<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 5, 1999,
REGISTRATION NO. 333-73021.
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
DIGITAL MICROWAVE CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 77-0016028
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
170 ROSE ORCHARD WAY
SAN JOSE, CALIFORNIA 95134
(408) 943-0777
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
CHARLES D. KISSNER
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
DIGITAL MICROWAVE CORPORATION
170 ROSE ORCHARD WAY
SAN JOSE, CALIFORNIA 95134
(408) 943-0777
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------------
WITH A COPY TO:
BRUCE ALAN MANN, ESQ.
MORRISON & FOERSTER LLP
425 MARKET STREET
SAN FRANCISCO, CALIFORNIA 94105-2482
(415) 268-7000
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this Registration Statement.
------------------------------
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, check the following
box: / /
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: /X/
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of 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(1)
<TABLE>
<CAPTION>
TITLE OF EACH CLASS AMOUNT TO BE PROPOSED OFFERING MAXIMUM AGGREGATE
OF SECURITIES TO BE REGISTERED(2) REGISTERED(3) PRICE PER UNIT(4) OFFERING PRICE
<S> <C> <C> <C>
Debt securities, Common Stock, par value
$0.01 per share(5), Common Stock
Warrants, Debt Warrants................. $100,000,000 $100,000,000(6)(7)
<CAPTION>
TITLE OF EACH CLASS AMOUNT OF
OF SECURITIES TO BE REGISTERED(2) REGISTRATION FEE
<S> <C>
Debt securities, Common Stock, par value
$0.01 per share(5), Common Stock
Warrants, Debt Warrants................. $27,800(8)
</TABLE>
(1) Estimated in accordance with Rule 457(o) solely for the purpose of
calculating the registration fee.
(2) Any securities registered hereunder may be sold separately or as units with
other securities registered hereunder.
(3) Includes such indeterminate number of shares of Common Stock as may be
issued at indeterminable prices, but with an aggregate initial offering
price not to exceed $100,000,000, plus such indeterminate number of shares
of Common Stock as may be issued upon exercise of Securities Warrants or in
exchange for, or upon conversion of, debt securities registered hereunder.
Also includes such additional principal amount as may be necessary such
that, if debt securities are issued with an original issue discount, the
aggregate initial offering price of all debt securities will equal
$100,000,000 less the dollar amount of other securities previously issued.
(4) Omitted pursuant to General Instruction II.D of Form S-3.
(5) Associated with the Common Stock are preferred share purchase rights that
will not be exercisable or evidenced separately from the Common Stock prior
to the occurrence of certain events.
(6) No separate consideration will be received for shares of Common Stock that
are issued upon conversion of debt securities.
(7) In U.S. Dollars or the equivalent thereof in one or more foreign currencies
or composite currencies.
(8) A registration fee of $18,070 was paid on February 26, 1999 for an aggregate
offering price of $65,000,000 and a registration fee of $9,730 is paid
herewith.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION AND AMENDMENT
PRELIMINARY PROSPECTUS, DATED AUGUST 5, 1999
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
PROSPECTUS
[LOGO]
BY THIS PROSPECTUS, WE MAY OFFER
UP TO $100,000,000 OF:
DEBT SECURITIES, COMMON STOCK,
DEBT WARRANTS AND COMMON STOCK WARRANTS
We will provide the specific terms of these securities in supplements to
this prospectus. For information on the general terms of these securities, see
"Description of debt securities," "Description of Common Stock," or "Description
of Securities Warrants." You should read this prospectus and the applicable
supplements carefully before you invest.
Digital Microwave Corporation's common stock trades on the Nasdaq National
Market under the symbol "DMIC."
------------------------
THIS INVESTMENT INVOLVES RISKS. SEE THE "RISK FACTORS" SECTION BEGINNING ON
PAGE 2.
---------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
This prospectus is dated , 1999.
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY MAY NOT CONTAIN ALL THE INFORMATION THAT MAY BE IMPORTANT TO
YOU. YOU SHOULD READ THE ENTIRE PROSPECTUS BEFORE MAKING AN INVESTMENT DECISION.
DIGITAL MICROWAVE CORPORATION
We design, manufacture and market advanced wireless solutions for worldwide
telephone network interconnection and access. We provide our customers with a
broad product line, which contains products that operate using a variety of
transmission frequencies. Our broad product line allows us to market and sell
our products to service providers in many locations worldwide with varying
interconnection and access requirements. We design our products to meet the
requirements of mobile communications networks and fixed access networks
worldwide.
HOW TO REACH US
We are incorporated in Delaware and our principal executive offices are
located at 170 Rose Orchard Way, San Jose, California 95134. Our telephone
number at that address is (408) 943-0777.
THE OFFERING OF SECURITIES UNDER THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
SEC using a "shelf" registration offering process. Under this shelf offering
process, we may sell:
- debt securities,
- common stock,
- debt warrants and
- common stock warrants,
either separately or in units, in one or more offerings up to a total dollar
amount of $100,000,000. This prospectus provides you with a general description
of those securities. Each time we sell any securities described in this
prospectus, we will provide a prospectus supplement that will contain specific
information about the terms of that offering. The prospectus supplement may also
add, update or change information contained in this prospectus. You should
carefully read this prospectus and the applicable prospectus supplement together
with the additional information described under the heading "Where You Can Find
More Information About Us" on page 25 of this prospectus.
1
<PAGE>
RISK FACTORS
AN INVESTMENT IN DIGITAL MICROWAVE CORPORATION INVOLVES A HIGH DEGREE OF
RISK. IN ADDITION TO THE OTHER INFORMATION INCLUDED IN THIS PROSPECTUS, YOU
SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS IN DETERMINING WHETHER OR
NOT TO PURCHASE THE SECURITIES OFFERED UNDER THIS PROSPECTUS. THESE MATTERS
SHOULD BE CONSIDERED IN CONJUNCTION WITH THE OTHER INFORMATION INCLUDED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS.
OUR DEPENDENCE ON OUR INTERNATIONAL OPERATIONS CAUSES US TO BE SUBJECT TO RISKS
THAT COULD HARM OUR BUSINESS IF THEY OCCUR
We are highly dependent on sales to customers outside the United States. In
fiscal year 1997, fiscal year 1998 and fiscal year 1999, sales to international
customers accounted for 90%, 93% and 87% of our net sales. We expect that
international sales will continue to account for the majority of our net product
sales for the foreseeable future. As a result, we are subject to the risks of
doing business internationally, which include:
- unexpected changes in regulatory requirements;
- fluctuations in foreign currency exchange rates;
- imposition of tariffs and other barriers and restrictions;
- management and operation of an enterprise spread over various countries;
- burden of complying with a variety of foreign laws; and
- general economic and geopolitical conditions, including inflation and
trade relationships.
If any of the above risks actually occurs, there may be a material adverse
effect on our business, financial condition and results of operations.
In addition, recent worldwide economic events, particularly in Asia and
Latin America, including depreciation of currencies, failures of financial
institutions, stock market declines, and reduction in planned capital investment
at key enterprises, may continue to cause our international revenues to
decrease.
THE UNPREDICTABILITY OF OUR QUARTER-TO-QUARTER RESULTS MAY HARM THE TRADING
PRICE OF OUR COMMON STOCK
Our quarterly operating results may vary significantly in the future for a
variety of reasons, many of which are outside of our control, and any of which
may harm our business. These factors include:
- volume and timing of product orders received and delivered during the
quarter;
- our ability and the ability of our key suppliers to respond to changes
made by customers in their orders;
- timing of new product introductions by us or our competitors;
- changes in the mix of products sold by us;
- cost and availability of components and subsystems;
- price erosion;
- adoption of new technologies and industry standards;
- competitive factors, including pricing, availability and demand for
competing products;
- fluctuations in foreign currency exchange rates;
- regulatory developments; and
- general economic conditions.
2
<PAGE>
Each of the above factors is difficult to forecast and thus could have a
material adverse effect on our business, financial condition and results of
operations. In addition, we also may increase spending in response to
competition or to pursue new market opportunities. Accordingly, there can be no
assurance that we will be able to sustain profitability in the future,
particularly on a quarter-to-quarter basis.
COMPETITION COULD HARM OUR ABILITY TO MAINTAIN OR IMPROVE OUR POSITION IN THE
MARKET AND COULD DECREASE OUR REVENUE
The microwave interconnection and access business is a specialized segment
of the wireless telecommunications industry and is extremely competitive. We
expect this competition to increase in the future. Our products compete on the
basis of the following key characteristics:
- breadth of product line;
- customer service and support;
- price and financing terms;
- performance;
- rapid time-to-market delivery capabilities; and
- reliability.
Several established and emerging companies offer a variety of microwave,
fiber optic and other connectivity products for applications similar to those of
our products. Our competitors may have more extensive engineering, manufacturing
and marketing capabilities and substantially greater financial, technical and
personnel resources than us. In addition, our competitors may have greater name
recognition, broader product lines, a larger installed base of products and
longer-standing customer relationships. We consider our primary competitors to
be Alcatel, L.M. Ericsson, NERA, Siemens AG, P-COM, Inc. and the Microwave
Communications Division of Harris Corporation. In addition, other existing
competitors presently include SIAE, NEC, Nokia, ATI, a subsidiary of World
Access, and Northern Telecom. In addition, some of our competitors have product
lines that compete with ours, and are also original equipment manufacturers
(OEMs) through which we market and sell our products. Some of our largest
customers could develop the capability to manufacture products similar to those
manufactured by us.
