<PAGE> 1
As filed with the Securities and Exchange Commission on January 29, 1998
Registration No. 333-39917
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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DSC COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 54-1025763
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1000 COIT ROAD
PLANO, TEXAS, 75075
(972) 519-3000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
-------------------
GEORGE B. BRUNT
DSC COMMUNICATIONS CORPORATION
1000 COIT ROAD
PLANO, TEXAS, 75075
(972) 519-3000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
With a copy to:
DANIEL W. RABUN
BAKER & MCKENZIE
2001 ROSS AVENUE, SUITE 4500
DALLAS, TEXAS 75201
(214) 978-3000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
___________________________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _____________________________________
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================================================
Amount Proposed Maximum Proposed Maximum Amount of
Title of Each Class of Shares to be Aggregate Aggregate Offering Registration
to be Registered Registered Price Per Security (1) (2) Price (1) Fee
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<S> <C> <C> <C> <C>
7% Convertible Subordinated Notes $ 365,335,000 100% $ 365,335,000 $107,774 (4)
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Common Stock, par value $.01 per share 7,347,070(3) Not Applicable Not Applicable Not Applicable
- ------------------------------------------------------------------------------------------------------------------------------------
Preferred Stock Purchase Rights 7,347,070 rights Not Applicable Not Applicable Not Applicable(5)
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</TABLE>
(1) Estimated solely for the purpose of computing the amount of the
registration fee in accordance with Rule 457(i).
(2) Exclusive of accrued interest, if any.
(3) Such number represents the number of shares of Common Stock initially
issuable upon conversion of the Notes registered hereby and, pursuant to
Rule 416 under the Securities Act of 1933, as amended, such indeterminate
number of shares of Common Stock as may be issued from time to time upon
conversion of the Notes by reason of adjustment of the conversion price
under certain circumstances outlined in the Prospectus.
(4) Of this fee $97,228 was paid in connection with the original filing of
this Registration Statement. The additional shares covered by this
Amendment No. 1 to Form S-3 Registration Statement were previously
registered under the Company's Registration Statement, Registration No.
333-39903 (which covers 4,936,663 shares of Common Stock). A registration
fee in the amount of $37,540.00 was paid with respect to such Registration
Statement.
(5) In accordance with Rule 457(g), no additional registration fee is required
in respect of the Preferred Stock Purchase Rights.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE> 2
PROSPECTUS
DSC COMMUNICATIONS CORPORATION
$365,335,000 7% CONVERTIBLE SUBORDINATED NOTES DUE AUGUST 1, 2004
7,347,070 SHARES OF COMMON STOCK
This Prospectus relates to the offering for resale by the selling
securityholders named herein (the "Selling Securityholders") of 7% Convertible
Subordinated Notes due August 1, 2004 (the "Notes") of DSC Communications
Corporation (the "Company") up to the aggregate principal amount of
$365,335,000. In addition, this Prospectus relates to the offering of 7,347,070
shares (subject to adjustment under certain circumstances) of the Company's
common stock, par value $.01 per share (the "Common Stock"), issued or issuable
upon conversion of the Notes. The Common Stock includes the preferred stock
purchase rights attaching to such stock pursuant to that certain Rights
Agreement dated April 25, 1996 by and between the Company and Harris Trust and
Savings Bank, formerly KeyCorp Shareholder Services, Inc. The Common Stock,
together with the Notes, are referred to herein as the "Securities." The Notes
were originally issued and sold in August 1997 in transactions exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"). The Notes are designated for trading on the Private
Offerings, Resales and Trading through Automated Linkages ("PORTAL") system of
the National Association of Securities Dealers, Inc. The Notes are neither
listed on any stock exchange nor included on any automated quotation system.
The Company's Common Stock is quoted on the Nasdaq National Market under the
symbol "DIGI." On January 27, 1998, the last reported sale price for the
Common Stock was $21.0625 per share.
The Notes are convertible into shares of Common Stock, prior to redemption
or maturity, at a conversion rate of 20.1106 shares per $1,000 principal amount
of Notes (equivalent to a conversion price of $49.725 per share), subject to
adjustment in certain events. See "Description of the Notes--Conversion."
Interest on the Notes is payable semi-annually February 1 and August 1,
commencing on February 1, 1998. At any time on or after August 1, 2000, the
Notes will be redeemable, in whole or in part, at the option of the Company,
upon not less than 30 days' nor more than 60 days' prior notice at redemption
prices as described herein. In the event of a Change in Control (as defined
herein), each holder of Notes may require the Company to repurchase its Notes,
in whole or in part, for cash or, at the Company's option, Common Stock (valued
at 95% of the average closing sale prices for the five trading days immediately
preceding the second trading day prior to the repurchase date) at a repurchase
price of 100% of the principal amount of Notes to be repurchased, plus accrued
interest to the repurchase date. See "Description of the Notes--Redemption" and
"--Repurchase at Option of Holders Upon a Change in Control."
The Notes are general unsecured obligations of the Company, subordinated in
right of payment to all existing and future Senior Indebtedness (as defined
herein) of the Company and effectively subordinated in right of payment to all
indebtedness and other liabilities of the Company's subsidiaries. See
"Description of the Notes--Subordination." As of September 30, 1997, the
aggregate amount of Senior Indebtedness outstanding was approximately $356.2
million, which includes indebtedness of the subsidiaries of the Company
guaranteed by the Company. Neither the Indenture (as defined herein) nor the
Notes limit the amount of Senior Indebtedness or other indebtedness that the
Company or its subsidiaries may incur.
The Company will not receive any of the proceeds from the sale of the
Securities offered hereby. The Selling Securityholders directly, through agents
designated from time to time, or through dealers or underwriters to be
designated, may sell Securities from time to time on terms to be determined at
the time of sale. The specific amount of Securities to be sold, the offering
price, the names of any such agent, dealer or underwriter, and any applicable
commission or discount with respect to the particular offer will be set forth
in a Prospectus Supplement. The Company has agreed to bear all expenses of
registration of the Securities under federal and state securities laws and to
indemnify the Selling Securityholders against certain liabilities under the
Securities Act. See "Plan of Distribution."
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR CERTAIN RISKS ASSOCIATED WITH AN
INVESTMENT IN THE SECURITIES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
IT IS ANTICIPATED THAT EACH OF THE PERSONS NAMED HEREIN UNDER THE CAPTION
"SELLING SECURITYHOLDERS" MAY OFFER AND SELL THE SECURITIES FROM TIME TO TIME
IN ORDINARY TRANSACTIONS TO OR THROUGH ONE OR MORE BROKERS OR DEALERS THROUGH
THE NASDAQ NATIONAL MARKET OR ANY NATIONAL SECURITIES EXCHANGE ON WHICH THE
COMMON STOCK IS APPROVED FOR LISTING IN THE FUTURE OR IN PRIVATE TRANSACTIONS
AT SUCH PRICES AS MAY BE OBTAINABLE. ANY SUCH PERSON MAY BE DEEMED TO BE AN
"UNDERWRITER" AS THAT TERM IS DEFINED BY THE SECURITIES ACT. HOWEVER, THE
COMPANY AND SUCH PERSONS DISCLAIM THAT ANY SUCH PERSON IS AN UNDERWRITER.
THE DATE OF THIS PROSPECTUS IS JANUARY 29, 1998
<PAGE> 3
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY, ANY SELLING SECURITYHOLDER OR ANY OTHER PERSON.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR
ANY OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY
CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
Available Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Incorporation of Certain Documents by Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
The Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Ratio of Earnings to Fixed Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Description of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
United States Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Description of Registration Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Selling Securityholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
</TABLE>
2
<PAGE> 4
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the Securities
and Exchange Commission (the "Commission"). Reports, proxy statements and
other information filed by the Company may be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
NW, Room 1024, Washington, D.C. 20549 and at the Commission's regional offices
at 7 World Trade Center, 13th Floor, New York, New York 10048 and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such materials may be obtained at prescribed rates upon request from the Public
Reference Section of the Commission at 450 Fifth Street, NW, Washington, D.C.
20549. The Common Stock of the Company is listed on the Nasdaq National Market,
and such reports, proxy statements and other information can also be inspected
at the offices of the Nasdaq National Market, Reports Section, 1735 K Street
N.W., Washington, D.C. 20006. In addition, such materials filed electronically
by the Company with the Commission are available at the Commission's World Wide
Web Site at http://www.sec.gov.
The Company has filed with the Commission a registration statement on
Form S-3 (the "Registration Statement") under the Securities Act, with respect
to the Securities offered hereby. This Prospectus, which constitutes a part of
that Registration Statement, does not contain all the information set forth in
that Registration Statement and the exhibits relating thereto. For further
information with respect to the Company and the Common Stock, reference is
hereby made to such Registration Statement and exhibits. Statements contained
herein concerning the provisions of any documents are necessarily summaries of
those documents, and each statement is qualified in its entirety by reference
to the copy of the applicable document filed with the Commission. The
Registration Statement and any amendments thereto, including exhibits filed as
a part thereof, are available for inspection and copying as set forth above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates in this Prospectus by reference the
following documents which have been filed with the Commission pursuant to the
Exchange Act and made a part hereof:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996;
(b) The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997;
(c) The Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1997;
(d) The Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997;
(e) The Company's Current Report on Form 8-K filed August 26, 1997;
(f) The Company's Current Report on Form 8-K filed November 3, 1997;
(g) The Company's Current Report on Form 8-K filed December 19, 1997, as
amended December 23, 1997;
(h) The Company's Current Report on Form 8-K filed January 28, 1998; and
(i) The description of the Company's Common Stock as contained in the
Company's Registration Statement on Form 8-A dated October 27, 1981,
including all amendments and reports filed for the purpose of updating
such descriptions; and the description of the Company's preferred
stock purchase rights as contained in the Company's Registration
Statement on Form 8-A dated May 13, 1996, including all amendments and
reports filed for the purpose of updating such descriptions.
Each document filed subsequent to the date of this Prospectus pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act and prior to the
termination of the offering shall be deemed to be incorporated by reference
into this
3
<PAGE> 5
Prospectus and to be made a part hereof from the date of filing of such
document. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is incorporated or
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
The Company will furnish without charge, upon written or oral request,
to each person, including any beneficial owner, to whom this Prospectus is
delivered, a copy of any or all of the documents incorporated by reference
herein other than exhibits to such documents (unless such exhibits are
specifically incorporated by reference into such documents). Such requests
should be directed to DSC Communications Corporation, 1000 Coit Road, Plano,
Texas 75075, Attention: General Counsel. Telephone number (972) 519-3000.
FORWARD-LOOKING STATEMENTS
This Registration Statement contains statements relating to future
results of the Company (including certain projections and business trends) that
are "forward-looking statements" within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act, which involve risks and
uncertainties. Actual results may differ materially from the results discussed
in or implied by the forward-looking statements. Factors that might cause such
a difference include, but are not limited to, those set forth under "Risk
Factors" and detailed from time to time in the filings of the Company with the
Commission.
4
<PAGE> 6
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more
detailed information appearing elsewhere in this Prospectus. The terms "the
Company" and "DSC Communications Corporation" refer solely to DSC
Communications Corporation and not its subsidiaries (except under the captions
"Prospectus Summary--The Company" and "Risk Factors."
THE COMPANY
The Company designs, develops, manufactures and markets digital
switching, access, transport and network management system products for the
worldwide telecommunications marketplace. These products allow
telecommunications service providers to build and upgrade their networks to
support a wide range of voice, data and video services. The Company offers a
comprehensive product line including digital switching systems, intelligent
network products, cellular switching systems, digital loop carrier products,
digital cross-connect products and optical transmission systems and related
advanced network management systems. The Company develops such systems to meet
U.S. and international telecommunications standards and the specific
requirements of the operating companies of the Regional Holding Companies
("RHCs"), independent telephone companies, long-distance carriers, private
networks and companies operating public and private communications networks in
other countries.
The Company supplies products to a domestic and international customer
base, including local exchange telephone companies, long-distance carriers,
cellular telephone companies, international telephone companies, various
Fortune 1000 companies and utility companies. Its domestic customers include
the RHCs and most major domestic independent telephone and long-distance
companies, including MCI Communications Corporation, U.S. Sprint Communications
Company L.P., GTE Communications Systems Corporation and WorldCom, Inc. The
Company is also a major manufacturer of high-capacity cellular switches for
Motorola, Inc., a leading supplier of wireless communication systems throughout
the world. International customers include DDI Corporation of Japan, Tele
Danmark, Deutsche Telekom in Germany, Cable & Wireless PLC and Mercury
Communications, Ltd. in the United Kingdom, British Telecommunications PLC,
Telefonos de Mexico, S.A. de C.V. and AAP Communications, Pty. Ltd. of
Australia.
The Company was incorporated under the laws of the State of Delaware
in 1976. The Company's executive offices are located at 1000 Coit Road, Plano,
Texas 75075. Its telephone number is (972) 519-3000.
5
<PAGE> 7
THE OFFERING
This Prospectus relates to the offering by the Selling Securityholders of both
the Notes and, to the extent the Notes have been, or are, converted, the Common
Stock. The following summary of certain terms of the Notes is not complete and
is qualified by all of the terms and conditions contained in the Notes and in
the Indenture. For a more detailed description of the terms of the Notes, see
"Description of Notes."
SECURITIES TO WHICH THIS PROSPECTUS RELATES
This Prospectus relates to the following Securities that may from time
to time be sold by the Selling Securityholders (i) up to $365,335,000 principal
amount of 7% Convertible Subordinated Notes due August 1, 2004 (the "Notes") of
the Company and (ii) all shares of Common Stock that may be acquired by any
Selling Securityholder upon conversion of any Note to which this Prospectus
relates as described in the preceding clause.
CERTAIN INFORMATION RELATING TO THE NOTES
<TABLE>
<S> <C>
Amount Outstanding . . . . . . . . . . . . . . As of December 31, 1997 there was outstanding an aggregate of
$400,000,000 principal amount of Notes.
Interest Payment Dates. . . . . . . . . . . . . February 1 and August 1 of each year, commencing on February 1,
1998.
Issuer . . . . . . . . . . . . . . . . . . . . DSC Communications Corporation, a Delaware corporation.
