is
ChaseMellon Shareholder Services, L.L.C.
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DESCRIPTION OF OTHER INDEBTEDNESS
The following summary of our debt agreements does not purport to
be complete and is qualified in its entirety by reference to the debt
agreements described below, including the definitions of certain
capitalized terms used herein. Any terms not defined in this section are
defined in the debt agreements. See "Where You Can Find More Information."
REVOLVING CREDIT AGREEMENT
On July 23, 1997, CommScope NC, our wholly owned subsidiary,
entered into a credit agreement (as amended, the "revolving credit
agreement") which provides for a $350 million revolving credit facility
that matures on December 31, 2002. The borrowings under the revolving
credit agreement will be structurally senior to, and will be repaid prior
to, any subordinated indebtedness, including the notes.
INTEREST RATE CALCULATIONS. Interest is payable quarterly, or at
the end of the relevant interest period, if earlier, at a per annum rate
equal to the Adjusted Base Rate for Adjusted Base Rate Loans, or a
Eurodollar Rate for Eurodollar ("LIBOR") Loans, plus in each case, the
relevant applicable margin. We are also able to set interest rates through
a competitive bid procedure.
The Adjusted Base Rate is a fluctuating rate calculated on a
daily basis as the highest of:
o the rate of interest publicly announced by The Chase
Manhattan Bank for the date of determination;
o 1% over the sum of (a) the product of the secondary market
rate for the three month certificates of deposit and a
fraction of the percentage for determining the reserve
requirement for a depositary institution, and (b) the net
annual assessment rate payable on that date to the FDIC for
insuring deposits; and
o 0.5% over the weighted average of the rates on overnight
Federal Funds transactions with members of the Federal
Reserve System as arranged by Federal Funds brokers on the
date of determination.
The Eurodollar Base Rate is the per annum rate determined by the
administrative agent to the arithmetic mean of the offered rates for
deposits in dollars with a term comparable to the interest period that
appears on the Telerate British Bankers Association Interest Settlement
Rates Page. The Eurodollar rate is the Eurodollar Base Rate adjusted for
reserve requirements. On September 30, 1999, the borrowings under the
revolving credit agreement had a weighted average interest rate of 5.7%.
FEES. The revolving credit agreement requires us to pay the
following fees:
o a quarterly facility fee based on our leverage ratio;
o a fee to each lender based on our leverage ratio in
proportion to the lender's standby letter of credit
availability;
o an issuing fee of 0.125% per annum on the face amount of
each letter of credit; and
o an administrative fee to The Chase Manhattan Bank for its
services as administrative agent under the revolving credit
agreement.
COVENANTS AND CONDITIONS. In addition to specific customary
covenants, the revolving credit agreement includes covenants that restrict
our ability to:
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o dispose of assets;
o incur additional indebtedness;
o incur liens on property or assets;
o pay dividends;
o guarantee any obligations;
o enter into certain investments or transactions;
o repurchase or redeem capital stock;
o engage in mergers or consolidation;
o make acquisitions; and
o engage in certain transactions with subsidiaries and
affiliates and otherwise restrict corporate activities.
The revolving credit agreement contains financial covenants which
require CommScope NC to maintain:
o a Leverage Ratio equal to or below 3.25 to 1.0;
o an Interest Coverage Ratio equal to or above 4.25 to 1.0;
and
o Consolidated Net Worth of at least the sum of (a)
$100,000,000 and (b) 50% of the Consolidated Net Income of
CommScope, Inc., if positive, for each fiscal quarter
beginning July 1, 1997.
We were in compliance with these covenants at September 30, 1999.
GUARANTEES. Both CommScope, Inc. and our subsidiaries (other than
CommScope NC) with greater than $50 million book value, if any, have
unconditionally guaranteed the obligations under the revolving credit
agreement.
EVENTS OF DEFAULT. The revolving credit agreement contains
customary events of default, which include a default in the payment of
principal or interest on debt or guarantees aggregating $12.5 million or
more. If any event of default occurs, our obligations could be accelerated
with material adverse results to the holders of the notes.
AMENDMENTS. The revolving credit agreement was amended on
December 7, 1999 to permit the issuance of the notes.
EURO CREDIT AGREEMENT
On February 26, 1999, CommScope NC, our wholly owned subsidiary,
entered into a credit agreement (as amended, the "Euro credit agreement"),
which provides for a 15 million Euro ($16.4 million on the date of
borrowing) term credit facility that matures on March 1, 2006. The
borrowings under the Euro credit agreement will rank senior to, and will be
repaid prior to, any subordinated indebtedness, including the notes.
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INTEREST RATE CALCULATIONS. Interest is payable quarterly at a
per annum rate equal to the Euro LIBOR Market Rate plus an applicable
margin. The Euro LIBOR Market Rate is the per annum rate determined by the
administrative agent to the arithmetic mean of the offered rates for
deposits in dollars with a term comparable to the interest period that
appears on the Telerate British Bankers Association Interest Settlement
Rates Page adjusted for reserve requirements. On September 30, 1999 the
borrowings under the Euro credit agreement had a weighted average interest
rate of 4.53%.
FEES. The Euro credit agreement required us to pay a one time fee
of 0.125% of the amount of the loan.
COVENANTS AND CONDITIONS. The Euro credit agreement includes the
same covenants and conditions as the revolving credit agreement described
above. We were in compliance with these covenants at September 30, 1999.
GUARANTEES. Both CommScope, Inc. and our subsidiaries (other than
CommScope NC) with greater than $50 million book value, if any, have
unconditionally guaranteed the obligations under the Euro credit agreement.
EVENTS OF DEFAULT. The revolving credit agreement contains
customary events of default, which include a default in the payment of
principal or interest on debt or guarantees aggregating $12.5 million or
more. If any event of default occurs, our obligations could be accelerated
with material adverse results to the holders of the notes.
AMENDMENTS. The Euro credit agreement was amended on December 7,
1999 to permit the issuance of the notes.
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CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES
The following is a summary of certain U.S. federal income tax
consequences and, in the case of Non-U.S. holders, as described below,
certain U.S. federal estate tax consequences, of the acquisition, ownership
and disposition of the notes and of the common stock into which the notes
may be converted by beneficial owners of the notes, but is not intended and
does not purport to be a complete analysis of all potential U.S. federal
income, estate tax, or other tax considerations which may be relevant to
certain investors in light of their particular investment or other
circumstances. In addition, we do not discuss any U.S. state or local
income or foreign income or other tax consequences. This summary is based
upon the provisions of the Internal Revenue Code of 1986, as amended,
Treasury Regulations and administrative and judicial interpretations
thereof, all as in effect as of the date of this prospectus and all of
which are subject to change or differing interpretation, possibly with
retroactive effect. The discussion below deals only with notes and common
stock held as capital assets which are, generally, property held for
investment, and does not address holders of notes or common stock that may
be subject to special rules, including, without limitation, certain U.S.
expatriates, financial institutions, insurance companies, tax-exempt
entities, dealers in securities or currencies, traders in securities that
elect mark-to-market accounting treatment, and persons who hold the notes
or common stock as part of a straddle, hedge, conversion or other
integrated transaction. You should consult your own tax advisor regarding
the particular U.S. federal, state and local and foreign income and other
tax consequences of acquiring, owning and disposing of the notes and common
stock that may be applicable to you.