OUR AVERAGE SALES PRICES ARE DECLINING
Wireless infrastructure suppliers are experiencing, and are likely to
continue to experience, intense price pressure, which has resulted, and is
expected to continue to result, in downward pricing pressure on our products. As
a result, we have experienced, and expect to continue to experience, declining
average sales prices for our products. Unit prices of our Spectrum II products
have decreased 15% to 20% over the last 18 months. Spectrum II represented
approximately 50% of our total sales for the same period. Our ability to attain
improved gross profit margins depends upon our ability to continue to improve
manufacturing efficiencies, reduce material costs of products and to continue to
introduce new products and product enhancements. There can be no assurance that
we will be able to offset this downward price pressure through corresponding
cost reductions. Any inability by us to respond to increased price competition
would have a material adverse effect on our business, financial condition and
results of operations. Since our customers frequently negotiate supply
arrangements far in advance of delivery dates, we must often commit to price
reductions for our products before we are aware of how, or if, cost reductions
can be obtained. As a result, current or future price reduction commitments
could have, and any inability by us to respond to increased price competition
would have, a material adverse effect on our business, financial condition and
results of operations.
3
<PAGE>
WE MUST DEVELOP NEW PRODUCTS TO KEEP UP WITH RAPID TECHNOLOGICAL CHANGE
The wireless communications market is characterized by rapidly changing
technologies and evolving industry standards. Accordingly, our future
performance, depends on a number of factors, including our ability to:
- identify emerging technological trends in our target markets;
- develop and maintain competitive products;
- enhance our products by adding innovative features that differentiate our
products from those of our competitors; and
- manufacture and bring products to market quickly at cost-effective prices.
We believe that to remain competitive in the future we will need to continue
to develop new products, which will require the investment of significant
financial resources in new product development. In the event that our new
products are not timely developed, do not gain market acceptance or are not
manufacturable at competitive prices, our business, financial condition or
results of operations could be materially adversely affected.
In some instances, we enter into agreements to supply products to customers
where the products are not fully developed at the time of entering into the
agreement. Our failure to develop products required for timely performance under
these agreements can have a material impact on our business, financial condition
and results of operations.
IMPROPER TESTING OF PRODUCTS COULD RESULT IN DELAYS OR RECALLS OF OUR PRODUCTS
Although we extensively test products prior to introduction, design errors
may be discovered after initial product sampling, resulting in delays in volume
production or recalls of products sold. The occurrence of these errors could
have a material adverse effect on our business, financial condition and results
of operations. Any significant delay or failure to develop, manufacture or ship
new or enhanced products because of design errors by us could also have a
material adverse effect on our business, financial condition and results of
operations.
WE DEPEND ON COMPONENT AVAILABILITY, SUBCONTRACTOR PERFORMANCE AND OUR KEY
SUPPLIERS TO MANUFACTURE AND DELIVER OUR PRODUCTS
Our manufacturing operations are highly dependent upon the delivery of
materials by outside suppliers in a timely manner. In addition, we depend in
part upon subcontractors to assemble major components and subsystems used in our
products in a timely and satisfactory manner. While we enter into long-term or
volume purchase agreements with a few of our suppliers, no assurance can be
given that materials, components, and subsystems will be available in the
quantities we require, if at all. Our inability to develop alternative sources
of supply quickly on a cost-effective basis could materially impair our ability
to manufacture and deliver products in a timely manner. There can be no
assurance that we will not experience material supply problems or component or
subsystem delays in the future.
IF WE FAIL TO MANAGE OUR INTERNAL DEVELOPMENT OR SUCCESSFULLY EFFECTUATE OUR
ACQUISITIONS, WE MAY NOT EFFECTIVELY MANAGE OUR GROWTH
Future growth of our operations depends, in part, on our ability to
introduce new products and product enhancements to meet the emerging trends in
the wireless telecommunications industry. We have pursued, and will continue to
pursue, growth opportunities through internal development and acquisitions of
complementary businesses and technologies. We are unable to predict whether and
when any prospective acquisition candidate will become available or the
likelihood that any acquisition will be completed. We compete for acquisition
and expansion opportunities with many entities that have substantially greater
4
<PAGE>
resources than us. In addition, acquisitions may involve difficulties in the
retention of personnel, diversion of management's attention, unexpected legal
liabilities, and tax and accounting issues. There can be no assurance that we
will be able to successfully identify suitable acquisition candidates, complete
acquisitions, integrate acquired businesses into our operations, or expand into
new markets. Once integrated, acquired businesses may not achieve comparable
levels of revenues, profitability, or productivity as our existing business or
otherwise perform as expected. Our failure to manage growth effectively could
have a material adverse effect on our business, financial condition and results
of operations.
WE MAY FAIL TO DEVELOP PRODUCTS THAT MEET THE TECHNICAL SPECIFICATIONS OF OUR
CUSTOMERS
Our customers typically require demanding specifications for quality,
performance and reliability. There can be no assurance that problems will not
occur with respect to the quality, performance and reliability of our systems or
related software tools. If these problems occur, we could experience increased
costs, delays in or cancellations or reschedulings of orders or shipments,
delays in collecting accounts receivable and product returns and discounts, any
of which would have a material adverse effect on our business, financial
condition and results of operations.
A SIGNIFICANT AMOUNT OF OUR REVENUES COMES FROM A FEW CUSTOMERS
During any given quarter, a small number of customers may account for a
significant portion of our net sales. For the fiscal year ended March 31, 1999,
the top three customers accounted for 14% of our net sales. At March 31, 1999,
three customers accounted for approximately 32% of our $63.9 million backlog.
There can be no assurance that our current customers will continue to place
orders with us, that orders by existing customers will continue to be at levels
of previous periods, or that we will be able to obtain orders from new
customers. Our customers typically are not contractually obligated to purchase
any quantity of products in any particular period and product sales to major
customers have varied widely from period to period. The loss of any existing
customer, a significant reduction in the level of sales to any existing
customer, or our failure to gain additional customers could have a material
adverse effect on our business, financial condition and results of operations.
IF WE FAIL TO MAINTAIN OUR OEM RELATIONSHIPS OUR DISTRIBUTION CHANNELS COULD BE
HARMED
We have relationships with OEM base station suppliers and in selected
countries we also market our products through independent agents and
distributors. These relationships increase our ability to pursue the limited
number of major contract awards each year. In addition, these relationships are
intended to provide our customers with easier access to financing and to
integrated systems providers with a variety of equipment and service
capabilities. There can be no assurance that we will be able to continue to
maintain and develop these relationships or that, if these relationships are
developed, they will be successful. The inability to establish or maintain these
distribution relationships could materially adversely affect our business,
financial condition or results of operations.
OUR BUSINESS MAY BE NEGATIVELY AFFECTED BY YEAR 2000 ISSUES
We are aware of the issues associated with the programming code in existing
computer systems as the year 2000 approaches. The "Year 2000" problem is
concerned with whether computer systems will properly recognize date-sensitive
information when the year changes to 2000. Systems that do not properly
recognize this information could generate erroneous data or cause a system to
fail. The Year 2000 problem is pervasive and complex as virtually every
company's computer operation will be affected in some way. Our computer
programs, which process our operational and financial transactions, were
designed and developed without considering the impact of the upcoming change in
century. If not corrected, our computer programs could fail or create erroneous
results by or at the year 2000.
5
<PAGE>
We have purchased new computer programs to address this issue and began
implementing these applications in fiscal 1999. We have contacted our primary
suppliers and subcontractors to determine that they are developing plans to
address processing transactions in the year 2000 and to monitor their progress
toward Year 2000 capability. We believe that we will expend approximately
$500,000 investigating and remedying issues related to Year 2000 readiness
involving our internal operations and to date have expensed approximately
$200,000. We believe that the Year 2000 readiness expenses will not have a
material adverse effect on our earnings. However, there can be no assurance that
Year 2000 problems will not occur with respect to our computer systems.
Furthermore, the Year 2000 problem may impact other entities with which we
transact business, and we cannot predict the effect of the Year 2000 problem on
these entities or the resulting effect on us. As a result, if our preventative
and/or corrective actions or those of companies we do business with are not made
in a timely manner, the Year 2000 issue could have a material adverse effect on
our business, financial condition and results of operations.
SUFFICIENT RADIO FREQUENCY SPECTRUM ALLOCATION MAY NOT BE ALLOCATED FOR USE OF
OUR PRODUCTS
Radio communications are subject to regulation by United States and foreign
laws and international treaties. Generally, our products must conform to a
variety of United States and international requirements established to avoid
interference among users of transmission frequencies and to permit
interconnection of telecommunications equipment. In addition, both in the United
States and internationally, we are affected by the allocation and auction of the
radio frequency spectrum by governmental authorities. Historically, in many
developed countries, the unavailability of frequency spectrum has inhibited the
growth of wireless telecommunications networks. In addition, to operate in a
jurisdiction, we must obtain regulatory approval for our products. Each
jurisdiction in which we market our products has its own regulations governing
radio communications. Products that support emerging wireless telecommunications
services can be marketed in a jurisdiction only if permitted by suitable
frequency allocations, auctions and regulations, and the process of establishing
new regulations is complex and lengthy. Failure by the governmental regulatory
authorities to allocate suitable frequency spectrum or to establish suitable
regulations for emerging wireless telecommunications services could have a
material adverse effect on our business, financial condition or results of
operations. There can be no assurance that governmental authorities, both in the
United States and internationally, will allocate sufficient radio frequency
spectrum for use by our products or that we will be successful in obtaining
approval for our products from these authorities.
