.
.
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As filed with the Securities and Exchange Commission on June 6, 2003 Registration No. 333-105416
--------------------------------------------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 TO FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ARRIS GROUP, INC.
(Exact name of registrant as specified in its charter)
----------------------------------
DELAWARE
(State or other jurisdiction 58-2588724
of incorporation or organization) (I.R.S. Employer Identification No.)
11450 TECHNOLOGY CIRCLE, DULUTH, GEORGIA 30097
(678) 473-2000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
------------------
LAWRENCE A. MARGOLIS
11450 TECHNOLOGY CIRCLE, DULUTH, GEORGIA 30097
(678) 473-2000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------
With copies to:
W. BRINKLEY DICKERSON, JR.
TROUTMAN SANDERS LLP
600 PEACHTREE STREET, N.E., SUITE 5200
ATLANTA, GEORGIA 30308-2216
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after the effective date of this Registration Statement. If the only
securities being registered on this Form are being offered pursuant to dividend
or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
--------------------------- ----------------------- ------------------------ ------------------------ ----------------------
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE AMOUNT TO BE AGGREGATE PRICE PER AGGREGATE OFFERING REGISTRATION FEE(1)
REGISTERED REGISTERED UNIT PRICE
--------------------------- ----------------------- ------------------------ ------------------------ ----------------------
4 1/2% Convertible
Subordinated Notes due 2008 $125,000,000 100% $125,000,000 $10,113*
--------------------------- ----------------------- ------------------------ ------------------------ ----------------------
Common Stock, $0.01 par
value per share (2) 25,000,000(3) None (4)
--------------------------- ----------------------- ------------------------ ------------------------ ----------------------
* Previously paid
(1) Calculated at the statutory rate of .00008090 of the proposed maximum
aggregate offering price, which price is exclusive of accrued interest and is
estimated solely for the purpose of calculating the registration fee.
(2) Includes preferred stock purchase rights which, prior to the occurrence of
certain events, will not be exercisable or evidenced separately from the common
stock.
(3) Includes 25,000,000 shares of common stock initially issuable upon
conversion of the notes at the conversion rate of 200 shares of common stock per
$1,000 principal amount of notes. Pursuant to Rule 416 under the Securities Act,
such number of shares of common stock registered hereby shall include an
indeterminate number of shares of common stock that may be issued in connection
with a stock split, stock dividend, recapitalization or similar event.
(4) Pursuant to Rule 457(i), there is no additional filing fee with respect to
the shares of common stock issuable upon conversion of the notes because no
additional consideration will be received in connection with the exercise of the
conversion privilege.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
THE SELLING SECURITYHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED JUNE 6, 2003
$125,000,000
[ARRIS LOGO]
4 1/2% CONVERTIBLE SUBORDINATED NOTES DUE 2008 AND THE
SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THE NOTES
-------------------------------------------------------------------------------
This prospectus will be used by selling securityholders to resell up to
$125,000,000 original principal amount of 4 1/2% Convertible Subordinated Notes
due 2008 and up to 25,000,000 shares of ARRIS common stock issuable upon
conversion of the notes.
Holders may convert the notes into our common stock at any time before their
maturity unless we previously have redeemed or repurchased them. The notes will
be due on March 15, 2008. The conversion rate is 200 shares per each $1,000
principal amount of notes, subject to adjustment. This is equivalent to an
initial conversion price of $5.00 per share. Our common stock is quoted on the
Nasdaq National Market under the symbol "ARRS." On June 3, 2003, the closing
sales price for our common stock on the Nasdaq National Market was $5.32 per
share.
We will pay interest on the notes on March 15 and September 15 of each year. The
first interest payment will be made on September 15, 2003. The notes are
subordinated in right of payment to our existing and future senior indebtedness
and are effectively subordinated to all of the indebtedness and other
liabilities of our subsidiaries.
We may redeem, under conditions as described in this prospectus, some or all of
the notes at any time at a redemption price of $1,000 per $1,000 principal
amount, plus accrued and unpaid interest, if any, to, but excluding, the
redemption date, if the closing price of our common stock has exceeded 150% of
the conversion price then in effect for at least 20 trading days within a period
of 30 consecutive trading days ending on the trading day immediately before the
date of mailing of the provisional redemption notice. If a provisional
redemption occurs on or before the third anniversary of the notes' issuance, we
also will make an interest make-whole payment in cash or, at our option, in
common stock. The interest make-whole payment would be equal to the present
value of the aggregate amount of the interest that would otherwise have accrued
from the provisional redemption date through the third anniversary of the
issuance of the notes. In the event of a change of control, as described in this
prospectus, you may require us to repurchase any notes held by you.
We do not intend to apply for listing of the notes on any securities exchange or
for inclusion of the notes in any automated quotation system. The notes have
been approved for trading on The PORTAL system of the National Association of
Securities Dealers, Inc.
INVESTING IN THE NOTES AND SHARES OF COMMON STOCK INVOLVES RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 8.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THIS PROSPECTUS IS DATED 2003.
TABLE OF CONTENTS
Documents Incorporated by Reference.......................................2
Where You Can Find More Information.......................................3
About ARRIS...............................................................4
Summary of the Notes and Common Stock.....................................4
Risk Factors..............................................................8
Cautionary Statements Concerning Forward-Looking Statements..............14
Use of Proceeds..........................................................15
Ratio of Earnings to Fixed Charges.......................................15
Description of the Notes.................................................16
Description of Capital Stock.............................................32
Certain United States Income Tax Considerations..........................35
Selling Securityholders..................................................41
Plan of Distribution.....................................................46
Independent Auditors.....................................................47
Legal Matters............................................................47
----------------
As used in this prospectus, the terms "ARRIS," "we," "our" and "us" each refer
to ARRIS Group, Inc. and our consolidated subsidiaries, as appropriate in the
context.
DOCUMENTS INCORPORATED BY REFERENCE
We are "incorporating by reference" some of the information we file with the
SEC, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be part of this prospectus, unless such information is updated by this
prospectus. We incorporate by reference the documents listed below and any
future filings made with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 (File No. 001-16631) after the initial filing of
the registration statement that contains this prospectus and prior to the
termination of this offering:
(a) Our Annual Report on Form 10-K for the year ended December 31, 2002;
(b) Our Quarterly Report on Form 10-Q for the quarter ended March 31, 2003;
(c) Our Current Report on Form 8-K, dated February 12, 2003;
(d) Our Current Report on Form 8-K, dated March 11, 2003;
(e) Our Proxy Statement for our Annual Meeting of Stockholders held on
May 22, 2003 (other than the material contained under the captions
"Compensation Committee Report on Executive Compensation," "Report of
the Audit Committee," "Performance Graph" and "Independent Auditors and
Their Fees");
(f) The description of our common stock contained in our Registration
Statement on Form 8-A, as filed on August 3, 2001, as amended by our
Registration Statement on Form 8-A/A as filed on August 7, 2001,
including any amendments or reports filed for the purpose of updating
such descriptions; and
(g) The description of our preferred stock purchase rights contained in our
Registration Statement on Form 8-A/A, as filed on October 3, 2002,
including any amendments or reports filed for the purpose of updating
such description.
2
We will provide to each person, including any beneficial owner, to whom a
prospectus is delivered, a copy of any or all of the information that has been
incorporated by reference in the prospectus but not delivered with the
prospectus. We will provide this information upon written or oral request at no
cost to the requester. You may request this information by contacting our
corporate headquarters at the following address: ARRIS Group, Inc., 11450
Technology Circle, Duluth, Georgia 30097, (678) 473-2000, Attn: Secretary.
WHERE YOU CAN FIND MORE INFORMATION
ARRIS files annual, quarterly and special reports, proxy statements and other
information with the SEC. The reports, proxy statements and other information
filed by ARRIS with the SEC can be inspected and copied at the Public Reference
Room of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates, and from the web site that the SEC maintains at http://www.sec.gov. You
may obtain information on the operation of the Public Reference Room by calling
the SEC at 1-800-SEC-0330. ARRIS' stock is quoted on the Nasdaq National Market
under the symbol "ARRS."
We also file these documents with the SEC electronically. You can access the
electronic versions of these filings on the Internet at the SEC's web site. We
have included this prospectus in our registration statement that we filed with
the SEC. The registration statement provides additional information that we are
not required to include in the prospectus. You can receive a copy of the entire
registration statement as described above. Although this prospectus describes
the material terms of certain contracts, agreements and other documents filed as
exhibits to the registration statement, you should read those exhibits for a
more complete description of the document or matter involved.
We filed a registration statement on Form S-3 to register with the SEC the
4 1/2% convertible subordinated notes due 2008 and the shares of ARRIS common
stock issuable upon conversion of the notes. This prospectus is part of the
registration statement and does not contain all of the information in the
registration statement.
----------------
You should rely only on the information incorporated by reference or provided in
this prospectus or a prospectus supplement or amendment. We have not authorized
anyone else to provide you with different information. We are not making an
offer of these securities in any state where the offer is not permitted. You
should assume that the information appearing in this prospectus or a prospectus
supplement or amendment or any documents incorporated by reference therein is
accurate only as of the date on the front cover of the applicable document. Our
business, financial condition, results of operations and prospects may have
changed since that date.
3
ABOUT ARRIS
We develop and supply equipment and technology for cable system operators and
other broadband service providers which allow them to deliver a full range of
integrated voice, video and data services to their subscribers. Further, we are
a leading supplier of infrastructure products used by cable system operators in
the build-out and maintenance of hybrid-fiber coaxial, or HFC, networks.
We are the successor to ANTEC Corporation. In August 2001, Nortel Networks LLC
and ANTEC combined their joint venture, Arris Interactive L.L.C. with ANTEC to
create our current company, ARRIS Group, Inc.
We are incorporated under the laws of the State of Delaware. Our principal
executive offices are located at 11450 Technology Circle, Duluth, Georgia 30097,
and our telephone number is (678) 473-2000. We also have a worldwide website at
http://www.arrisi.com.
SUMMARY OF THE NOTES AND COMMON STOCK
Securities Offered.............................. Up to $125,000,000 aggregate principal amount of 4 1/2%
Convertible Subordinated Notes due March 15, 2008, held by
various selling securityholders.
Up to 25,000,000 shares of ARRIS common stock (for resale by
selling securityholders after conversion of the notes), issuable
by ARRIS upon conversion of the notes.
Interest........................................ We will pay interest on the notes semi-annually on March 15 and
September 15 of each year, commencing September 15, 2003.
Conversion...................................... The notes are convertible at the option of the holder into
shares of our common stock at a conversion rate of 200 shares
per $1,000 principal amount of the notes, which is equivalent to
a conversion price of $5.00 per share. The conversion rate is
subject to adjustment. You may convert the notes at any time on
or before the close of business on the maturity date, unless we
have previously redeemed or repurchased the notes; provided,
however, that if a note is called for redemption or repurchase,
you will be entitled to convert the note at any time before the
close of business on the date immediately preceding the date
fixed for redemption or repurchase, as the case may be.
Subordination................................... The notes are unsecured and subordinated to our present and
future senior indebtedness, as that term is defined in this
prospectus. The notes are also structurally subordinated in
right of payment to all indebtedness and other liabilities of
our subsidiaries. As of June 1, 2003, we had no outstanding
senior indebtedness (other than approximately $5.0 million in
letters of credit) although we had the right to borrow up to
$45.7 million under our credit facility. The indenture under
which the notes will be issued will not restrict our incurrence
of indebtedness, including senior indebtedness, or our
subsidiaries' incurrence of indebtedness.
4
Global Note; Book Entry
System.......................................... The notes are issued only in fully registered form without
interest coupons and in minimum denominations of $1,000. The
notes are evidenced by one or more global notes deposited with
the trustee for the notes, as custodian for The Depository Trust
Company (DTC). Beneficial interest in the global notes will be
shown on, and transfer of those beneficial interests can be made
through only, records maintained by DTC and its participants.
Provisional Redemption.......................... We may redeem the notes, in whole or in part, at any time at a
redemption price equal to $1,000 per $1,000 principal amount of
the notes to be redeemed, plus accrued and unpaid interest if
any, to, but excluding, the date of redemption if (1) the
closing price of our common stock on the Nasdaq National Market
has exceeded 150% of the conversion price then in effect for at
least 20 trading days within a period of 30 consecutive trading
days ending on the trading day immediately before the date of
mailing of the provisional redemption notice and (2) the
registration statement covering the resale of the notes and the
shares of common stock issuable upon conversion of the notes is
effective and available for use and is expected to remain
effective and available for use for 30 days following the
provisional redemption date, unless registration is no longer
required.
Provisional Redemption
Interest Make-Whole
Payment up to Third
Anniversary..................................... If a provisional redemption occurs on or before the third
anniversary of the notes' issuance, we also will make an
interest make-whole payment in addition to the payment of
accrued and unpaid interest described. The interest make-whole
payment would be equal to the present value of the aggregate
amount of the interest that would otherwise have accrued from
the provisional redemption date through the third anniversary of
the notes' issuance. The present value will be calculated using
the bond equivalent yield on U.S. Treasury notes or bills having
a term nearest in length to that of the remaining period from
the date preceding the date on which notice of the provisional
redemption is mailed through the third anniversary of the notes'
issuance.
We must pay any accrued and unpaid interest through the date
of redemption as well as the interest make-whole payment on the
notes called for provisional redemption, regardless of whether
those notes are converted prior to the date of the provisional
redemption.
The interest make-whole payment will be payable in cash or,
at our option, subject to certain conditions, in common stock.
The number of shares of common stock will equal the amount
of the interest make-whole payment divided by 95% of the average
closing sales price for the five consecutive trading days
ending on and including the third day prior to the date of
the provisional redemption. We will specify in the notice of
provisional redemption whether the interest make-whole
payment will be made in cash or in common stock.
5
Repurchase at the Option of
Holders......................................... Upon a change of control, as that term is defined in this
prospectus, you will have the right, subject to certain
conditions, to require us to purchase your notes at 100% of
their principal amount, plus any unpaid interest accrued up to
their purchase date. The repurchase price is payable in cash or,
at our option, in shares of our common stock. The number of
shares of common stock will equal the amount of the repurchase
price divided by 95% of the average closing sales price for the
five consecutive trading days ending on and including the third
day prior to the date of the repurchase. The repurchase offer
will specify whether the repurchase price will be paid in cash
or in common stock. We may not have sufficient funds to pay the
purchase price for any duly tendered notes upon a change of
control.
Use of Proceeds................................. We will not receive any proceeds from the sale by any security
holder of the notes or the shares offered by this prospectus.
Events of Default............................... The following are events of default under the indenture for the
notes:
- our failure to pay any installment of interest (including
liquidated damages, if any) on the notes and the continuance
of any such failure for 30 days;
- our failure to pay all or any part of the principal of,
or premium, if any, on the notes;
- our failure to perform any conversion of notes required
under the indenture and the continuance of any such
failure for 30 days;
- our failure to observe or perform any other covenant or
agreement contained in the notes or the indenture and,
subject to certain exceptions, the continuance of such
failure for a period of 60 days after applicable written
notice;
- certain events of bankruptcy, insolvency or reorganization with
respect to us or any of our significant subsidiaries;
- our failure or any significant subsidiary's failure to make any
payment at maturity, including any applicable grace period, in
respect of indebtedness (other than non-recourse obligations)
in an amount in excess of $20 million, and continuance of such
failure for 30 days after applicable written notice; and
- default by us or any significant subsidiary with respect to any
indebtedness (other than non-recourse obligations), which
default results in the acceleration of indebtedness in an amount
in excess of $20 million without such indebtedness having been
discharged or such acceleration having been rescinded or annulled
for 30 days after applicable written notice.
6
Registration Rights............................. Pursuant to a registration rights agreement that was executed as
part of the initial placement of these notes, we agreed to file
with the SEC within 90 days after the date of initial issuance
of the notes and to use our reasonable efforts to cause to
become effective within 180 days after the date of initial
issuance of the notes, a shelf registration statement with
respect to the resale of the notes and the common stock issuable
upon conversion of the notes. If we fail to comply with certain
of our obligations under the registration rights agreement,
liquidated damages will be payable on the notes.
Trading......................................... The notes have been approved for trading on The PORTAL system of
the National Association of Securities Dealers, Inc. Our common
stock is traded on the Nasdaq National Market under the symbol
"ARRS."
Risk Factors.................................... You should read "Risk Factors" beginning on page 8 of this
prospectus so that you understand the risks associated with an
investment in the notes and shares of our common stock.
7
RISK FACTORS
An investment in the notes and in our common stock involves a high degree of
risk. You should carefully consider the risks described below and the other
information contained in this prospectus and in our other filings incorporated
by reference before deciding to invest. The risks described below and in our
other filings incorporated by reference are not the only ones facing us.
Additional risks not presently known to us, or which we currently consider
immaterial also may adversely affect us. If any of the following risks actually
occur, our business, financial condition and operating results could be
materially adversely affected. In such case, the trading price of our notes or
common stock could decline, and you could lose part or all of your investment.
RISK FACTORS RELATED TO OUR BUSINESS
OUR BUSINESS IS DEPENDENT ON CUSTOMERS' CAPITAL SPENDING ON BROADBAND
COMMUNICATION SYSTEMS, AND REDUCTIONS BY CUSTOMERS IN CAPITAL SPENDING COULD
ADVERSELY AFFECT OUR BUSINESS.
Our performance has been largely dependent on customers' capital spending for
constructing, rebuilding, maintaining or upgrading broadband communications
systems. Capital spending in the telecommunications industry is cyclical. A
variety of factors will affect the amount of capital spending, and therefore,
our sales and profits, including:
- general economic conditions;
- availability and cost of capital;
- other demands and opportunities for capital;
- regulations;
- demands for network services;
- competition and technology; and
- real or perceived trends or uncertainties in these factors.
Developments in the industry and in the capital markets over the past two years
have reduced access to funding for new and existing customers, causing delays in
the timing and scale of deployments of our equipment, as well as the
postponement or cancellation of certain projects by our customers. In addition,
during the same period, we and other vendors received notification from several
customers that they were canceling new projects or scaling back existing
projects or delaying new orders to allow them to reduce inventory levels which
were in excess of their current deployment requirements.
