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AS FILED PURSUANT TO RULE 424(B)(2)
REGISTRATION NO. 333-73021
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED OCTOBER 1, 1999)
1,347,368 SHARES
[LOGO]
DIGITAL MICROWAVE CORPORATION
COMMON STOCK
----------------
Digital Microwave Corporation is offering and selling 1,347,368 shares of its
common stock with this prospectus supplement.
The common stock is listed on the Nasdaq National Market under the symbol
"DMIC." On March 7, 2000, the last reported sale price for the common stock on
the Nasdaq National Market was $36.375 per share.
INVESTING IN THE COMMON STOCK INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON
PAGE S-5 OF THIS PROSPECTUS SUPPLEMENT AND ON PAGE 2 OF THE ACCOMPANYING
PROSPECTUS.
The underwriter will purchase the shares of common stock from Digital Microwave
Corporation at a price of $33.25 per share, resulting in $44.8 million aggregate
net proceeds (before expenses) to Digital Microwave Corporation.
The underwriter may offer the common stock offered by this prospectus supplement
from time to time for sale in one or more transactions, which may involve block
transactions, on the Nasdaq National Market, in the over-the-counter market or
otherwise, at market prices prevailing at the time of sale, at prices related to
prevailing market prices or at negotiated prices, subject to prior sale when, as
and if delivered to and accepted by the underwriter.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement or the accompanying prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
The shares of common stock will be ready for delivery on or about March 10,
2000.
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DAIN RAUSCHER WESSELS
------------------------
March 7, 2000
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You should rely only on the information contained in this prospectus supplement
and the accompanying prospectus. No dealer, salesperson or other person is
authorized to give information that is not contained in the prospectus
supplement and the accompanying prospectus. This prospectus supplement and the
accompanying prospectus are not an offer to sell nor are they seeking an offer
to buy these securities in any jurisdiction where the offer or sale is not
permitted. The information contained in this prospectus supplement and the
accompanying prospectus is correct only as of the date of this prospectus,
regardless of the time of delivery of this prospectus or any sale of these
securities.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
About this Prospectus Supplement............................ S-3
Forward-Looking Statements.................................. S-3
Prospectus Supplement Summary............................... S-4
Risk Factors................................................ S-5
Use of Proceeds............................................. S-5
Recent Accounting Pronouncements............................ S-5
Underwriting................................................ S-6
Experts..................................................... S-6
Legal Matters............................................... S-7
Where You Can Find More Information About Us................ S-7
PROSPECTUS
Prospectus Summary.......................................... 1
Digital Microwave Corporation............................... 1
How to Reach Us............................................. 1
The Offering of Securities Under this Prospectus............ 1
Risk Factors................................................ 2
Use of Proceeds............................................. 8
Ratios of Earnings to Fixed Charges......................... 8
Description of Debt Securities.............................. 9
Description of Our Common Stock............................. 17
Description of Securities Warrants.......................... 20
Plan of Distribution........................................ 23
Legal Opinions.............................................. 24
Experts..................................................... 24
Where You Can Find More Information About Us................ 25
</TABLE>
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Digital Microwave Corporation's principal executive offices are located at 170
Rose Orchard Way, San Jose, California 95134. Its telephone number is
(408) 943-0777.
As used in this prospectus supplement and the accompanying prospectus, the terms
"we," "us," "our," the "Company" or "Digital Microwave" mean Digital Microwave
Corporation and its subsidiaries (unless the context indicates a different
meaning), and the term "common stock" means our common stock, $0.01 par value
per share.
The underwriter is offering the shares subject to various conditions and may
reject all or part of any order.
S-2
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ABOUT THIS PROSPECTUS SUPPLEMENT
We provide information to you about this offering of shares of our common stock
in two separate documents: (a) the accompanying prospectus, which provides
general information, some of which may not apply to this offering, and (b) this
prospectus supplement, which describes the specific details regarding this
offering. Generally, when we refer to this "prospectus," we are referring to
both documents combined.