WE MAY BE UNABLE TO HIRE, INTEGRATE OR RETAIN QUALIFIED PERSONNEL
Due to the specialized nature of our business, our future performance is
highly dependent upon the continued services of our key engineering personnel
and executive officers, including Charles D. Kissner, who currently serves as
our Chairman of the Board and Chief Executive Officer. The loss of any key
personnel could have a material adverse effect on our business, financial
condition and results of operations. Our prospects depend upon our ability to
attract and retain qualified engineering, manufacturing, marketing, sales and
management personnel for our operations. Competition for personnel is intense
and there can be no assurance that we will be successful in attracting or
retaining qualified personnel. The failure of any key employee to perform in his
or her current position or our inability to attract and retain qualified
personnel could have a material adverse effect on our business, financial
condition and results of operations.
WE MAY BE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS
We rely upon a combination of trade secrets, trademarks, copyrights, patents
and contractual rights to protect our intellectual property in the United States
and internationally. We enter into confidentiality and invention assignment
agreements with our employees, and enter into non-disclosure agreements with our
suppliers and appropriate customers so as to limit access to and disclosure of
our proprietary information.
6
<PAGE>
There can be no assurance that any steps taken by us will be adequate to deter
misappropriation or impede independent third party development of similar
technologies. In the event that these intellectual property arrangements are
insufficient, our business, financial condition and results of operations could
be materially adversely affected. Moreover, there can be no assurance that the
protection provided to our intellectual property by the laws and courts of
foreign nations will be substantially similar to the remedies available under
United States law or that third parties will not assert infringement claims
against us.
DEFENDING AGAINST INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS COULD BE EXPENSIVE
AND COULD DISRUPT OUR BUSINESS
The wireless telecommunications industry is characterized by numerous
allegations of patent infringement among competitors and considerable related
litigation. Accordingly, we may in the future be notified that we are infringing
patent or other intellectual property rights of others. Although there are
currently no pending lawsuits regarding intellectual property rights matters
against us or unresolved notices that we are infringing upon intellectual
property rights of others, there can be no assurance that litigation or
infringement claims will not occur in the future. Litigation or claims could
result in substantial costs and diversion of resources and could have a material
adverse effect on our business, financial condition and results of operations.
In the event of an adverse result of any intellectual property litigation, we
could be required to expend significant resources to develop non-infringing
technology or to obtain licenses to the technology which is the subject of the
litigation. There can be no assurance that we would be successful in this
development or that any license would be available on commercially reasonable
terms.
OUR STOCK PRICE MAY BE VOLATILE
Announcements of developments related to our business, announcements by
competitors, quarterly fluctuations in our financial results and general
conditions in the telecommunications industry in which we compete or the
national economies in which we do business, and other factors could cause the
price of our common stock to fluctuate, perhaps substantially. In addition, in
recent years the stock market has experienced extreme price fluctuations, which
have often been unrelated to the operating performance of affected companies.
These factors and fluctuations could have a material adverse effect on the
market price of our common stock.
WE HAVE MADE FORWARD-LOOKING STATEMENTS IN THIS PROSPECTUS
The statements contained in this prospectus that are not historical fact are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. The safe harbor provisions provided in Section
27A of the Securities Act of 1933 and Section 21E of the Exchange Act of 1934
apply to forward-looking statements we make. These statements can be identified
by the use of forward-looking terminology, including "believes," "expects,"
"may," "will," "should," or "anticipates" or the negative of these terms or
other variations or comparable terminology, or by discussions of strategy that
involve risks and uncertainties. Numerous factors, including economic and
competitive conditions, timing and volume of incoming orders, shipment volumes,
product margins, and foreign exchange rates, could cause actual results to
differ materially from those described in these statements, and prospective
investors should carefully consider these factors in evaluating these
forward-looking statements. These forward-looking statements are based on
current expectations, and we assume no obligation to update this information
unless in the course of offering the securities under this prospectus we provide
you with a prospectus supplement.
7
<PAGE>
USE OF PROCEEDS
Unless the applicable prospectus supplement states otherwise, the net
proceeds from the sale of the Offered Securities will be added to our general
corporate funds and may be used to repay long-term or short-term borrowings and
for other general corporate purposes. Until the net proceeds have been used,
they will be invested in short-term marketable securities. If we elect at the
time of the issuance of the securities to make different or more specific use of
proceeds other than as described in this prospectus, the change in use of
proceeds will be described in the applicable prospectus supplement.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table shows our ratio of earnings to fixed charges for the
last five fiscal years.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------------------------------
1995 1996 1997 1998 1999
--------- --------- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges...................... -- -- 6.7 27.5 --
Ratio of deficiency earnings to fixed charges........... (4.1) (5.5) -- -- (199.7)
</TABLE>
For purposes of calculating the ratios, fixed charges consist of:
- interest on debt; and
- the interest portion of rental expense on operating leases.
The ratio of earnings to fixed charges is calculated as follows:
(income before extraordinary charges and income taxes) + (fixed charges)
-----------------------------------------------------------------
(fixed charges)
8
<PAGE>
DESCRIPTION OF DEBT SECURITIES
This section describes the general terms and provisions of the debentures,
notes, bonds and other evidences of indebtedness that we may issue and which the
trustee named in the applicable prospectus supplement will authenticate and
deliver under an indenture (the "Indenture"). The particular terms of the debt
securities offered by any prospectus supplement and the extent, if any, to which
these general provisions may apply to the debt securities so offered will be
described in the applicable prospectus supplement relating to the debt
securities.
We have summarized various terms and provisions of the form of Indenture in
this section. This summary is not complete. We also have filed the form of the
Indenture as an exhibit to the registration statement. You should read the form
of Indenture for additional information before you buy any debt securities. The
summary that follows includes numerical references in parentheses to section
numbers of the form of Indenture so that you can more easily locate these
provisions. Capitalized terms used but not defined in this summary have the
meanings specified in the Indenture.
GENERAL DESCRIPTION OF THE DEBT SECURITIES
Unless otherwise specified in the applicable prospectus supplement, the debt
securities will represent our direct, senior, unsecured obligations. The
Indenture does not limit the amount of debt securities that we may issue and
permits us to issue debt securities from time to time. Debt securities issued
under the Indenture will be issued as part of a series of securities that has
been established by us pursuant to the Indenture. (Section 301) Unless a
prospectus supplement relating to debt securities states otherwise, the
Indenture and the terms of the debt securities will not contain any covenants
designed to afford holders of any debt securities protection in a highly
leveraged or other transaction involving us that may adversely affect holders of
the debt securities. If we ever issue Bearer Securities, we will summarize
provisions of the Indenture that relate to Bearer Securities in the applicable
prospectus supplement.
A prospectus supplement relating to any series of debt securities being
offered will include specific terms relating to the offering. (Section 301)
These terms will include some or all of the following:
- the title and type of the debt securities;
- any limit on the total principal amount of the debt securities;
- the price at which the debt securities will be issued;
- the date or dates on which the principal of and premium, if any, on the
debt securities will be payable;
- the maturity date of the debt securities;
- any amortization with respect to the debt securities;
- any conversion mechanism whereby the debt securities would convert into
shares of Common Stock;
- if the debt securities will bear interest:
- the interest rate on the debt securities;
- the date from which interest will accrue;
- the record and interest payment dates for the debt securities;
- the first interest payment date; and
- any circumstances under which we may defer interest payments;
- any optional redemption provisions that would permit us or the Holders as
defined below, of debt securities to elect redemption of the debt
securities prior to their final maturity;
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- any sinking fund provisions that would obligate us to redeem the debt
securities prior to their final maturity;
- the currency or currencies in which the debt securities will be
denominated and payable, if other than U.S. dollars;
- any provisions that would permit us or the Holders of the debt securities
to elect the currency or currencies in which the debt securities are paid;
- whether the provisions described under the heading "Defeasance" below
apply to the debt securities;
- any changes to or additional Events of Default or covenants;
- whether the debt securities will be issued in whole or in part in the form
of Global Securities and, if so, the name of the depositary for those
Global Securities (a "Global Security" means a debt security that we issue
in accordance with the Indenture to represent all or part of a series of
debt securities);
- any special tax implications of the debt securities; and
- any other terms of the debt securities.
A "Holder," with respect to a Registered Security, means the person in whose
name the Registered Security is registered in the Security Register. (Section
101)
PAYMENT; TRANSFER
In the applicable prospectus supplement, we will designate a place of
payment where you can receive payment of the principal of, and any premium and
interest on, the debt securities or where you can transfer the debt securities.
Even though we will designate a place of payment, we may elect to pay any
interest on the debt securities by mailing a check to the person listed as the
owner of the debt securities in the Security Register or by wire transfer to an
account designated by that person in writing not less than ten days before the
date of the interest payment. (Sections 305, 307, 1002) There will be no service
charge for any registration of transfer or exchange of the debt securities, but
we may require you to pay any tax or other governmental charge payable in
connection with a transfer or exchange of the debt securities. (Section 305)
DENOMINATIONS
Unless the prospectus supplement states otherwise, the debt securities will
be issued only in registered form, without coupons, in denominations of $1,000
each or multiples of $1,000.