Conversion Price . . . . . . . . . . . . . . . $49.725 per share (equivalent to a conversion rate of 20.1106
shares per $1,000 principal amount of Notes), subject to
adjustment.
Conversion Rights . . . . . . . . . . . . . . . The Notes will be convertible into shares of Common Stock of
the Company at any time on or after November 20, 1997 and prior
to the close of business on August 1, 2004, unless previously
redeemed or repurchased, at the conversion price set forth
above, subject to adjustment. Holders of Notes called for
redemption will be entitled to convert the Notes to and
including, but not after, the close of business on the fifth
Trading Day (as defined) next preceding the date fixed for
redemption. The right to convert a Note delivered for
repurchase will terminate on the close of business on the
second Trading Day next preceding the repurchase date. See
"Description of Notes--Conversion Rights."
Optional Redemption . . . . . . . . . . . . . . The Notes are redeemable at the option of the Company, on or
after August 1, 2000, at the redemption prices set forth
herein, plus accrued interest to the redemption date. See
"Description of Notes--Redemption."
Repurchase at Option of Holders
Upon a Change in Control . . . . . . . . . . . Upon a Change in Control (as defined), holders of the Notes
will have the right, subject to certain conditions and
restrictions, to require the Company to repurchase their Notes
at 100% of the principal amount thereof, plus accrued interest
to the repurchase date. The repurchase price is payable in cash
or, at the option of the Company, in Common Stock (valued at
95% of the average closing prices of the Common Stock for the
five Trading Days ending on and including the third Trading Day
next preceding the repurchase date). See "Description of
Notes--Repurchase at Option of Holders Upon a Change in
Control."
</TABLE>
6
<PAGE> 8
<TABLE>
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Subordination . . . . . . . . . . . . . . . . . The Notes are unsecured obligations of the Company,
subordinated in right of payment to all existing and future
Senior Indebtedness (as defined under "Description of
Notes--Subordination") of the Company. The Notes are also
effectively subordinated in right of payment to all
indebtedness and other liabilities of the subsidiaries of the
Company. As of September 30, 1997, the aggregate amount of
outstanding Senior Indebtedness of the Company was
approximately $356.2 million, which includes indebtedness of
the subsidiaries of the Company guaranteed by the Company. The
Indenture does not restrict the incurrence of additional Senior
Indebtedness or other indebtedness by the Company nor the
incurrence of additional indebtedness or other liabilities by
the subsidiaries of the Company. See "Description of
Notes--Subordination."
Events of Default . . . . . . . . . . . . . . . Events of default include: (a) failure to pay principal of or
premium, if any, on any Note when due, whether or not such
payment is prohibited by the subordination provisions of the
Indenture; (b) failure to pay any interest on any Note when
due, continuing for 30 days, whether or not such payment is
prohibited by the subordination provisions of the Indenture;
(c) failure to perform, or the breach of, any other covenant of
the Company in the Indenture, continuing for 60 days after
written notice as provided in the Indenture; (d) default by the
Company in respect of any indebtedness for money borrowed in
excess of $20,000,000, which default constitutes a failure to
pay such indebtedness at maturity or results in acceleration of
such indebtedness, if such indebtedness is not discharged, or
such acceleration is not rescinded or annulled, within 30 days
after written notice as provided in the Indenture; and (e)
certain events of bankruptcy, insolvency or reorganization. See
"Description of Notes--Events of Default."
Registration Rights . . . . . . . . . . . . . . Pursuant to the Registration Rights Agreement (as defined), the
Company agreed to file a Shelf Registration Statement (as
defined) (of which this Prospectus constitutes a part) in
respect of the Notes and the Common Stock issuable upon
conversion thereof. Upon certain failures by the Company to
comply with certain of its obligations under the Registration
Rights Agreement, additional interest will be payable on the
Notes. See "Description of Notes--Registration Rights" and
"Description of Registration Rights Agreement."
Listing . . . . . . . . . . . . . . . . . . . . The Notes are designated for trading on the PORTAL System of
the National Association of Securities Dealers, Inc. The
Company's Common Stock is quoted on the Nasdaq National Market
under the symbol "DIGI."
</TABLE>
RISK FACTORS
See "Risk Factors" for certain considerations relevant to an
investment in the Securities offered hereby.
7
<PAGE> 9
RISK FACTORS
Potential investors should carefully evaluate all of the information
contained and incorporated by reference in this Registration Statement and, in
particular, the following:
CUSTOMER CONCENTRATION
The Company has a diversified customer base including long distance
carriers, RHCs, Motorola, Inc., international PTTs and other domestic and
international independent telephone companies. However, a large portion of the
Company's revenue is concentrated among several of the Company's larger
customers. During 1996, revenue from the Company's three largest customers in
total accounted for approximately 39% of the Company's consolidated revenue.
Although the Company expects that these customer relationships will continue to
generate substantial revenue in the near term, there can be no assurance that
any of these customers will continue to purchase products, or continue to
purchase products at historical levels. Product orders generally are subject to
rescheduling and cancellation without penalty. A material reduction in the
purchases of the Company's products by any of the Company's significant
customers could have a material adverse effect on the Company.
PRODUCT OBSOLESCENCE AND IMPORTANCE OF NEW PRODUCTS
The industry in which the Company operates is characterized by rapidly
changing technological and market conditions, which may shorten product life
cycles. The Company's future competitive position and operating results depend
upon successful production and sales of its existing products, its ability to
develop and produce on a timely basis new products to meet existing and
anticipated industry demands, and its ability to reduce the costs of existing
systems, software and services. During the product development process, the
Company is required to make a substantial investment in research and
development, capital and, at times, inventory for products that often require
extensive field testing and evaluation prior to actual sales to its customers.
Delays in product completion and/or slower than expected market acceptance of
certain products have negatively impacted the Company's operating performance
in the past and also, in certain cases, resulted in adjustments to carrying
values of assets, including the majority of the non-cash special charge in the
third quarter of 1996. In addition, when the Company's products are eventually
sold to customers, there can be no assurance that such products will be
profitable. The Company may be materially adversely affected if it is unable to
develop and produce on a timely basis new products to meet existing and
industry demands, if substantial delays in the availability of new products
occur, or if any of the Company's existing or new products are not commercially
successful and the Company is therefore required to adjust the carrying value,
or discontinue such product.
TIMELY AND ADEQUATE SUPPLY OF MATERIALS
The Company generally uses standard parts and components for its
products and believes that, in most cases, there are a number of alternative,
qualified vendors for most of those parts and components. The Company purchases
certain custom components and products from single suppliers. The Company
believes that the manufacturers of the particular custom components and
products should be able to meet expected future demands. Recent changes in
silicon wafer and other electronic component technologies have required the
Company to evaluate the feasibility of "lifetime" purchases of certain
component materials. Such "lifetime" purchases may or may not be sufficient to
fulfill customer demand. Alternatively, the Company could be required to find
second sourcing of these component materials or modify existing product
designs. Although the Company has not experienced any material adverse effects
from the inability to obtain timely delivery of needed components, an
unanticipated interruption of the Company's ability to secure comparable
components could have a material adverse effect on the Company's revenues and
profitability. In addition, certain of the Company's products contain a number
of subsystems or components acquired from other manufacturers on an original
equipment manufacturer ("OEM") basis. These OEM products are often available
only from a limited number of manufacturers. In the event that an OEM product
was no longer available from a current OEM vendor, second sourcing would be
required and could delay customer deliveries which could have a material
adverse effect on the Company's revenues and profitability.
8
<PAGE> 10
COMPETITION
The Company currently faces significant competition in its markets and
expects that the level of price and product competition will increase. In
addition, as a result of both the trend toward global expansion by foreign and
domestic competitors and technological and public policy changes, the Company
anticipates that new and different competitors will enter its markets. These
competitors may include entrants from the telecommunications, software and data
networking industries. The Company believes that it enjoys a strong competitive
position due to its large installed base, its strong relationship with key
customers and its technological leadership and new product development
capabilities. However, many of the Company's foreign and domestic competitors
have more extensive engineering, manufacturing, marketing, financial and
personnel resources than those of the Company. The Company's ability to compete
is dependent upon several factors, including, but not limited to, product
features, innovation, quality, reliability, service, support, price and the
retention and attraction of qualified design and development personnel.
QUARTERLY EARNINGS FLUCTUATIONS
The Company's operating results may fluctuate significantly from
quarter to quarter due to several factors. As is the case with other companies
in the telecommunications manufacturing industry, a large portion of customer
purchase orders are received and shipments occur in the latter part of most
quarters. As a result, revenue and earnings can fluctuate significantly from
quarter to quarter based on customer requirements, and the timing of orders and
shipments. In addition, periodic operating results may be materially affected
by shifts in the mix of products delivered, including the amount of software
content, the impact of sales price changes, the timing of satisfactory
completion of development and testing of new products and product enhancements
and adjustments in the carrying value, or the discontinuation, of any of the
Company's products. See "--Product Obsolescence and Importance of New
Products." The Company has historically experienced a stronger demand for its
products in the fourth quarter and a lower demand for its products in the first
quarter; however, there is no assurance this will continue in the future.
INTERNATIONAL GROWTH AND FOREIGN EXCHANGE
The international marketplace has become an increasingly important
source of new business opportunities for the Company as potential growth rates
of some international markets are higher than those of the United States.
However, access to customers in international markets is often more difficult
due to a variety of factors including the established relationships between the
national service providers, some of which are currently or were formerly
government-owned or -controlled, and their traditional indigenous suppliers of
telecommunications equipment. There can be no assurance that the Company will
be able to overcome these barriers. In addition, pursuit of customers in
international markets may require significant investments for an extended
period before returns on such investments, if any, are realized. The Company
also has manufacturing operations at several locations outside the United
States. Such business, investment and operating activities could be materially
adversely affected by economic and labor conditions, political instability, tax
laws (including U.S. taxes on foreign subsidiaries) and changes in the value of
the United States dollar versus the local currency in which products are sold.
A significant change in the value of the dollar against the currency of one or
more countries where the Company recognizes substantial revenue or earnings may
materially adversely affect the Company's operating results. The Company
attempts to mitigate this risk through the use of forward foreign exchange
contracts where possible, although there can be no assurances that such
attempts will be successful.
KEY PERSONNEL
The Company is dependent upon the continued services and management
experience of certain of its senior management personnel. If the Company were
to lose the services of such senior management personnel, it could have a
material adverse effect on the Company.
9
<PAGE> 11
INTELLECTUAL PROPERTY AND LICENSING
The Company's proprietary technology is a key component of the value
of its products. The Company has an established program to protect its
proprietary information through patent, trademark, copyright and trade secret
procedures. The Company currently has patents issued to it and numerous patent
applications pending in the United States and foreign countries. There is no
guarantee that the pending applications will mature into issued patents or that
the patents issued will be held valid or will provide competitive advantage to
the Company in the respective jurisdictions if challenged or circumvented. The
laws of some foreign countries do not extend the same level of protection for
intellectual property as do the laws of the United States. While the Company
believes that the protection of its intellectual property by patents,
copyrights and trade secrets has value, it also believes the continued
innovative skills, technological expertise and management abilities of its
employees underlies the success of the Company.
Because of the rapid rate of technological innovation in the
telecommunications industry, the high numbers of patents being applied for
internationally and delays in various patent offices, it is not possible to
anticipate whether each of the Company's products or any of their respective
components may be covered by a patent applied for or issued to a third party.
From time to time the Company receives notice from third parties regarding
patent or other intellectual property claims. If infringement is alleged, the
Company believes that, based upon industry practice, any necessary license or
rights from a third party may be obtained on terms that would not have a
material adverse effect on the Company's financial condition or its results of
operations. Nevertheless, there can be no assurance that the necessary licenses
would be available on acceptable terms, if at all, or that the Company would
prevail in any challenge by a third party. The inability to obtain certain
licenses or other rights or to obtain such licenses or rights on favorable
terms, or litigation arising out of such other parties' assertion, could have a
material adverse effect on the Company's business, operating results and
financial condition.
POSSIBLE VOLATILITY OF NOTES AND STOCK PRICE
The market price of the Common Stock has been, and may continue to be,
volatile. Factors such as new product announcements by the Company or its
competitors, quarterly fluctuations in the operating results of the Company,
its competitors and other technology companies may have a significant impact on
the market price of the Notes and the Common Stock into which the Notes are
convertible. In particular, if the Company were to report operating results
which did not meet the expectations of the research analysts, the market price
of the Notes and Common Stock could be materially adversely affected. From time
to time, the stock market has experienced extreme price and volume
fluctuations, which have particularly affected the market prices for many high
technology companies and which have often been unrelated to the operating
performance of the specific companies.
ABSENCE OF MARKET; TRANSFER RESTRICTIONS
There is no existing trading market for the Notes and there can be no
assurance as to the liquidity of any such market that may develop, the ability
of the holders of Notes to sell such securities, the price at which the holders
of Notes would be able to sell such securities or whether a trading market, if
it develops, will continue. If such market were to exist, the Notes could trade
at prices higher or lower than their principal amount, depending on many
factors, including prevailing interest rates, the market for similar securities
and the operating results of the Company. The Company does not intend to apply
for listing of the Notes on any securities exchange or for inclusion of the
Notes on any automated quotation system.
Each purchaser of Notes offered hereby in making its purchase will be
deemed to have made certain acknowledgments, representations and agreements.
Transfers of Notes and Common Stock issuable upon conversion of the Notes are
subject to certain restrictions.
10
<PAGE> 12
IMPACT OF REGULATION
The telecommunications industry is subject to regulation in the United
States and other countries. Federal and state regulatory agencies, including
the Federal Communications Commission and the various state Public Utility
Commissions and Public Service Commissions, regulate most of the Company's
domestic customers. In addition, the RHCs are restricted by the terms of the
Modified Final Judgment which resulted from the court-ordered divestiture of
the RHCs by AT&T Corporation, and which prohibited the RHCs from manufacturing
telecommunications equipment and providing interexchange or long-distance
services. In early 1996, the Telecommunications Act of 1996 (the "1996
Legislation") was passed. The 1996 Legislation contains provisions that permit
the RHCs, subject to satisfying certain conditions, to manufacture
telecommunications equipment. One or more RHCs may decide to manufacture
telecommunications equipment, to design and provide telecommunications
software, or to form alliances with other manufacturers, any of which could
result in increased competition for the Company and reduce the RHCs' and other
customers' purchases from the Company. There can be no assurance that
deregulation will continue in the future or that future deregulation will not
have a material adverse effect on the Company.
