1
As filed with the Securities and Exchange Commission on August 11, 1999
Registration No. 333-____.AS FILED WITH THE SECURITIES EXCHANGE COMMISSION ON MARCH 20, 2000
REGISTRATION NO. 333-32068
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington,WASHINGTON, D.C. 20549
-----------------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------------------------
SDL, INC.
(Exact nameName of registrantRegistrant as specifiedSpecified in its charter)
Delaware 3674 77-0331449
(State or other jurisdiction (Primary Standard Industrial (I.R.S. employer
of incorporation or organization) Classification CodeCharter)
Delaware 77-0331449
(State or jurisdiction of (I.R.S. Employer
incorporation or organization Identification Number) identification number)
80 Rose Orchard Way
San Jose, California 95134ROSE ORCHARD WAY
SAN JOSE, CALIFORNIA 95134-1365
(408) 943-9411
(Address including ZIP code, and telephone number
including area code, of registrant's principal executive offices)
--------------------
Michael---------------
MICHAEL L. Foster
Chief Financial OfficerFOSTER
VICE PRESIDENT - FINANCE
SDL, Inc.INC.
80 Rose Orchard Way
San Jose, California 95134ROSE ORCHARD WAY
SAN JOSE, CALIFORNIA 95134-1365
(408) 943-9411
(Name, address, including ZIPzip code, and telephone number, including area code,
of agent for service)
--------------------
Copies To:---------------
COPIES TO:
William D. Sherman, Esq.
Stephen J. Schrader, Esq.
MORRISONMorrison & FOERSTERFoerster LLP
755 Page Mill Road
Palo Alto, California 94304
(650) 813-5600
--------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this Registration
Statement
as determined by market conditions.
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 of 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. [ ]
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CALCULATION OF REGISTRATION FEE
==================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES TO BE AMOUNT TO BE AGGREGATE OFFERING AGGREGATE OFFERING AMOUNT OF
REGISTERED(1) REGISTERED(2) PRICE PER UNIT(2)(3) PRICE(2)(3) REGISTRATION FEE
==================================================================================================================
Common Stock(4),
$0.001 par value per
share.......
Preferred Stock(5), $0.001
par value per share....... $300,000,000 (2) (3) $300,000,000 $83,400
Depositary Shares(6)......
Warrants(7)...............
Debt Securities(8)........
- ------------------------------------------------------------------------------------------------------------------
Total..................... $300,000,000 (2) (3) $300,000,000 $83,400(9)
==================================================================================================================
(1) Subject to footnote (2), this Registration Statement also covers contracts
which may be issued by the Registrant under which the counterparty may be
required to purchase Common Stock, Preferred Stock, Depositary Shares or
Debt Securities.
(2) In no event will the aggregate maximum offering price of all securities
registered pursuant to this Registration Statement exceed $300,000,000. Any
securities registered hereunder may be sold separately or as units with
other securities registered hereunder.
(3) The proposed maximum offering price per unit (a) has been omitted pursuant
to Instruction II.D. of Form S-3 and (b) will be determined, from time to
time, by the Registrant in connection with the issuance by the Registrant of
the securities registered hereunder.
(4) Subject to footnote 2, there is being registered hereunder an indeterminate
number of shares of Common Stock as may be sold from time to time by
Registrant. Subject to footnote (2), there is also being registered
hereunder an indeterminate number of shares of Common Stock that may be
issued upon conversion of Preferred Stock, Depositary Shares or Debt
Securities registered hereunder or upon exercise of Warrants registered
hereunder, as the case may be.
(5) Subject to footnote 2, there is being registered hereunder an indeterminate
number of shares of Preferred Stock as may be sold from time to time by
Registrant or may be issued upon conversion of Debt Securities or exercise
of Warrants registered hereunder.
(6) To be represented by Depositary Receipts representing an interest in all or
a specified portion of a share of Preferred Stock.
