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As Filed Pursuant to Rule 424(b)(3)
Registration No. 333-30596
PROSPECTUS
CONEXANT SYSTEMS, INC.
COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
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In connection with the acquisition of all outstanding shares and options of
Microcosm Communications Limited, on January 6, 2000 we issued 1,523,430 shares
of our common stock and options to purchase 94,078 shares of our common stock to
the shareholders and option holders of Microcosm. The stock options were issued
under our Microcosm Communications Limited Stock Option Plan. This prospectus
may be used by former shareholders of Microcosm to resell the common stock
received by them in the Microcosm acquisition transaction and by former option
holders of Microcosm to resell the common stock received by them upon exercise,
prior to the date of this prospectus, of the stock options they received in the
acquisition transaction. In addition, this prospectus may be used by any
transferee of those shares of common stock transferred by a former shareholder
or option holder of Microcosm. This prospectus may also be used by Conexant to
offer and sell shares of common stock upon exercise of stock options issued to
former option holders of Microcosm in the acquisition transaction.
In connection with the acquisition of the wireless broadband business unit
of Oak Technology, Inc., on January 19, 2000 we issued 293,794 shares of our
common stock to Oak Technology. This prospectus may be used by Oak Technology to
resell the common stock received by it in the acquisition transaction.
In connection with the acquisition of Istari Design, Inc., on November 9,
1999 we issued 100,506 shares of our common stock to the shareholders of Istari.
This prospectus may be used by the former shareholders of Istari to resell the
common stock received by them in the acquisition transaction.
Our common stock is traded on the Nasdaq National Market under the symbol
"CNXT". On February 24, 2000, the last reported sale price for our common stock
on the Nasdaq National Market was $123.0625 per share.
INVESTING IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. PLEASE
CONSIDER THE "RISK FACTORS" BEGINNING ON PAGE 3 OF THIS PROSPECTUS.
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 25, 2000.
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TABLE OF CONTENTS
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Summary..................................................... 1
Risk Factors................................................ 3
Use of Proceeds............................................. 15
Price Range of Common Stock................................. 15
Dividend Policy............................................. 16
Determination of Option Exercise Prices..................... 16
Microcosm Stock Option Plan................................. 16
Description of Capital Stock................................ 18
U.K. Tax Considerations..................................... 23
U.S. Federal Income Tax Considerations...................... 24
Selling Securityholders..................................... 27
Plan of Distribution........................................ 29
Legal Matters............................................... 31
Experts..................................................... 32
How to Obtain More Information.............................. 32
Forward-Looking Statements.................................. 33
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SUMMARY
CONEXANT SYSTEMS, INC.
Conexant Systems, Inc. (which may be referred to as Conexant, we, us or
our) is the world's largest independent company focused exclusively on providing
semiconductor products for communications electronics. With more than 30 years
of experience in developing communications products, we draw upon our expertise
in mixed-signal processing technology to deliver integrated systems and
semiconductor products for a broad range of communications applications. These
products facilitate communications worldwide through wireline voice and data
communications networks, cordless and cellular wireless telephony systems,
personal imaging devices and equipment, and emerging cable and wireless
broadband communications networks. We align our business into five product
platforms:
- Network Access
- Wireless Communications
- Digital Infotainment
- Personal Imaging
- Personal Computing
Before December 31, 1998, we were a wholly-owned subsidiary of Rockwell
International Corporation and, together with certain other subsidiaries and
divisions of Rockwell, operated Rockwell's semiconductor systems business
("Semiconductor Systems"). On December 31, 1998, we became an independent,
public company by means of a tax-free spin-off from Rockwell. Our principal
offices are located at 4311 Jamboree Road, Newport Beach, California 92660-3095.
Unless the context otherwise indicates, as used in this prospectus, all
references to Conexant, we, us and our are to Semiconductor Systems for periods
prior to our spin-off from Rockwell and to Conexant Systems, Inc. and its
subsidiaries for periods following the spin-off.
ACQUISITION OF MICROCOSM COMMUNICATIONS LIMITED
On January 6, 2000, we completed the acquisition of all outstanding
ordinary, "A" ordinary and preference shares and options to purchase ordinary
shares of Microcosm Communications Limited, a leading supplier of high-speed
integrated circuits for fiber optic communications located in Bristol, England.
The purchase price was approximately $129 million, subject to a holdback of
approximately $18 million to pay any contingent indemnification obligations. The
closing payment was made by delivery of 1,523,430 shares of our common stock to
the shareholders of Microcosm and options to purchase 94,078 shares of our
common stock to the option holders of Microcosm. Certain shareholders and option
holders of Microcosm could receive additional consideration of up to
approximately $52 million, payable in shares of common stock and stock options,
if certain performance and technology goals are achieved.
Under the Stock Purchase Agreement dated as of January 6, 2000 among
Conexant and the shareholders and option holders of Microcosm, we have agreed to
register the resale of shares of our common stock issued at the closing of the
Microcosm acquisition transaction and the shares issuable upon exercise of the
stock options granted at the closing of the Microcosm acquisition transaction.
We have also agreed to register the resale of shares of our common stock issued
in connection with any release of the indemnification holdback or as additional
consideration if the performance and technology goals referred to above are
achieved, as well as shares of our common stock issuable upon exercise of any
stock options that may be granted in connection with those events. These
additional shares are not covered by this prospectus and will be separately
registered following the events described above.
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ACQUISITION OF OAK TECHNOLOGY LTD.
On January 19, 2000, we completed the acquisition of the wireless broadband
business unit of Oak Technology, Inc. located in Bristol, England through the
acquisition of all outstanding ordinary shares of Oak Technology, Inc.'s
wholly-owned subsidiary, Oak Technology Ltd., and certain assets related to that
business. The purchase price was approximately $25 million, payable in a
combination of shares of our common stock and cash. The closing payment included
delivery of 293,794 shares of our common stock to Oak Technology, Inc.
Under the Bill of Sale and Assignment Agreement dated as of January 19,
2000 between Conexant and Oak Technology, Inc. we have agreed to register the
shares of common stock issued to Oak Technology upon a demand by Oak Technology
or, if requested by Oak Technology, as part of a registration under the
Securities Act of 1933 by us of other shares of our common stock. Oak Technology
has requested that its shares be included in the registration statement of which
this prospectus is a part and that it be included as a selling securityholder in
this prospectus.
ACQUISITION OF ISTARI DESIGN, INC.
On November 9, 1999, we completed the acquisition of Istari Design, Inc.
through the merger of a wholly-owned subsidiary of Conexant with and into
Istari, as a result of which Istari became a wholly-owned subsidiary of
Conexant. In the merger, the shareholders of Istari received an aggregate of
100,506 shares of our common stock. Under the Agreement and Plan of
Reorganization dated November 9, 1999, among Conexant, Istari Acquisition Corp.
and Istari and the Registration Rights Agreement dated as of November 10, 1999
between Conexant and the shareholders of Istari, we have agreed to register the
shares of common stock issued to the former shareholders of Istari, if requested
by them, as part of a registration under the Securities Act of 1933 by us of
other shares of our common stock, including shares held by other shareholders of
Conexant. Each of the former shareholders of Istari has requested that his
shares of our common stock be included in the registration statement of which
this prospectus is a part and that he be included as a selling securityholder in
the prospectus.
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RISK FACTORS
You should carefully consider and evaluate all of the information in this
prospectus, including the risk factors listed below. Any of these risks could
materially and adversely affect our business, financial condition and results of
operations, which in turn could materially and adversely affect the price of our
common stock.
OUR FUTURE SUCCESS DEPENDS LARGELY ON THE GROWTH OF OUR EXPANSION PLATFORMS.
We are dependent on the success of our plan, begun in 1995, to diversify
our business and expand into the following selected related product platforms:
- Network Access;
- Wireless Communications;
- Digital Infotainment; and
- Personal Imaging.
We believe that these platforms offer higher growth prospects than our
dial-up PC modem business. Our future financial performance and overall success,
particularly in the long term, will depend largely on two factors:
- first, the rate of sales growth and margin contribution of our expansion
platforms; and
- second, whether these platforms will increase their contribution to our
financial performance and be sufficient to offset the decline in sales of
our dial-up PC modem chipset products.
There are numerous risks inherent in our diversification and expansion
strategy, many of which are beyond our control. In certain product lines within
these expansion platforms, we currently have minimal market presence relative to
other more established competitors. Moreover, success with these expansion
platforms will depend, in part, on the ability of our customers to develop new
and enhanced products and to successfully introduce and market those products to
end users. We cannot assure you that our diversification and expansion program
will be successful. A failure of this program would have a material adverse
effect on our business, financial condition and results of operations.
WE MUST INCUR SUBSTANTIAL RESEARCH AND DEVELOPMENT EXPENSES.
The semiconductor industry requires substantial investment in research and
development. In order to remain competitive, we must continue to make
substantial investments in research and development to develop new and enhanced
products. We cannot assure you that we will have sufficient resources to develop
new and enhanced technologies and competitive products. Our failure to continue
to make sufficient investments in research and development programs could have a
material adverse effect on our business, financial condition and results of
operations.
OUR SUCCESS IS DEPENDENT UPON OUR ABILITY TO TIMELY DEVELOP NEW PRODUCTS AND
REDUCE COSTS.
Our operating results will depend largely on our ability to continue to
introduce new and enhanced semiconductor products on a timely basis. Successful
product development and introduction depends on numerous factors, including,
among others:
- our ability to anticipate customer and market requirements and changes in
technology and industry standards;
- our ability to accurately define new products;
- our ability to timely complete new products and introduce our products to
the market;
- our ability to differentiate our products from offerings of our
competitors; and
- market acceptance of our products.
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Furthermore, we are required to continually evaluate expenditures for
planned product development and to choose among alternative technologies based
upon our expectations of future market growth. We cannot assure you that we will
be able to develop and introduce new or enhanced products in a timely and cost-
effective manner, that our products will satisfy customer requirements or
achieve market acceptance, or that we will be able to anticipate new industry
standards and technological changes. We also cannot assure you that we will be
able to respond successfully to new product announcements and introductions by
competitors.
In addition, prices of established products may decline, sometimes
significantly, over time. We believe that in order to remain competitive we must
continue to reduce the cost of producing and delivering existing products at the
same time that we develop and introduce new or enhanced products. We cannot
assure you that we will be able to continue to reduce the cost of our products
to remain competitive.
WE MUST INCUR SIGNIFICANT CAPITAL EXPENDITURES FOR MANUFACTURING TECHNOLOGY AND
EQUIPMENT TO REMAIN COMPETITIVE.
The semiconductor industry is highly capital intensive. Semiconductor
manufacturing requires a constant upgrading of process technology to remain
competitive, as new and enhanced semiconductor processes are developed which
permit smaller, more efficient and more powerful semiconductor devices. We
maintain our own manufacturing, assembly and test facilities which have required
and will continue to require significant investments in manufacturing technology
and equipment.
We expect fiscal 2000 capital expenditures to be substantially higher than
the $214 million spent on capital expenditures during fiscal 1999. There can be
no assurance that we will have sufficient capital resources to make necessary
investments in manufacturing technology and equipment.
WE FACE A RISK THAT CAPITAL NEEDED FOR OUR BUSINESS WILL NOT BE AVAILABLE WHEN
WE NEED IT.
We believe that cash flows from operations, proceeds from our recent
offering of $650 million of our 4% convertible notes due 2007, existing cash
reserves and available borrowings under our three-year $350 million secured
revolving credit facility will be sufficient to satisfy our future research and
development, capital expenditure, working capital and other financing
requirements. However, we cannot assure you that this will be the case or that
we will have access to alternative sources of capital on favorable terms or at
all.
In addition, we have and will continue to review on an ongoing basis
strategic investments and acquisitions which will help us grow our business.
These investments and acquisitions may require additional capital resources. We
cannot assure you that the capital required to fund these investments and
acquisitions will be available in the future.
OUR OPERATING RESULTS MAY BE IMPACTED BY SUBSTANTIAL QUARTERLY AND ANNUAL
FLUCTUATIONS AND MARKET DOWNTURNS.
These fluctuations are due to a number of factors, many of which are beyond
our control. These factors include, among others:
- the effects of competitive pricing pressures;
- decreases in average selling prices of our products;
- production capacity levels and fluctuations in manufacturing yields;
- availability and cost of products from our suppliers;
- the gain or loss of significant customers;
- our ability to develop, introduce and market new products and
technologies on a timely basis;
- new product and technology introductions by competitors;
- changes in the mix of products produced and sold;
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- market acceptance of our products and our customers' products;
- intellectual property disputes;
- seasonal customer demand;
- the timing of significant orders; and
- the timing and extent of product development costs.