MULTI-YEAR AGREEMENTS
As part of its ongoing operations, the Company periodically enters
into agreements with customers which have a duration of greater than one year.
Certain of these agreements have included requirements to develop new
technologies, including hardware and software, as well as requirements to
provide installation of infrastructure systems. Certain of these agreements
also contain performance criteria, which, if not satisfied, could subject the
Company to substantial penalties, damages or non-payment, or could result in
termination of such agreements.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Securities offered hereby.
11
<PAGE> 13
RATIO OF EARNINGS TO FIXED CHARGES
The table below sets forth the ratio of earnings to fixed charges for
the Company for the periods indicated. For purposes of computing such ratio,
(i) earnings consist of income before income taxes plus fixed charges (other
than interest capitalized) and (ii) fixed charges consist of interest expense,
interest capitalized, amortization of debt issuance costs and discount and
premium, and the estimated interest portion of rental expense.
<TABLE>
<CAPTION>
Year Ended December 31, Nine Months
------------------------------------------------------------------------------------------ Ended
1992 1993 1994 1995 1996 September 30, 1997
---------------- --------------- ---------------- --------------- ---------------- ------------------
<S> <C> <C> <C> <C> <C>
1.6x 9.0x 19.6x 10.3x * 5.4x
----
</TABLE>
* Earnings were not sufficient to cover total fixed charges for the year
ended December 31, 1996 by approximately $14.7 million.
DESCRIPTION OF NOTES
The Notes were issued under an Indenture, dated as of August 12, 1997
(the "Indenture"), between the Company and The Bank of New York, as Trustee
(the "Trustee"). Wherever particular defined terms of the Indenture (including
the Notes and the various forms thereof) are referred to, such defined terms
are incorporated herein by reference. References in this section to the
"Company" are solely to DSC Communications Corporation and not to its
subsidiaries. The following summaries of certain provisions of the Indenture
do not purport to be complete and are subject to, and are qualified in their
entirety by reference to, the detailed provisions of the Notes and the
Indenture, including the definitions therein. A copy of the Indenture was
filed as an exhibit to the Company's Current Report on Form 8-K dated, August
26, 1997.
GENERAL
In August 1997, the Company issued an aggregated principal amount of
$400,000,000 of the Notes to the Initial Purchasers (as defined in the
Indenture) pursuant to exemptions from the Securities Act. The Notes were
offered and sold by the Initial Purchasers to Qualified Institutional Buyers
(as defined in the Indenture) in reliance on Rule 144A of the Securities Act
and in offshore transactions to non-U.S. persons in reliance on Regulation S
under the Securities Act.
The Notes are unsecured subordinated obligations of the Company, and
will mature on August 1, 2004. Payment in full of the principal amount of the
Notes will be due August 1, 2004. The Notes will bear interest at the rate of
7% per annum, payable semiannually on February 1 and August 1 of each year
(each, an "Interest Payment Date"), commencing on February 1, 1998.
The Notes are convertible into Common Stock initially at the rate of
20.1106 shares per $1,000 principal amount of Notes (equivalent to a conversion
price of $49.725 per share), subject to adjustment upon the occurrence of
certain events described below under "--Conversion Rights," at any time on or
after November 20, 1997 and prior to the close of business on August 1, 2004,
unless previously redeemed or repurchased in such cases, not after the close of
business on the fifth Trading Day (as defined below) prior to the date of
redemption or the second Trading Day prior to the date of repurchase. "Trading
Days" means (i) if the Common Stock is listed or admitted for trading on any
national securities exchange, days on which such national securities exchange
is open for business; (ii) if the Common Stock is quoted on the Nasdaq National
Market or any other system of automated dissemination of quotations of
securities prices, days on which trades may be effected through such system; or
(iii) if the Common Stock is not listed or admitted for trading on any national
securities exchange or quoted on the Nasdaq National Market or any other system
of automated
12
<PAGE> 14
dissemination of quotation of securities prices, days on which the Common Stock
is traded the regular way in the over- the-counter market and for which a
closing bid and a closing asked price for the Common Stock are available.
The Notes are redeemable at the option of the Company, on or after
August 1, 2000, in whole or in part, at the redemption prices set forth below
under "--Redemption," plus accrued interest to the redemption date.
CONVERSION RIGHTS
The holder of any Note will have the right, at the holder's option, to
convert any portion of the principal amount of a Note that is an integral
multiple of $1,000 (provided that the unconverted portion of such Note is an
integral multiple of $1,000), into shares of Common Stock at any time on or
after November 20, 1997 and prior to the close of business on August 1, 2004,
unless previously redeemed or purchased, at a conversion price of $49.725 per
share, subject to adjustment as described below. The right to convert a Note
called for redemption or delivered for repurchase will terminate at the close
of business on the fifth Trading Day prior to the redemption date for such Note
or the second Trading Day preceding the repurchase date, as the case may be.
The right of conversion attaching to any Note may be exercised by the
holder by delivering the Note to the specified office of a Conversion Agent,
accompanied by a duly signed and completed notice of conversion, a copy of
which may be obtained from any Conversion Agent. The conversion date will be
the date on which the Note and the duly signed and completed notice of
conversion are so delivered. As promptly as practicable on or after the
conversion date, the Company will issue and deliver to the Trustee a
certificate or certificates for the number of full shares of Common Stock
issuable upon conversion, together with payment in cash in lieu of any fraction
of a share; such certificate and payment will be sent by the Trustee to the
holder. Any Note surrendered for conversion during the period from the close of
business on any Regular Record Date (as defined below) to the opening of
business on the next succeeding Interest Payment Date shall be accompanied by
payment in New York Clearing House funds or other funds acceptable to the
Company of an amount equal to the interest payable on such Interest Payment
Date on the principal amount of such Notes being surrendered for conversion,
except that if any Note or portions thereof has been called for redemption or
repurchase and, as a result, the right to convert such Note called for
redemption or repurchase would terminate during the period between a Regular
Record Date and the corresponding Interest Payment Date, then the holder of
such Note who converts such Note or a portion thereof will be entitled to
receive the amount of interest so payable and shall not be required to repay
such interest upon surrender of such Note for conversion. In the case of any
Note that has been converted after any Regular Record Date and on or prior to
the next Interest Payment Date, interest whose Stated Maturity is on such
Interest Payment Date shall be payable on such Interest Payment Date
notwithstanding such conversion, and such interest shall be paid to the holder
of such Note on such Regular Record Date. As a result of the foregoing
provisions, except as provided above, holders that surrender Notes for
conversion on a date that is not an Interest Payment Date will not receive any
interest for the period from the Interest Payment Date next preceding the date
of conversion to the date of conversion or for any later period, even if the
Notes are surrendered after a notice of redemption (except for the payment of
interest on Notes called for redemption on a redemption date or to be
repurchased on a repurchase date between a Regular Record Date and the Interest
Payment Date to which it relates). No other payment or adjustment for interest,
or for any dividends in respect of Common Stock, will be made upon conversion.
Holders of Common Stock issued upon conversion will not be entitled to receive
any dividends payable to holders of Common Stock as of any record time before
the close of business on the conversion date. No fractional shares will be
issued upon conversion but, in lieu thereof, the Company will calculate an
appropriate amount to be paid in cash based on the market price of Common Stock
at the close of business on the day of conversion. "Regular Record Date" for
interest payable in respect of any Note on any Interest Payment Date means
January 15 or July 15 (whether or not a Business Day), as the case may be, next
preceding such Interest Payment Date.
With regard to a holder delivering a Note for conversion, the Company
will pay any taxes or duties in respect of the issue or delivery of Common
Stock on conversion, but the Company shall not be required to pay any tax or
duty which may be payable in respect of any transfer involved in the issue or
delivery of the Common Stock in a name other than that of the holder of the
Note. Certificates representing shares of Common Stock will not be issued or
delivered unless and until the person requesting such issuance has paid to the
Company the amount of any such tax or duty or has established to the
satisfaction of the Company that such tax or duty has been paid.
13
<PAGE> 15
The conversion price is subject to adjustment in certain events,
including: (a) dividends (and other distributions) payable in Common Stock on
shares of capital stock of the Company, (b) the issuance to all holders of
Common Stock of rights, options or warrants entitling them to subscribe for or
purchase Common Stock at less than the then current market price (determined as
provided in the Indenture) of Common Stock, (c) subdivisions, combinations and
reclassifications of Common Stock, (d) distributions to all holders of Common
Stock of evidences of indebtedness of the Company, shares of capital stock, or
property (including securities, but excluding those dividends, rights, options,
warrants and distributions referred to above, dividends and distributions paid
exclusively in cash and distributions upon mergers or consolidations to which
the next succeeding paragraph applies), (e) distributions consisting
exclusively of cash (excluding any cash portion of distributions referred to in
(d) above, or cash distributed upon a merger or consolidation to which the next
succeeding paragraph applies) to all holders of Common Stock in an aggregate
amount that, combined together with (i) the aggregate amount of any other such
all-cash distributions made within the preceding 12 months in respect of which
no adjustment has been made and (ii) the aggregate amount of any cash and the
fair market value of other consideration payable in respect of any tender offer
by the Company or any of its subsidiaries for Common Stock concluded within the
preceding 12 months in respect of which no adjustment has been made, exceeds
12.5% of the Company's market capitalization (being the product of the then
current market price of the Common Stock and the number of shares of Common
Stock then outstanding) on the record date for such distribution, and (f) the
successful completion of a tender offer made by the Company or any of its
subsidiaries for Common Stock which involves an aggregate consideration that,
together with (i) the aggregate of cash and other consideration payable in a
tender offer by the Company or any of its subsidiaries for Common Stock
expiring within the 12 months preceding the expiration of such tender offer in
respect of which no adjustment has been made and (ii) the aggregate amount of
any cash distributions to all holders of Common Stock within the 12 months
preceding the expiration of such tender offer in respect of which no
adjustments have been made, exceeds 12.5% of the Company's market
capitalization on the expiration of such tender offer. The Company may make
such reductions in the conversion price in addition to those required in the
foregoing provisions as it considers to be advisable in order to avoid or
diminish any income tax to holders of Common Stock resulting from any dividend,
distribution of stock or issuance of rights or warrants to purchase or
subscribe for stock or from any event treated as such for income tax purposes.
No adjustment of the conversion price will be required to be made until the
cumulative adjustments amount to 1.0% or more of the conversion price. The
Company will compute any adjustments to the conversion price pursuant to this
paragraph and will give notice of any such adjustments by mail to holders of
the Notes. See "--Notices."
In case of any consolidation or merger of the Company with or into
another Person or any merger of another Person into the Company (other than a
merger that does not result in any reclassification, conversion, exchange or
cancellation of the Common Stock) or any sale or transfer of all or
substantially all of the assets of the Company, each Note then outstanding
will, without the consent of the holder of any Note, become convertible only
into the kind and amount of securities, cash and other property receivable upon
such consolidation, merger, sale or transfer by a holder of the number of
shares of Common Stock into which such Note was convertible immediately prior
thereto (assuming such holder of Common Stock failed to exercise any rights of
election and that such Note was then convertible).
If at any time the Company makes a distribution of property to its
stockholders that would be taxable to such stockholders as a dividend for
federal income tax purposes (e.g., distributions of evidences of indebtedness
or assets of the Company, but generally not stock dividends on Common Stock or
rights to subscribe for Common Stock) and, pursuant to the anti-dilution
provisions of the Indenture, the number of shares into which Notes are
convertible is increased, such increase may be deemed for federal income tax
purposes to be the payment of a taxable dividend to holders of Notes. See
"United States Taxation--United States Holders--Dividends."
SUBORDINATION
The payment of the principal of, premium, if any, and interest on, the
Notes will be subordinated in right of payment to the extent set forth in the
Indenture to the prior payment in full of all Senior Indebtedness of the
Company. Senior Indebtedness means the principal of (and premium, if any) and
interest (including all interest accruing subsequent to the filing of a
petition initiating any proceeding under city, state, federal or foreign
bankruptcy laws, whether or not allowable as a claim in any such proceeding)
on, and all fees and other amounts payable in connection with, the following,
whether absolute or contingent, secured or unsecured, due or to become due,
outstanding on the date of the
14
<PAGE> 16
Indenture or thereafter created, incurred or assumed: (a) indebtedness of the
Company evidenced by credit or loan agreements, notes, bonds, debentures, or
other written obligations, (b) all obligations of the Company for money
borrowed, (c) all obligations of the Company evidenced by a note or similar
instrument given in connection with the acquisition of any businesses,
properties or assets of any kind, (d) obligations of the Company as lessee
under leases required to be capitalized on the balance sheet of the lessee
under generally accepted accounting principles, (e) obligations of the Company
under interest rate and currency swaps, caps, floors, collars, hedge
agreements, forward contracts or similar agreements or arrangements intended to
protect the Company against fluctuations in interest or currency exchange
rates, (f) all obligations of the type referred to in clauses (a) through (e)
above of another person and all dividends of another person, the payment of
which, in either case, the Company has assumed or guaranteed, or for which the
Company is responsible or liable, directly or indirectly, jointly or severally,
as obligor, guarantor or otherwise, or which is secured by a lien on property
of the Company, and (g) renewals, extensions, modifications, replacements,
restatements and refundings of, or any indebtedness or obligation issued in
exchange for, any such indebtedness or obligation described in clauses (a)
through (f) of this paragraph; provided, however, that Senior Indebtedness
shall not include the Notes or any such indebtedness or obligation (a) if the
terms of such indebtedness or obligation (or the terms of the instrument under
which, or pursuant to which it is issued) provide that such indebtedness or
obligation is not superior in right of payment to the Notes, (b) if such
indebtedness or obligation is non-recourse to the Company or (c) if such
indebtedness or obligation is a conditional sale contract or any account
payable or any other indebtedness created or assumed by the Company in the
ordinary course of business in connection with the obtaining of inventories or
services.