Certain Federal Income Tax Consequences to U.S. Holders
For purposes of the following discussion, a "U.S. holder" means a
beneficial owner of a note or common stock that is, for U.S. federal income
tax purposes,
(1) a citizen or individual resident of the United States,
(2) a corporation or partnership (unless the Internal Revenue
Service provides otherwise) created or organized in or under the laws of
the United States or of any political subdivision thereof,
(3) an estate the income of which is subject to U.S. federal
income taxation regardless of its source, or
(4) a trust if, in general, the trust is subject to the
supervision of a court within the United States and the control of one or
more United States persons as described in section 7701(a)(30) of the
Internal Revenue Code.
TAXATION OF STATED INTEREST. In general, stated interest paid on
a note will be taxable to a U.S. holder as ordinary income at the time it
is received or accrued in accordance with the U.S. holder's regular method
of accounting for federal income tax purposes.
LIQUIDATED DAMAGES. As more fully described above under
"Descriptions of Notes -- Registration Rights; Liquidated Damages," in the
event a registration statement is not filed or does not become effective as
provided in the Registration Rights Agreement, we will be required to pay
liquidated damages to U.S. holders of the notes. Under the Treasury
Regulations regarding contingent payment debt instruments, any payment
subject to a remote or incidental contingency (i.e., there is a remote
likelihood that the payment will be required or the potential amount of the
payment is insignificant relative to the remaining payments on the debt
instrument) is not considered a contingent payment and is ignored for
purposes of computing original issue discount accruals. We believe that the
liquidated damage payments with respect to the notes are subject to either
a remote or incidental contingency. Accordingly, a U.S. holder of a note
should be required to report any liquidated damage payment as interest for
U.S. federal income tax purposes only at the time the payment is made or
properly accrued under the U.S. holder's method of accounting.
MARKET DISCOUNT. The resale of notes may be adversely affected by
the impact on a purchaser of the "market discount" provisions of the Code.
For this purpose, the market discount on a note generally will be equal
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to the amount, if any, by which the stated redemption price at maturity of
the note immediately after its acquisition (other than at original issue)
exceeds the U.S. holder's adjusted tax basis in the note. Subject to a de
minimis exception, these provisions generally require a U.S. holder who
acquires a note at a market discount to treat as ordinary income any gain
recognized on the disposition of that note to the extent of the "accrued
market discount" on such note at the time of disposition, unless the U.S.
holder elects to include accrued market discount in income currently. This
election to include market discount in income currently, once made, applies
to all market discount obligations acquired on or after the first taxable
year to which the election applies and may not be revoked without the
consent of the IRS. In general, market discount will be treated as accruing
on a straight-line basis over the remaining term of the note at the time of
acquisition, or, at the election of the U.S. holder, under a constant yield
method. A U.S. holder who acquires a note at a market discount and who does
not elect to include accrued market discount in income currently may be
required to defer the deduction of a portion of the interest on any
indebtedness incurred or maintained to purchase or carry the note until the
note is disposed of in a taxable transaction. If a U.S. holder acquires a
note with market discount and receives common stock upon conversion of the
note, the amount of accrued market discount not previously included in
income with respect to the converted note through the date of conversion
will be treated as ordinary income upon the disposition of the common
stock.
AMORTIZABLE BOND PREMIUM. If a U.S. holder of a note acquires the
note at a cost that is in excess of the amount payable at maturity (after
reducing that cost by an amount equal to the value of the conversion
option), the U.S. holder may elect under Section 171 of the Code to
amortize the excess cost (as an offset to interest income) on a constant
interest rate basis over the term of the note. However, because the notes
may be redeemed at our option at a price in excess of their principal
amount, a U.S. holder may be required to amortize any bond premium based on
the earlier call date and the call price payable at that time. If the U.S.
holder makes an election to amortize bond premium, the tax basis of all the
U.S. holder's notes will be reduced by the allowable bond premium
amortization. The amortization election would apply to all debt instruments
held or subsequently acquired by the electing purchaser and cannot be
revoked without permission from the IRS. On conversion of a note into
conversion shares, no additional amortization of any bond premium would be
allowed, and any remaining premium would be added to the U.S. holder's tax
basis in the common stock received.
DISPOSITIONS. Upon the sale, exchange or retirement of a note or
upon the sale of a share of common stock, a U.S. holder generally will
recognize taxable gain or loss in an amount equal to the difference, if
any, between the amount realized on the disposition (excluding any amount
received that is attributable to accrued but unpaid interest) and the U.S.
holder's adjusted tax basis in the note or common stock. A U.S. holder's
adjusted tax basis in a note will generally equal the cost of such note to
that holder, less principal payments received by that holder and increased
by any market discount previously included in income by that holder. A
holder's tax basis in the common stock received on conversion of a note
will be the same as the holder's adjusted tax basis in the note at the time
of the conversion, reduced by any basis allocable to a fractional share
paid in cash. Gain or loss recognized by a U.S. holder on the sale,
exchange or retirement of a note or upon the sale of a share of common
stock generally will be capital gain or loss and will be long-term capital
gain or loss if the note or common stock was held for more than one year.
Long-term capital gain recognized by a non-corporate U.S. holder generally
will be subject to a maximum tax rate of 20%. Subject to certain limited
exceptions, capital losses cannot be used to offset ordinary income.
CONVERSION OF THE NOTES. A U.S. holder generally will not
recognize any income, gain or loss upon conversion of a note into common
stock, except with respect to cash received in lieu of a fractional share
of common stock. The holder's tax basis in the common stock received on
conversion of a note will be the same as the holder's adjusted tax basis in
the note at the time of conversion (reduced by any basis allocable to a
fractional share), and the holding period for the common stock received on
conversion will generally include the holding period of the note converted.
Cash received in lieu of a fractional share of common stock upon
conversion should be treated as a payment in exchange for the fractional
share of common stock. Accordingly, the receipt of cash in lieu of a
fractional share of common stock generally should result in capital gain or
loss (measured by the difference between the cash received for the
fractional share and the U.S. holder's adjusted tax basis in the fractional
share).
48
<PAGE>
DISTRIBUTIONS ON THE COMMON STOCK. The amount of any distribution
by us in respect of the common stock (including any liquidated damages in
respect of common stock as described above under "Description of
Notes--Registration Rights; Liquidated Damages") will be equal to the
amount of cash and the fair market value, on the date of distribution, of
any property distributed. Generally, distributions will be treated as a
dividend, subject to a tax as ordinary income, to the extent of our current
or accumulated earnings and profits, then as a tax-free return of capital
to the extent of the holder's tax basis in the common stock and thereafter
as gain from the sale or exchange of the stock.
ADJUSTMENT OF CONVERSION PRICE. If at any time we make a
distribution of property to stockholders that would be taxable to those
stockholders as a dividend (e.g., distributions of evidences of
indebtedness or assets of our company, but generally not stock dividends or
rights to subscribe for common stock) for U.S. federal income tax purposes
and, in accordance with the antidilution provisions of the notes, the
conversion price of the notes is decreased, the amount of that decrease may
be deemed to be the payment of a taxable dividend to holders of the notes.
As a result, U.S. holders of notes could recognize taxable income as a
result of an event pursuant to which they receive no cash or property.
BACKUP WITHHOLDING AND INFORMATION REPORTING. We are required to
furnish to record holders of the notes, other than corporations and other
exempt holders, and to the IRS, information with respect to interest paid
on the notes and dividends paid on the common stock.