IF INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH THE
PROSPECTUS, YOU SHOULD RELY ON THIS PROSPECTUS SUPPLEMENT.
You should read this prospectus supplement and the accompanying prospectus
carefully before you invest. Both documents contain information you should
consider when making your investment decision. You should also read and consider
the information in the documents to which we have referred you in "Where You Can
Find More Information About Us" on page S-7 of this prospectus supplement.
If we use a capitalized term in this prospectus supplement and do not define the
term in this document, the capitalized term is defined in the prospectus.
FORWARD-LOOKING STATEMENTS
Some of the information included and incorporated by reference in this
prospectus supplement contains forward-looking statements, such as those
pertaining to our (including certain of our subsidiaries') technology, products,
and business performance. Forward-looking statements involve numerous risks and
uncertainties and you should not rely on them as predictions of future events.
There is no assurance that the events or circumstances reflected in
forward-looking statements will be achieved or will occur. You can identify
forward-looking statements by the use of forward-looking terminology such as
"believes," "expects," "may," "will," "should," "seeks," "approximately,"
"intends," "plans," "pro forma," "estimates" or "anticipates" or the negative of
these words and phrases or similar words or phrases. You can also identify
forward-looking statements by discussions of strategy, plans or intentions. The
statements in our Annual Report on Form 10-K for the fiscal year ended
March 31, 1999, our Quarterly Report on Form 10-Q for the fiscal quarter ended
June 30, 1999, our Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1999, and our Quarterly Report on Form 10-Q for the fiscal quarter
ended December 31, 1999 concerning our future products, expenses, revenues,
gross margins, liquidity and cash needs, as well as our plans and strategies,
contain forward-looking statements concerning our future operations and
financial results within the meaning of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934. These
forward-looking statements are based on current expectations, and we assume no
obligation to update this information. Numerous factors, such as economic and
competitive conditions, timing and volume of incoming orders, shipment volumes,
product margins, and foreign exchange rates, as well as the factors detailed
below under the captions "Risk Factors," could cause actual results to differ
materially from those described in these statements. Prospective investors
should carefully consider the factors discussed above in evaluating these
forward-looking statements.
S-3
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PROSPECTUS SUPPLEMENT SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED IN OTHER PARTS OF THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. BECAUSE IT IS A SUMMARY, IT DOES NOT
CONTAIN ALL OF THE INFORMATION THAT YOU SHOULD CONSIDER BEFORE INVESTING IN THE
SHARES. YOU SHOULD READ THE ENTIRE PROSPECTUS SUPPLEMENT, THE ACCOMPANYING
PROSPECTUS AND THE DOCUMENTS INCORPORATED BY REFERENCE CAREFULLY.
THE COMPANY
Digital Microwave designs, manufactures and markets advanced wireless solutions
for worldwide telephone network interconnection and access. We provide customers
with a broad product line, which contains products that operate using a variety
of transmission frequencies, ranging from 0.3 GigaHertz (GHz) to 38 GHz, and a
variety of transmission capacities, typically ranging from 64 Kilobits to OC-3
or 155 Megabits per second. Our broad product line allows us to market and sell
its 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. Our products are designed to enable our customers to deploy and
expand their wireless infrastructure and market their services rapidly to
subscribers, so that service providers can realize a return on their investments
in frequency allocation licenses and network equipment.
Our address is Digital Microwave Corporation, 170 Rose Orchard Way, San Jose,
California 95134, and our telephone number is (408) 943-0777.
THE OFFERING
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<S> <C>
Common stock offered by Digital Microwave................... 1,347,368 shares
Common stock to be outstanding after the offering........... 72,293,221 shares
Use of proceeds............................................. For general corporate purposes,
including working capital, and to fund
potential strategic investments and
acquisitions.