Upon any payment or distribution of assets to creditors upon any
liquidation, dissolution, winding up, reorganization, assignment for the
benefit of creditors, marshaling of assets or any bankruptcy, insolvency or
similar proceedings of the Company, the holders of all Senior Indebtedness will
first be entitled to receive payment in full of all amounts due or to become
due thereon before the holders of the Notes will be entitled to receive any
payment in respect of the principal of or premium, if any, or interest on the
Notes. In the event of the acceleration of the maturity of any Notes, the
holders of all Senior Indebtedness outstanding at the time of such acceleration
will first be entitled to receive payment in full of all amounts due or to
become due thereon before the holders of the Notes will be entitled to receive
any payment upon the principal of or premium, if any, or interest on the Notes.
No payments on account of principal, premium, if any, or interest in respect of
the Notes may be made if there shall have occurred and be continuing a default
in any payment with respect to Senior Indebtedness, or an event of default with
respect to any Senior Indebtedness permitting the holders thereof to accelerate
the maturity thereof, or if any judicial proceeding shall be pending with
respect to any such default. For purposes of the subordination provisions, the
payment, issuance or delivery of cash, property or securities (other than
"junior securities") upon conversion of a Note will be deemed to constitute
payment on account of the principal of such Note.
By reason of such subordination, in the event of insolvency, creditors
of the Company who are holders of Senior Indebtedness may recover more,
ratably, than the holders of the Notes, and such subordination may result in a
reduction or elimination of payments to the holders of the Notes.
As of September 30, 1997, the aggregate amount of Senior Indebtedness
outstanding was approximately $356.2 million, which includes indebtedness of
the subsidiaries of the Company guaranteed by the Company. In addition, the
Notes will be effectively subordinated to all indebtedness and other
liabilities (including trade payables and lease obligations) of the Company's
subsidiaries, because any right of the Company to receive any assets of its
subsidiaries upon their liquidation or reorganization (and the subsequent right
of the holders of the Notes to participate in those assets) will be effectively
subordinated to the claims of that subsidiary's creditors (including trade
creditors), except to the extent that the Company itself is recognized as a
creditor of such subsidiary, in which case the claims of the Company would
still be subordinate to any security interest in the assets of such subsidiary
and any indebtedness of such subsidiary senior to that held by the Company.
The Indenture does not limit the Company's ability to incur Senior
Indebtedness or any other indebtedness nor does the Indenture limit the ability
of the Company's subsidiaries to incur additional indebtedness or other
liabilities.
15
<PAGE> 17
REDEMPTION
The Notes may not be redeemed at the option of the Company prior to
August 1, 2000. On and after August 1, 2000, the Notes may be redeemed, in
whole or in part, at the option of the Company, at the redemption prices
specified below, upon not less than 30 days' nor more than 60 days' prior
notice as provided under "--Notices" below.
The redemption price (expressed as a percentage of principal amount)
is as follows for the 12-month periods beginning on August 1 of the following
years:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
----- ----------
<S> <C>
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104.0
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103.0
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102.0
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101.0
</TABLE>
and thereafter is equal to 100% of the principal amount, in each case together
with accrued interest to the date of redemption.
No sinking fund is provided for the Notes.
PAYMENT AND CONVERSION
The principal of the Notes will be payable in U.S. dollars, against
surrender thereof at the Corporate Trust Office of the Trustee in the Borough
of Manhattan, The City of New York, or at such other office or agency of the
Company as may be designated by it for such purpose, in U.S. currency by U.S.
dollar check drawn on, or by transfer to a U.S. dollar account (such a transfer
to be made only to a holder of an aggregate principal amount of Notes in excess
of U.S.$2,000,000 and only if such holder shall have furnished wire
instructions in writing to the Trustee no later than 15 days prior to the
relevant payment date) maintained by the holder with a bank in the Borough of
Manhattan, The City of New York. Notes will bear interest at a rate of 7% per
annum from August 12, 1997 or from the most recent Interest Payment Date to
which interest has been paid or provided for, payable semi-annually on February
1 and August 1 of each year, commencing February 1, 1998, to the Person in
whose name the Note (or any predecessor Note) is registered at the close of
business on the preceding January 15 or July 15, as the case may be. Payment of
interest on a Note may be made by U.S. dollar check drawn on a bank in the
Borough of Manhattan, The City of New York, mailed to the address of the person
entitled thereto as such address shall appear in the Security Registrar (as
defined), or, upon written application by the holder to the Security Registrar
setting forth instructions not later than the relevant Record Date, by transfer
to a U.S. dollar account (such a transfer to be made only to a holder of an
aggregate principal amount of Notes in excess of U.S. $2,000,000) maintained by
the holder with a bank in the Borough of Manhattan, The City of New York. No
transfer to a dollar account will be made unless the Trustee has received
written wire instructions not less than 15 days prior to the relevant payment
date.
Any payment on the Notes due on any day which is not a Business Day
need not be made on such day, but may be made on the next succeeding Business
Day with the same force and effect as if made on such due date, and no interest
shall accrue on such payment for the period from and after such date. "Business
Day," when used with respect to any place of payment, place of conversion or
any other place, as the case may be, means each Monday, Tuesday, Wednesday,
Thursday and Friday which is not a day on which banking institutions in such
place of payment, place of conversion or other place, as the case may be, are
authorized or obligated by law or executive order to close.
Notes may be surrendered for conversion at the Corporate Trust Office
of the Trustee, or at such other office or agency of the Company, subject to
any laws or regulations applicable thereto and subject to the right of the
Company to terminate the appointment of any Conversion Agent as may be
designated by it for such purpose in the Borough of Manhattan, The City of New
York, or at such other offices or agencies as the Company may designate. Notes
surrendered for conversion must be accompanied by appropriate notices and any
payments in respect of interest or taxes, as applicable, as described above
under "--Conversion Rights".
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The Company has initially appointed the Trustee as Paying Agent and
Conversion Agent. The Company may at any time terminate the appointment of any
Paying Agent or Conversion Agent and appoint additional or other Paying Agents
and Conversion Agents, provided that until the Notes have been delivered to the
Trustee for cancellation, or monies sufficient to pay the principal of,
premium, if any, and interest on the Notes have been made available for payment
and either paid or returned to the Company as provided in the Indenture, it
will maintain an office or agency in the Borough of Manhattan, The City of New
York for payments with respect to the Notes and for the surrender of Notes for
conversion. Notice of any such termination or appointment and of any change in
the office through which any Paying Agent or Conversion Agent will act will be
given in accordance with "--Notices" below.
All monies deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of principal of, premium, if any,
or interest on any Notes, which remain unclaimed at the end of two years after
such payment has become due and payable will be paid to the Company, and the
holder of such Note appertaining thereto will thereafter, as an unsecured
general creditor, look only to the Company for payment thereof.
REPURCHASE AT OPTION OF HOLDERS UPON A CHANGE IN CONTROL
If a Change in Control (as defined below) occurs, each holder of Notes
shall have the right, at the holder's option, to require the Company to
repurchase all of such holder's Notes, or any portion of the principal amount
thereof that is equal to $1,000 or an integral multiple of $1,000 in excess
thereof, on the date (the "Repurchase Date") that is 45 days after the date of
the Company Notice (as defined below), at a price equal to 100% of the
principal amount of the Notes to be repurchased (the "Repurchase Price"),
together with interest accrued to the Repurchase Date.
The Company may, at its option, in lieu of paying the Repurchase Price
in cash, pay the Repurchase Price in Common Stock valued at 95% of the average
of the closing prices per share of the Common Stock for the five consecutive
Trading Days ending on and including the third Trading Day preceding the
Repurchase Date; provided, that payment may not be made in Common Stock unless
such stock is listed on a national securities exchange or traded on the Nasdaq
National Market at the time of payment.
On or before the 30th day after the occurrence of a Change in Control,
the Company will give to all holders of the Notes notice, as provided in the
Indenture (a "Company Notice"), of the occurrence of such Change in Control and
of the repurchase right arising as a result thereof. The Company Notice shall
be given in accordance with "--Notices" below. To exercise the repurchase
right, a holder of Notes must deliver to the Trustee or any Paying Agent on or
before the 30th day after the date of the Company Notice irrevocable written
notice of the holder's exercise of such right, together with the Notes. At
least two Trading Days prior to the Repurchase Date, the Company must publish a
Company Notice in the manner described above specifying whether the Company
will pay the Repurchase Price in cash or in Common Stock.
A "Change in Control" shall be deemed to have occurred at such time,
after the original issuance of the Notes, of:
(i) the acquisition by any Person of beneficial ownership,
directly or indirectly, through a purchase, merger or other
acquisition transaction or series of transactions, of shares of
capital stock of the Company entitling such Person to exercise 50% or
more of the total voting power of all shares of capital stock of the
Company entitled to vote generally in elections of directors (any
shares of voting stock of which such Person is the beneficial owner
that are not then outstanding being deemed outstanding for purposes of
calculating such percentage), other than any such acquisition by the
Company, any subsidiary of the Company or any employee benefit plan of
the Company existing on the date of the Indenture; or
(ii) any consolidation or merger of the Company with or into
any other Person, any merger of another person with or into the
Company, or any conveyance, sale, transfer or lease of all or
substantially all of the assets of the Company to another Person
(other than (a) any such transaction (x) which does not result in any
reclassification, conversion, exchange or cancellation of outstanding
shares of capital stock of the Company or (y) pursuant to which
holders of the Common Stock immediately prior to such transaction have
the
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entitlement to exercise, directly or indirectly, 50% or more of the
total voting power of all shares of capital stock entitled to vote
generally in the election of directors of the continuing or surviving
Person immediately after such transaction and (b) any merger which is
effected solely to change the jurisdiction of incorporation of the
Company and results in a reclassification, conversion or exchange of
outstanding shares of Common Stock into solely shares of common
stock);
provided, however, that a Change in Control shall not be deemed to have
occurred if either (a) the closing price per share of the Common Stock for any
five Trading Days within the period of 10 consecutive Trading Days ending
immediately after the later of the Change in Control or the public announcement
of the Change in Control (in the case of a Change in Control under clause (i)
above) or the 10 consecutive Trading Days ending immediately prior to the date
of the Change in Control (in the case of a Change in Control under clause (ii)
above) shall equal or exceed 105% of the conversion price of the Notes in
effect on each such Trading Day, or (b) all the consideration (excluding cash
payments for fractional shares) to be paid for the Common Stock in the
transaction or transactions constituting the Change in Control consists of
shares of common stock traded on a national securities exchange or quoted on
the Nasdaq National Market and as a result of such transaction or transactions
the Notes become convertible solely into such common stock. "Beneficial owner"
shall be determined in accordance with Rule 13d-3 promulgated by the Commission
under the Exchange Act, and the term "Person" shall include any syndicate or
group deemed to be a "person" under Section 13(d)(3) of the Exchange Act.
Failure by the Company to repurchase the Notes when required would
result in an Event of Default with respect to the Notes whether or not such
repurchase is permitted by the subordination provisions. See "--Events of
Default."
Rule 13e-4 under the Exchange Act requires the dissemination of
certain information to Securityholders in the event of an issuer tender offer
and may apply in the event that the repurchase option becomes available to
holders of the Notes. The Company will comply with this rule to the extent
applicable at that time.
The Company may, to the extent permitted by applicable law, at any
time purchase Notes in the open market or by tender at any price or by private
agreement. Any Note so purchased by the Company may, to the extent permitted
by applicable law and subject to restrictions contained in the Purchase
Agreement, dated August 7, 1997, between the Company and the Initial
Purchasers, be re-issued or resold or may, at the Company's option, be
surrendered to the Trustee for cancellation. Any Notes surrendered as
aforesaid may not be re-issued or resold and will be canceled promptly.
The foregoing provisions would not necessarily afford holders of the
Notes protection in the event of highly leveraged or other transactions
involving the Company that may adversely affect holders.
MERGERS AND SALES OF ASSETS BY THE COMPANY
The Company may not consolidate with or merge into any other Person or
convey, transfer or lease all its properties and assets substantially as an
entirety to any Person, and the Company shall not permit any Person to
consolidate with or merge into the Company or convey, transfer or lease all or
substantially all of its properties and assets to the Company unless (a) in the
case the Company shall consolidate with or merge into another Person or convey,
transfer or lease its properties and assets substantially as an entirety to any
Person, the Person formed by such consolidation or into which the Company is
merged, the Person which acquires by conveyance or transfer, or which leases
the properties and assets of the Company substantially as an entirety, shall be
a corporation, limited liability company, partnership or trust, shall be
organized and validly existing under the laws of the United States of America,
any State thereof or the District of Columbia and shall expressly assume by an
indenture supplemental hereto, executed and delivered to the Trustee, in form
satisfactory to the Trustee, the payment of the principal of, premium, if any,
and interest on the Notes and the performance or observance of every covenant
of the Indenture, on the part of the Company to be performed or observed and
shall have provided for conversion rights in accordance with the Indenture, (b)
immediately after giving effect to such transaction, no Event of Default, and
no event which, after notice or lapse of time or both, would become an Event of
Default, shall have occurred and be continuing and (c) the Company has
delivered to the Trustee an officer's certificate and an opinion of counsel,
each stating that such consolidation, merger, conveyance,
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transfer or lease and supplemental indenture (if required) complies with, among
other things, the requirements set forth in this paragraph.
EVENTS OF DEFAULT
The following are Events of Default under the Indenture: (a) failure
to pay principal of or premium, if any, on any Note at its maturity, whether or
not such payment is prohibited by the subordination provisions of the
Indenture; (b) failure to pay any interest on any Note when due, continuing for
30 days, whether or not such payment is prohibited by the subordination
provisions of the Indenture; (c) failure to perform, or the breach of, any
covenant or warranty of the Company in the Indenture, continuing for 60 days
after written notice to the Company by the Trustee as provided in the
Indenture; (d) failure to pay when due the principal of, or acceleration of,
any indebtedness for money borrowed by the Company in excess of $20,000,000 if
such indebtedness is not discharged, or such acceleration is not annulled,
within 30 days after written notice as provided in the Indenture; and (e)
certain events of bankruptcy, insolvency or reorganization. Subject to the
provisions of the Indenture relating to the duties of the Trustee in case an
Event of Default shall occur and be continuing, the Trustee is under no
obligation to exercise any of its rights or powers under the Indenture at the
request or direction of any of the holders, unless such holders shall have
offered to the Trustee reasonable indemnity. Subject to such provisions for the
indemnification of the Trustee, the holders of a majority in aggregate
principal amount of the Outstanding Notes will have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee or exercising any trust or power conferred on the Trustee.