In general, "backup withholding" at a rate of 31% may apply to
payments of principal and interest made on a note, payments of dividends on
common stock, and to the payment of the proceeds of a sale or exchange of
common stock or of a note before maturity, that are made to a non-corporate
U.S. holder if such holder fails to provide a correct taxpayer
identification number or otherwise comply with applicable requirements of
the backup withholding rules. The backup withholding tax is not an
additional tax and may be credited against a U.S. holder's U.S. federal
income tax liability, provided that correct information is provided to the
Internal Revenue Service.
Certain U.S. Federal Income and Estate Tax Consequences to Non-U.S. Holders
For purposes of the following discussion, a "Non-U.S. holder" is
a beneficial owner of a note or common stock that is not, for U.S. federal
income tax purposes, a U.S. holder. An individual may, subject to certain
exceptions, be deemed to be a resident alien, as opposed to a non-resident
alien, by virtue of being present in the United States on at least 31 days
in the calendar year and for an aggregate of at least 183 days during a
three-year period ending in the current calendar year, counting for these
purposes all of the days present in the current year, one-third of the days
present in the immediately preceding year, and one-sixth of the days
present in the second preceding year. Resident aliens are subject to U.S.
federal tax as if they were U.S. citizens.
Under present U.S. federal income and estate tax law and subject to the
discussions below concerning income effectively connected with a trade or
business in the United States and backup withholding:
o payments of principal, premium, if any, and interest on a
note by us or any of our agents to any Non-U.S. holder will
not be subject to withholding of U.S. federal income tax,
provided that in the case of interest
49
<PAGE>
(1) the Non-U.S. holder does not directly or indirectly,
actually or constructively, own 10 percent or more of
the total combined voting power of all classes of our
stock entitled to vote,
(2) the Non-U.S. holder is not
(A) a controlled foreign corporation that is related
to us through sufficient stock ownership, or
(B) a bank receiving interest described in Section
881(c)(3)(A) of the Internal Revenue Code, and
(3) either
(A) the beneficial owner of the note certifies to us
or our paying agent, under penalties of perjury,
that it is not a "United States person", as
defined in the Internal Revenue Code and provides
its name, address, and U.S. Taxpayer
identification number, if any or
(B) a securities clearing organization, bank or other
financial institution that holds customers'
securities in the ordinary course of its trade or
business (a "financial institution") and holds the
note on behalf of the beneficial owner certifies
to us or our paying agent under penalties of
perjury that it, or the financial institution
between it and the beneficial owner, has received
from the beneficial owner the certificate
described in (A) above and provides us or our
paying agent with a copy of this certificate;
o payments of dividends on the common stock to a Non-U.S.
holder will be subject to withholding of U.S. federal income
tax at a 30% rate unless that rate is reduced by an
applicable income tax treaty. Dividends that are effectively
connected with the holder's conduct of a trade or business
in the U.S. are generally subject to U.S. federal income tax
at regular rates, but are not generally subject to the 30%
withholding tax if the Non-U.S. holder files a properly
executed Form W-8ECI or currently a Form 4224 or successor
form with the payor;
o a Non-U.S. holder will not be subject to U.S. federal income
tax on any gain or income realized on the sale or other
disposition of common stock, or the sale, exchange,
redemption, retirement at maturity or other disposition of a
note; provided that, in the case of proceeds representing
accrued interest, the conditions described in the first
bullet paragraph above are met, unless
(1) the Non-U.S. holder is an individual who is present in
the United States for 183 days or more during the
taxable year of gain and certain other conditions are
met, or
(2) the gain is effectively connected with the conduct of a
U.S. trade or business by such Non-U.S. holder, or if
an income tax treaty applies, is generally attributable
to a U.S. "permanent establishment" maintained by the
Non-U.S. holder;
o interest on notes not excluded from U.S. withholding tax as
described in the first bullet paragraph above will be
subject to U.S. withholding at a 30% rate, except where an
applicable tax treaty provides for the reduction or
elimination of such withholding tax;
o a note held by an individual who at the time of death is not
a citizen or resident of the United States will not be
subject to U.S. federal estate tax as a result of such
individual's death if, at the time of the individual's
death,
50
<PAGE>
(1) the individual did not directly or indirectly, actually
or constructively, own 10 percent or more of the total
combined voting power of all classes of our stock
entitled to vote, and
(2) the income on the note would not have been effectively
connected with the conduct of a trade or business by
the individual in the United States; and
o common stock owned or treated as owned by an individual who
at the time of death is not a citizen or resident of the
United States will be subject to U.S. federal estate tax
unless otherwise provided by an applicable estate tax
treaty.
If a Non-U.S. holder of a note is engaged in a trade or business
in the United States and interest on or gain realized on the sale of the
note is effectively connected with the conduct of such trade or business
or, if an income tax treaty applies, and the Non-U.S. holder maintains a
U.S. "permanent establishment" to which the interest or gain is generally
attributable, the Non-U.S. holder, although exempt from the withholding tax
discussed in the first bullet paragraph above, provided that such holder
furnishes a properly executed United States Internal Revenue Service Form
W-8ECI or currently a Form 4224 or successor form on or before any payment
date to claim such exemption, may be subject to U.S. federal income tax on
such interest, as well as on gain or income discussed in the third bullet
paragraph above, on a net basis in the same manner as if it were a U.S.
holder.
In addition, a foreign corporation that is a holder of a note or
common stock may be subject to a branch profits tax equal to 30% of its
effectively connected earnings and profits for the taxable year, subject to
some adjustments, unless it qualifies for a lower rate under an applicable
income tax treaty. For this purpose, interest on a note, dividends on
common stock or gain recognized on the disposition of a note or common
stock will be treated as effectively connected earnings and profits if that
interest, dividend or gain is effectively connected with the conduct by the
foreign corporation of a trade or business in the United States.
Treasury Regulations generally effective for payments made after
December 31, 2000 will provide alternative methods for satisfying the
certification requirement described in clause (3) of the first bullet
paragraph above and may also require a Non-U.S. holder claiming the benefit
of an income tax treaty to provide its U.S. taxpayer identification number.
These regulations generally also will require, in the case of a note or
common stock held by a foreign partnership, that
(1) in the case of interest, the certification described in
clause (3) of the first bullet paragraph above be
provided by the partners and in the case of dividends,
the partners certify entitlement to a reduced rate of
withholding under an applicable treaty and
(2) the partnership provide certain information, including
a U.S. taxpayer identification number.
A look-through rule will apply in the case of tiered
partnerships.
Under current Treasury Regulations, backup withholding at a rate
of 31% and information reporting will not apply to payments of interest or
dividends made by us or our paying agent, in its capacity as such, to a
Non-U.S. holder of a note or common stock if such holder has provided the
required certification as set forth above or has otherwise established an
exemption, provided that neither we nor our paying agent has actual
knowledge that the holder is a United States person or that the conditions
of any other exemption are not in fact satisfied. We or our paying agent
may, however, report payments of interest or dividends on the notes or
common stock. Payments of the proceeds from a disposition by a Non-U.S.
holder of a note or common stock made to or through a foreign office of a
broker will not be subject to information reporting or backup withholding,
except that information reporting may apply to such payments if the broker
is
51
<PAGE>
(1) a United States person,
(2) a controlled foreign corporation for U.S. federal
income tax purposes,
(3) a foreign person 50% or more of whose gross income is
effectively connected with a U.S. trade or business for
a specified three-year period, unless the Non-U.S.
holder is an exempt recipient or such broker has
evidence that the payee is a Non-U.S. holder and no
actual knowledge that such evidence is false and
certain other conditions are met, or
(4) with respect to payments made after December 31, 2000,
a foreign partnership, if at any time during its tax
year, one or more of its partners are U.S. persons, as
defined in Treasury Regulations, who in the aggregate
hold more than 50% of the income or capital interest in
the partnership or if, at any time during its tax year,
such foreign partnership is engaged in a U.S. trade or
business.