ORIGINAL ISSUE DISCOUNT
Debt securities may be issued under the Indenture as Original Issue Discount
Securities and sold at a substantial discount below their stated principal
amount. If a debt security is an "Original Issue Discount Security," that means
that an amount less than the principal amount of the debt security will be due
and payable upon a declaration of acceleration of the maturity of the debt
security pursuant to the Indenture. (Section 101) The applicable prospectus
supplement will describe the federal income tax consequences and other special
factors which should be considered prior to purchasing any Original Issue
Discount Securities.
CLASSIFICATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES
The Indenture contains restrictive covenants that apply to us and all of our
Restricted Subsidiaries. Those covenants do not apply to our Unrestricted
Subsidiaries. For example, (1) the assets and indebtedness of Unrestricted
Subsidiaries and (2) investments by us or our Restricted Subsidiaries in
Unrestricted
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Subsidiaries are not included in the calculations described under the heading
"Restrictions on Secured Funded Debt" below. The Indenture does not require us
to maintain any Restricted Subsidiaries and, if we do not, the Indenture will
not provide any limitations on the amount of secured debt created or incurred by
our Subsidiaries.
A "Subsidiary" is any corporation of which we own more than 50% of the
outstanding shares of Voting Stock directly or through one or more of our other
Subsidiaries. "Voting Stock" means stock that is entitled to vote in an election
for directors.
"Restricted Subsidiaries" are all of our Subsidiaries other than
Unrestricted Subsidiaries. A "Wholly Owned Restricted Subsidiary" is a
Restricted Subsidiary of which we own all of the outstanding capital stock
directly or through our other Wholly Owned Restricted Subsidiaries.
Our "Unrestricted Subsidiaries" are:
- any Subsidiaries listed in a schedule to the Indenture;
- any Subsidiary that our Board of Directors in the future designates as an
Unrestricted Subsidiary pursuant to the Indenture; and
- any other Subsidiary if a majority of its Voting Stock is owned by an
Unrestricted Subsidiary.
Our Board of Directors can at any time change a Subsidiary's designation
from an Unrestricted Subsidiary to a Restricted Subsidiary if (1) the majority
of that Subsidiary's Voting Stock is not owned by an Unrestricted Subsidiary and
(2) after the change of designation, we would be in compliance with the
restrictions contained in the Secured Funded Debt covenant described under the
heading "Restrictions on Secured Funded Debt" below. (Sections 101, 1010(a))
RESTRICTIONS ON SECURED FUNDED DEBT
The Indenture limits the amount of Secured Funded Debt that we and our
Restricted Subsidiaries may incur or otherwise create, including by guarantee.
Neither we nor our Restricted Subsidiaries may incur or otherwise create any new
Secured Funded Debt unless immediately after the incurrence or creation of the
new Secured Funded Debt:
- the sum of:
- the aggregate principal amount of all of our outstanding Secured Funded
Debt and that of our Restricted Subsidiaries (other than categories of
Secured Funded Debt discussed below), plus
- the aggregate amount of our Attributable Debt and that of our
Restricted Subsidiaries relating to sale and lease-back transactions,
- does not exceed a percentage of our Consolidated Net Tangible Assets to be
determined prior to execution of the Indenture.
This limitation does not apply if the outstanding debt securities are secured
equally and ratably with or prior to the new Secured Funded Debt. (Sections
1008(a), 1008(c))
"Secured Funded Debt" means Funded Debt which is secured by a mortgage, lien
or other similar encumbrance upon any of our assets or those of our Restricted
Subsidiaries. (Section 101)
"Funded Debt" means:
- Indebtedness maturing or which we may extend or renew to mature, more than
12 months after the time the amount of Secured Funded Debt is computed,
plus
- guarantees of Indebtedness or of dividends, except guarantees in
connection with the sale or discount of accounts receivable, trade
acceptances and other paper arising in the ordinary course of business,
plus
- in the case of a Subsidiary, all preferred stock of that Subsidiary.
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Funded Debt does not include any amount relating to obligations under leases
or guarantees of leases whether or not those obligations would be included as
liabilities on our consolidated balance sheet. (Section 101)
"Indebtedness" means, except as set forth in the next sentence:
- all items of indebtedness or liability, except capital and surplus, which
under GAAP would be included in total liabilities on the liability side of
a balance sheet as of the date that indebtedness is being determined;
- indebtedness secured by a mortgage, lien or other similar encumbrance on
property owned subject to that mortgage, lien or other similar
encumbrance, regardless of whether the indebtedness secured by that
mortgage, lien or other similar encumbrance was assumed; and
- guarantees, endorsements, other than for purposes of collection, and other
contingent obligations relating to, or to purchase or otherwise acquire,
indebtedness of others, unless the amount is included in the preceding two
bullet points.
Indebtedness does not include any obligations or guarantees of obligations
relating to lease rentals, even if these kinds of obligations or guarantees of
obligations would be included as liabilities on the consolidated balance sheet
of our Company and our Restricted Subsidiaries. (Section 101)
"Attributable Debt" means:
- the balance sheet liability amount of capital leases as determined by
GAAP, plus
- the amount of future minimum operating lease payments required to be
disclosed by GAAP, less any amounts required to be paid on account of
maintenance and repairs, insurance, taxes, assessments, water rates and
similar charges, discounted using the methodology used to calculate the
present value of operating lease payments in our most recent Annual Report
to Shareholders reflecting that calculation.
The amount of Attributable Debt relating to an operating lease that can be
terminated by the lessee with the payment of a penalty will be calculated based
on the lesser of (1) the aggregate amount of lease payments required to be made
until the first date the lease can be terminated by the lessee plus the amount
of the penalty or (2) the aggregate amount of lease payments required to be made
during the remaining term of the lease. (Section 101)
"Consolidated Net Tangible Assets" means the total consolidated amount of
our assets and those of our Restricted Subsidiaries, minus applicable reserves
and other properly deductible items and after excluding any investments made in
Unrestricted Subsidiaries or in corporations while they were Unrestricted
Subsidiaries but which are not Subsidiaries at the time of the calculation,
minus
- all liabilities and liability items, including capital leases, or
guarantees of capital leases, which under GAAP would be included in the
balance sheet, except Funded Debt, capital stock and surplus, surplus
reserves and provisions for deferred income taxes, and
- goodwill, trade names, trademarks, patents, unamortized debt discount and
expense and other similar intangibles. (Section 101)
The following categories of Secured Funded Debt will not be considered in
determining whether we are in compliance with the covenant described in the
first paragraph under the heading "Restrictions on Secured Funded Debt":
- Secured Funded Debt of a Restricted Subsidiary owing to us or to one of
our Wholly Owned Restricted Subsidiaries;
- Secured Funded Debt resulting from a mortgage, lien or other similar
encumbrance in favor of the U.S. Government or any State or any
instrumentality thereof to secure various payments;
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- Secured Funded Debt resulting from a mortgage, lien or other similar
encumbrance on property, shares of stock or Indebtedness of any company
existing at the time that the respective company becomes one of our
Subsidiaries;
- Secured Funded Debt resulting from a mortgage, lien or other similar
encumbrance on property, shares of stock or Indebtedness which (1) exists
at the time that the property, shares of stock or Indebtedness is acquired
by us or one of our Restricted Subsidiaries, including acquisitions by
merger or consolidation, (2) secures the payment of any part of the
purchase price of or construction cost for the respective property, shares
of stock or Indebtedness or (3) secures any indebtedness incurred prior
to, at the time of, or within 120 days after, the acquisition of the
respective property, shares of stock or Indebtedness or the completion of
any construction of the respective property for the purpose of financing
all or a part of the purchase price or construction cost of the respective
property, shares of stock or Indebtedness, provided that, in all cases, we
continue to comply with the covenant relating to mergers and
consolidations discussed under the heading "Consolidation, Merger or Sale"
below; Secured Funded Debt secured by a mortgage, lien or other similar
encumbrance in connection with the issuance of revenue bonds on which the
interest is exempt from federal income tax pursuant to the Internal
Revenue Code of 1986; and
- any extension, renewal or refunding of (1) any Secured Funded Debt
permitted under the first paragraph under the heading "Restrictions on
Secured Funded Debt," (2) any Secured Funded Debt outstanding at a date to
be determined, of any then Restricted Subsidiary or (3) any Secured Funded
Debt of any company outstanding at the time the respective company became
a Restricted Subsidiary. (Section 1008(b))
RESTRICTIONS ON SALE AND LEASE-BACK TRANSACTIONS
The Indenture provides that neither we nor any of our Restricted
Subsidiaries may enter into any sale and lease-back transaction involving any
Operating Property as defined below, more than 120 days after its acquisition or
the completion of its construction and commencement of its full operation,
unless either:
- we or the relevant Restricted Subsidiary could (1) create Secured Funded
Debt on the respective property equal to the Attributable Debt with
respect to the sale and lease-back transaction and (2) still be in
compliance with the restrictions on Secured Funded Debt discussed in the
"Restrictions on Secured Funded Debt" section above; or we apply an
amount, subject to credits for various voluntary retirements of debt
securities and/or Funded Debt, equal to the greater of (a) the fair value
of the respective property or (b) the net proceeds of the respective sale,
within 120 days, to the retirement of Secured Funded Debt.
