Filed Pursuant to Rule 424(b)(3)
Registration No. 333-107325
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED AUGUST 4, 2003
9,000,000 SHARES
(ARRIS LOGO)
COMMON STOCK
$5.65 PER SHARE
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Nortel Networks Inc. is offering 9,000,000 shares of our common stock. We will
not receive any proceeds from the sale of these shares.
Our shares are listed on the Nasdaq National Market under the symbol "ARRS." On
November 24, 2003, the last reported sale price of our common stock on the
Nasdaq National Market was $6.24 per share.
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 4 OF THE PROSPECTUS THAT ACCOMPANIES THIS PROSPECTUS SUPPLEMENT AND THE
REPORTS INCORPORATED BY REFERENCE IN THE ACCOMPANYING PROSPECTUS.
PER
SHARE TOTAL
----- -----------
Public Offering Price..................................... $5.65 $50,850,000
Underwriting Discount..................................... $0.20 $ 1,800,000
Proceeds to Nortel Networks Inc. (before expenses)........ $5.45 $49,050,000
CIBC World Markets Corp. also may offer the shares in transactions on the Nasdaq
National Market, in the over-the-counter market or through negotiated
transactions at market prices or negotiated prices.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
CIBC WORLD MARKETS
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS NOVEMBER 24, 2003
UNDERWRITING
We, Nortel Networks and CIBC World Markets Corp. have entered into an
underwriting agreement with respect to the shares being offered. Subject to
certain conditions, CIBC World Markets Corp. has agreed to purchase all of the
shares.
CIBC World Markets Corp. is committed to take and pay for all of the shares
being offered, if any are taken.
The shares should be ready for delivery on or about November 28, 2003, against
payment in immediately available funds. CIBC World Markets Corp. is offering the
shares subject to various conditions and may reject all or part of any order.
CIBC World Markets Corp. has advised us and Nortel Networks that they propose to
offer the shares directly to the public at the public offering price that
appears on the cover of this prospectus supplement. In connection with the sale
of the shares of common stock offered hereby, CIBC World Markets Corp. may be
deemed to have received compensation in the form of underwriting discounts. CIBC
World Markets Corp. may effect such transactions by selling shares of the common
stock to or through dealers, and such dealers may receive compensation in the
form of discounts, concessions or commissions from CIBC World Markets Corp. or
purchasers of shares of common stock for whom they may act as agents or to whom
they may sell as principal. After the shares are released for sale to the
public, CIBC World Markets Corp. may change the offering price and other selling
terms at various times.
We have agreed with CIBC World Markets Corp. not to offer, sell, contract to
sell, pledge, or otherwise transfer or dispose of, directly or indirectly, any
of our common stock or securities that are convertible into or exercisable or
exchangeable for our common stock and not to enter into any swap or other
agreement that transfers any of the economic consequences of ownership of our
common stock during the period from the date of this prospectus supplement
continuing through the date 60 days after the date of this prospectus
supplement, except with the prior written consent of CIBC World Markets Corp.
This agreement does not apply to shares of our common stock:
- issued upon the exercise of options granted under our existing employee
benefit plans or pursuant to our option exchange offer;
- issued pursuant to any of our existing employee benefit plans;
- issued in exchange for our 4.5% convertible subordinated notes in
transactions pursuant to sec.3(a)(9) of the Securities Act of 1933 or upon
conversion of such notes;
- offered for sale by selling stockholders pursuant to that registration
statement filed with the Commission (File No. 333-82404), as amended,
relating to shares of our common stock issued pursuant to the terms of the
Asset Purchase Agreement dated as of December 8, 2001, as amended, between
Cadant, Inc. and us (or Rule 144 sales by such selling stockholders as an
alternative thereto);
- offered for sale by selling stockholders pursuant to that registration
rights agreement, dated as of October 29, 1996, between ANTEC Corporation
(whose obligations under such agreement were assumed by us) and TCI TSX Inc.
(now Liberty ANTC, Inc.);
- issued upon the exercise of any options granted to employees of Com21 in
connection with our acquisition of certain assets of Com21;
- issued to employees of Atoga Systems in connection with our acquisition of
certain assets of Atoga Systems; or
- that may be offered or otherwise transferred or disposed of by us as allowed
in the pricing agreement.
This agreement also does not apply to any options issued under our existing
employee benefit plans.