Payments of the proceeds from a disposition by a Non-U.S. holder
of a note or common stock made to or through the U.S. office of a broker is
subject to information reporting and backup withholding unless the holder
or beneficial owner certifies under penalties of perjury that he or she is
not a United States person and satisfies certain other conditions or
otherwise establishes an exemption from information reporting and backup
withholding.
Any amounts withheld under the backup withholding rules from a
payment to a Non-U.S. holder would be allowed as a refund or a credit
against such holder's U.S. federal income tax liability, provided the
required information is furnished to the Internal Revenue Service.
Non-U.S. holders should consult their tax advisors regarding U.S.
federal, state, local and foreign tax consequences to non-U.S. holders of
purchasing, holding and disposing of the notes or common stock.
52
<PAGE>
SELLING SECURITYHOLDERS
The notes were originally issued by us and sold by the initial
purchasers in a transaction exempt from the registration requirements of
the Securities Act to persons reasonably believed by the initial purchasers
to be qualified institutional buyers. Selling holders, including their
transferees, pledgees or donees or their successors, may from time to time
offer and sell pursuant to this prospectus any or all of the notes and
common stock into which the notes are convertible.
The following table sets forth information with respect to the
selling holders and the principal amounts of notes, and shares of common
stock, beneficially owned by each selling holder that may be offered under
this prospectus. The information is based on information provided by or on
behalf of the selling holders. The selling holders may offer all, some or
none of the notes or common stock into which the notes are convertible.
Because the selling holders may offer all or some portion of the notes or
the common stock, no estimate can be given as to the amount of the notes or
the common stock that will be held by the selling holders upon termination
of any sales. In addition, the selling holders identified below may have
sold, transferred or otherwise disposed of all or a portion of their notes
since the date on which they provided the information regarding their notes
in transactions exempt from the registration requirements of the Securities
Act.
<TABLE>
<CAPTION>
COMMON
STOCK
ISSUABLE
PRINCIPAL UPON COMMON
AMOUNT OF CONVERSION STOCK
NOTES OF THE OWNED
BENEFICIALLY NOTES AFTER
OWNED AND AND COMPLETION
OFFERED OFFERED OF THE
NAME HEREBY(1) HEREBY(1) OFFERING(2)
---- ------------ ---------- -----------
<S> <C> <C> <C>
1976 Distribution Trust FBO AR Lauder/Zinterhoffer $ 17,000 352 --
1976 Distribution Trust FBO Jane Lauder 17,000 352 --
AAM/Zazove Institutional Income Fund, L.P. 1,100,000 22,826 --
Allstate Insurance Company 500,000 10,375 --
American Fidelity Assurance Company 200,000 4,150 --
American Investors Life 450,000 9,338 --
Amerisure Companies/Michigan Mutual Insurance 700,000 14,525 --
Company
Amerus 175,000 3,631 --
Argent Classic Convertible Arbitrage Fund L.P. 1,000,000 20,751 --
Arkansas Teachers Retirement System 3,114,000 64,619 --
Arpeggio Fund, LP 700,000 14,525 --
Associated Electric & Gas Insurance Services 300,000 6,225 --
Limited
AXP Bond Fund, Inc. 1,550,000 32,164 --
AXP Variable Portfolio- 700,000 14,525 --
Bond Fund
AXP Variable Portfolio- 1,300,000 26,976 --
Managed Fund
Baltimore Life Insurance Company 200,000 4,150 --
Bankers Trust Trustee for Daimler Chrysler Corp. 4,495,000 93,276 --
Emp. #1 Pension Plan dated 4/1/89
Baptist Health of South Florida 208,000 4,316 --
Bay County PERS 280,000 5,810 --
Bear, Stearns & Co., Inc. 3,100,000 64,328 -
Blue Cross Blue Shield of Florida 2,500,000 51,877 --
Boilermaker - Blacksmith Pension Trust 1,300,000 26,976 --
Boilermakers Blacksmith Pension Plan 1,800,000 37,352 --
53
<PAGE>
Boston Museum of Fine Art 138,000 2,863 --
Brahma 100,000 2,075 --
BVI SS Board 33,000 684 --
CALAMOS Convertible Fund - 1,500,000 31,126 --
CALAMOS Investment Trust
CALAMOS Convertible Portfolio - CALAMOS Advisors 25,000 518 --
Trust
CALAMOS Global Growth and Income Fund - CALAMOS 100,000 2,075 --
Investment Trust
CALAMOS Growth and Income Fund - CALAMOS 750,000 15,563 --
Investment Trust
CALAMOS Market Neutral Fund - CALAMOS Investment 30,000 622 --
Trust
California Employees' Public 3,000,000 62,253 --
Retirement System
Castle Convertible Fund, Inc. 250,000 5,187 --
Champion International Corporation Master 1,100 22 --
Retirement Trust
City of Birmingham Retirement & Relief System 2,000,000 41,502 --
City of Knoxville Pension System 400,000 8,300 --
City University of New York 85,000 1,763 --
Commonwealth Professional Assurance Company c/o 405,000 8,404 --
Income Research & Management
Consulting Group Capital Markets Funds 65,000 1,348 --
Continental Casualty Company 1,000,000 20,751 --
Coua Bond- 600,000 12,450 --
Debenture Fund
Delta Airlines Master Trust 2,400,000 49,802 --
Dorinco Reinsurance Company 1,500,000 31,126 --
Elf Aquitaine 300,000 6,225 --
Employee Benefit Convertible Securities Fund 260,000 5,395 --
Engineers Joint Pension Fund 425,000 8,819 --
Fidelity Financial Trust: Fidelity Convertible Fund 6,000,000 124,507 --
Family Service Life Insurance Company 200,000 4,150 --
Financial Benefit 50,000 1,037 --
Franklin & Marshall College 335,000 6,951 --
Fuji U.S. Income Open 600,000 12,450 --
General Motors Investment Management Corp. 3,100,000 64,328 --
Genesee County Employees' Retirement System 725,000 15,044 --
Grable Foundation 121,000 2,510 --
Grady Hospital 132,000 2,739 --
Granville Capital Corporation 2,500,000 51,877 --
Greek Catholic Union 40,000 830 --
Greek Catholic Union II 15,000 311 --
Gryphon Domestic III, LLC 3,700,000 76,779 --
Guaranty Income Life Insurance Company 200,000 4,150 --
Guardian High Yield Bond Fund 200,000 4,150 --
Guardian Life Insurance Co. of America 2,000,000 41,502 --
54
<PAGE>
Guardian Pension Trust 100,000 2,075 --
HealthNow New York, Inc. 125,000 2,593 --
IDS Series Fund, Inc. - Income Portfolio 50,000 1,037 --
Indiana Lumbermen's Mutual Insurance 250,000 5,187 --
Investcorp - SAM Fund Limited 6,700,000 139,032 --
Island Insurance Convertible Account 155,000 3,216 --
J.M. Hull Associates L.P. 100,000 2,075 --
Jackson County Employees' Retirement System 450,000 9,338 --
Julius Baer Securities 260,000 5,395 --
Kerr-McGee Corporation 900,000 18,676 --
Kettering Medical Center Funded Depreciation 80,000 1,660 --
Account
Key Asset Management, Inc. as Agent for Int'l. 20,000 415 --
Licensing Ind. Mch. Assoc. #2
Key Asset Management, Inc. as Agent for Omnova 45,000 933 --
Solutions
Key Asset Management, Inc. as Agent for the 25,000 518 --
Aerojet Inc. Fdn.