This restriction will not apply to any sale and lease-back transaction (1)
between us and one of our Restricted Subsidiaries, (2) between any of our
Restricted Subsidiaries or (3) involving a lease for a period, including
renewals, of three years or less. (Section 1009)
"Operating Property" means a parcel of real property owned by us or any
Subsidiary and primarily used in the operation of its business. If we acquire a
new Subsidiary that already owns and operates the respective property, then the
respective property will not be considered Operating Property until 90 days
after the relevant acquisition. (Section 101)
CONSOLIDATION, MERGER OR SALE
The Indenture generally permits a consolidation or merger between us and
another corporation. It also permits the sale or transfer by us of all or
substantially all of our property and assets and the purchase
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by us of all or substantially all of the property and assets of another
corporation. These transactions are permitted if:
- the resulting or acquiring corporation, if other than us, assumes all of
our responsibilities and liabilities under the Indenture, including the
payment of all amounts due on the debt securities and performance of the
covenants in the Indenture;
- immediately after the transaction, no Event of Default exists; and
- except in the case of a consolidation or merger of a Restricted Subsidiary
with or into us, either (1) we have obtained the consent of the Holders of
a majority in aggregate principal amount of the outstanding debt
securities of each series or (2) immediately after the transaction, the
resulting or acquiring corporation could incur additional Secured Funded
Debt and still be in compliance with the restrictions on Secured Funded
Debt as described in the "Restrictions on Secured Funded Debt" section
above. (Section 801) Even though the Indenture contains the provisions
described above, we are not required by the Indenture to comply with those
provisions if we sell all of our property and assets to another
corporation if, immediately after the sale:
- that corporation is one of our Wholly Owned Restricted Subsidiaries; and
- we could incur additional Secured Funded Debt and still be in compliance
with the restrictions on Secured Funded Debt, as described in the
"Restrictions on Secured Funded Debt" section above. (Section 803)
If we consolidate or merge with or into any other corporation or sell all or
substantially all of our assets according to the terms and conditions of the
Indenture, the resulting or acquiring corporation will be substituted for us in
the Indenture with the same effect as if it had been an original party to the
Indenture. As a result, the relevant successor corporation may exercise our
rights and powers under the Indenture, in our name or in its own name and we
will be released from all our liabilities and obligations under the Indenture
and under the debt securities. (Section 802)
MODIFICATION AND WAIVER
Under the Indenture, our specified rights and obligations and the specified
rights of Holders of the debt securities may be modified or amended with the
consent of the Holders of a majority of the aggregate principal amount of the
outstanding debt securities of each series of debt securities affected by the
modification or amendment. The following modifications and amendments will not
be effective against any Holder without its consent:
- a change in various payments due on the debt securities;
- a change in the Place of Payment or currency in which any payment on the
debt securities is payable;
- a limitation of a Holder's right to sue us for the enforcement of various
payments due on the debt securities;
- a reduction in the percentage of outstanding debt securities required to
consent to a modification or amendment of the Indenture;
- a limitation of a Holder's right, if any, to repayment of debt securities
at the respective Holder's option; and
- a modification of any of the foregoing requirements or a reduction in the
percentage of outstanding debt securities required to waive compliance
with specified provisions of the Indenture or to waive various defaults
under the Indenture. (Section 902) Under the Indenture, the Holders of a
majority
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of the aggregate principal amount of the outstanding debt securities of
any series of debt securities may, on behalf of all Holders of that
series:
- waive compliance by us with specified restrictive covenants of the
Indenture; and
- waive any past default under the Indenture, except:
- a default in the payment of the principal of or any premium or interest on
any debt securities of that series; or
- a default under any provision of the Indenture which itself cannot be
modified or amended without the consent of the Holders of each outstanding
debt security of that series. (Sections 1012, 513)
EVENTS OF DEFAULT
"Event of Default," when used in the Indenture with respect to any series of
debt securities, means any of the following:
- failure to pay interest on any debt security of that series for 30 days
after the payment is due;
- failure to pay the principal of or any premium on any debt security of
that series when due;
- failure to deposit any sinking fund payment when due on debt securities of
that series;
- failure to perform any other covenant in the Indenture that applies to
debt securities of that series for 90 days after we have received written
notice of the failure to perform in the manner specified in the Indenture;
- default under any Indebtedness for borrowed money, including other series
of debt securities, or under any mortgage, lien or other similar
encumbrance, indenture or instrument, including the Indenture, which
secures any Indebtedness for borrowed money, and which results in
acceleration of the maturity of an outstanding principal amount of
Indebtedness greater than an aggregate dollar amount to be determined
prior to the execution of the Indenture, unless the acceleration is
rescinded or the Indebtedness is discharged within 10 days after we have
received written notice of the default in the manner specified in the
Indenture;
- specified events in bankruptcy, insolvency or reorganization; or
- any other Event of Default that may be specified for the debt securities
of that series when that series is created. (Section 501)
If an Event of Default for any series of debt securities occurs and
continues, the Trustee or the Holders of a percentage to be determined prior to
the execution of the Indenture, or higher, of the aggregate principal amount of
the outstanding debt securities of the series may declare the entire principal
of all the debt securities of that series to be due and payable immediately. If
a declaration occurs, the Holders of a majority of the aggregate principal
amount of the outstanding debt securities of that series can, subject to various
conditions, rescind the declaration. (Sections 502, 513)
The prospectus supplement relating to each series of debt securities which
are Original Issue Discount Securities will describe the particular provisions
that relate to the acceleration of maturity of a portion of the principal amount
of the respective series when an Event of Default occurs and continues.
An Event of Default for a particular series of debt securities does not
necessarily constitute an Event of Default for any other series of debt
securities issued under the Indenture. The Indenture requires us to file an
officers' certificate with the Trustee each year that states that certain
defaults do not exist under the terms of the Indenture. (Section 1011) The
Trustee may withhold notice to the Holders of debt securities of any default,
except defaults in the payment of principal, premium, interest or any sinking
fund installment, if it considers the withholding of notice to be in the best
interests of the Holders. (Section 602)
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Other than its duties in the case of a default, a Trustee is not obligated
to exercise any of its rights or powers under the Indenture at the request,
order or direction of any Holders, unless the Holders offer the Trustee
reasonable indemnification. (Sections 601, 603) If reasonable indemnification is
provided, then, subject to other rights of the Trustee, the Holders of a
majority in principal amount of the outstanding debt securities of any series
may, with respect to the debt securities of that series, direct the time, method
and place of:
- conducting any proceeding for any remedy available to the Trustee; or
- exercising any trust or power conferred upon the Trustee. (Sections 512,
603)
The Holder of a debt security of any series will have the right to begin any
proceeding with respect to the Indenture or for any remedy only if:
- the Holder has previously given the Trustee written notice of a continuing
Event of Default with respect to that series;
- the Holders of at least a percentage to be determined prior to the
execution of the Indenture, or higher, in aggregate principal amount of
the outstanding debt securities of that series have made a written request
of, and offered reasonable indemnification to, the Trustee to begin a
proceeding;
- the Trustee has not started a proceeding within 60 days after receiving
the request; and
- the Trustee has not received directions inconsistent with the relevant
request from the Holders of a majority in aggregate principal amount of
the outstanding debt securities of that series during those 60 days.
(Section 507)
However, the Holder of any debt security will have an absolute right to
receive payment of principal of and any premium and interest on the debt
security when due and to institute suit to enforce payment. (Section 508)
DEFEASANCE
DEFEASANCE AND DISCHARGE. At the time that we establish a series of debt
securities under the Indenture, we can provide that the debt securities of that
series are subject to the defeasance and discharge provisions of the Indenture.
If we so provide, we will be discharged from our obligations on the debt
securities of that series if we deposit with the Trustee, in trust, sufficient
money or Government Obligations, as defined below, to pay the principal,
interest, any premium and any other sums due on the debt securities of that
series, such as sinking fund payments, on the dates the relevant payments are
due under the Indenture and the terms of the debt securities. (Section 403) As
used above, "Government Obligations" mean:
- securities of the same government which issued the currency in which the
series of debt securities are denominated and in which interest is
payable; or
- securities of government agencies backed by the full faith and credit of
the respective government. (Section 101)
In the event that we deposit funds in trust and discharge our obligations
under a series of debt securities as described above, then:
- the Indenture will no longer apply to the debt securities of that series,
except for obligations to compensate, reimburse and indemnify the Trustee,
to register the transfer and exchange of debt securities, to replace lost,
stolen or mutilated debt securities and to maintain paying agencies and
the trust funds; and
- Holders of debt securities of that series can only look to the trust fund
for payment of principal, any premium and interest on the debt securities
of that series. (Section 403)
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Under federal income tax law, a deposit and discharge may be treated as an
exchange of the related debt securities for an interest in the trust mentioned
above. Each holder might be required to recognize gain or loss equal to the
difference between (1) the holder's cost or other tax basis for the debt
securities and (2) the value of the holder's interest in the trust. Holders
might be required to include in income a share of the income, gain or loss of
the trust, including gain or loss recognized in connection with any substitution
of collateral, as described in this section under the heading "Substitution of
Collateral" below. You are urged to consult your own tax advisers as to the
specific consequences of a deposit and discharge, including the applicability
and effect of tax laws other than federal income tax law.