(7) Subject to footnote 2, there is being registered hereunder an indeterminate
number of Warrants representing rights to purchase Preferred Stock or Common
Stock registered hereunder.
(8) Subject to footnote 2, there is being registered hereunder an indeterminate
number of Debt Securities as may be sold from time to time.
(9) Calculated pursuant to Rule 457(o) of the rules and regulations under the
Securities Act of 1933, as amended.
--------------------statement.
-------------------
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 AN 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.
================================================================================
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THE INFORMATION IN THIS2
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.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED AUGUST 11, 1999
$300,000,000- --------------------------------------------------------------------------------
SDL, INC.
4,337,961 SHARES OF COMMON STOCK
PREFERRED STOCK, DEPOSITARY SHARES,
WARRANTS AND DEBT SECURITIES
SDL, Inc. may offer, from time- --------------------------------------------------------------------------------
347,961 shares of our common stock have been issued to time, in one or more series or
classesformer
stockholders of Queensgate Instruments Limited ("Queensgate") and in amounts, at prices and on terms that it will determine at the
time of offering, with an additional
aggregate public offering pricemaximum of up to $300,000,000
(or its equivalent in another currency based on the exchange rate at the time of
sale):
-3,990,000 shares of our common stock $0.001 par value per share;
-may be issued in
the future, pursuant to an earn out, to former stockholders and former
optionholders of Queensgate as payment for the acquisition by us of all of the
outstanding equity interests of Queensgate in March, 2000. The shares of preferredour
common stock $0.001 par value per share;
-which may be issued in the future will, if issued, be in payment of
the Company's obligations under an earn-out provision in connection with the
acquisition of all of the outstanding equity interests of Queensgate. Some of
these holders may wish to sell shares of preferred stock represented by depositary
shares;
- warrants to purchaseour common stock or preferred stock;in the future, and
- debt securities.this prospectus allows them to do so. We will providenot receive any of the specific termsproceeds
from any sale of shares by these securities in
supplementsholders, but we have agreed to bear the
expenses of registration of the shares by this prospectus. You should readShare numbers in this
prospectus andare included on a post-split basis to reflect our 2-for-1 stock split
being effected in the applicable supplement carefully before you invest.form of a 100% stock dividend payable on March 13, 2000 to
holders of record of our stock on February 29, 2000.
Our common stock is listed on the NASDAQNasdaq National Market System under the symbol "SDLI." On August 9, 1999, theSDLI.
The last reported salessale price of our common stock on the NASDAQNasdaq National Market Systemon
March 17, 2000 was $63.375$216.875 per share.
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INVESTING IN THE SECURITIESCOMMON STOCK INVOLVES RISKS WHICH ARE DESCRIBED IN THEA HIGH LEVEL OF INVESTMENT RISK. SEE
"RISK FACTORS" SECTION BEGINNINGINCORPORATED BY REFERENCE ON PAGE ___5 OF THIS PROSPECTUS.
-------------------PROSPECTUS
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Neither Thethe Securities Andand Exchange Commission Nor Any State Securities Commission Has Approved Or
Disapproved Of These Securities Or Determined That This Prospectus Is Truthful
Or Complete. Any Representation To The Contrary Is A Criminal Offense.
-------------------
The datenor any state securities
commission has approved or disapproved of these securities, or determined if
this prospectus is August ___, 1999.truthful or complete. Any representation to the contrary is a
criminal offense.