Key Asset Management, Inc. as Agent for the 630,000 13,073 --
Charitable Sec. Fd.
Key Asset Management, Inc. as Agent for the EB 630,000 13,073 --
Convertible Sec. Fd.
Key Asset Management, Inc. as Agent for the Field 25,000 518 --
Fdn. of Illinois
Key Asset Management, Inc. as Agent for the Key 110,000 2,282 --
Tr. Convertible Sec. Fd.
Key Asset Management, Inc. as Agent for the Parker 80,000 1,660 --
Society/Convertible
Key Asset Management, Inc. as Agent for the Union 35,000 726 --
Security Life Ins. Co.
Key Asset Management, Inc. as Agent for the 600,000 12,450 --
Victory Convertible Sec. Fd.
Key Asset Management, Inc. as Investment Manager 170,000 3,527 --
for the Health Foundation of Greater Cincinnati
Key Asset Management, Inc. as Investment Manager 660,000 13,695 --
for the JC Penney Life Ins. Co.
Key Asset Management, Inc. as Investment Manager 365,000 7,574 --
for the Potlatch-First Trust Co. of St. Paul
Key Asset Management, Inc. as Investment Manager 515,000 10,686 --
for the University of So. Florida Fdn.
Key Asset Management, Inc. as Investment Manager 40,000 830 --
for Tote Convertible Bonds
Knoxville Utilities Board Retirement System 230,000 4,772 --
Lions Clubs International Foundation 100,000 2,075 --
Lord Abbett & Co. 6,000,000 12,450 --
Oxford Fund
Lord Abbett Bond Debenture 1,200,000 24,901 --
Lumbermens 175,000 3,361 --
55
<PAGE>
Macomb County & Employees' Retirement System 400,000 8,300 --
Manufacturers & Traders Trust Co. 125,000 2,593 --
Maryland State Retirement System 1,830,000 37,974 --
Massachusetts Mutual Life Insurance Company 1,425,000 29,570 --
MassMutual Corporate Investors 250,000 5,187 --
MassMutual Corporate Value Partners Limited 550,000 11,413 --
MassMutual High Yield Partners II LLC 850,000 17,638 --
MassMutual Participation Investors 125,000 2,593 --
Merrill Lynch Insurance Group 298,000 6,183 --
Merrill Lynch Pierce Fenner & Smith Inc. 1,892,000 39,261 --
Michigan Mutual Insurance Company 1,000,000 20,751 --
Michigan Professional Insurance Exchange 80,000 1,660 --
MidAmerican Life Insurance Company 70,000 1,452 --
Morgan Stanley Dean Witter Convertible Securities 2,500,000 51,877 --
Trust
Motors Insurance 1,025,000 21,270 --
Museum of Fine Arts, Boston 46,000 954 --
Nashville Electric Service 325,000 6,744 --
Nations Capital Income Fund 4,000,000 83,004 --
New Era Life Insurance Company 200,000 4,150 --
New Hampshire Retirement System 271,000 5,623 --
New Orleans Firefighters 134,000 2,780 --
New York Life Insurance and Annuity Corporation 2,000,000 41,502 --
New York Life Insurance Company 4,000,000 83,004 --
Nicholas-Appelgate Convertible Fund 803,000 16,633 --
NORCAL Mutual Insurance Company 400,000 8,300 --
Occidental Petroleum 227,000 4,710 --
Ohio BWC 159,000 3,299 --
Oppenheimer Convertible Securities Fund 7,000,000 145,258 --
Pacific Innovations Trust Capital Income Fund 285,000 5,914 --
Pacific Life Insurance Company 2,500,000 51,878 --
Paloma Strategic Securities Limited 1,500,000 31,126 --
PARIBAS 500,000 10,375 --
Parker-Hannifin Corporation 55,000 1,141 --
Penn Treaty Network America Insurance Co. 305,000 6,329 --
Physicians Life 332,000 6,889 --
Pilgrim Convertible Fund 3,678,000 76,322 --
PIMCO Convertible Bond Fund 3,820,000 79,269 --
PIMCO Total Return Fund 1,000,000 20,751 --
Port Authority of Allegheny
County Retirement and Disability Allowance 1,375,000 28,532 --
Plan for the Employees Represented by Local 85
of the Amalgamated Trust Union
PRIM Board 4,180,000 86,740 --
ProMutual 168,000 3,486 --
Putnam Convertible Income Growth Trust 1,928,000 40,008 --
Putnam Balanced Retirement Fund 119,000 2,469 --
Putnam Convertible Opportunities and Income Trust 123,000 2,552 --
Radian Group Inc. 1,000,000 20,751 --
Regence Idaho 175,000 3,631 --
Regence Oregon 157,000 3,257 --
Regence Utah 54,000 1,120 --
Regence Washington 264,000 5,478 --
56
<PAGE>
Rhapsody Fund, LP 1,850,000 38,389 --
Rhone-Poulenc Rorer Pension Fund 120,000 2,490 --
Saar Holdings CDO Limited 300,000 6,225 --
San Diego City Retirement 1,005,000 20,854 --
San Diego County Convertible 2,757,000 57,211 --
SB Balanced Fund 275,000 5,706 --
Shell Pension Trust 179,000 3,714 --
Smith Barney Convertible Fund 750,000 15,563 --
Southern Farm Bureau Life Insurance Company 750,000 15,563 --
SPT 1,100,000 22,826 --
Starvest Managed Portfolio 110,000 2,282 --
State Street Bank Custodian for GE Pension Trust 2,865,000 59,452 --
The Dow Chemical Company Employees' Retirement Plan 2,600,000 53,953 --
The Fondren Foundation 80,000 1,660 --
The TCW Group, Inc. 8,000,000 166,009 --
The Travelers Indemnity Company 1,632,000 33,865 --
The Travelers Insurance Company 1,045,000 21,684 --
The Travelers Series Trust Convertible Bond 400,000 8,300 --
Portfolio
Total Return Portfolio 1,200,000 24,901 --
Travelers Insurance Company Separate Account TLAC 123,000 2,552 --
Tufts Associated Health Plan c/o Income Research 520,000 10,790 --
& Management
Unifi, Inc. Profit Sharing Plan and Trust 125,000 2,593 --
Union Food and Commercial Workers Local 1262 and 535,000 11,101 --
Employers Pension Fund
University of Massachusetts c/o Income Research & 75,000 1,556 --
Management
University of Rochester 43,000 892 --
University of South Florida 1,000,000 20,751 --
Van Kampen Convertible Securities Fund 240,000 4,980 905,400 (3)
Van Kampen Harbor Fund 1,260,000 26,146 905,400 (3)
Van Waters & Rogers, Inc. Retirement Plan 380,000 7,885 --
Wake Forest University 1,026,000 21,290 --
Warburg Dillon Read LLC 4,425,000 91,824 --
White River Securities LLC 3,100,000 64,328 --
Writers Guild- 264,000 5,478 --
Industry Health Fund
- -----------------
(1) Amounts indicated may be in excess of the total amount registered due
to ales or transfers exempt from the registration requirements of the
Securities Act since the date upon which selling holders provided to
us the information regarding their notes.