Nortel Networks has agreed with CIBC World Markets Corp. (a) not to offer, sell,
contract to sell, pledge, or otherwise transfer or dispose of, directly or
indirectly, any of our common stock or securities
S-1
that are convertible into or exercisable or exchangeable for, our common stock,
(b) not to enter into any swap or other agreement that transfers any of the
economic consequences of ownership of our common stock and (c) not to make any
demand for the registration of our common stock or any security convertible into
or exercisable or exchangeable for our common stock, during the period from the
date of this prospectus supplement continuing through the date 60 days after the
date of this prospectus supplement, except with the prior written consent of
CIBC World Markets Corp or under certain other limited circumstances.
We and Nortel Networks have agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
In connection with the offering, CIBC World Markets Corp. may purchase and sell
shares of our common stock in the open market. These transactions may include
short sales and purchases to cover positions created by short sales. Short sales
would involve the sale by CIBC World Markets Corp. of a greater number of shares
than it is required to purchase in the offering. CIBC World Markets Corp. must
close out any short position by purchasing shares in the open market. A short
position is more likely to be created if CIBC World Markets Corp. is concerned
that there may be downward pressure on the price of the common stock in the open
market after pricing that could adversely affect investors who purchase in the
offering.
Purchases to cover a short position may have the effect of preventing or
retarding a decline in the market price of our common stock and may stabilize,
maintain or otherwise affect the market price of the common stock. As a result,
the price of the common stock may be higher than the price that otherwise might
exist in the open market. Neither we nor CIBC World Markets Corp. makes any
representation or prediction as to the effect that the transactions described
above may have on the price of the shares. These transactions may occur on the
Nasdaq National Market or otherwise. If such transactions are commenced, they
may be discontinued without notice at any time.
CIBC World Markets Corp. or its affiliates have provided, and may in the future
provide, various investment banking and other advisory services to us and Nortel
Networks, for which they have received, and may in the future receive, customary
compensation.
LEGAL MATTERS
Certain legal matters in connection with the offering to which this prospectus
supplement and the accompanying prospectus relate will be passed upon for ARRIS
by Troutman Sanders LLP, Atlanta, Georgia. Certain legal matters in connection
with the offering will be passed upon for the underwriter by Cahill Gordon &
Reindel LLP, New York, New York.
S-2
14,000,000 SHARES
(ARRIS LOGO)
COMMON STOCK
--------------------------------------------------------------------------------
By this prospectus, Nortel Networks Inc. may offer and sell, from time to time,
up to 14,000,000 shares of common stock offered by it under this prospectus. For
additional information on the methods of sale, you should refer to the section
of this prospectus entitled "Plan of Distribution." The shares of common stock
registered under this prospectus may be sold by Nortel Networks directly to
purchasers or through agents, underwriters, or dealers on any stock exchange,
market or trading facility on which the shares are traded or in private
transactions. These sales may be at fixed or negotiated prices which will be
determined at the time of sale. If required, the name of any agents,
underwriters or dealers and any other required information will be set forth in
a supplement to this prospectus. We will bear the expenses and fees incurred in
registering the shares offered by this prospectus. Nortel Networks will pay any
brokerage commissions or discounts attributable to the sale of its shares. We
will not receive any of the proceeds from the sale of common stock by Nortel
Networks.
Shares of our common stock are listed on the Nasdaq National Market under the
symbol "ARRS."
INVESTING IN OUR COMMON STOCK INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON
PAGE 4.
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 AUGUST 4, 2003.
TABLE OF CONTENTS
PAGE
----
About this Prospectus....................................... 1
Documents Incorporated by Reference......................... 1
Where You Can Find More Information......................... 2
About ARRIS................................................. 2
Risk Factors................................................ 4
Cautionary Statements Concerning Forward-Looking
Statements................................................ 9
Use of Proceeds............................................. 9
Description of Capital Stock................................ 9
Selling Stockholder......................................... 13
Certain Transactions between Nortel Networks and ARRIS...... 14
Plan of Distribution........................................ 16
Experts..................................................... 18
Legal Matters............................................... 18
------------------------------------
As used in this prospectus, the terms "ARRIS," "we," "our" and "us" each refer
to ARRIS Group, Inc. and its consolidated subsidiaries, as appropriate in the
context.
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission utilizing a "shelf" registration process.