DEFEASANCE OF CERTAIN COVENANTS AND CERTAIN EVENTS OF DEFAULT. At the time
that we establish a series of debt securities under the Indenture, we can
provide that the debt securities of that series are subject to the covenant
defeasance provisions of the Indenture. If we so provide and we make the deposit
described in this section under the heading "Defeasance and Discharge" above:
- we will not have to comply with the following restrictive covenants:
- consolidation, merger or sale (Sections 801, 803);
- restrictions on Secured Funded Debt (Section 1008);
- restrictions on sale and lease-back transactions (Section 1009);
- classification of Restricted and Unrestricted Subsidiaries (Section
1010); and
- any other covenant we designate when we establish the series of debt
securities; and
- we will not have to treat the events described in the fourth bullet point
under the heading "Events of Default" above as they relate to the
covenants listed above that have been defeased and no longer are in effect
and the events described in the fifth, sixth and seventh bullet points
under the heading "Events of Default" as Events of Default under the
Indenture in connection with that series.
In the event of a defeasance, our obligations under the Indenture and the
debt securities, other than with respect to the covenants and the Events of
Default specifically referred to above, will remain in effect. (Section 1501)
If we exercise our option not to comply with the covenants listed above and
the debt securities of the relevant series become immediately due and payable
because an Event of Default has occurred, other than as a result of an Event of
Default specifically referred to above, the amount of money and/or Government
Obligations on deposit with the Trustee will be sufficient to pay the principal,
interest, any premium and any other sums, due on the debt securities of the
relevant series, such as sinking fund payments, on the date payments are due
under the Indenture and the terms of the debt securities, but may not be
sufficient to pay amounts due at the time of acceleration. However, we would
remain liable for the balance of the payments. (Section 1501)
SUBSTITUTION OF COLLATERAL. At the time that we establish a series of debt
securities under the Indenture, we can provide for our ability to, at any time,
withdraw any money or Government Obligations deposited pursuant to the
defeasance provisions described above if we simultaneously substitute other
money and/or Government Obligations which would satisfy our payment obligations
on the debt securities of that series pursuant to the defeasance provisions
applicable to those debt securities. (Section 402)
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DESCRIPTION OF OUR COMMON STOCK
This section describes the general terms and provisions of the shares of our
common stock. Any prospectus supplement will describe the specific terms of the
common stock offered through that prospectus supplement and any general terms
outlined in this section that will not apply to that common stock.
We have summarized terms and provisions of our common stock in this section.
This summary is not complete. You should read our Restated Certificate of
Incorporation and our Bylaws and the Certificate of Designation relating to the
Series A Preferred Stock for additional information before you buy any of our
common stock.
GENERAL DESCRIPTION OF OUR COMMON STOCK
SHARES OUTSTANDING. We are authorized to issue up to 95,000,000 shares of
common stock. As of February 22, 1999, 61,868,295 shares were issued and
outstanding.
VOTING. Holders of shares of our common stock are entitled to one vote per
share on all matters to be voted on by stockholders.
DIVIDENDS. Holders of our common stock are entitled to receive dividends,
if any, as may be declared from time to time by our Board of Directors out of
legally available funds.
LIQUIDATION. Upon our liquidation or dissolution, holders of our common
stock are entitled to share ratably in the distribution of assets, subject to
the rights of the holders of our preferred stock.
PREEMPTIVE RIGHTS; SINKING FUND. Holders of our common stock have no
preemptive rights, subscription rights or conversion rights. There are no
redemption or sinking fund provisions with respect to our common stock.
LISTING. Our outstanding shares of common stock are listed on the Nasdaq
National Market under the symbol "DMIC." ChaseMellon Shareholder Services L.L.C.
serves as the transfer agent and registrar for our common stock.
OUR CERTIFICATE OF INCORPORATION AND BYLAWS CONTAIN ANTI-TAKEOVER PROVISIONS
Provisions of our Restated Certificate of Incorporation and Bylaws could
discourage potential acquisition proposals and could delay or prevent a change
in control of our company. These provisions could diminish the opportunities for
a stockholder to participate in tender offers, including tender offers at a
price above the then current market value of our common stock. These provisions
may also inhibit fluctuations in the market price of our common stock that could
result from takeover attempts.
PREFERRED STOCK. Under our Restated Certificate of Incorporation, we have
authority to issue 5,000,000 shares of preferred stock in one or more series as
determined by our Board of Directors. No shares of preferred stock are currently
issued or outstanding. Our Board of Directors may, without further action by our
stockholders, issue a series of preferred stock and fix the rights and
preferences of those shares, including the dividend rights, dividend rates,
conversion rights, exchange rights, voting rights, terms of redemption,
redemption price or prices, liquidation preferences and the number of shares
constituting any series or the designation of any series. The rights of the
holders of our common stock will be subject to, and may be adversely affected
by, the rights of the holders of any preferred stock issued by us in the future.
NOMINATION PROCEDURES. In addition to members of our Board of Directors,
stockholders can nominate candidates for our Board of Directors. However, a
stockholder must follow the advance notice procedures described in Section 14 of
our Bylaws. In general, a stockholder must submit a written notice of
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the nomination to our Corporate Secretary at least 60 days before a scheduled
meeting of our stockholders.
PROPOSAL PROCEDURES. Stockholders can propose that business other than
nominations to our Board of Directors be considered at an annual meeting of
stockholders only if a stockholder follows the advance notice procedures
described in our Bylaws. In general, a stockholder must submit a written notice
of the proposal and the stockholder's interest in the proposal at least 60 days
before the date set for the annual meeting of our stockholders.
AMENDMENT OF BYLAWS. Under our Bylaws, our Board of Directors can adopt,
amend or repeal the Bylaws, subject to limitations under the Delaware General
Corporation Law. Our stockholders also have the power to change or repeal our
Bylaws.
BUSINESS COMBINATION STATUTE. We are subject to Section 203 of the Delaware
General Corporation Law. Section 203 restricts specified transactions and
business combinations between a corporation and an "Interested Stockholder"
owning 15% or more of the corporation's outstanding voting stock for a period of
three years from the date the stockholder becomes an Interested Stockholder.
Subject to specified exceptions, unless the transaction is approved by our Board
of Directors and the holders of at least 66.67% of the outstanding voting stock
of the corporation, excluding shares held by the Interested Stockholder, Section
203 prohibits significant business transactions such as a merger with,
disposition of assets to, or receipt of disproportionate financial benefits by,
the Interested Stockholder, or any other transaction that would increase the
Interested Stockholder's proportionate ownership of any class or series of the
corporation's stock. The statutory ban does not apply if, upon consummation of
the transaction in which any person becomes an Interested Stockholder, the
Interested Stockholder owns at least 85% of the outstanding voting stock of the
corporation, excluding shares held by persons who are both directors and
officers or by specified employee stock plans.
RIGHTS AGREEMENT. In October 1991, we adopted a Stockholder's Rights
Agreement pursuant to which one Preferred Share Purchase Right (a "Right") was
distributed for each outstanding share of our common stock. Each Right, as
adjusted to give effect to a stock dividend, which effected a two-for-one stock
split, in November 1997, entitles our stockholders to buy one two-hundredth of a
share of Series A Junior Participating preferred stock at an exercise price of
$50.00 upon specified events. The Rights expire on October 23, 2001, unless
earlier redeemed by us.
The Rights become exercisable if a person acquires 15% or more of our common
stock or announces a tender offer that would result in the person owning 15% or
more of our common stock, other than a person who has reported or is required to
report beneficial ownership of our common stock on Schedule 13G under the
Exchange Act of 1934, with respect to whom the threshold is 20%. If the Rights
become exercisable, the holder of each Right, other than the person whose
acquisition triggered the exercisability of the Rights, will be entitled to
purchase, at the Right's then-current exercise price, a number of shares of our
common stock having a market value of twice the exercise price. In addition, if
we were to be acquired in a merger or business combination after the Rights
became exercisable, each Right would entitle its holder to purchase, at the
Right's then-current exercise price, stock of the acquiring company having a
market value of twice the exercise price. The Rights, as adjusted to give effect
to a stock dividend, which effected a two-for-one stock split, in November 1997,
are redeemable by us at a price of $0.005 per Right at any time within ten days
after a person has acquired 15%, or 20% in the case of a Schedule 13G filer, or
more of our common stock.
19
<PAGE>
DESCRIPTION OF SECURITIES WARRANTS
This section describes the general terms and provisions of the warrants for
the purchase of debt securities or common stock (the "Securities Warrants") that
we may issue. The particular terms of the Securities Warrants offered by any
prospectus supplement and the extent, if any, to which these general provisions
may apply to the Securities Warrants so offered will be described in the
applicable prospectus supplement relating to the Securities Warrants.
Securities Warrants may be issued alone or together with debt securities or
common stock offered by any prospectus supplement and may be attached to or
separate from those securities. Each series of Securities Warrants will be
issued under a separate warrant agreement (a "Securities Warrant Agreement")
between us and a bank or trust company, as warrant agent (the "Securities
Warrant Agent"), which will be described in the applicable prospectus
supplement. The Securities Warrant Agent will act solely as our agent in
connection with the Securities Warrants and will not act as an agent or trustee
for any holders of Securities Warrants.
We have summarized general terms and provisions of the Securities Warrant
Agreements and Securities Warrants in this section. The summary is not complete.
We have also filed the forms of Securities Warrant Agreements and the
certificates representing the Securities Warrants ("Securities Warrant
Certificates") as exhibits to the registration statement. You should read the
applicable forms of Securities Warrant Agreement and Securities Warrant
Certificate for additional information before you buy any Securities Warrants.
