AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 30, 1998
REGISTRATION NO. 333-
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
---------------
ASPECT TELECOMMUNICATIONS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CALIFORNIA 94-2974062
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
1730 FOX DRIVE
SAN JOSE, CALIFORNIA 95131-2312
(408) 325-2200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
JAMES R. CARREKER
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
ASPECT TELECOMMUNICATIONS CORPORATION
1730 FOX DRIVE
SAN JOSE, CALIFORNIA 95131-2312
(408) 325-2200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
JON E. GAVENMAN
BROOKE CAMPBELL
VENTURE LAW GROUP
A PROFESSIONAL CORPORATION
2800 SAND HILL ROAD
MENLO PARK, CALIFORNIA 94025
(650) 854-4488
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
FROM TIME TO TIME AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an Offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same Offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same Offering. [_]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
=================================================================================================
PROPOSED PROPOSED
TITLE OF EACH CLASS AMOUNT MAXIMUM MAXIMUM AMOUNT OF
OF SECURITIES TO BE TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE
- -------------------------------------------------------------------------------------------------
Zero Coupon Convertible
Subordinated
Debentures due 2018... $490,000,000 100% $490,000,000 $136,220
Common Stock, $.01 par
value(2).............. 4,269,370 shares(2) -- -- --
=================================================================================================
(1) Estimated solely for the purpose of calculating the registration fee. This
fee is calculated on the basis of the proposed offering price of the
Debentures alone, unless the Company will receive additional consideration
when holders of the Debentures exercise their option to convert. In this
case, the maximum amount which may be received shall be added to the to
the proposed offering price of the Debentures.
(2) This number represents the number of shares of Common Stock that are
initially issuable upon conversion of the Zero Coupon Convertible
Subordinated Debentures due 2018 registered under this Registration
Statement. In addition, pursuant to Rule 416 under the Securities Act of
1933, as amended, and as a result of the Debentures' antidilution
provisions, this number also represents the indeterminate number of shares
of Common Stock that may be issued from time to time when the Debentures
are converted. Pursuant to rule 457(i) no registration fee is required for
these shares.
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.
===============================================================================
PROSPECTUS
$490,000,000
ASPECT TELECOMMUNICATIONS CORPORATION
ZERO COUPON CONVERTIBLE SUBORDINATED DEBENTURES DUE 2018 AND SHARES OF COMMON
STOCK ISSUABLE UPON CONVERSION OF THE DEBENTURES
THE DEBENTURES
. Aggregate principal amount at maturity: $490,000,000
. Yield to maturity: 6.0% per year
. Conversion rate: 8.713 shares of Aspect Common Stock per $1,000 principal
amount at maturity of Debentures
. Date of maturity: August 10, 2018
THE DEBENTURES AND COMMON
STOCK OFFERED IN THIS
PROSPECTUS INVOLVE A HIGH
DEGREE OF RISK. CONSIDER
CAREFULLY THE RISK FACTORS
BEGINNING ON PAGE 8.
CONVERSION
. Debenture holders can convert the Debentures into Aspect Common Stock any
time prior to maturity.
. If the Debentures have been redeemed or repurchased the holder can no longer
exercise the option to convert.
SUBORDINATION
. The Debentures are not secured by any of Aspect's assets.
. The Debentures are subordinate in right of payment to all of Aspect's Senior
Indebtedness and effectively subordinate to the debt of Aspect's
subsidiaries.
. The Debentures do not restrict the Company from incurring additional debt.
REDEMPTION
. Aspect can redeem the Debentures at any time on or after August 10, 2003.
. Holders can require Aspect to repurchase the Debentures on August 10, 2003,
August 10, 2008 and August 10, 2013 for cash or, at Aspect's election, for
Aspect Common Stock, if certain conditions are met.
. Holders can require Aspect to redeem the Debentures for cash in the event of
a Fundamental Change.
. You can find the table which lists the redemption prices on page 27 and the
repurchase prices on page 30.
SALE OF SECURITIES
. The Debentures and shares of Common Stock issuable upon conversion (the
"Conversion Shares") may be sold either directly or through broker dealers.
. Aspect will not receive any proceeds from the sale of either the Debentures
or the Conversion Shares.
. The selling holders will pay for underwriting discounts and selling
commission related to the sale of the Debentures or the Conversion Shares.
Aspect will pay for all other expenses related to such sales. Broker dealers
may receive compensation for these sales.
The Debentures are currently designated for trading on the Portal MarketSM.
Once resold pursuant to this Prospectus the Debentures will not remain eligible
for trading on the Portal Market. Aspect Common Stock is traded on the Nasdaq
National Market under the symbol "ASPT."
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY CONTRARY
REPRESENTATION IS A CRIMINAL OFFENSE.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
, 1998
TABLE OF CONTENTS
PAGE
----
Information Available to You............................................... 2
The Company................................................................ 4
Summary.................................................................... 5
Risk Factors............................................................... 8
Use of Proceeds............................................................ 15
Ratio of Earnings to Fixed Charges......................................... 15
Selling Securityholders.................................................... 16
Description of Debentures.................................................. 17
Certain United States Federal Income Tax Considerations.................... 37
Plan of Distribution....................................................... 43
Legal Matters.............................................................. 44
Experts.................................................................... 44
INFORMATION AVAILABLE TO YOU
Aspect Telecommunications Corporation ("Aspect", the "Company", "We" or "Us")
files annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission ("SEC"). You can
inspect and copy the Registration Statement on Form S-3 of which this
Prospectus is a part, as well as reports, proxy statements and other
information filed by Aspect, at the public reference facilities maintained by
the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the following regional offices of the SEC: 7 World Trade Center, Suite 1300,
New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. You can obtain copies of such material from the
Public Reference Room of the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. You can call the SEC at 1-800-732-0330 for
information regarding the operation of its Public Reference Room. The SEC also
maintains a World Wide Web site at http:\\www.sec.gov that contains reports,
proxy and information statements, and other information regarding registrants
(like Aspect) that file electronically.
This Prospectus provides you with a general description of the Debentures and
Common Stock being registered. This Prospectus is part of a Registration
Statement that we have filed with the SEC. To see more detail, you should read
the exhibits and schedules filed with our Registration Statement.
The SEC allows this Prospectus to "incorporate by reference" certain other
information that Aspect files with them, which means that we can disclose
important information to you by referring to those documents. The information
incorporated by reference is an important part of this Prospectus, and
information that Aspect files later with the SEC will automatically update and
replace this information. We incorporate by reference the documents listed
below and any future filings made by Aspect with the SEC under Sections 13(a),
13(c), 14 or 15(d) of the Securities and Exchange Act of 1934 until we have
sold all of the securities that we have registered.
(1)Our Annual Report on Form 10-K for the year ended December 31, 1997;
(2)Our Quarterly Reports on Form 10-Q for the quarters ended March 31, 1998
and June 30, 1998;
2
(3)Our Current Reports on Form 8-K filed on May 22, 1998, July 24, 1998,
and August 5, 1998; and
(4)The description of our capital stock contained in the Registration
Statement on Form 8-A which was filed with the Commission on March 22,
1990.
If you make a request for such information in writing or by telephone, we
will provide to you, at no cost, a copy of any or all of the information
incorporated by reference in the Registration Statement of which this
Prospectus is a part. Requests should be addressed to: Aspect
Telecommunications Corporation, 1730 Fox Drive, San Jose, California 95131-
2312, Attention: Investor Relations (telephone number (408) 325-2200).
3
THE COMPANY
Aspect is a leading worldwide provider of mission-critical, integrated call
center solutions. Our solutions include automatic call distribution (ACD)
systems and software; computer-telephony integration (CTI) application software
and tools; interactive voice response (IVR) systems; Web response systems; call
center management information and reporting tools; and call center planning and
forecasting packages. We also deliver consulting, training, and system
integration services that help organizations effectively plan, integrate,
staff, and manage call centers. We market our products and services worldwide
to organizations in a broad array of industries including financial services,
government, healthcare, retailing, technology, telecommunications, and
transportation.
We are incorporated in the State of California. Our principal executive offices
are located at 1730 Fox Drive, San Jose, California 95131 and our telephone
number is (408) 325-2200.
4
SUMMARY
The Debentures...................... .$490,000,000 principal amount at
maturity of Zero Coupon Convertible
Subordinated Debentures due 2018 (the
"Debentures").
.The Company will not make periodic
interest payments on the Debentures.
See "Description of Debentures--
General."
Yield to Maturity of Debentures..... .6.00% per year (computed on a semi-
annual bond equivalent basis)
calculated from August 10, 1998.
Conversion.......................... .The holder has the option to convert the
Debentures into Aspect Common Stock,
par value $.01 per share (the "Common
Stock") at any time after November 8,
1998.
.The Debentures are convertible into
Common Stock at a conversion rate of
8.713 shares per $1,000 principal
amount at maturity of Debentures. The
conversion rate will be subject to
adjustment if certain events occur. See
"Description of Debentures--Conversion
of Debentures."
.You must exercise this option before the
Debentures reach maturity.
.If the Debentures have been redeemed by
the Company, the holder can no longer
exercise this option to convert.
Subordination....................... .The Debentures will be subordinated in
right of payment to all existing and
future Senior Indebtedness.
.The Debentures will also be effectively
subordinated in right of payment to all
indebtedness and other liabilities of
the Company's subsidiaries.
.At June 30, 1998 the Company had
approximately $54.3 million of Senior
Indebtedness outstanding, of which
approximately $41.7 million related to
foreign exchange contracts.
5
.At June 30, 1998 the Company's
subsidiaries had approximately $36.3
million of indebtedness and other
liabilities, including trade and other
payables outstanding, but excluding
intercompany liabilities and
liabilities that are not required to be
reflected on a balance sheet by
generally accepted accounting
principals. See "Description of
Debentures--Subordination of
Debentures."
Original Issue Discount............. .The Debentures are being offered at
original issue discount for Federal
income tax purposes equal to the excess
of the principal amount at maturity of
the Debentures over the amount of their
issue price.
.Although Aspect will not make periodic
payments of interest on the Debentures,
holders should be aware that accrued
original issue discount will be
included periodically in the holder's
gross income for Federal income tax
purposes prior to conversion,
redemption, other disposition or
maturity of the Debentures, whether or
not such Debentures are ultimately
converted, redeemed, sold (to the
Company or otherwise) or paid at
maturity. See "Certain Federal Income
Tax Considerations."
Sinking Fund........................ .None
Redemption at the Option of the
Company............................. .The Company cannot redeem the Debentures
prior to August 10, 2003.
.After August 10, 2003, the Company has
the option to redeem all or part of the
Debentures for cash at any time.
.Redemption prices are equal to the issue
price plus accrued original issue
discount to the date of redemption. You
can find a table on page 27 that lists
the redemption prices. See "Description
of Debentures--Redemption of Debentures
at the Option of the Company."
Fundamental Change.................. .The holder may redeem the Debentures if
there is a Fundamental Change (as
defined) in the Company.
6
.The Fundamental Change redemption price
is equal to the issue price plus
accrued original issue discount to the
date of redemption, subject to
adjustment in certain circumstances.
You can find a table on page 27 that
lists the redemption prices. See
"Description of Debentures--Redemption
at the Option of the Holder Upon a
Fundamental Change."
Purchase at the Option of the .The Company will purchase the Debentures
Holder.............................. at the option of the holder on August
10, 2003, August 10, 2008 and August
10, 2013 for a purchase price equal to
the issue price plus accrued original
issue discount to the date of purchase.
The Company may elect to pay the
purchase price in Common Stock instead
of cash if certain conditions are met.
You can find a table on page 30 that
lists the purchase prices. See
"Description of Debentures--Purchase of
Debentures at the Option of the
Holder."
Use of Proceeds..................... .The Company will not receive any of the
proceeds from the sale by holders (the
"Selling Securityholders") of the
Debentures or the Conversion Shares.
7
RISK FACTORS
Should you choose to make an investment in the securities offered in this
Prospectus, you must understand that this investment involves a high degree of
risk. You should not make an investment in these securities if you cannot
afford to lose your entire investment. Before purchasing these securities you
must consider carefully the following risk factors as well as the other
information contained or incorporated by reference in this Prospectus. Some of
the statements contained in this Prospectus and the documents incorporated by
reference into this Prospectus contain projections of results of operations and
financial condition or state other "forward-looking" information. You should
read the cautionary statements in this Prospectus as applying to all related
forward-looking statements wherever they appear in this Prospectus. Our actual
results may differ materially from our projections. The risks set forth below,
among others, could have a material adverse effect on our business, operating
results or financial condition.
Variability and Uncertainty of Revenues and Operating Results. Our revenues,
gross margins, and operating results may fluctuate significantly from period to
period for many reasons including:
. reduced demand for our products and services
. a limited number of large systems or multisystem orders accounting for a
significant portion of product revenues in any particular quarter
. the timing of consulting and systems integration projects
. dependence on new customers for a significant percentage of product
revenues
. fluctuations in the results of operations of existing operations,
recently acquired subsidiaries, newly established business units or
distributors of our products or services
. mix of products and services and channels of distribution
. changes in market growth rates for different products and services.
In addition, our products typically represent substantial capital commitments
by customers, involving a long sales cycle. As a result, customer purchase
decisions may be significantly affected by a variety of factors including:
. general economic and financial market conditions
. world political events
. trends in capital spending for telecommunications products
. market competition and the availability or announcement of alternative
technologies
. the degree to which call transaction processing is mission-critical for
customers.
Product Concentration, Technological Change, New Product Defects and
Implementation Risk. Sales and installations of Aspect ACD Systems account for
a substantial portion of net revenues. A number of factors could adversely
affect demand for our products or services including:
. failure to meet customer specifications
. problems with system performance, system availability, installation or
service delivery commitments.
8
The market for our products and services is subject to rapid technological
change and new product introductions. Current competitors or new market
entrants may develop new, proprietary products with features that could
adversely affect the competitive position of our products. We may not
successfully anticipate market demand for new products or services or introduce
them in a timely manner.
Due to their complexity and sophistication, from time to time our software
products and implementations may contain defects that can be difficult to
correct. Software defects may cause delays in product introductions and
shipments, resulting in:
. increased costs or penalties
. design modifications
. reduced customer satisfaction
. unanticipated downtime
. lost revenues, or product returns.
Further, implementation of our software solutions (including consulting and
systems integration projects), could have additional risks of performance
failures or delays in implementation. Such delays could adversely affect our
reputation in the market and could result in increased costs and delayed or
lost revenues. In addition, the timing of systems integration projects may
contribute to quarterly fluctuations in revenues. Failure to meet completion
schedules for such projects may also result in penalties for delayed
completion.