Nasdaq National Market symbol............................... DMIC
</TABLE>
These share numbers are based on shares outstanding as of March 6, 2000 and
exclude:
- 6,579,446 shares of common stock issuable upon exercise of outstanding
options at a weighted average exercise price of $9.0743; and
- 2,987,874 shares of common stock reserved for issuance under our stock
option plans upon exercise of options not yet granted.
S-4
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RISK FACTORS
BEFORE PURCHASING OUR COMMON STOCK, YOU SHOULD CAREFULLY CONSIDER THE RISKS
DESCRIBED UNDER THE HEADING "RISK FACTORS" BEGINNING ON PAGE 2 OF THE
ACCOMPANYING PROSPECTUS AND THE RISKS DESCRIBED IN THE DOCUMENTS INCORPORATED BY
REFERENCE INTO THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS,
INCLUDING THOSE SET FORTH UNDER THE CAPTION "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--FACTORS THAT MAY
AFFECT FUTURE FINANCIAL RESULTS" IN OUR QUARTERLY REPORT ON FORM 10-Q FOR THE
FISCAL QUARTER ENDED DECEMBER 31, 1999, TOGETHER WITH THE RISK FACTOR DESCRIBED
BELOW:
OUR SALES WOULD SUFFER IF ONE OR MORE OF OUR KEY CUSTOMERS WERE UNABLE TO OBTAIN
NECESSARY FINANCING
In the event of depreciation in key currencies, failure of financial
institutions or other events adversely impacting the ability of our key
customers, especially those outside the United States, to obtain the financing
necessary to complete their orders for our products, these customers may
substantially reduce, delay or cancel their orders. The reduction, delay or
cancellation of orders due to our customers' financing difficulties could
materially and adversely affect our financial condition and results of
operations.
USE OF PROCEEDS
We estimate that the net proceeds to us from this offering will be approximately
$44.7 million. "Net proceeds" is what we expect to receive after paying expenses
of the offering.
We intend to use the net proceeds for general corporate purposes, including
working capital, and may also use a portion of the net proceeds to fund
potential strategic investments and acquisitions; however, we have no present
agreements or commitments in this regard.
Until we use the net proceeds of the offering, we may invest the net proceeds in
highly liquid investment grade instruments, including interest-bearing bank
accounts, certificates of deposit, money market securities, U.S. government or
U.S. government agency securities.
RECENT ACCOUNTING PRONOUNCEMENTS
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial Statements."
SAB 101 provides guidance on applying generally accepted accounting principles
to revenue recognition in financial statements. We will adopt SAB 101 as
required in the first quarter of 2000 and we are evaluating the effect that this
adoption may have on our consolidated results of operations and financial
position.
S-5
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UNDERWRITING
We have entered into an underwriting agreement with Dain Rauscher Incorporated.
Subject to the terms and conditions of the underwriting agreement, Dain Rauscher
Incorporated has agreed to purchase from us all of the shares offered by this
prospectus supplement. Dain Rauscher Incorporated is referred to below as the
"underwriter."
This is a firm commitment underwriting. This means that the underwriter has
agreed to purchase all of the shares offered by this prospectus supplement if
any are purchased.
The shares should be ready for delivery on or about March 10, 2000 against
payment in immediately available funds. The underwriter has advised us that it
proposes to offer the shares of common stock offered by this prospectus
supplement from time to time in one or more transactions, which may involve
block transactions, on the Nasdaq National Market, in the over-the-counter
market or otherwise, at market prices prevailing at the time of sale, at prices
related to prevailing market prices or at negotiated prices, subject to prior
sale when, as and if delivered to and accepted by the underwriter. The
underwriter may effect these transactions by selling shares of common stock to
or through dealers, and those dealers may receive compensation in the form of
discounts, concessions or commissions from the underwriter and/or the purchasers
of the shares of common stock for whom they may act as agents or to whom they
may sell as principal. Any compensation received by the underwriter or those
dealers and any profits on resale as principal may be deemed to be underwriting
discounts and commissions under the Securities Act of 1933.
We estimate the offering expenses payable by us to be approximately $100,000.