If an Event of Default shall occur and be continuing, either the
Trustee or the holders of at least 25% in principal amount of the Outstanding
Notes may accelerate the maturity of all Notes; provided, however, that after
such acceleration, but before a judgment or decree based on acceleration, the
holders of a majority in aggregate principal amount of Outstanding Notes may,
under certain circumstances, rescind and annul such acceleration if all Events
of Default, other than the nonpayment of accelerated principal, have been cured
or waived as provided in the Indenture. For information as to waiver of
defaults, see "--Meetings, Modification and Waiver."
No holder of any Note will have any right to institute any proceeding
with respect to the Indenture or for any remedy thereunder, unless such holder
shall have previously given to the Trustee written notice of a continuing Event
of Default and unless also the holders of not less than 25% in principal amount
of the Outstanding Notes shall have made written request, and offered
reasonable indemnity, to the Trustee to institute such proceeding as trustee,
and the Trustee shall not have received from the holders of a majority in
principal amount of the Outstanding Notes a direction inconsistent with such
request and shall have failed to institute such proceeding within 60 days.
However, such limitations do not apply to a suit instituted by a holder of a
Note for the enforcement of payment of the principal of, premium, if any, or
interest on such Note on or after the respective Stated Maturities expressed in
such Note or of the right to convert such Note in accordance with the
Indenture.
The Company will be required to furnish to the Trustee annually a
statement as to the performance by the Company of certain of its obligations
under the Indenture and as to any default in such performance.
MEETINGS, MODIFICATION AND WAIVER
The Indenture contains provisions for convening meetings of the
holders of Notes to consider matters affecting their interests.
Modifications and amendments of the Indenture may be made, and certain
past defaults by the Company may be waived, either (i) with the written consent
of the holders of not less than a majority in aggregate principal amount of the
Notes at the time Outstanding or (ii) by the adoption of a Resolution, at a
meeting of holders of the Notes at which a quorum is present, by the holders of
at least 66 2/3% in aggregate principal amount of the Outstanding Notes
represented at such meeting or by a majority in aggregate principal amount of
the Notes at the time Outstanding. However, no such modification or amendment
may, without the consent of the holder of each Outstanding Note affected
thereby, (a) change the Stated Maturity of the principal of, or any installment
of interest on, any Note, (b) reduce the
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principal amount or the rate of interest payable on any Note, (c) reduce the
amount payable upon redemption or repurchase, (d) modify the provisions with
respect to the repurchase right of the holders in a manner adverse to the
holders, (e) change the coin or currency for payment of principal of, premium,
if any, interest on, or any other amount payable on, any Note, (f) impair the
right to institute suit for the enforcement of any payment in respect of any
Note on or after the Stated Maturity thereof (or, in the case of redemption or
any repurchase after the redemption date or Repurchase Date, as the case may
be), (g) modify the obligation of the Company to maintain an office or agency
in New York City, (h) modify the subordination provisions in a manner adverse
to the holders of the Notes, (i) reduce the above-stated percentage of
Outstanding Notes necessary to modify or amend the Indenture, (j) reduce the
percentage of aggregate principal amount of Outstanding Notes necessary for
waiver of compliance with certain provisions of the Indenture or for waiver of
certain defaults, (k) reduce the percentage in aggregate principal amount of
Notes Outstanding required for the adoption of a resolution or the quorum
required at any meeting of holders of Notes at which a resolution is adopted,
(l) adversely affect the right to convert any Note except as permitted as
described under "--Conversion Rights," (m) modify the obligation of the Company
to deliver information required under Rule 144A to permit resales of Notes and
Common Stock issuable upon conversion thereof in the event the Company ceases
to be subject to certain reporting requirements under the United States
securities laws, (n) modify the provisions described under "--Repurchase at
Option of Holders Upon a Change in Control" in a manner adverse to the holders
or (o) modify certain of the Company's obligations under the Registration
Rights Agreement or its obligation to pay additional interest upon any failure
to comply with such obligations. The quorum at any meeting called to adopt a
resolution will be persons holding or representing a majority in aggregate
principal amount of the Notes at the time Outstanding and, at any reconvened
meeting adjourned for lack of a quorum, 25% of such aggregate principal amount.
The holders of a majority in aggregate principal amount of the
Outstanding Notes may waive compliance by the Company with certain restrictive
provisions of the Indenture. The holders of (i) 66 2/3% in aggregate principal
amount of the Outstanding Securities represented at a meeting of holders of
Outstanding Securities at which a quorum is present or (ii) a majority in
aggregate principal amount of the Outstanding Notes may waive any past default
under the Indenture, except a default in the payment of principal, premium, if
any, or interest or a default with respect to a covenant or condition that may
only be modified or amended with the consent of each holder.
REGISTRATION RIGHTS
This summary of certain provisions of the Registration Rights
Agreement, dated as of August 12, 1997, by and between the Company and the
Initial Purchasers (the "Registration Rights Agreement") does not purport to be
complete and is subject to, and qualified in its entirety by reference to, all
the provisions of the Registration Rights Agreement. In the Registration
Rights Agreement the Company agreed to, among other things, (i) file with the
Commission within 90 days after the date of original issuance of the Notes, a
Registration Statement (the "Shelf Registration Statement"), of which this
Prospectus is a part, covering resales of the Registrable Securities (as
defined under "Description of Registration Rights Agreement") and (ii) use its
reasonable best efforts to cause the Shelf Registration Statement to be
declared effective under the Securities Act within 90 calendar days after the
date of such filing. See "Description of Registration Rights Agreement."
The Company is obligated to keep the Shelf Registration Statement
effective until the earliest of (i) the expiration of two years from the time
the Shelf Registration Statement is declared effective, (ii) such time as all
Registrable Securities have been sold pursuant to the Shelf Registration
Statement, transferred pursuant to Rule 144 under the Securities Act or
otherwise transferred in a manner that results in a new security not subject to
transfer restrictions under the Securities Act being delivered pursuant to the
Indenture and (iii) such time as, in the opinion of counsel, all of the
Registrable Securities held by non-affiliates of the Company are eligible for
resale pursuant to Rule 144(k) under the Securities Act and the legends
described have been removed from such Registrable Securities. In the event
that, during the period that the Company is required to maintain the
effectiveness of the Shelf Registration Statement, the Shelf Registration
Statement ceases to be effective (or the holders are otherwise prevented or
restricted by the Company from effecting sales pursuant thereto) for more than
60 days, whether or not consecutive, during any 12- month period (an
"Effectiveness Failure"), then the interest rate borne by the Notes will
increase by an additional one- half of one percent (0.50%) per annum from the
61st day of the applicable 12-month period such Shelf Registration Statement
ceases to be effective (or the holders are otherwise prevented or restricted by
the Company from effecting sales
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pursuant thereto) until such time as the Effectiveness Failure is cured. For
the purpose of determining an Effectiveness Failure, days on which the Company
has been obligated to pay additional interest in accordance with the foregoing
in respect of a prior Effectiveness Failure within the applicable 12-month
period will not be included. The Registration Rights Agreement provides that
the additional interest described in this paragraph with respect to a
Registration Default will be the exclusive monetary remedy available to holders
of Notes for such Registration Default.
TRANSFER AND EXCHANGE
At the option of the holder upon written request, and subject to the
terms of the Indenture, any Note will be exchangeable at any time into an equal
aggregate principal amount of Notes of different authorized denominations
provided that any applicable transfer restrictions are satisfied.
Notes may be presented for registration of transfer (with the form of
transfer endorsed thereon duly executed) or exchange, at the office of any
transfer agent (the "Security Registrar"), without service charge but, in the
case of a transfer, upon payment of any taxes and other governmental charges as
described in the Indenture. Any registration of transfer or exchange will be
effected upon the transfer agent or the Security Registrar, as the case may be,
being satisfied with the documents of title and identity of the person making
the request, and subject to such reasonable regulations as the Company may from
time to time agree upon with the transfer agents and the Security Registrar,
all as described in the Indenture. Subject to the applicable transfer
restrictions, Notes may be transferred in whole or in part in authorized
denominations.
The Company has initially appointed the Trustee as Security Registrar
and transfer agent, acting through its Corporate Trust Office in the Borough of
Manhattan, The City of New York. The Company reserves the right to vary or
terminate the appointment of the Security Registrar or of any transfer agent or
to appoint additional or other transfer agents or to approve any change in the
office through which any Security Registrar or any transfer agent acts,
provided that there will at all times be a Security Registrar in and a transfer
agent in the Borough of Manhattan, The City of New York.
In the event of a redemption of any Notes for any of the reasons set
forth under "--Redemption," the Company will not be required (a) to register
the transfer or exchange of the Notes for a period of 15 days immediately
preceding the date notice is given identifying the serial numbers of the Notes
called for such redemption or (b) to register the transfer or exchange of any
Note, or portion thereof, called for redemption.
PURCHASE AND CANCELLATION
The Company or any subsidiary may at any time and from time to time
purchase Notes at any price in the open market or otherwise.
All Securities surrendered for payment, redemption, repurchase,
registration of transfer or exchange or conversion shall, if surrendered to any
Person other than the Trustee, be delivered to the Trustee. All Securities so
delivered to the Trustee shall be canceled promptly by the Trustee. No
Securities shall be authenticated in lieu of or in exchange for any Securities
canceled as provided in the Indenture.
TITLE
With respect to any Note, the Company, the Trustee, the Paying Agent
and any other agent of the Company or the Trustee may treat the Person in whose
name such Note is registered as the owner thereof for the purpose of receiving
payment thereof and for all other purposes whatsoever.
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NOTICES
Notices to holders of Notes will be given by mail to the addresses of
such holders as they appear in the Security Register. Such notices will be
deemed to have been given when mailed.
Notice of a redemption of Notes will be given at least once not less
than 30 nor more than 60 days prior to the redemption date (which notice shall
be irrevocable) and will specify the redemption date.
REPLACEMENT OF NOTES
Notes that become mutilated, destroyed, stolen or lost will be
replaced by the Company at the expense of the holder upon delivery to the
Trustee of the mutilated Notes or evidence of the loss, theft or destruction
thereof satisfactory to the Company and the Trustee. In the case of a lost,
stolen or destroyed Note, indemnity satisfactory to the Trustee and the Company
may be required at the expense of the holder of such Note before a replacement
Note will be issued.
PAYMENT OF STAMP AND OTHER TAXES
The Company shall pay all stamp and other duties, if any, which may be
imposed by the United States or any political subdivision thereof or taxing
authority thereof or therein with respect to the issuance, transfer, exchange
or conversion of the Notes. The Company will not be required to make any
payment with respect to any other tax, assessment or governmental charge
imposed by any government or any political subdivision thereof or taxing
authority therein.
GOVERNING LAW
The Indenture and the Notes are governed by and construed in
accordance with the laws of the State of New York, United States of America.
THE TRUSTEE
In case an Event of Default shall occur (and shall not be cured), the
Trustee will be required to use the degree of care of a prudent person in the
conduct of his own affairs in the exercise of its powers. Subject to such
provisions, the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request of any of the holders of
Notes, unless they shall have offered to the Trustee reasonable security or
indemnity.
UNITED STATES TAXATION
The following is a summary of certain United States federal income and
estate tax considerations relating to the purchase, ownership and disposition
of the Notes and of Common Stock into which Notes may be converted, but does
not purport to be a complete analysis of all the potential tax considerations
relating thereto. This summary is based on laws, regulations, rulings and
decisions now in effect (or, in the case of certain United States Treasury
Regulations ("Treasury Regulations"), now in proposed form), all of which are
subject to change, possibly on a retroactive basis. This summary deals only
with holders that will hold Notes and Common Stock into which Notes may be
converted as "capital assets" (within the meaning of Section 1221 of the
Internal Revenue Code of 1986, as amended (the "Code")) and does not address
tax considerations applicable to investors that may be subject to special tax
rules, such as banks, tax-exempt organizations, insurance companies, dealers in
securities or currencies, persons that will hold Notes as a position in a
hedging transaction, "straddle" or "conversion" transaction for tax purposes,
or persons that have a "functional currency" other than the U.S. dollar. This
summary discusses the tax considerations applicable to the initial purchasers
of the Notes who purchase the Notes at their "issue price" (as defined in
Section 1273 of the Code) and does not discuss the tax considerations
applicable to subsequent purchasers of the Notes. INVESTORS CONSIDERING THE
PURCHASE OF NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE
APPLICATION OF THE UNITED STATES FEDERAL INCOME AND ESTATE TAX LAWS TO THEIR
PARTICULAR
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SITUATIONS AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE,
LOCAL OR FOREIGN TAXING JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY.
UNITED STATES HOLDERS
As used herein, the term "United States Holder" means the beneficial
owner of a Note or Common Stock that for United States federal income tax
purposes is (i) a citizen or resident of the United States, (ii) treated as a
domestic corporation or domestic partnership, (iii) an estate the income of
which is subject to United States federal income tax without regard to its
source or (iv) a trust if a United States court is able to exercise primary
supervision over administration of the trust and one or more United States
fiduciaries have authority to control all substantial decisions of the trust.
Payment of Interest
Interest on a Note generally will be includible in the income of a
United States Holder as ordinary income at the time such interest is received
or accrued, in accordance with such holder's method of accounting for United
States federal income tax purposes.
Sale, Exchange or Redemption of the Notes
Upon the sale, exchange or redemption of a Note, a United States
Holder generally will recognize capital gain or loss equal to the difference
between (i) the amount of cash proceeds and the fair market value of any
property received on the sale, exchange or redemption (except to the extent
such amount is attributable to accrued interest income, which is taxable as
ordinary income) and (ii) such holder's adjusted tax basis in the Note. A
United States Holder's adjusted tax basis in a Note generally will equal the
cost of the Note to such holder, less any principal payments received by such
holder. Such capital gain will be taxed at a lower rate if the United States
Holder's holding period in the Note is more than one year at the time of sale,
exchange or redemption. The capital gain rate may be further reduced if the
United States Holder's holding period in the Note is more than 18 months.