Competition. We believe the market for our products and services is intensely
competitive, including companies that market:
. ACD systems
. private branch exchange systems that include ACD features
. telephone operating companies that market ACD functionality
. CTI software companies
. systems integrators
. participants in the problem tracking and resolution software market
. pre-network routing companies
. IVR companies.
As the hardware requirements for a traditional call center diminish, other
companies, including companies offering alternative or complementary
technologies, may obtain a significant position in the call transaction
processing market. For example, the anticipated convergence of voice and data
over a single network could result in increased competition for the Company.
In addition, many current and potential competitors, including Lucent
Technologies, Inc. (Lucent), Northern Telecom Limited (Nortel), Rockwell
International Corporation (Rockwell), and Siemens Business Communication
Systems Inc. (Siemens), have longer operating histories, considerably greater
resources, and larger customer bases than Aspect. We expect to encounter
significant competition from these and other sources.
9
Acquisitions and Investments. We have periodically acquired companies and
intellectual property and made minority equity investments in other companies.
For example, in May 1998, we acquired Voicetek Corporation. Voicetek provides
software platforms and applications including IVR systems and network-deployed
enhanced service solutions.
In the future, we may make further acquisitions or investments. Such
transactions, including the Voicetek acquisition, have numerous risks,
including the following:
. inability to successfully integrate or commercialize acquired
technologies or otherwise realize anticipated synergies or economies of
scale on a timely basis
. diversion of management attention
. disruption of our ongoing business
. inability to retain key technical and managerial personnel for both
companies
. inability to establish and maintain uniform standards, controls,
procedures, and processes
. governmental or competitive responses to the proposed transactions
. impairment of relationships with employees, vendors, and/or customers
including, in particular, Voicetek's original equipment manufacturers
(OEMs) and value-added resellers (VAR) relationships.
In addition, acquisitions or investments by the Company may result in
significant write-offs, the creation of goodwill or the issuance of additional
equity or debt securities. For instance, the acquisition of Voicetek resulted
in a one-time charge against after-tax earnings of $68.2 million for purchased
in-process technology.
Management of Growth. Our rapid growth has placed a significant strain on our
operational and financial systems. We are upgrading these systems and may
experience substantial disruption and incur significant expenses during these
transitions. We must carefully manage accounts receivables to limit credit
risk. We must also maintain inventories at levels consistent with product
demand. Inaccurate data (e.g., credit histories or supply/demand forecasts)
could quickly result in excessive balances or insufficient reserves.
Intellectual Property; Litigation. There has been extensive litigation
regarding patents and other intellectual property rights in our industry and we
are periodically notified of such claims by third parties. For example, in
March 1997, Lucent filed a patent infringement lawsuit against Aspect. While we
attempt to avoid infringing patents or proprietary rights of others, claims may
be asserted or prosecuted against us. We also periodically negotiate with third
parties to establish patent license or cross-license agreements. However, such
negotiations may not succeed. Moreover, even if we negotiate license agreements
with a third party, future disputes with such parties are possible. If we are
unable to resolve an intellectual property dispute through a license,
settlement or successful litigation, we could be subject to damage assessments
and be prevented from making, using, or selling certain products or services.
In the future, we could become involved in other types of litigation, such as
shareholder lawsuits for alleged violations of securities laws, claims by
employees, and product liability claims. Any litigation could result in
substantial cost to and diversion of effort by the Company.
10
Additionally, our success depends in part upon our internally developed
technology. We generally enter into confidentiality or license agreements with
our employees, consultants, and vendors; and control access to and
distribution of our software, documentation, and other proprietary
information. Despite these precautions, unauthorized third parties may copy or
otherwise obtain and use our technology. In addition, third parties may
develop similar technology independently.
Expansion of Distribution Channels. We have historically sold our products
and services through our direct sales force and a limited number of
distributors. In connection with the Voicetek acquisition, we implemented a
broadened OEM distribution channel, and in the future may depend increasingly
on expanded distributor, electronic, and other alternate distribution channels
to accommodate changing customer preferences, competitive environment, or
other factors. We may not be successful in expanding these distribution
channels.
International Operations. We market our products and services in over 30
countries worldwide and anticipate entering additional countries in the
future. For the year ended December 31, 1997 and for the six months ended June
30, 1998, sales outside of North America made up approximately 28.3% and 29.4%
of our total revenues, respectively. The financial resources required to enter
a new international market may be substantial, and international operations
are subject to additional risks including:
. the cost and timing of the multiple governmental approvals and product
modifications required by many countries
. market acceptance
. exchange rate fluctuations
. delays in telecommunications deregulation
. difficulties in staffing and managing foreign subsidiary operations
. political and economic instability
. potentially negative tax and foreign and domestic trade legislation,
which could result in the creation of trade barriers such as tariffs,
duties, quotas, and other restrictions.
Failure to successfully enter certain major international markets, and the
costs of such entry, could impair our competitive position, and prevent us
from competing on a global scale.
Dependence on Key Personnel. We depend on certain key management and
technical personnel and on our ability to attract and retain highly qualified
personnel in labor markets characterized by high turnover among, high demand
for, and limited supply of, qualified people.
We have recently perceived increased levels of turnover among such
personnel, particularly among technology companies located in the Silicon
Valley area of California. These increased turnover levels may be disruptive
to our culture and operations, and may make retention of highly qualified
personnel increasingly challenging.
Licenses from Third Parties. We depend upon licensors to help us effectively
use licensed technologies. Should any licensors fail to provide adequate
support, we would have to develop internal or locate external capabilities. As
a result, we could be unable to meet development or delivery commitments.
11
Geographic Concentration. Significant elements of our product development,
manufacturing, information technology systems, corporate offices, and support
functions are concentrated at a single location in the Silicon Valley area of
California. In the event of a natural disaster, such as an earthquake or flood,
or in localized extended outages of critical utilities or transportation
systems, we could experience a significant business interruption.
Limited Sources of Component Supply. We depend on certain critical components
in the production of our products and services. Certain of these components can
be obtained only from a single supplier and only in limited quantities. In
addition, some of our major suppliers:
. use proprietary technology that could require significant redesign of our
products in the case of a change in vendor
. could discontinue, or modify components in a manner incompatible with our
current use
. use manufacturing processes and tools that cannot be easily migrated to
other vendors.
If any of these vendors experience difficulty meeting our requirements for
components, we may be unable to meet development or delivery commitments.
Regulatory Requirements. Our products are subject to various regulations that
require, among other things, that our products meet certain radio frequency
emission standards, be compatible with the public telephone networks, and
conform to certain safety and other standards.
We may not successfully obtain or maintain the necessary regulatory approvals
for our products, and sales of products that fail to comply may be prohibited.
Y2K and Proximate Dates. Many computer systems are expected to experience
problems handling certain upcoming dates, including 9/9/99, dates from the year
2000, and in particular the millennium leap-year calculation. These systems
will need to be modified or replaced prior to these dates in order to remain
functional.
We are assessing both the readiness of our internal computer systems and the
compliance of our products and software sold to customers for handling these
dates, and believe that we will successfully implement the changes necessary to
address these issues. The cost of these efforts is not expected to have a
material effect on our operating results. There could, however, be delays in,
or increased costs associated with, the implementation of these changes.
Significant Leverage; Debt Service. The Company incurred $150 million of
principal indebtedness ($490 million principal at maturity) from the sale of
the Debentures in the August 1998 private placement. This new debt resulted in
a ratio of long-term debt to total shareholder's equity of approximately 57% at
September 30, 1998. As a result of this sale of the Debentures in August 1998,
we have substantially increased our principal and interest obligations. The
degree to which we are leveraged could materially and adversely affect our
ability to obtain additional financing and could make us more vulnerable to
industry downturns and competitive pressures. Our ability to meet our debt
service obligations will depend on our future performance, which will be
subject to financial, business, and other factors affecting our operations,
many of which are beyond our control.
12
Volatility of Debentures and Common Stock Price. The price of the Debentures
and the Conversion Shares may be subject to significant volatility. You cannot
consider our past financial performance a reliable indicator of performance for
any future period and should not use historical data to predict future results
or trends. For any given quarter, a shortfall in our operating results from the
levels expected by securities analysts or others could immediately and
adversely effect the price of the Debentures and the Conversion Shares. If we
do not learn of such shortfalls until late in a fiscal quarter, there could be
an even more immediate and adverse affect on the price of the Debentures and
the Conversion Shares. In addition, this volatility could be exacerbated by the
relatively low trading volume of the Company's Common Stock. Further, the
market price of the Debentures and the Conversion Shares may decline.
We operate in a rapidly changing high-technology industry. In the past and
recently, the high technology industry has exhibited significant stock market
volatility. Should the price of Common Stock decline rapidly, we may become
subject to class action securities litigation. Litigation would be a costly
diversion for our management team.
Subordination. The Debentures are not secured by our assets and are
subordinated in right of payment to all of our existing and future Senior
Indebtedness. In the event of bankruptcy, liquidation or reorganization and in
certain other events, we will not be able to pay our obligations with respect
to the Debentures until all Senior Indebtedness has been fully paid. The
Debentures are effectively subordinated to all of the liabilities of our
subsidiaries since we are a shareholder of our subsidiaries and will only
receive funds as a shareholder after our subsidiaries have repaid all
obligations to their creditors. We may not have sufficient assets remaining to
pay amounts due on any or all of the Debentures then outstanding. The Indenture
does not prohibit or limit us or our subsidiaries from incurring additional
Senior Indebtedness, other debt or other liabilities. Our ability to pay our
obligations on the Debentures could be adversely affected if we or our
subsidiaries incur more debt.
The following sets forth our indebtedness at June 30, 1998 to which the
Debentures are subordinated:
Senior Indebtedness.............. $54.3 million (of this amount, $41.7
million related to foreign exchange
contracts)
Indebtedness of subsidiaries..... $36.3 million (including trade and other
payables but excluding intercompany
liabilities and liabilities of a type not
required to be reflected on a balance sheet
in accordance with generally accepted
accounting principles)
Both we and our subsidiaries expect that from time to time we will incur
additional indebtedness to which the Debentures will be subordinated. See
"Description of Debentures -- Subordination of Debentures."
Limitations on Repurchases and Redemptions of Debentures. On each August 10,
2003, August 10, 2008 and August 10, 2013, we will become obligated to
purchase, at the Debenture holder's option, any outstanding Debenture, subject
to certain conditions. In addition, upon a Fundamental Change (as defined),
each holder will have the right, at the holder's option, to require the Company
to redeem all or a portion of such holder's Debentures. We may not have
sufficient
13
funds to pay the repurchase price on any purchase date or the redemption price
in the event of a Fundamental Change. If we did not have sufficient funds on a
purchase date, we could be required to issue shares of Common Stock at
valuations based on then prevailing market prices, if we met certain
conditions.
Future debt to which we may become a party could contain covenants that
restrict our right to repurchase or redeem the Debentures. We may then have to
refinance such debt or seek the consent of then-existing lenders to repurchase
or redeem the Debentures. If we were unable to either refinance the existing
debt or redeem the Debentures, we would be in default under the Debentures,
which may in turn cause us to default on other debt and would likely prohibit
or restrict payment on the Debentures. Additionally, if a Fundamental Change
would constitute an event of default under Senior Indebtedness then
outstanding, the Indenture's subordination provisions would likely prohibit or
restrict payments to the holders of Debentures.
The term "Fundamental Change" applies to certain types of transactions and
does not include all events that could adversely affect the Company. Even
though we are required to redeem the Debentures in the event of a Fundamental
Change, holders still may not be protected in the event that we are involved in
certain types of highly leveraged transactions, reorganizations, mergers or
similar transactions. See "Description of Debentures -- Redemption at Option of
the Holder Upon a Fundamental Change."
Absence of a Public Market for the Debentures. The Debentures were issued in
August 1998 in a private placement to a small number of institutional buyers
and have been designated for trading on the Portal Market. Debentures resold
pursuant to this Prospectus will not remain eligible for trading on the Portal
Market. We do not intend to list the Debentures on any national securities
exchange or on The Nasdaq Stock Market.
An active trading market for the Debentures may not develop or last, in which
case the trading price of such Debentures could be adversely affected. In that
case, Debenture holders may have difficulty in reselling the Debentures or may
be unable to sell them at all. If a public trading market develops for the
Debentures, the Debentures' future trading prices will depend on many factors,
including, among other things, prevailing interest rates and the market price
of the shares of the Company's Common Stock.
Rating of Debentures. We believe that it is likely that one or more rating
agencies may rate the Debentures. There can be no assurance that any such
agency or agencies will rate the Debentures or, if they do, what rating or
ratings they will assign. If one or more rating agencies assign the Debentures
a rating lower than generally expected by investors, or subsequently reduce
their ratings, it is likely that the market price of the Debentures would be
materially adversely affected.
14
USE OF PROCEEDS
The Company will not receive any proceeds from the sale by the Selling
Securityholders of the Debentures or the Conversion Shares.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's consolidated ratio of earnings
to fixed charges for the periods shown.
SIX MONTHS
FISCAL YEAR ENDED DECEMBER ENDED
31, JUNE 30,
--------------------------- ----------
1993 1994 1995 1996 1997 1997 1998
----- ---- ---- ----- ----- ----- ----
Ratio of earnings to fixed charges(1)... 12.6x 8.0x 9.6x 13.9x 25.8x 36.1x N/A
- --------
(1) Ratio of earnings to fixed charges is computed by dividing fixed charges
into earnings before income taxes plus fixed charges. Fixed charges consist
of interest expense (including amortization of original issue discount and
debt issuance costs, as applicable) and the estimated portion of operating
lease rental expense which represents the interest factor (deemed to be
one-third of lease payments). For the six months ended June 30, 1998, there
was a deficiency of earnings available to cover fixed charges amounting to
$25.2 million. Excluding the charge of $68.2 million for purchased in-
process technology associated with the acquisition of Voicetek Corporation,
the ratio of earnings to fixed charges for the six months ended June 30,
1998 would have been 24.2x.
15
SELLING SECURITYHOLDERS
The Debentures were originally issued by the Company in a private placement
and were resold by the initial purchasers thereof to qualified institutional
buyers (within the meaning of Rule 144A under the Securities Act) or other
institutional accredited investors (as defined in Rule 501 (a) (1), (2), (3) or
(7) under the Securities Act) in transactions exempt from registration under
the Securities Act. The Debentures and the Conversion Shares that may be
offered pursuant to this Prospectus will be offered by the Selling
Securityholders. The following table sets forth certain information concerning
the principal amount of Debentures beneficially owned by each Selling
Securityholder and the number of Conversion Shares that may be offered from
time to time pursuant to this Prospectus.