Under this process, Nortel Networks, over the next two years, may sell up to
14,000,000 shares of our common stock in one or more offerings. This prospectus
provides you with a general description of the common stock Nortel Networks may
offer. The stockholder of record in this offering is Nortel Networks Inc., a
wholly-owned subsidiary of Nortel Networks Limited, which is in turn a
wholly-owned subsidiary of Nortel Networks Corporation. Nortel Networks
Corporation exercises sole voting and investment power with respect to the
shares being offered hereby by Nortel Networks Inc. For convenience, this
prospectus uses "Nortel Networks" to refer to both Nortel Networks Corporation
and Nortel Networks Inc. and specifies the specific entity only where material.
Each time Nortel Networks sells common stock under this prospectus, it will
provide, to the extent required by law, a prospectus supplement that will
contain specific information about the terms of the offering. The prospectus
supplement may also add, update or change information contained in this
prospectus. You should read both the prospectus and any prospectus supplement
together with additional information described below under the heading "Where
You Can Find More Information."
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 Reports on Form 8-K, dated January 9, February 12, March 10,
March 11, March 13, March 18, March 27, June 12 and July 23, 2003,
respectively;
1
(d) 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");
(e) The description of our common stock contained in our Registration
Statement on Form 8-A filed on August 3, 2001, as amended by our Registration
Statement on Form 8-A/A filed on August 7, 2001, including any amendments or
reports filed for the purpose of updating such descriptions; and
(f) The description of our preferred stock purchase rights contained in our
Registration Statement on Form 8-A/A filed on October 3, 2002, including any
amendments or reports filed for the purpose of updating such description.
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 website 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 website. 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.
This prospectus is part of the registration statement and does not contain all
of the information in the registration statement. Whenever reference is made in
this prospectus to any contract or other document of ours, you should refer to
the exhibits that are part of the registration statement for a copy of the
referenced contract or document.
---------------------
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, and
the selling stockholder is not permitted to make, 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.
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
2
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. The information on our website is not incorporated by
reference in this prospectus.
3
RISK FACTORS
An investment 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 in our common stock. 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 common
stock could decline, and you could lose part or all of your investment.
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 June 2002. Even if the financial health of that
company and other customers improves, 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, Adelphia's bankruptcy filing 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 July 1, 2003, Cabovisao owed us approximately 18.6 million
euros, substantially all of which was past due. Cabovisao had committed to a
schedule of 2003 payments to us for our products and services but failed to make
the February through June payments by their due dates. On June 13, 2003,
Cabovisao's parent, Csii, filed for court-supervised restructuring and
recapitalization. While Csii has announced that its bankers have provided
waivers pertaining to the maturity of Cabovisao's credit facility until October
31, 2003, and that it expects to implement a restructuring plan providing for an
infusion of new equity, we cannot assure
4
you that Cabovisao's account with us will be ultimately collected. We currently
are discussing with Cabovisao a payment plan that, if agreed to, would provide
it with a discount on its obligations to us in exchange for a near-term partial
payment of its account and future payments. We have increased our reserves for
doubtful accounts as of June 30, 2003 to reflect our estimate of the amount that
we are likely to receive. We will not deliver further products to Cabovisao
until we have a satisfactory payment plan with Cabovisao, and we cannot assure
you 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.
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
5
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
July 13, 2003, we had no borrowings outstanding under the credit facility (other
than approximately $8.6 million in letters of credit), and our borrowing base
was $37.8 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 July 24, 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 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.
6
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;
- 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.
7
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
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,
the Philippines and other foreign countries. 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.
8
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.
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.
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 or documents
incorporated by reference into 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, (1) all of the factors affecting
our business may not have been correctly identified and assessed; (2) the
publicly available and other information, upon which the analysis contained in
this document is based, may not be complete or correct; (3) the analysis may not
be correct; or (4) the strategies, which are based in part on this analysis, may
not be successful.
USE OF PROCEEDS
Nortel Networks will receive all of the proceeds from the sale of common stock
offered by this prospectus. We will not receive any of the proceeds from the
sale of the shares of common stock by Nortel Networks but have agreed to bear
certain expenses associated with registering the shares under federal and state
securities laws.
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
9
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 certificate of incorporation and 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 shares of our common stock to be offered hereby by the selling stockholder
are 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 $1.00 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:
- 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
- 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.