Conversion of the Notes
A United States Holder generally will not recognize any income, gain
or loss upon conversion of a Note into Common Stock except with respect to cash
received in lieu of a fractional share of Common Stock. Such United States
Holder's tax basis in the Common Stock received on conversion of a Note will be
the same as such holder's adjusted tax basis in the Note at the time of
conversion (reduced by any basis allocable to a fractional share interest), and
the holding period for the Common Stock received on conversion will generally
include the holding period of the Note converted.
Cash received in lieu of a fractional share of Common Stock upon
conversion will be treated as a payment in exchange for the fractional share of
Common Stock. Accordingly, the receipt of cash in lieu of a fractional share of
Common Stock generally will result in capital gain or loss (measured by the
difference between the cash received for the fractional share and the United
States Holder's adjusted tax basis in the fractional share).
Dividends
Dividends paid on the Common Stock generally will be includible in the
income of a United States Holder as ordinary income to the extent of the
Company's current or accumulated earnings and profits.
If at any time (i) the Company makes a distribution of cash or
property to its stockholders or purchases Common Stock and such distribution or
purchase would be taxable to such stockholders as a dividend for United States
federal income tax purposes (e.g., distributions of property would include
distributions of evidences of indebtedness or assets of the Company, but
generally not stock dividends or rights to subscribe for Common Stock) and,
pursuant to the anti-dilution provisions of the Indenture, the conversion
price of the Notes is decreased, or (ii) the conversion price of the Notes is
decreased at the discretion of the Company, such decrease in conversion price
may be deemed to be the payment
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of a taxable dividend to holders of Notes (pursuant to Section 305 of the
Code). Holders of Notes could therefore have taxable income as a result of an
event pursuant to which they received no cash or property.
Sale of Common Stock
Upon the sale or exchange of Common Stock, a United States Holder
generally will recognize capital gain or loss equal to the difference between
(i) the amount of cash and the fair market value of any property received upon
the sale or exchange and (ii) such holder's adjusted tax basis in the Common
Stock. Such capital gain will be taxed at a lower rate if the United States
Holder's holding period in the Common Stock is more than one year at the time
of the sale or exchange. The capital gains rate may be further reduced if the
United States Holder's holding period in the Common Stock is more than 18
months. A United States Holder's basis and holding period in Common Stock
received upon conversion of a Note are determined as discussed above under
"--Conversion of the Notes."
Information Reporting and Backup Withholding Tax
In general, information reporting requirements will apply to payments
of principal, premium, if any, and interest on a Note, payments of dividends on
Common Stock, payments of the proceeds of the sale of a Note and payments of
the proceeds of the sale of Common Stock to certain non-corporate United States
Holders, and a 31% backup withholding tax may apply to such payments if the
United States Holder (i) fails to furnish or certify his correct taxpayer
identification number to the payor in the manner required, (ii) is notified by
the Internal Revenue Service (the "IRS") that he has failed to report payments
of interest and dividends properly, or (iii) under certain circumstances, fails
to certify that he has not been notified by the IRS that he is subject to
backup withholding for failure to report interest and dividend payments. Any
amounts withheld under the backup withholding rules from a payment to a United
States Holder will be allowed as a credit against such holder's United States
federal income tax liability and may entitle the United States Holder to a
refund provided that the required information is furnished to the IRS.
NON-UNITED STATES HOLDERS
As used herein, the term "Non-United States Holder" means any
beneficial owner of a Note or Common Stock that is not a United States Holder.
Payment of Interest
Payment of interest on a Note by the Company or any Paying Agent to a
Non-United States Holder will qualify for the "portfolio interest exemption"
and therefore will not be subject to United States federal income tax or
withholding tax, provided that such interest income is not effectively
connected with a United States trade or business of the Non-United States
Holder and provided that the Non-United States Holder (i) does not actually or
constructively own 10% or more of the combined voting power of all classes of
stock of the Company entitled to vote, (ii) is not a controlled foreign
corporation related to the Company actually or constructively through stock
ownership, (iii) is not a bank receiving interest on a loan entered into in the
ordinary course of business, (iv) is not, and does not receive payments in an
account, within a country designated by the IRS as not qualifying for the
portfolio interest exemption (it being understood that, although the IRS has
not at the current time made such designation or given any public notice it
intends to do so in the future, it has the statutory authority so to do) and
(v) either (a) provides a Form W-8 (or a suitable substitute form) signed under
penalties of perjury that includes its name and address and certifies as to its
non-United States status in compliance with applicable law and regulations, or
(b) a securities clearing organization, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or
business, holds the Note and provides a statement to the Company or its agent
under penalties of perjury in which it certifies that such a Form W-8 (or a
suitable substitute) has been received by it from the Non-United States Holder
or qualifying intermediary and furnishes the Company or its agent a copy
thereof.
On October 14, 1997, final regulations were published ("the Final
Regulations") that provide alternative methods for satisfying the certification
requirement described in the first paragraph above. The Final Regulations also
generally require, in the case of Notes held by a foreign partnership, that (x)
the certification described above be provided
24
<PAGE> 26
by the partners, rather than by the partnership, and (y) the partnership
provide certain information, including a United States taxpayer identification
number. A look-through rule would apply in the case of tiered partnerships. The
Final Regulations are effective for payments made after December 31, 1998.
Except to the extent that an applicable treaty otherwise provides, a
Non-United States Holder generally will be taxed in the same manner as a United
States Holder with respect to interest if the interest income is effectively
connected with a United States trade or business of the Non-United States
Holder. Effectively connected interest received by a corporate Non-United
States Holder may also, under certain circumstances, be subject to an
additional "branch profits tax" at a 30% rate (or, if applicable, a lower
treaty rate). Even though such effectively connected interest is subject to
income tax, and may be subject to the branch profits tax, it is not subject to
withholding tax if the holder delivers a completed IRS Form 4224 to the payor.
Interest income of a Non-United States Holder that is not effectively
connected with a United States trade or business and that does not qualify for
the portfolio interest exemption described above will generally be subject to a
30% (or, if applicable, a lower treaty rate) withholding tax.
Sale, Exchange or Redemption of the Notes
A Non-United States Holder of a Note will generally not be subject to
United States federal income tax or withholding tax on any gain realized on the
sale, exchange or redemption of the Note (including the receipt of cash in lieu
of fractional shares upon conversion of a Note in Common Stock) unless (1) the
gain is effectively connected with a United States trade or business of the
Non-United States Holder, (2) in the case of a Non-United States Holder who is
an individual, such holder is present in the United States for a period or
periods aggregating 183 days or more during the taxable year of the
disposition, and either such holder has a "tax home" in the United States or
the disposition is attributable to an office or other fixed place of business
maintained by such holder in the United States, (3) the holder is subject to
tax pursuant to the provisions of the Code applicable to certain United States
expatriates, or (4) the Company is a United States real property holding
corporation. See "--United States Foreign Investment in Real Property Tax Act."
Conversion of the Notes
In general, no United States federal income tax or withholding tax
will be imposed upon the conversion of a Note into Common Stock by a Non-United
States Holder except with respect to the receipt of cash in lieu of fractional
shares by Non-United States Holders upon conversion of a Note where any of the
conditions described above under "--Sale, Exchange or Redemption of the Notes"
is satisfied.
Sale or Exchange of Common Stock
A Non-United States Holder generally will not be subject to United
States federal income tax or withholding tax on the sale or exchange of Common
Stock unless any of the conditions described above under "--Sale, Exchange or
Redemption of the Notes" is satisfied.
Dividends
Dividends paid (or deemed paid, as described above under "--United
States Holders--Dividends") on Common Stock to a Non-United States Holder
(excluding dividends that are effectively connected with the conduct of a trade
or business in the United States by such United States Holder and are taxable
as described below) will be subject to United States federal withholding tax at
a 30% rate (or, if applicable, a lower treaty rate). Except to the extent that
an applicable tax treaty otherwise provides, a Non-United States Holder will be
taxed in the same manner as a United States Holder on dividends paid (or deemed
paid) that are effectively connected with the conduct of a trade or business in
the United States by the Non-United States Holder. If such Non-United States
Holder is a foreign corporation, it may also be subject to a United States
branch profits tax at a 30% rate (or, if applicable, a lower treaty rate). Even
though such effectively connected dividends are subject to income tax, and may
be subject to the branch profits tax, they will not be subject to U.S.
withholding tax if the holder delivers a completed IRS Form 4224 to the payor.
25
<PAGE> 27
Under current Treasury Regulations, dividends paid to an address in a
foreign country are presumed to be paid to a resident of that country (unless
the payor has knowledge to the contrary) for purposes of the withholding tax
discussed above and, under the current interpretation of Treasury Regulations,
for purposes of determining the applicability of a tax treaty rate. Under the
Proposed Regulations described in "--Payment of Interest" however, a Non-
United States Holder of Common Stock who wished to claim the benefit of an
applicable treaty rate would be required to satisfy applicable certification
requirements. In addition, under the Proposed Regulations, the certification
and information reporting requirements described above in the second paragraph
under "--Payment of Interest" would apply with respect to dividends paid on
Common Stock held by a foreign partnership.
Death of a Non-United States Holder
A Note held by an individual who is not a citizen or resident of the
United States at the time of death will not be includible in the decedent's
gross estate for United States estate tax purposes, provided that such Holder
or beneficial owner did not at the time of death actually or constructively own
10% or more of the combined voting power of all classes of stock of the Company
entitled to vote, and provided that, at the time of death, payments with
respect to such Note would not have been effectively connected with the conduct
by such Non-United States Holders of a trade or business within the United
States.
Common Stock actually or beneficially held by a Non-United States
Holder at the time of his death (or previously transferred subject to certain
retained rights or powers) will be subject to United States federal estate tax
unless otherwise provided by an applicable estate tax treaty.
Information Reporting and Backup Withholding Tax
Under current law, United States information reporting requirements
and backup withholding tax will not apply to payments on a Note to a Non-United
States Holder if the Form W-8 or similar statement described in "--Payment of
Interest" is duly provided by such Non-United States Holder, provided that the
payor does not have actual knowledge that the holder is a United States person.
If and when the Proposed Regulations described in "--Payment of Interest"
become effective, alternative certification requirements (and, possibly,
partner-level certification requirements in the case of holders that are
foreign partnerships) may apply with respect to Notes. See "--Payment of
Interest."
Information reporting and backup withholding tax also will not apply
to any nominee or other agent of the beneficial owner of such Note, unless such
custodian, nominee or agent (i) is a United States person, (ii) derives 50% or
more of its gross income for certain periods from the conduct of a trade or
business in the United States or (iii) is a controlled foreign corporation as
to the United States. Payment on a Note to the beneficial owner thereof by a
United States office of a custodian, nominee or agent is subject to information
reporting and backup withholding requirements, unless the beneficial owner of
the Note provides the Form W-8 or suitable substitute statement described in
"--Payment of Interest" or the beneficial owner otherwise establishes an
exemption.
Information reporting requirements and backup withholding tax will not
apply to any payment of the proceeds of the sale of a Note or any payment of
the proceeds of the sale of Common Stock effected outside the United States by
a foreign office of a "broker" (as defined in applicable Treasury Regulations),
unless such, broker (i) is a United States person, (ii) derives 50% or more of
its gross income for certain periods from the conduct of a trade or business in
the United States or (iii) is a controlled foreign corporation as to the United
States. Payment of the proceeds of any such sale effected outside the United
States by a foreign office of any broker that is described in (i), (ii) or
(iii) of the preceding sentence will not be subject to backup withholding tax,
but will be subject to information reporting requirements unless such broker
has documentary evidence in its records that the beneficial owner is a
Non-United States Holder and certain other conditions are met, or the
beneficial owner otherwise establishes an exemption. Payment of the proceeds of
any such sale to or through the United States office of a broker is subject to
information reporting and backup withholding requirements, unless the
beneficial owner of the Note provides the Form W-8 or suitable substitute
statement described in "--Payment of Interest" or otherwise establishes an
exemption.
26
<PAGE> 28
If paid to an address outside the United States, dividends on Common
Stock held by a Non-United States Holder will not under current law be subject
to the information reporting and backup withholding requirements discussed in
this section, provided that the payor does not have actual knowledge that the
payee is a United States person. However, under the Proposed Regulations,
dividend payments generally would be subject to information reporting and
backup withholding unless applicable certification requirements are satisfied.
See "--Payment of Interest" with respect to these requirements and the
additional requirements that would be applicable to foreign partnerships under
the Proposed Regulations.
The backup withholding and information reporting rules are currently
under review by the Department of the Treasury, and their application to the
Notes and Common Stock could be changed prospectively by future regulations.
United States Foreign Investment in Real Property Tax Act
Under the Foreign Investment in Real Property Tax Act ("FIRPTA"), any
person who acquires a "United States real property interest" (as described
below) from a foreign person must deduct and withhold a tax equal to 10% of the
amount realized by the foreign transferor. In addition, a foreign person who
disposes of a United States real property interest generally is required to
recognize gain or loss that is subject to United States federal income tax.
With respect to any Non-United States Holder, "United States real property
interest" generally includes any interest (other than an interest solely as
creditor) in a United States corporation unless it is established under
specific procedures that the corporation is not (and was not for the lesser of
such Non-United States Holder's holding period in the interest or the prior
five-year period) a "United States real property holding corporation." The
Company does not believe that it is a United States real property holding
corporation as of the date hereof, although it has not conducted or obtained an
appraisal of its assets to determine whether it is now or will be a United
States real property holding corporation. If the Company is unable to establish
that it is not a United States real property holding corporation, then, unless
an exemption applies, both the Common Stock and Notes would be treated as
United States real property interests. As discussed below, however, an
exemption should apply to the Common Stock and the Notes except with respect to
a Non- United States Holder whose beneficial ownership of Common Stock or the
Notes exceeds 5% of the total fair market value.