General economic or other conditions causing a downturn in the market for
semiconductor products, affecting the timing of customer orders or causing order
cancellations or rescheduling of orders, could also adversely affect our
operating results. Moreover, our customers may change delivery schedules or
cancel or reduce orders without significant penalty and generally are not
subject to minimum purchase requirements.
The foregoing factors are difficult to forecast, and these, as well as
other factors, could materially adversely affect our quarterly or annual
operating results. If our operating results fail to meet the expectations of
analysts or investors, it could materially and adversely affect the price of our
common stock.
WE FACE A RISK THAT WE WILL BE UNABLE TO INTEGRATE COMPANIES WE ACQUIRE.
We have recently completed several acquisitions, including the recent
acquisitions of Microcosm, the wireless broadband business of Oak Technology,
Inc., and Istari. In addition, we recently announced an agreement to acquire
Maker Communications, Inc. From time to time, we evaluate acquisitions and may
make additional acquisitions in the future. Integrating acquired organizations
and their products and services may be expensive, time-consuming and a strain on
our resources. Risks we could face with respect to acquisitions include:
- the difficulty of integrating acquired technology into our product
offerings;
- the failure successfully to integrate acquired technology, resulting in
the impairment of amounts currently capitalized as intangible assets;
- the impairment of relationships with employees and customers;
- the difficulty of coordinating and integrating geographically-dispersed
operations;
- the difficulty of coordinating and integrating overall business
strategies and sales and marketing and research and development efforts;
- the potential disruption of our ongoing business and distraction of
management;
- the maintenance of brand recognition of acquired businesses;
- the maintenance of corporate cultures, controls, procedures and policies;
and
- the potential unknown liabilities associated with acquired businesses.
Our inability to address any of these risks successfully could harm our
business.
We may have difficulty in integrating any future acquisitions with our
current organization, technology and product and services offerings, and any
acquired features, functions, products or services may not achieve market
acceptance.
WE MAY NOT BE ABLE TO SUSTAIN OUR RECENT RETURN TO PROFITABILITY.
In September 1998, we announced a comprehensive plan to restructure our
business to position us for future profitability. This plan resulted in fourth
quarter fiscal 1998 special charges of approximately $147 million and included
workforce reductions, facility closures and other actions. Our fiscal 1998
full-year net loss was approximately $262 million, including inventory
write-offs of approximately $66 million, a charge for intellectual property
matters of approximately $43 million and the fourth quarter special charges.
Although we
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returned to profitability in fiscal 1999, there can be no assurance that we will
be able to sustain such profitability.
OUR CREDIT FACILITY MAY RESTRICT OUR OPERATING AND FINANCIAL FLEXIBILITY.
We entered into a three-year $350 million secured revolving credit facility
in December 1998. This credit facility is guaranteed by each of our domestic
subsidiaries and includes covenants that may restrict our operating and
financial flexibility in the future. Substantially all of our assets and the
assets of our domestic subsidiaries and the stock of our subsidiaries, subject
to certain exceptions, have been pledged as collateral to secure repayment of
this credit facility. The credit facility includes restrictions on capital
expenditures, indebtedness, acquisitions, mergers, asset sales and liens on
assets that apply to us and our subsidiaries. We also must meet certain
financial tests and maintain certain financial ratios. Although we believe that
we will be able to comply with these requirements, compliance with these
requirements may restrict our operating and financial flexibility. We cannot
assure you that we will in fact be able to satisfy all of the requirements in
the credit facility. If we do not satisfy the financial ratios or comply with
the other covenants included in the credit facility, the lenders under the
credit facility could declare all amounts owed to them due and payable and
proceed against their collateral. Such a foreclosure on the collateral would
have a material adverse effect on our business, financial condition and results
of operations.
WE ENGAGE IN LITIGATION TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS AND TO
DEFEND OURSELVES AGAINST CLAIMS OF INFRINGEMENT BY OTHERS.
Our business faces risks of intellectual property, infringement and
litigation. The semiconductor industry is characterized by vigorous protection
and pursuit of intellectual property rights. In the past, we have found it
necessary to engage in litigation to enforce our intellectual property rights,
to protect our trade secrets or to determine the validity and scope of
proprietary rights of others, including our customers. We expect future
litigation on similar grounds.
We have received, and may continue to receive in the future, claims of
infringement of intellectual property rights of others. We are a party to
certain pending proceedings involving such claims. We cannot assure you that:
- we will prevail in pending actions;
- other actions alleging infringement by us of third-party patents or
invalidity of our patents will not be asserted or prosecuted against us;
or
- any assertions of infringement or actions seeking to establish the
invalidity of our patents will not materially and adversely affect our
business, financial condition and results of operations.
Even if we are successful in such matters, the attempted enforcement of
intellectual property rights by or against us could result in significant costs
and diversion of our resources. It could also have a material adverse effect on
our business, financial condition and results of operations. If claims or
actions are asserted or commenced against us, in certain situations we may seek
to obtain licenses under a third party's intellectual property rights to avert
or resolve a controversy. We cannot assure you that under such circumstances a
license would be available on commercially reasonable terms, if at all.
WE MAY NOT BE SUCCESSFUL IN PROTECTING OUR INTELLECTUAL PROPERTY RIGHTS.
We rely primarily on patent, copyright, trademark and trade secret laws, as
well as nondisclosure and confidentiality agreements and other methods, to
protect our proprietary technologies and processes. In addition, we often
incorporate the intellectual property of our customers into our designs, and
have certain obligations with respect to the non-use and non-disclosure of their
intellectual property. We cannot assure you that:
- the steps we take to prevent misappropriation or infringement of our
intellectual property or the intellectual property of our customers will
be successful;
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- any existing or future patents will not be challenged, invalidated or
circumvented; or
- any of the measures described above would provide meaningful protection.
Despite these precautions, it may be possible for a third party to copy or
otherwise obtain and use our technology without authorization, develop similar
technology independently or design around our patents. If any of our patents
fails to protect our technology it would make it easier for our competitors to
offer similar products. In addition, effective copyright, trademark and trade
secret protection may be unavailable or limited in certain countries.
OUR INTELLECTUAL PROPERTY INDEMNIFICATION PRACTICE MAY ADVERSELY IMPACT OUR
BUSINESS.
We have historically indemnified our customers for certain costs and
damages of patent infringement in circumstances where our product is the factor
creating the customer's infringement exposure. This practice generally excludes
coverage in circumstances where infringement arises out of the combination of
our products with products of others. This indemnification practice could have a
material adverse effect on our business, financial condition and results of
operations, particularly in situations where our products are designed for use
in devices manufactured by our customers that comply with international
standards. These international standards are often covered by patent rights held
by our competitors or our customers. The combined costs of obtaining licenses
from all holders of patent rights essential to such standards could be high and
could have a material adverse effect on our business, financial condition and
results of operations.
WE OPERATE IN THE HIGHLY CYCLICAL SEMICONDUCTOR INDUSTRY.
The semiconductor industry is highly cyclical and is characterized by
constant and rapid technological change, rapid product obsolescence and price
erosion, evolving standards, short product life cycles and wide fluctuations in
product supply and demand.
The industry has experienced significant downturns, often in connection
with, or in anticipation of, maturing product cycles (of both semiconductor
companies' and their customers' products) and declines in general economic
conditions. These downturns have been characterized by diminished product
demand, production overcapacity, high inventory levels and accelerated erosion
of average selling prices.
We have, in the recent past, experienced these conditions in our dial-up PC
modem chipset business and may experience such downturns in this and other
product platforms in the future. For example, in fiscal 1998, average selling
prices for our Personal Computing products fell by approximately 50 percent, the
annual growth rate for such products fell to approximately 20 percent and in the
fourth quarter, we made a provision for excess and obsolete inventories of
approximately $66 million due to lower than anticipated demand, price declines
and obsolescence of certain products. Any future downturns of this nature could
have a material adverse effect on our business, financial condition and results
of operations. From time to time the semiconductor industry also has experienced
periods of increased demand and production capacity constraints. We may
experience substantial changes in future operating results due to general
semiconductor industry conditions, general economic conditions and other
factors.
WE ARE SUBJECT TO INTENSE COMPETITION AND COULD LOSE BUSINESS TO OUR
COMPETITORS.
The semiconductor industry in general and the markets in which we compete
in particular are intensely competitive. We compete worldwide with a number of
United States and international semiconductor manufacturers that are both larger
and smaller than us in terms of resources and market share. We currently face
significant competition in our markets and expect that intense price and product
competition will continue. This competition has resulted and is expected to
continue to result in declining average selling prices for our products. We also
anticipate that additional competitors will enter our markets as a result of
growth opportunities in communications electronics, the trend toward global
expansion by foreign and domestic competitors, technological and public policy
changes and relatively low barriers to entry in certain markets of the industry.
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We currently enjoy substantial market share in our V.90 and facsimile modem
chipset product lines. However, as we continue our diversification strategy and
develop our expansion platforms, we are and will be competing in certain new
markets in which we have little or no market share and existing competitors have
dominant market positions. Moreover, as with many companies in the semiconductor
industry, customers for certain of our products offer other products that
compete with similar products offered by us.
We believe that the principal competitive factors for integrated circuit
("IC") providers to our addressed markets are:
- product performance;
- level of integration;
- quality;
- compliance with industry standards;
- price;
- time-to-market;
- system cost;
- design and engineering capabilities;
- new product innovation; and
- customer support.
The specific bases on which we compete vary by product platform.
Many of our current and potential competitors have certain advantages,
including:
- longer operating histories and presence in key markets;
- greater name recognition;
- access to larger customer bases; and
- significantly greater financial, sales and marketing, manufacturing,
distribution, technical and other resources than we have.
As a result, such competitors may be able to adapt more quickly to new or
emerging technologies and changes in customer requirements or may be able to
devote greater resources to the development, promotion and sale of their
products than Conexant.
Current and potential competitors also have established or may establish
financial or strategic relationships among themselves or with our existing or
potential customers, resellers or other third parties. These relationships may
affect customers' purchasing decisions. Accordingly, it is possible that new
competitors or alliances among competitors could emerge and rapidly acquire
significant market share. We cannot assure you that we will be able to compete
successfully against current and potential competitors. We also cannot assure
you that competition will not have a material adverse effect on our business,
financial condition and results of operations.
Many of our competitors have combined with each other and consolidated
their businesses, including the consolidation of competitors with our customers.
This is attributable to a number of factors, including the high-growth nature of
the communications electronic industry and the time-to-market pressures on
suppliers to decrease the time required for product conception, research and
development, sampling and production launch before a product reaches the market.
This consolidation trend is expected to continue, since investments, alliances
and acquisitions may enable semiconductor suppliers, including Conexant and our
competitors, to augment technical capabilities or to achieve faster
time-to-market for their products than would be possible solely through internal
development.
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Consolidations by industry participants, including in some cases,
acquisitions of certain of our customers by our competitors, are creating
entities with increased market share, customer base, technology and marketing
expertise in markets in which we compete. These developments may significantly
and adversely affect our current markets, the markets we are seeking to serve
and our ability to compete successfully in those markets.
WE MAY NOT BE ABLE TO KEEP ABREAST OF THE RAPID TECHNOLOGICAL CHANGES IN OUR
MARKETS.
The demand for our products can change quickly and in ways we may not
anticipate because our markets generally exhibit the following characteristics:
- rapid technological developments;
- evolving industry standards;
- changes in customer requirements;
- frequent new product introductions and enhancements; and
- short product life cycles with declining prices over the life cycle of
the product.
Our products could become obsolete sooner than anticipated because of a
faster than anticipated change in one or more of the technologies related to our
products or in market demand for products based on a particular technology,
particularly due to the introduction of new technology that represents a
substantial advance over current technology. Such an event could have a material
adverse effect on our business, financial condition and results of operations.
For example, increased market demand for sub-$1,000 PCs is causing PC OEMs to
require less expensive modem devices, such as software modems, which require
fewer semiconductor components than our traditional modem chipsets. As a result,
these devices may render obsolete the traditional hardware upgrade path for our
modem products. Currently accepted industry standards are also subject to
change, which may contribute to the obsolescence of our products.
OUR MANUFACTURING PROCESS IS EXTREMELY COMPLEX AND SPECIALIZED.