PROVISIONS OF THE SECURITIES WARRANTS
If we offer Securities Warrants, the applicable prospectus supplement will
describe their terms. If Securities Warrants for the purchase of debt securities
are offered, the applicable prospectus supplement will describe the terms of
these Securities Warrants, including the following if applicable:
- the offering price;
- the currencies in which these Securities Warrants are being offered;
- the designation, aggregate principal amount, currencies, denominations and
terms of the series of the debt securities that can be purchased if a
holder exercises these Securities Warrants;
- the designation and terms of any series of debt securities with which
these Securities Warrants are being offered and the number of Securities
Warrants offered with each debt security or share of common stock;
- the date on and after which the holder of these Securities Warrants can
transfer them separately from the related common stock or series of debt
securities;
- the principal amount of the series of debt securities that can be
purchased if a holder exercises these Securities Warrants and the price
and currencies in which the principal amount may be purchased upon
exercise;
- the date on which the right to exercise these Securities Warrants begins
and the date on which the right expires;
- United States federal income tax consequences; and
- any other terms of these Securities Warrants.
- Securities Warrants for the purchase of debt securities will be in
registered form only.
20
<PAGE>
If Securities Warrants for the purchase of common stock are offered, the
applicable prospectus supplement will describe the terms of these Securities
Warrants, including the following where applicable:
- the offering price;
- the total number of shares that can be purchased if a holder of these
Securities Warrants exercises them;
- the designation and terms of the series of debt securities with which
these Securities Warrants are being offered and the number of Securities
Warrants being offered with each debt security or share of common stock;
- the date on and after which the holder of these Securities Warrants can
transfer them separately from the related common stock or series of debt
securities;
- the number of shares of common stock that can be purchased if a holder
exercises these Securities Warrant and the price at which the common stock
may be purchased upon each exercise;
- the date on which the right to exercise these Securities Warrants begins
and the date on which the right expires;
- United States federal income tax consequences; and
- any other terms of these Securities Warrants.
- Securities Warrants for the purchase of Common Stock will be in registered
form only.
A holder of Securities Warrant Certificates may (1) exchange them for new
certificates of different denominations, (2) present them for registration of
transfer and (3) exercise them at the corporate trust office of the Securities
Warrant Agent or any other office indicated in the applicable prospectus
supplement. Until any Securities Warrants to purchase debt securities are
exercised, the holder of Securities Warrants will not have any of the rights of
Holders of the debt securities that can be purchased upon exercise, including
any right to receive payments of principal, premium or interest on the
underlying debt securities or to enforce covenants in the Indenture. Until any
Securities Warrants to purchase common stock are exercised, holders of
Securities Warrants will not have any of the rights of holders of the underlying
common stock, including any right to receive dividends or to exercise any voting
rights.
EXERCISE OF SECURITIES WARRANTS
Each holder of a Securities Warrant is entitled to purchase the principal
amount of debt securities or number of shares of common stock, as the case may
be, at the exercise price described in the applicable prospectus supplement.
After the close of business on the day when the right to exercise terminates, or
a later date if we extend the time for exercise, unexercised Securities Warrants
will become void.
A holder of Securities Warrants may exercise them by following the general
procedure outlined below:
- delivering to the Securities Warrant Agent the payment required by the
applicable prospectus supplement to purchase the underlying security;
- properly completing and signing the reverse side of the Securities Warrant
Certificate representing the Securities Warrants; and
- delivering the Securities Warrant Certificate representing the Securities
Warrants to the Securities Warrant Agent within five business days of the
Securities Warrant Agent receiving payment of the exercise price.
If you comply with the procedures described above, your Securities Warrants
will be considered to have been exercised when the Securities Warrant Agent
receives payment of the exercise price. After you have completed those
procedures, we will, as soon as practicable, issue and deliver to you the debt
21
<PAGE>
securities or common stock that you purchased upon exercise. If you exercise
fewer than all of the Securities Warrants represented by a Securities Warrant
Certificate, a new Securities Warrant Certificate will be issued to you for the
unexercised amount of Securities Warrants. Holders of Securities Warrants will
be required to pay any tax or governmental charge that may be imposed in
connection with transferring the underlying securities in connection with the
exercise of the Securities Warrants.
AMENDMENTS AND SUPPLEMENTS TO SECURITIES WARRANT AGREEMENTS
We may amend or supplement a Securities Warrant Agreement without the
consent of the holders of the applicable Securities Warrants if the changes are
not inconsistent with the provisions of the Securities Warrants and do not
materially adversely affect the interests of the holders of the Securities
Warrants. We, along with the Securities Warrant Agent, may also modify or amend
a Securities Warrant Agreement and the terms of the Securities Warrants if a
majority of the then outstanding unexercised Securities Warrants affected by the
modification or amendment consent. However, no modification or amendment that
accelerates the expiration date, increases the exercise price, reduces the
majority consent requirement for any modification or amendment, or otherwise
materially adversely affects the rights of the holders of the Securities
Warrants may be made without the consent of each holder affected by the
modification or amendment.
COMMON STOCK WARRANT ADJUSTMENTS
Unless the applicable prospectus supplement states otherwise, the exercise
price of, and the number of shares of common stock covered by, a Common Stock
Warrant will be adjusted in the manner set forth in the applicable prospectus
supplement if specified events occur, including:
- if we issue capital stock as a dividend or distribution on the common
stock;
- if we subdivide, reclassify or combine the common stock;
- if we issue rights or warrants to all holders of common stock entitling
them for a period expiring 45 days after the date fixed for determining
the stockholders entitled to receive the rights or warrants to purchase
common stock at less than the current market price as will be defined in
the Warrant Agreement for the applicable series of Common Stock Warrants;
or
- if we distribute to all holders of common stock evidences of our
indebtedness or our assets, excluding specified cash dividends and
distributions described below, or rights or warrants, excluding rights or
warrants referred to above.
Except as stated above, the exercise price and number of shares of common
stock covered by a Common Stock Warrant will not be adjusted if we issue common
stock or any securities convertible into or exchangeable for common stock, or
securities carrying the right to purchase common stock or securities convertible
into or exchangeable for common stock.
Holders of Common Stock Warrants may have additional rights under the
following circumstances:
- a reclassification or change of the common stock;
- a consolidation or merger involving us; or
- a sale or conveyance to another corporation of all or substantially all of
our property and assets.
If one of the above transactions occurs and holders of our common stock are
entitled to receive stock, securities, other property or assets, including cash,
with respect to or in exchange for our common stock, the holders of the Common
Stock Warrants then outstanding will be entitled to receive upon exercise of
their Common Stock Warrants the kind and amount of shares of stock and other
securities or property that they would have received upon the reclassification,
change, consolidation, merger, sale or conveyance if they had exercised their
Common Stock Warrants immediately before the transaction.
22
<PAGE>
PLAN OF DISTRIBUTION
We may sell the securities under this prospectus through agents, through
underwriters or dealers or directly to one or more purchasers.
Underwriters, dealers and agents that participate in the distribution of the
securities under this prospectus may be underwriters as defined in the
Securities Act of 1933 and any discounts or commissions received by them from us
and any profit on the resale of these securities by them may be treated as
underwriting discounts and commissions under the Securities Act. Any
underwriters or agents will be identified and their compensation, including
their underwriting discount, will be described in the applicable prospectus
supplement. The prospectus supplement also will describe other terms of the
offering, including any discounts or concessions allowed or reallowed or paid to
dealers and any securities exchanges on which these securities may be listed.
If underwriters are used in the sale, the securities will be acquired by the
underwriters for their own account and may be resold from time to time in one or
more transactions, including negotiated transactions, at a fixed public offering
price or at varying prices determined at the time of sale. These securities may
be either offered to the public through underwriting syndicates represented by
managing underwriters or by underwriters without a syndicate. The obligations of
the underwriters to purchase these securities will be subject to specified
conditions precedent and the underwriters will be obligated to purchase all the
securities of a series if any are purchased. Any initial public offering price
and any discounts or concessions allowed or reallowed or paid to dealers may be
changed from time to time.
The distribution of these securities may occur from time to time in one or
more transactions at a fixed price or prices, which may be changed, at market
prices prevailing at the time of sale, at prices related to the prevailing
market prices or at negotiated prices.
If the applicable prospectus supplement indicates, we will authorize dealers
or our agents to solicit offers by particular institutions to purchase these
securities from us pursuant to contracts that provide for payment and delivery
on a future date. We must approve all institutions, but they may include, among
others:
- commercial and savings banks;
- insurance companies;
- pension funds;
- investment companies; and
- educational and charitable institutions.
The institutional purchaser's obligations under the contract are only
subject to the condition that the purchase of these securities under this
prospectus at the time of delivery is allowed by the laws that govern the
purchaser. The dealers and our agents will not be responsible for the validity
or performance of the contracts.
We may have agreements with the underwriters, dealers and agents to
indemnify them against specific civil liabilities, including liabilities under
the Securities Act, or to contribute with respect to payments which the
underwriters, dealers or agents may be required to make as a result of those
specific civil liabilities.
Except for shares of common stock, when we issue the securities under this
prospectus, they may be new securities without an established trading market. If
we sell securities to an underwriter for public offering and sale, the
underwriter may make a market for the relevant securities, but the underwriter
will not be obligated to do so and could discontinue any market making without
notice at any time. Therefore, we cannot give any assurances to you concerning
the liquidity of any security under this prospectus.
23
<PAGE>
Underwriters and agents and their affiliates may be customers of, engage in
transactions with, or perform services for us or our subsidiaries in the
ordinary course of their businesses.