10
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, (1) 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 (2) 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 should not interfere with any merger or other
business combination approved by our board of directors.
11
CERTAIN CHARTER AND BY-LAW PROVISIONS
Pursuant to the provisions of the Delaware General Corporation Law, or DGCL, we
have adopted provisions in our certificate of incorporation and by-laws which
require us to indemnify our officers and directors to the fullest extent
permitted by law, and which eliminate the personal liability of our directors to
us or our stockholders for monetary damages for breach of their duty of due care
except
- for any breach of the duty of loyalty;
- for acts or omissions not in good faith or which involve intentional
misconduct or knowing violations of laws;
- for liability under Section 174 of the DGCL (relating to certain unlawful
dividends, stock repurchases or stock redemptions); or
- for any transaction from which the director derived any improper personal
benefit.
These provisions do not eliminate 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 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:
- the corporation has elected in its certificate of incorporation not to be
governed by Section 203 (we have not made such election);
- 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;
- 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
- 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.
12
COMMON STOCK MARKET DATA AND DIVIDENDS
On August 6, 2001, our common stock began trading on the Nasdaq National Market
under the symbol "ARRS." Prior to the ARRIS reorganization on August 3, 2001,
our common stock traded on the Nasdaq National Market under the symbol "ANTC."
The following table reports the high and low trading prices per share of our
common stock as reported by the Nasdaq National Market for each of the quarters
since January 1, 2001.
HIGH LOW
------ -----
2001
First Quarter............................................... $14.38 $6.63
Second Quarter.............................................. $15.76 $5.25
Third Quarter............................................... $13.59 $2.68
Fourth Quarter.............................................. $11.65 $3.18
2002
First Quarter............................................... $10.70 $7.71
Second Quarter.............................................. $ 9.90 $3.13
Third Quarter............................................... $ 5.10 $3.04
Fourth Quarter.............................................. $ 4.09 $1.50
2003
First Quarter............................................... $ 5.73 $3.23
Second Quarter.............................................. $ 6.70 $3.63
Third Quarter (through July 24, 2003)....................... $ 5.35 $4.16
On July 24, 2003, the last reported sales price for our common stock as reported
by the Nasdaq National Market was $5.06 per share. As of July 24, 2003, there
were approximately 302 record holders of our common stock.
We have not paid cash dividends on our common stock since our inception. Our
credit agreement contains covenants that prohibit us from paying such dividends.
On October 3, 2002, to implement our shareholder rights plan, our board of
directors declared a dividend consisting of one right for each share of our
common stock outstanding at the close of business on October 25, 2002. Each
right represents the right to purchase one one-thousandth of a share of our
Series A Participating Preferred Stock and becomes exercisable only if a person
or group acquires beneficial ownership of 15% or more of our common stock or
announces a tender or exchange offer for 15% or more of our common stock or
under other similar circumstances.
SELLING STOCKHOLDER
The following table sets forth certain information regarding the beneficial
ownership, as of July 24, 2003, of shares of our common stock by Nortel Networks
and the beneficial ownership of common stock as adjusted to reflect the sale of
the common stock by Nortel Networks as if the sale of all of the shares had
occurred as of July 24, 2003. Except as otherwise indicated, to our knowledge,
Nortel Networks Corporation has sole voting and investment power with respect to
the securities held of record by Nortel Networks Inc. The amounts set forth
below are based upon information provided to us by Nortel Networks, or on our
records, and are accurate to the best of our knowledge. It is possible, however,
that Nortel Networks may acquire or dispose of additional shares of our common
stock from time to time after the date of this prospectus and any changes of
which we are advised will be set forth in a prospectus supplement to the extent
so required. See "Plan of Distribution." The common stock offered by this
prospectus may be offered from time to time by Nortel Networks, or any of its
pledgees, assignees, donees,
13
distributees, transferees or other successors in interest to any or all of the
shares of ARRIS common stock held by it.