Our manufacturing operations are complex and subject to disruption due to
causes beyond our control. The fabrication of integrated circuits is an
extremely complex and precise process consisting of hundreds of separate steps.
It requires production in a highly controlled, clean environment. Minute
impurities, errors in any step of the fabrication process, defects in the masks
used to print circuits on a wafer or a number of other factors can cause a
substantial percentage of wafers to be rejected or numerous die on each wafer
not to function.
We are exploring wafer manufacturing alternatives, including increased use
of outside foundries, entering into business relationships with respect to wafer
manufacturing or other actions related to our wafer manufacturing facilities. We
cannot assure you that we will succeed in implementing any such alternatives.
Our operating results are highly dependent upon our ability to produce
large volumes of integrated circuits at acceptable manufacturing yields. Our
operations may be affected by lengthy or recurring disruptions of operations at
any of our production facilities or those of our subcontractors. These
disruptions may include labor strikes, work stoppages, fire, earthquake,
flooding or other natural disasters. These disruptions could cause significant
delays in shipments until we could shift the products from an affected facility
or subcontractor to another facility or subcontractor.
In the event of these types of delays, we cannot assure you that the
required alternate capacity, particularly wafer production capacity, would be
available on a timely basis or at all. Even if alternate wafer production
capacity is available, we may not be able to obtain it on favorable terms, which
would result in a loss of customers. Any inability to obtain sufficient
manufacturing capacities to meet demand, either at our own facilities or through
foundry or similar arrangements with others, could have a material adverse
effect on our business, financial condition and results of operations. Certain
of our manufacturing facilities are located
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near major earthquake fault lines, including our California and Mexico
facilities. We maintain only minimal earthquake insurance coverage on these
facilities.
Due to the highly specialized nature of the gallium arsenide semiconductor
manufacturing process, in the event of a disruption at our Newbury Park,
California wafer fabrication facility, alternate gallium arsenide production
capacity would not be readily available from third party sources. Any disruption
of operations at our Newbury Park wafer fabrication facility or the interruption
in the supply of epitaxial wafers used in our gallium arsenide process could
have a material adverse effect on our business, financial condition and results
of operations, particularly with respect to our Wireless Communications
products.
WE MAY NOT BE ABLE TO ACHIEVE MANUFACTURING YIELDS TO MAINTAIN OUR
PROFITABILITY.
Minor deviations in the manufacturing process can cause substantial
manufacturing yield loss, and in some cases, cause production to be suspended.
Manufacturing yields for new products initially tend to be lower as we complete
product development and commence volume manufacturing, and will typically
increase as we ramp to full production. Our forward product pricing includes
this assumption of improving manufacturing yields and, as a result, material
variances between projected and actual manufacturing yields have a direct effect
on our gross margin and profitability. The difficulty of forecasting
manufacturing yields accurately and maintaining cost competitiveness through
improving manufacturing yields will continue to be magnified by the ever
increasing process complexity of manufacturing integrated circuit products. Our
manufacturing operations also face pressures arising from the compression of
product life cycles which requires us to bring new products on line faster and
for shorter periods while maintaining acceptable manufacturing yields and
quality without, in many cases, reaching the longer-term, high volume
manufacturing conducive to higher manufacturing yields and declining costs.
WE ARE DEPENDENT UPON THIRD PARTIES FOR THE SUPPLY OF RAW MATERIALS AND
COMPONENTS.
We believe we have adequate sources for the supply of raw materials and
components for our manufacturing needs with suppliers located around the world.
Raw wafers and other raw materials used in the production of our CMOS products
are available from several suppliers. We are currently dependent on a single
source supplier for epitaxial wafers used in the gallium arsenide semiconductor
manufacturing processes at our Newbury Park, California facility. However, we
are in the process of arranging alternative suppliers. The number of qualified
alternative suppliers for such wafers is limited and the process of qualifying a
new epitaxial wafer supplier could require a substantial leadtime. Although we
historically have not experienced any significant difficulties in obtaining an
adequate supply of raw materials and components necessary for our manufacturing
operations, the loss of a significant supplier or the inability of a supplier to
meet performance and quality specifications or delivery schedules could have a
material adverse effect on our business, financial condition and results of
operations.
UNCERTAINTIES INVOLVING THE ORDERING AND SHIPMENT OF OUR PRODUCTS COULD
ADVERSELY AFFECT OUR BUSINESS.
Our sales are typically made pursuant to individual purchase orders and we
generally do not have long-term supply arrangements with our customers. Our
customers may cancel orders until 30 days prior to the shipping date. In
addition, we sell a portion of our products through distributors who have
certain rights to return unsold products to us. Moreover, semiconductor
companies, including Conexant, routinely manufacture or purchase inventory based
on estimates of customer demand for their products, which is difficult to
predict. The cancellation or deferral of product orders, the return of
previously sold products or overproduction due to the failure of anticipated
orders to materialize could result in our holding excess or obsolete inventory
which could have a material adverse effect on our business, financial condition
and results of operations. For example, in the fourth quarter of fiscal 1998, we
made a provision for excess and obsolete inventories of $66 million due to lower
than anticipated demand, price declines and the obsolescence of certain
products.
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WE ARE SUBJECT TO THE RISKS OF DOING BUSINESS INTERNATIONALLY.
For the fiscal year ended September 30, 1999, approximately 61 percent of
our total sales were to customers located outside the United States, primarily
in the Asia-Pacific and European countries. In addition, we have facilities and
suppliers located outside the United States, including our assembly and test
facility in Mexicali, Mexico and third-party foundries located in the
Asia-Pacific region. Our international sales and operations are subject to a
number of risks inherent in selling and operating abroad. These include, but are
not limited to, risks regarding:
- currency exchange rate fluctuations;
- local economic and political conditions;
- disruptions of capital and trading markets;
- restrictive governmental actions (such as restrictions on transfer of
funds and trade protection measures, including export duties and quotas
and customs duties and tariffs);
- changes in legal or regulatory requirements;
- import or export licensing requirements;
- limitations on the repatriation of funds;
- difficulty in obtaining distribution and support;
- nationalization;
- the laws and policies of the United States affecting trade, foreign
investment and loans; and
- tax laws.
Because most of our international sales, other than sales to Japan (which
are denominated principally in Japanese yen), are currently denominated in U.S.
dollars, our products could become less competitive in international markets if
the value of the U.S. dollar increases relative to foreign currencies.
Moreover, we may be competitively disadvantaged relative to our competitors
located outside the United States who may benefit from a devaluation of their
local currency. We cannot assure you that the factors described above will not
have a material adverse effect on our ability to increase or maintain our
foreign sales or on our business, financial condition and results of operations.
Our operating performance has been impacted by the current economic
situation in the Asia-Pacific region. This economic situation has increased the
uncertainty with respect to the long-term viability of certain of our customers
and suppliers in the region. Sales to customers in Japan and other countries in
the Asia-Pacific region, principally Taiwan, South Korea and Hong Kong,
represented approximately 52 percent of total revenues in fiscal 1999.
We enter into foreign currency forward exchange contracts, principally for
the Japanese yen, to minimize risk of loss from currency exchange rate
fluctuations for foreign currency commitments entered into in the ordinary
course of business. We have not experienced nor do we anticipate any material
adverse effect on our results of operations or financial condition related to
these foreign currency forward exchange contracts. We have not entered into
foreign currency forward exchange contracts for other purposes and our financial
condition and results of operations could be affected (negatively or positively)
by currency fluctuations.
OUR SUCCESS DEPENDS ON OUR ABILITY TO EFFECT SUITABLE INVESTMENTS, ALLIANCES OR
ACQUISITIONS.
Although we invest significant resources in research and development
activities, the complexity and rapidity of technological changes make it
impractical for us to pursue development of all technological solutions on our
own. As part of our goal to provide advanced semiconductor product systems, we
have and will continue to review on an ongoing basis investment, alliance and
acquisition prospects that would complement our existing product offerings,
augment our market coverage or enhance our technological
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<PAGE> 14
capabilities. However, we cannot assure you that we will be able to identify and
consummate suitable investment, alliance or acquisition transactions in the
future.
Moreover, if we consummate such transactions, they could result in:
- the diversion of management resources,
- dilutive issuances of equity securities,
- large one-time write-offs,
- the incurrence of debt and contingent liabilities,
- amortization of expenses related to goodwill and other intangible assets,
and
- other acquisition related costs.
Any of these events could materially adversely affect our business,
financial condition and results of operations and the price of our common stock.
The ultimate success of any such investments, alliances or acquisitions in
achieving the purposes for which they are undertaken will depend on our ability
to integrate successfully any acquired business and to retain key personnel, as
well as a variety of other factors.
OUR SUCCESS COULD BE NEGATIVELY AFFECTED IF KEY PERSONNEL LEAVE.
Our future success depends largely upon the continued service of our
executive officers and other key management and technical personnel. Our success
also depends on our ability to continue to attract, retain and motivate
qualified personnel. We are dependent on key technical personnel. They represent
a significant asset, as the source of our technological and product innovations.
The competition for such personnel is intense in the semiconductor industry. We
cannot assure you that we will be able to continue to attract and retain
qualified management and other personnel necessary for the design, development,
manufacture and sale of our products.
We may have difficulty attracting and retaining key personnel during
periods of poor operating performance. The loss of the services of one or more
of our key employees or our inability to attract, retain and motivate qualified
personnel could have a material adverse effect on our business, financial
condition and results of operations. In particular, the loss of the services of
Dwight W. Decker, our Chairman and Chief Executive Officer, or certain key
design and technical personnel could materially and adversely affect us.
OUR MANAGEMENT TEAM MAY BE SUBJECT TO A VARIETY OF DEMANDS FOR ITS ATTENTION.
Our management currently faces a variety of challenges. These include
implementing our ongoing diversification and expansion strategy and expanding
the infrastructure and systems necessary for us to operate as an independent
public company. While we believe that we have sufficient management resources to
execute each of these initiatives, we cannot assure you that we will have these
resources or that our initiatives will be successfully implemented. Failure to
implement these initiatives successfully could have a material adverse effect on
our business, financial condition and results of operations.
WE MAY BE LIABLE FOR PENALTIES UNDER ENVIRONMENTAL LAWS, RULES AND REGULATIONS,
WHICH COULD NEGATIVELY AFFECT OUR SUCCESS.
We use a variety of chemicals in our manufacturing operations and are
subject to a wide range of environmental protection regulations in the United
States and Mexico. While we have not experienced any material adverse effect on
our operations as a result of such regulations, we cannot assure you that
current or future regulations would not have a material adverse effect on our
business, financial condition and results of operations.
In the United States, environmental regulations often require parties to
fund remedial action regardless of fault. Consequently, it is often difficult to
estimate the future impact of environmental matters, including
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<PAGE> 15
potential liabilities. We cannot assure you that the amount of expense and
capital expenditures that might be required to complete remedial actions and to
continue to comply with applicable environmental laws will not have a material
adverse effect on our business, financial condition and results of operations.
We have been designated as a potentially responsible party at one Superfund
site located at a former silicon wafer manufacturing facility and steel
fabrication plant in Parker Ford, Pennsylvania formerly occupied by
Semiconductor Systems. The site was also formerly occupied by Recticon
Corporation and Allied Steel Products Corporation, each of whom has been named
as a potentially responsible party and each of whom is insolvent. We have
accrued approximately $4 million at September 30, 1999 for the cost of
groundwater remediation, including installation of a public water supply line
and groundwater pump and treatment system, as well as routine groundwater
sampling. In addition, we are engaged in two other remediations of groundwater
contamination at our Newport Beach and Newbury Park, California facilities for
which we have accrued approximately $4 million for the costs of remediation at
September 30, 1999. Pursuant to our agreement with Rockwell, we have assumed
liabilities in respect of environmental matters related to current and former
operations of Conexant.
WE HAVE A LIMITED HISTORY AS AN INDEPENDENT COMPANY.
We have a limited operating history as an independent company. Accordingly,
the financial information incorporated into this prospectus for periods prior to
January 1, 1999 may not necessarily reflect the results of the operations,
financial position and cash flows we would have had if we had operated
independently during the periods presented. We cannot assure you that we will be
profitable on an ongoing basis as a stand-alone company. Prior to the spin-off,
we relied on Rockwell for cash investments and various financial and
administrative services.
THE VALUE OF OUR COMMON STOCK MAY BE ADVERSELY AFFECTED BY MARKET VOLATILITY.