We have agreed to indemnify the underwriter against certain liabilities,
including liabilities under the Securities Act of 1933.
We have agreed with the underwriter, subject to certain exceptions, not to
issue, sell or register with the Securities and Exchange Commission or otherwise
dispose of any of our equity securities for a period of 90 days after the date
of this prospectus supplement, without the prior written consent of the
underwriter.
In connection with the offering, the underwriter may purchase and sell shares of
common stock in the open market. These transactions may include short sales and
purchases to cover positions created by short sales. Short sales involve the
sale by the underwriter of a greater number of shares than it is required to
purchase in the offering. These activities may maintain or otherwise affect the
market price of the common stock. As a result, the price of the common stock may
be higher than the price that otherwise might exist in the open market. If these
activities are commenced, they may be discontinued by the underwriter at any
time. These transactions may be effected on the Nasdaq National Market, in the
over-the-counter market or otherwise.
From time to time, the underwriter has provided, and may continue to provide,
investment banking and other financial advisory services to us. In the ordinary
course of business, the underwriter may actively trade our securities for its
own account or for accounts of customers and, accordingly, it may at any time
hold long or short positions in those securities.
EXPERTS
The audited 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, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
S-6
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LEGAL MATTERS
The validity of the common stock offered under this prospectus supplement and
the accompanying prospectus will be passed upon for us by Morrison & Foerster
LLP, Palo Alto, California. Pillsbury Madison & Sutro LLP, San Francisco,
California, is acting as counsel for the underwriter in connection with selected
legal matters relating to the shares of common stock offered by this prospectus
supplement and the accompanying prospectus.
WHERE YOU CAN FIND MORE INFORMATION ABOUT US
The Securities and Exchange Commission allows us to "incorporate by reference"
information into this prospectus supplement and the accompanying 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 supplement and the
accompanying prospectus and information that we file subsequently with the SEC
will automatically update this prospectus supplement and the accompanying
prospectus. We incorporate by reference the documents listed below that we
previously filed with the SEC. The documents contain important information about
us and our finances.
- Our Annual Report on Form 10-K for the fiscal year ended March 31, 1999, as
amended by Form 10-K/A filed on September 17, 1999.
- Our Quarterly Reports on Form 10-Q for the fiscal quarters ended June 30,
1999, September 30, 1999 and December 31, 1999.
- Our Current Reports on Form 8-K filed with the SEC on November 18, 1999 and
November 22, 1999.
- 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.
All documents and reports that we file pursuant to sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934 after the date of this prospectus
supplement are also incorporated by reference in this prospectus supplement and
the accompanying prospectus and will be deemed a part of this prospectus
supplement and the accompanying prospectus from the date of filing of the
document or report.
Statements contained in this document or incorporated or deemed to be
incorporated by reference after the date of this prospectus supplement will
modify statements in any other subsequently filed documents to the extent the
new information differs from the old information. Any statements modified or
superseded will no longer constitute a part of this prospectus supplement and
the accompanying prospectus in their original form.
We will provide without charge to each person to whom a copy of this prospectus
supplement and the accompanying prospectus are delivered, upon written or oral
request, a copy of the information that has been or may be incorporated by
reference in this prospectus supplement and the accompanying prospectus, other
than exhibits to the relevant documents. Direct any request for copies to Carl
A. Thomsen, Senior 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).
S-7
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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 October 1, 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.
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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.
BECAUSE WE DEPEND ON OUR INTERNATIONAL OPERATIONS WE ARE SUSCEPTIBLE TO A NUMBER
OF POLITICAL, ECONOMIC AND GEOGRAPHIC 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, the occurrence of any negative
international political, economic or geographic events could result in
significant revenue shortfalls. These revenue shortfalls could cause our
business, financial condition and results of operations to be harmed. Some of
the risks of doing business internationally 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.
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;
2
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- regulatory developments; and
- general economic conditions.