Further, several of our customers have accumulated significant levels of debt
and have recently announced, or are expected to announce, financial
restructurings, including bankruptcy filings. For example, Adelphia has been
operating under bankruptcy since the first half of 2002. Even if the financial
health of that company and other customers improve, we cannot assure you that
these customers will be in a position to purchase new equipment at levels we
have seen in the past. In addition, the bankruptcy filing of Adelphia in June
2002 has further heightened concerns in the financial markets about the domestic
cable industry. This concern, coupled with the current uncertainty and volatile
capital markets, has affected the market values of domestic cable operators and
may further restrict their access to capital.
DEVELOPMENTS RELATING TO CABOVISAO MAY ADVERSELY AFFECT OUR BUSINESS AND RESULTS
OF OPERATIONS.
Cabovisao, a Portugal-based MSO, accounted for approximately 6% of our total
sales in 2002. As of June 1, 2003, Cabovisao owed us approximately 18.6 million
euros in accounts receivable. Cabovisao committed to a schedule of 2003 payments
to us for our products and services. Cabovisao made its January 2003 payment of
2.0 million euros to us according
8
to the schedule. However, Cabovisao failed to make the subsequent scheduled
payments by the due date, which was 2.5 million euros each in February, March,
April and May. Cabovisao and its parent company, Csii, are currently considering
alternatives to meet its financial needs, including debt restructuring or a
possible court-supervised restructuring, among other alternatives. We will not
deliver further products to Cabovisao until we have a satisfactory payment plan
with Cabovisao and are considering what actions should be taken regarding the
situation. We cannot assure you that Cabovisao will pay us according to
schedule, if at all, or that we will make any sales to Cabovisao in the future.
THE MARKETS IN WHICH WE OPERATE ARE INTENSELY COMPETITIVE, AND COMPETITIVE
PRESSURES MAY ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.
The markets for broadband communication systems are extremely competitive and
dynamic, requiring the companies that compete in these markets to react quickly
and capitalize on change. This will require us to retain skilled and experienced
personnel as well as deploy substantial resources toward meeting the
ever-changing demands of the industry. We compete with national and
international manufacturers, distributors and wholesalers including many
companies larger than us. Our major competitors include:
- ADC Telecommunications, Inc.;
- Broadband Services, Inc.;
- Cisco Systems, Inc.;
- Juniper Networks, Inc.;
- Motorola, Inc.;
- Riverstone Networks, Inc.;
- Scientific-Atlanta, Inc.;
- Tellabs, Inc.;
- Terayon Communications Systems, Inc.; and
- TVC Communications, Inc.
The rapid technological changes occurring in the broadband markets may lead to
the entry of new competitors, including those with substantially greater
resources than ours. Because the markets in which we compete are characterized
by rapid growth and, in some cases, low barriers to entry, smaller niche market
companies and start-up ventures also may become principal competitors in the
future. Actions by existing competitors and the entry of new competitors may
have an adverse effect on our sales and profitability. The broadband
communications industry is further characterized by rapid technological change.
In the future, technological advances could lead to the obsolescence of some of
our current products, which could have a material adverse effect on our
business.
Further, many of our larger competitors are in a better position to withstand
any significant reduction in capital spending by customers in these markets.
They often have broader product lines and market focus and therefore will not be
as susceptible to downturns in a particular market. In addition, several of our
competitors have been in operation longer than we have been, and therefore they
have more long-standing and established relationships with domestic and foreign
broadband service users. We may not be able to compete successfully in the
future, and competition may harm our business.
9
OUR BUSINESS HAS PRIMARILY COME FROM SEVERAL KEY CUSTOMERS. THE LOSS OF ONE OF
THESE CUSTOMERS OR A SIGNIFICANT REDUCTION IN SERVICES TO ONE OF THESE CUSTOMERS
WOULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS.
Our two largest customers are Cox Communications and Comcast (primarily through
the recently acquired AT&T Broadband business). For the quarter ended March 31,
2003, sales to Cox Communications accounted for approximately 27.5% of our total
revenues, while sales to Comcast (including AT&T Broadband) accounted for
approximately 26.1%. We currently are the exclusive provider of telephony
products for both Cox Communications and, in eight metro areas, Comcast, as
successor to AT&T Broadband. In addition, we have two other customers who
accounted for more than 5% each of our total revenues for the quarter ended
March 31, 2003. The loss of Cox Communications, Comcast, or one of our other
large customers, or a significant reduction in the services provided to any of
them would have a material adverse impact on our business. In addition, as a
result of the merger of Comcast with AT&T Broadband in late 2002, we have
experienced interruptions in purchasing by the resulting Comcast entity in 2003.
Comcast has announced that its initial priority after its acquisition of AT&T
Broadband will be to emphasize video and high-speed data operations and focus on
improving the profitability of its telephony operations at the expense of
subscriber growth. As a result, we experienced a significant decline in sales of
our CBR telephony product to Comcast in the fourth quarter of 2002, which has
continued into 2003.
OUR CREDIT FACILITY IMPOSES FINANCIAL COVENANTS THAT MAY ADVERSELY AFFECT THE
REALIZATION OF OUR STRATEGIC OBJECTIVES.
We and certain of our subsidiaries have entered into a revolving credit facility
providing for borrowing up to a committed amount of $115.0 million, with
borrowing also limited by a borrowing base determined by reference to eligible
accounts receivable and, subject to certain conditions, eligible inventory. The
credit facility imposes, among other things, covenants limiting the incurrence
of additional debt and liens and requires us to meet certain financial
objectives. The credit facility has a maturity date of August 3, 2004. As of
June 1, 2003, we had no borrowings outstanding under the credit facility (other
than approximately $5.0 million in letters of credit), and our borrowing base
was $45.7 million. Any acceleration of the maturity date of the credit facility
could have a material adverse effect on our business, including preventing the
redemption of the notes due 2008.
WE HAVE SIGNIFICANT STOCKHOLDERS THAT MAY NOT ACT CONSISTENTLY WITH THE
INTERESTS OF OUR OTHER STOCKHOLDERS.
As of June 1, 2003, Nortel Networks owned approximately 18.7% of our common
stock and Liberty Media Group beneficially owned approximately 10.3% of our
common stock. These respective ownership interests result in both Nortel
Networks and Liberty Media having a significant influence over us. Nortel
Networks and Liberty Media may exert their respective influences or sell their
respective shares at a time or in a manner that is inconsistent with the
interests of our other stockholders.
Any sales of substantial amounts of our common stock, including shares that may
be held by Nortel Networks after conversion, in the public market, or the
perception that such sales might occur, could have a depressive effect on the
market price of our common stock.
WE HAVE ANTI-TAKEOVER DEFENSES THAT COULD DELAY OR PREVENT AN ACQUISITION OF OUR
COMPANY.
On October 3, 2002, our board of directors approved the adoption of a
shareholder rights plan, commonly known as a "poison pill." This plan is not
intended to prevent a takeover, but is intended to protect and maximize the
value of shareholders' interests. This poison pill could make it more difficult
for a third party to acquire us or may delay that process.
WE MAY DISPOSE OF EXISTING PRODUCT LINES OR ACQUIRE NEW PRODUCT LINES IN
TRANSACTIONS THAT MAY ADVERSELY IMPACT US AND OUR FUTURE RESULTS.
On an ongoing basis, we evaluate our various product offerings in order to
determine whether any should be sold or closed and whether there are businesses
that we should pursue acquiring. Future acquisitions and divestitures entail
various risks, including:
- the risk that acquisitions will not be integrated or otherwise
perform as expected;
10
- the risk that we will not be able to find a buyer for a product line
while product line sales and employee morale will have been damaged
because of general awareness that the product line is for sale; and
- the risk that the purchase price obtained will not be equal to the book
value of the assets for the product line that we sell.
PRODUCTS CURRENTLY UNDER DEVELOPMENT MAY FAIL TO REALIZE ANTICIPATED BENEFITS.
Rapidly changing technologies, evolving industry standards, frequent new product
introductions and relatively short product life cycles characterize the markets
for our products. The technology applications currently under development by us
may not be successfully developed. Even if the developmental products are
successfully developed, they may not be widely used or we may not be able to
successfully exploit these technology applications. To compete successfully, we
must quickly design, develop, manufacture and sell new or enhanced products that
provide increasingly higher levels of performance and reliability. However, we
may not be able to successfully develop or introduce these products if our
products:
- are not cost-effective;
- are not brought to market in a timely manner;
- fail to achieve market acceptance; or
- fail to meet industry certification standards.
Furthermore, our competitors may develop similar or alternative new technology
applications that, if successful, could have a material adverse effect on us.
Our strategic alliances are based on business relationships that have not been
the subject of written agreements expressly providing for the alliance to
continue for a significant period of time. The loss of a strategic partner could
have a material adverse effect on the progress of new products under development
with that partner.
CONSOLIDATIONS IN THE TELECOMMUNICATIONS INDUSTRY COULD RESULT IN DELAYS OR
REDUCTIONS IN PURCHASES OF PRODUCTS, WHICH WOULD HAVE A MATERIAL ADVERSE EFFECT
ON OUR BUSINESS.
The telecommunications industry has experienced the consolidation of many
industry participants, and this trend is expected to continue. We and one or
more of our competitors may each supply products to businesses that have merged,
such as AT&T Broadband and Comcast, or will merge in the future. Consolidations
could result in delays in purchasing decisions by the merged businesses, and we
could play either a greater or lesser role in supplying the communications
products to the merged entity. These purchasing decisions of the merged
companies could have a material adverse effect on our business. For example, we
experienced purchasing delays while the Comcast and AT&T Broadband deal was
pending and have experienced slowdowns since the transaction was completed.
Mergers among the supplier base also have increased, and this trend may
continue. The larger combined companies with pooled capital resources may be
able to provide solution alternatives with which we would be put at a
disadvantage to compete. The larger breadth of product offerings by these
consolidated suppliers could result in customers electing to trim their supplier
base for the advantages of one-stop shopping solutions for all of their product
needs. Consolidation of the supplier base could have a material adverse effect
on our business.
OUR SUCCESS DEPENDS IN LARGE PART ON OUR ABILITY TO ATTRACT AND RETAIN QUALIFIED
PERSONNEL IN ALL FACETS OF OUR OPERATIONS.
Competition for qualified personnel is intense, and we may not be successful in
attracting and retaining key executives, marketing, engineering and sales
personnel, which could impact our ability to maintain and grow our operations.
Our future success will depend, to a significant extent, on the ability of our
management to operate effectively. In the past, competitors and others have
attempted to recruit our employees and in the future, their attempts may
continue. The loss of services of any key personnel, the inability to attract
and retain qualified personnel in the future or delays in hiring required
11
personnel, particularly engineers and other technical professionals, could
negatively affect our business.
WE ARE SUBSTANTIALLY DEPENDENT ON CONTRACT MANUFACTURERS, AND AN INABILITY TO
OBTAIN ADEQUATE AND TIMELY DELIVERY OF SUPPLIES COULD ADVERSELY AFFECT OUR
BUSINESS.
Many components, subassemblies and modules necessary for the manufacture or
integration of our products are obtained from a sole supplier or a limited group
of suppliers. Our reliance on sole or limited suppliers, particularly foreign
suppliers, and our reliance on subcontractors involves several risks including a
potential inability to obtain an adequate supply of required components,
subassemblies or modules and reduced control over pricing, quality and timely
delivery of components, subassemblies or modules. Historically, we have not
generally maintained long-term agreements with any of our suppliers or
subcontractors. An inability to obtain adequate deliveries or any other
circumstance that would require us to seek alternative sources of supply could
affect our ability to ship products on a timely basis. Any inability to reliably
ship our products on time could damage relationships with current and
prospective customers and harm our business.
OUR INTERNATIONAL OPERATIONS MAY BE ADVERSELY AFFECTED BY ANY DECLINE IN THE
DEMAND FOR BROADBAND SYSTEMS DESIGNS AND EQUIPMENT IN INTERNATIONAL MARKETS.
Sales of broadband communications equipment into international markets are an
important part of our business. The entire line of our products is marketed and
made available to existing and potential international customers. In addition,
United States broadband system designs and equipment are increasingly being
employed in international markets, where market penetration is relatively lower
than in the United States. While international operations are expected to
comprise an integral part of our future business, international markets may no
longer continue to develop at the current rate, or at all. We may fail to
receive additional contracts to supply equipment in these markets.
OUR INTERNATIONAL OPERATIONS MAY BE ADVERSELY AFFECTED BY CHANGES IN THE FOREIGN
LAWS IN THE COUNTRIES IN WHICH OUR PRODUCTS ARE MANUFACTURED.
A significant portion of our products are manufactured or assembled in Mexico
and the Philippines and other countries outside of the United States. The
governments of the foreign countries in which our products are manufactured may
pass laws that impair our operations, such as laws that impose exorbitant tax
obligations or nationalize these manufacturing facilities.
WE FACE RISKS RELATING TO CURRENCY FLUCTUATIONS AND CURRENCY EXCHANGE.
We may encounter difficulties in converting our earnings from international
operations to U.S. dollars for use in the United States. These obstacles may
include problems moving funds out of the countries in which the funds were
earned and difficulties in collecting accounts receivable in foreign countries
where the usual accounts receivable payment cycle is longer.
We are exposed to various market risk factors such as fluctuating interest rates
and changes in foreign currency rates. These risk factors can impact results of
operations, cash flows and financial position. We manage these risks through
regular operating and financing activities and periodically use derivative
financial instruments such as foreign exchange forward contracts. There can be
no assurance that our risk management strategies will be effective.
OUR PROFITABILITY HAS BEEN, AND MAY CONTINUE TO BE, VOLATILE, WHICH COULD
ADVERSELY AFFECT THE PRICE OF OUR STOCK.
We have experienced several years with significant operating losses. Although we
have been profitable in the past, we may not be profitable or meet the level of
expectations of the investment community in the future, which could have a
material adverse impact on our stock price. In addition, our operating results
may be adversely affected by timing of sales or a shift in our product mix.
12
WE MAY FACE HIGHER COSTS ASSOCIATED WITH PROTECTING OUR INTELLECTUAL PROPERTY.
Our future success depends in part upon our proprietary technology, product
development, technological expertise and distribution channels. We cannot
predict whether we can protect our technology or whether competitors can develop
similar technology independently. We have received and may continue to receive
from third parties, including some of our competitors, notices claiming that we
have infringed upon third-party patents or other proprietary rights. Any of
these claims, whether with or without merit, could result in costly litigation,
divert the time, attention and resources of our management, delay our product
shipments, or require us to enter into royalty or licensing agreements. If a
claim of product infringement against us is successful and we fail to obtain a
license or develop non-infringing technology, our business and operating results
could be adversely affected.
RISK FACTORS RELATED TO THE NOTES
THE NOTES ARE SUBORDINATED.
The notes are general unsecured obligations and subordinated in right of payment
to all of our existing and future senior indebtedness, as defined in the
indenture. In the event of our bankruptcy, liquidation or reorganization or upon
acceleration of the notes due to an event of default under the indenture, and in
certain other events, our assets will be available to pay obligations on the
notes only after all senior indebtedness has been paid. As a result, there may
not be sufficient assets remaining to pay amounts due on any or all of the
outstanding notes. In addition, we will not make any payments on the notes in
the event of payment defaults or other specified defaults on our senior
indebtedness. The notes also will be structurally subordinated to the
liabilities, including trade payables, of any of our subsidiaries. Neither we
nor our subsidiaries are prohibited from incurring additional debt under the
indenture, including senior indebtedness. As of March 31, 2003, we and our
subsidiaries had approximately $11.5 million of outstanding indebtedness or
other liabilities to which the notes would have been effectively subordinated.
In addition, because of how we manage our operations, our current liabilities
(e.g., accounts payable) could be viewed as obligations of our subsidiaries and,
therefore, senior to the notes. As of April 30, 2003, we had approximately 79.2
million of current liabilities.
IF WE INCUR ADDITIONAL INDEBTEDNESS, WE MIGHT NOT HAVE SUFFICIENT ASSETS TO PAY
OUR OBLIGATIONS UNDER THE NOTES.
The indenture under which we have issued the notes does not restrict us or our
subsidiaries from incurring additional debt. Further, the indenture does not
restrict our ability to pay dividends or issue or repurchase our securities,
which payment or issuance would increase our general indebtedness. If we, or our
subsidiaries, were to incur additional debt or liabilities, we might not be able
to pay our obligations under the notes.
The degree to which we incur additional debt could have important consequences
to note holders, including:
- limiting our ability to obtain any necessary financing in the future
for working capital, capital expenditures, debt service requirements
or other purposes;
- requiring us to dedicate a substantial portion of our cash flows from
operations to the payment of indebtedness and not for other purposes,
such as working capital and capital expenditures;
- limiting our flexibility to plan for, or react to, changes in our
business;
- making us more indebted than some of our competitors, which may place
us at a competitive disadvantage; and
- making us more vulnerable to a downturn in our business.
WE MAY BE UNABLE TO REPURCHASE THE NOTES UPON A CHANGE OF CONTROL.
Upon a change of control of our company, as described under "Description of the
Notes--Repurchase at the Option of Holders upon a Change of Control," note
holders may require us to redeem all or a portion of their notes. If a change of
control were to occur, we might not have enough funds to pay the purchase price
for any tendered notes.
13
Also, future credit agreements or other agreements relating to our indebtedness
may provide that a change of control under the indenture constitutes an event of
default and additionally may prohibit the repurchase or redemption of the notes.
If a change of control were to occur at a time when we were prohibited from
purchasing the notes, we could seek the consent of our lenders to purchase the
notes or could attempt to refinance this debt. If we did not obtain their
consent, we could not redeem the notes.
Our failure to redeem tendered notes would constitute an event of default under
the indenture, which would constitute a default under our credit agreement and
might constitute a default under the terms of our other indebtedness. In such
circumstances, or if a change of control would constitute an event of default
under our senior indebtedness, the provisions of this indenture would limit or
prohibit payments to note holders. The term "change of control" is limited to
certain specified transactions and may not include other events that might harm
our financial condition. Our obligation to offer to purchase the notes upon a
change of control would not necessarily protect you in the event of a highly
leveraged transaction, reorganization, merger or similar transaction.