NO. OF SHARES PERCENTAGE OF
OWNED COMMON STOCK
RELATIONSHIP WITH PRIOR TO NO. OF SHARES TO BE OWNED AFTER
NAME ARRIS TRANSACTION OFFERED FOR RESALE SALE
---- ----------------- ------------- ------------------- -------------
Nortel Networks Inc. See below 14,000,000 14,000,000 0%
CERTAIN TRANSACTIONS BETWEEN NORTEL NETWORKS AND ARRIS
ARRIS INTERACTIVE L.L.C. OPERATING AGREEMENT
On August 3, 2001, we acquired Nortel Networks' portion of Arris Interactive
L.L.C., which was a joint venture formed by Nortel Networks LLC, the
predecessor-in-interest of Nortel Networks Inc., and us in 1995. As part of this
transaction, Nortel Networks LLC exchanged its remaining ownership interest in
Arris Interactive for 37 million shares of ARRIS common stock and a Class B
membership interest in Arris Interactive with a face amount of $100 million. The
Class B membership interest earned a return of 10% per annum, compounded
annually. In June 2002, we entered into an option agreement with Nortel Networks
that permitted us to redeem the Class B membership interest in Arris Interactive
at a discount of 21% prior to June 30, 2003. To further induce us to redeem the
Class B membership interest, Nortel Networks offered to forgive an additional
$5.9 million of the amount owed Nortel Networks if we redeemed the Class B
membership interest prior to March 31, 2003. We used approximately $88.4 million
of the proceeds of our March 2003 offering of our 4 1/2% convertible
subordinated notes due 2008 to redeem the entire Class B membership interest.
OPTION SIDE-LETTER
In March 2003 Nortel Networks granted us an option to purchase up to 16 million
shares of ARRIS common stock from Nortel Networks at a discount to the
prevailing market price at the time of purchase, subject to various conditions.
On March 24, 2003, in accordance with the terms of this option agreement, we
purchased 8 million shares for an aggregate purchase price of $28.0 million.
Pursuant to the terms of the option agreement, there was also a reduction in the
forgiveness of the earnings on the Class B membership interest in Arris
Interactive L.L.C. The option expired on June 30, 2003.
REGISTRATION RIGHTS AGREEMENT
In connection with our acquisition of Nortel Networks' interest in Arris
Interactive, we and Nortel Networks entered into a registration rights
agreement. Under this agreement, we granted Nortel Networks registration rights
for the common stock issued to Nortel Networks in connection with the
acquisition of Arris Interactive. Nortel Networks has the right to require us to
initiate a public offering for any shares requested to be sold by Nortel
Networks, provided that, with the exception of the 6 million shares covered by
our March 11, 2003 letter of amendment with Nortel Networks, the number of
shares requested to be sold by Nortel Networks is equal to at least 5% of our
then outstanding shares of common stock and Nortel Networks may exercise its
rights to request a registration once during any 90-day period.
Additionally, Nortel Networks has the right to participate in and sell shares of
stock held by it during any public offering of our stock, whether offered by us
or any other stockholder. We have agreed to pay for Nortel Networks' expenses
relating to its participation in a public offering, whether or not the offering
is initiated by Nortel Networks. We may not grant registration rights to other
stockholders superior to those granted to Nortel Networks without also offering
such superior registration rights to Nortel Networks.
14
INVESTOR RIGHTS AGREEMENT
In connection with our acquisition of Nortel Networks' interest in Arris
Interactive, we and Nortel Networks also entered into an investor rights
agreement governing certain aspects of the relationship between Nortel Networks
and us. We and Nortel Networks originally entered into the investor rights
agreement on October 18, 2000. The agreement was subsequently amended on April
9, 2001, August 3, 2001 and June 7, 2002.
The investor rights agreement contains, among other things, rights relating to
and limitations on transactions of our common stock by Nortel Networks. Nortel
Networks has agreed that it generally will not acquire additional shares of our
common stock, make any proposals seeking a business combination involving us,
except as provided in the investor rights agreement, or make any similar
arrangements regarding our voting securities, engage in a proxy contest or
solicitation, call a meeting of stockholders or seek stockholder approval of any
action or participate in a group with other holders of our voting securities.
However, Nortel Networks may participate in discussions or negotiations
regarding the acquisition of ARRIS by an unaffiliated third party. The
third-party offer must be for at least 90% of the outstanding shares of our
common stock held by stockholders other than Nortel Networks, its affiliates or
the third party. In addition, at least a majority of the shares of our common
stock held by these stockholders must be tendered in the third-party offer. The
per share consideration offered to Nortel Networks and its affiliates in the
third-party offer may be below the consideration offered to stockholders
unaffiliated with Nortel Networks or the third party.