The trading price of our common stock fluctuates significantly. Since our
common stock began trading publicly, the reported closing price of our common
stock on the Nasdaq National Market has been as high as $124.4219 and as low as
$7.1875 per share. This price may be influenced by many factors, including:
- our performance and prospects,
- the depth and liquidity of the market for our common stock,
- investor perception of Conexant and the industry in which it operates,
- changes in earnings estimates or buy/sell recommendations by analysts,
- general financial and other market conditions, and
- domestic and international economic conditions.
In addition, public stock markets have experienced extreme price and
trading volume volatility, particularly in high technology sectors of the
market. This volatility has significantly affected the market prices of
securities of many technology companies for reasons frequently unrelated to or
disproportionately impacted by the operating performance of these companies.
These broad market fluctuations may adversely affect the market price of our
common stock.
CERTAIN PROVISIONS IN OUR ORGANIZATIONAL DOCUMENTS AND RIGHTS AGREEMENT AND
DELAWARE LAW MAY MAKE IT DIFFICULT FOR SOMEONE TO ACQUIRE CONTROL OF CONEXANT.
We have established certain anti-takeover measures that may affect our
common stock and outstanding convertible notes. Our restated certificate of
incorporation, our by-laws, our rights agreement with ChaseMellon Shareholder
Services, L.L.C., as rights agent, dated as of November 30, 1998, as amended,
and the Delaware General Corporation Law contain several provisions that would
make more difficult an acquisition of
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<PAGE> 16
control of Conexant in a transaction not approved by our board of directors. Our
restated certificate of incorporation and by-laws include provisions such as:
- the ability of our board of directors to issue shares of our preferred
stock in one or more series without further authorization of our
shareowners;
- a fair price provision;
- a prohibition on shareowner action by written consent;
- a requirement that shareowners provide advance notice of any shareowner
nominations of directors or any proposal of new business to be considered
at any meeting of shareowners;
- a requirement that a supermajority vote be obtained to remove a director
for cause or to amend or repeal certain provisions of our restated
certificate of incorporation or by-laws;
- elimination of the right of shareowners to call a special meeting of
shareowners; and
- the division of our board of directors into three classes to be elected
on a staggered basis, one class each year.
We also have a rights agreement which gives our shareowners certain rights
that would substantially increase the cost of acquiring us in a transaction not
approved by our board of directors.
In addition to the rights agreement and the provisions in our restated
certificate of incorporation and by-laws, Section 203 of the Delaware General
Corporation Law provides that, subject to certain exceptions, a corporation
shall not engage in any business combination with any interested shareowner
during the three-year period following the time that such shareowner becomes an
interested shareowner. The restrictions of Section 203 of the Delaware General
Corporation Law, in certain circumstances, make it more difficult for a person
who would be an interested shareowner to effect various business combinations
with a corporation during this three-year period. The provisions of Section 203
of the Delaware General Corporation Law provide that the shareowner approval
requirement may be avoided if a majority of the directors then in office
approved either the business combination or the transaction that resulted in the
shareowner becoming an interested shareowner.
WE MAY BE RESPONSIBLE FOR CERTAIN FEDERAL INCOME TAX LIABILITIES THAT RELATE TO
OUR SPIN-OFF FROM ROCKWELL.
In connection with our spin-off from Rockwell, the Internal Revenue Service
issued a tax ruling to Rockwell stating that the spin-off would qualify as a
tax-free reorganization within the meaning of Section 368(a)(1)(D) of the
Internal Revenue Code of 1986, as amended. While the tax ruling generally is
binding on the Internal Revenue Service, the continuing validity of the tax
ruling is subject to certain factual representations and assumptions. We are not
aware of any facts or circumstances that would cause such representations and
assumptions to be untrue.
The Tax Allocation Agreement dated as of December 31, 1998 between Conexant
and Rockwell provides that we will be responsible for any taxes imposed on
Rockwell, Conexant or Rockwell shareowners as a result of either:
- the failure of the spin-off from Rockwell to qualify as a tax-free
reorganization within the meaning of Section 368(a)(1)(D) of the Internal
Revenue Code or
- the subsequent disqualification of the spin-off from Rockwell as a
tax-free transaction to Rockwell under Section 361(c)(2) of the Internal
Revenue Code,
if the failure or disqualification is attributable to certain post-spin-off
actions by or in respect of Conexant (including our subsidiaries) or our
shareowners, such as our acquisition by a third party at a time and in a manner
that would cause such failure or disqualification.
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The Tax Allocation Agreement also provides, among other things, that
neither Rockwell nor Conexant is to take any action inconsistent with, nor fail
to take any action required by, the request for the tax ruling or the tax ruling
unless:
- required to do so by law, or
- the other party has given its prior written consent, or
- in certain circumstances, a supplemental ruling permitting such action is
obtained.
Rockwell and Conexant have indemnified each other for any tax liability
resulting from each entity's failure to comply with these provisions.
In addition, we effected certain tax-free intragroup spin-offs as a result
of Rockwell's spin-off of Meritor Automotive, Inc. on September 30, 1997. The
Tax Allocation Agreement provides that we will be responsible for any taxes
imposed on Rockwell, Conexant or Rockwell shareowners in respect of those
intragroup spin-offs if such taxes are attributable to certain actions taken
after the spin-off from Rockwell by or in respect of Conexant (including our
subsidiaries) or our shareowners, such as our acquisition by a third party at a
time and in a manner that would cause the taxes to be incurred.
If we were required to pay any of the taxes described above, such payment
would have a material adverse effect on our financial position, results of
operations and cash flow.
USE OF PROCEEDS
The selling securityholders will receive all of the proceeds from the sales
of common stock by them pursuant to this prospectus. We will not receive any
proceeds from these sales. Any proceeds received by us from the exercise of the
stock options granted at the closing of the Microcosm acquisition transaction,
representing the exercise price for the stock options, will be used for general
corporate purposes. The actual amount of proceeds we receive on exercise of the
stock options will depend on how many options are ultimately exercised. However,
if all the stock options were exercised, the aggregate proceeds would not exceed
approximately $1,172,000.
PRICE RANGE OF COMMON STOCK
Our common stock began trading on the Nasdaq National Market under the
symbol "CNXT" on January 4, 1999. The following table lists the high and low per
share sale prices for our common stock as reported by the Nasdaq National Market
for the periods indicated. These per share sale prices reflect the 2-for-1 stock
split effected in the form of a stock dividend on October 29, 1999.
<TABLE>
<CAPTION>
HIGH LOW
----- ---
<S> <C> <C>
Fiscal year ending September 30, 1999:
Second quarter............................................ $ 13 27/32 $ 6 27/32
Third quarter............................................. $ 31 15/16 $13 3/16
Fourth quarter............................................ $ 41 17/32 $27 5/8
Fiscal year ending September 30, 2000:
First quarter............................................. $ 76 3/16 $30 7/8
Second quarter (through February 24, 2000)................ $ 132 1/2 $53
</TABLE>
On February 24, 2000 the last bid price of the common stock as reported on
the Nasdaq National Market was $123.0625 per share. As of January 28, 2000 there
were approximately 52,300 holders of record of our common stock.
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DIVIDEND POLICY
We have never paid cash dividends on our common stock and do not anticipate
paying any cash dividends in the foreseeable future. In addition, our existing
bank credit facility limits our ability to declare and pay dividends.
DETERMINATION OF OPTION EXERCISE PRICES
Pursuant to the Stock Purchase Agreement entered into in connection with
the Microcosm acquisition transaction, each holder of Microcosm options
received, in exchange for the surrender and cancellation of all of his or her
Microcosm options, a stock option to purchase that number of shares of Conexant
common stock equal to the number of shares he or she would have received if he
or she had exercised the Microcosm option and had been a Microcosm shareholder
immediately prior to the closing of the Microcosm acquisition transaction. The
exercise price per share of the new Conexant option was determined in accordance
with the Stock Purchase Agreement by aggregating the exercise prices of all
Microcosm options held by the Microcosm option holder immediately prior to the
closing and dividing it by the total number of shares of Conexant common stock
for which the new Conexant option is exercisable. This determination of the
exercise price was established through negotiations among the parties to the
Stock Purchase Agreement.
MICROCOSM STOCK OPTION PLAN
The following statements include summaries of certain provisions of our
Microcosm Communications Limited Stock Option Plan. These statements do not
purport to be complete and are qualified by reference to the provisions of the
Plan, which are incorporated by reference into this prospectus. The Plan was
adopted by Conexant's board of directors and became effective as of January 6,
2000.
PURPOSE; ELIGIBILITY
The purpose of the Plan is to provide a means for Conexant to perform its
obligations under the Stock Purchase Agreement with respect to the holders of
Microcosm options. The Microcosm options originally granted under Microcosm's
Executive Share Option Scheme were surrendered and canceled at the closing of
the Microcosm acquisition transaction. In exchange, we granted stock options
under the Plan. In addition, as additional consideration for the surrender and
cancellation of their Microcosm options, the former holders of Microcosm options
will be entitled to receive additional stock options under the Plan, in
accordance with the Stock Purchase Agreement, upon the release of the
indemnification holdback or as additional consideration payable if certain
performance or technology goals are achieved.
Only those persons who, on the closing date of the Microcosm acquisition
transaction, held Microcosm options are eligible to participate in the Plan and
be granted stock options under the Plan. These stock options may be subsequently
transferred, subject to certain restrictions on transfer.
PURCHASE PRICE
The purchase price of the shares of our common stock subject to an option
may be paid:
- in cash;
- in shares of our common stock (valued at the closing price of our common
stock as reported in the Nasdaq National Market reporting system on the
date of exercise, or if no sale of shares of our common stock is reported
for such date, the next preceding day for which there is a reported sale
(the "Fair Market Value"));
- in a combination of shares of our common stock and cash; or
- through such other means as Conexant's board of directors determines are
consistent with the Plan's purpose and applicable law.
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No fractional shares of common stock will be issued or accepted.
In addition, any participant may simultaneously exercise options and sell
the shares of common stock acquired, pursuant to a brokerage or other
arrangement, and use the proceeds from the sale as payment of the purchase price
of the common stock and any applicable withholding taxes.
SHARES AVAILABLE
Subject to appropriate adjustment in the event of any change in shares of
our common stock, including but not limited to stock dividends, stock splits and
recapitalizations, awards may be granted under the Plan for that number of
shares of our common stock as are necessary to provide to the holders of
Microcosm options, in the form of stock options, their portion of the
consideration paid or to be paid by us pursuant to the Stock Purchase Agreement.
The common stock that may be delivered pursuant to an award under the Plan
may be treasury shares, authorized but unissued shares of common stock or shares
of common stock acquired in the open market to satisfy the requirements of the
Plan.
AWARD AGREEMENTS
Each award under the Plan will be evidenced by an award agreement between
the holder and Conexant. Each award agreement will state the number of shares of
common stock subject to the award and will include the terms described below. In
the event of any conflict between an award agreement and the Plan, the terms of
the Plan will govern.
Exercising Options
The stock options issued under the Plan are immediately exercisable and
entitle the option holder to purchase the number of shares of our common stock
set forth in the award agreement. The exercise prices of the stock options
issued at the closing of the Microcosm acquisition transaction were determined
in accordance with the terms of the Stock Purchase Agreement described above
under "Determination of Option Exercise Prices" and the exercise prices of any
stock options subsequently issued under the Plan will be $1 per share. Each
stock option granted under the Plan will be exercisable for a period of two
years from the date of grant.
Holders of the stock options may simultaneously exercise their stock
options, and sell that number of shares of common stock issued upon exercise of
the stock options, at a price per share equal to the Fair Market Value of our
common stock on the day the stock option is exercised, as is necessary so that
the proceeds of such purchases would be sufficient to pay the exercise price of
the stock options and any applicable withholding taxes in connection with such
exercise (a "cashless exercise").
Rights as a Shareowner
A participant will have no rights as a shareowner with respect to any
common stock covered by an award until the date the participant becomes the
holder of record of the shares. Except as described below under "Adjustment
Provisions", no adjustment will be made for dividends or other rights, unless
the award agreement specifically requires the adjustment.