THE NOTES ARE NOT TRADED ON ANY SECURITIES EXCHANGE OR OTHER STOCK MARKET, AND
ANY MARKET FOR THE NOTES MAY NOT BE MAINTAINED.
The notes have been approved for trading on The PORTAL Market. Although CIBC
World Markets Corp., the "initial purchaser" of the notes, has made a market in
the notes in the past, it is not obligated to make a market in the notes. The
initial purchaser or any others could stop making a market in the notes at any
time without notice. Accordingly, any market for the notes that has developed
may not continue.
We do not intend to apply for listing of the notes on any securities exchange or
other stock market. While we have agreed to file with the SEC and to use our
reasonable efforts to cause to become effective a registration statement for the
resale of the notes and the common stock issuable upon conversion of the notes,
the registration statement may not be declared or maintained effective by the
SEC. Unless and until we register the notes and the shares of underlying common
stock pursuant to the provisions of the registration rights agreement described
in this prospectus, they may not be offered or sold except in transactions that
are exempt from the registration requirements of the Securities Act. If no such
exemption is available, holders will not be able to sell their notes or any
common stock issued upon conversion of notes.
WE MAY NOT BE ABLE TO REFINANCE THE NOTES IF REQUIRED OR IF WE SO DESIRE.
We may need or desire to refinance all or a portion of the notes at maturity. We
cannot assure you that we would be able to refinance the notes on commercially
reasonable terms, if at all. If we are not able to refinance the notes on terms
favorable to us, we may not have sufficient funds to pay the principal amount or
repurchase price due.
CAUTIONARY STATEMENTS CONCERNING FORWARD-LOOKING STATEMENTS
This document and the documents incorporated by reference into this document
contain numerous forward-looking statements about our financial condition,
results of operations, cash flows, dividends, financing plans, business
strategies, operating efficiencies, capital and other expenditures, competitive
positions, growth opportunities for existing products, plans and objectives of
management, markets for stock or ownership interests and other matters. The
words "estimate," "project," "intend," "expect," "believe," "forecast" and
similar expressions are intended to identify these forward-looking statements,
but some of these statements may use other phrasing. Any statement in this
document that is not a historical fact also is a forward-looking statement.
Except to the extent required by applicable law, we expressly disclaim any
obligation to publicly release any revisions to these forward-looking statements
to reflect events or circumstances after the date of this document. Such
forward-looking statements, wherever they occur in this document, are
necessarily estimates reflecting the best judgment of our senior management and
involve a number of risks and uncertainties that could cause actual results to
differ materially from those suggested by the forward-looking statements.
Important factors that could cause actual results to differ materially from
those suggested by the forward-looking statements are described in the risk
factors above and elsewhere in this document. In addition to the foregoing, (i)
all of the factors affecting our business may not have been correctly identified
and assessed; (ii) the publicly available and other information, upon which the
analysis
14
contained in this document is based, may not be complete or correct; (iii) the
analysis may not be correct; or (iv) the strategies, which are based in part on
this analysis, may not be successful.
USE OF PROCEEDS
Although we received proceeds in connection with the initial private placement
of the notes, we will not receive any of the proceeds from the sale of the notes
or the shares by the selling securityholders. We received net proceeds of
approximately $120.1 million when we originally issued the notes in March 2003.
We used approximately $88.4 million of the net proceeds to redeem Nortel
Networks' Class B membership interest in our subsidiary Arris Interactive
L.L.C., at a discount. We also used approximately $28.0 million of the net
proceeds to repurchase 8 million shares of our common stock held by Nortel
Networks, at a discount. We used the remaining net proceeds for working capital
and general corporate purposes.
RATIO OF EARNINGS TO FIXED CHARGES
Our ratio of earnings to fixed charges for each of the periods indicated is as
follows:
FISCAL YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
----------------------------------------------------------------------------------------------------------------------
1998 1999 2000 2001 2002 2002 2003
----------------------------------------------------------------------------------------------------------------------
Ratio of earnings to fixed
charges(1) 0.07 2.27 2.69 --(2) --(3) 0.41 1.71
(1) For purposes of the calculation of ratio of earnings to fixed charges,
earnings are defined as earnings before income taxes plus fixed
charges. Fixed charges consist of interest expense on all indebtedness
and rental expense.
(2) As a result of the loss for the fiscal year ended December 31, 2001,
earnings did not cover fixed charges by $65,449,000.
(3) As a result of the loss for the fiscal year ended December 31, 2002,
earnings did not cover fixed charges by $143,662,000.
15
DESCRIPTION OF THE NOTES
We issued notes under the indenture dated March 18, 2003 between us and The Bank
of New York, as trustee. The following description summarizes the material
provisions of the notes and the indenture and is qualified in its entirety by
reference to all of the provisions of the indenture, including its definitions
of certain terms. A copy of the indenture and the form of note is available to
you upon request. We urge you to read the indenture. Wherever particular
provisions or defined terms of the indenture (or the form of note which is part
thereof) are referred to in this summary, such provisions or defined terms are
incorporated by reference as a part of the statements made and such statements
are qualified in their entirety by such reference.
GENERAL
The notes are our general, unsecured obligations, initially limited in aggregate
principal amount to $125,000,000. The notes are subordinated in right of payment
to all existing and future senior indebtedness, as described under
"Subordination" below and defined in "Certain Definitions" below. The notes were
issued only in fully registered form, without coupons, in denominations of
$1,000 and integral multiples thereof. The notes are convertible into shares of
our common stock as described in "Conversion" below.
The notes will mature on March 15, 2008, unless earlier redeemed or repurchased
by their terms. The notes bear interest at the rate per annum of 4 1/2% from
their date of issuance, or from the most recent interest payment date to which
interest has been paid or provided for, payable semi-annually in cash in arrears
on March 15 and September 15 of each year, commencing September 15, 2003, until
the principal is paid or made available for payment or the notes have been
converted. We will pay interest to the persons in whose names the notes are
registered at the close of business on March 1 and September 1 immediately
preceding the interest payment dates. Principal of, premium on, if any, interest
on and liquidated damages, if any, with respect to the notes will be payable,
the notes will be convertible and the notes may be presented for registration of
transfer or exchange, at our office or agency maintained for such purpose, which
office or agency shall be maintained in New York, New York. Interest will be
calculated on the basis of a 360-day year consisting of twelve 30-day months.
Interest payable per $1,000 principal amount of notes for the period from March
18, 2003 to September 15, 2003 will be $22.25.
At our option, payment of interest and liquidated damages, if any, may be made
by check mailed to note holders at the addresses set forth upon our registry
books. No service charge will be made for any registration of note transfers or
exchanges, but we may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection with certain transfers or
exchanges. Until otherwise designated by us, our office or agency will be the
corporate trust office of the trustee presently located in New York, New York.
The indenture does not contain any financial covenants or any restrictions on
the payment of dividends, the issuance or repurchase of our securities or the
incurrence of indebtedness, including senior indebtedness. The indenture
contains no covenants or other provisions to afford protection to note holders
in the event of a highly leveraged transaction or our change of control, except
to the limited extent described under "Repurchase of Notes at the Option of the
Holder upon a Change of Control."
CONVERSION
Each note holder has the option at any time prior to the close of business on
the stated maturity date of the notes (unless previously redeemed or
repurchased) to convert any portion of the principal amount of the notes that is
$1,000 or an integral multiple thereof into shares of our common stock at the
conversion price of $5.00 per share (subject to adjustment as described below).
The right to convert a note called for redemption or delivered for repurchase
and not withdrawn will terminate at the close of business on the business day
immediately prior to the redemption date or repurchase date, as applicable, for
such note, unless we subsequently fail to pay the applicable redemption price or
repurchase price, as the case may be. In each case, the initial conversion rate
is equal to 200 shares per $1,000 principal amount of notes, which is equivalent
to an initial conversion price of approximately $5.00 per share.
16
We have been informed that The Depository Trust Company, or DTC, New York, New
York, will effect the conversion upon notice from the holder of a beneficial
interest in the global note in accordance with DTC's rules and procedures. The
conversion date will be the date on which the note and the duly signed and
completed notice of conversion are so delivered to the trustee. As promptly as
practicable on or after the conversion date, we will issue and deliver to the
trustee a certificate or certificates for the number of full shares of our
common stock issuable upon conversion, together with payment in cash in lieu of
any fractional shares, and the trustee shall deliver the certificate(s) to the
conversion agent for delivery to the holder of the note being converted. The
shares of our common stock issuable upon conversion of the notes will be fully
paid and nonassessable.
In the case of any note that has been converted into common stock after any
record date, but on or before the next interest payment date, interest, the
stated due date of which is on such interest payment date, shall be payable on
such interest payment date notwithstanding such conversion, and such interest
shall be paid to the holder of such note who is a holder on such record date.
Any note converted after any record date but before the next interest payment
date (other than notes called for redemption) must be accompanied by payment of
an amount equal to the interest payable on that interest payment date on the
principal amount of notes being surrendered for conversion. We will not issue
fractional shares of our common stock upon conversion of any notes but, in lieu
thereof, we will pay an appropriate amount in cash based on the market price of
our common stock (determined in accordance with the indenture) at the close of
business on the day of conversion. As a result of the foregoing provisions,
holders who surrender notes for conversion on a date that is not an interest
payment date will not receive any interest for the period from the interest
payment date next preceding the date of conversion to the date of conversion or
for any later period, except for notes that are called for redemption on a
redemption date between a record date and the corresponding interest payment
date as provided above.
The conversion price will be adjusted upon the occurrence of:
(a) the issuance of shares of our common stock as a dividend
or other distribution on any class of our capital stock;
(b) any issuance to all or substantially all holders of our
common stock of rights, options or warrants entitling them to subscribe
for or purchase common stock at less than the then current market price
of our common stock (determined in accordance with the indenture,
including any rights issued or issuable pursuant to our shareholder
rights plan); provided, however, that if such rights, options or
warrants are only exercisable upon the occurrence of certain triggering
events, then the conversion price will not be adjusted until such
triggering events occur; and provided, further, that any holder who is
a holder of shares of our common stock (or direct or indirect interests
therein) at the time of conversion of any note, but who is not entitled
as a holder of our common stock to hold or receive rights pursuant to
the terms of the shareholder rights plan, shall not be eligible to
receive any such rights thereunder, and any distribution of rights
pursuant to the shareholder rights plan complying with the other
requirements of the indenture shall not constitute a distribution of
rights for the purposes of the other indenture provisions regarding
conversion of the notes;
(c) certain subdivisions, combinations or reclassifications of
our outstanding common stock;
(d) any distribution to all or substantially all holders of
our common stock of evidences of indebtedness, shares of our capital
stock (other than common stock), cash or other assets (including
securities, but excluding those dividends, rights, options, warrants
and distributions referred to above and distributions in connection
with our liquidation, dissolution or winding up and excluding dividends
and distributions paid exclusively in cash and in mergers and
consolidations to which the second succeeding paragraph applies);
(e) any distribution consisting exclusively of cash (excluding
any cash portion of distributions referred to in (d) above, or cash
distributed upon a merger or consolidation to which the second
succeeding paragraph applies) to all or substantially all holders of
our common stock in an aggregate amount that, combined together with
(i) all other such all-cash distributions made within the then
preceding 12 months in respect of which no adjustments have been made
and (ii) any cash and the fair market value of other consideration paid
or payable in respect of any tender offer by us or any of our
subsidiaries for our common stock concluded within the preceding 12
months in respect of which no adjustment has been made exceeds 10% of
our market capitalization (defined
17
as being the product of the then current market price of the common
stock multiplied by the number of shares of common stock then
outstanding) on the record date of such distribution; and
(f) the completion of a tender offer made by us or any of our
subsidiaries for our common stock to the extent that the aggregate
consideration, together with (i) any cash and other consideration
payable in a tender offer by us or any of our subsidiaries for common
stock expiring with the 12 months preceding the expiration of such
tender offer in respect of which no adjustment has been made and (ii)
the aggregate amount of any such all-cash distributions referred to in
(e) above to all holders of our common stock within the 12 months
preceding the expiration of such tender offer in respect of which no
adjustments have been made, exceeds 10% of our market capitalization on
the expiration of such tender offer.
In the event of a distribution to all or substantially all of the holders of
common stock of rights, warrants or options to subscribe for or purchase any
securities (other than those referred to in (b) above), we may instead of making
an adjustment in the conversion price, provide that each note holder, who
converts the note after the record date for such distribution and prior to the
expiration of such rights, shall be entitled to receive upon such conversion of
the note, in addition to shares of our common stock, an appropriate number of
such rights, warrants or options. No adjustment of the conversion price will be
required to be made until the cumulative adjustments amount to one percent or
more of the conversion price as last adjusted.
We, from time to time and to the extent permitted by law, may reduce the
conversion price by any amount for any period of at least 20 business days, in
which case we shall give at least 15 days notice of such reduction to the
trustee, if our board of directors has made a determination that such reduction
would be in our best interest, which determination shall be conclusive. We may,
at our option, make such reductions in the conversion price, in addition to
those set forth above, as our board of directors deems advisable to avoid or
diminish any income tax to holders of our common stock resulting from any
dividend or distribution of stock (or rights to acquire stock) or from any event
treated as such for United States Federal income tax purposes. See "Certain
United States Income Tax Considerations."
In case of any reclassification or change of outstanding shares of our common
stock issuable upon conversion of the notes (other than certain changes in par
value) or our consolidation or merger with or into another person or any
consolidation or merger of another person with or into us (with certain
exceptions), or in case of any sale, transfer or conveyance of all or
substantially all of our assets, each note then outstanding will, without the
consent of any note holder, become convertible only into the kind and amount of
securities, cash and other property receivable upon such reclassification,
change, consolidation, merger, sale, transfer or conveyance by a holder of the
number of shares of our common stock into which such note was convertible
immediately prior thereto after giving effect to any adjustment required to be
made as set forth above; provided that if the kind or amount of securities, cash
and other property is not the same for each share of our common stock held
immediately prior to such reclassification, change, consolidation, merger, sale,
transfer, or conveyance, any holder who fails to exercise any right of election
shall receive per share the kind and amount of securities, cash or other
property received per share by a plurality of such shares.
We will use all reasonable efforts to cause all registrations to be made with,
and to obtain any approvals by, any governmental authority under any Federal or
state law of the United States that may be required on our part in connection
with the conversion of the notes into our common stock. If at any time during
the two-year period following the date of the original issuance of the notes a
registration statement under the Securities Act covering the shares of our
common stock issuable upon conversion of the notes is not effective or is
otherwise unavailable for effecting resales of such shares, shares of our common
stock issued upon conversion of the notes may not be sold or otherwise
transferred except in accordance with or pursuant to an exemption from, or
otherwise in a transaction not subject to, the registration requirements of the
Securities Act.
SUBORDINATION
The notes are our general, unsecured obligations, subordinated in right of
payment to all existing and future senior indebtedness, as that term is defined
under "Certain Definitions" below. As of June 1, 2003, we had no senior
indebtedness outstanding (other than approximately $5.0 million in letters of
credit). We had the right as of June 1, 2003 to borrow up to $45.7 million under
our revolving credit facility, which does constitute senior indebtedness.
18
The notes are effectively subordinated in right of payment to all existing and
future liabilities (including trade payables) of our subsidiaries. Our
subsidiaries had approximately $79.2 million of current liabilities as of April
30, 2003. The indenture does not restrict the incurrence of senior indebtedness
or other indebtedness by us or our subsidiaries or our ability to transfer
assets or business operations to our subsidiaries, subject to the provisions
described under "Repurchase of Notes at the Option of the Holder upon a Change
of Control" and "Limitation on Merger, Sale or Consolidation."
The indenture provides that we may not make, directly or through any subsidiary,
or have made on our behalf, any payment or distributions of any kind or
character (by setoff or otherwise) on account of the principal of, premium, if
any, interest on or liquidated damages or any other Obligations under or with
respect to, the notes, or to acquire any of the notes (including repurchases of
notes at the option of the holder) for cash or property (other than junior
securities), or on account of the redemption provisions of the notes
(collectively, the "subordinated obligations"), (i) upon the maturity of any
senior indebtedness, by lapse of time, acceleration (unless waived) or
otherwise, unless and until all principal of, premium, if any, and interest on,
and fees, charges, expenses, indemnifications and all other Obligations payable
in respect of designated senior indebtedness are first paid in full in cash, or
(ii) in the event of default in the payment of any principal of, premium, if
any, or interest on, any designated senior indebtedness when it becomes due and
payable, whether at maturity or at a date fixed for prepayment or by declaration
or otherwise, unless and until such payment default has been cured or waived or
otherwise has ceased to exist. The payment of cash, property or securities
(other than junior securities) upon conversion of a note will constitute payment
on a note and therefore will be subject to the subordination provisions in the
indenture.
Upon (i) the happening of an event of default (other than a payment default)
that permits, or would permit with (a) the passage of time, (b) the giving of
notice, (c) the making of any payment of the notes then required to be made or
(d) any combination thereof, the holders of designated senior indebtedness or
their representative immediately to accelerate the maturity of such designated
senior indebtedness and (ii) written notice of such non-payment default being
given to us and the trustee by the representative, then, unless and until such
non-payment default has been cured or waived or otherwise has ceased to exist,
no payment or distribution of any kind or character in cash or property (by
setoff or otherwise) may be made by or on our behalf, directly or through any
subsidiary, on account of the subordinated obligations, in any such case other
than payments made with junior securities. Notwithstanding the foregoing, unless
(i) the designated senior indebtedness in respect of which such non-payment
default exists has been declared due and payable in its entirety within 179 days
after the payment notice is delivered as set forth above, and (ii) such
declaration has not been rescinded or waived, at the end of the payment blockage
period, we shall be required to pay to the holders of the notes all regularly
scheduled payments on the notes that were not paid during the payment blockage
period due to the foregoing prohibitions (and upon the making of such payments
any acceleration of the notes made during the payment blockage period shall be
of no further force or effect) and to resume all other payments as and when due
on the notes. Not more than one payment notice may be given in any consecutive
365-day period, irrespective of the number of defaults with respect to senior
indebtedness during such period. In no event, however, may the total number of
days during which any payment blockage period is or payment blockage periods are
in effect exceed 179 days in the aggregate during any consecutive 365-day
period.