(2) Assumes that all notes, and common stock issuable upon conversion of
the notes, are sold in the offering.
(3) The selling holder's investment advisor and sister corporations act as
investment advisor or sub-advisor to other Mutual Funds which hold
shares of our common stock.
</TABLE>
57
<PAGE>
None of the selling holders nor any of their affiliates,
officers, directors or principal equity holders has held any position or
office or has had any material relationship with us within the past three
years except that Merrill Lynch, Pierce, Fenner & Smith was an initial
purchaser. The selling holders purchased all of the notes in private
transactions on or after December 15, 1999. All of the notes were
"restricted securities" under the Securities Act prior to this
registration.
Information concerning the selling holders may change from time
to time and any changed information will be set forth in supplements to
this prospectus if and when necessary. In addition, the conversion rate and
therefore, the number of shares of common stock issuable upon conversion of
the notes, is subject to adjustment under certain circumstances.
Accordingly, the aggregate principal amount of notes and the number of
shares of common stock into which the notes are convertible may increase or
decrease.
58
<PAGE>
PLAN OF DISTRIBUTION
The selling holders and their successors, including their
transferees, pledgees or donees or their successors, may sell the notes and
the common stock into which the notes are convertible directly to
purchasers or through underwriters, broker-dealers or agents, who may
receive compensation in the form of discounts, concessions or commissions
from the selling holders or the purchasers. These discounts, concessions or
commissions as to any particular underwriter, broker-dealer or agent may be
in excess of those customary in the types of transactions involved.
The notes and the common stock into which the notes are
convertible may be sold in one or more transactions at fixed prices, at
prevailing market prices at the time of sale, at prices related to the
prevailing market prices, at varying prices determined at the time of sale,
or at negotiated prices. These sales may be effected in transactions, which
may involve crosses or block transactions:
o on any national securities exchange or U.S. inter-dealer
system of a registered national securities association on
which the notes or the common stock may be listed or quoted
at the time of sale;
o in the over-the-counter market;
o in transactions otherwise than on these exchanges or systems
or in the over-the-counter market;
o through the writing of options, whether the options are
listed on an options exchange or otherwise; or
o through the settlement of short sales.
In connection with the sale of the notes and the common stock
into which the notes are convertible or otherwise, the selling holders may
enter into hedging transactions with broker-dealers or other financial
institutions, which may in turn engage in short sales of the notes or the
common stock into which the notes are convertible in the course of hedging
the positions they assume. The selling holders may also sell the notes or
the common stock into which the notes are convertible short and deliver
these securities to close out their short positions, or loan or pledge the
notes or the common stock into which the notes are convertible to
broker-dealers that in turn may sell these securities.
The aggregate proceeds to the selling holders from the sale of
the notes or common stock into which the notes are convertible offered by
them will be the purchase price of the notes or common stock less discounts
and commissions, if any. Each of the selling holders reserves the right to
accept and, together with their agents from time to time, to reject, in
whole or in part, any proposed purchase of notes or common stock to be made
directly or through agents. We will not receive any of the proceeds from
this offering.
Our outstanding common stock is listed for trading on the New
York Stock Exchange. We do not intend to list the notes for trading on any
national securities exchange or on the New York Stock Exchange and can give
no assurance about the development of any trading market for the notes.
In order to comply with the securities laws of some states, if
applicable, the notes and common stock into which the notes are convertible
may be sold in these jurisdictions only through registered or licensed
brokers or dealers. In addition, in some states the notes and common stock
into which the notes are convertible may not be sold unless they have been
registered or qualified for sale or an exemption from registration or
qualification requirements is available and is complied with.
The selling holders and any underwriters, broker-dealers or
agents that participate in the sale of the notes and common stock into
which the notes are convertible may be "underwriters" within the meaning of
Section 2(11) of the Securities Act. Any discounts, commissions,
concessions or profit they earn on any resale of the shares may be
underwriting discounts and commissions under the Securities Act. Selling
holders who are "underwriters"
59
<PAGE>
within the meaning of Section 2(11) of the Securities Act will be subject
to the prospectus delivery requirements of the Securities Act. The selling
holders have acknowledged that they understand their obligations to comply
with the provisions of the Exchange Act and the rules thereunder relating
to stock manipulation, particularly Regulation M.
In addition, any securities covered by this prospectus that
qualify for sale pursuant to Rule 144 or Rule 144A of the Securities Act
may be sold under Rule 144 or Rule 144A rather than pursuant to this
prospectus. A selling holder may not sell any notes or common stock
described in this prospectus and may not transfer, devise or gift these
securities by other means not described in this prospectus.
To the extent required, the specific notes or common stock to be
sold, the names of the selling holders, the respective purchase prices and
public offering prices, the names of any agent, dealer or underwriter, and
any applicable commissions or discounts with respect to a particular offer
will be set forth in an accompanying prospectus supplement or, if
appropriate, a post-effective amendment to the registration statement of
which this prospectus is a part.
We entered into a registration rights agreement for the benefit
of holders of the notes to register their notes and common stock under
applicable federal and state securities laws under specific circumstances
and at specific times. The registration rights agreement provides for
cross-indemnification of the selling holders and us and their and our
respective directors, officers and controlling persons against specific
liabilities in connection with the offer and sale of the notes and the
common stock, including liabilities under the Securities Act. We will pay
substantially all of the expenses incurred by the selling holders incident
to the offering and sale of the notes and the common stock.
EXPERTS
The financial statements and schedules incorporated in this
prospectus by reference from the Company's Annual Report on Form 10-K for
the year ended December 31, 1998 have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their report, which is incorporated
herein by reference, and has been so incorporated in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.
VALIDITY OF SECURITIES
The validity of the notes and the common stock which may be
offered by this prospectus is being passed upon for us by Fried, Frank,
Harris, Shriver & Jacobson, (a partnership including professional
corporations), New York, New York.
WHERE YOU CAN FIND MORE INFORMATION
Our principal executive offices are located at 1375 Lenoir-Rhyne
Boulevard, Hickory, North Carolina 28601 (telephone (828) 324-2200). We
also maintain an Internet home page at www.Commscope.com.
We have filed with the Securities and Exchange Commission a
registration statement on Form S-3 to register the securities offered by
this prospectus. However, this prospectus does not contain all of the
information contained in the registration statement and the exhibits and
schedules to the registration statement. We strongly encourage you to
carefully read the registration statement and the exhibits and schedules to
the registration statement. We also file annual, quarterly and special
reports, proxy statements and other information with the SEC.
You may inspect and copy such material at the public reference
facilities maintained by the SEC at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, as well as at the SEC's regional offices at 500
West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade
Center, Suite 1300, New York, New York 10048. You may also obtain copies of
such material from the SEC at prescribed rates by writing to the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Washington, D.C.
20549.
60
<PAGE>
Please 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 web site at www.sec.gov.