NUMBER OF
PRINCIPAL AMOUNT OF CONVERSION
DEBENTURES PERCENTAGE OF SHARES THAT
BENEFICIALLY OWNED DEBENTURES MAY BE
NAME THAT MAY BE SOLD ($) OUTSTANDING (%) SOLD(1)(2)
---- -------------------- --------------- -----------
Salomon Brothers Asset Man-
agement, Inc. ............. 122,706,900 25.0% 1,069,145(3)
Deutsche Bank Securities.... 57,000,000 11.6% 496,641(4)
Aristeia International
Limited.................... 14,354,000 3.0% 135,066(4)
Aristeia Trading, L.L.C..... 10,646,000 2.2% 92,758(4)
Highbridge Capital
Corporation................ 9,000,000 1.8 78,417(4)
Orrington Investments
Limited Partnership........ 1,800,000 * 15,683(4)
Orrington International Fund
LTD........................ 1,200,000 * 10,456(4)
Any other holders of Deben-
tures or future transferee,
pledgee, donee or successor
of or from any such other
holder(5) (6).............. 273,293,100 55.8% 2,381,202
- --------
* Less than 1%.
(1) Assumes conversion of the full amount of Debentures held by such holder at
the initial Conversion Rate of 8.713 shares per $1,000 principal amount at
maturity of Debentures; such Conversion Rate is subject to adjustment as
described under "Description of Debentures--Conversion of Debentures."
Accordingly, the number of shares of Common Stock issuable upon conversion
of the Debentures may increase or decrease from time to time. Under the
terms of the Indenture, fractional shares will not be issued upon
conversion of the Debentures; cash will be paid in lieu of fractional
shares, if any.
(2) As of September 30, 1998, the Company had 51,156,055 shares outstanding.
(3) The number of Conversion Shares held by Salomon Brothers Asset Management,
Inc. represents 2.1% of the Company's outstanding Common Stock as of
September 30, 1998.
(4) The number of Conversion Shares represents less than 1% of the Company's
Outstanding Common Stock as of September 30, 1998.
(5) Information concerning other Selling Securityholders will be set forth in
supplements to this Prospectus from time to time, if required.
(6) Assumes that any other holders of Debentures, or any future transferees,
pledgees, donees or successors of or from any such other holder of
Debentures, do not beneficially own any Common Stock other than the Common
Stock issuable upon conversion of the Debentures at the initial Conversion
Rate.
The preceding table has been prepared based upon the information furnished to
the Company by the Selling Securityholders named therein.
From time to time, each of Morgan Stanley & Co. Incorporated and Credit
Suisse First Boston Corporation or their respective affiliates have provided,
and may continue to provide, investment banking services to the Company, for
which they or their respective affiliates have received or may
16
receive customary fees. None of the other Selling Securityholders has had any
position, office or other material relationship with the Company or its
affiliates within the past three years.
The Selling Securityholders identified above may have sold, transferred or
otherwise disposed of, in transactions exempt from the registration
requirements of the Securities Act, all or a portion of their Debentures since
the date on which the information in the preceding table is presented.
Information concerning the Selling Securityholders may change from time to time
and any such changed information will be set forth in supplements to this
Prospectus if and when necessary. Because the Selling Securityholders may offer
all or some of the Debentures that they hold and/or Conversion Shares pursuant
to the offering contemplated by this Prospectus, no estimate can be given as to
the amount of the Debentures or Common Shares that will be held by the Selling
Securityholders upon the termination of this offering. See "Plan of
Distribution."
DESCRIPTION OF DEBENTURES
The Debentures were issued under an indenture dated as of August 10, 1998
(the "Indenture"), between the Company and State Street Bank and Trust Company
of California, N.A., as trustee (the "Trustee"). The form of Indenture and the
Registration Rights Agreement (defined below) have been filed as exhibits to
the Registration Statement. The following summaries of certain provisions of
the Debentures, the Indenture and the Registration Rights Agreement do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all the provisions of the Debentures, the Indenture and the
Registration Rights Agreement, including the definitions therein of certain
terms that are not otherwise defined in this Prospectus. Wherever particular
provisions or defined terms of the Indenture (or of the form of Debenture which
is a part thereof) or Registration Rights Agreement are referred to, such
provisions or defined terms are incorporated herein by reference. References in
this section to the "Company" are solely to Aspect Telecommunications
Corporation and not to its subsidiaries.
GENERAL
The Debentures are unsecured obligations of the Company limited to
$490,000,000 aggregate principal amount at maturity and will mature on August
10, 2018. The Debentures were issued in the initial private placement at an
original issue price of $306.56 per $1,000 principal amount at maturity (the
"Issue Price"), which represented an original issue discount of 69.344% from
the principal amount thereof payable at maturity ("Original Issue Discount").
The Debentures are being offered at a substantial discount from their
principal amount at maturity and will therefore have "Original Issue Discount"
for U.S. federal income tax purposes. See "Certain Federal Income Tax
Considerations."
There will be no periodic payments of interest on the Debentures. The
calculation of the accrual of Original Issue Discount (the difference between
the Issue Price of a Debenture and the principal amount at maturity of a
Debenture) in the period during which a Debenture remains outstanding will be
on a semi-annual bond equivalent basis using a year composed of twelve 30-day
months, such accrual will commence on the Issue Date of the Debentures.
Maturity, conversion, purchase by the Company at the option of a holder or
redemption of a Debenture will cause Original Issue Discount and interest, if
any, to cease to accrue on such Debenture, under the terms and subject to the
conditions of the Indenture. The Company may not reissue a Debenture that has
matured or been
17
converted, purchased by the Company at the option of a holder, redeemed or
otherwise canceled (except for registration of transfer, exchange or
replacement thereof).
The principal amount at maturity of each Debenture is payable at the office
or agency of the paying agent, initially the Trustee, in the Borough of
Manhattan, The City of New York, or any other office of the paying agent
maintained for such purpose. Debentures may be presented for conversion or
exchange into Common Stock at the office of the conversion agent and Debentures
in definitive form may be presented for exchange for other Debentures or
registration of transfer at the office of the registrar, each such agent
initially being the Trustee. The Company will not charge a service charge for
any registration of transfer or exchange of Debentures, however, the Company
may require payment by a holder of a sum sufficient to cover any tax,
assessment or other governmental charge payable in connection therewith.
FORM, DENOMINATION AND REGISTRATION
The Debentures are issuable in fully registered form, without coupons, in
denominations of $1,000 principal amount and multiples thereof.
Global Debenture; Book-Entry Form. Debentures sold by the Selling
Securityholders pursuant to the Registration Statement of which this Prospectus
forms a part may be represented by a global Debenture (the "Global Debenture").
The Global Debenture will be deposited with, or on behalf of, The Depository
Trust Company, New York, New York ("DTC") and registered in the name of Cede
and Co. ("Cede") as DTC's nominee. Except as set forth below, the Global
Debenture may be transferred, in whole or in part, only to another nominee of
DTC or to a successor of DTC or its nominee.
Purchasers of the Debentures may hold their interests in the Global Debenture
directly through DTC if such holder is a participant in DTC, or indirectly
through organizations which are participants in DTC (the "Participants").
Transfers between Participants will be effected in the ordinary way in
accordance with DTC rules and will be settled in clearing house funds. The laws
of some states require that certain persons take physical delivery of
securities in definitive form. Consequently, the ability to transfer beneficial
interests into the Global Debenture to such persons may be limited.
Persons who are not Participants may beneficially own interests in the Global
Debenture held by DTC only though Participants, or certain banks, brokers,
dealers, trust companies and other parties that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly
("Indirect Participants"). So long as Cede, as the nominee of DTC, is the
registered owner of the Global Debenture, Cede for all purposes will be
considered the sole holder of the Global Debenture. Except as provided below,
owners of beneficial interests in the Global Debenture will not be entitled to
have certificates registered in their names, will not receive or be entitled to
receive physical delivery of certificates in definitive registered form and
will not be considered the holders thereof.
Payment of Original Issue Discount and interest (if any) on and the
redemption price and the purchase price of the Global Debenture will be made to
Cede, the nominee for DTC, as the registered owner of the Global Debenture by
wire transfer of immediately available funds on the payment date therefor.
Neither the Company, the Trustee nor any paying agent will have any
responsibility or
18
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in the Global Debenture or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
The Company has been informed by DTC that, with respect to any payment of
interest (if any) on and the redemption price or the purchase price of, the
Global Debenture, DTC 's practice is to credit Participants' accounts on the
payment date therefor with payments in amounts proportionate to their
respective beneficial interests in the principal amount represented by the
Global Debenture as shown on the records of DTC, unless DTC has reason to
believe that it will not receive payment on such payment date. Payments by
Participants to owners of beneficial interests in the principal amount
represented by the Global Debenture held through such Participants will be the
responsibility of such Participants, as is now the case with securities held
for the accounts of customers registered in "street name."
Because DTC can only act on behalf of Participants, who in turn act on behalf
of Indirect Participants and certain banks, the ability of a person having a
beneficial interest in the principal amount represented by the Global Debenture
to pledge such interest to persons or entities that do not participate in the
DTC system, or otherwise take actions in respect of such interest, may be
affected by the lack of physical certificates evidencing such interest.
Neither the Company nor the Trustee (nor any registrar, paying agent nor
conversion agent under the Indenture) will have any responsibility for the
performance by DTC or its Participants or Indirect Participants of their
operations. DTC has advised the Company that it will take any action permitted
to be taken by a holder of Debentures (including, without limitation, the
presentation of Debentures for exchange as described below), only at the
direction of one or more Participants to whose account with DTC interests in
the Global Debenture are credited, and only in respect of the principal amount
of the Debentures represented by the Global Debenture as to which such
Participant or Participants has or have given such direction.
DTC has advised the Company 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
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 for its Participants and to facilitate the clearance and settlement
of securities transactions between Participants through electronic book-entry
changes to the accounts of its Participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and may include
certain other organizations. Certain of such Participants (or their
representatives), together with other entities, own DTC. Indirect access to the
DTC system is available to others such as banks, brokers, dealers and trust
companies that clear through, or maintain a custodial relationship with, a
Participant, either directly or indirectly.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Debenture among Participants, it is under
no obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. If DTC is at any time unwilling or
unable to continue as depositary and a successor depositary is not appointed by
the
19
Company within 90 days, the Company will cause the Debentures to be issued in
definitive registered form in exchange for the Global Debenture.
Conveyance of notices and other communications by DTC to Participants, by
Participants to Indirect Participants and Indirect Participants to beneficial
owners will be governed by arrangements among them, subject to any statutory or
regulatory requirements that may be in effect from time to time. Redemption
notices shall be sent to Cede, as nominee of DTC. If less than all of the
Debentures are being redeemed, DTC will reduce the amount of interest of each
Participant in such Debentures in accordance with its procedures.
Certificated Debentures. Holders of Debentures may request that certificated
Debentures be issued in exchange for Debentures represented by the Global
Debenture. Furthermore, certificated Debentures may be issued in exchange for
Debentures represented by the Global Debenture if no successor depositary is
appointed by the Company as set forth above under "Global Debenture, Book-Entry
Form."
SUBORDINATION OF DEBENTURES
The indebtedness evidenced by the Debentures is subordinated to the extent
provided in the Indenture to the prior payment in full in cash or other payment
satisfactory to the holders of Senior Indebtedness of all existing and future
Senior Indebtedness. Such subordination will not prevent the occurrence of any
Event of Default under the Indenture.
Upon any distribution of assets of the Company upon any dissolution, winding
up, voluntary or involuntary bankruptcy, insolvency, liquidation,
reorganization, receivership or similar proceeding relating to the Company or
its property, an assignment for the benefit of creditors or any marshaling of
the Company's assets or liabilities, the holders of Senior Indebtedness will be
entitled to receive payment in full, in cash or other payment satisfactory to
the holders of Senior Indebtedness, of all obligations due in respect of such
Senior Indebtedness before the holders of Debentures will be entitled to
receive any payment of the principal amount at maturity, Issue Price, accrued
Original Issue Discount, Redemption Price, Purchase Price, Fundamental Change
Redemption Price and interest, if any (including Liquidated Damages, if any) or
other payment in respect of the Debentures (a "Payment on the Debentures"), and
until all obligations with respect to Senior Indebtedness are paid in full in
cash or other payment satisfactory to the holders of Senior Indebtedness, any
Payment on the Debentures to which the holders of Debentures would be entitled
shall be made to the holders of Senior Indebtedness. By reason of the
subordination, in the event of the Company's dissolution, winding up,
bankruptcy, liquidation, reorganization or similar proceeding relating to the
Company or its property, an assignment for the benefit of creditors or any
marshaling of the Company's assets, holders of Senior Indebtedness may receive
more, ratably, and the holders of Debentures may receive less, ratably, than
the other creditors of the Company.
In the event that the Debentures are declared due and payable prior to their
stated maturity by reason of the occurrence of an Event of Default, then the
Company is obligated to notify promptly holders of Senior Indebtedness of such
acceleration. The Company may not pay monies owed pursuant to the Debentures
until 120 days have passed after such acceleration occurs and may thereafter
pay the Debentures only if the terms of the Indenture otherwise permit payment
at that time.
20
The Company also may not make any Payment on the Debentures if (i) a default
in any payment obligations in respect of Senior Indebtedness occurs and is
continuing, without regard to any applicable period of grace (whether at
maturity or at a date fixed for payment or by declaration or otherwise) (each a
"payment default") or (ii) any other default occurs and is continuing with
respect to Designated Senior Indebtedness that permits holders of the
Designated Senior Indebtedness as to which such default relates to accelerate
its maturity and the Trustee receives a notice of such default (a "Payment
Blockage Notice") from the Company or from a representative for any issue of
Designated Senior Indebtedness. Payments on the Debentures may and shall be
resumed (a) in case of a payment default, the earlier of the date on which such
default is cured or waived in accordance with the terms of the governing
instrument or ceases to exist and (b) in case of a nonpayment default, the
earlier of the date on which such nonpayment default is cured or waived in
accordance with the terms of the governing instrument or ceases to exist or 179
days after the date on which the applicable Payment Blockage Notice is received
by the Trustee, if the maturity of such Designated Senior Indebtedness has not
been accelerated, and in either case only if the terms of the Indenture
otherwise permit payment at that time. No new period of payment blockage may be
commenced pursuant to a Payment Blockage Notice unless and until 365 days have
elapsed since the initial effectiveness of the immediately prior Payment
Blockage Notice. No nonpayment default that existed or was continuing on the
date of delivery of any Payment Blockage Notice to the Trustee shall be, or
shall be made, the basis for a subsequent Payment Blockage Notice unless such
default shall have been cured or waived for a period of not less than 90 days
(it being acknowledged that (x) any action of the Company or any of its
subsidiaries occurring subsequent to delivery of a Payment Blockage Notice that
would give rise to any event of default pursuant to any provision of Senior
Indebtedness under which an event of default previously existed (or was
continuing at the time of delivery of such Payment Blockage Notice) shall
constitute a new event of default for this purpose and (y) any breach of a
financial covenant giving rise to a nonpayment default for a period ending
subsequent to the date of delivery of the respective Payment Blockage Notice
shall constitute a new event of default for this purpose).