Upon any payment or distribution of our assets or distribution of any kind or
character in cash, property or securities upon any dissolution, winding up,
total or partial liquidation or reorganization of our company, whether voluntary
or involuntary, in bankruptcy, insolvency, receivership or a similar proceeding
or upon assignment for the benefit of the creditors or any marshaling of assets
or liabilities (i) the holders of all senior indebtedness will first be entitled
to receive payment on all Obligations due on the senior indebtedness in full in
cash before the holders of the notes are entitled to receive any payment or
distributions of any kind or character (other than junior securities) on account
of the subordinated obligations and (ii) any payment or distribution of our
assets of any kind or character, whether in cash, property or securities (other
than junior securities) to which the holders of the notes or the trustee on
behalf of the holders would be entitled (by setoff or otherwise), except for the
subordination provisions contained in the indenture, will be paid by the
liquidating trustee or agent or other person making such a payment or
distribution directly to the holders of senior indebtedness or their
representative to the extent necessary to make payment in full in cash of all
Obligations on senior indebtedness remaining unpaid, after giving effect to any
concurrent payment or distribution, or provision therefor, to the holders of
such senior indebtedness.
In the event that, notwithstanding the foregoing, any payment or distribution of
our assets or any subsidiary's assets (other than junior securities) shall be
received by the note holders or the trustee on behalf of the holders or any
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paying agent at a time when such payment or distribution is prohibited by the
foregoing provisions, such payment or distribution shall be held in trust for
the benefit of the holders of senior indebtedness, and shall be paid or
delivered by such holders or the trustee or such paying agent, as the case may
be, to the holders of the senior indebtedness remaining unpaid or unprovided for
or their representative or representatives, or to the trustee or trustees under
any indenture pursuant to which any instruments evidencing any of such senior
indebtedness may have been issued, ratably according to the aggregate amounts
remaining unpaid on account of the senior indebtedness held or represented by
each, for application to the payment of all senior indebtedness remaining
unpaid, to the extent necessary to pay or to provide for the payment of all such
senior indebtedness in full in cash after giving effect to any concurrent
payment or distribution, or provision therefor, to the holders of such senior
indebtedness.
No provision contained in the indenture or the notes affects our obligation,
which is absolute and unconditional, to pay, when due, principal of, premium, if
any, and interest on the notes. The subordination provisions of the indenture
and the notes do not prevent the occurrence of any default or event of default
under the indenture or limit the rights of the trustee or any note holder,
subject to the preceding paragraphs, to pursue any other rights or remedies with
respect to the notes.
We conduct certain of our operations through our subsidiaries. Accordingly, our
ability to meet our cash obligations in the future in part will be dependent
upon the ability of our subsidiaries to make cash distributions to us. The
ability of our subsidiaries to make distributions to us is and will continue to
be restricted by, among other limitations, applicable provisions of the laws of
national and state governments and may be restricted by contractual provisions.
The indenture does not limit the ability of our subsidiaries to incur such
contractual restrictions in the future. Our right to participate in the assets
of any subsidiary (and thus the ability of note holders to benefit indirectly
from such assets) is generally subject to the prior claims of creditors,
including trade creditors, of that subsidiary except to the extent that we are
recognized as a creditor of such subsidiary, in which case our claims would
still be subject to any security interest of other non-subordinated or pari
passu creditors of the subsidiary. Substantially all of our domestic
subsidiaries have guarantied the indebtedness under the credit facility. The
notes, therefore, effectively are subordinated to obligations to creditors,
including trade creditors, of our subsidiaries with respect to the assets of the
subsidiaries against which such creditors have a more direct claim.
As a result of these subordination provisions, in the event of the liquidation,
bankruptcy, reorganization, insolvency, receivership or similar proceeding or an
assignment for the benefit of our creditors or any of our subsidiaries or a
marshaling of our assets or liabilities and our subsidiaries, note holders may
receive ratably less than other creditors.
PROVISIONAL REDEMPTION
We may redeem some or all of the notes at any time at a redemption price of
$1,000 per $1,000 principal amount of notes, plus accrued and unpaid interest,
if any, to the redemption date, if (i) the closing price of our common stock on
the Nasdaq National Market has exceeded 150% of the conversion price then in
effect for at least 20 trading days within a period of 30 consecutive trading
days ending on the trading day immediately before the date of mailing of the
provision redemption notice and (ii) the registration statement covering the
notes and the shares of common stock issuable upon conversion of the notes is
effective and available for use for the 30 days following the provisional
redemption date, unless registration is not required.
If a provisional redemption occurs on or before the third anniversary of the
notes' issuance, we also will make an interest make-whole payment in addition to
the payment of accrued and unpaid interest described above. The interest
make-whole payment would be equal to the present value of the aggregate amount
of the interest that would otherwise have accrued from the provisional
redemption date through the third anniversary of the notes' issuance. The
present value will be calculated using the bond equivalent yield on U.S.
Treasury notes or bills having a term nearest in length to that of the remaining
period from the date preceding the date on which notice of the provision
redemption is mailed through the third anniversary of the notes' issuance;
provided, however, that if the period from such redemption date to the third
anniversary of the notes' issuance is less than one year, the weekly average
yield on actually traded United States Treasury securities adjusted to a
constant maturity of one year will be used.
We must pay note holders any accrued and unpaid interest through the date of
redemption as well as the interest make-whole payment on the notes called for
provisional redemption, regardless of whether those notes are converted prior to
the date of the provisional redemption. The interest make-whole payment will be
payable in cash
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or, at our option, subject to certain conditions, in common stock. The number of
shares of common stock will equal the amount of the interest make-whole payment
divided by 95% of the average closing sale price for the five consecutive
trading days ending on and including the third day prior to the date of the
provisional redemption.
Notice of any redemption will be sent, by first-class mail, at least 30 days and
not more than 60 days prior to the date fixed for redemption (the "redemption
date"), to the holder of each note to be redeemed to such holder's last address
as then shown upon the registry books of the registrar. The notice of redemption
must state the redemption date, the redemption price, the amount of accrued
interest and liquidated damages, if any, to be paid and, if an interest
make-whole payment will be made, whether the interest make-whole payment will be
in cash or in common stock. Any notice that relates to a note to be redeemed in
part only must state the portion of the principal amount to be redeemed and must
state that on and after the redemption date, upon surrender of such note, a new
note or notes in principal amount equal to the unredeemed portion thereof will
be issued. On and after the redemption date, interest will cease to accrue on
the notes or portions thereof called for redemption, unless we default in our
obligations with respect thereto. The notes do not have the benefit of any
sinking fund.
REPURCHASE OF NOTES AT THE OPTION OF THE HOLDER UPON A CHANGE OF CONTROL
The indenture provides that, in the event that a change of control has occurred,
we are required first, to offer to repay in full and terminate all commitments
under all indebtedness under the credit facility and all such other senior
indebtedness and to repay the indebtedness owed to such lender which has
accepted such offer and second, to make an irrevocable and unconditional (except
as described below) offer to purchase all notes on the date that is no later
than 45 business days (except as described below) after the occurrence of such
change of control at a price equal to 100% of the principal amount thereof,
together with accrued and unpaid interest and liquidated damages, if any, to
(but excluding) the repurchase date. At our option, instead of paying the
repurchase price solely in cash, we may pay the repurchase price (to the extent
not paid in cash) in shares of our common stock, valued at 95% of the average of
the closing prices for the five trading days immediately preceding and including
the third trading day preceding the repurchase date. The repurchase price may be
paid in shares of our common stock only if the following conditions are
satisfied:
- such shares have been registered under the Securities Act or
are freely transferable without such registration;
- the issuance of common stock does not require registration or
qualification with or approval of any governmental authority
under any state law or any other federal law, which
registration or qualification or approval has not been made or
obtained;
- such shares have been approved for quotation on the Nasdaq
National Market or listing on a national securities exchange;
and
- such shares will be issued out of our authorized but unissued
common stock and upon issuance, will be duly and validly
issued and fully paid and non-assessable and free of any
preemptive rights.
A note holder may accept the repurchase offer with respect to all or a portion
of our notes (provided that the principal amount of such notes must be $1,000 or
an integral multiple thereof). The repurchase offer shall be made within 25
business days following a change of control and shall remain open for 20
business days following its commencement except to the extent that a longer
period is required by applicable law. The repurchase offer will specify whether
the repurchase price will be paid in cash or common stock. Upon expiration of
the repurchase offer period, we shall purchase all notes tendered during the
repurchase offer period in response to the repurchase offer. If required by
applicable law, the repurchase date and the repurchase offer period may be
extended as so required.
On or before the repurchase date, we will (i) accept for payment notes or
portions thereof properly tendered pursuant to the repurchase offer, (ii)
deposit with the paying agent cash sufficient to pay the repurchase price
(together with accrued and unpaid interest and liquidated damages, if any) of
all notes so tendered and (iii) deliver to the trustee the notes so accepted,
together with an officers' certificate listing the notes or portions thereof
being purchased by us. The paying agent will promptly mail to the holders of
notes so accepted payment in an amount equal to the repurchase price (together
with accrued and unpaid interest, if any), and the trustee will promptly
authenticate and mail or deliver to such holders a new note or notes equal in
principal amount to any unpurchased portion of the notes
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surrendered. Any notes not so accepted will be promptly mailed or delivered by
us to the holder thereof. We will announce publicly the results of the
repurchase offer on or as soon as practicable after the repurchase date.
The phrase "all or substantially all" of our assets, as included in the
definition of change of control, is likely to be interpreted by reference to
applicable state law at the relevant time, and will be dependent on the facts
and circumstances existing at such time. As a result, there may be a degree of
uncertainty in ascertaining whether a sale or transfer of "all or substantially
all" of our assets has occurred.
The repurchase feature may make more difficult or discourage a takeover of our
company, and, thus, the removal of incumbent management. The provisions of the
indenture relating to a change of control may not afford the holders of the
notes protection in the event of a highly leveraged transaction, reorganization,
restructuring, merger, spin-off or similar transaction that may adversely affect
holders, if such transaction does not constitute a change of control. Moreover,
certain events with respect to us which may involve an actual change of control
of our company may not constitute a change of control for purposes of the
indenture. For instance, one or more shareholders could acquire a significant
portion, but less than 50% of our shares of common stock (the threshold in the
definition of "change of control") and thereby be able to exert substantial
influence with respect to us.
The right to require us to repurchase notes as a result of the occurrence of a
change of control could create an event of default under senior indebtedness as
a result of which any repurchase could be blocked by the subordination
provisions of the notes. Our failure to repurchase the notes when required would
result in an event of default with respect to the notes whether or not such
repurchase is permitted by the subordination provisions. See "Subordination." In
addition, there can be no assurance that, in the event of our change of control,
we would either have, or have access to, adequate funds to redeem the notes.
Except as described herein, no modification of the indenture regarding the
provisions on repurchase at the option of any note holder upon a change of
control that adversely affects a holder is permissible without the consent of
the holder of the note so affected. In the event of a change of control, if
holders of in excess of two-thirds of the outstanding aggregate principal amount
of the notes so determine at any time following the occurrence of such change of
control and before the close of business on the business day immediately
preceding the repurchase date, such event shall not be treated as a change of
control for purposes of the indenture. In such event, (i) we shall not be
required to make the repurchase offer, (ii) to the extent the repurchase offer
already has been made, such repurchase offer shall be deemed revoked and (iii)
to the extent any notes have been tendered in response to any such revoked
repurchase offer, such tender shall be rescinded and the notes so tendered shall
be promptly returned to the holders thereof. For purposes of any such
determination by the holders of the outstanding notes, notes held by us or our
affiliate (including any person that would become our affiliate (or its
successor) as a consequence of the event or series of events that otherwise
would be treated as a change of control for purposes of the indenture) shall be
disregarded.
To the extent applicable, we will comply with the provisions of Rule 13e-4 and
14e-1 or any other tender offer rules under the Securities Exchange Act of 1934
and any other securities laws, and will file a Schedule TO or any other schedule
if required under such rules, in connection with any offer by us to repurchase
notes at the option of the holders upon a change of control.
LIMITATION ON MERGER, SALE OR CONSOLIDATION
The indenture provides that we may not, directly or indirectly, consolidate with
or merge with or into, or sell, lease, convey or transfer all or substantially
all of our assets (on a consolidated basis), whether in a single transaction or
a series of related transactions, to another person or group of affiliated
persons (other than to our wholly owned subsidiaries), unless (i) either (a) in
the case of a merger or consolidation, we are the surviving entity or (b) the
resulting, surviving or transferee entity is a corporation organized under the
laws of the United States, any state thereof or the District of Columbia and
expressly assumes by supplemental indenture all of our obligations in connection
with the notes and the indenture; and (ii) no default or event of default shall
exist immediately before or after giving effect to such transaction.
Upon any consolidation or merger or any transfer of all or substantially all of
our assets in accordance with the foregoing, the successor corporation formed by
such consolidation or into which we are merged or to which such
22
transfer is made, shall succeed to, and be substituted for, us and may exercise
every right and power of ours under the indenture with the same effect as if
such successor corporation had been named therein as us, and we will be released
from our obligations under the indenture and the notes, except as to any
obligations that arise from or as a result of such transaction.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise) of all or substantially all of the properties and assets of one or
more subsidiaries, which properties and assets, if held by us instead of such
subsidiary, would constitute all or substantially all of our properties and
assets, shall be deemed to be the transfer of all or substantially all of our
properties and assets.
REPORTS
Whether or not we are subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act, we shall deliver to the trustee, within 15 days after
it is or would have been required to file such with the SEC, annual and
quarterly consolidated financial statements substantially equivalent to
financial statements that would have been included in reports filed with the SEC
if we were subject to the requirements of Section 13 or 15(d) of the Exchange
Act, including, with respect to annual information only, a report thereon by our
certified independent public accountants as such would be required in such
reports to the SEC and, in each case, together with a management's discussion
and analysis of financial condition and results of operations as such would be
so required. In addition, for so long as the notes or our common stock into
which they are convertible are transfer restricted securities, upon request, we
will continue to provide to holders the information specified by Rule
144A(d)(4).
EVENTS OF DEFAULT AND REMEDIES
The indenture defines an "event of default" as (i) our failure to pay any
installment of interest (including liquidated damages, if any) on the notes as
and when due and payable and the continuance of any such failure for 30 days;
(ii) our failure to pay all or any part of the principal of, or premium, if any,
on the notes when and as the same become due and payable at maturity,
redemption, by acceleration or otherwise, including, without limitation,
pursuant to any repurchase offer; (iii) our failure to perform any conversion of
notes required under the indenture and the continuance of any such failure for
30 days; (iv) our failure to observe or perform any other covenant or agreement
contained in the notes or the indenture and, subject to certain exceptions, the
continuance of such failure for a period of 60 days after written notice is
given to us by the trustee or to us and the trustee by the holders of at least
25% in aggregate principal amount of the outstanding notes; (v) certain events
of bankruptcy, insolvency or reorganization with respect to us or any of our
significant subsidiaries; (vi) our failure or any significant subsidiary's
failure to make any payment at maturity, including any applicable grace period,
in respect of indebtedness (other than non-recourse obligations) in an amount in
excess of $20 million, and continuance of such failure for 30 days after written
notice is given to us by the trustee or to us and the trustee by the holders of
at least 25% in aggregate principal amount of outstanding notes; or (vii)
default by us or any significant subsidiary with respect to any indebtedness
(other than non-recourse obligations), which default results in the acceleration
of indebtedness in an amount in excess of $20 million without such indebtedness
having been discharged or such acceleration having been rescinded or annulled
for 30 days after written notice is given us by the trustee or to us and the
trustee by the holders of at least 25% in aggregate principal amount of
outstanding notes. The indenture provides that, if a default occurs and is
continuing, the trustee must, within 90 days after the trustee's receiving
actual notice of occurrence of such default, give to the holders notice of such
default, but the trustee shall be protected in withholding such notice if it in
good faith determines that the withholding of such notice is in the interest of
the holders, except in the case of a default in the payment of the principal of,
premium, if any, or interest on any of the notes when due or in the payment of
any redemption or repurchase obligation.
The indenture provides that, if an event of default occurs and is continuing
(other than an event of default specified in clause (v) above with respect to
us), then, in every such case, unless the principal of all of the notes shall
have already become due and payable, either the trustee or the holders of at
least 25% in aggregate principal amount of the notes then outstanding, by notice
in writing to us and the representative (and to the trustee if given by
holders), may declare all principal, premium, if any, and accrued interest and
liquidated
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damages, if any, on the notes to be due and payable on the earlier of (x) five
business days following delivery of such notices to us and the representative
and (y) the date of acceleration of the designated senior indebtedness. If an
event of default specified in clause (v) above with respect to us occurs, all
principal, premium, if any, and accrued interest and liquidated damages, if any,
will be immediately due and payable on all outstanding notes without any
declaration or other act on the part of the trustee or the holders. The holders
of no less than a majority in aggregate principal amount of notes generally are
authorized to rescind such acceleration on behalf of the holders of all
outstanding notes if (i) all existing events of default, other than the
non-payment of the principal of, premium, if any, and interest on the notes that
have become due solely by such acceleration, have been cured or waived and (ii)
we have paid or deposited with the trustee cash sufficient to pay (a) all
overdue interest on, and overdue liquidated damages with respect to, all of the
notes, (b) the principal of, and premium, if any, applicable to any notes which
would then be due otherwise than by such declaration of acceleration, and
interest thereon at the rate borne by the notes, (c) to the extent that payment
of such interest is lawful, interest upon overdue interest and liquidated
damages at the rate borne by the notes, and (d) all sums paid or advanced by the
trustee hereunder and the compensation, expenses, disbursements and advances of
the trustee, its agents and counsel.