LEGAL OPINIONS
Morrison & Foerster LLP, San Francisco, California, will issue an opinion
about the legality of the securities offered by this prospectus. Any
underwriters will be represented by their own legal counsel.
EXPERTS
The financial statements and schedules incorporated by reference in this
prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto. The consolidated financial statements are, and
consolidated financial statements included in subsequent filings with the SEC
will be, incorporated by reference in this prospectus in reliance upon the
report given upon the authority of said firm as experts in accounting and
auditing to the extent consolidated financial statements included in subsequent
filings are covered by consents executed by said firm and filed with the SEC.
WHERE YOU CAN FIND MORE INFORMATION ABOUT US
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the
Internet at the SEC's web site at http://www.sec.gov. You also may read and copy
any document we file with the SEC at its public reference facilities at 450
Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's regional offices at
7 World Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. You also can
obtain copies of the documents at prescribed rates by writing to the Public
Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the operation
of its public reference facilities. Our SEC filings also are available at the
offices of the Nasdaq Stock Market, located at 1735 K Street, N.W., Washington,
D.C. 20006.
The SEC allows us to "incorporate by reference" information into this
prospectus, which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is an important part of this prospectus and
information that we file subsequently with the SEC will automatically update
this prospectus. We incorporate by reference the documents listed below that we
previously filed with the SEC. These documents contain important information
about us and our finances.
- Annual Report on Form 10-K for the fiscal year ended March 31, 1999; and
- The description of our common stock contained in the Registration
Statements on Form 8-A filed with the SEC on May 29, 1987 and November 5,
1991, as amended on December 27, 1996.
We also incorporate by reference additional documents that we may file with
the SEC after the initial filing of the registration statement that contains
this prospectus and prior to the time that we sell all the securities offered by
this prospectus. These additional documents include periodic reports, such as
Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports
on Form 8-K, as well as proxy statements.
We will provide without charge to each person to whom a copy of this
prospectus is delivered, upon written or oral request, a copy of the information
that has been or may be incorporated by reference in this prospectus, other than
exhibits to the relevant documents. Direct any request for copies to Carl A.
Thomsen, Vice President, Chief Financial Officer and Secretary, at our corporate
headquarters, located at 170 Rose Orchard Way, San Jose, California 95134
(telephone number (408) 943-0777).
24
<PAGE>
You should rely only on the information contained or incorporated by
reference in this prospectus or any applicable prospectus supplement. We have
not authorized anyone to provide you with any other information. We may only use
this prospectus to sell securities if it is accompanied by a prospectus
supplement. We are only offering these securities in states where the offer is
permitted. You should not assume that the information in this prospectus or any
applicable prospectus supplement is accurate as of any date other than the dates
on the front of those documents.
25
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an estimate, subject to future contingencies, of the
expenses to be incurred by the Registrant in connection with the issuance and
distribution of the securities being registered:
<TABLE>
<S> <C>
Registration Fee.................................................. $ 18,070
Legal Fees and Expenses*.......................................... 25,000
Accounting Fees and Expenses*..................................... 10,000
Printing and Engraving Fees*...................................... 35,000
Listing Fees*..................................................... 17,500
Miscellaneous*.................................................... 10,000
---------
Total........................................................... $ 115,570
---------
---------
</TABLE>
- ------------------------
* Estimated pursuant to instruction to Item 511 of Regulation S-K.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145(a) of the Delaware General Corporation Law (the "DGCL") provides
in relevant part that "a corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation), by
reason of the fact that he is or was a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interest of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful." With respect to
derivative actions, Section 145(b) of the DGCL provides in relevant part that
"[a] corporation may indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action or suit by or
in the right of the corporation to procure a judgment in its favor...[by reason
of his service in one of the capacities specified in the preceding sentence]
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interest of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper."
The Registrant's Restated Certificate of Incorporation provides that each
person who is or was or who had agreed to become a director or officer of the
Registrant or who had agreed at the request of the Registrant's Board of
Directors or an officer of the Registrant to serve as an employee or agent of
the Registrant or as a director, officer, employee or agent or another
corporation, partnership, joint venture, trust or other enterprise, shall be
indemnified by the Registrant to the full extent permitted by the DGCL or any
other applicable laws. Such Restated Certificate of Incorporation also provides
that the Registrant may enter into one or more agreements with any person which
provides for indemnification greater or different than that provided in such
Certificate, and that no amendment or repeal of such Certificate shall apply to
or have any effect on the right to indemnification permitted or authorized
thereunder for or with
II-1
<PAGE>
respect to claims asserted before or after such amendment or repeal arising from
acts or omissions occurring in whole or in part before the effective date of
such amendment or repeal.
The Registrant's Bylaws provide that the Registrant shall indemnify to the
full extent authorized by law any person made or threatened to be made a party
to an action or a proceeding, whether criminal, civil, administrative or
investigative, by reason of the fact that he, his testator or intestate was or
is a director, officer or employee of the Registrant or any predecessor of the
Registrant or serves or served any other enterprise as a director, officer or
employee at the request of the Registrant or any predecessor of the Registrant.
The Registrant has entered into indemnification agreements with its
directors and certain of its officers.
The Registrant has purchased and maintains insurance on behalf of any person
who is or was a director or officer against loss arising from any claim asserted
against him and incurred by him in any such capacity, subject to certain
exclusions.
See also the undertakings set out in response to Item 17 herein.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
- --------- ------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement for Debt Securities.+
1.2 Form of Underwriting Agreement for Common Stock.+
3.1 Restated Certificate of Incorporation (incorporated by
reference to Exhibit 3.1 of the Registrant's Annual Report
on Form 10-K for the year ended March 31, 1998).+
3.2 Amended and Restated Bylaws dated as of October 8, 1998
(incorporated by reference to Exhibit 3.1 of the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended December 31, 1998).+
4.1 Amended and Restated Rights Agreement, dated as of November
3, 1998, between the Registrant and ChaseMellon Shareholder
Services, L.L.C., including the form of the Certificate of
Designations for the Series A Junior Participating Stock
(incorporated by reference to Exhibit 4.1 of the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended December 31, 1998.)+
4.2 Form of Indenture.+
4.3 Form of Debt Warrant Agreement, including form of Debt
Warrant Certificate.+
4.4 Form of Common Stock Warrant Agreement, including form of
Common Stock Warrant Certificate.+
4.5 Form of Senior Debenture.+
5.1 Opinion of Morrison & Foerster LLP together with consent.+
12.1 Computations of ratio of earnings to fixed charges.+
23.1 Consent of Morrison & Foerster LLP (contained in the opinion
of counsel filed as Exhibit 5.1 to this Registration
Statement).+
23.2 Consent of Arthur Andersen LLP, independent public
accountants.
24.1 Powers of Attorney (see page II-4 of the Registration
Statement).+
</TABLE>
- ------------------------
+ Previously filed
II-2
<PAGE>
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the Registration Statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high 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 percent change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply
if the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed with or
furnished to the Commission by the registrant pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial BONA FIDE offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the 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 Act and will be governed by the final adjudication of
such issue.
(d) The undersigned Registrant hereby undertakes that for purposes of
determining any liability under the Securities Act of 1933, the information
omitted from the form of prospectus filed as part of this
II-3
<PAGE>
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act of 1933 shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(e) The undersigned Registrant hereby undertakes that for the purpose of
determining any liability under the Securities Act of 1933, each post-effective
amendment that contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(f) The undersigned registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act in accordance with the
rules and regulations prescribed by the Commission under Section 305(b)(2) of
the Act.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Jose and the State of California, on this 5th day
of August, 1999.
<TABLE>
<S> <C> <C>
DIGITAL MICROWAVE CORPORATION
By: /s/ CHARLES D. KISSNER*
-----------------------------------------
Charles D. Kissner
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ CHARLES D. KISSNER*
- ------------------------------ Chairman of the Board and August 5, 1999
Charles D. Kissner Chief Executive Officer
/s/ RICHARD C. ALBERDING*
- ------------------------------ Director August 5, 1999
Richard C. Alberding
/s/ PAUL BACHOW*
- ------------------------------ Director August 5, 1999
Paul Bachow
/s/ JOHN W. COMBS*
- ------------------------------ Director August 5, 1999
John W. Combs
/s/ CLIFFORD H. HIGGERSON*
- ------------------------------ Director August 5, 1999
Clifford H. Higgerson
/s/ JAMES D. MEINDL*
- ------------------------------ Director August 5, 1999
James D. Meindl
/s/ V. FRANK MENDICINO*
- ------------------------------ Director August 5, 1999
V. Frank Mendicino
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ BILLY B. OLIVER*
- ------------------------------ Director August 5, 1999
Billy B. Oliver
/s/ HOWARD ORINGER*
- ------------------------------ Director August 5, 1999
Howard Oringer
Vice President, Chief
/s/ CARL A. THOMSEN Financial Officer and
- ------------------------------ Secretary August 5, 1999
Carl A. Thomsen (Principal Financial and
Accounting Officer)
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By: /s/ CARL A. THOMSEN
-------------------------
Carl A. Thomsen
ATTORNEY-IN-FACT
</TABLE>
II-6
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated April 21, 1999
included or incorporated by reference in Digital Microwave Corporation's Form
10-K for the year ended March 31, 1999 and to all references to our Firm
included in this registration statement.
/s/ ARTHUR ANDERSEN LLP
San Jose, California
July 30, 1999