INCORPORATION BY REFERENCE
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 you 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 (other than information filed in response to Items
402(k) and (l) of Regulation S-K):
1. Our Annual Report on Form 10-K for the fiscal year ended
December 31, 1998, including all material incorporated by reference in that
report;
2. Our Current Reports on Form 8-K dated January 4, 1999,
December 7, 1999, December 15, 1999 and February 3, 2000;
3. Our Definitive Proxy Statement on Schedule 14A, filed on March
31, 1999, excluding the Sections captioned "Report of the Compensation
Committee" and "Performance Graph";
4. Our Quarterly Reports on Form 10-Q for the fiscal quarters
ended March 31, 1999, June 30, 1999 and September 30, 1999, including all
material incorporated by reference in each of those reports;
5. All other reports filed by us pursuant to Section 13(a) or
15(d) of the Exchange Act since December 31, 1998, including all material
incorporated by reference in such reports; and
6. The description of the common stock contained in our
Registration Statement on Form 8-A, dated June 30, 1997, as amended.
You may request a copy of these filings, at no cost to you, by
writing or telephoning us at: CommScope, Inc.: Attention: Investor
Relations: 1375 Lenoir-Rhyne Boulevard, Hickory, North Carolina 28601
(telephone (828) 324-2200).
Our common stock is quoted on the NYSE under the symbol "CTV."
The last reported sales price of the common stock on the NYSE on February
8, 2000 was $32 9/16 per share. You may inspect reports and other
information concerning us at the offices of the NYSE, 20 Broad Street, New
York, New York 10004.
You should rely only on the information incorporated by reference
or provided in this prospectus. We have authorized no one to provide you
with different information. You should not assume that the information in
this prospectus is accurate as of any date other than the date on the front
of the document.
FORWARD-LOOKING STATEMENTS
Statements in this prospectus which are other than historical
facts are intended to be "forward-looking statements" within the meaning of
the Securities Exchange Act of 1934, the Private Securities Litigation
Reform Act of 1995 and other related laws. These forward-looking statements
are identified by their use of such terms and phrases as "intends,"
"intend," "intended," "goal," "estimate," "estimates," "expects," "expect,"
"expected," "project," "projects," "projected," "projections," "plans,"
"anticipates," "anticipated," "should," "designed to," "foreseeable
future," "believe," "believes" and "scheduled" and similar expressions.
These statements are subject to various risks and uncertainties, many of
which are outside of our control, such as the level of market demand for
our products, competitive pressures, the ability to achieve reductions in
costs and to continue to integrate acquisitions, price fluctuations of
materials and the potential unavailability thereof, foreign currency
fluctuations,
61
<PAGE>
technological obsolescence, international economic and political
uncertainties as well as the specific factors described above. The
information contained in this prospectus represents our best judgment at
the date of this prospectus based on information currently available.
However, we do not intend to update this information to reflect any
developments or information obtained after the date of this prospectus and
we disclaim any legal obligation to do so.
62
<PAGE>
================================ ==================================
We have not authorized any
dealer, salesperson or other
person to give you written
information other than this
prospectus or to make
representations as to matters
not stated in this prospectus.
You must not rely on
unauthorized information. This
prospectus is not an offer to
sell these securities or our
solicitation of your offer to
buy these securities in any
jurisdiction where that would
not be permitted or legal.
Neither the delivery of this
prospectus nor any sales made
hereunder after the date of this
prospectus shall create an
implication that the information
contained herein or our affairs
have not changed since the date
hereof.
COMMSCOPE, INC.
$172,500,000 of 4% Convertible
Subordinated Notes and 3,579,581
shares of Common Stock
Issuable upon Conversion of the Notes
----------------------------------
PROSPECTUS
----------------------------------
February 9, 2000
================================ ==================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemized statement of expenses of the
Registrant in connection with the securities being registered. All of the
expenses are estimated, except for the registration fee.
Securities and Exchange Commission registration fee..... $ 45,540
Legal fees and expenses................................. $ 25,000
Accounting fees and expenses............................ $ 7,500
New York Stock Exchange Supplemental Listing fee........ $ 1,500
Miscellaneous........................................... $ 2,960
--------
Total............................................... $ 82,500
========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "DGCL")
provides that a corporation may indemnify its directors and officers, as
well as other employees and individuals (each an "Indemnified Party," and
collectively, "Indemnified Parties"), against expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement in
connection with specified actions, suits, or proceedings, whether civil,
criminal, administrative, or investigative, other than in connection with
actions by or in the right of the corporation (a "derivative action"), if
an Indemnified Party acted in good faith and in a manner such Indemnified
Party reasonably believed to be in or not opposed to the best interests of
the corporation and, with respect to any criminal action or proceeding, had
no reasonable cause to believe that his or her conduct was unlawful. A
similar standard is applicable in the case of derivative actions, except
that a corporation may only indemnify an Indemnified Party for expenses
(including attorneys' fees) incurred in connection with the defense or
settlement of such derivative action. Additionally, in the context of a
derivative action, DGCL Section 145 requires court approval before there
can be any indemnification where an Indemnified Party has been found liable
to the corporation. The statute provides that it is not exclusive of other
indemnification arrangements that may be granted pursuant to a
corporation's charter, by-laws, disinterested director vote, stockholder
vote, agreement, or otherwise.
Section 102(b)(7) of the DGCL permits a corporation to provide in
its certificate of incorporation that a director of the corporation shall
not be personally liable to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability for (i) any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law,
(iii) any willful or negligent declaration of an unlawful dividend, stock
purchase or redemption, or (iv) any transaction from which the director
derived an improper personal benefit.
The Certificate of Incorporation and By-Laws of the Registrant
provide that directors and officers of the Registrant shall not, to the
fullest extent permitted by the DGCL, be liable to the Registrant or any of
its stockholders for monetary damages for any breach of fiduciary duty as a
director or officer, as the case may be. The Certificate of Incorporation
and By-Laws of the Registrant also provide that if the DGCL is amended to
permit further elimination or limitation of the personal liability of
directors and officers, then the liability of the directors and officers of
the Registrant shall be eliminated or limited to the fullest extent
permitted by the DGCL, as so amended.
The Registrant has entered into agreements to indemnify its
directors and officers in addition to the indemnification provided for in
its Certificate of Incorporation and By-Laws. These agreements, among other
things, indemnify the Registrant's directors and officers to the fullest
extent permitted by Delaware law for certain expenses (including attorney's
fees), liabilities, judgments, fines and settlement amounts incurred by
such person arising out of or in connection with such person's service as a
director or officer of the Registrant or an affiliate of the Registrant.
II - 1
<PAGE>
The Registrant maintains directors' and officers' liability
insurance, under which its directors and officers are insured, within the
limits and subject to the limitations of the policies, against certain
expenses in connection with the defense of, and certain liabilities which
might be imposed as a result of, actions, suits or proceedings to which
directors and officers are parties by reason of being or have been
directors or officers of the Registrant, as the case may be.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
EXHIBITS
--------
3.1* Amended and Restated Certificate of Incorporation of
CommScope, Inc.
3.2* Amended and Restated By-Laws of CommScope, Inc.
4.1** Rights Agreement, dated June 12, 1997, between CommScope,
Inc. and ChaseMellon Shareholder Services, L.L.C.
4.2*** Amendment No. 1 to the Rights Agreement, dated as of June
14, 1999 between CommScope, Inc. and ChaseMellon Shareholder
Services, LLC.
4.4+ Purchase Agreement dated December 9, 1999 between CommScope,
Inc. and the Initial Purchasers
4.5+ Indenture, dated as of December 15, 1999 between CommScope
and First Union National Bank, as Trustee
4.6+ Registration Rights Agreement, dated December 15, 1999
between CommScope and the Initial Purchasers.