Prior to the declaration of acceleration of the maturity of the notes, the
holders of a majority in aggregate principal amount of the notes at the time
outstanding may waive on behalf of all the holders any default, except a default
in the payment of principal of, or interest on or liquidated damages with
respect to any note not yet cured, or a default with respect to any covenant or
provision that cannot be modified or amended without the consent of the holder
of each outstanding note affected. Subject to the provisions of the indenture
relating to the trustee's duties, the trustee will be under no obligation to
exercise any of its rights or powers under the indenture at the request, order
or direction of any of the holders, unless such holders have offered to the
trustee reasonable security or indemnity. Subject to all provisions of the
indenture and applicable law, the holders of a majority in aggregate principal
amount of the notes at the time outstanding will have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the trustee, or exercising any trust or power conferred on the trustee.
The indenture provides that no holder may pursue any remedy under the indenture,
except for a default in the payment of principal, premium, if any, or interest
on the notes, unless: the holder gives to the trustee written notice of a
continuing event of default; the holders of at least 25% in principal amount of
the outstanding notes make a written request to the trustee to pursue the
remedy; such holders offer to the trustee indemnity satisfactory to the trustee
against any loss, liability or expense; the trustee does not comply with the
request within 60 days after the receipt of the request and the offer of
indemnity; and the trustee shall not have received during such 60-day period a
contrary direction from the holders of a majority in principal amount of the
outstanding notes.
REGISTRATION RIGHTS
The following summary of the registration rights provided in the registration
rights agreement and the notes is not complete. You should refer to the
registration rights agreement and the notes for a full description of the
registration rights that apply to the notes.
We entered into the registration rights agreement with CIBC World Markets on
March 18, 2003. Pursuant to the registration rights agreement, we filed with the
SEC the shelf registration on Form S-3, of which this prospectus is a part, to
cover resales of registrable securities by the holders thereof who satisfy
certain conditions relating to the provision of information in connection with
the shelf registration statement. The notes and the common stock issuable upon
conversion of the notes are referred to collectively as "registrable
securities." We will use all reasonable efforts to have the shelf registration
statement declared effective as promptly as practicable but not later than 180
days after March 18, 2003, and to keep such shelf registration statement
effective until the earliest of:
(1) March 18, 2005;
(2) the date when all registrable securities shall have been
registered under the Securities Act and disposed of;
(3) the date on which all registrable securities held by
non-affiliates are eligible to be sold to the public pursuant
to Rule 144(k) under the Securities Act; or
(4) a subsequent shelf registration covering all of the
registrable securities has been declared effective under the
Securities Act.
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We will be permitted to suspend the use of the prospectus which is a part of the
registration statement for a period not to exceed an aggregate of 45 days in any
90-day period or an aggregate of 90 days in any twelve-month period under
certain circumstances relating to pending corporate developments, public filings
with the SEC and similar events.
If:
(1) on or prior to the 90th day after the latest date of original
issuance of the notes, the shelf registration statement has
not been filed with the SEC;
(2) on or prior to the 180th day after the latest date of original
issuance of the notes, the shelf registration statement has
not been declared effective by the SEC; or
(3) after the shelf registration statement has been declared
effective, such shelf registration statement ceases to be
effective or usable (subject to certain exceptions) in
connection with resales of notes and the common stock issuable
upon the conversion of the notes in accordance with and during
the periods specified in the registration rights agreement and
(A) unless we declare a suspension period to be in effect, we
do not cure the shelf registration statement within five
business days by a post-effective amendment or a report filed
pursuant to the Exchange Act or (B) if applicable, we do not
terminate the suspension period described above by the 45th
day or the 90th day, as the case may be,
(we refer to each such event described above in clauses (1) through (3) as a
registration default), liquidated damages will accrue on the notes and the
underlying shares of common stock that are registrable securities in addition to
the rate set forth in the title of the notes, from and including the date on
which any such registration default occurs to, but excluding, the date on which
the registration default has been cured, at the rate of 0.5% per year for the
notes (or an equivalent amount for any common stock issued upon conversion of
the notes that are registrable securities) for the first 90 days immediately
following the registration default, with such liquidated damages increasing by
an additional 0.5% per annum at the beginning of each subsequent 90-day period,
provided, that liquidated damages may not accrue under more than one of the
foregoing clauses (1), (2) or (3) at any one time, and, up to a maximum
additional interest rate of 2.0% per year. We will have no other liabilities for
monetary damages with respect to our registration obligations. With respect to
each holder, our obligations to pay liquidated damages remain in effect only so
long as the notes and the common stock issuable upon the conversion of the notes
held by the holder are "registrable securities" within the meaning of the
registration rights agreement. References in this "Description of the Notes" to
interest on the notes shall mean interest plus liquidated damages, if any.
A holder who elects to sell any registrable securities pursuant to the shelf
registration statement will be required to be named as a selling security holder
in the related prospectus, may be required to deliver a prospectus to
purchasers, may be subject to certain civil liability provisions under the
Securities Act in connection with those sales and will be bound by the
provisions of the registration rights agreement that apply to a holder making
such an election, including certain indemnification provisions.
We will provide to holders of registrable securities included in the shelf
registration statement copies of the prospectus contained in the shelf
registration statement, notify each such holder when the shelf registration
statement has become effective and take certain other actions as are required to
permit resales of the registrable securities.
We mailed, pursuant to the registration rights agreement, a notice and
questionnaire to holders of registrable securities not fewer than 30 calendar
days prior to the time we intend in good faith to have shelf registration
statement declared effective, which time we refer to as the "effective time."
No holder of registrable securities will be entitled to be named as a selling
securityholder in the shelf registration statement as of the effective time, and
no holder of registrable securities will be entitled to use the prospectus that
is part of the shelf registration statement for offers and resales of
registrable securities at any time, unless such holder has returned a completed
and signed notice and questionnaire to us by the deadline for response set forth
in the notice and questionnaire. Holders of registrable securities, however,
have at least 20 calendar days from the date on
25
which the notice and questionnaire is first mailed to them to return a completed
and signed notice and questionnaire to us.
Beneficial owners of registrable securities who have not returned a notice and
questionnaire by the questionnaire deadline described above may receive another
notice and questionnaire from us upon request. When we receive a completed and
signed notice and questionnaire prior to the effective date of the registration
statement, we will include the registrable securities covered thereby in the
shelf registration statement, subject to restrictions on the timing and number
of supplements to the shelf registration statement provided in the registration
rights agreement.
SATISFACTION AND DISCHARGE
We may discharge certain of our obligations under the indenture while notes
remain outstanding if (1) all outstanding notes have or will become due and
payable at their scheduled maturity within one year or (2) all outstanding notes
are scheduled for redemption within one year, and, in either case, we have
deposited with the trustee an amount sufficient to pay and discharge all
outstanding notes on the date of their scheduled maturity or the scheduled date
of redemption.
TRANSFER AND EXCHANGE
Notes may be transferred or exchanged at the office of the security registrar in
accordance with the indenture. We will not impose a service charge for any
transfer or exchange, but we may require holders to pay any tax or other
governmental charges associated with any transfer or exchange. In the event of
any potential redemption of the notes, we will not be required to:
- issue, authenticate or register the transfer of or exchange of
any note during a period beginning at the opening of business
10 business days before the mailing of a notice of redemption
and ending at the close of business on the day of the mailing;
or
- register the transfer of or exchange any note selected for
redemption, in whole or in part, except the unredeemed portion
of notes being redeemed in part.
We have initially appointed the trustee as the security registrar, paying agent
and conversion agent, acting through its corporate trust office. We reserve the
right to:
- vary or terminate the appointment of the security registrar,
paying agent or conversion agent;
- appoint additional paying agents or conversion agents; or
- approve any change in the office through which any security
registrar or any paying agent or conversion agent acts.
PURCHASE AND CANCELLATION
All notes surrendered for payment, redemption, registration of transfer or
exchange or conversion shall, if surrendered to any person other than the
trustee, be delivered to the trustee. All notes delivered to the trustee shall
be cancelled promptly by the trustee. No notes shall be authenticated in
exchange for any notes cancelled as provided in the indenture.
We may, to the extent permitted by law and by our credit facility, purchase
notes in the open market or by tender offer at any price or by private
agreement. Any notes purchased by us may, to the extent permitted by law, be
reissued or resold or may, at our option, be surrendered to the trustee for
cancellation. Any notes surrendered for cancellation may not be reissued or
resold and will be promptly cancelled. Any notes held by us or one of our
subsidiaries shall be disregarded for voting purposes in connection with any
notice, waiver, consent or direction requiring the vote or concurrence of note
holders.
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AMENDMENTS AND SUPPLEMENTS
The indenture contains provisions permitting us and the trustee to enter into a
supplemental indenture for certain limited purposes without the consent of the
holders. With the consent of the holders of not less than a majority in
aggregate principal amount of the notes at the time outstanding, we and the
trustee are permitted to amend or supplement the indenture or any supplemental
indenture or modify or waive the rights of the holders; provided that no such
modification may, without the consent of each holder affected thereby: (i)
change the stated maturity of any note or reduce the principal amount thereof or
the rate (or extend the time for payment) of interest thereon or any premium
payable upon the redemption thereof, or change the place of payment where, or
the coin or currency in which, any note or any premium or the interest thereon
is payable, or impair the right to institute suit for the conversion of any note
or the enforcement of any such payment on or after the due date thereof
(including, in the case of redemption, on or after the redemption date), or
reduce the repurchase price, or alter the repurchase offer (other than as set
forth herein) or redemption provisions in a manner adverse to the holders, or
(ii) reduce the percentage in principal amount of the outstanding notes, the
consent of whose holders is required for any such amendment, supplemental
indenture or waiver provided for in the indenture or (iii) adversely affect the
right of such holder to convert notes or alter, in a manner that adversely
affects the right of such holder, the provisions relating to anti-dilution
protection in respect thereof. A supplemental indenture entered into in
compliance with the "Limitation on Merger, Sale or Consolidation" covenant would
not require the consent of the holders of the notes.
NO PERSONAL LIABILITY OF SHAREHOLDERS, OFFICERS, DIRECTORS AND EMPLOYEES
The indenture provides that no shareholder, officer, director, employee or
partner, as such, past, present or future, of ours or any successor corporation
shall have any personal liability in respect of our obligations under the
indenture or the notes by reason of his, her or its status as such shareholder,
officer, director, employee or partner.
BOOK ENTRY, DELIVERY AND FORM
Each note was issued as a book-entry note in fully registered form without
coupons. Each note issued in book-entry form is represented by one U.S. global
note, which was deposited on the date of the closing of the sale of the notes,
with, or on behalf of, the depositary, which is Depository Trust Company, or
DTC, and registered in the name of Cede and Co. as the depositary's nominee.
Owners of beneficial interests in book-entry notes will not be entitled to
physical delivery of notes in certificated form. We will make payments of
principal of, and premium, if any, and interest, if any, on the notes through
the applicable trustee to the depositary for the notes.
DTC has advised us as follows: DTC is a limited purpose trust company organized
under the laws of the State of New York, a member of the Federal Reserve System,
a clearing corporation within the meaning of the New York Uniform Commercial
Code and a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC was created to hold securities of institutions that
have accounts with DTC ("participants") and to facilitate the clearance and
settlement of securities transactions among its participants in such securities
through electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. DTC's
participants include securities brokers and dealers, banks, trust companies,
clearing corporations and may include certain other organizations. Indirect
access to DTC's book-entry system is also available to others such as banks,
brokers, dealers and trust companies (collectively, the "indirect participants")
that clear through or maintain a custodial relationship with a participant,
either directly or indirectly.
We expect that pursuant to procedures established by DTC, upon the deposit of
global notes with DTC, DTC will credit on its book-entry registration and
transfer system the principal amount of notes represented by such global note to
the accounts of participants. Ownership of beneficial interests in the global
note will be limited to participants or persons that may hold interests through
participants. Ownership of beneficial interests in the global note will be shown
on and the transfer of those ownership interests will be effected only through,
records maintained by DTC (with respect to participants' interests), the
participants and the indirect participants (with respect to the owners of
beneficial interests in the global note other than participants). All interests
in the global note deposited with DTC are subject to the procedures and
requirements of DTC.
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The laws of some jurisdictions may require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such limits and
laws may impair the ability to transfer or pledge beneficial interests in the
global note.
So long as DTC (or its nominee) is the registered holder and owner of the global
note, DTC (or such nominee) will be considered the sole legal owner and holder
of the notes evidenced by such global note for all purposes of such notes and
the indenture. Except as set forth below, as an owner of a beneficial interest
in the global note, you will not be entitled to receive physical delivery of
certificated notes and will not be considered to be the owner or holder of any
notes under such global note. We understand that, under existing industry
practice, in the event an owner of a beneficial interest in a global note
desires to take any action that DTC, as the holder of such global note, is
entitled to take, DTC would authorize the participants to take such action, and
the participants would authorize beneficial owners owning through such
participants to take such action or would otherwise act upon the instructions of
beneficial owners owning through them.
We will make payments of principal of, premium, if any, and interest on the
notes represented by the global note registered in the name of and held by DTC
or its nominee to DTC or its nominee, as the case may be, as the registered
owner and holder of the global note.
We expect that DTC (or its nominee), upon receipt of any payment of principal
of, premium, if any, or interest on the global note will credit the accounts of
their relevant participants or account holders, as applicable, with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of the global note as shown on the records of DTC (or its nominee). We
also expect that payments by participants or indirect participants or account
holders, as applicable, to owners of beneficial interests in the global note
held through such participants or indirect participants or account holders will
be governed by standing instructions and customary practices and will be the
responsibility of such participants or indirect participants or account holders,
as applicable. We will not have any responsibility or liability for any aspect
of the records relating to, to payments made on account of, beneficial ownership
interests in the global note for any notes or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests or for any
other aspect of the relationship between DTC and its participants or indirect
participants, or the relationship between such participants or indirect
participants, and the owners of beneficial interests in the global note owning
through such participants.
All amounts payable under the notes will be payable in U.S. dollars, except as
may otherwise be stated in this prospectus or agreed between any applicable
securities clearing system and any holders. Payments will be subject in all
cases to any fiscal or other laws and regulations (including any regulations of
any applicable securities clearing system) applicable thereto. None of the
trustee, us, or any of our respective agents shall be liable to any holder of a
global note or other person for any commissions, costs, losses or expenses in
relation to or resulting from any currency conversion or rounding effected in
connection therewith. Investors may be subject to foreign exchange risks that
may have important economic and tax consequences to them.
Subject to certain conditions, the notes represented by the global note are
exchangeable for certificated notes in definitive form of like tenor in
denominations of $1,000 principal amount and multiples thereof if:
- DTC provides notification that it is unwilling or unable to
continue as depositary for the global notes or DTC ceases to
be a clearing agency registered under the Exchange Act and, in
either case, a successor is not appointed within 90 days;
- we in our discretion at any time determine not to have all the
notes represented by the global notes; or
- a default entitling note holders to accelerate the maturity
date has occurred and is continuing.
Any note that is exchangeable as above is exchangeable for certificated notes
issuable in authorized denominations and registered in such names as DTC shall
direct. Subject to the foregoing, the global note is not exchangeable, except
for a global note of the same aggregate denomination to be registered in the
name of DTC (or its nominee).
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Holders who desire to convert their notes into common stock pursuant to the
terms of the notes should contact their brokers or other participants or
indirect participants to obtain information on procedures, including proper
forms and cut-off times, for submitting such requests.
GOVERNING LAW
The indenture and the notes and the registration rights agreement provide that
they are to be governed in accordance with the laws of the State of New York,
without regard to choice of laws provisions.
THE TRUSTEE
The Bank of New York is the trustee under the indenture. A successor trustee may
be appointed in accordance with the terms of the indenture.
The indenture contains certain limitations on the rights of the trustee, in the
event it becomes a creditor of ours, to obtain payment of claims in certain
cases, or to realize on certain property received in respect of any such claim
as security or otherwise. The trustee will be permitted to engage in other
transactions with us and our subsidiaries; provided, however, that, if it
acquires any conflicting interest (as defined), it must eliminate such conflict
or resign.
In case an event of default shall occur (and shall not be cured or waived), the
trustee will be required to use the degree of care of a prudent person in the
conduct of its own affairs in the exercise of its powers. Subject to such
provisions, the trustee will be under no obligation to exercise any of its
rights or powers under the indenture at the request of any of the holders of
notes, unless they shall have offered to the trustee reasonable security or
indemnity.
ABSENCE OF PUBLIC MARKET
There is no existing public market for the notes, and there can be no assurance
as to the liquidity of any market that may develop for the notes, the ability of
the holders to sell their notes or at what price holders of the notes will be
able to sell their notes. Future trading prices of the notes will depend upon
many factors including, among other things, prevailing interest rates, our
operating results, the price of our common stock and the market for similar
securities.
CERTAIN DEFINITIONS
"Capital stock" means, with respect to any person, any and all shares,
interests, rights to purchase (other than convertible or exchangeable
indebtedness), warrants, options, participations or other equivalents of or
interests (however designated) in stock issued by that person.
"Capitalized lease obligation" means, as to any person, the obligation of such
person to pay rent or other amounts under a lease to which such person is a
party that is required to be classified and accounted for as a capital lease
obligation under GAAP (as defined in the indenture).
"Change of control" means (i) an event or series of events as a result of which
any "person" or "group" (as such terms are used in Sections 13(d)(3) and 14(d)
of the Exchange Act) (excluding us or any of our wholly owned subsidiaries or
any of our employee benefit plans or those of any such subsidiary) is or
becomes, directly or indirectly, the "beneficial owner" (as defined in Rules
13d-3 and 13d-5 under the Exchange Act, whether or not applicable) of more than
50% of the combined voting power of the then outstanding securities entitled to
vote generally in elections of directors, managers or trustees, as applicable,
of us or any successor entity ("voting stock"), (ii) the completion of any
consolidation or merger of us with or into any other person, or sale,
conveyance, transfer or lease by us of all or substantially all of our assets to
any person, or any merger of any other person into us in a single transaction or
series of related transactions, and, in the case of any such transaction or
series of related transactions, the outstanding common stock is changed or
exchanged as a result, unless our shareholders immediately before such
transaction own, directly or indirectly, immediately following such transaction,
at least a majority of the combined voting power of the outstanding voting
securities of the person resulting from such transaction in substantially the
same proportion as their ownership of the voting stock immediately before such
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transaction, or (iii) such time as the continuing directors do not constitute a
majority of the board of directors (or, if applicable, our successor
corporation).