An interest in a United States corporation generally will not be
treated as a United States real property interest if, at any time during the
calendar year, any class of stock of the corporation is "regularly traded" on
an established securities market (the "regularly-traded exemption"). The
Company believes that the Company's Common Stock is regularly traded on an
established securities market within the meaning of the applicable regulations,
although there can be no assurance that the Common Stock will remain regularly
traded. The remainder of this discussion assumes that the Common Stock is and
will remain regularly traded on an established securities market.
The regularly-traded exemption is not available to a regularly traded
interest (such as the Common Stock) if such interest is owned by a person who
beneficially owns (actually or constructively) more than 5% of the total fair
market value of that class of interests at any time during the five-year period
ending on the date of disposition of such interest or other applicable
determination date. Accordingly, except with respect to a sale or other
disposition of Common Stock by a Non-United States Holder whose aggregate
beneficial ownership has exceeded that 5% threshold, no withholding or income
taxation under the FIRPTA rules should be required with respect to the sale,
exchange or other disposition of Common Stock by a Non-United States Holder.
The regularly-traded exemption will apply to a "non-regularly traded
class of interests" in a United States corporation that is convertible into a
regularly traded class of interests in the corporation unless, on the date such
non-regularly traded interest was acquired by its present holder, such interest
had a fair market value greater than the fair market value on that date of 5%
of the regularly traded class of the corporation's stock into which it is
convertible. (Interests of a non-regularly traded class acquired over a period
of time will be aggregated for purposes of applying the 5% test described
above.) This discussion assumes that the Notes constitute interests that are
non- regularly traded interests convertible into a regularly traded class of
interests. (It is not entirely certain how the regularly traded exemption will
apply if the Notes become "regularly traded" within the meaning of the FIRPTA
rules. For example, the regularly traded exemption may in that event not apply
to a Non-United States Holder who actually and constructively owned more than
5% of the Notes even though Notes owned by such Non-United States Holder
represented no more than 5% of the
27
<PAGE> 29
value of the outstanding Common Stock. Therefore, such Non-United States Holder
could be required to recognize gain or loss that is subject to United States
Federal income tax with respect to a transfer of Notes. However, a transfer of
Notes would not be subject to the 10% withholding tax discussed above if the
Notes were regularly traded, regardless of whether the transferor held more
than 5% of the Notes.) Accordingly, except with respect to the sale, exchange,
conversion or redemption of the Notes by a Non-United States Holder whose
aggregate actual or constructive ownership of such Notes on an applicable
determination date had a fair market value greater than 5% of the Common Stock,
no withholding or income taxation under the FIRPTA rules should be required
with respect to the sale, exchange, conversion or redemption of Notes by a
Non-United States Holder. A Non-United States Holder who sells or otherwise
disposes of Notes may be required to inform its transferee whether such Notes
constitute a United States real property interest.
Any investor that may approach or exceed 5% ownership, either alone or
in conjunction with related persons, should consult its own tax advisor
concerning the United States tax consequences that may result.
DESCRIPTION OF REGISTRATION RIGHTS AGREEMENT
The following summary of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and qualified in
its entirety by reference to, all the provisions of the Registration Rights
Agreement.
SHELF REGISTRATION STATEMENT
The Registration Rights Agreement required the Company to file a Shelf
Registration Statement, of which this Prospectus is a part, with the Commission
for the benefit of the holders of the Notes and the Common Stock issuable upon
conversion thereof (collectively, the "Registrable Securities") within 90 days
of August 12, 1997 and to use its reasonable best efforts to have the Shelf
Registration Statement declared effective within 90 days after such filing.
The Company is obligated to keep the Shelf Registration Statement effective
until the earliest of (i) the expiration of two years from the time the Shelf
Registration Statement is declared effective, (ii) such time as all Registrable
Securities have been sold pursuant to the Shelf Registration Statement,
transferred pursuant to Rule 144 under the Securities Act or otherwise
transferred in a manner that results in a new security not subject to transfer
restrictions under the Securities Act being delivered pursuant to the Indenture
and (iii) such time as, in the opinion of counsel, all of the Registrable
Securities held by non-affiliates of the Company are eligible for resale
pursuant to Rule 144(k) under the Securities Act and the legends described
under "Notice to Investors" have been removed from such Registrable Securities.
ADDITIONAL INTEREST
If the Company fails to comply with certain of its obligations under
the Registration Rights Agreement, additional interest is payable on the Notes
as described under "Description of Notes--Registration Rights."
UNDERWRITTEN OFFERING
The Registration Rights Agreement provides that holders of 33 1/3% of
the Registrable Securities may elect to have one underwritten offering. The
managing underwriter(s) for any such offering must be selected by holders of
50% of the Registrable Securities to be included in the underwritten offering
and must be reasonably acceptable to the Company. The Company has the right to
defer any underwritten offering for up to 120 days for a valid business reason.
FEES AND EXPENSES
In the Registration Rights Agreement, the Company agreed to pay all
fees and expenses incident to the filing of the Shelf Registration Statement
and maintaining its effectiveness for resales of Registrable Securities. In
addition, the Company agreed to pay up to a maximum of $85,000 for the fees and
disbursements of a single counsel selected by holders of not less than 25% of
the Registrable Securities to represent them in connection with the Shelf
Registration Statement. Except as provided in the preceding sentence, the
holders of Registrable Securities included in the Shelf
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<PAGE> 30
Registration Statement are responsible (on a pro rata basis based on the
principal amount of Registrable Securities included therein) for the fees and
disbursements of such counsel.
In the case of an underwritten offering, the Company will pay up to a
maximum of $200,000 for the fees and expenses in connection therewith (the fees
and disbursements of one counsel for the holders participating in such offering
being included in such fees and expenses). The holders participating in such
offering will be responsible (on a pro rata basis based on the principal amount
of Registrable Securities included in such offering) for all fees and expenses
of such underwritten offering in excess of $200,000, including any fees and
expenses of counsel to the holders, counsel to the Company and the Company's
independent public accountants that may constitute part of such excess amount.
In no event will the Company be responsible for underwriting discounts
or commissions in connection with such underwritten offering.
INDEMNIFICATION
In the Registration Rights Agreement, the Company agreed to indemnify
the holders of Registrable Securities against certain liabilities, including
liabilities under the Securities Act, and each holder of Registrable Securities
included in the Shelf Registration Statement is obligated to indemnify the
Company and any other holder against any liability with respect to any
information furnished by such holder in writing to the Company expressly for
use in the Shelf Registration Statement.
SELLING SECURITYHOLDERS
The Notes were originally issued by the Company to Goldman, Sachs &
Co. and NationsBanc Capital Markets, Inc. (the "Initial Purchasers") on August
12, 1997, pursuant to an exemption from the registration requirements of the
Securities Act provided by Section 4(2) thereof. The Notes were sold
simultaneously by the Initial Purchasers in transactions exempt from the
registration requirements of the Securities Act pursuant to Rule 144A of the
Securities Act or Regulation S of the Securities Act. An aggregate of
$400,000,000 principal amount of Notes was issued and was outstanding as of
December 31, 1997.
This Prospectus relates to the offer and sale by each Selling
Securityholder of the following securities (the "Resale Securities"): (i) the
Notes that are set forth in the table below with respect to such Selling
Securityholder (as such table may be amended from time to time by means of a
supplement or amendment hereto) and (ii) all shares of Common Stock that may be
acquired by any Selling Securityholder upon conversion of any Note to which
this Prospectus relates as described in the preceding clause.
The "Selling Securityholders" include: (i) each person and entity
that is identified as a Selling Securityholder in the table below (as such
table may be supplemented or amended from time to time by means of a supplement
or amendment hereto) and (ii) any transferee, donee, pledgee or other successor
of any such person or entity that acquires any of the Resale Securities in a
transaction exempt from the registration requirements of the Securities Act and
that is identified in a supplement or amendment hereto.
Based upon information provided to the Company by each Selling
Securityholder, the table below indicates with respect to each Selling
Securityholder: (i) the aggregate principal amount of Notes beneficially owned
by such Selling Securityholder and (ii) the aggregate number of shares of
Common Stock issuable upon conversion of such Notes (rounded down to the
nearest whole number) based upon the current per share conversion price. The
table below also indicates by footnote reference any material relationship that
a Selling Securityholder has had with the Company during the preceding three
years. This Prospectus covers all Securities shown in the table below.
29
<PAGE> 31
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK
PRINCIPAL AMOUNT ISSUABLE UPON
SELLING SECURITYHOLDER(1) OF NOTES OWNED CONVERSION OF NOTES(2)
------------------------------------------------------------ --------------------- ----------------------
<S> <C> <C>
Natwest Securities Limited $ 65,755,000 1,322,372
Bear Stearns Securities Corporation 63,795,000 1,282,955
Goldman, Sachs International 21,800,000 438,411
UBS Securities LLC 20,000,000 402,212
J. P. Morgan & Co. Incorporated(3) 15,000,000 301,659
MainStay Convertible Fund 14,500,000 291,603
General Motors Pension Fund 14,000,000 281,548
Bankers Trust International 10,000,000 201,106
CFW-C, L.P. 10,000,000 201,106
Swiss Bank Corporation - London Branch 8,500,000 170,940
The Northwestern Mutual Life Insurance Company(4) 8,000,000 160,884
Kennilworth Partners LP 7,000,000 140,774
Merrill, Lynch, Pierce, Fenner & Smith, Inc. 6,640,000 133,534
SMM Company B.V. 6,100,000 122,674
BancAmerica Robertson Stephens 5,980,000 120,261
Silverton International Fund Limited 5,100,000 102,564
Allstate Insurance Company 5,000,000 100,553
Oregon - Equity Fund 5,000,000 100,553
Tribeca Investments, L.L.C. 5,000,000 100,553
Pimco Renaissance Fund 4,500,000 90,497
South Dakota Retirement System 4,000,000 80,442
Kellner, DiLeo & Co. 3,650,000 73,403
HSBC Securities, Inc. 3,200,000 64,353
American Investors Life Insurance Company 3,000,000 60,331
Canadian Imperial Holdings 3,000,000 60,331
Employers Reinsurance Corporation 3,000,000 60,331
BancAmerica Robertson Stephens 2,980,000 59,929
Franklin Investors Securities Trust 2,500,000 50,276
Franklin Universal Trust 2,500,000 50,276
New York Life Separate Account #7 2,500,000 50,276
Travelers Indemnity Company 2,331,000 46,877
Nomura Securities (Bermuda) Ltd. 2,000,000 40,221
SoundShore Partners L.P. 2,000,000 40,221
Motors Insurance Corp. 1,750,000 35,193
Shepherd Investments International, Ltd. 1,505,000 30,266
The Travelers Insurance Company 1,502,000 30,206
Donaldson, Lufkin & Jenrette Securities Corp. 1,500,000 30,165
Offshore Strategies Ltd. 1,350,000 27,149
PRIM Board 1,165,000 23,428
Salomon Brothers Equity Arbritrage Finance Limited I 1,125,000 22,624
Argent Classic Convertible Arbitrage Fund (Bermuda) L.P. 1,000,000 20,110
Argent Classic Convertible Arbitrage Fund, L.P. 1,000,000 20,110
Pacific Life Insurance Company 1,000,000 20,110
Stark International 1,000,000 20,110
Goldman Sachs & Co., Bank, Zurich 900,000 18,099
Salomon Brothers Diversified Arbitrage Strategies Fund Ltd. 875,000 17,596
The Minnesota Mutual Life Insurance Company 865,000 17,395
MIMLIC Asset Management Co. 865,000 17,395
Arkansas PERS 850,000 17,094
Halliburton Company Employee Benefit 820,000 16,490
Delaware PERS 725,000 14,580
Castle Convertible Fund, Inc. 500,000 10,055
</TABLE>
30
<PAGE> 32
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK
PRINCIPAL AMOUNT ISSUABLE UPON
SELLING SECURITYHOLDER(1) OF NOTES OWNED CONVERSION OF NOTES(2)
------------------------------------------------------------ --------------------- ----------------------
<S> <C> <C>
Natwest Securities Limited $ 65,755,000 1,322,372
Bear Stearns Securities Corporation 63,795,000 1,282,955
Goldman, Sachs International 21,800,000 438,411
UBS Securities LLC 20,000,000 402,212
Franklin Multi-Income Trust 500,000 10,055
Franklin Strategic Income Fund 500,000 10,055
KD Offshore Fund, C.V. 500,000 10,055
Pacific Life Insurance Company 500,000 10,055
Pacific Life Insurance Company 500,000 10,055
Starvest Discretionary 500,000 10,055
Laterman Strategies 90's LLC 360,000 7,239
Salomon Brothers Total Return Fund 350,000 7,038
Fairfax County URS Convertible Bonds 295,000 5,932
ICI American Holdings 290,000 5,832
Laterman & Co. 290,000 5,832
Zeneca Holdings 290,000 5,832
Robert Kirk 200,000 4,022
Kapiolani Medical 190,000 3,821
Woodson W. Fishback Trust 170,000 3,418
The Travelers Life & Annuity Company 167,000 3,358
NALCO Chemical Co. Retirement Plan 135,000 2,714
Mildred Fishback Revocable Trust 130,000 2,614
ALCAN Corp. Master Retirement Trust 125,000 2,513
Hawaii Airlines Pilots Retirement Plan 125,000 2,513
Fairfax County Police Pension and Retirement Fund 110,000 2,212
Benjamin Moore & Co. Retirement Income 100,000 2,011
IBEW Local 292 Pension Fund 100,000 2,011
Hawaii Airlines - IAM 85,000 1,709
Paloma Securities L.L.C. 50,000 1,005
Nestle USA 45,000 904
AICPA Long Term Investment Fund 20,000 402
Halliburton Foundation, Inc. 20,000 402
Hawaii Airlines Salaried Emply. 20,000 402
AICPA Revised Staff Pension Plan 15,000 301
Holton Arms School Pooled Investment Fund 15,000 301
Inland Foundation, Inc. 10,000 201
</TABLE>
(1) Each Selling Securityholder is the beneficial owner of the indicated
Notes. In certain cases, the indicated Notes may be held of record by a
nominee or custodian for the account of the Selling Securityholder.
(2) The per share conversion price and, therefore, the number of shares of
Common Stock that may be issuable upon conversion of the Notes is subject to
adjustment as described under "Description of Notes--Conversion Rights."