The term "Senior Indebtedness" means the principal of, premium, if any,
interest (including all interest accruing subsequent to the commencement of any
bankruptcy or similar proceeding, whether or not a claim for post-petition
interest is allowable as a claim in any such proceeding), rent and end of term
payments payable on or in connection with, and, to the extent not included in
the foregoing, all amounts payable as fees, costs, expenses, liquidated
damages, indemnities, repurchase and other put obligations and other amounts to
the extent accrued or due on or in connection with Indebtedness (as defined) of
the Company, whether outstanding on the date of the Indenture or thereafter
created, incurred, assumed, guaranteed or in effect guaranteed by the Company
(including all deferrals, renewals, extensions or refundings of, or amendments,
modifications or supplements to, the foregoing). Notwithstanding the foregoing,
the term Senior Indebtedness does not include (i) Indebtedness evidenced by the
Debentures, (ii) Indebtedness of the Company to any subsidiary of the Company,
a majority of the voting stock of which is owned, directly or indirectly, by
the Company, (iii) accounts payable or other indebtedness to trade creditors
created or assumed by the Company in the ordinary course of business and (iv)
any particular Indebtedness in which the instrument creating or evidencing the
same or the assumption or guarantee thereof expressly provides that such
Indebtedness shall not be senior in right of payment to, or is pari passu with,
or is subordinated or junior to, the Debentures.
21
The term "Indebtedness" means, with respect to any Person (as defined) and
without duplication:
(a) all indebtedness, obligations and other liabilities (contingent or
otherwise) of such Person for borrowed money (including obligations of the
Company in respect of overdrafts, foreign exchange contracts, currency
exchange agreements, interest rate protection agreements, and any loans or
advances from banks, whether or not evidenced by Debentures or similar
instruments) or evidenced by bonds, debentures, Debentures or similar
instruments (whether or not the recourse of the lender is to the whole of
the assets of such Person or to only a portion thereof);
(b) all reimbursement obligations and other liabilities (contingent or
otherwise) of such Person with respect to letters of credit, bank
guarantees or bankers' acceptances;
(c) all obligations and liabilities (contingent or otherwise) in respect
of leases of such Person (i) required, in conformity with generally
accepted accounting principles, to be accounted for as capitalized lease
obligations on the balance sheet of such Person, or (ii) required, in
conformity with generally accepted accounting principles to be accounted
for as an operating lease, provided either (A) such operating lease
requires, at the end of the term thereof, that such Person make any payment
other than accrued periodic rent in the event that such Person does not
acquire the leased real property and related fixtures subject to such
lease, or (B) such Person has an option to acquire the leased real property
and related fixtures, whether such option is exercisable at any time or
under specified circumstances;
(d) all obligations of such Person (contingent or otherwise) with respect
to an interest rate swap, cap or collar agreement or other similar
instrument or agreement;
(e) all direct or indirect guaranties or similar agreements by such
Person in respect of, and obligations or liabilities (contingent or
otherwise) of such Person to purchase or otherwise acquire or otherwise
assure a creditor against loss in respect of, indebtedness, obligations or
liabilities of another Person of the kind described in clauses (a) through
(d);
(f) any indebtedness or other obligations described in clauses (a)
through (d) secured by any mortgage, pledge, lien or other encumbrance
existing on property which is owned or held by such Person, regardless of
whether the indebtedness or other obligation secured thereby shall have
been assumed by such Person; and
(g) any and all deferrals, renewals, extensions and refundings of, or
amendments, modifications or supplements to, any indebtedness, obligation
or liability of the kind described in clauses (a) through (f).
The term "Designated Senior Indebtedness" means any particular Senior
Indebtedness in which the instrument creating or evidencing the same or the
assumption or guarantee thereof (or related agreements or documents to which
the Company is a party) expressly provides that such Senior Indebtedness shall
be "Designated Senior Indebtedness" for purposes of the Indenture; provided
that such instrument, agreement or other document may place limitations and
conditions on the right of such Senior Indebtedness to exercise the rights of
Designated Senior Indebtedness.
The Debentures are obligations exclusively of the Company. Since a portion of
the operations of the Company are conducted through subsidiaries, the cash flow
and the consequent ability to service debt, including the Debentures, are
dependent upon the earnings of its subsidiaries and the
22
distribution of those earnings to, or upon loans or other payments of funds by
those subsidiaries to, the Company. The subsidiaries are separate and distinct
legal entities and have no obligation, contingent or otherwise, to pay any
amount pursuant to the Debentures or to make any funds available therefor,
whether by dividends, loans or other payments. In addition, the payment of
dividends and making of loans and advances to the Company by its subsidiaries
may be subject to statutory or contractual restrictions, are contingent upon
the earnings of those subsidiaries and are subject to various business
considerations.
Any right of the Company to receive assets of any of its subsidiaries upon
their liquidation or reorganization (and the consequent right of the holders of
the Debentures to participate in those assets) will be effectively subordinated
to the claims of that subsidiary's creditors (including trade creditors),
except to the extent that the Company is itself recognized as a creditor of
such subsidiary, in which case the claims of the Company would still be
subordinate to any security interests in the assets of such subsidiary and any
indebtedness of such subsidiary senior to that held by the Company.
At June 30, 1998, the Company had approximately $54.3 million of indebtedness
outstanding that would have constituted Senior Indebtedness, of which
approximately $41.7 million related to foreign exchange contracts, and the
Company's subsidiaries had approximately $36.3 million of indebtedness and
other liabilities (including trade and other payables) outstanding (excluding
intercompany liabilities and liabilities of a type not required to be reflected
on a balance sheet in accordance with generally accepted accounting principles)
to which the Debentures would have been effectively subordinated. The Indenture
does not limit the amount of additional indebtedness, including Senior
Indebtedness, which the Company can create, incur, assume or guarantee, nor
does the Indenture limit the amount of indebtedness which any subsidiary can
create, incur, assume or guarantee.
In the event that, notwithstanding the foregoing, the Trustee or any holder
of the Debentures receives any payment or distribution of assets of the Company
of any kind in contravention of any of the subordination provisions of the
Indenture, whether in cash, property or securities, including, without
limitation, by way of set-off or otherwise, in respect of the Debentures before
all Senior Indebtedness is paid in full in cash or other payment satisfactory
to the holders of Senior Indebtedness, then such payment or distribution will
be held by the recipient in trust for the benefit of, and paid over to, holders
of Senior Indebtedness or their representatives to the extent necessary to make
payment in full in cash or other payment satisfactory to the holders of Senior
Indebtedness of all Senior Indebtedness remaining unpaid, after giving effect
to any concurrent payment or distribution, or provision therefor, to or for the
holders of Senior Indebtedness.
The Company is obligated to pay reasonable compensation to the Trustee and to
indemnify the Trustee against certain losses, liabilities or expenses incurred
by it in connection with its duties relating to the Debentures. The Trustee's
claims for such payments will generally be senior to those of holders of the
Debentures in respect of all funds collected or held by the Trustee.
CONVERSION OF DEBENTURES
A holder of a Debenture may convert it into Common Stock of the Company at
any time after November 8, 1998 and prior to maturity; provided that if a
Debenture is called for redemption, the
23
holder may convert it only until the close of business on the last Trading Day
prior to the Redemption Date unless the Company defaults in the payment of the
Redemption Price. A Debenture in respect of which a holder has delivered a
Purchase Notice exercising the option of such holder to require the Company to
purchase such Debenture may be converted only if such notice is withdrawn in
accordance with the terms of the Indenture. Similarly, a Debenture in respect
of which a holder is exercising its option to require redemption upon a
Fundamental Change may be converted only if such holder withdraws its election
to exercise its option in accordance with the terms of the Indenture. A holder
may convert its Debentures in part so long as such part is $l,000 principal
amount at maturity or an integral multiple thereof.
The initial Conversion Rate is 8.713 shares of Common Stock per $1,000
principal amount at maturity of Debentures, subject to adjustment upon the
occurrence of certain events, as described below. A holder entitled to a
fractional share of Common Stock shall receive cash equal to the then current
market value of such fractional share.
On conversion of a Debenture, a holder will not receive any cash payment
representing accrued Original Issue Discount. The Company's delivery to the
holder of the fixed number of shares of Common Stock into which the Debenture
is convertible (together with the cash payment, if any, in lieu of a fractional
share of Common Stock) will be deemed to satisfy the Company's obligation to
pay the principal amount of the Debenture including the accrued Original Issue
Discount attributable to the period from the Issue Date to the Conversion Date.
Thus, the accrued Original Issue Discount is deemed to be paid in full rather
than canceled, extinguished or forfeited. The Conversion Rate will not be
adjusted at any time during the term of the Debentures for such accrued
Original Issue Discount.
To convert a certificated Debenture into Common Stock, a holder must (i)
complete and manually sign the conversion notice on the back of the Debenture
(or complete and manually sign a facsimile thereof) and deliver such notice to
the conversion agent, (ii) surrender the Debenture to the conversion agent,
(iii) if required, furnish appropriate endorsements and transfer documents, and
(iv) if required, pay all transfer or similar taxes. Pursuant to the Indenture,
the date on which all of the foregoing requirements have been satisfied is the
Conversion Date.
The Conversion Rate is subject to adjustment under formulae as set forth in
the Indenture in certain events, including:
(i) the issuance of Common Stock of the Company as a dividend or
distribution on the Common Stock;
(ii) certain subdivisions and combinations of the Common Stock;
(iii) the issuance to all holders of Common Stock of certain rights or
warrants to purchase Common Stock;
(iv) the distribution to all holders of Common Stock of capital stock
(other than Common Stock) of the Company or evidences of indebtedness of
the Company or of assets (including securities other than Common Stock, but
excluding those rights, warrants, dividends and distributions referred to
in clause (i) or (iii) above or paid in cash);
24
(v) distributions consisting of cash, excluding any quarterly cash
dividend on the Common Stock to the extent that the aggregate cash dividend
per share of Common Stock in any quarter does not exceed the greater of (x)
the amount per share of Common Stock of the next preceding quarterly cash
dividend on the Common Stock to the extent that such preceding quarterly
dividend did not require an adjustment of the Conversion Rate pursuant to
this clause (v) (as adjusted to reflect subdivisions or combinations of the
Common Stock), and (y) 3.75 percent of the average of the last reported
sales price of the Common Stock during the ten Trading Days immediately
prior to the date of declaration of such dividend, and excluding any
dividend or distribution in connection with the liquidation, dissolution or
winding up of the Company;
(vi) payment in respect of a tender offer or exchange offer by the
Company or any Subsidiary (as defined) of the Company for the Common Stock
to the extent that the cash and value of any other consideration included
in such payment per share of Common Stock exceeds the Current Market Price
(as defined) per share of Common Stock on the Trading Day next succeeding
the last date on which tenders or exchanges may be made pursuant to such
tender or exchange offer; and
(vii) payment in respect of a tender offer or exchange offer by a person
other than the Company or any Subsidiary of the Company in which, as of the
closing date of the offer, the Board of Directors is not recommending
rejection of the offer.
If an adjustment is required to be made as set forth in clause (v) above
as a result of a distribution that is a quarterly dividend, such adjustment
would be based upon the amount by which such distribution exceeds the
amount of the quarterly cash dividend permitted to be excluded pursuant to
clause (v) above. If an adjustment is required to be made as set forth in
clause (v) above as a result of a distribution that is not a quarterly
dividend, such adjustment would be based upon the full amount of the
distribution. The adjustment referred to in clause (vii) above will only be
made if the tender offer or exchange offer is for an amount that increases
the offeror's ownership of Common Stock to more than 25% of the total
shares of Common Stock outstanding, and if the cash and value of any other
consideration included in such payment per share of Common Stock exceeds
the Current Market Price per share of Common Stock on the business day next
succeeding the last date on which tenders or exchanges may be made pursuant
to such tender or exchange offer. The adjustment referred to in clause
(vii) above will generally not be made, however, if as of the closing of
such offer, the offering documents with respect to such offer disclose a
plan or an intention to cause the Company to engage in a consolidation or
merger of the Company or a sale of all or substantially all of the
Company's assets.
The Indenture provides that if the Company implements a stockholders' rights
plan, such rights plan must provide that upon conversion of the Debentures the
holders will receive, in addition to the Common Stock issuable upon such
conversion, such rights whether or not such rights have separated from the
Common Stock at the time of such conversion.
No adjustment in the Conversion Rate will be required unless such adjustment
would require a change of at least 1% in the rate then in effect: provided that
any adjustment that would otherwise be required to be made shall be carried
forward and taken into account in any subsequent adjustment.
25
Except as stated above, the Conversion Rate will not be adjusted for the
issuance of Common Stock or any securities convertible into or exchangeable for
Common Stock or carrying the right to purchase any of the foregoing.
In the case of (i) any reclassification of the Common Stock, or (ii) a
consolidation or merger involving the Company or a sale or conveyance to
another corporation of the property and assets of the Company as an entirety or
substantially as an entirety, in each case as a result of which holders of
Common Stock shall be entitled to receive stock, securities, other property or
assets (including cash) with respect to or in exchange for such Common Stock,
the holders of the Debentures then outstanding will be entitled thereafter to
convert such Debentures into the kind and amount of shares of stock, securities
or other property or assets (including cash) which they would have owned or
been entitled to receive upon such reclassification, consolidation, merger,
sale or conveyance had such Debentures been converted immediately prior to such
reclassification, consolidation, merger, sale or conveyance assuming that a
holder of Debentures would not have exercised any rights of election as to the
stock, securities or other property or assets (including cash) receivable in
connection therewith.