4.7**** Specimen Stock Certificate.
5+ Opinion of Fried, Frank, Harris, Shriver & Jacobson
12 Statements re: Computations of Ratios
23.1+ Consent of Fried, Frank, Harris, Shriver & Jacobson
(included in Exhibit 5.1)
23.2 Independent Auditors' Consent
24+ Powers of Attorney (included on the signature page hereof)
25+ Statement of Eligibility of the Trustee on Form T-1.
* Incorporated herein by reference from the Company's
Quarterly Report on Form 10-Q for the period ended June 30,
1997 (File No. 1-12929).
** Incorporated herein by reference from the Registration
Statement on Form 8-A filed June 30, 1997 (File No.
1-12929).
*** Incorporated herein by reference from the Amendment to the
Registration Statement on Form 8-A/A filed June 14, 1999
(File No. 1-12929).
**** Incorporated herein by reference from the Company's
Registration Statement on Form S-4 filed June 13, 1997 (Reg.
No. 333-23935).
+ Previously filed
II - 2
<PAGE>
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this
registration statement
(i) to include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events
arising after the effective date of the
registration statement (or the most recent
post-effective amendment thereof) which,
individually or in the aggregate, represent a
fundamental change in the information set forth in
the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of
securities offered would not exceed that which was
registered) and any deviation from the low or high
and of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price
represent no more than 20 percent change in the
maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the
effective registration statement;
(iii) to include any material information with respect
to the plan of distribution not previously
disclosed in the registration statement or any
material change to such information in the
registration statement;
provided, however, that the undertakings set forth in paragraphs (1)(i) and
(ii) above do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic
reports filed with or furnished to the Commission by the registrant
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference 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.
(b) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of
an employee benefit 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.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors,
officers, and controlling persons of the registrant pursuant
to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a
II - 3
<PAGE>
director, officer, or controlling person of the registrant
in the successful defense of any action, suit or proceeding)
is asserted by such director, officer, or controlling person
in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the
final adjudication of such issue.
II - 4
<PAGE>
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 Amendment No. 1 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Hickory, State of North Carolina, on February 9, 2000.
COMMSCOPE, INC.
By: /s/Frank M. Drendel
-----------------------------
Frank M. Drendel
Chairman and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY IN WHICH SIGNED DATE
--------- ------------------------ ----
<S> <C> <C>
/s/Frank M. Drendel Chairman and February 9, 2000
------------------------- Chief Executive Officer
Frank M. Drendel (Principal Executive Officer)
/s/Jearld L. Leonhardt Executive Vice President February 9, 2000
------------------------- and Chief Financial Officer
Jearld L. Leonhardt (Principal Financial Officer)
/s/William R. Gooden Senior Vice President and Controller February 9, 2000
------------------------- (Principal Accounting Officer)
William R. Gooden
* Director February 9, 2000
-------------------------
Edward D. Breen
* Director February 9, 2000
-------------------------
Duncan M. Faircloth
* Director February 9, 2000
-------------------------
Boyd L. George
* Director February 9, 2000
-------------------------
George N. Hutton, Jr.
* Director February 9, 2000
-------------------------
James N. Whitson
- -------------
* By: /s/ Frank B. Wyatt, II
-----------------------
Frank B. Wyatt, II
Attorney-in-Fact
</TABLE>
II - 5
<PAGE>
EXHIBIT INDEX
3.1* Amended and Restated Certificate of Incorporation of
CommScope, Inc.
3.2* Amended and Restated By-Laws of CommScope, Inc.
4.1** Rights Agreement, dated June 12, 1997, between CommScope,
Inc. and ChaseMellon Shareholder Services, L.L.C.
4.2*** Amendment No. 1 to the Rights Agreement, dated as of June
14, 1999 between CommScope, Inc. and ChaseMellon Shareholder
Services, LLC.
4.4+ Purchase Agreement dated December 9, 1999 between CommScope,
Inc. and the Initial Purchasers
4.5+ Indenture, dated as of December 15, 1999 between CommScope
and First Union National Bank, as Trustee
4.6+ Registration Rights Agreement, dated December 15, 1999
between CommScope and the Initial Purchasers.
4.7**** Specimen Stock Certificate.
5+ Opinion of Fried, Frank, Harris, Shriver & Jacobson
12 Statements re: Computations of Ratios
23.1+ Consent of Fried, Frank, Harris, Shriver & Jacobson
(included in Exhibit 5.1)
23.2 Independent Auditors' Consent
24+ Powers of Attorney (included on the signature page hereof)
25+ Statement of Eligibility of the Trustee on Form T-1.
* Incorporated herein by reference from the Company's
Quarterly Report on Form 10-Q for the period ended June 30,
1997 (File No. 1-12929).
** Incorporated herein by reference from the Registration
Statement on Form 8-A filed June 30, 1997 (File No.
1-12929).
*** Incorporated herein by reference from the Amendment to the
Registration Statement on Form 8-A/A filed June 14, 1999
(File No. 1-12929).
**** Incorporated herein by reference from the Company's
Registration Statement on Form S-4 filed June 13, 1997 (Reg.
No. 333-23935).
+ Previously filed
EXHIBIT 12
<TABLE>
<CAPTION>
Nine Months Ended
Years ended December 31, September 30,
------------------------------------------------- ----------------------
1994 1995 1996 1997 1998 1998 1999
------------------------------------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Actual ratio of earnings to fixed charges:
Income before income taxes 75,485 76,713 92,103 61,514 60,214 41,024 75,528
Add fixed charges:
Interest expense 12,281 8,891 10,091 13,615 15,298 11,990 7,673
Amortization of deferred financing fees - - - 70 150 112 116
------------------------------------------------- ----------------------
Total earnings as defined 87,766 85,604 102,194 75,199 75,662 53,126 83,317
Fixed charges:
Interest expense 12,281 8,891 10,091 13,615 15,298 11,990 7,673
Amortization of deferred financing fees - - - 70 150 112 116
------------------------------------------------- ----------------------
Total fixed charges as defined 12,281 8,891 10,091 13,685 15,448 12,102 7,789
------------------------------------------------- ----------------------
ACTUAL RATIO OF EARNINGS TO FIXED CHARGES 7.15 9.63 10.13 5.49 4.90 4.39 10.70
================================================= ======================
Pro forma
Pro forma Nine months
Year ended ended
December 31, September 30,
1998 1999
Adjusted Adjusted
-------------- --------------
Pro forma ratio of earnings to fixed charges:
Income before income taxes 62,921 76,149
Add fixed charges:
Interest expense 11,871 6,512
Amortization of deferred financing fees 870 656
-------------- --------------
Total earnings as defined 75,662 83,317
Fixed charges:
Interest expense 11,871 6,512
Amortization of deferred financing fees 870 656
-------------- --------------
Total fixed charges as defined 12,741 7,168
-------------- --------------
PRO FORMA RATIO OF EARNINGS TO FIXED CHARGES 5.94 11.62
============== ==============
</TABLE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement No. 333-94691 of CommScope, Inc. on Form S-3 of our
report dated January 29, 1999 appearing in the Annual Report on Form 10-K
of CommScope, Inc. for the year ended December 31, 1998 and to the
reference to us under the heading "Experts" in the Prospectus, which is
part of this Registration Statement.
DELOITTE & TOUCHE LLP
Hickory, North Carolina
February 7, 2000