Withholding
Whenever taxes are required by law to be withheld in connection with the
granting, vesting or exercise of an award, we will have the right to deduct from
any payment to be made by us or ChaseMellon Shareholder Services, L.L.C., our
stock option administrator, under the Plan (including by retaining the notional
proceeds received by us on a cashless exercise of stock options by a sale to us
or the cash proceeds received by ChaseMellon from a cashless exercise of stock
options and remitting the cash or cash equivalent to Microcosm in order for
Microcosm to withhold the applicable personal taxes in connection with such
cashless exercise) or to require the participant to remit to us an amount
sufficient to satisfy the tax withholding obligation. A
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<PAGE> 20
participant may satisfy the withholding obligation by paying the amount of any
taxes in cash, or shares of common stock may be delivered to us or sold or
deducted from the payment to satisfy the obligation in full or in part. If a
participant satisfies the withholding obligation by paying in shares of our
common stock, the tax amounts will be limited to the statutory minimum as
required by law.
ADMINISTRATION; INTERPRETATION
The Plan is administered by Conexant's board of directors. Conexant's board
of directors also has the power to interpret the Plan, to adopt, amend and
rescind procedural rules and regulations relating to the exercise of stock
options under the Plan, and to take all other actions that Conexant's board of
directors may deem necessary or appropriate for the implementation and
administration of the Plan.
ADJUSTMENT PROVISIONS
In the event of any change in or affecting shares of our common stock on
account of any merger, consolidation, reorganization, recapitalization,
reclassification, stock dividend, stock split or combination, or other
distribution to holders of our common stock (other than a cash dividend), the
Plan will be amended and the board of directors may adopt adjustments and take
certain actions thereunder as it deems appropriate under the circumstances,
provided that such adjustments and actions do not materially adversely affect
the participants or any holder of stock options granted under the Plan. In the
event of a recapitalization, reorganization or reclassification of Conexant, the
stock options shall be exercisable for the same consideration as that for which
our common stock is exchanged. These amendments, adjustments and actions may
include, without limitation, changes in the number of shares of our common stock
which may be issued or transferred pursuant to the Plan, the number of shares of
our common stock subject to outstanding stock options and the related exercise
price per share or a requirement that holders of stock options exercise such
options and become holders of our common stock upon the occurrence of certain
events.
AMENDMENT AND TERMINATION; TERM; GOVERNING LAW
Except as described above under "Adjustment Provisions", (a) the Plan and
the stock options granted under the Plan may not be amended, suspended or
terminated without the consent in writing of the holders of then outstanding
stock options representing at least 75 percent of the common stock underlying
such stock options and (b) without the approval of the shareowners of Conexant,
(i) the number of shares subject to the Plan may not be increased and (ii) the
exercise price of any stock option may not be reduced. In no event will such an
amendment, suspension or termination impair the rights of any holder of stock
options without that holder's consent.
The Plan will remain in effect until all awards granted under the Plan have
been exercised or terminated under the terms of the Plan and applicable award
agreements.
The award agreements and all actions taken thereunder will be governed by
the laws of the State of Delaware.
DESCRIPTION OF CAPITAL STOCK
The following description of our capital stock, as amended or superseded by
any applicable prospectus supplement, includes a summary of certain provisions
of our restated certificate of incorporation and our by-laws. This description
is subject to the detailed provisions of, and is qualified by reference to, our
certificate of incorporation and our by-laws, copies of which have been filed as
exhibits to the registration statement of which this prospectus is a part.
We are authorized to issue (1) 1,000,000,000 shares of common stock, of
which 202,571,118 shares of common stock were outstanding as of February 4,
2000, and (2) 25,000,000 shares of preferred stock, without par value, of which
our board of directors has designated 1,500,000 shares as Series A Junior
Participating Preferred Stock for issuance in connection with the exercise of
our preferred share purchase rights. For a more detailed discussion of our
preferred share purchase rights and how they relate to our common stock, see
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<PAGE> 21
"Conexant Rights Plan". The authorized shares of common stock and preferred
stock will be available for issuance without further action by our shareowners,
unless such action is required by applicable law or the rules of any stock
exchange or automated quotation system on which our securities may be listed or
traded. If the approval of our shareowners is not so required, our board of
directors may determine not to seek shareowner approval.
Certain of the provisions described under this section entitled
"Description of Capital Stock" could have the effect of discouraging
transactions that might lead to a change of control of Conexant.
COMMON STOCK
Our restated certificate of incorporation and by-laws:
- establish a classified board of directors,
- require shareowners to provide advance notice of any shareowner
nominations of directors or any proposal of new business to be considered
at any meeting of shareowners,
- require a supermajority vote to remove a director or to amend or repeal
certain provisions of our restated certificate of incorporation or
by-laws, and
- preclude shareowners from calling a special meeting of shareowners.
Holders of common stock are entitled to such dividends as may be declared
by our board of directors out of funds legally available therefor. Dividends may
not be paid on common stock unless all accrued dividends on preferred stock, if
any, have been paid or set aside. In the event of our liquidation, dissolution
or winding up, the holders of common stock will be entitled to share pro rata in
the assets remaining after payment to creditors and after payment of the
liquidation preference plus any unpaid dividends to holders of any outstanding
preferred stock. See "Dividend Policy".
Each holder of common stock will be entitled to one vote for each such
share outstanding in such holder's name. No holder of common stock will be
entitled to cumulate votes in voting for directors. Our certificate provides
that, unless otherwise determined by our board of directors, no holder of common
stock will have any right to purchase or subscribe for any stock of any class
which we may issue or sell.
ChaseMellon Shareholder Services, L.L.C. is the transfer agent and
registrar for our common stock.
PREFERRED STOCK
Our restated certificate of incorporation authorizes our board of directors
to establish one or more series of preferred stock of up to an aggregate of
25,000,000 shares and to determine, with respect to any series of our preferred
stock, the terms and rights of the series. Although our board of directors has
no intention at the present time of doing so, it could issue a series of
preferred stock that could, depending on the terms of such series, impede the
completion of a merger, tender offer or other takeover attempt.
CERTAIN PROVISIONS IN OUR RESTATED CERTIFICATE OF INCORPORATION AND BY-LAWS
Our certificate and by-laws contain various provisions intended to (1)
promote the stability of our shareowner base and (2) render more difficult
certain unsolicited or hostile attempts to take us over which could disrupt us,
divert the attention of our directors, officers and employees and adversely
affect the independence and integrity of our business.
Pursuant to our certificate, the number of directors is fixed by our board
of directors. Other than directors elected by the holders of any series of
preferred stock or any other series or class of stock except common stock, our
directors are divided into three classes, each class to consist as nearly as
possible of one-third of the directors. Directors elected by shareowners at an
annual meeting of shareowners will be elected by a plurality of all votes cast.
Currently, the terms of office of the three classes of directors expire,
respectively, at our annual meetings in 2001, 2002 and 2003. The term of the
successors of each such class of directors expires three years from the year of
election.
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Our restated certificate of incorporation contains a fair price provision
pursuant to which a Business Combination (as defined in our restated certificate
of incorporation) between us or one of our subsidiaries and an Interested
Shareowner (as defined in our restated certificate of incorporation) requires
approval by the affirmative vote of the holders of not less than 80 percent of
the voting power of all of our outstanding capital stock entitled to vote
generally in the election of directors, voting together as a single class,
unless the Business Combination is approved by at least two-thirds of the
Continuing Directors (as defined in our restated certificate of incorporation)
or certain fair price criteria and procedural requirements specified in the fair
price provision are met. If either the requisite approval of our board of
directors or the fair price criteria and procedural requirements were met, the
Business Combination would be subject to the voting requirements otherwise
applicable under the Delaware General Corporation Law, which for most types of
Business Combinations currently would be the affirmative vote of the holders of
a majority of all of our outstanding shares of stock entitled to vote thereon.
Any amendment or repeal of the fair price provision, or the adoption of
provisions inconsistent therewith, must be approved by the affirmative vote of
the holders of not less than 80 percent of the voting power of all of our
outstanding capital stock entitled to vote generally in the election of
directors, voting together as a single class, unless such amendment, repeal or
adoption were approved by at least two-thirds of the Continuing Directors, in
which case the provisions of the Delaware General Corporation Law would require
the affirmative vote of the holders of a majority of the outstanding shares of
our capital stock entitled to vote thereon.
Our restated certificate of incorporation and by-laws provide that a
special meeting of shareowners may be called only by a resolution adopted by a
majority of the entire board of directors. Shareowners are not permitted to
call, or to require that the board of directors call, a special meeting of
shareowners. Moreover, the business permitted to be conducted at any special
meeting of shareowners is limited to the business brought before the meeting
pursuant to the notice of the meeting given by us. In addition, our certificate
provides that any action taken by our shareowners must be effected at an annual
or special meeting of shareowners and may not be taken by written consent in
lieu of a meeting. Our by-laws establish an advance notice procedure for
shareowners to nominate candidates for election as directors or to bring other
business before meetings of our shareowners.
Our restated certificate of incorporation provides that the affirmative
vote of at least 80 percent of the voting power of all of our outstanding
capital stock entitled to vote generally in the election of directors, voting
together as a single class, would be required to:
- amend or repeal the provisions of our certificate with respect to (a) the
election of directors, (b) the right to call a special shareowners'
meeting or (c) the right to act by written consent,
- adopt any provision inconsistent with such provisions, or
- amend or repeal the provisions of our restated certificate of
incorporation with respect to amendments to our restated certificate of
incorporation or by-laws.
In addition, our restated certificate of incorporation provides that our board
of directors may make, alter, amend and repeal our by-laws and that the
amendment or repeal by shareowners of any of our by-laws would require the
affirmative vote of at least 80 percent of the voting power described above,
voting together as a single class.
CONEXANT RIGHTS PLAN
Each outstanding share of common stock also evidences one preferred share
purchase right. Each preferred share purchase right entitles the registered
holder to purchase from us one two-hundredth of a share of Series A Junior
Participating Preferred Stock, at $300, subject to adjustment. The description
and terms of the preferred share purchase rights are set forth in the rights
agreement dated as of November 30, 1998, as amended as of December 9, 1999.
Until the earlier to occur of (1) 10 days following a public announcement
that a person or group of affiliated or associated persons (an "Acquiring
Person") has acquired beneficial ownership of 20 percent or more of the
outstanding common stock or (2) 10 business days, or such later date as may be
determined by
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<PAGE> 23
our board of directors prior to such time as any person or group becomes an
Acquiring Person, following the commencement of, or announcement of an intention
to make, a tender offer or exchange offer the consummation of which would result
in the beneficial ownership by a person or group of 20 percent or more of the
outstanding common stock, preferred share purchase rights will be attached to
common stock and will be owned by the registered owners of common stock.
The rights agreement provides that, until the preferred share purchase
rights are no longer attached to the common stock, or until the earlier
redemption or expiration of the preferred share purchase rights:
- the preferred share purchase rights will be transferred with and only
with common stock,
- certificates representing common stock and statements in respect of
shares of common stock registered in book-entry or uncertificated form
will contain a notation incorporating the terms of the preferred share
purchase rights by reference, and
- the transfer of any shares of common stock will also constitute the
transfer of the associated preferred share purchase rights.
As soon as practicable following the date the preferred share purchase rights
are no longer attached to the common stock (the "Distribution Date"), separate
certificates evidencing preferred share purchase rights will be mailed to
holders of record of common stock as of the close of business on the date the
preferred share purchase rights are no longer attached to the common stock and
the separate certificates alone will evidence preferred share purchase rights.
In addition, the rights agreement provides that in connection with the
issuance or sale of our common stock following the Distribution Date and prior
to the earlier of (1) the date the preferred share purchase rights are redeemed
and (2) the date the preferred share purchase rights expire, (a) we will, with
respect to common stock issued or sold pursuant to the exercise of stock options
or under any employee plan or arrangement in existence prior to the Distribution
Date, or upon the exercise, conversion or exchange of securities, notes or
debentures (pursuant to the terms thereof) issued by us and in existence prior
to the Distribution Date, and (b) we may, in any other case, if deemed necessary
or appropriate by the board of directors, issue certificates representing the
appropriate number of preferred share purchase rights in connection with such
issuance or sale. We will not be obligated to issue any of these certificates
if, and to the extent that, we are advised by counsel that the issuance of those
certificates would create a significant risk of material adverse tax
consequences to us or the person to whom such certificate would be issued or
would create a significant risk that the stock options or employee plans or
arrangements would fail to qualify for otherwise available special tax
treatment. In addition, no certificate will be issued if, and to the extent
that, appropriate adjustments otherwise have been made in lieu of the issuance
thereof.
Preferred share purchase rights will not be exercisable until the
Distribution Date. Preferred share purchase rights will expire on December 31,
2008, unless this expiration date is extended or unless preferred share purchase
rights are earlier redeemed by us, in each case, as described below.