In the event of a taxable distribution to holders of Common Stock or in
certain other circumstances requiring an adjustment to the Conversion Rate, the
holders of Debentures may, in certain circumstances, be deemed to have received
a distribution subject to United States income tax as a dividend, in certain
other circumstances, the absence of such an adjustment may result in a taxable
dividend to the holders of Common Stock. See "Certain Federal Income Tax
Considerations."
The Company from time to time may to the extent permitted by law increase the
Conversion Rate by any amount for any period of at least 20 business days, in
which case the Company shall give at least 15 days' notice of such increase, if
the Board of Directors has made a determination that such increase would be in
the best interests of the Company, which determination shall be conclusive. The
Company may, at its option, make such increases in the Conversion Rate, in
addition to those set forth above, as the Board of Directors deems advisable to
avoid or diminish any income tax to holders of Common Stock resulting from any
dividend or distribution to stock (or rights to acquire stock) or from any
event treated as such for income tax purposes. See "Certain Federal Income Tax
Considerations."
REDEMPTION OF DEBENTURES AT THE OPTION OF THE COMPANY
No sinking fund is provided for the Debentures. Prior to August 10, 2003, the
Debentures will not be redeemable at the option of the Company. Beginning on
August 10, 2003, the Company may redeem the Debentures for cash as a whole at
any time, or from time to time in part, upon not less than 30 days' nor more
than 60 days' notice of redemption given by mail to holders of Debentures. The
Debentures will be redeemable in multiples of $l,000 principal amount at
maturity.
The table below shows Redemption Prices of Debentures per $1,000 principal
amount at maturity thereof at August 10, 2003 and at each August 10 thereafter
prior to maturity and at maturity on August 10, 2018, which prices reflect the
accrued Original Issue Discount calculated to each such date. The Redemption
Price of a Debenture redeemed between such dates would include
26
an additional amount reflecting the additional Original Issue Discount accrued
since the next preceding date in the table to the actual Redemption Date.
(2) (3)
(1) ACCRUED ORIGINAL REDEMPTION
DEBENTURE ISSUE DISCOUNT PRICE
ISSUE PRICE AT 6.00% (1)+(2)
----------- ---------------- ----------
August 10, 2003......................... $306.56 $105.44 $ 412.00
August 10, 2004......................... 306.56 130.53 437.09
August 10, 2005......................... 306.56 157.14 463.70
August 10, 2006......................... 306.56 185.38 491.94
August 10, 2007......................... 306.56 215.34 521.90
August 10, 2008......................... 306.56 247.13 553.69
August 10, 2009......................... 306.56 280.85 587.41
August 10, 2010......................... 306.56 316.62 623.18
August 10, 2011......................... 306.56 354.57 661.13
August 10, 2012......................... 306.56 394.83 701.39
August 10, 2013......................... 306.56 437.55 744.11
August 10, 2014......................... 306.56 482.86 789.42
August 10, 2015......................... 306.56 530.94 837.50
August 10, 2016......................... 306.56 581.94 888.50
August 10, 2017......................... 306.56 636.05 942.61
August 10, 2018......................... 306.56 693.44 1,000.00
If less than all of the outstanding Debentures held in certificated form are
to be redeemed, the Trustee shall select the Debentures held in such form to be
redeemed in principal amounts at maturity of $1,000 or integral multiples
thereof by lot, pro rata or by another method the Trustee considers fair and
appropriate (as long as such method is not prohibited by the rules of any stock
exchange or quotation system on which the Debentures are then listed or
quoted). If a portion of a holder's certificated Debentures is selected for
partial redemption and such holder converts a portion of such Debentures, such
converted portion shall be deemed to be the portion selected for redemption.
Debentures registered in the name of DTC or its nominee will be redeemed as
described under "--Form, Denomination and Registration--Global Debenture; Book-
Entry Form."
REDEMPTION AT OPTION OF THE HOLDER UPON A FUNDAMENTAL CHANGE
If a Fundamental Change (as defined) occurs at any time prior to August 10,
2018, each holder of Debentures shall have the right, at the holder's option,
to require the Company to redeem any or all of such holder's Debentures on the
date (the "Repurchase Date") that is 45 days after the date of the Company's
notice of such Fundamental Change. The Debentures will be redeemable in
multiples of $1,000 principal amount at maturity.
The Company shall redeem such Debentures at a price (the "Fundamental Change
Redemption Price") equal to the Issue Price plus accrued Original Issue
Discount to the Repurchase Date; provided that if the Applicable Price (as
defined) in connection with the Fundamental Change is less than the Reference
Market Price (as defined), the Company shall redeem such Debentures at a price
equal to the foregoing Fundamental Change Redemption Price multiplied by the
fraction obtained by dividing the Applicable Price by the Reference Market
Price.
27
The Company shall mail to all holders of record of the Debentures a notice of
the occurrence of a Fundamental Change and of the redemption right arising as a
result thereof on or before the tenth day after the occurrence of such
Fundamental Change. The Company shall deliver to the Trustee a copy of such
notice. To exercise the redemption right, holders of Debentures must deliver,
on or before the 30th day after the date of the Company's notice of a
Fundamental Change, the Debentures to be so redeemed, duly endorsed for
transfer, together with the form entitled "Option to Elect Redemption Upon a
Fundamental Change" on the reverse thereof duly completed, to the Company (or
an agent designated by the Company for such purpose).
The term "Fundamental Change" means the occurrence of any transaction or
event in connection with which all or substantially all Common Stock shall be
exchanged for, converted into, acquired for or constitute solely the right to
receive consideration (whether by means of an exchange offer, liquidation,
tender offer, consolidation, merger, combination, reclassification,
recapitalization or otherwise) which is not all or substantially all common
stock listed (or, upon consummation of or immediately following such
transaction or event, which will be listed) on a United States national
securities exchange or approved for quotation on The Nasdaq National Market or
any similar United States system of automated dissemination of quotations of
securities prices.
The term "Applicable Price" means (i) in the event of a Fundamental Change in
which the holders of the Common Stock receive only cash, the amount of cash
received by the holder of one share of Common Stock and (ii) in the event of
any other Fundamental Change, the average of the last reported sale price for
the Common Stock during the ten Trading Days prior to the record date for the
determination of the holders of Common Stock entitled to receive cash,
securities, property or other assets in connection with such Fundamental
Change, or, if there is no such record date, the date upon which the holders of
the Common Stock shall have the right to receive such cash, securities,
property or other assets in connection with the Fundamental Change.
The term "Reference Market Price" shall initially mean $18.917 and in the
event of any adjustment to the Conversion Rate pursuant to the provisions of
the Indenture, the Reference Market Price shall also be adjusted so that the
Reference Market Price shall be equal to the initial Reference Market Price
multiplied by a fraction the numerator of which is the initial Conversion Rate
(8.713, without regard to any adjustment thereto) and the denominator of which
is the initial Conversion Rate following such adjustment.
The Company will comply with the provisions of Rule 13e-4 and any other
tender offer rules under the Exchange Act which may then be applicable in
connection with the redemption rights of Debenture holders in the event of a
Fundamental Change.
The redemption rights of the holders of Debentures could discourage a
potential acquiror of the Company. The Fundamental Change redemption feature,
however, is not the result of management's knowledge of any specific effort to
obtain control of the Company by means of a merger, tender offer, solicitation
or otherwise, or part of a plan by management to adopt a series of anti-
takeover provisions.
28
The term "Fundamental Change" is limited to certain specified transactions
and may not include other events that might adversely affect the financial
condition of the Company, nor would the requirement that the Company offer to
repurchase the Debentures upon a Fundamental Change necessarily afford the
holders of the Debentures protection in the event of a highly leveraged
transaction, reorganization, merger or similar transaction involving the
Company.
No Debentures may be redeemed at the option of holders upon a Fundamental
Change if there has occurred and is continuing an Event of Default described
under "Events of Default, Notice and Waiver" below (other than a default in the
payment of the Fundamental Change Redemption Price with respect to such
Debentures). In the event of a Fundamental Change and exercise by holders of
the Debentures of their associated rights to require the Company to redeem all
or a portion of their Debentures, there can be no assurance that the Company
would have sufficient funds to pay the redemption price for all the Debentures
tendered by the holders thereof. Any future credit agreements or other
agreements relating to other indebtedness (including Senior Indebtedness) to
which the Company becomes a party may provide that a Fundamental Change or the
maturing of any obligation to redeem the Debentures upon a Fundamental Change
would constitute an event of default thereunder and may restrict or prohibit
the redemption of the Debentures. In the event a Fundamental Change occurs at a
time when the Company is prohibited from redeeming the Debentures, the Company
could seek the consent of its then existing lenders to redeem the Debentures or
could attempt to refinance the borrowings that contain such prohibition. If the
Company does not obtain such a consent or repay such borrowings, the Company
would remain prohibited from redeeming the Debentures. In such case, the
Company's failure to redeem Debentures required to be redeemed under the terms
of the Indenture would constitute an Event of Default under the Indenture and
would likely constitute a default under the terms of any other indebtedness of
the Company outstanding at such time. In such circumstances, or if a
Fundamental Change would in and of itself constitute an event of default under
agreements governing Senior Indebtedness then outstanding, the subordination
provisions in the Indenture would likely prohibit or restrict payments to the
holders of Debentures.
PURCHASE OF DEBENTURES AT THE OPTION OF THE HOLDER
On August 10, 2003, August 10, 2008 and August 10, 2013 (each, a "Purchase
Date"), the Company will become obligated to purchase, at the option of the
holder thereof, any outstanding Debenture for which a written Purchase Notice
has been delivered by the holder to the office of the paying agent (initially
the Trustee) at any time from the opening of business on the date that is
20 Business Days (as defined) prior to such Purchase Date until the close of
business on such Purchase Date and for which such Purchase Notice has not been
withdrawn, subject to certain additional conditions.
The Purchase Notice shall state:
(i) the certificate numbers of the Debentures to be delivered by the
holder thereof for purchase by the Company;
(ii) the portion of the principal amount at maturity of Debentures to be
purchased, which portion must be $1,000 or a multiple thereof;
29
(iii) that such Debentures are to be purchased by the Company pursuant to
the applicable provisions of the Debentures; and
(iv) in the event the Company elects, pursuant to the Company Notice (as
defined), to pay the Purchase Price to be paid as of such Purchase Date in
Common Stock, in whole or in part, but such Purchase Price is ultimately to
be paid to such holder entirely in cash because any of the conditions to
payment of the Purchase Price (or portion thereof) in Common Stock is not
satisfied by the Purchase Date, as described below, whether such holder
elects (x) to withdraw such Purchase Notice as to some or all of the
Debentures to which it relates (stating the principal amount at maturity
and certificate numbers of the Debentures as to which such withdrawal shall
relate), or (y) to receive cash in respect of the entire Purchase Price for
all Debentures subject to such Purchase Notice.
If the holder fails to indicate, in the Purchase Notice and in any written
notice of withdrawal relating to such Purchase Notice, such holder's choice
with respect to the election described in clause (iv) above, such holder shall
be deemed to have elected to receive cash in respect of the entire Purchase
Price for all Debentures subject to such Purchase Notice in such circumstances.
For a discussion of the tax treatment of a holder receiving cash or Common
Stock pursuant to its election to tender its Debentures to the Company on a
Purchase Date. See "Certain Federal Income Tax Considerations."
Any Purchase Notice may be withdrawn by the holder by a written notice of
withdrawal delivered to the paying agent prior to the close of business on the
Purchase Date. The notice of withdrawal shall state the principal amount at
maturity and the certificate numbers of the Debentures as to which the
withdrawal notice relates and the principal amount at maturity, if any, which
remains subject to the Purchase Notice.
The Purchase Price payable in respect of a Debenture shall be equal to the
Issue Price plus accrued Original Issue Discount to the Purchase Date. The
table below shows the Purchase Prices of a Debenture as of the specified
Purchase Dates. The Company may elect to pay the Purchase Price payable, as of
any Purchase Date, in cash or Common Stock or any combination thereof.
PURCHASE DATE PRICE
------------- -----
August 10, 2003...................................................... $412.00
August 10, 2008...................................................... $553.69
August 10, 2013...................................................... $744.11
If the Company elects to pay the Purchase Price, in whole or in part, in
Common Stock, the number of shares to be delivered in respect of the portion of
the Purchase Price to be paid in Common Stock shall be equal to such portion of
the Purchase Price divided by the Market Price (as defined) of the Common
Stock. However, no fractional shares of Common Stock will be delivered upon any
purchase by the Company of Debentures through the delivery of Common Stock in
payment, in whole or in part, of the Purchase Price. Instead, the Company will
pay cash based on the Market Price for all fractional shares of Common Stock.
The Company will give notice (the "Company Notice") not less than 20 Business
Days prior to the Purchase Date (the "Company Notice Date") to all holders at
their addresses shown in the register of the registrar (and to beneficial
owners as required by applicable law) stating, among other things, whether the
Company will pay the Purchase Price of the Debentures in cash or Common
30
Stock, or any combination thereof (specifying the percentage of each) and, if
the Company elects to pay in Common Stock, in whole or in part the method of
calculating the Market Price of the Common Stock.
The "Market Price" means the average of the Sale Prices (as defined) of the
Common Stock for the five Trading Day period ending on the third Business Day
prior to the applicable Purchase Date (if the third Business Day prior to the
applicable Purchase Date is a Trading Day or, if it is not a Trading Day, then
on the last trading day prior to such third Business Day), appropriately
adjusted to take into account the occurrence during the period commencing on
the first of such Trading Days during such five Trading Day period and ending
on such Purchase Date of certain events that would result in an adjustment of
the Conversion Rate under the Indenture with respect to the Common Stock.
The "Sale Price" of the Common Stock on any date means the closing per share
sale price (or if no closing sale price is reported, the average bid and ask
prices or, if more than one, in either case, the average of the average bid and
average ask prices) on such date as reported in the composite transactions for
the principal United States securities exchange on which the Common Stock is
traded or, if the Common Stock is not listed on a United States national or
regional stock exchange, as reported by The Nasdaq National Market. Because the
Market Price of the Common Stock is determined prior to the applicable Purchase
Date, holders of Debentures bear the market risk with respect to the value of
the Common Stock to be received from the date of determination of such Market
Price to such Purchase Date. The Company may elect to pay the Purchase Price in
Common Stock only if the information necessary to calculate the Market Price is
reported in a daily newspaper of national circulation.
Upon determination of the actual number of shares of Common Stock in
accordance with the foregoing provisions, the Company will publish such
determination in a daily newspaper of national circulation.