"Continuing director" means at any date a member of our board of directors (i)
who was a member of such board on the date of initial issuance of the notes or
(ii) who was nominated or elected by at least a majority of the directors who
were such continuing directors (as described in clause (i)) at the time of such
nomination or election or whose election to our board of directors was
recommended or endorsed by at least a majority of the directors who were such
continuing directors (as described in clause (i)) at the time of such nomination
or election.
"Credit facility" means that certain Credit Agreement, dated as of August 3,
2001, among Arris International, Inc., Arris Interactive L.L.C., and certain
subsidiaries of Arris International, Inc., as borrowers; the various lenders
party thereto; the CIT Group/Business Credit, Inc., as administrative agent and
collateral agent; and Credit Suisse First Boston, as syndication agent, lead
arranger and book running manager, as such agreement may be amended, restated,
modified, renewed, refunded, replaced or refinanced from time to time
thereafter, including any notes, guaranties, security or pledge agreements,
letters of credit and other documents or instruments executed pursuant thereto
and any exhibits or schedules to any of the foregoing, as the same may be in
effect from time to time, in each case, as such agreements may be amended,
modified, supplemented, renewed, refunded, replaced, refinanced (including
increasing the amount of available borrowings thereunder or adding additional
subsidiaries of our company as additional and/or replacement borrowers or
guarantors), extended or restated from time to time (whether with the original
agents and lenders or other agents and lenders or otherwise, and whether
provided under the original credit agreement or other credit agreements or
otherwise), including any appendices, exhibits or schedules to any of the
foregoing.
"Designated senior indebtedness" means (i) any indebtedness outstanding under
the credit facility and (ii) any other senior indebtedness, the principal amount
of which is $10 million or more and that has been designated by us as
"designated senior indebtedness" (it being expressly understood, however, that
on the issue date, the credit facility prohibits us from designating any
indebtedness other than indebtedness evidenced by the credit facility as
"designated senior indebtedness").
"Indebtedness" of any person means, without duplication, (a) all liabilities and
Obligations, contingent or otherwise, of any such person, (i) in respect of
borrowed money including, without limitation, senior indebtedness (whether or
not the lender has recourse to all or any portion of the assets of such person),
(ii) evidenced by credit or loan agreements, bonds, notes, debentures or similar
instruments (including, without limitation, notes or similar instruments given
in connection with the acquisition of any business, properties or assets of any
kind), (iii) evidenced by bankers' acceptances or similar instruments issued or
accepted by banks, (iv) for the payment of money relating to a capitalized lease
obligation or (v) evidenced by a letter of credit, bank guarantee or a
reimbursement obligation of such person with respect to any letter of credit;
(b) all obligations of such person issued or assumed as the deferred purchase
price of property or services (but excluding trade accounts payable or accrued
liabilities arising in the ordinary course of business); (c) all net obligations
of such person under interest swap and hedging obligations; (d) all liabilities
of others of the kind described in the preceding clauses, (a), (b) or (c) that
such person has guaranteed or that is otherwise its legal liability, or which is
secured by a lien on property of such person, and all obligations to purchase,
redeem or acquire any capital stock; and (e) any and all deferrals, renewals,
extensions, modifications, replacements, restatements, refinancings and
refundings (whether direct or indirect) of, or any indebtedness or obligation
issued in exchange for, any liability of the kind described in any of the
preceding clauses (a), (b), (c) or (d), or this clause (e), whether or not
between or among the same parties.
"Interest swap and hedging obligations" means the obligations of any person
under any interest rate or currency protection agreement, future agreement,
option agreement, swap agreement, cap agreement or other interest rate or
currency hedge agreement, collar agreement or other similar agreement or
arrangement to which such person is a party or beneficiary.
"Junior securities" means any of our qualified capital stock and our
indebtedness, in each case that is subordinated to all senior indebtedness (and
any equity and debt securities issued in exchange for senior indebtedness) to
substantially the same extent as, or to a greater extent than, the notes are
subordinated to senior indebtedness pursuant to the indenture.
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"Obligations" means all obligations for principal, premium, interest, penalties,
fees, indemnifications, reimbursements, damages and other liabilities payable
under the documentation governing any indebtedness.
"Representative" means the trustee, agent or representative in respect of any
designated senior indebtedness; provided that if, and for so long as, any
designated senior indebtedness lacks such a representative, then the
representative for such designated senior indebtedness shall at all times
constitute the holders of a majority in outstanding principal amount of such
designated senior indebtedness.
"Senior indebtedness" means all of our Obligations to pay the principal of,
premium, if any, interest (including all interest accruing subsequent to the
commencement of any bankruptcy or similar proceeding at the rate provided for in
the documentation with respect thereto, whether or not a claim for post-petition
interest is allowed as a claim in any such proceeding) and rent payable on or in
connection with, and all letters of credit, reimbursement obligations and fees,
costs, expenses and other amounts and liabilities accrued or due on or in
connection with, the credit facility and any other indebtedness of ours, whether
outstanding on the date of the indenture or thereafter created, incurred,
assumed, guaranteed or in effect guaranteed by us, unless the instrument
creating or evidencing such indebtedness expressly provides that such
indebtedness is not senior or superior in right of payment to the notes or is
pari passu with, or subordinated to, the notes; provided that in no event shall
senior indebtedness include (a) our indebtedness owed or owing to any of our
subsidiaries, (b) our indebtedness representing any account payable or other
accrued current liability or obligation incurred in the ordinary course of
business in connection with the obtaining of materials or services, (c) any
liability for taxes owed or owing by us or any of our subsidiaries or (d) the
notes.
"Shareholder rights plan" means that certain Rights Agreement, dated as of
October 3, 2002, between ARRIS and The Bank of New York, as Rights Agent, as
such agreement may be amended, restated, modified, supplemented or replaced from
time to time.
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DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock is 325,000,000 shares consisting of 320,000,000
shares of common stock, par value $0.01 per share, and 5,000,000 shares of
preferred stock, par value $1.00 per share, in such series and with such voting
powers, designations, preferences and relative, participating, optional or other
special rights, and qualifications, limitations or restrictions thereof, as may
be fixed from time to time by the board of directors for each series. The
following summary description of certain provisions of our Amended and Restated
Certificate of Incorporation and the By-laws does not purport to be complete and
is qualified in its entirety by reference to said provisions.
COMMON STOCK
Holders of common stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Holders of a majority of the shares of common stock entitled to vote in
any election of directors may elect all of the directors standing for election.
Holders of common stock are entitled to receive ratably such dividends, if any,
as may be declared by the board of directors out of funds legally available
therefor, subject to any preferential dividend rights of outstanding preferred
stock. Upon our liquidation, dissolution or winding up, the holders of common
stock are entitled to receive ratably our net assets available after the payment
of all debts and other liabilities and subject to the prior rights of any
outstanding preferred stock. Holders of common stock have no preemptive,
subscription, redemption or conversion rights.
The outstanding shares of common stock are, and the common stock issuable upon
exchange of the notes will be, when issued and paid for, fully paid and
non-assessable.
The rights, preferences and privileges of holders of common stock are subject
to, and may be adversely affected by, the rights of the holders of shares of any
series of preferred stock which we may designate and issue.
PREFERRED STOCK
We have authorized 5,000,000 shares of preferred stock which may be issued with
such preferences and voting rights as the board of directors, without further
approval by the stockholders, may determine by duly adopted resolution. See
"Certain Charter and By-Law Provisions." We have no shares of preferred stock
issued and outstanding. With the adoption of our shareholder rights plan on
October 3, 2002, we designated 320,000 shares of preferred stock as Series A
Participating Preferred Stock.
SHAREHOLDER RIGHTS PLAN
Our board of directors has declared a dividend of one right for each outstanding
share of our common stock to holders of record of our common stock at the close
of business on October 25, 2002, called the "record date." Each right entitles
the registered holder to purchase from us one one-thousandth of a share of
Series A Participating Preferred Stock, par value $0.01 per share, at a purchase
price of $37.00, subject to adjustment. The description and terms of the rights
are set forth in a Rights Agreement, dated as of October 3, 2002, between ARRIS
and The Bank of New York, as rights agent.
Initially, the rights will be attached to all common stock certificates
representing shares then outstanding, and no separate rights certificates will
be distributed. The rights will separate from the common stock and a
distribution date will occur upon the earlier of (i) ten business days following
a public announcement that a person or group of affiliated or associated persons
has (subject to certain exceptions) acquired, or obtained the right to acquire,
beneficial ownership of 15% or more of the outstanding shares of our common
stock, other than as a result of repurchases of stock by us (such person,
subject to certain exceptions, an "acquiring person"), or (ii) ten business days
(or such later date as the board shall determine) following (x) the commencement
of a tender offer or exchange offer that, if successfully completed, would
result in a person or group becoming an acquiring person of such outstanding
shares of our common stock or (y) the date of the public announcement of the
interest of any person or group (subject to certain exceptions) to commence a
tender offer or exchange offer that, if successfully completed, would result in
the person becoming an acquiring person of such outstanding shares of our common
stock.
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The rights agreement provides that, until the distribution date (or the earlier
expiration or redemption of the rights), we will issue one new right for each
share of common stock issued by us after the record date. The rights are not
exercisable until the distribution date and will expire at the close of business
on October 3, 2012, unless earlier redeemed by us.
Each share of Series A Participating Preferred Stock purchasable upon exercise
of the rights will have a preferential dividend equal to 1,000 times the
aggregate per share amount of all cash dividends declared on the common stock,
and 1,000 times the aggregate per share amount of all non-cash dividends or
other distributions (other than a dividend payable in shares of common stock or
a subdivision of the outstanding common stock) declared on the shares of common
stock. In the event of our liquidation, dissolution or winding up, the holders
of the Series A Participating Preferred Stock will be entitled to receive an
aggregate amount per share equal to 1,000 times the aggregate amount distributed
per share to each holder of shares of common stock plus any accrued and unpaid
dividends on the Series A Participating Preferred Stock. In the event of any
merger, consolidation, combination or other transaction in which shares of
common stock are exchanged, each share of Series A Participating Preferred Stock
will be similarly exchanged in an amount per share equal to 1,000 times the
amount and type of consideration received per share of common stock. The rights
of the shares of Series A Participating Preferred Stock as to dividends and
liquidation, and in the event of a merger or consolidation, are protected by
antidilution provisions.
In the event a person becomes an acquiring person, each holder of a right will
thereafter have the right to receive, upon exercise, common stock (or, in
certain circumstances, cash, property or other securities of the company) having
a value equal to two times the exercise price of the right. Notwithstanding any
of the foregoing, following the occurrence of any of the events set forth in
this paragraph, all rights that are, or (under certain circumstances specified
in the rights agreement) were, beneficially owned by any acquiring person will
be null and void.
In the event that, at any time following the stock acquisition date, (i) we are
acquired in a merger or other business combination transaction in which we are
not the surviving corporation (other than a merger which follows an offer
described in the second preceding paragraph), or (ii) 50% or more of our assets,
cash flow or earning power is sold or transferred, each holder of a right
(except rights which previously have been voided) shall have the right to
receive, upon exercise, common stock of the acquiring company having a value
equal to two times the exercise price of the right.
At any time after a person becomes an acquiring person and prior to the
acquisition by such person or group of 50% or more of the outstanding common
stock, our board may exchange the rights (other than rights owned by the person
or group which have become void), in whole or in part, at an exchange ratio of
one share of common stock per right (subject to adjustment). At any time prior
to ten business days following the stock acquisition date, our board may redeem
the rights in whole, but not in part, at a price of $0.001 per right (payable in
cash, common stock or other consideration deemed appropriate by the board).
Immediately upon the action of the board ordering redemption of the rights, the
rights will terminate and the only right of the holders of rights will be to
receive the $0.001 redemption price.
The rights are intended to protect our stockholders in the event of an unfair or
coercive offer to acquire us and to provide our board of directors with adequate
time to evaluate unsolicited offers. The rights may have anti-takeover effects.
The rights will cause substantial dilution to a person or group that attempts to
acquire us without conditioning the offer on a substantial number of rights
being acquired. The rights, however, should not affect any prospective offer or
willing to make an offer at a fair price and determined by our board of
directors. The rights should not interfere with any merger or other business
combination approved by our board of directors.
CERTAIN CHARTER AND BY-LAW PROVISIONS
Pursuant to the provisions of the Delaware General Corporation Law (the "DGCL"),
we have adopted provisions in our Certificate of Incorporation and By-laws which
required us to indemnify our officers and directors to the fullest extent
permitted by law, and eliminate the personal liability of our directors to us or
our stockholders for monetary damages for breach of their duty of due care
except (i) for any breach of the duty of loyalty; (ii) for acts or omissions not
in good faith or which involve intentional misconduct or knowing violations of
laws; (iii) for liability under Section 174 of the DGCL (relating to certain
unlawful dividends, stock repurchases or stock redemptions); or (iv) for any
transaction from which the director derived any improper personal benefit. These
provisions do not eliminate
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a director's duty of care. Moreover, the provisions do not apply to claims
against a director for violation of certain laws, including Federal securities
laws. We believe that these provisions will assist us in attracting or retaining
qualified individuals to serve as directors and officers.
Our Restated Certificate of Incorporation includes a provision which allows the
board of directors, without stockholder approval to issue up to 5,000,000 shares
of preferred stock with voting, liquidation and conversion rights that could be
superior to and adversely affect the voting power of holders of common stock.
The issuance of preferred stock could have the effect of delaying, deferring or
preventing a change in control of our company.
DELAWARE ANTI-TAKEOVER LAW
We are a Delaware corporation that is subject to Section 203 of the DGCL. Under
Section 203 certain "business combinations" between a Delaware corporation whose
stock generally is publicly traded or held of record by more than 2,000
stockholders and an "interested stockholder" are prohibited for a three-year
period following the date that such stockholder became an interested
stockholder, unless (i) the corporation has elected in its certificate of
incorporation not to be governed by Section 203 (we have not made such
election), (ii) the business combination was approved by the board of directors
of the corporation before the other party to the business combination became an
interested stockholder, (iii) upon consummation of the transaction that made it
an interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the commencement of the
transaction (excluding voting stock owned by directors who are also officers or
held in employee benefit plans in which the employees do not have a confidential
right to tender or vote stock held by the plan) or (iv) the business combination
is approved by the board of directors of the corporation and ratified by
two-thirds of the voting stock which the interested stockholder did not own. The
three-year prohibition also does not apply to certain business combinations
proposed by an interested stockholder following the announcement or notification
of certain extraordinary transactions involving the corporation and a person who
had not been an interested stockholder during the previous three years or who
became an interested stockholder with the approval of a majority of the
corporation's directors. The term "business combination" is defined generally to
include mergers or consolidations between a Delaware corporation and an
interested stockholder, transactions with an interested stockholder involving
the assets or stock of the corporation or its majority-owned subsidiaries, and
transactions which increase an interested stockholder's percentage ownership of
stock. The term "interested stockholder" is defined generally as those
stockholders who become beneficial owners of 15% or more of a Delaware
corporation's voting stock, together with the affiliates or associates of that
stockholder.
34
CERTAIN UNITED STATES INCOME TAX CONSIDERATIONS
The following is a summary of the material United States federal income tax
consequences of the purchase of the notes, the ownership and disposition of the
notes and the ownership and disposition of our common stock into which such
notes may be converted, but does not purport to be a complete analysis of all
the potential tax considerations relating thereto. Unless otherwise stated, this
summary deals only with notes, and common stock into which such notes may be
converted, held as capital assets by persons who acquire the notes upon original
issue at their original issue price. The tax treatment of a holder may vary
depending on its particular situation. This summary does not deal with special
classes of holders, such as partnerships and other passthrough entities,
ex-patriots, dealers in securities or currencies, banks, thrifts, real estate
investment trusts, regulated investment companies, insurance companies, tax
exempt organizations, and persons holding the notes or common stock as part of a
straddle or as part of a hedging or conversion transaction or other integrated
investment. Further, it does not include any description of alternative minimum
tax consequences or the tax laws of any state, local or foreign government that
may be applicable to the notes or common stock into which such notes may be
converted. Prospective investors should consult their own tax advisors with
regard to the application of any state, local or other tax laws. This summary is
based on the Internal Revenue Code of 1986, as amended (the "Code"), the
Treasury regulations thereunder and administrative and judicial interpretation
thereof, all as of the date hereof, and all of which are subject to change
(possibly on a retroactive basis). The authorities on which this summary is
based are subject to various interpretations, and it is therefore possible that
the federal income tax treatment of the ownership and disposition of the notes
and common stock into which such notes may be converted may differ from the
treatment described below. We have not sought any ruling from the Internal
Revenue Service (the "IRS") with respect to the statements made and the
conclusions reached in the following summary, and there can be no assurance that
the IRS will agree with such statements and conclusions. In addition, the IRS is
not precluded from asserting a contrary position. This summary does not consider
the effect of any applicable foreign, state, local or other tax laws.
The following discussion reflects our position that the notes will not be
considered "contingent payment instruments." Although we believe our position to
be correct, the IRS may successfully assert a contrary position, based on the
fact that (1) we may be required to make a payment of additional amounts if we
do not file or cause to be declared effective a registration statement or such
registration statement ceases to be effective or usable, as described under
"Description of Notes -- Registration Rights," or (2) if we call the notes for
provisional redemption, we may be required to pay "make-whole" payments in
connection with such redemption. If the IRS successfully asserted the contrary
position, the U.S. federal income tax consequences of owning and disposing of
the notes might differ materially and adversely from the consequences described
below (e.g., you may be required to recognize interest income on an accelerated
bases, any gain you recognize on a disposition of a note may be characterized as
interest income (as opposed to capital gain) and/or a conversion of your notes
into common stock may become a taxable event).
PERSONS CONSIDERING THE PURCHASE OF NOTES SHOULD CONSULT THEIR TAX ADVISERS WITH
REGARD TO THE APPLICATION OF THE UNITED STATES FEDERAL INCOME TAX LAWS TO THEIR
PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE LAWS OF
ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION.