The purchase price payable, and the number of shares of Series A junior
preferred stock or other securities or property issuable, upon exercise of the
preferred share purchase rights will be subject to adjustment from time to time
to prevent dilution upon the occurrence of the following events:
- in the event of a stock dividend on, or a subdivision, combination or
reclassification of, Series A junior preferred stock,
- upon the grant to holders of shares of Series A junior preferred stock of
certain rights or warrants to subscribe for or purchase shares of Series
A junior preferred stock at a price, or securities convertible into
shares of Series A junior preferred stock with a conversion price, less
than the then current market price of the shares of Series A junior
preferred stock, or
- upon the distribution to holders of shares of Series A junior preferred
stock of evidences of indebtedness or assets (excluding regular periodic
cash dividends or dividends payable in shares of
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Series A junior preferred stock) or of subscription rights or warrants
(other than those referred to above).
The number of outstanding preferred share purchase rights and the number of
one one-hundredths of a share of Series A junior preferred stock issuable upon
exercise of each preferred share purchase right will also be subject to
adjustment in the event of a stock split of common stock or a stock dividend on
common stock payable in common stock or subdivisions, consolidations or
combinations of common stock occurring, in any such case, prior to the date the
preferred share purchase rights are no longer attached to the common stock.
We cannot redeem shares of Series A junior preferred stock purchasable upon
exercise of preferred share purchase rights. Each share of Series A junior
preferred stock will be entitled to a minimum preferential quarterly dividend
payment of $1 per share but will be entitled to an aggregate dividend of 100
times the dividend declared per share of common stock whenever such dividend is
declared. In the event of liquidation, the holders of Series A junior preferred
stock will be entitled to a minimum preferential liquidation payment of $100 per
share but will be entitled to an aggregate payment of 100 times the payment made
per share of common stock. Each share of Series A junior preferred stock will
have 100 votes, voting together with common stock. In the event of any merger,
consolidation or other transaction in which shares of common stock are
exchanged, each share of Series A junior preferred stock will be entitled to
receive 100 times the amount received per share of common stock. These rights
will be protected by customary antidilution provisions.
Because of the nature of the Series A junior preferred stock's dividend,
liquidation and voting rights, the value of the one two-hundredth interest in a
share of Series A junior preferred stock purchasable upon exercise of each
preferred share purchase right should approximate the value of one share of
common stock.
In the event that, at any time after a person has become an Acquiring
Person, we are acquired in a merger or other business combination transaction or
50 percent or more of our consolidated assets or earning power is sold, proper
provision will be made so that each holder of a preferred share purchase right
will thereafter have the right to receive, upon the exercise thereof at the then
current exercise price of a preferred share purchase right, that number of
shares of common stock of the acquiring company which at the time of such
transaction will have a market value of two times the exercise price of a
preferred share purchase right. In the event that any person becomes an
Acquiring Person, proper provision shall be made so that each holder of a
preferred share purchase right, other than preferred share purchase rights
beneficially owned by the Acquiring Person (which will thereafter be void), will
thereafter have the right to receive upon exercise, in lieu of shares of Series
A junior preferred stock, that number of shares of common stock having a market
value of two times the exercise price of a preferred share purchase right.
At any time after any person or group of affiliated or associated persons
becomes an Acquiring Person, and prior to the acquisition by such person or
group of 50 percent or more of the outstanding shares of common stock, our board
of directors may exchange preferred share purchase rights (other than preferred
share purchase rights owned by such person or group, which will have become void
after such person became an Acquiring Person) for common stock or Series A
junior preferred stock, in whole or in part, at an exchange ratio of one share
of common stock, or two hundredths of a share of Series A junior preferred stock
(or of a share of another series of preferred stock having equivalent rights,
preferences and privileges), per preferred share purchase right (subject to
adjustment).
With certain exceptions, no adjustment in the purchase price will be
required until cumulative adjustments require an adjustment of at least 1
percent. No fractional shares of Series A junior preferred stock will be issued,
other than fractions which are integral multiples of one two-hundredth of a
share of Series A junior preferred stock, which may, at our election, be
evidenced by depository receipts. Instead, an adjustment in cash will be made
based on the market price of Series A junior preferred stock on the last trading
day prior to the date of exercise.
At any time prior to the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 20 percent or more of the
outstanding shares of common stock, our board of directors may redeem preferred
share purchase rights in whole, but not in part, at a price of $.01 per
preferred share purchase
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<PAGE> 25
right. The redemption of preferred share purchase rights may be made effective
at such time, on such basis and with such conditions as our board of directors
may determine, in its sole discretion. Immediately upon any redemption of
preferred share purchase rights, the right to exercise preferred share purchase
rights will terminate and the only right of the holders of preferred share
purchase rights will be to receive the redemption price.
The terms of preferred share purchase rights may be amended by our board of
directors without the consent of the holders of preferred share purchase rights,
including an amendment to decrease the threshold at which a person becomes an
Acquiring Person from 20 percent to not less than 10 percent, except that from
and after such time as any person becomes an Acquiring Person no such amendment
may adversely affect the interests of the holders of preferred share purchase
rights.
Until a preferred share purchase right is exercised, the holder thereof, as
such, will have no rights as a shareowner of Conexant, including, without
limitation, the right to vote or to receive dividends.
The foregoing summary of the material terms of preferred share purchase
rights is qualified by reference to the rights agreement, a copy of which has
been filed as an exhibit to the registration statement of which this prospectus
is a part.
U.K. TAX CONSIDERATIONS
Conexant has been advised by Manches & Co., U.K. counsel for Conexant, of
the following details regarding the U.K. tax position of U.K. Holders arising
from the exercise of the stock options and the ownership and disposition of
common stock. This discussion is based on currently existing provisions of U.K.
law, and administrative and judicial interpretations thereof, all as in effect
or proposed on the date hereof and all of which are subject to change, possibly
with retroactive effect, or different interpretations. There can be no assurance
that the U.K. Inland Revenue will not take a view contrary to the
interpretations set forth herein, and no ruling from the Inland Revenue has been
or will be sought.
Moreover, this discussion is for general information only and does not
address all of the tax consequences that may be relevant to particular holders.
The actual tax consequences of the exercise of stock options and the ownership
and disposition of our common stock will vary depending upon the particular
circumstances of each holder. The discussion which follows also does not address
the tax consequences applicable to all categories of holders, some of which
(such as dealers in securities or commodities, investors that do not hold their
common stock as capital assets, tax-exempt organizations, banks, thrifts and
insurance companies) may be subject to special rules.
For purposes of this summary, a "U.K. Holder" means a beneficial owner of
our common stock or stock options who is resident in the U.K. for the purposes
of U.K. taxation law.
Holders of our common stock and stock options are advised to consult their
own tax advisers as to the U.K. or other tax consequences of the exercise of the
stock options and the ownership and disposition of our common stock, including
the effect of any state, local or foreign tax laws.
Stock Options
If a U.K. Holder who is employed by Conexant or any associated company
acquired options by reason of his or her employment or pursuant to the Microcosm
Stock Purchase Agreement then, on an exercise of the options for our common
stock, the U.K. Holder will be subject to income tax on the exercise of such
options. The tax will normally be charged on the difference between the value of
our common stock acquired and the price paid by the owner for the common stock.
The tax will in most instances be collected via the PAYE (pay as you earn)
mechanism from subsequent payments of salary to the U.K. Holder. A charge to
both employees' and employers' National Insurance Contributions (NIC) could also
arise on exercise of such options. Employers' NIC is a liability of the
employer, not the employee.
A subsequent disposal of our common stock may result in a liability to
United Kingdom taxation of chargeable gains, depending on individual
circumstances. If a U.K. Holder who is employed by Conexant or
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<PAGE> 26
any associated company acquired our common stock on exercise of options granted
by reason of his or her employment or pursuant to the Microcosm Stock Purchase
Agreement then, in certain unusual circumstances, the U.K. Holder will be
subject to income tax on some or all of the gain made on selling the common
stock.
Gains on Disposition of Our Common Stock
A disposal of our common stock by a U.K. Holder may result in a liability
to United Kingdom taxation of chargeable gains.
For any U.K. Holder who is subject to U.K. corporation tax, the chargeable
gain will be calculated after deducting an allowance for inflation based on the
U.K. Retail Price Index (the indexation allowance).
For U.K. Holders who are not U.K. corporation taxpayers, the indexation
allowance has been frozen at April 5, 1998. However, a new relief (taper relief)
has been introduced from that date under which the chargeable proportion of any
gain on our common stock will generally be reduced by reference to the time the
stock has been held. For most taxpayers with a qualifying period of ownership of
three years taper relief will reduce the chargeable gain on the stock by 5
percent, with further reductions of 5 percent for each complete year the stock
is held thereafter, subject to maximum taper relief of 40 percent where the
stock is held for 10 years or more. In certain circumstances taper relief can be
higher than these rates.
If a U.K. Holder who is employed by Conexant or any associated company
acquired our common stock by reason of his or her employment or pursuant to the
Microcosm Stock Purchase Agreement then, in certain unusual circumstances, the
U.K. Holder will be subject to income tax on some or all of the gain made on
selling the stock.
Dividends
Dividends received from our common stock will in general be subject to U.K.
tax in the hands of U.K. Holders. Most taxpayers will be entitled to offset
against the U.K. tax charge the amount of any U.K. withholding tax paid in
respect of the dividend. The amount of U.S. withholding tax may be reduced below
the normal 30 percent rate pursuant to the U.S./U.K. double tax treaty.
U.K. Inheritance Tax
Individuals who are domiciled or deemed domiciled in the U.K. are generally
subject to U.K. inheritance tax on their worldwide assets, wherever these are
situated, and this would include our common stock. Where both U.K. inheritance
tax and U.S. federal estate tax are chargeable in respect of the stock, a credit
will normally be available to prevent a double tax charge from arising.
U.S. FEDERAL INCOME TAX CONSIDERATIONS
Conexant has been advised by Chadbourne & Parke LLP, counsel for Conexant,
that under the present provisions of the Internal Revenue Code, the principal
U.S. federal income tax consequences arising from the exercise of the stock
options and the ownership and disposition of common stock are described below.
This discussion is based on currently existing provisions of the Internal
Revenue Code, existing, temporary and proposed Treasury regulations promulgated
thereunder, and administrative and judicial interpretations thereof, all as in
effect or proposed on the date hereof and all of which are subject to change,
possibly with retroactive effect, or different interpretations. There can be no
assurance that the Internal Revenue Service will not take a view contrary to the
interpretations set forth herein, and no ruling from the IRS has been or will be
sought.
Moreover, this discussion is for general information only and does not
address all of the tax consequences that may be relevant to particular holders.
The actual tax consequences of the exercise of stock options and the ownership
and disposition of our common stock will vary depending upon the particular
circumstances of each holder. The discussion which follows also does not address
the tax consequences applicable to all categories of holders, some of which
(such as dealers in securities or commodities, investors that do not hold their
common
24
<PAGE> 27
stock as capital assets, tax exempt organizations, banks, thrifts, insurance
companies and holders of common stock that own (directly, indirectly or by
attribution) 10 percent or more of the outstanding common stock) may be subject
to special rules.
For purposes of this summary, a "U.S. Holder" includes a beneficial owner
of our common stock or stock options that is: (1) a citizen or resident of the
United States; (2) a corporation, partnership or other entity created or
organized in or under the laws of the United States or any state thereof; (3) a
trust which is subject to primary supervision by a court within the United
States and with respect to which one or more United States fiduciaries have the
authority to control all substantial decisions; or (4) an estate the income of
which is subject to U.S. federal income tax regardless of its source. A
"Non-U.S. Holder" is any beneficial owner of our common stock or stock options
that is not a U.S. Holder.
Holders of our common stock and stock options are advised to consult their
own tax advisers as to the United States or other tax consequences of the
exercise of the stock options and the ownership and disposition of our common
stock, including the effect of any state, local or foreign tax laws.
U.S. HOLDERS
Stock Options
If an individual U.S. Holder exercises a stock option, the individual U.S.
Holder will, except as noted below, realize ordinary taxable compensation income
measured by the difference between the option price and the fair market value of
the shares on the date of exercise, and we will be entitled to a deduction in
the same amount. Any difference between such fair market value and the price at
which the individual U.S. Holder may subsequently sell such shares will be
treated as capital gain or loss, long-term or short-term depending on the length
of time the shares have been held.