The Company's right to purchase Debentures with Common Stock is subject to
the satisfaction of various conditions, including: (i) the registration of the
Common Stock under the Securities Act, if required, and (ii) compliance with
other applicable federal and state securities laws, if any. If such conditions
are not satisfied by a Purchase Date, the Company will pay the Purchase Price
of the Debentures to be purchased on such Purchase Date entirely in cash. The
Company will comply with the provisions of Rule 13e-4 and any other tender
offer rules under the Exchange Act which may then be applicable and will file a
Schedule 13E-4 or any other schedule required thereunder in connection with any
offer by the Company to purchase Debentures at the option of holders.
Payment of the Purchase Price for a Debenture for which a Purchase Notice has
been delivered and not withdrawn is conditioned upon book-entry transfer or
delivery of such Debenture (together with necessary endorsements) to the paying
agent at its office in the Borough of Manhattan, The City of New York, or any
other office of the paying agent maintained for such purpose, at any time
(whether prior to, on or after the Purchase Date) after delivery of such
Purchase Notice. Payment of the Purchase Price for such Debenture will be made
promptly following the later of the Purchase Date or the time of book-entry
transfer or delivery of such Debenture. If the paying agent holds, in
accordance with the terms of the Indenture, money or securities sufficient to
pay the Purchase Price
31
of such Debenture on the Business Day following the Purchase Date, then, on and
after such date, such Debenture will cease to be outstanding and Original Issue
Discount on such Debenture will cease to accrue whether or not book-entry
transfer of such Debenture is made or such Debenture is delivered to the paying
agent, and all other rights of the holder shall terminate (other than the right
to receive the Purchase Price upon delivery of the Debenture).
No Debentures may be purchased at the option of the holder for cash if there
has occurred (prior to, on or after the giving by the holders of such
Debentures of the required Purchase Notice) and is continuing an Event of
Default described under "Events of Default; Notice and Waiver" below (other
than a default in the payment of the Purchase Price with respect to such
Debentures).
If the Company becomes obligated to purchase any outstanding Debenture on a
Purchase Date, there can be no assurance that the Company would have sufficient
funds to pay the Purchase Price on that Purchase Date (in which case, the
Company could be required to issue shares of Common Stock to pay the Purchase
Price at valuations based on then prevailing market prices) for all the
Debentures tendered by the holders thereof. Any future credit agreements or
other agreements relating to other indebtedness (including Senior Indebtedness)
to which the Company becomes a party may provide that the maturing of any
obligation to purchase the Debentures would constitute an event of default
thereunder and may restrict or prohibit the repurchase of the Debentures. In
the event a Purchase Date occurs at a time when the Company is prohibited from
repurchasing the Debentures, the Company could seek the consent of its then
existing lenders to repurchase the Debentures or could attempt to refinance the
borrowings that contain such prohibition. If the Company does not obtain such a
consent or repay such borrowings, the Company would remain prohibited from
repurchasing the Debentures. The Company's failure to repurchase Debentures
required to be repurchased under the terms of the Indenture would constitute an
Event of Default under the Indenture and would likely constitute a default
under the terms of any other indebtedness of the Company outstanding at such
time, including Senior Indebtedness. In such circumstances, the subordination
provisions in the Indenture would likely prohibit or restrict payments to the
holders of Debentures.
MERGERS AND SALES OF ASSETS BY THE COMPANY
The Company may not consolidate with or merge into any other person or
convey, transfer or lease its properties and assets substantially as an
entirety to another person, unless, among other items, (i) the resulting,
surviving or transferee person (if other than the Company) is organized and
existing under the laws of the United States, any state thereof or the District
of Columbia, (ii) such successor person assumes all obligations of the Company
under the Debentures and the Indenture and (iii) the Company or such successor
person shall not immediately thereafter be in default under the Indenture. Upon
the assumption of the Company's obligations by such person in such
circumstances, subject to certain exceptions, the Company shall be discharged
from all obligations under the Debentures and the Indenture. Certain such
transactions which would constitute a Fundamental Change would permit each
holder to require the Company to redeem the Debentures of such holder as
described under "--Redemption at Option of the Holder Upon a Fundamental
Change."
32
EVENTS OF DEFAULT; NOTICE AND WAIVER
The Indenture provides that, if an Event of Default specified therein shall
have happened and be continuing, either the Trustee or the holders of not less
than 25% in aggregate principal amount at maturity of the Debentures then
outstanding may declare the Issue Price of the Debentures plus the Original
Issue Discount on the Debentures and any Liquidated Damages under the
Registration Rights Agreement accrued to the date of such declaration to be
immediately due and payable. In the case of certain events of bankruptcy or
insolvency, the Issue Price of the Debentures plus the Original Issue Discount
accrued thereon to the occurrence of such event shall automatically become and
be immediately due and payable. Under certain circumstances, the holders of a
majority in aggregate principal amount at maturity of the outstanding
Debentures may rescind any such acceleration with respect to the Debentures and
its consequences. Interest shall accrue at the rate of 6.00% per annum and be
payable on demand upon a default in the payment of the Issue Price, accrued
Original Issue Discount, accrued Liquidated Damages, if any, or any Redemption
Price, Purchase Price or Fundamental Change Redemption Price to the extent that
payment of such interest shall be legally enforceable.
Under the Indenture, Events of Default are defined as: (i) default in payment
of the principal amount at maturity, Issue Price, accrued Original Issue
Discount, accrued Liquidated Damages, if any, Redemption Price, Purchase Price
or Fundamental Chance Redemption Price with respect to any Debenture when such
becomes due and payable (whether or not payment is prohibited by the provisions
of the Indenture), provided that in the case of any failure to pay Liquidated
Damages, such failure continues for a period of 30 days; (ii) failure by the
Company to comply with any of its other agreements in the Debentures or the
Indenture upon the receipt by the Company of notice of such default by the
Trustee or by holders of not less than 25% in aggregate principal amount at
maturity of the Debentures then outstanding and the Company's failure to cure
such default within 60 days after receipt by the Company of such notice; or
(iii) certain events of bankruptcy or insolvency.
The Trustee shall give notice to holders of the Debentures of any continuing
default known to the Trustee within 90 days after the occurrence thereof;
provided that, except in the case of a default as described in clause (i) of
the preceding paragraph, the Trustee may withhold such notice if it determines
in good faith that withholding the notice is in the interests of the holders.
The holders of a majority in aggregate principal amount at maturity of the
outstanding Debentures may 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; provided that such direction shall not be in
conflict with any law or the Indenture and subject to certain other
limitations. Before proceeding to exercise any right or power under the
Indenture at the direction of such holders, the Trustee shall be entitled to
receive from such holders or which might be reasonable security indemnity
satisfactory to it against the costs, expenses and liabilities incurred by it
in complying with any such direction. No holder of any Debenture will have any
right to pursue any remedy with respect to the Indenture or the Debentures
unless:
(i) such holder shall have previously given the Company and the Trustee
written notice of a continuing Event of Default;
33
(ii) the holders of at least 25% in aggregate principal amount at
maturity of the outstanding Debentures shall have made a written request to
the Trustee to pursue such remedy;
(iii) such holder or holders have offered to the Trustee reasonable
indemnity satisfactory to the Trustee;
(iv) the holders of a majority in aggregate principal amount at maturity
of the outstanding Debentures have not given the Trustee a direction
inconsistent with such request within 60 days after receipt of such
request; and
(v) the Trustee shall have failed to comply with the request within such
60-day period.
However, the right of any holder (x) to receive payment of the principal
amount at maturity, Issue Price, accrued Original Issue Discount, Redemption
Price, Purchase Price, Fundamental Change Redemption Price and any interest in
respect of a default in the payment of any such amounts on a Debenture, on or
after the due date expressed in such Debenture, (y) to institute suit for the
enforcement of any such payments or conversion or (z) to convert Debentures
shall not be impaired or adversely affected without such holder's consent. The
holders of at least a majority in aggregate principal amount at maturity of the
outstanding Debentures may waive an existing default and its consequences,
other than (i) any default in any payment on the Debentures, (ii) any default
with respect to the conversion rights of the Debentures or (iii) any default in
respect of certain covenants or provisions in the Indenture which may not be
modified without the consent of the holder of each Debenture as described in
"--Modification" below. The Company will be required to furnish to the Trustee
annually a statement as to any default by the Company in the performance and
observance of its obligations under the Indenture.
REGISTRATION RIGHTS
The Company has entered into a registration rights agreement with the initial
purchasers (the "Registration Rights Agreement") pursuant to which the Company,
at its expense, will, for the benefit of the holders, file with the Commission
the Shelf Registration Statement (of which this Prospectus forms a part)
covering resale of the Registrable Securities as soon as practicable, but in
any event within 90 days after the first date of original issuance of the
Debentures. The Company will use its best efforts to cause the Shelf
Registration Statement to become effective as promptly as is practicable, but
in any event within 180 days of such first date of original issuance and to
keep the Shelf Registration Statement effective until the earlier of (i) the
sale pursuant to the Shelf Registration Statement of all the securities
registered thereunder and (ii) the expiration of the holding period applicable
to such securities held by persons that are not affiliates of the Company under
Rule 144(k) under the Securities Act or any successor provision, subject to
certain permitted exceptions. The Company will be permitted to suspend the use
of this Prospectus under certain circumstances relating to pending corporate
developments, public filings with the Commission and similar events for a
period not to exceed 30 days in any three-month period and not to exceed an
aggregate of 90 days in any 12-month period. The Company will agree to pay
predetermined liquidated damages as described herein ("Liquidated Damages") to
holders of Debentures and holders of Common Stock issued upon conversion of the
Debentures if the Shelf Registration Statement is not timely filed or made
effective or if the prospectus is unavailable for periods in excess of those
permitted above. Such Liquidated Damages shall accrue until such failure to
file or become effective or unavailability
34
is cured, (i) in respect of any Debenture, at a rate per annum equal to 0.25%
for the first 90 day period after the occurrence of such event and 0.5%
thereafter of the Applicable Principal Amount (as defined) at maturity thereof
and, (ii) in respect of any shares of Common Stock into which the Debentures
have been converted, at a rate per annum equal to 0.25% for the first 90 day
period and 0.5% thereafter of the then Applicable Conversion Price (as
defined). A holder who sells Debentures and Common Stock issued upon conversion
of the Debentures pursuant to the Shelf Registration Statement generally will
be required to be named as a selling stockholder in the related prospectus,
deliver a prospectus to purchasers and be bound by certain provisions of the
Registration Rights Agreement that are applicable to such holder (including
certain indemnification provisions). The Company will pay all expenses of the
Shelf Registration Statement, provide to each registered holder copies of such
prospectus, notify each registered holder when the Shelf Registration Statement
has become effective and take certain other actions as are required to permit,
subject to the foregoing, unrestricted resales of the Debentures and the Common
Stock issued upon conversion of the Debentures. The term "Applicable Principal
Amount" means, as of any date of determination, with respect to each $1,000
principal amount at maturity of Debentures, the sum of the initial Issue Price
of such Debentures ($306.56) plus accrued Original Issue Discount with respect
to such Debentures through such date of determination or, if no Debentures are
then outstanding, such sum calculated as if such Debentures were then
outstanding. The term "Applicable Conversion Price" means, as of any date of
determination, the Applicable Principal Amount per $1,000 principal amount at
maturity of Debentures as of such date of determination divided by the
Conversion Rate in effect as of such date of determination or, if no Debentures
are then outstanding, the Conversion Rate that would be in effect were
Debentures then outstanding.
The Company has agreed in the Registration Rights Agreement to give notice to
all holders of the filing and effectiveness of the Shelf Registration Statement
by release made to Reuters Economic Services and Bloomberg Business News.
Selling Securityholders have received a form of notice and questionnaire (the
"Questionnaire") to be completed and delivered by a holder to the Company at
least three business days prior to any intended distribution of Registrable
Securities pursuant to the Shelf Registration Statement. Holders are required
to complete and deliver the Questionnaire prior to the effectiveness of the
Shelf Registration Statement so that such holder may be named as a selling
securityholders in the related prospectus at the time of effectiveness. Upon
receipt of such a completed Questionnaire, together with such other information
as may be reasonably requested by the Company, from a holder following the
effectiveness of the Shelf Registration Statement, the Company will, as
promptly as practicable but in any event within five Business Days of such
receipt, file such amendments to the Shelf Registration Statement or
supplements to the related prospectus as are necessary to permit such holder to
deliver such prospectus to purchasers of Registrable Securities (subject to the
Company's right to suspend the use of the prospectus as described above). The
Company has agreed to pay Liquidated Damages in the amount set forth above to
such holder if the Company fails to make such filing in the time required or,
if such filing is a post-effective amendment to the Shelf Registration
Statement required to be declared effective under the Securities Act, if such
amendment is not declared effective within 45 days of the filing thereof. Any
holder that does not complete and deliver a Questionnaire or provide such other
information will not be named as a selling securityholder in the prospectus and
therefore will not be permitted to sell any Registrable Securities pursuant to
the Shelf Registration Statement.
35
The summary herein of certain provisions of the Registration Rights Agreement
is subject to, and is qualified in its entirety by reference to, all the
provisions of the Registration Rights Agreement.
MODIFICATION
Modification and amendment of the Indenture or the Debentures may be effected
by the Company and the Trustee with the consent of the holders of not less than
a majority in aggregate principal amount at maturity of the Debentures then
outstanding. Notwithstanding the foregoing, no such amendment may, without the
consent of each holder affected thereby:
(i) reduce the principal amount at maturity, Issue Price, Purchase Price,
Fundamental Chance Redemption Price or Redemption Price, or extend the
stated maturity of any Debenture or alter the manner or rate of accrual of
Original Issue Discount or interest, or make any Debenture payable in money
or securities other than that stated in the Debenture;
(ii) make any change to the principal amount at maturity of Debentures
whose holders must consent to an amendment or any waiver under the
Indenture or modify the Indenture provisions relating to such amendments or
waivers;
(iii) make any change that adversely affects the right to convert any
Debenture or the right to require the Company to purchase a Debenture or
the right to require the Company to redeem a Debenture upon a Fundamental
Change;
(iv) modify the provisions of the Indenture relating to the subordination
of the Debentures in a manner adverse to the holders of the Debentures; or
(v) impair the right to institute suit for the enforcement of any payment
with respect to, or conversion of, the Debentures.
The Indenture also provides for certain modifications of its terms without
the consent of the holders. No amendment may be made to the subordination
provisions of the Indenture that adversely affects the rights of any holder of
Senior Indebtedness then outstanding, unless the holders of such Senior
Indebtedness (as required pursuant to the terms of such Senior Indebtedness)
consent to such change.