In addition, the investor rights agreement places limitations on Nortel
Networks' ability to sell or transfer any shares of common stock, except a
transfer to an affiliate of Nortel Networks. Generally, Nortel Networks may sell
or transfer shares of common stock only in the following transactions:
- in a bona fide public offering effected in accordance with the registration
rights agreement;
- in a bona fide open market transaction as permitted by the provisions of
Rule 144 under the Securities Act of 1933; or
- in a privately-negotiated transaction.
The investor rights agreement may be terminated by either ARRIS or Nortel
Networks if:
- a transaction as a result of a third-party offer is consummated;
- the parties mutually agree in writing; or
- at any time after Nortel Networks and its affiliates cease to own shares
representing at least 10% of the total voting power of ARRIS.
Following the Arris Interactive acquisition in 2001 and in accordance with the
investor rights agreement, Nortel Networks designated two new members of our
board of directors. Because Nortel Networks' ownership of shares of ARRIS common
stock has fallen below 20% of our outstanding common stock (but it is greater
than 10% of our outstanding common stock), Nortel Networks currently is entitled
to designate only one member of our board of directors. If Nortel Networks and
its affiliates cease to own shares representing at least 10% of our outstanding
common stock, then it is not entitled to any nominees on the board and it will
cause the resignation of its nominee then serving on the board. Nortel Networks
has agreed to vote its shares of our common stock for the election of the slate
of nominees proposed by us for election to our board of directors so long as
Nortel Networks' nominee is included in such slate. Nortel Networks is otherwise
free to vote such shares as it elects.
In addition to the agreements and transactions described in this section, we and
Nortel Networks are parties to other agreements which are described in the Proxy
Statement for our Annual Meeting of Stockholders, which was held on May 22,
2003, under the caption "Certain Relationships and Related Transactions,"
including but not limited to a transitional services agreement, a loaned
employee agreement, a component supply agreement, a development agreement, sales
representation agreements (the last of which terminated in December 2002) and a
lease agreement.
15
PLAN OF DISTRIBUTION
Nortel Networks, or its pledgees, assignees, donees, distributees, transferees,
or any other successors in interest to any or all of the shares of our common
stock held by Nortel Networks, has advised us that it may sell the shares from
time to time on any stock exchange or automated interdealer quotation system on
which the shares are listed, in the over-the-counter market, in privately
negotiated transactions or otherwise, at fixed prices that may be changed, at
market prices prevailing at the time of sale, at prices related to prevailing
market prices or at prices otherwise negotiated. Subject to the limitations set
forth in the investor rights agreement between us and Nortel Networks, Nortel
Networks may sell the shares by one or more of the following methods, without
limitation:
- block trades in which the broker or dealer so engaged will attempt to sell
the shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
- purchases by a broker or dealer as principal and resale by the broker or
dealer for its own account pursuant to this prospectus;
- an exchange distribution in accordance with the rules of any stock exchange
on which the shares are listed;
- ordinary brokerage transactions and transactions in which the broker
solicits purchases;
- privately negotiated transactions;
- short sales;
- through the writing of options on the shares, whether or not the options are
listed on an options exchange;
- through the distribution of the shares by Nortel Networks to its partners,
members, stockholders or creditors;
- one or more underwritten offerings on a firm commitment or best efforts
basis; and
- any combination of any of these methods of sale.
In addition, any shares that qualify for sale pursuant to Rule 144 under the
Securities Act of 1933 may be sold under Rule 144 rather than pursuant to this
prospectus.
Nortel Networks may engage brokers and dealers, and any brokers or dealers may
arrange for other brokers or dealers to participate in effecting sales of the
shares. These brokers, dealers or underwriters may act as principals or as
agents of Nortel Networks. Broker-dealers may agree to sell a specified number
of the shares at a stipulated price per share. If the broker-dealer is unable to
sell shares acting as agent for Nortel Networks, it may purchase as principal
any unsold shares at the stipulated price. Broker-dealers who acquire shares as
principals may thereafter resell the shares from time to time in transactions in
any stock exchange or automated interdealer quotation system on which the shares
are then listed, at prices and on terms then prevailing at the time of sale, at
prices related to the then-current market price or in negotiated transactions.
Broker-dealers may use block transactions and sales to and through
broker-dealers, including transactions of the nature described above.