If upon exercise of an option the option price is paid in shares of stock,
rather than cash, no gain or loss will be recognized upon the transfer of such
shares in payment of the option price to the extent that the number of shares
received is equal to the number of shares surrendered. In such case, the basis
and holding period of a corresponding number of the shares received will be the
same as the basis and holding period of the shares surrendered. To the extent
that the number of shares received upon the exercise exceeds the number of
shares surrendered, an individual U.S. Holder would realize ordinary income in
an amount equal to the fair market value of such excess number of shares, and
such individual U.S. Holder's basis for such shares would be equal to such
amount.
NON-U.S. HOLDERS
Stock Options
The exercise of a stock option will have no U.S. federal income tax
consequences to a Non-U.S. Holder of our common stock.
Dividends
In the event that dividends are paid on shares of our common stock,
dividends paid to a Non-U.S. Holder of our common stock will be subject to
withholding of U.S. federal income tax at a 30 percent rate or such lower rate
as may be specified by an applicable income tax treaty. However, if (i)
dividends are effectively connected with the conduct of a trade or business by
the Non-U.S. Holder within the United States and, where a tax treaty applies,
are attributable to a U.S. permanent establishment of the Non-U.S. Holder and
(ii) an Internal Revenue Service Form 4224 or successor form is filed with the
payer, the dividends are not subject to withholding tax, but instead are subject
to U.S. federal income tax on a net basis at applicable graduated individual or
corporate rates. Any such effectively connected dividends received by a foreign
corporation may, under certain circumstances, be subject to an additional
"branch profits tax" at a rate of 30 percent or such lower rate as may be
specified by an applicable income tax treaty.
Dividends paid to an address outside the United States are presumed to be
paid to a resident of such country (unless the payer has knowledge to the
contrary) for purposes of the withholding discussed above and
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for purposes of determining the applicability of a tax treaty rate. However,
Treasury Regulations that are generally effective for payments made after
December 31, 2000 (the "Final Withholding Tax Regulations"), provide that a
Non-U.S. Holder must comply with certification procedures (or, in the case of
payments made outside the United States with respect to an offshore account,
certain documentary evidence procedures), directly or through an intermediary to
obtain the benefits of a reduced rate under an income tax treaty. In addition,
the Final Withholding Tax Regulations will require a Non-U.S. Holder who
provides an IRS Form 4224 or successor form (as discussed above) also to provide
its U.S. taxpayer identification number.
A Non-U.S. Holder of our common stock eligible for a reduced rate of U.S.
withholding tax pursuant to an income tax treaty may obtain a refund of any
excess amounts withheld by filing an appropriate claim for refund with the IRS.
Gain on Disposition of Conexant Stock
A Non-U.S. Holder generally will not be subject to U.S. federal income tax
with respect to gain recognized on a sale or other disposition of our common
stock unless: (i) the gain is effectively connected with a trade or business of
the Non-U.S. Holder in the United States and, where a tax treaty applies, is
attributable to a U.S. permanent establishment of the Non-U.S. Holder; or (ii)
in the case of a Non-U.S. Holder who is an individual and holds our common stock
as a capital asset, such holder is present in the United States for 183 or more
days in the taxable year of the sale or other disposition and certain other
conditions are met.
An individual Non-U.S. Holder who falls under clause (i) above will, unless
an applicable treaty provides otherwise, be taxed on his or her net gain derived
from the sale under regular graduated U.S. federal income tax rates. An
individual Non-U.S. Holder who falls under clause (ii) above will be subject to
a flat 30 percent tax on the gain derived from the sale, which may be offset by
certain U.S. capital losses.
A Non-U.S. Holder that is a foreign corporation falling under clause (i)
above will be taxed on its gain under regular graduated U.S. federal income tax
rates and may be subject to an additional branch profits tax equal to 30 percent
of its effectively connected earnings and profits within the meaning of the Code
for the taxable year, as adjusted for certain items, unless it qualifies for a
lower rate under an applicable income tax treaty.
Federal Estate Tax
Common stock held by an individual Non-U.S. Holder at the time of death
will be included in such holder's gross estate for U.S. federal estate tax
purposes, unless an applicable estate tax treaty provides otherwise.
Information Reporting and Backup Withholding Tax
Under Treasury regulations, Conexant must report annually to the IRS and to
each Non-U.S. Holder the amount of dividends paid to such holder and the tax
withheld with respect to such dividends, regardless of whether withholding was
required. Copies of the information returns reporting such dividends and
withholding may also be made available to the tax authorities in the country in
which the Non-U.S. Holder resides under the provisions of an applicable income
tax treaty.
A backup withholding tax is imposed at the rate of 31 percent on certain
payments to persons that fail to furnish certain identifying information to the
payer. Backup withholding generally will not apply to dividends paid to a
Non-U.S. Holder at an address outside the United States (unless the payer has
knowledge that the payee is a U.S. person). However, in the case of dividends
paid after December 31, 2000, the Final Withholding Tax Regulations provide that
a Non-U.S. Holder generally will be subject to withholding tax at a 31 percent
rate unless certain certification procedures (or in the case of payments made
outside the United States with respect to an offshore account, certain
documentary evidence procedures) are complied with, directly or through an
intermediary. Backup withholding and information reporting generally will also
apply to dividends paid on our common stock at addresses inside the United
States to Non-U.S. Holders that fail to provide certain identifying information
in the manner required. The Final Withholding Tax Regulations
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provide certain presumptions unless Conexant receives certification from the
holder of the Non-U.S. Holder's Non-U.S. status.
Payment of the proceeds of a sale of our common stock by or through a U.S.
office of a broker is subject to both backup withholding and information
reporting unless the beneficial owner provides the payer with its name and
address and certifies under penalties of perjury that it is a Non-U.S. Holder,
or otherwise establishes an exemption. In general, backup withholding and
information reporting will not apply to a payment of the proceeds of a sale of
our common stock by or through a foreign office of a broker. If, however, such
broker is, for U.S. federal income tax purposes, a U.S. person, a controlled
foreign corporation or a foreign person that derives 50 percent or more of its
gross income for certain periods from the conduct of a trade or business in the
United States (or, in addition, for periods after December 31, 2000, a foreign
partnership in certain circumstances), such payments will be subject to
information reporting, but not backup withholding, unless (i) such broker has
documentary evidence in its records that the beneficial owner is a Non-U.S.
Holder and certain other conditions are met or (ii) the beneficial owner
otherwise established an exemption.
Any amounts withheld under the backup withholding rules generally will be
allowed as a refund or a credit against such holder's U.S. federal income tax
liability provided the required information is furnished in a timely manner to
the IRS.
SELLING SECURITYHOLDERS
The shares which may be resold hereunder by the selling securityholders
are:
- shares issued by us in connection with the acquisition of all of the
outstanding shares of Microcosm at the closing of the Microcosm
acquisition transaction;
- shares issued prior to the date of this prospectus upon exercise of stock
options granted by us at the closing of the Microcosm acquisition
transaction in connection with the surrender and cancellation of all of
the outstanding Microcosm options;
- shares issued by us in connection with the acquisition of the wireless
broadband business of Oak Technology, Inc.; and
- shares issued by us in connection with the acquisition of Istari.
The shares originally issued at the closing of the Microcosm, Oak
Technology Ltd. and Istari acquisition transactions and the shares issued prior
to the date of this prospectus upon exercise of Conexant options granted to
former option holders of Microcosm were issued in transactions exempt from the
registration requirements of the Securities Act. Selling securityholders,
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 their
shares of our common stock.
The following table sets forth information, as of February 24, 2000, with
respect to the selling securityholders and the shares of common stock
beneficially owned by each selling securityholder that may be offered pursuant
to this prospectus. The information is based on information provided by or on
behalf of the selling securityholders. The selling securityholders may offer
all, some or none of the shares of common stock. Because the selling
securityholders may offer all or some portion of the common stock, we cannot
estimate the amount of the common stock that will be held by the selling
securityholders upon termination of any of these sales. In addition, the selling
securityholders identified below may have sold, transferred or otherwise
disposed of all or a portion of their shares of common stock since the date on
which they provided the information regarding their shares in transactions
exempt from the registration requirements of the Securities Act. No selling
securityholder named in the table below beneficially owns one percent or more of
our common stock
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based on 202,571,118 shares of common stock outstanding on February 4, 2000.
Information concerning other selling securityholders will be set forth in
prospectus supplements from time to time, if required.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK SHARES OF
OWNED PRIOR COMMON STOCK
NAME TO THE OFFERING OFFERED HEREBY
- ---- --------------- --------------
<S> <C> <C>
MICROCOSM ACQUISITION:
Donna Brailey............................................... 466 466
Jenny Brayne................................................ 58 58
Christopher Bryson.......................................... 87 87
Peter Davies................................................ 2,211 2,211
Jerome Garez................................................ 425 425
Christian Hess.............................................. 87 87
Graham Jones................................................ 525 525
Amanda Karn................................................. 87 87
Richard Mayo................................................ 66,354 66,354
Andrew John Millard......................................... 73 73
John Michael Millard........................................ 73 73
Stuart Millard.............................................. 56 56
Ya Nong Ning................................................ 174 174
Mark Richardson............................................. 583 583
Gary Steele................................................. 517,134 517,134
Richard Watts............................................... 49,337 49,337
Colin Whitfield............................................. 291 291
Mark Wills.................................................. 87 87
Shen Chia Wong.............................................. 147,678 147,678
3i Group, plc............................................... 147,875 147,875
Vertex Technology Fund II, Ltd.............................. 147,875 147,875
Bear, Stearns International Limited......................... 877,931(1) 441,894
OAK TECHNOLOGY LTD. ACQUISITION:
Oak Technology, Inc......................................... 293,794 293,794
ISTARI DESIGN ACQUISITION:
Steven Gardner.............................................. 35,895 35,895
James Petronovich........................................... 35,895 35,895
George Peponides............................................ 28,716 28,716
TOTAL:...................................................... 2,353,767 1,917,730
</TABLE>
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(1) Includes 299,463 shares of common stock into which $6,917,000 aggregate
principal amount of Conexant's 4 1/4% Convertible Subordinated Notes Due
2006 held by the selling securityholder are convertible at a conversion
price of $23.098 per share of common stock and 136,574 shares of common
stock into which $14,750,000 aggregate principal amount of Conexant's 4%
Convertible Subordinated Notes Due 2007 held by the selling securityholder
are convertible at a conversion price of $108 per share of common stock.
Each of the selling securityholders set forth in the table under the
caption "Microcosm Acquisition", other than Bear, Stearns International Limited,
is a party to the Stock Purchase Agreement dated as of January 6, 2000 with
Conexant. Oak Technology, Inc. is a party to the Bill of Sale and Assignment
Agreement dated as of January 19, 2000 with Conexant. Each of the selling
securityholders set forth in the table under "Istari Acquisition" is a party to
the Registration Rights Agreement dated as of November 9, 1999 with Conexant.
Each of the following individuals, prior to the acquisition of Microcosm on
January 6, 2000, held and continues to hold the following positions with
Microcosm: Gary Steele, Chairman, President and Chief Executive Officer;
Alistair Blaxill, Vice President of Marketing; Stephen King, Vice President of
Sales;
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Richard Mayo, Vice President of Applications; Mark Richardson, Vice President of
Finance; Richard Watts, Vice President of Research; Nick Weiner, Vice President
of Engineering; and Brian Williams; Vice President of Production Engineering.
Prior to the acquisition of Istari Design, Inc. on November 9, 1999, James
Petronovich was Chairman of the Board and Chief Executive Officer, George
Peponides was Chief Financial Officer, and Steven Gardner was Secretary of
Istari Design, Inc.
In addition, as of the date of this prospectus, each of the individual
selling securityholders set forth in the table, other than Shen Chia Wong, is an
employee of Conexant or one of its subsidiaries.
All of the shares received by the selling securityholders at the closing of
the Microcosm, Oak Technology Ltd. and Istari acquisition transactions or upon
the exercise of their Conexant options were "restricted securities" under the
Securities Act prior to this registration.
Certain shares covered by this prospectus and held by the former
shareholders of Istari are subject to repurchase rights on the part of Conexant
and may not be sold by such shareholders until such repurchase rights have
lapsed. Shares of Istari common stock held by the Istari shareholders
immediately prior to the merger were subject to repurchase rights on the part of
Istari pursuant to Stock Purchase Agreements entered into between Istari and
each of its shareholders. For each full month in a 60-month period (beginning
with the date of employment) that an Istari shareholder remained employed by
Istari, the number of Istari shares subject to Istari's repurchase right would
be reduced by one-sixtieth ( 1/60th). Istari's right to repurchase the Istari
shares could be exercised upon the occurrence of certain events, including the
Istari shareholder ceasing to be an employee of Istari for any reason or a
merger of Istari in which the Istari shares are converted into other property.