(3) As of November 4, 1997, J. P. Morgan & Co. Incorporated, through its
various subsidiaries, including J. P. Morgan Investment Management, Inc. and
Morgan Guaranty Trust Company of New York, held in a fiduciary capacity 19,721
outstanding shares of Common Stock. Such shares are not covered by this
Prospectus.
(4) As of October 27, 1997, Northwestern Mutual Series Fund, Inc. and
Mason Street Funds, Inc., affiliates of The Northwestern Mutual Life Insurance
Company were the owners of 56,200 shares and 600 shares, respectively, of
Common Stock. Such shares are not covered by this Prospectus.
(5) As of October 31, 1997, Mildred Fishback Revocable Trust was the owner
of 1,200 outstanding shares of Common Stock. Such shares are not covered by
this Prospectus.
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<PAGE> 33
Assuming that the Selling Securityholders dispose of all securities
covered by this Prospectus (and assuming no additional acquisitions or
dispositions of Notes or shares of Common Stock by such Selling
Securityholders), none of the Selling Securityholders would continue to own any
Notes or shares of Common Stock (except for the shares currently owned by a
Selling Securityholder described in the footnotes to the table above).
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<PAGE> 34
PLAN OF DISTRIBUTION
The Notes were issued in connection with a private placement. The
Resale Securities, of which the Notes constitute a part, may be sold from time
to time by the Selling Securityholders. The Selling Securityholders may from
time to time sell all or a portion of the Resale Securities in transactions in
the over-the-counter market, in negotiated transactions, or a combination of
such methods of sale, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at negotiated prices. The
Resale Securities may be sold directly or through broker-dealers. If the Resale
Securities are sold through broker-dealers, the Selling Securityholders may pay
brokerage commissions and charges. The methods by which the Resale Securities
may be sold include (a) a block trade (which may involve crosses) in which the
broker or dealer so engaged will attempt to sell the securities as agent but
may position and resell a portion of the block as principal to facilitate the
transaction; (b) by a broker or dealer as principal and resale by such broker
or dealer for its own account pursuant to this Prospectus; (c) exchange
distributions and/or secondary distributions; (d) ordinary brokerage
transactions and transactions in which the broker solicits purchasers and (e)
privately negotiated transactions.
Pursuant to the provisions of the Registration Rights Agreement
entered into by and between the Company and the Initial Purchaser, the Company
will pay the costs and expenses incident to its registration and qualification
of the Resale Securities offered hereby, including registration and filing
fees. In addition, the Company has agreed to indemnify the Selling
Securityholders against certain liabilities, including liabilities arising
under the Securities Act. See "Description of Notes--Registration Rights
Agreement."
The holders of the Resale Securities are qualified institutional
buyers within the meaning of Rule 144A of the Securities Act or non-U.S.
persons within the meaning of Regulation S under the Securities Act. Prior to
any use of this Prospectus for the resale of the Resale Securities registered
herein, this Prospectus will be amended or supplemented to set forth the name
of the Selling Securityholder, the amount of the Notes and/or the number of
shares of Common Stock beneficially owned by such Selling Securityholder, and
the amount of the Notes and/or the number of shares of Common Stock to be
offered for resale by such Selling Securityholder. The supplemented or amended
Prospectus will also disclose whether any Selling Securityholder selling in
connection with such supplemented or amended Prospectus has held any position
or office with, been employed by or otherwise had a material relationship with,
the Company or any of its affiliates during the three years prior to the date
of the supplemented or amended Prospectus.
The Selling Securityholders and any broker-dealer participating in the
distribution of the Resale Securities may be deemed to be "underwriters" within
the meaning of the Securities Act, and any profit and any commissions paid or
any discounts or concessions allowed to any such broker-dealer may be deemed to
be underwriting discounts and commissions under the Securities Act. The Selling
Securityholders may indemnify any broker-dealer that participates in
transactions involving the sale of Notes and the Common Stock against certain
liabilities, including liabilities under the Securities Act.
There can be no assurances that the Selling Securityholders will sell
any or all of the Resale Securities offered by them hereunder. The resale of
the Resale Securities will be freely transferable in the hands of persons other
than affiliates of the Company. The Common Stock is listed and principally
traded on the Nasdaq National Market under the symbol "DIGI."
The Company will receive none of the proceeds from the resale of the
Resale Securities.
LEGAL MATTERS
The validity of the issuance of the Securities offered hereby will be
passed upon for the Selling Securityholders by Baker & McKenzie, Dallas, Texas.
33
<PAGE> 35
EXPERTS
The consolidated financial statements and schedule of the Company and
its subsidiaries incorporated by reference in the Company's Annual Report (Form
10-K) for the year ended December 31, 1996, have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon incorporated by
reference therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
34
<PAGE> 36
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The table below sets forth the estimated expenses expected to be paid
by the Company in connection with the issuance and distribution of the Resale
Securities covered by this Registration Statement. For information concerning
certain additional expenses that the Company and/or the Selling Securityholders
may be required to pay in the event that there is an underwritten offering of
the Resale Securities, see "Plan of Distribution."
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee . . . . . . .$107,774
Printing and Engraving Expenses . . . . . . . . . . . . . . . . . 5,000
Legal Fees and Expenses (other than Blue Sky) . . . . . . . . . . 30,000
"Blue Sky" Fees and Expenses . . . . . . . . . . . . . . . . . . . 1,000
Accounting Fees and Expenses . . . . . . . . . . . . . . . . . . . 5,000
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . 1,226
-------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . $150,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
DSC's bylaws require that directors and officers be indemnified to the
maximum extent permitted by law. DSC's Restated Certificate of Incorporation
includes a provision eliminating, to the fullest extent permitted by Delaware
law, director liability for monetary damages for breaches of fiduciary duty.
Section 145 of the General Corporation Law of the State of Delaware
provides that a director or officer of a corporation (i) shall be indemnified
by the corporation for all expenses of litigation or other legal proceedings
brought against such person by reason of the fact that such person is or was a
director or an officer of the corporation when he is successful on the merits,
(ii) may be indemnified by the corporation for the expenses, judgments, fines,
and amounts paid in settlement of such litigation (other than a derivative
suit) even if he is not successful on the merits if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation (and, in the case of a criminal proceeding, had no
reason to believe his conduct was unlawful), and (iii) may be indemnified by
the corporation for expenses of a derivative suit (a suit by a stockholder
alleging a breach by a director or officer of a duty owed to the corporation),
even if he is not successful on the merits, if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the corporation, provided that no such indemnification may be made in
accordance with this clause (iii) if the director or officer is adjudged liable
to the corporation, unless a court determines that, despite such adjudication
but in view of all circumstances, he is fairly and reasonably entitled to
indemnification of such expenses. The indemnification described in clauses
(ii) and (iii) above shall be made only upon order by a court or a
determination by (a) a majority of directors who are not parties to such
action, (b) a majority vote of a committee consisting of such disinterested
directors, (c) independent legal counsel in a written opinion if no such
disinterested directors exist, or if such disinterested directors so direct, or
(d) the stockholders, that indemnification is proper because the applicable
standard of conduct is met. Expenses incurred by a director or officer in
defending an action may be advanced by the corporation prior to the final
disposition of such action upon receipt of an undertaking by such director or
officer to repay such expenses if it is ultimately determined that he is not
entitled to be indemnified in connection with the proceeding to which the
expenses relate.
DSC has purchased and currently has in force directors' and officers'
liability insurance policies which cover certain liabilities of directors and
officers arising out of claims based on certain acts or omissions by them in
their capacity as directors or officers. DSC has entered into indemnification
agreements with certain of its directors and executive officers. Each of these
agreements, among other things, contractually obligates DSC to, under certain
circumstances, indemnify the officer or director against certain expenses and
liabilities arising out of legal proceedings which may be brought against such
officer or director by reason of his status or service as a director or
officer. In
II-1
<PAGE> 37
addition, in a related trust agreement (the "Trust Agreement"), DSC has
provided $1 million to be held in trust by a third-party trustee to be used to
satisfy DSC's obligations pursuant to the indemnification agreements which have
been executed and any similar agreements which may be executed in the future.
The Trust Agreement further provides that DSC's Board of Directors may, in its
discretion, provide up to an additional $1 million to the trustee.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
4.1 Indenture, dated August 12, 1997, between the Company and The Bank of New York, as Trustee
(incorporated by reference to Exhibit No. 4.1 to the Company's Current Report on Form 8-K, Commission
File No. 0-10018)
4.2 Registration Rights Agreement, dated as of August 12, 1997, among the Company, Goldman, Sachs & Co. and
NationsBanc Capital Markets, Inc. (incorporated by reference to Exhibit No. 4.2 to the Company's
Current Report on Form 8-K, Commission File No. 0-10018)
4.3 Form of Notes (included in Exhibit 4.1)
4.4 Restated Certificate of Incorporation of the Company dated November 3, 1997 (incorporated by reference
to Exhibit No. 3.1 to the Company's Registration Statement on Form S-8, Registration No. 333-41929,
dated December 10, 1997)
4.5 Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit No. 3.4 to the
Company's Annual Report on Form 10-K for the year ended December 31, 1996, Commission File No. 0-10018,
dated March 31, 1997)
4.6 Rights Agreement, dated April 25, 1996 between the Company and Harris Trust and Savings Bank, formerly
KeyCorp Shareholder Services, Inc. as rights agent (incorporated by reference to Exhibit No. 4 to the
Company's Current Report on Form 8-K, Commission File No. 0-010018, dated May 9, 1996)
*5.1 Form of Opinion of Baker & McKenzie
*12.1 Computation of ratio of earnings to fixed charges
**23.1 Consent of Ernst & Young LLP
*23.2 Consent of Baker & McKenzie (included in Exhibit 5.1)
*24 Power of Attorney (see signature pages of Registration Statement)
*25 Form T-1 Statement of Eligibility and Qualification of Trustee (bound separately)
</TABLE>
- ------------------------
* Previously filed
** Filed herewith
II-2
<PAGE> 38
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement (or the
most recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the information
set forth in the Registration Statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective Registration
Statement;
(iii) To include any material information with respect to
the Plan of Distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
Registration Statement is on Form S-3 or Form S-8, and the information required
to be included in a post-effective amendment by those paragraphs is contained
in periodic reports filed by the Registrant pursuant to Section 13 or Section
15(d) of the Exchange Act that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act, each filing of
the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of
the Exchange Act (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
II-3
<PAGE> 39
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, hereunto
duly authorized, in the City of Plano, State of Texas, on January 29, 1998.
DSC COMMUNICATIONS CORPORATION
By: /s/ James L. Donald
---------------------------------
Name: JAMES L. DONALD
Title: Chairman of the Board,
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated. Each person whose signature appears
below hereby authorizes and appoints James L. Donald and Gerald F. Montry, and
each of them, either one of whom may act without joinder of the other, as his
attorney-in-fact to sign on his behalf individually and in the capacity stated
below all amendments and post-effective amendments to this Registration
Statement as that attorney-in-fact may deem necessary or appropriate.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ James L. Donald Chairman of the Board, President and Chief January 29, 1998
- -------------------------------------- Executive Officer (Principal Executive
JAMES L. DONALD Officer)
/s/ Gerald F. Montry Senior Vice President, Chief Financial January 29, 1998
- -------------------------------------- Officer, and Director (Principal Financial
GERALD F. MONTRY Officer)
/s/ Kenneth R. Vines Vice President, Finance (Principal January 29, 1998
- -------------------------------------- Accounting Officer)
KENNETH R. VINES
/s/ Raymond J. Dempsey Director January 29, 1998
- --------------------------------------
RAYMOND J. DEMPSEY
/s/ Sir John Fairclough Director January 29, 1998
- --------------------------------------
SIR JOHN FAIRCLOUGH
/s/ James L. Fischer Director January 29, 1998
- --------------------------------------
JAMES L. FISCHER
/s/ Robert S. Folsom Director January 29, 1998
- --------------------------------------
ROBERT S. FOLSOM
/s/ William O. Hunt Director January 29, 1998
- --------------------------------------
WILLIAM O. HUNT
</TABLE>
II-4
<PAGE> 40
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
4.1 Indenture, dated August 12, 1997, between the Company and The Bank of New York, as Trustee (incorporated
by reference to Exhibit No. 4.1 to the Company's Current Report on Form 8-K, Commission File No. 0-10018)
4.2 Registration Rights Agreement, dated as of August 12, 1997, among the Company, Goldman, Sachs & Co. and
NationsBanc Capital Markets, Inc. (incorporated by reference to Exhibit No. 4.2 to the Company's Current
Report on Form 8-K, Commission File No. 0-10018)
4.3 Form of Notes (included in Exhibit 4.1)
4.4 Restated Certificate of Incorporation of the Company dated November 3, 1997 (incorporated by reference to
Exhibit No. 3.1 to the Company's Registration Statement on Form S-8, Registration No. 333-41929, dated
December 10, 1997
4.5 Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit No. 3.4 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1996, Commission File No. 0-10018, dated March
31, 1997)
4.6 Rights Agreement, dated April 25, 1996 between the Company and Harris Trust and Savings Bank, formerly
KeyCorp Shareholder Services, Inc. as rights agent (incorporated by reference to Exhibit No. 4 to the
Company's Current Report on Form 8-K, Commission File No. 0-010018, dated May 9, 1996)
*5.1 Form of Opinion of Baker & McKenzie
*12.1 Computation of ratio of earnings to fixed charges
**23.1 Consent of Ernst & Young LLP
*23.2 Consent of Baker & McKenzie (included in Exhibit 5.1)
*24 Power of Attorney (see signature pages of Registration Statement)
*25 Form T-1 Statement of Eligibility and Qualification of Trustee (bound separately)
</TABLE>
* Previously filed
** Filed herewith
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 1 to the Registration Statement (Form S-3, No. 333-39917) and
related Prospectus of DSC Communications Corporation and to the incorporation
by reference therein of our reports dated January 23, 1997, with respect to the
consolidated financial statements and schedule of DSC Communications
Corporation incorporated by reference or included in its Annual Report
(Form 10-K) for the year ended December 31, 1996 filed with the Securities and
Exchange Commission.
/s/ ERNST & YOUNG LLP
Dallas, Texas,
January 23, 1998