TAX CONSEQUENCES TO UNITED STATES HOLDERS
As used herein, the term "United States Holder" means a beneficial owner of
notes or common stock into which such notes may be converted that is for United
States federal income tax purposes: (i) a citizen or resident (as defined in
Section 7701(b) of the Code) of the United States, (ii) a corporation or other
entity created or organized under the laws of the United States or a political
subdivision thereof, (iii) an estate the income of which is subject to United
States federal income taxation regardless of its source, or (iv) a trust if (a)
a court within the United States is able to exercise primary supervision over
the administration of the trust and one or more United States persons have the
authority to control all substantial decisions of the trust, or (b) such trust
has validly elected to be treated as a United States person.
35
STATED INTEREST
Interest paid on a note will generally be taxable to a United States Holder as
ordinary interest income at the time it accrues or is received in accordance
with the United States Holder's method of accounting for federal income tax
purposes.
ADJUSTMENTS OF THE CONVERSION RATIO
The terms of the notes allow for changes in their conversion rate in certain
circumstances. Changes in conversion rate could be treated as a taxable stock
dividend if the changes have the effect of increasing a United States Holder's
proportionate interest in our earnings and profits. This could occur, for
example, if the conversion rate is adjusted to compensate holders of notes for
distributions of property to our stockholders. By contrast, changes in the
conversion rate will not be treated as a taxable stock dividend if the changes
simply prevent the dilution of interests of holders of the notes through
application of a bona fide, reasonable adjustment formula. Any taxable
constructive stock dividend resulting from a change to, or failure to change,
the conversion rate would be treated the same as an actual dividend equal to the
amount by which your proportionate interest in our earnings and profits is
increased. Accordingly, the constructive stock dividend would result in ordinary
income to the recipient to the extent of our earnings and profits (and would
increase the adjusted tax basis of the notes by the same amount), with any
excess treated first as a tax-free reduction in adjusted basis and then as
capital gain.
SALE, EXCHANGE OR RETIREMENT OF THE NOTES
Upon the sale, exchange or retirement (including redemption or repurchase, but
excluding conversion) of a note, a United States Holder generally will recognize
taxable gain or loss equal to the difference between (i) the amount realized
(i.e., the amount of cash and fair market value of property received in exchange
for the note, but not including any amounts received in respect of accrued
interest, which will be taxed as ordinary income as described above) on the
sale, exchange or retirement and (ii) the United States Holder's adjusted tax
basis in the note. A United States Holder's adjusted tax basis in a note
generally will be equal to the United States Holder's original purchase price
for the note. Any gain or loss realized on the sale, exchange or retirement of a
note generally will be capital gain or loss and will be long-term capital gain
or loss if, at the time of sale, exchange or retirement, the note has been held
for more than one year.
CONVERSION OF THE NOTES
A United States Holder's conversion of a note into our common stock generally
will not be a taxable event, except that the receipt of cash in lieu of a
fractional share of common stock will result in capital gain or loss (measured
by the difference between the cash received in lieu of the fractional share and
the United States Holder's tax basis in the fractional share). A United States
Holder's tax basis in common stock received upon the conversion of a note will
be the same as the United States Holder's basis in the note at the time of
conversion, reduced by any basis allocated to a fractional share. The United
States Holder's holding period for the common stock received will include the
United States Holder's holding period for the note converted.
The tax consequences of a "make-whole" payment made in connection with a
conversion of the notes are unclear. United States Holders should contact their
tax advisers regarding the tax consequences of receiving a "make-whole" payment
in such circumstances. A "make-whole" payment in such circumstances may be
treated as ordinary income, a tax-free return of capital, a capital gain, or
some combination of the foregoing, and we have not determined which position to
take and likely will not make such determination unless and until we are
required to make such a payment.
DIVIDENDS ON COMMON STOCK
If we make distributions on our common stock, those distributions will generally
be treated as a dividend, subject to tax as ordinary income, to the extent of
our current or accumulated earnings and profits, then as a tax-free return of
capital to the extent of the United States Holder's adjusted tax basis in the
common stock and thereafter as gain from the sale or exchange of that stock.
Dividends paid to Holders that are U.S. corporations may qualify for the
dividends-received deduction.
36
SALE OF COMMON STOCK
Upon the sale or exchange of our common stock, a United States Holder generally
will recognize capital gain or loss equal to the difference between (i) the
amount of cash and the fair market value of any property received upon the sale
or exchange and (ii) the United States Holder's adjusted tax basis in the common
stock. That capital gain or loss will be long-term if the United States Holder's
holding period is more than one year and will be short-term if the holding
period is equal to or less than one year.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Information returns will be filed with the IRS in connection with payments on
the notes or our common stock and the proceeds from a sale or other disposition
of the notes or our common stock. Additionally, a United States Holder may be
subject to "backup withholding" under certain circumstances. Backup withholding
applies to a Holder if the Holder, among other things, (i) fails to furnish its
social security number or other taxpayer identification number ("TIN") to the
payor responsible for backup withholding (for example, the Holder's securities
broker), (ii) furnishes such payor an incorrect TIN, (iii) fails to provide such
payor with a certified statement, signed under penalties of perjury, that the
TIN provided to the payor is correct and that the Holder is not subject to
backup withholding, or (iv) fails to report properly interest and dividends on
his tax return. Backup withholding, however, does not apply to payments made to
certain exempt recipients, such as corporations and tax-exempt organizations.
Backup withholding applies to "reportable payments," which generally will
include distributions of interest and principal payments on the notes and
dividends. Currently, the backup withholding tax rate is 30%, but will be
gradually reduced to 28% by 2006.
TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS
As used herein, the term "Non-United States Holder" means a beneficial owner of
a note or our common stock that for U.S. federal income tax purposes is a
nonresident alien, individual, corporation, estate or trust that is not a United
States Holder, as defined above.
PAYMENTS OF INTEREST
Subject to the discussion below concerning backup withholding, payments of
interest on a note by us or any paying agent to any Non-United States Holder
that are not effectively connected with a trade or business in the United States
will not be subject to United States federal withholding tax, provided that: (a)
the Non-United States Holder does not own, actually or constructively, 10% or
more of the total combined voting power of all classes of our stock entitled to
vote, is not a controlled foreign corporation related, directly or indirectly,
to us through stock ownership and is not a bank receiving certain types of
interest; (b) either (i) the Non-United States Holder timely certifies to us or
our paying agent, under penalties of perjury, that such holder is not a United
States person and provides its name and address, or (ii) a custodian, broker,
nominee or other intermediary acting as an agent for the Non-United States
Holder (such as a securities clearing organization, bank or other financial
institution that holds customer's securities in the ordinary course of its trade
or business) that holds the notes in such capacity timely certifies to us or our
paying agent, under penalties of perjury, that such statement has been received
from the beneficial owner of the notes by such intermediary, or by any other
financial institution between such intermediary and the beneficial owner, and
furnishes to us or our paying agent a copy thereof (the foregoing certification
may be provided on a properly completed IRS Form W-8BEN or W-8IMY, as
applicable, or any successor forms duly executed under penalties of perjury);
and (c) neither we nor our paying agent has actual knowledge or reason to know
that the conditions of the exemption are, in fact, not satisfied. If the
conditions described in clauses (a) through (c) are not satisfied, such interest
payments will be subject to U.S. federal withholding tax of 30% unless the
holder qualifies for an exemption from or reduction in withholding under an
applicable tax treaty.
If a Non-United States Holder of a note is engaged in a trade or business in the
United States, and if payments on the note are effectively connected with the
conduct of this trade or business, the Non-United States Holder, although exempt
from the withholding tax discussed above, generally will be taxed in the same
manner as a United States Holder (see "Tax Consequences to United States
Holders" above), unless an income tax treaty provides otherwise, except that (i)
the Non-United States Holder will be required to provide to us or our paying
agent a properly executed IRS Form W-8ECI in order to claim an exemption from
withholding tax, and (ii) if the Non-United States
37
Holder is a foreign corporation, it may also be subject to a branch profits tax
on its effectively connected income at a 30% rate or such lower rate that may be
provided by an applicable income tax treaty. Non-United States Holders should
consult their own tax advisers with respect to other United States tax
consequences of the ownership and disposition of notes including the
applicability of income tax treaties, which may provide different rules.
ADJUSTMENTS OF THE CONVERSION RATIO
The conversion rate of the notes is subject to adjustment in some circumstances,
which could give rise to a taxable deemed distribution to Non-United States
Holders of the notes. See "Tax Consequences to United States Holders --
Adjustments of the Conversion Ratio" above. The deemed distribution will
constitute a dividend for United States federal income tax purposes to the
extent of our current or accumulated earnings and profits as determined under
United States federal income tax principles and to the extent treated as a
dividend generally will be subject to United States withholding tax at a 30%
rate (which withholding generally will be satisfied by withholding subsequent
interest payments on the notes), unless (x) a lower rate is provided by an
applicable income tax treaty and the Non-United States Holder or its agent
timely furnishes to us or our agent a properly completed IRS Form W-8BEN or
W-8IMY, as applicable, or any successor form, duly executed under penalties of
perjury, certifying that such Non- United States Holder is entitled to the
reduced or zero percent withholding tax rate under the income tax treaty, and
neither we nor our paying agent has actual acknowledge or reason to know that
the conditions of this exemption are, in fact, not satisfied or (y) the
distribution is effectively connected with the conduct by the Non-United States
Holder of a trade or business in the United States and the Non-United States
Holder timely furnishes to us or our paying agent a properly completed IRS Form
W-8ECI, or any successor form, duly executed under penalties of perjury,
certifying to the foregoing, and neither we nor our paying agent have actual
knowledge or reason to know that the conditions of this exemption are, in fact,
not satisfied.
SALE, EXCHANGE, CONVERSION OR REDEMPTION OF THE NOTES AND COMMON STOCK
Subject to the exceptions in this section, a Non-United States Holder of a note
will not be subject to United States federal income tax (i) upon conversion of a
note into shares of our common stock or (ii) on gain realized on the sale,
exchange or redemption of the note or our common stock into which such note may
be converted (including cash for a fractional share on conversion).
If the gain is effectively connected with the conduct by the Non-United States
Holder of a trade or business in the United States, the Non-United States Holder
would be subject to the rules described above under "Tax Consequences to United
States Holders -- Sale, Exchange or Retirement of the Notes." Moreover, if that
Non-United States Holder is a foreign corporation, it may also be subject to a
branch profits tax on its effectively connected income at a 30% rate or such
lower rate that may be provided by an applicable income tax treaty, at any time
during a specified period.
If we are a United States real property holding corporation (a "USRPHC") at any
time during a specified period, a Non-United States Holder would, subject to the
exception described below, be subject to federal income tax with respect to gain
realized on the disposition of the notes (other than a conversion of the notes)
or shares of our common stock. We do not believe that we are a USRPHC or will
become a USRPHC in the future. If we become a USRPHC, so long as our common
stock continues to be regularly traded on an established securities market, only
a Non-United States Holder (i) who owns notes with a value greater than 5% of
our common stock as of the latest date such notes were acquired, or (ii) who
actually or constructively owns (or owned at any time during the five-year
period ending on the date of disposition) more than 5% of our common stock will
be subject to United States tax on the disposition thereof.
If you are an individual who is present in the United States for 183 days or
more in the taxable year of disposition, you are not otherwise a resident of the
United States for United States federal income tax purposes and certain other
requirements are met, you will be subject to a 30% tax on gain realized on the
sale, exchange or other disposition (other than conversion) of a note or our
common stock into which such note may be converted.
38
DIVIDENDS ON COMMON STOCK
Subject to the discussion below of backup withholding, dividends, if any, paid
on our common stock to a Non-United States Holder generally will be subject to
United States withholding tax at a 30% rate unless (x) a lower rate is provided
by an applicable income tax treaty and the Non-United States Holder or its agent
timely furnishes to us or our agent a properly completed IRS Form W-8BEN or
W-8IMY, as applicable, or any successor form, duly executed under penalties of
perjury, certifying that such Non-United States Holder is entitled to the
reduced or zero percent withholding tax rate under the income tax treaty, and
neither we nor our paying agent has actual knowledge or reason to know that the
conditions of this exemption are, in fact, not satisfied or (y) the distribution
is effectively connected with the conduct by the Non-United States Holder of a
trade or business in the United States and the Non-United States Holder timely
furnishes to us or our paying agent a properly completed IRS Form W-8ECI, or any
successor form, duly executed under penalties of perjury, certifying to the
foregoing, and neither we nor our paying agent have actual knowledge or reason
to know that the conditions of this exemption are, in fact, not satisfied.
Dividends for this purpose may include deemed dividends as discussed in
"Adjustments of the Conversion Ratio" above.
Except to the extent otherwise provided under an applicable income tax treaty, a
Non-United States Holder generally will be taxed in the same manner as a United
States Holder on dividends paid (or deemed paid) that are effectively connected
with the conduct of a trade or business in the United States by the Non-United
States Holder (unless an income tax treaty provides otherwise). If that
Non-United States Holder is a foreign corporation, it may also be subject to a
United States branch profits tax on that effectively connected income at a 30%
rate or a lower rate as may be specified by an applicable income tax treaty.
The tax consequences of a "make-whole" payment made in connection with a
conversion of the notes are unclear. Non-United States Holders should contact
their tax advisers regarding the tax consequences of receiving a "make-whole"
payment in such circumstances. Because the tax treatment of such a payment is
unclear, we have not determined how to characterize it and likely will not make
any such determination unless and until we are required to make such a payment.
UNITED STATES FEDERAL ESTATE TAX
A note held by an individual who at the time of death is not a citizen or
resident of the United States (as specially defined for United States federal
estate tax purposes) will not be subject to United States federal estate tax if
the individual did not actually or constructively own 10% or more of the total
combined voting power of all classes of our stock and, at the time of the
individual's death, payments with respect to such note would not have been
effectively connected with the conduct by such individual of a trade or business
in the United States. Common stock held by an individual who at the time of
death is not a citizen or resident of the United States (as specially defined
for United States federal estate tax purposes) will be included in such
individual's estate for United States federal estate tax purposes, unless an
applicable estate tax treaty otherwise applies.
BACKUP AND INFORMATION REPORTING
Information returns will be filed annually with the IRS and provided to each
Non-United States Holder with respect to any dividends paid on our common stock
or interest paid on the notes that are subject to withholding or that are exempt
from United States withholding tax pursuant to an income tax treaty or other
reason. Copies of these information returns also may be made available under the
provisions of a specific treaty or agreement to the tax authorities of the
country in which the Non-United States Holder resides. Under certain
circumstances, the Internal Revenue Code imposes a backup withholding
obligation. Dividends or interest paid to a Non-United States Holder of common
stock or notes generally will be exempt from backup withholding if the
Non-United States Holder or its agent provides a properly executed IRS Form
W-8BEN or W-8IMY, as applicable, or otherwise establishes an exemption.
Principal payments on the notes and the payment of the proceeds from the
disposition of common stock or notes to or through the United States office of
any broker, United States or foreign, will be subject to information reporting
and possible backup withholding unless the owner certifies as to its non-United
States status under penalties of perjury or otherwise establishes an exemption,
provided that the broker does not have actual knowledge that the
39
Holder is a United States person or that the conditions of any other exemption
are not, in fact, satisfied. Information reporting (but not backup withholding)
may also apply with respect to certain principal payments and sales proceeds
paid to or through certain non-United States officers of brokers unless an
exemption is established. Non-United States Holders should consult their own tax
advisors on the application of information reporting and backup withholding to
them in their particular circumstances (including upon their disposition of
common stock or notes).
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules from a payment to a Non-United States Holder will be
refunded or credited against the Non-United States Holder's federal income tax
liability, if any, if the Non-United States Holder provides the required
information to the IRS.
NON-CONFIDENTIALITY OF CERTAIN TAX MATTERS
Notwithstanding the foregoing or anything else contained in this prospectus or
elsewhere to the contrary (and notwithstanding any other express or implied
agreement or understanding regarding confidentiality), the company, initial
purchasers, and each holder of the notes and their respective employees,
representatives and other agents are expressly authorized to disclose the tax
treatment and tax structure of any of the transactions contemplated in this
prospectus (the "Transactions") to any and all persons, without limitation of
any kind. Such persons and their agents may disclose all materials of any kind
(including opinions or other tax analyses) insofar as such materials relate to
the tax treatment and tax structure of the Transactions. This authorization does
not extend to disclosure of any other information, including (without
limitation) (a) the identity of purchasers or potential purchasers in the
Transactions, (b) the existence or status of negotiations, (c) any pricing
information or (d) any financial, business, legal or personal information of or
regarding any such person or its affiliates that is not related to the tax
treatment and tax structure of the Transactions.
40
SELLING SECURITYHOLDERS
The notes were originally acquired from us by CIBC World Markets on March 18,
2003. CIBC World Markets has advised us that it resold the notes in transactions
exempt from the registration requirements of the Securities Act to persons it
reasonably believed were "qualified institutional buyers" (as defined in Rule
144A of the Securities Act). These subsequent purchasers, or their transferees,
pledgees, donees or successors, may from time to time offer and sell any or all
of the notes and/or shares pursuant to this prospectus provided that they are
named herein as selling securityholders.
The notes and the shares are being registered pursuant to the registration
rights agreement, which provides that we file the shelf registration statement
with regard to the notes and the shares within 90 days of the date of original
issuance of the notes and use our reasonable best efforts to cause such shelf
registration statement to become effective within 180 days of the original
issuance of the notes and to keep such shelf registration statement continuously
effective until the earlier of:
- March 18, 2005;
- the date when all registrable securities covered by such shelf
registration statement have been sold pursuant thereto;
- all registrable securities held by persons who are not our
affiliates have been resold pursuant to Rule 144(k) of the
Securities Act or cease to be outstanding; or
- a subsequent shelf registration covering all of the
registrable securities has been declared effective under the
Securities Act.
Although none of the selling securityholders has advised us that it currently
intends to sell all or any of the notes or shares pursuant to this prospectus,
the selling securityholders may choose to sell the notes and/or shares from time
to time upon notice to us. See "Plan of Distribution."