The repurchase right entitled Istari to repurchase the Istari shares at the same
price per share paid by the Istari shareholder. To the extent Istari elected not
to exercise its repurchase rights, those rights could be assigned to any
successor to Istari. Pursuant to the Agreement and Plan of Reorganization with
Conexant, the shares of Istari common stock that were subject to the repurchase
right were converted in the merger into shares of our common stock, subject to
the same repurchase rights on the part of Conexant as were held by Istari with
respect to the Istari shares prior to the merger. The repurchase price per share
was also adjusted by the conversion ratio in the merger.
Information concerning the selling securityholders may change from time to
time and any changed information will be set forth in supplements to this
prospectus if and when necessary.
PLAN OF DISTRIBUTION
The selling securityholders and their successors, which term includes their
transferees, pledgees or donees or their successors, may sell 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
from the selling securityholders 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 common stock may be sold in one or more transactions at:
- fixed prices,
- prevailing market prices at the time of sale,
- prices related to the prevailing market prices,
- varying prices determined at the time of sale, or
- negotiated prices.
These sales may be effected in transactions:
- on any national securities exchange or quotation service on which our
common stock may be listed or quoted at the time of sale, including the
Nasdaq National Market,
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- in the over-the-counter market,
- otherwise than on such exchanges or services or in the over-the-counter
market,
- through the writing of options, whether the options are listed on an
options exchange or otherwise, or
- through the settlement of short sales.
These transactions may include block transactions or crosses. Crosses are
transactions in which the same broker acts as agent on both sides of the trade.
In connection with the sale of the common stock or otherwise, the selling
securityholders may enter into hedging transactions with broker-dealers or other
financial institutions. These broker-dealers or financial institutions may in
turn engage in short sales of the common stock in the course of hedging the
positions they assume with selling securityholders. The selling securityholders
may also sell the common stock short and deliver these securities to close out
such short positions, or loan or pledge the common stock to broker-dealers that
in turn may sell these securities.
The aggregate proceeds to the selling securityholders from the sale of the
common stock offered by them hereby will be the purchase price of the common
stock less discounts and commissions, if any. Each of the selling
securityholders 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
common stock to be made directly or through agents. We will not receive any of
the proceeds from the offering of shares by the selling securityholders.
Our outstanding common stock is listed for trading on the Nasdaq National
Market.
In order to comply with the securities laws of some states, if applicable,
the common stock may be sold in these jurisdictions only through registered or
licensed brokers or dealers.
The selling securityholders and any broker-dealers or agents that
participate in the sale of the common stock may be deemed to be "underwriters"
within the meaning of Section 2(11) of the Securities Act. Profits on the sale
of the common stock by selling securityholders and any discounts, commissions or
concessions received by any broker-dealers or agents might be deemed to be
underwriting discounts and commissions under the Securities Act. Selling
securityholders who are deemed to be "underwriters" 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 securityholders and any other person participating in a
distribution will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder. Regulation M of the Exchange Act may limit
the timing of purchases and sales of any of the securities by the selling
securityholders and any other person. In addition, Regulation M may restrict the
ability of any person engaged in the distribution of the securities to engage in
market-making activities with respect to the particular securities being
distributed for a period of up to five business days before the distribution.
The selling securityholders 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, and have
agreed that they will not engage in any transaction in violation of such
provisions.
To our knowledge, there are currently no plans, arrangements or
understandings between any selling securityholder and any underwriter,
broker-dealer or agent regarding the sale of the common stock by the selling
securityholders.
A selling securityholder may decide not to sell any common stock described
in this prospectus. We cannot assure you that any selling securityholder will
use this prospectus to sell any or all of the common stock. Any securities
covered by this prospectus which qualify for sale pursuant to Rule 144 of the
Securities Act may be sold under Rule 144 rather than pursuant to this
prospectus. In addition, a selling securityholder may transfer, devise or gift
the common stock by other means not described in this prospectus.
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With respect to a particular offering of the common stock, to the extent
required, an accompanying prospectus supplement or, if appropriate, a
post-effective amendment to the registration statement of which this prospectus
is a part will be prepared and will set forth the following information:
- the specific shares of common stock to be offered and sold,
- the names of the selling securityholders,
- the respective purchase prices and public offering prices and other
material terms of the offering,
- the names of any participating agents, broker-dealers or underwriters,
and
- any applicable commissions, discounts, concessions and other items
constituting compensation from the selling securityholders.
Under the Stock Purchase Agreement, the holders of the shares of common
stock received at the closing of the Microcosm acquisition transaction or upon
exercise of the stock options received in the Microcosm acquisition transaction
have a right to register their shares of common stock under applicable federal
and state securities laws under certain circumstances and at certain times. The
Microcosm registration rights provide that the Microcosm selling securityholders
and Conexant will indemnify each other and their respective directors, officers,
employees, stockholders, agents and controlling persons against specific
liabilities in connection with the offer and sale of the common stock, including
liabilities under the Securities Act, or will be entitled to contribution in
connection with those liabilities. We will pay all of our expenses and specified
expenses incurred by the Microcosm selling securityholders incidental to the
registration, offering and sale of the common stock to the public, but each
Microcosm selling securityholder will be responsible for payment of commissions,
concessions, fees and discounts of underwriters, broker-dealers and agents, if
any.
Under the Bill of Sale and Assignment Agreement, Oak Technology, Inc. has
the right to register its shares of common stock under applicable federal and
state securities laws under certain circumstances and at certain times. The Bill
of Sale and Assignment Agreement also provides for indemnification or
contribution substantially similar to the indemnification and contribution
provisions contained in the Stock Purchase Agreement. Oak Technology, Inc. will
pay a pro rata portion of certain of our expenses incidental to the
registration, offering and sale of the common stock to the public, and will be
responsible for payment of commissions, concessions, fees and discounts of
underwriters, broker-dealers and agents, if any. Such pro rata portion will be
based upon the percentage of Oak Technology's registrable shares included in the
registration statement, of which this prospectus is a part, as compared to the
total number of shares registered in the registration statement.
Under the Agreement and Plan of Reorganization, the former shareholders of
Istari have the right to register their shares of common stock under applicable
federal and state securities laws under certain circumstances and at certain
times. The Istari registration rights provide that the Istari selling
securityholders will indemnify us and our directors, our officers who sign the
registration statement and any controlling persons of Conexant, and we will
indemnify each selling securityholder, any underwriter for such selling
securityholder and any controlling persons of such selling securityholder,
against specific liabilities in connection with the offer and sale of the common
stock, including liabilities under the Securities Act, or will be entitled to
contribution in connection with those liabilities. We will pay all of our
expenses and specified expenses incurred by the Istari selling securityholders
incidental to the registration, offering and sale of the common stock to the
public, but each selling securityholder will be responsible for payment of
commissions, concessions, fees and discounts of underwriters, broker-dealers and
agents, if any.
LEGAL MATTERS
The validity of the issuance of the common stock issued at the closing of
the Microcosm, Oak Technology Ltd. and Istari acquisitions, issued upon exercise
of the stock options prior to the date of this prospectus and issuable on
exercise of the stock options, will be passed upon for us by our Senior Vice
President, General Counsel and Secretary, Dennis E. O'Reilly, Esq.
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EXPERTS
The consolidated financial statements and the financial statement schedule
incorporated in this prospectus by reference from Conexant's Annual Report on
Form 10-K for the fiscal year ended September 30, 1999 have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and have been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
The consolidated financial statements of Maker Communications, Inc.
incorporated by reference in this prospectus have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report with
respect thereto, and are incorporated herein in reliance upon the authority of
said firm as experts in giving said reports.
HOW TO OBTAIN MORE INFORMATION
In accordance with the Exchange Act, we file reports, proxy and information
statements and other information with the Securities and Exchange Commission.
You may read and copy these reports, proxy and information statements and other
information that we file at the SEC's public reference room at 450 Fifth Street,
N.W., Washington, D.C. 20549. You may obtain information on the operation of the
public reference room by calling the SEC at 1-800-SEC-0330. The SEC also
maintains an internet site that contains reports, proxy and information
statements and other information regarding registrants (including Conexant) that
file electronically with the SEC (http://www.sec.gov). Our internet site is
http://www.conexant.com.
You also may inspect reports, proxy statements and other information about
Conexant at the offices of The Nasdaq Stock Market, Inc. National Market System,
1735 K Street, N.W., Washington, D.C. 20006-1500.
We have filed with the SEC a registration statement on Form S-3 under the
Securities Act. This prospectus does not contain all of the information in the
registration statement. We have omitted certain parts of the registration
statement, as permitted by the rules and regulations of the SEC. You may inspect
and copy the registration statement, including exhibits, at the SEC's public
reference room or internet site. Our statements in this prospectus about the
contents of any contract or other document are not necessarily complete. You
should refer to the copy of each contract or other document we have filed as an
exhibit to the registration statement for complete information.
The SEC's rules allow us to "incorporate by reference" into this prospectus
the information we file with the SEC. This means that we can disclose important
information to you by referring you to those filings. This information we
incorporate by reference is considered a part of this prospectus, and subsequent
information that we file with the SEC will automatically update and supersede
this information. Any such information so modified or superseded will not
constitute a part of this prospectus, except as so modified or superseded. We
incorporate by reference the following documents and any future filings we make
with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act until
the selling securityholders sell all of the shares of common stock offered by
this prospectus:
- Our Annual Report on Form 10-K for the fiscal year ended September 30,
1999 (including the portions of our Proxy Statement for our 2000 Annual
Meeting of Shareowners that are incorporated therein by reference);
- Our Quarterly Report on Form 10-Q for the quarter ended December 31,
1999;
- Our Current Report on Form 8-K dated January 4, 2000, as amended by our
Current Report on Form 8-K/A dated January 11, 2000;
- Our Current Report on Form 8-K dated February 16, 2000; and
- The descriptions of the common stock and the preferred share purchase
rights contained on pages 78 and 85-87 in our Registration Statement on
Form 10, as amended (File Number 000-24923) dated
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December 1, 1998, as amended by Part II, Item 2 of our Quarterly Report
on Form 10-Q for the quarter ended December 31, 1999.
Upon written or oral request, we will provide you with a copy of any of the
incorporated documents without charge (not including exhibits to the documents
unless the exhibits are specifically incorporated by reference into the
documents). You may submit such a request for this material to Office of the
Secretary, Conexant Systems, Inc., 4311 Jamboree Road, Newport Beach, California
92660-3095 (telephone number (949) 483-4600).
FORWARD-LOOKING STATEMENTS
In addition to historical information, this prospectus contains statements
relating to our future results. These statements include certain projections and
business trends which are "forward looking" within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements are
made only as of the date of this prospectus. We do not undertake to update or
revise the forward-looking statements, whether as a result of new information,
future events or otherwise.
Our actual results may differ materially from projected results as a result
of certain risks and uncertainties. These risks and uncertainties include,
without limitation, those described under "Risk Factors" as well as those set
forth below and those detailed from time to time in our filings with the SEC:
- global and market conditions, including, without limitation, the cyclical
nature of the semiconductor industry and the markets related to our
products and those of our customers;
- demand for and market acceptance of new and existing products;
- successful development of new products;
- timing of new product introductions;
- successful integration of Maker Communications, Inc. following its
acquisition, as well as the successful integration of our other recent
acquisitions;
- availability and extent of use of manufacturing capacity;
- pricing pressures and other competitive factors;
- changes in product mix;
- fluctuations in manufacturing yields;
- product obsolescence;
- our ability to develop and implement new technologies and to obtain
protection of the related intellectual property;
- the successful implementation of our diversification strategy;
- our labor relations and those of our customers and suppliers;
- uncertainties of litigation; and
- other risks and uncertainties.
------------------------
The Conexant logo is a trademark of Conexant Systems, Inc. Other brands, names
and trademarks contained in this prospectus are the property of their respective
owners.
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CONEXANT SYSTEMS, INC.
COMMON STOCK
(INCLUDING ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
------------------------
PROSPECTUS
------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
DIFFERENT INFORMATION. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER
THAN THE DATE OF THIS PROSPECTUS. WE ARE NOT MAKING AN OFFER OF THESE SECURITIES
IN ANY STATE WHERE THE OFFER IS NOT PERMITTED.
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