TAXATION OF DEBENTURES
See "Certain Federal Income Tax Considerations" for a discussion of certain
tax considerations relevant to a holder of Debentures.
INFORMATION CONCERNING THE TRUSTEE
State Street Bank and Trust Company of California, N.A., as Trustee under the
Indenture, has been appointed by the Company as paying agent, conversion agent,
registrar and custodian with regard to the Debentures.
36
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain material U.S. federal income
tax considerations relating to the purchase, ownership and disposition of the
Debentures and Conversion Shares to U.S. Holders (as defined below), and
certain material U.S. federal income and estate tax considerations relating to
the purchase, ownership and disposition of the Debentures and Conversion Shares
to Non-U.S. Holders (as defined below). The discussion is a summary only and
does not purport to be a complete analysis of all the potential tax
considerations relating thereto. This discussion is based upon the Internal
Revenue Code of 1986, as amended (the "Code"), existing and proposed Treasury
Regulations, and judicial decisions and administrative interpretations
thereunder, as of the date hereof, all of which are subject to change, possibly
with retroactive effect, or different interpretations. There can be no
assurance that the Internal Revenue Service (the "IRS") will not challenge one
or more of the tax consequences described herein, and the Company has not
obtained, nor does it intend to obtain, a ruling from the IRS or an opinion of
counsel with respect to the U.S. federal tax consequences of acquiring or
holding Debentures and Conversion Shares.
The discussion does not purport to address all tax consequences that may be
important to a particular holder in light of the holder's circumstances (such
as the alternative minimum tax provisions of the Code), or to certain
categories of investors (such as certain financial institutions, insurance
companies, tax-exempt organizations, dealers in securities, or persons who hold
Debentures or Common Stock as part of a hedge, conversion or constructive sale
transaction, straddle or other risk reduction transaction) that may be subject
to special rules. This discussion is limited to purchasers of Debentures who
hold the Debentures and any Common Stock into which the Debentures are
converted as capital assets. This discussion also does not address the tax
consequences arising under the laws of any foreign, state or local jurisdiction
or U.S. estate and gift tax law as applicable to U.S. Holders.
PERSONS CONSIDERING THE PURCHASE OF A DEBENTURE SHOULD CONSULT THEIR OWN TAX
ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF ACQUIRING, HOLDING,
CONVERTING OR OTHERWISE DISPOSING OF THE DEBENTURES AND COMMON STOCK, INCLUDING
THE EFFECT AND APPLICABILITY OF STATE, LOCAL OR FOREIGN TAX LAWS.
U.S. HOLDERS
As used herein, the term "U.S. Holder" means a holder of a Debenture or
Conversion Shares that is (i) for United States federal income tax purposes, a
citizen or resident of the United States, (ii) a corporation, partnership or
other entity created or organized in or under the laws of the United States or
of any 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, the administration of which is subject to the primary supervision
of a court within the United States and which has one or more United States
persons with authority to control all substantial decisions. A "non-U.S.
Holder" is any holder other than a U.S. Holder.
Original Issue Discount on the Debentures. The Debentures have been issued at
a substantial discount from their stated redemption price at maturity. For
federal income tax purposes, the excess
37
of the stated redemption price at maturity of each Debenture over its issue
price constitutes original issue discount ("Original Issue Discount"). The
issue price of the Debentures will equal the initial price at which a
substantial amount of the Debentures is sold (not including sales to Initial
Purchasers or placement agents, including the Initial Purchasers). U.S. Holders
of the Debentures will be required to report Original Issue Discount as taxable
ordinary income as it accrues, in accordance with the constant yield method
described below, before receipt of the cash attributable to such income,
regardless of such U.S. Holder's regular method of accounting for United States
federal income tax purposes. A U.S. Holder of a Debenture must include in gross
income for federal income tax purposes the sum of the daily portions of
Original Issue Discount with respect to the Debenture for each day during the
taxable year or portion of a taxable year on which such U.S. Holder holds the
Debenture. The daily portion is determined by allocating to each day of each
accrual period a pro rata portion of an amount equal to the adjusted issue
price of the Debenture at the beginning of the accrual period multiplied by the
yield to maturity of the Debenture (determined by compounding at the close of
each accrual period and adjusted for the length of the accrual period). The
adjusted issue price of a Debenture at the start of any accrual period will be
the issue price of the Debenture increased by the accrued Original Issue
Discount for each prior accrual period. Under these rules, U.S. Holders will
have to include in gross income increasingly greater amounts of Original Issue
Discount in each successive accrual period. A U.S. Holder's original tax basis
for determining gain or loss on the sale or other disposition of a Debenture
will be increased by any accrued Original Issue Discount includable in such
U.S. Holder's gross income.
There are several circumstances under which the Company could make a payment
on a Debenture which would affect the yield to maturity of a Debenture,
including (as described under "Description of Debentures") the payment of
Liquidated Damages, or certain Redemptions or repurchases of a Debenture.
According to Treasury Regulations, the possibility of a change in the yield
will not be treated as affecting the amount of Original Issue Discount required
to be realized by a holder (or the timing of such recognition) if the
likelihood of the change, as of the date the debt obligations are issued, is
remote. The Company intends to report on the basis that the likelihood of any
change in the yield on the Debentures is remote. The Company also intends to
report on the basis that there is no alternative payment schedule that would
minimize the yield on the Debentures to the Company.
The Company or a paying agent will be required to furnish annually to the
Internal Revenue Service and each U.S. Holder information regarding the amount
of Original Issue Discount attributable to that year.
Market Discount. Any principal payment or gain realized by a U.S. Holder on
disposition or retirement of a Debenture will be treated as ordinary income to
the extent that there is accrued market discount on the Debenture. The amount
of market discount on a Debenture for a holder will equal the excess of the
adjusted issue price of such Debenture over the initial tax basis of such
Debentures in the hands of such holder. To the extent a holder exchanges or
converts a Debenture into Common Stock in a transaction that is otherwise tax
free, any accrued market discount will carry over and generally be recognized
upon a disposition of the Common Stock. Unless a U.S. Holder irrevocably elects
to accrue market discount under a constant-interest method, accrued market
discount is the total market discount multiplied by a fraction, the numerator
of which is the number of days the U.S. Holder has held the obligation and the
denominator of which is the number of days
38
from the date the holder acquired the obligation until its maturity. A U.S.
Holder may be required to defer a portion of its interest deductions for the
taxable year attributable to any indebtedness incurred or continued to purchase
or carry a Debenture purchased with market discount. Any such deferred interest
expense would not exceed the market discount that accrues during such taxable
year and is, in general, allowed as a deduction not later than the year in
which such market discount is includable in income. If the holder elects to
include market discount in income currently as it accrues on all market
discount instruments acquired by the U.S. Holder in that taxable year or
thereafter, the (i) interest deferral described above will not apply and (ii)
market discount will not carry over into Common Stock as described above. Any
such election is terminable only with the consent of the IRS and applies to all
market discount bonds acquired during or after the year for which it is made.
Acquisition Premium. A U.S. Holder will be considered to have "acquisition
premium" to the extent the U.S. Holder's initial tax basis in a Debenture is
greater than (x) the adjusted issue price of such Debenture but less than (y)
the stated redemption price at maturity of such Debenture. Acquisition premium
may offset the amount of Original Issue Discount received on such Debenture
that the U.S. Holder is required to include in income.
Sale, Exchange or Retirement of the Debentures. Upon the sale, exchange or
retirement of a Debenture, including as a result of a tender upon the
occurrence of a Fundamental Change, and, except as discussed in the next
paragraph on a Purchase Date, a U.S. Holder will recognize gain or loss equal
to the difference between the sale or redemption proceeds and the U.S. Holder's
adjusted tax basis in the Debenture.
If a U.S. Holder elects to exercise its option to tender the Debentures to
the Company on a Purchase Date and the Company issues Common Stock in
satisfaction of all or part of the Purchase Price, the exchange of the
Debentures for Common Stock should qualify as a reorganization for federal
income tax purposes. If the Purchase Price is paid solely in Common Stock,
except in the case of a fractional share described below, a U.S. Holder shall
not be required to recognize any gain or loss realized. If the Purchase Price
is paid in a combination of Common Stock and cash (other than cash received in
lieu of a fractional share), gain (but not loss) realized by the U.S. Holder
would be recognized, but only to the extent of the cash received. A U.S.
Holder's initial tax basis in the Common Stock received would be equal to such
U.S. Holder's adjusted tax basis in the Debenture tendered (except for any
portion allocable to a fractional share of Common Stock), increased by the
amount of gain recognized (other than with respect to a fractional share) and
decreased by the amount of any cash received (except cash received in lieu of a
fractional share). The holding period for Common Stock received in the exchange
will include the holding period of the Debenture tendered to the Company in
exchange therefor. The receipt of cash in lieu of a fractional share of Common
Stock should generally result in capital gain or loss, measured by the
difference between the amount of cash received for the fractional share and the
U.S. Holder's tax basis in the fractional share interest.
A holder's adjusted tax basis in a Debenture will generally equal the
holder's cost of the Debenture increased by any Original Issue Discount
previously included in income by such holder with respect to such Debenture and
decreased by any payments received thereon. Except to the extent of any accrued
market discount, gain or loss realized on the sale, exchange or retirement of a
Debenture will generally be capital gain or loss and will be long-term capital
gain or loss if the
39
Debenture is held for more than one year. For individual U.S. Holders, under
recently enacted legislation, gain on most capital assets held by an individual
U.S. Holder more than one year would be subject to a maximum U.S. federal rate
of tax of 20%.
Conversion of Debentures. A U.S. Holder's conversion of a Debenture into
Common Stock will generally not be a taxable event (except with respect to cash
received in lieu of a fractional share). A U.S. Holder's basis in the Common
Stock received on conversion of a Debenture will be the same as the U.S.
Holder's basis in the Debenture at the time of conversion (exclusive of any tax
basis allocable to a fractional share), and the holding period for the Common
Stock received on conversion will include the holding period of the Debenture
converted. The receipt of cash in lieu of a fractional share of Common Stock
should generally result in capital gain or loss (measured by the difference
between the cash received for the fractional share interest and the U.S.
Holder's tax basis in the fractional share interest).
Dividends; Adjustment of Conversion Price. Dividends, if any, paid on the
Common Stock generally will be includable in the income of a U.S. Holder as
ordinary income to the extent of the Company's current or accumulated earnings
and profits.
If at any time the Company makes a distribution of property to shareholders
that would be taxable to such shareholders as a dividend for federal income tax
purposes (for example, distributions of evidences of indebtedness or assets of
the Company, but generally not stock dividends or rights to subscribe for
Common Stock) and, pursuant to the anti-dilution provisions of the Indenture,
the Conversion Rate of the Debentures is increased, such increase may be deemed
to be the payment of a taxable dividend to U.S. Holders of Debentures. If the
Conversion Rate is increased at the discretion of the Company or in certain
other circumstances, such increase also may be deemed to be the payment of a
taxable dividend to U.S. Holders of Debentures.
Sale of Common Stock. Upon the sale or exchange of Common Stock, a U.S.
Holder generally will recognize capital gain or capital loss (except to the
extent of any accrued market discount not previously included in income) equal
to the difference between the amount realized on such sale or exchange and the
holder's adjusted tax basis in such shares. Such capital gain or loss will be
long-term capital gain or loss if the cumulative holding period of the Common
Stock (including the holding period of a Debenture converted to such Common
Stock as described above) is more than one year. Individual U.S. Holders may be
subject to certain maximum rates of tax on the sale of Common Stock. See "--
Sale, Exchange Of Retirement of the Debentures."
NON-U.S. HOLDERS
The following discussion is a summary of the principal United States federal
income and estate tax consequences resulting from the ownership of the
Debentures or Common Stock by Non-U.S. Holders.
Withholding Tax on Payments of Principal and Original Issue Discount on
Debentures. The payment of principal (including any Original Issue Discount
included therein) of a Debenture by the Company or any paying agent of the
Company to any Non-U.S. Holder will not be subject to United States federal
withholding tax, provided that in the case of payment of cash in respect of
Original Issue Discount (i) the Non-U.S. Holder does not actually or
constructively own 10% or more of the
40
total voting combined power of all classes of stock of the Company, (ii) the
Non-U.S. Holder is not a controlled foreign corporation that is related to the
Company within the meaning of the Code and, (iii) either (A) the beneficial
owner of the Debenture certifies to the applicable payor or its agent, under
penalties of perjury, that it is not a U.S. Holder and provides its name and
address on United States Treasury Form W-8 (or a suitable substitute form), or
(B) a securities clearing organization, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or
business (a "financial institution") and holds the Debenture certifies under
penalties of perjury that such a Form W-8 (or suitable substitute form) has
been received from the beneficial owner by it or by a financial institution
between it and the beneficial owner and furnishes the payor with a copy
thereof. Except to the extent otherwise provided under an applicable tax
treaty, a Non-U.S. Holder generally will be taxed in the same manner as a U.S.
Holder with respect to Original Issue Discount on a Debenture if such Original
Issue Discount is effectively connected with a U.S. trade or business of the
Non-U.S. Holder. Effectively connected interest received by a corporate Non-
U.S. Holder may also, under certain circumstances, be subject to an additional
"branch profits tax" at a 30% rate (or, if applicable, a lower treaty rate).
Such effectively connected Original Issue Discount will not be subject to
withholding tax if the holder delivers an IRS Form 4224 (and, beginning January
1, 2000, a Form W-8) to the payor.
Dividends. Dividends, if any, paid on the Common Stock to a Non-U.S. Holder
(and, after December 31, 1999, any deemed dividends resulting from an
adjustment to the Conversion Rate, see "U.S. Holders--Dividends; Adjustment of
Conversion Price" above) generally will be subject to a 30% United States
federal withholding tax, subject to reduction for Non-U.S. Holders eligible for
the benefits of certain income tax treaties. Currently, for purposes of
determining whether tax is to be withheld at the 30% rate or at a reduced
treaty rate, the Company will ordinarily presume that dividends paid to an
address in a foreign country are paid to a resident of such country absent
knowledge that such presumption is not warranted. Under Treasury Regulations
effective for payments after December 31, 1999, holders will be required to
satisfy certain applicable certification requirements to claim treaty benefits.
Except to the extent otherwise provided under an applicable tax treaty, a Non-
U.S. Holder generally will be taxed in the same manner as a U.S. Holder on
dividends paid (or deemed paid) that are effectively connected with the conduct
of a trade or business in the U.S. by the Non-U.S. Holder. If such Non-U.S.