Subject to the limitations set forth in the investor rights agreement, Nortel
Networks may pledge, hypothecate or grant a security interest in some or all of
its shares. The pledgees, secured parties or persons to whom the shares have
been hypothecated will, upon foreclosure in the event of default, be deemed to
be a selling stockholder. In addition, subject to the limitations set forth in
the investor rights agreement, Nortel Networks may, from time to time, sell the
shares short, and, in those instances, this prospectus may be delivered in
connection with the short sales and the shares offered under this prospectus may
be used to cover short sales.
To the extent required under the Securities Act, the aggregate amount of Nortel
Networks' shares being offered and the terms of the offering, the names of any
agents, brokers, dealers or underwriters and any
16
applicable commission with respect to a particular offer will be set forth in an
accompanying prospectus supplement. Any underwriters, dealers, brokers or agents
participating in the distribution of the shares may receive compensation in the
form of underwriting discounts, concessions, commissions or fees from Nortel
Networks and/or purchasers of Nortel Networks' shares, for whom they may act
(which compensation as to a particular broker-dealer might be in excess of
customary commissions).
Nortel Networks and any underwriters, brokers, dealers or agents that
participate in the distribution of the shares may be deemed to be "underwriters"
within the meaning of the Securities Act, and any discounts, concessions,
commissions or fees received by them and any profit on the resale of the shares
sold by them may be deemed to be underwriting discounts and commissions.
Subject to the limitations set forth in the investor rights agreement, Nortel
Networks may enter into hedging transactions with broker-dealers and the
broker-dealers may engage in short sales of the shares in the course of hedging
the positions they assume with them, including, without limitation, in
connection with distributions of the shares by those broker-dealers. Nortel
Networks may enter into options or other transactions with broker-dealers that
involve the delivery of the shares offered hereby to the broker-dealers, who may
then resell or otherwise transfer those shares pursuant to this prospectus.
Nortel Networks may also loan or pledge the shares offered hereby to a
broker-dealer and the broker-dealer may sell the shares offered hereby so loaned
or upon a default may sell or otherwise transfer the pledged shares offered
hereby pursuant to this prospectus.
Nortel Networks and other persons participating in the sale or distribution of
the shares will be subject to applicable provisions of the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder, including
Regulation M. This regulation may limit the timing of purchases and sales of any
of the shares by Nortel Networks and any other person. The anti-manipulation
rules under the Exchange Act may apply to sales of shares in the market and to
the activities of Nortel Networks and its affiliates. Furthermore, Regulation M
may restrict the ability of any person engaged in the distribution of the shares
to engage in market-making activities with respect to the particular shares
being distributed for a period of up to five business days before the
distribution. These restrictions may affect the marketability of the shares and
the ability of any person or entity to engage in market-making activities with
respect to the shares.
We agreed to register the shares under the Securities Act, and, with certain
exceptions, to keep the registration statement, of which this prospectus is a
part, effective and usable until no later than two years following the date of
initial effectiveness of such registration statement, which effectiveness shall
terminate upon the occurrence of certain agreed upon events. We have agreed to
pay all expenses in connection with the preparation and filing of the
registration statement, excluding underwriting discounts, concessions,
commissions or fees and expenses of Nortel Networks, such as fees and expenses
of counsel of Nortel Networks.
We will not receive any proceeds from sales of any shares by Nortel Networks.
We cannot assure you that Nortel Networks will sell all or any portion of the
shares offered hereby.
17
EXPERTS
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.
18
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9,000,000 SHARES
(ARRIS LOGO)
COMMON STOCK
-----------------------------------
PROSPECTUS SUPPLEMENT
November 24, 2003
-----------------------------------
CIBC WORLD MARKETS
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS NOVEMBER 24, 2003
--------------------------------------------------------------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT
AND THE ACCOMPANYING PROSPECTUS. NO DEALER, SALESPERSON OR OTHER PERSON IS
AUTHORIZED TO GIVE INFORMATION THAT IS NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS IS NOT AN OFFER TO SELL NOR IS IT SEEKING AN OFFER TO
BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS IS CORRECT ONLY AS OF THE DATE OF THIS PROSPECTUS
SUPPLEMENT, REGARDLESS OF THE TIME OF THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT
AND THE ACCOMPANYING PROSPECTUS OR ANY SALE OF THESE SECURITIES.