The following table sets forth information, as of June 3, 2003, unless otherwise
indicated, with respect to the selling securityholders and the respective
principal amounts of notes beneficially owned by each selling securityholder
that may be offered pursuant to this prospectus. Such information has been
obtained from the selling securityholders. None of the selling securityholders
has, or within the past three years has had, any position, office or other
material relationship with us or any of our predecessors or affiliates, except
as noted below. Because the selling securityholders may offer all or some
portion of the notes or the common stock issuable upon conversion thereof
pursuant to this prospectus, no estimate can be given as to the amount of the
notes or the common stock issuable upon conversion thereof that will be held by
the selling securityholders upon termination of any such sales. In addition, the
selling securityholders identified below may have sold, transferred or otherwise
disposed of all or a portion of their convertible notes since June 3, 2003 in
transactions exempt from the registration requirements of the Securities Act.
PRINCIPAL AMOUNT OF
NOTES OWNED AND AMOUNT OF SHARES AMOUNT OF SHARES
NAME OF SELLING SECURITYHOLDER OFFERED HEREBY OWNED(1)(2) OFFERED HEREBY(2)(3)
------------------------------ -------------------- ----------------- --------------------
AIG/National Union Fire Insurance $ 195,000 39,000 39,000
Alexandra Global Master Fund, LTD $12,000,000 2,400,000 2,400,000
Alpine Associates $ 6,350,000 1,270,000 1,270,000
Alpine Partners, L.P. $ 900,000 180,000 180,000
Amaranth LLC $ 2,337,000 467,400 467,400
41
PRINCIPAL AMOUNT OF
NOTES OWNED AND AMOUNT OF SHARES AMOUNT OF SHARES
NAME OF SELLING SECURITYHOLDER OFFERED HEREBY OWNED(1)(2) OFFERED HEREBY(2)(3)
------------------------------ -------------------- ----------------- ---------------------
Argent Classic Convertible Arbitrage $ 1,500,000 300,000 300,000
Fund L.P.
Argent Classic Convertible Arbitrage $ 3,500,000 700,000 700,000
(Bermuda) Fund Ltd.
Argent Low Lev Convertible Arbitrage $ 300,000 60,000 60,000
Fund LLC
Argent Low Lev Convertible Arbitrage $ 1,700,000 340,000 340,000
Fund Ltd.
Arkansas PERS $ 435,000 87,000 87,000
Attorney's Title Insurance Fund $ 50,000 10,000 10,000
B.C. McCabe Foundation $ 160,000 32,000 32,000
Boilermakers Blacksmith Pension Trust $ 550,000 110,000 110,000
BP Amoco PLC Master Trust $ 448,000 89,600 89,600
Chrysler Corporation Master Retirement $ 1,015,000 203,000 203,000
Trust
CIBC World Markets $ 1,955,000 391,000 391,000
Citigroup Global Markets FMR Salomon $ 500,000 100,000 100,000
Smith Barney
DBAG London $34,800,000 6,960,000 6,960,000
Delaware PERS $ 610,000 122,000 122,000
Delta Air Lines Master Trust $ 270,000 54,000 54,000
(domestic convertible account)
Delta Air Lines Master Trust/FRIC $ 260,000 52,000 52,000
Delta Pilots Disability and Survivorship $ 155,000 31,000 31,000
Trust
Duke Endowment $ 105,000 21,000 21,000
42
PRINCIPAL AMOUNT OF
NOTES OWNED AND AMOUNT OF SHARES AMOUNT OF SHARES
NAME OF SELLING SECURITYHOLDER OFFERED HEREBY OWNED(1)(2) OFFERED HEREBY(2)(3)
------------------------------ -------------------- ----------------- ---------------------
F.R. Convt Sec Fn $ 60,000 12,000 12,000
Global Undervalued Securities $ 1,500,000 300,000 300,000
Master Fund, L.P.
HBK Master Fund L.P. $24,750,000 4,950,000 4,950,000
Hotel Union and Hotel Industry of Hawaii $ 198,000 39,600 39,600
Pension Plan
ICI American Holdings Trust $ 140,000 28,000 28,000
Jefferies and Company, Inc. $ 8,000 1,600 1,600
KBC Financial Products (Cayman Island) $ 5,000,000 1,000,000 1,000,000
Limited
KBC Financial Products USA Inc. $ 1,100,000 220,000 220,000
KeySpan Foundation $ 75,000 15,000 15,000
Lyxor Master Fund $ 400,000 80,000 80,000
Ref: Argent/Low Lev CB c/o Argent
Marathon Global Convertible Master Fund, $ 4,500,000 900,000 900,000
Ltd.
Microsoft Corporation $ 440,000 88,000 88,000
Motion Picture Industry Health Plan - $ 80,000 16,000 16,000
Active Member Fund
Motion Picture Industry Health Plan - $ 50,000 10,000 10,000
Retiree Member Fund
National Fuel Gas Company Retirement Plan $ 115,000 23,000 23,000
OCM Convertible Trust $ 790,000 158,000 158,000
43
PRINCIPAL AMOUNT OF
OF NOTES OWNED AMOUNT OF SHARES AMOUNT OF SHARES
NAME OF SELLING SECURITYHOLDER AND OFFERED HEREBY OWNED(1)(2) OFFERED HEREBY(2)(3)
------------------------------ ------------------- ----------------- --------------------
Oxford, Lord Abbett and Co. $ 1,475,000 295,000 295,000
Partner Reinsurance Company Ltd. $ 255,000 51,000 51,000
Prudential Insurance Company of America $ 35,000 7,000 7,000
Quantum Partners LDC $ 2,000,000 400,000 400,000
Qwest Occupational Health Trust $ 95,000 19,000 19,000
RHP Master Fund, Ltd. $ 2,000,000 400,000 400,000
Silverback Master, Ltd. $ 1,000,000 200,000 200,000
Southern Farm Bureau Life Insurance $ 325,000 65,000 65,000
Sphinx Convertible Bond Fund SPC $ 154,000 30,800 30,800
State Employees' Retirement Fund of the $ 340,000 68,000 68,000
State of Delaware
State of Oregon - Equity $ 1,925,000 385,000 385,000
Sunrise Partners Limited Partnership $ 413,000 82,600 82,600
Syngenta AG $ 105,000 21,000 21,000
Total Fina Elf Finance USA Inc. $ 200,000 40,000 40,000
Vanguard Convertible Securities Fund, $ 2,510,000 502,000 502,000
Inc.
Viacom Inc. Pension Plan Master Trust $ 15,000 3,000 3,000
Xavex Convertible Arbitrage 2 Fund $ 100,000 20,000 20,000
Zeneca Holdings Trust $ 150,000 30,000 30,000
Zurich Institutional Benchmarks Master $ 1,177,000 235,400 235,400
Fund Ltd.
44
PRINCIPAL AMOUNT OF
OF NOTES OWNED AMOUNT OF SHARES AMOUNT OF SHARES
NAME OF SELLING SECURITYHOLDER AND OFFERED HEREBY OWNED(1)(2) OFFERED HEREBY(2)(3)
------------------------------ --------------------- ----------------- --------------------
Zurich Institutional Benchmark Master $ 200,000 40,000 40,000
Fund c/o Argent
(1) Includes the shares into which the notes held by such selling securityholder
are convertible at the conversion price.
(2) The conversion price and the number of shares issuable upon conversion of
the notes are subject to adjustment under certain circumstances. See
"Description of Notes -- Conversion Rights." Accordingly, the number of shares
issuable upon conversion of the notes may increase or decrease from time to
time. Fractional shares will not be issued upon conversion of the notes; rather,
cash will be paid in lieu of fractional shares, if any.
(3) Assumes that the full amount of notes held by the selling securityholder are
converted into shares at the conversion price and offered by such shares by such
selling securityholder pursuant to the prospectus.
We may from time to time include additional selling securityholders and
information about such selling securityholders' plans of distribution in future
supplements to the prospectus.
45
PLAN OF DISTRIBUTION
We will not receive any of the proceeds of the sale of the notes and the
underlying common stock offered by this prospectus. The notes and the underlying
common stock may be sold from time to time to purchasers:
- directly by the selling securityholders;
- through underwriters, broker-dealers or agents who may receive
compensation in the form of discounts, concessions or
commissions from the selling securityholders or the purchasers
of the notes and the underlying common stock.
The selling securityholders and any such broker-dealers or agents who
participate in the distribution of the notes and the underlying common stock may
be deemed to be "underwriters." As a result, any profits on the sale of the
notes and underlying common stock by selling securityholders and any discounts,
commissions or concessions received by any such broker-dealers or agents might
be deemed to be underwriting discounts and commissions under the Securities Act.
If the selling securityholders were to be deemed underwriters, the selling
securityholders may be subject to certain statutory liabilities of, including,
but not limited to, Sections 11, 12 and 17 of the Securities Act and Rule 10b-5
under the Exchange Act.
If the notes and underlying common stock are sold through underwriters or
broker-dealers, the selling securityholders will be responsible for underwriting
discounts or commissions or agent's commissions.
The notes and underlying common stock may be sold in one or more transactions
at:
- fixed prices;
- prevailing market prices at the time of sale;
- varying prices determined at the time of sale; or
- negotiated prices.
These sales may be effected in transactions:
- on any national securities exchange or quotation service on
which the notes and underlying common stock may be listed or
quoted at the time of the sale, including the Nasdaq National
Market in the case of the common stock;
- in the over-the-counter market;
- in transactions otherwise than on such exchanges or services
or in the over-the-counter market; or
- through the writing of options.
These transactions may include block transactions or crosses. Crosses are
transactions in which the same broker acts as agent on both sides of the trade.
In connection with the sales of the notes and underlying common stock or
otherwise, the selling securityholders may enter into hedging transactions with
broker-dealers. These broker-dealers may in turn engage in short sales of the
notes and underlying common stock in the course of hedging their positions. The
selling securityholders may also sell the notes and underlying common stock
short and deliver notes and underlying common stock to close out short
positions, or loan or pledge notes and underlying common stock to broker-dealers
that, in turn may sell the notes and underlying common stock. To our knowledge,
there are currently no plans, arrangements or understandings between any selling
securityholders and any writer, broker-dealer or agent regarding the sale of the
notes and the underlying common stock by the selling securityholders.
46
Our common stock trades on the Nasdaq National Market under the symbol "ARRS."
We cannot assure you as to the development of liquidity or any trading market
for the notes. See "Risk Factors -- The notes are not traded on any securities
exchange or other stock market, and any market for the notes may not be
maintained."
There can be no assurances that any selling securityholder will sell any or all
of the notes or underlying common stock pursuant to this prospectus. In
addition, any notes or underlying common stock covered by this prospectus that
qualify for sale pursuant to Rule 144 or Rule 144A of the Securities Act may be
sold under Rule 144 or Rule 144A rather than pursuant to this prospectus.
The selling securityholders and other person participating in such distribution
will be subject to the Exchange Act. The Exchange Act rules include, without
limitation, Regulation M, which may limit the timing of purchases and sales of
any of the notes and the underlying common stock by the selling securityholders
and any other such person. In addition, Regulation M of the Exchange Act may
restrict the ability of any person engaged in the distribution of the notes and
the underlying common stock to engage in market-making activities with respect
to the particular notes and the underlying common stock being distributed for a
period of up to five business days prior to the commencement of such
distribution. This may affect the marketability of the notes and the underlying
common stock and the ability of any person or entity to engage in market-making
activities with respect to the notes and the underlying common stock.
Pursuant to the registration rights agreement filed as an exhibit to this
registration statement, we and the selling securityholders will be indemnified
by the other against certain liabilities, including certain liabilities under
the Securities Act or will be entitled to contribution in connection with these
liabilities.
We have agreed to pay substantially all of the expenses incidental to the
registration, offering and sale of the notes and the underlying common stock to
the public other than commissions, fees and discounts of underwriters, brokers,
dealers and agents.
INDEPENDENT AUDITORS
The consolidated financial statements of ARRIS Group, Inc. appearing in ARRIS
Group, Inc.'s Annual Report (Form 10-K) for the year ended December 31, 2002,
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given on the authority of such firm as experts in
accounting and auditing.
LEGAL MATTERS
The validity of the securities offered by this prospectus will be passed upon
for us by Troutman Sanders LLP, Atlanta, Georgia.
47
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated costs and expenses of ARRIS in
connection with the issuance and distribution of the securities being registered
hereby:
SEC registration fee..................................... $ 10,113
Printing and engraving costs............................. $ 50,000
Accounting fees and expenses............................. $ 50,000
Legal fees and expenses.................................. $ 200,000
Trustee's fees and expenses.............................. $ 10,000
----------
Total.................................................... $ 320,113
All of the above items are estimates except the SEC registration fee. All of
such estimated expenses will be borne by ARRIS.
ITEM 15.
INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law empowers a Delaware
corporation to indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of such corporation) by reason of the fact that such person
is or was a director, officer, employee or agent of such corporation, or is or
was serving at the request of such corporation as a director, officer, employee
or agent of another corporation or enterprise. A corporation may indemnify such
person against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding if such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe such person's conduct was
unlawful. A Delaware corporation may indemnify officers and directors in an
action by or in the right of the corporation to procure a judgment in its favor
under the same conditions, except that no indemnification is permitted without
judicial approval if the officer or director is adjudged to be liable to the
corporation. Where a present or former officer or director is successful on the
merits or otherwise in the defense of any action referred to above, the
corporation must indemnify such person against the expenses (including
attorneys' fees) that such person actually and reasonably incurred in connection
therewith. The indemnification provided is not deemed to be exclusive of any
other rights to which an officer or director may be entitled under any
corporation's by-laws, agreement, vote or otherwise.
II-1
ITEM 16.
EXHIBITS INDEX
Exhibit No. Description
----------- -----------
4.1 Form of Note (included in Exhibit 4.2).
4.2 Indenture dated March 18, 2003, incorporated by reference to
Exhibit 4.3 to ARRIS' Annual Report on Form 10-K for the year
ended December 31, 2002.
5 Opinion of Troutman Sanders LLP.
10.1 Registration Rights Agreement dated March 18, 2003, between
ARRIS and CIBC World Markets, incorporated by reference to
Exhibit 10.5 to ARRIS' Quarterly Report on Form 10-Q for the
quarter ended March 31, 2003.
10.2* Purchase Agreement dated March 12, 2003, between ARRIS and CIBC
World Markets.
12* Computation of Ratio of Earnings to Fixed Charges.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Troutman Sanders LLP (included in Exhibit 5).
24* Powers of Attorney.
25* Statement of Eligibility of Trustee (Form T-1).
* Previously filed.
ITEM 17.
UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by Section 10(a)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the
total dollar value of securities offered would not
exceed that which was registered) and any deviation
from the low or high end of the estimated maximum
offering range may be reflected in the form of
prospectus filed with the SEC pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price
represent no more than 20% change in the maximum
aggregate offering price set forth in the
"Calculation of Registration Fee" table in the
effective registration statement.
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
the registration statement or any material change to
such information in the registration statement;
Provided however, that paragraphs (1)(i) and (1)(ii) do not
apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to Section
13 or Section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of post-effective
amendment any of the securities being registered that remain
unsold at the termination of the offering.
II-2
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in this registration statement shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(5) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
or controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
informed that in the opinion of the Securities and Exchange
Commission this type of indemnification is against public
policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against liabilities arising under the Securities Act of 1933
(other than the payment by the registrant of expenses incurred
or paid by a director, officer, or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by any director, officer or
controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of the submitted issue.
The undersigned registrant hereby further undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of
prospectus filed as part of this registration statement in
reliance under Rule 430A and contained in a form of prospectus
filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act of 1933 shall be deemed to be
part of this registration statement as of the time it was
declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Duluth, State of Georgia, on June 6, 2003.
ARRIS GROUP, INC.
(Registrant)
By: /s/ Lawrence A. Margolis
--------------------------------------
Lawrence A. Margolis, Executive Vice
President and Chief Financial Officer
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
/s/ Robert J. Stanzione* Date: June 6, 2003
--------------------------------------------
Robert J. Stanzione, President,
Chief Executive Officer and Chairman of the
Board (Principal Executive Officer)
/s/ Lawrence A. Margolis Date: June 6, 2003
--------------------------------------------
Lawrence A. Margolis, Executive Vice
President and Chief Financial Officer
(Principal Financial Officer)
/s/ David B. Potts* Date: June 6, 2003
--------------------------------------------
David B. Potts, Senior Vice President of
Finance and Chief Information Officer
(Principal Accounting Officer)
/s/ Alex B. Best* Date: June 6, 2003
--------------------------------------------
Alex B. Best, Director
Date:
--------------------------------------------
Harry L. Bosco, Director
II-4
/s/ John (Ian) Anderson Craig* Date: June 6, 2003
--------------------------------------------
John (Ian) Anderson Craig, Director
/s/ Randy K. Dodd* Date: June 6, 2003
--------------------------------------------
Randy K. Dodd, Director
/s/ Matthew B. Kearney* Date: June 6, 2003
--------------------------------------------
Matthew B. Kearney, Director
/s/ William H. Lambert* Date: June 6, 2003
--------------------------------------------
William H. Lambert, Director
/s/ John R. Petty* Date: June 6, 2003
--------------------------------------------
John R. Petty, Director
/s/ Larry Romrell* Date: June 6, 2003
--------------------------------------------
Larry Romrell, Director
* By: /s/ Lawrence A. Margolis
---------------------------------------
Lawrence A. Margolis, Attorney-in-Fact
II-5
EXHIBITS INDEX
Exhibit No. Description
----------- -----------
4.1 Form of Note (included in Exhibit 4.2).
4.2 Indenture dated March 18, 2003, incorporated by reference to
Exhibit 4.3 to ARRIS' Annual Report on Form 10-K for the year
ended December 31, 2002.
5 Opinion of Troutman Sanders LLP.
10.1 Registration Rights Agreement dated March 18, 2003, between
ARRIS and CIBC World Markets, incorporated by reference to
Exhibit 10.5 to ARRIS' Quarterly Report on Form 10-Q for the
quarter ended March 31, 2003.
10.2* Purchase Agreement dated March 12, 2003, between ARRIS and
CIBC World Markets.
12* Computation of Ratio of Earnings to Fixed Charges.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Troutman Sanders LLP (included in Exhibit 5).
24* Powers of Attorney.
25* Statement of Eligibility of Trustee (Form T-1).
* Previously filed.
II-6