Holder is a foreign corporation, it may also be subject to a United States
branch profits tax on such effectively connected income at a 30% rate or such
lower rate as may be specified by an applicable income tax treaty.
Gain on Disposition of the Debentures and Common Stock. A Non-U.S. Holder
generally will not be subject to United States federal income tax on gain
realized on the sale, exchange or redemption of a Debenture, including the
exchange of a Debenture for Common Stock, or the sale or exchange of Common
Stock unless (i) in the case of an individual Non-U.S. Holder, such holder is
present in the United States for 183 days or more in the year of such sale,
exchange or redemption and either (A) has a "tax home" in the United States and
certain other requirements are met, or (B) the gain from the disposition is
attributable to an office or other fixed place of business in the United
States, (ii) the Non-U.S. Holder is subject to tax pursuant to the provisions
of U.S. tax law applicable to certain U.S. expatriates, (iii) the gain is
effectively connected with the conduct of a United States trade or business of
the Non-U.S. Holder, or (iv) in the case of the disposition of Common Stock,
the Company is a U.S. real property holding corporation. The Company does not
believe that it is
41
currently a "United States real property holding corporation" or that it will
become one in the future.
U.S. Federal Estate Tax. A Debenture 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 stock of
the Company and, at the time of the individual's death, payments with respect
to such Debenture 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 U.S. federal estate
tax purposes, unless an applicable estate tax treaty otherwise applies.
BACKUP WITHHOLDING AND INFORMATION REPORTING
U.S. Holders. Information reporting will apply to payments of interest or
dividends on or the proceeds of the sale or other disposition of the Debentures
or shares of Common Stock with respect to certain noncorporate U.S. Holders,
and backup withholding at a rate of 31% may apply unless the recipient of such
payment supplies a taxpayer identification number, certified under penalties of
perjury, as well as certain other information or otherwise establishes an
exemption from backup withholding. Any amount withheld under the backup
withholding rules is allowable as a credit against the U.S. Holder's federal
income tax, provided that the required information is provided to the IRS.
Non-U.S. Holders. The Company must report annually to the IRS and to each
Non-U.S. Holder the amount of any dividends paid to, and the tax withheld with
respect to, such holder, regardless of whether any tax was actually withheld.
Copies of these information returns may also be made available under the
provisions of a specific treaty or agreement to the tax authorities of the
country in which the Non-U.S. Holder resides.
Under current Treasury Regulations, backup withholding and information
reporting will not apply to payments of principal, including cash payments in
respect of Original Issue Discount, on the Debentures by the Company or any
agent thereof to a Non-U.S. Holder if the Non-U.S. Holder certifies as to its
Non-U.S. Holder status under penalties of perjury or otherwise establishes an
exemption (provided that neither the Company nor its agent has actual knowledge
that the holder is a U.S. person or that the conditions of any other exemptions
are not in fact satisfied). The payment of the proceeds on the disposition of
Debentures or shares of Common Stock to or through the United States office of
a United States or foreign broker will be subject to information reporting and
backup withholding unless the owner provides the certification described above
or otherwise establishes an exemption. The proceeds of the disposition by a
Non-U.S. Holder of Debentures or shares of Common Stock to or through a foreign
office of a broker will not be subject to backup withholding or information
reporting. However, if such broker is a U.S. person, a controlled foreign
corporation for United States tax purposes, or a foreign person, 50% or more of
whose gross income from all sources for certain periods is from activities that
are effectively connected with a U.S. trade or business, or, in the case of
payments made after December 31, 1999, a foreign partnership with
42
certain connections to the United States, information reporting requirements
will apply unless such broker has documentary evidence in its files of the
holder's Non-U.S. status and has no actual knowledge to the contrary or unless
the holder otherwise establishes an exemption. Recently finalized Treasury
Regulations would modify the application of the information reporting
requirements and the back-up withholding tax to Non-U.S. Holders effective
January 1, 2000.
PLAN OF DISTRIBUTION
The Company will not receive any of the proceeds of the sale of the
Debentures and the Conversion Shares (the "Securities") offered hereby. The
Securities may be sold from time to time to purchasers directly by the Selling
Securityholders. Alternatively, the Selling Securityholders may from time to
time offer the Securities through underwriters, broker-dealers or agents who
may receive compensation in the form of discounts, concessions or commissions
from the Selling Securityholders and/or the purchasers of the Securities for
whom they may act as agent. The Selling Securityholders and any such broker-
dealers or agents who participate in the distribution of the Securities may be
deemed to be "underwriters," and any profits on the sale of the Securities by
them 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. To the extent the Selling Securityholders may be
deemed to be 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.
The Registrable Securities offered hereby may be sold from time to time
directly by the Selling Securityholders or, alternatively, through
underwriters, broker-dealers or agents. If the Securities are sold through
underwriters or broker-dealers, the Selling Securityholders will be responsible
for underwriting discounts or commissions or agent's commissions. Such
Securities may be sold in one or more transactions at fixed prices, at
prevailing market prices at the time of sale, at varying prices determined at
the time of sale, or at negotiated prices. Such sales may be effected in
transactions (which may involve block transactions) (i) on any national
securities exchange or quotation service on which the Securities may be listed
or quoted at the time of the sale (including the Nasdaq National Market in the
case of the Common Stock), (ii) in the over-the-counter market, (iii) in
transactions otherwise than on such exchanges or services or in the over-the-
counter market, or (iv) through the writing of options. In connection with
sales of the Securities or otherwise, the Selling Securityholders may enter
into hedging transactions with broker-dealers, which may in turn engage in
short sales of the Securities in the course of hedging in positions they
assume. The Selling Securityholders may also sell Securities short and deliver
Securities to close out short positions, or loan or pledge Securities to
broker-dealer that in turn may sell such securities
To the best knowledge of the Company, there are currently no plans,
arrangements or understandings between any Selling Securityholders and any
underwriter, broker-dealer or agent regarding the sale of the Securities by the
Selling Securityholders. There is no assurance that any Selling Securityholder
will sell any or all of the Securities offered by it hereunder or that any such
Selling Securityholder will not transfer, devise or gift such Securities by
other means not described herein.
43
The outstanding Common Stock is listed for trading on The Nasdaq National
Market under the symbol "ASPT". The Company does not intend to apply for
listing of the Debentures on any securities exchange or for quotation through
Nasdaq. Accordingly, no assurance can be given as to the development of
liquidity or any trading market for the Debentures. See "Risk Factors--Absence
of Public Market."
There can be no assurance that any Selling Securityholder will sell any or
all of the Debentures or Conversion Shares registered pursuant to the
Registration Statement of which this Prospectus forms a part. In addition, any
securities covered by the Registration Statement of which this Prospectus forms
a part 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 any other person participating in such
distribution will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including, without limitation Regulation
M which may limit the timing of purchases and sales of any of the Securities by
the Selling Securityholders and any other such person. Furthermore, Regulation
M of the Exchange Act may restrict the ability of any person engaged in the
distribution of the Securities to engage in market-making activities with
respect to the particular Securities being distributed for a period of up to
five business days prior to the commencement of such distribution. All of the
foregoing may affect the marketability of the Securities and the ability of any
person or entity to engage in market-making activities with respect to the
Securities.
Pursuant to the Registration Rights Agreement entered into in connection with
the offer and sale of the Debentures by the Company, each of the Company 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 therewith.
The Company has agreed to pay substantially all the expenses incidental to
the registration, offering and sale of the Securities to the public other than
commissions, fees and discounts of underwriters, brokers, dealers and agents.
LEGAL MATTERS
Certain legal matters with respect to the validity of the Debentures and the
Conversion Shares offered hereby will be passed upon for the Company by Venture
Law Group, A Professional Corporation, Menlo Park, California.
EXPERTS
The financial statements and the related financial statement schedule
incorporated in this Prospectus by reference from the Company's Annual Report
on Form 10-K for the year ended December 31, 1997 have been audited by Deloitte
& Touche LLP, independent auditors, as stated in their reports, which are
incorporated herein by reference, and have been so incorporated in reliance
upon the reports of such firm given upon their authority as experts in
accounting and auditing.
44
NEITHER THE COMPANY NOR ANY OTHER AUTHORITY HAS AUTHORIZED ANYONE TO GIVE
INFORMATION BEYOND WHAT IS SET FORTH IN THIS PROSPECTUS. SALES OF THE
SECURITIES DESCRIBED IN THIS PROSPECTUS ARE NOT DIRECTED AT ANYONE IN ANY
JURISDICTION IN WHICH AN OFFER OR SOLICITATION OF SUCH SECURITIES IS NOT
AUTHORIZED, OR IN WHICH THE PERSON MAKING THE OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT AS OF
THE DATE OF THIS PROSPECTUS. NEITHER DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE PURSUANT TO THIS PROSPECTUS SHALL IMPLY THAT THE INFORMATION CONTAINED IN
THIS PROSPECTUS IS CORRECT AS OF ANY TIME AFTER THE DATE OF THIS PROSPECTUS.
----------------
ASPECT TELECOMMUNICATIONS CORPORATION
$490,000,000
ZERO COUPON CONVERTIBLE SUBORDINATED
DEBENTURES DUE 2018
AND SHARES OF COMMON STOCK ISSUABLE
UPON CONVERSION THEREOF
----------------
PROSPECTUS
----------------
, 1998
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses payable by the
Registrant in connection with the sale and distribution of the securities
being registered hereby. Normal commission expenses and brokerage fees are
payable individually by the Selling Securityholders. All amounts are estimated
except the Securities and Exchange Commission registration fee.
SEC registration fee............................................. $136,220
Legal fees and expenses.......................................... $ 45,000
Accounting fees and expenses..................................... $ 15,000
Miscellaneous fees and expenses.................................. $ 5,000
--------
Total.......................................................... $201,220
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 317 of the California Corporations Code allows for the
indemnification of officers, directors, and other corporate agents in terms
sufficiently broad to indemnify such persons under certain circumstances for
liabilities (including reimbursement for expenses incurred) arising under the
Securities Act. Article IV of the Registrant's Articles of Incorporation and
Article VI of the Registrant's Bylaws provides for indemnification of the
Registrant's directors, officers, employees and other agents to the extent and
under the circumstances permitted by the California Corporations Code. The
Registrant has also entered into agreements with its directors and officers
that will require the Registrant, among other things, to indemnify them
against certain liabilities that may arise by reason of their status or
service as directors to the fullest extent not prohibited by law.
In addition, the Registrant carries director and officer liability insurance
in the amount of $20 million.
In connection with this offering, the Selling Securityholders have agreed to
indemnify the Registrant, its directors and officers and each such person who
controls the Registrant, against any and all liability arising from inaccurate
information provided to the Registrant by the Selling Securityholders and
contained herein.
ITEM 16. EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
4.1 Indenture, dated August 10, 1998, by and among the Company and
State Street Bank and Trust Company of California, N.A., as
Trustee, including the form of Debenture.
4.2 Form of Debenture (included in Exhibit 4.1).
4.3 Registration Rights Agreement, dated August 10, 1998, by and among
the Company, Morgan Stanley & Co. Incorporated and Credit Suisse
First Boston Corporation.
5.1 Opinion of Venture Law Group, A Professional Corporation.
12.1 Statement re: computation of ratio of earnings to fixed charges.
23.1 Consent of Venture Law Group, A Professional Corporation (see
Exhibit 5.1).
23.2 Independent auditors' consent.
24.1 Power of Attorney (see page II-4).
25.1 Statement of Eligibility Under the Trust Indenture Act of 1939 of a
Corporation Designated to Act as Trustee on Form T-1.
II-1
ITEM 17. UNDERTAKINGS.
1. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10 (a) (3) of the
Securities Act of 1933 (the "Act");
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which is registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424 (b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement; and
(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 the undertakings set forth in clauses (i) and (iii)
above shall not apply if the information required to be included in a post-
effective amendment by these clauses is contained in periodic reports filed by
the registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 (the "Exchange Act") that are incorporated by reference
in this registration statement.
(2) That, for the purpose of determining any liability under the Act, each
such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
2. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Act, each filing of the registrant's
annual report pursuant to Section 13 (a) or Section 15 (d) of the Exchange Act
that is incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
3. The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent
or given, the latest annual report, to security holders that is incorporated
by reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14e-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
4. Insofar as indemnification of liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the provisions described under Item 15 above, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
II-2
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
5. The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424 (b) (1) or (4)
or 497(h) under the Act 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 Act, 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, Aspect
Telecommunications Corporation certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-3 and has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Jose, State of
California, on October 30, 1998.
ASPECT TELECOMMUNICATIONS
CORPORATION
By: /s/ JAMES R. CARREKER
__________________________________
James R. Carreker
Chairman, Chief Executive Officer
and Director
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints James R. Carreker and Eric J. Keller,
jointly and severally, his or her true and lawful attorneys-in-fact, each with
full power of substitution, for him or her in any and all capacities, to sign
any and all amendments (including post-effective amendments) to this
Registration Statement, and to file the same, with all exhibits thereto and
all documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said attorneys-
in-fact or any of them, or his or their substitute or substitutes, may
lawfully do or cause to be done or by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ JAMES R. CARREKER Chairman, Chief Executive October 30, 1998
____________________________________ Officer and Director
James R. Carreker (Principal Executive Officer)
/s/ ERIC J. KELLER Vice President, Finance and October 30, 1998
____________________________________ Chief Financial Officer
Eric J. Keller (Principal Financial Officer
and Principal Accounting
Officer)
/s/ DEBRA J. ENGEL Director October 30, 1998
____________________________________
Debra J. Engel
/s/ NORMAN A. FOGELSONG Director October 30, 1998
____________________________________
Norman A. Fogelsong
Director October , 1998
____________________________________
James L. Patterson
Director October , 1998
____________________________________
John W. Peth
II-4
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
4.1 Indenture, dated August 10, 1998, by and among the Company and State
Street Bank and Trust Company of California, N.A., as Trustee,
including the form of Debenture.
4.2 Form of Debenture (included in Exhibit 4.1).
4.3 Registration Rights Agreement, dated August 10, 1998, by and among the
Company, Morgan
Stanley & Co. Incorporated and Credit Suisse First Boston
Corporation.
5.1 Opinion of Venture Law Group, a Professional Corporation.
12.1 Statement re: computation of ratio of earnings to fixed charges.
23.1 Consent of Venture Law Group, A Professional Corporation (see Exhibit
5.1).
23.2 Independent auditors' consent.
24.1 Power of Attorney (see page II-4).
25.1 Statement of Eligibility Under the Trust Indenture Act of 1939 of a
Corporation Designated to Act as Trustee on Form T-1.