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, WHICH MAY DECREASE OUR GROSS PROFIT
MARGINS
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
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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.
WE MUST DEVELOP NEW PRODUCTS TO KEEP UP WITH RAPID TECHNOLOGICAL CHANGE OR WE
MAY BE UNABLE TO COMPETE IN OUR MARKET AREA
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
WHICH COULD REDUCE OUR REVENUES
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.
LACK OF COMPONENT AVAILABILITY OR THE INABILITY OF OUR SUBCONTRACTORS TO PERFORM
OR OUR KEY SUPPLIERS TO MANUFACTURE AND DELIVER OUR PRODUCTS COULD CAUSE OUR
PRODUCTS TO BE PRODUCED IN AN UNTIMELY OR UNSATISFACTORY MANNER
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, which could have a material
adverse effect on our business, financial condition and results of operations.
There can be no assurance that we will not experience material supply problems
or component or subsystem delays in the future.
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IF WE FAIL TO MANAGE OUR INTERNAL DEVELOPMENT OR SUCCESSFULLY EFFECTUATE OUR
ACQUISITIONS, WE MAY NOT EFFECTIVELY MANAGE OUR GROWTH AND OUR BUSINESS MAY BE
HARMED
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
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.
IF WE FAIL TO DEVELOP PRODUCTS THAT MEET THE TECHNICAL SPECIFICATIONS OF OUR
CUSTOMERS, WE COULD EXPERIENCE INCREASED COSTS TO REMEDY THESE FAILURES
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.
BECAUSE A SIGNIFICANT AMOUNT OF OUR REVENUES COMES FROM A FEW CUSTOMERS, THE
TERMINATION OF ANY OF THESE CUSTOMER RELATIONSHIPS MAY HARM OUR BUSINESS
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 result in
significant revenue shortfalls. If these revenue shortfalls occur, our business
and financial condition would be harmed.
IF WE FAIL TO MAINTAIN OUR OEM RELATIONSHIPS OUR DISTRIBUTION CHANNELS COULD BE
HARMED WHICH COULD CAUSE OUR REVENUES TO DECREASE
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 result in
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significant revenue shortfalls. If these revenue shortfalls occur, our business,
financial condition or results of operations could be harmed.
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.
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.
IF SUFFICIENT RADIO FREQUENCY SPECTRUM ALLOCATION IS NOT ALLOCATED FOR USE OF
OUR PRODUCTS IT MAY RESTRICT OUR ABILITY TO MARKET 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.
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WE NEED TO HIRE, INTEGRATE AND RETAIN QUALIFIED PERSONNEL BECAUSE THESE
INDIVIDUALS ARE IMPORTANT TO OUR FUTURE SUCCESS
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 harm our business. 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.
IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS ADEQUATELY, WE MAY
BE DEPRIVED OF LEGAL RECOURSE AGAINST THOSE WHO MISAPPROPRIATE OUR INTELLECTUAL
PROPERTY
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. There can be no assurance that any steps taken by
us will be adequate to deter misappropriation or impede independent third
parties from developing technology that is similar or superior to our
proprietary technology which could lead to substantial competition in our market
area. If we fail to adequately protect our intellectual property rights and
proprietary information our business could be harmed. 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 WHICH MAY LEAD TO LOSSES BY INVESTORS AND
SECURITIES LITIGATION
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.
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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 Securities
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.
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)
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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 Subsidiaries are not included in the calculations described under
the heading
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"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
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purchase 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)
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Under the Indenture, the Holders of a majority 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
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notice of 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.
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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.
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;
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- 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 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
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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.
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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
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prospectus. 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.
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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/A for the fiscal year ended March 31, 1999;
- Quarterly Report on Form 10-Q for the quarter ended June 30, 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).
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
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1,347,368 SHARES
[LOGO]
DIGITAL MICROWAVE CORPORATION
COMMON STOCK
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PROSPECTUS
SUPPLEMENT
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DAIN RAUSCHER WESSELS
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March 7, 2000
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