- --------------------------------------------------------------------------------
March 20, 2000
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TABLE OF CONTENTS
PAGEPage
----
About This Prospectus...................................................... 3
Where You Can Find More Information........................................ 3Available Information......................................................3
Incorporation Ofof Certain Documents By Reference............................ 3by Reference............................4
The Company................................................................ 4Company................................................................6
Use Of Proceeds............................................................ 4
Ratios Of Earnings to Fixed Charges........................................ 4
Forward Looking Statements................................................. 5of Proceeds............................................................6
Risk Factors............................................................... 5
Description Of Common Stock................................................ 14
Description Of Preferred Stock............................................. 15
Description Of Depositary Shares........................................... 16
Description Of Warrants.................................................... 19
Description Of Debt Securities............................................. 20
Delaware Law and Certain Charter Provisions................................ 29Factors...............................................................6
Selling Stockholders.......................................................8
Plan of Distribution....................................................... 30Distribution.......................................................9
Experts...................................................................11
Legal Matters.............................................................. 31
Experts.................................................................... 31Matters.............................................................11
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ABOUT THIS PROSPECTUS
ThisNo person has been authorized to give any information or to make any
representations not contained or incorporated by reference in this prospectus is part of a registration statement that we filedin
connection with the Securities and Exchange Commission using a "shelf" registration process.
Under this shelf process, we may sell any combination of the common stock,
preferred stock, depositary shares, warrants and debt securitiesoffer described in this prospectus and, if given or made,
such information and representations must not be relied upon as having been
authorized by the Company or the selling stockholders. Neither the delivery of
this prospectus nor any sale made under this prospectus shall under any
circumstances create any implication that there has been no change in onethe
affairs of SDL, Inc. since the date hereof or more offerings up to a total dollar amountsince the date of $300,000,000.any documents
incorporated herein by reference. This prospectus provides you withdoes not constitute an offer
to sell or a general descriptionsolicitation of an offer to buy any securities other than the
securities to which it relates, or an offer or solicitation in any state to any
person to whom it is unlawful to make such offer in such state.
AVAILABLE INFORMATION
We are subject to the informational requirements of the securities we may offer. Each time we sell securities, we will provide a
prospectus supplement that will contain specific information about the termsSecurities
Exchange Act of that offering. The prospectus supplement may also add, update or change
information contained in this prospectus. You should read both this prospectus
and the applicable prospectus supplement together with additional information
described under the heading "Where You Can Find More Information."
Unless otherwise indicated or unless the context requires otherwise, all
references in this prospectus to "SDL", "we," "us," "our" or the "Company" mean
SDL, Inc. and its subsidiaries. When we refer to our "Charter" we mean the
Company's Restated Certificate of Incorporation,1934, as amended (the "Exchange Act"), and as supplemented
byin accordance with
the Certificate of Designation for the Series B Preferred Stock.
WHERE YOU CAN FIND MORE INFORMATION
The Company files annual, quarterly and specialAct we file reports, proxy statements and other information with the
Securities and Exchange Commission (the "SEC""Commission"). You may readThese reports, proxy
statements and copy any document we file with the SECother information filed can be inspected and copied at the
SEC's public
reference rooms at Room 1024, Judiciary Plaza,Commission's Public Reference Section, 450 Fifth Street, N.W., Washington, D.C.,
20549, and at the SEC'sfollowing regional offices atof the Commission: Seven World
Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. Please callCopies of such material can be
obtained from the SECPublic Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549, at 1-800-SEC-0330 for further information on the public reference rooms.prescribed rates. The SEC
alsoCommission maintains a
web site that contains(http://www.sec.gov) containing reports, proxy and information
statements and other information regardingof registrants, including ours, that file
electronically with the SEC (http://www.sec.gov). YouCommission. In addition, the Common Stock is listed on
the Nasdaq National Market and similar information concerning us can inspect reportsbe
inspected and other information
we filecopied at the offices of the National Association of Securities
Dealers, Inc., 1735 K. Street, N.W., Washington, D.C. 20006.9513 Key West Avenue, Rockville, Maryland 20850.
We have filed with the Commission a registration statement ofon Form S-3 (of which
this prospectus is a part
and related exhibits with the SECpart) under the Securities Act of 1933, as amended (the
"Securities Act"). The, with respect to the shares being offered by this prospectus.
This prospectus does not contain all of the information set forth in this
registration statement, contains additionalsome portions of which have been omitted as permitted by
the rules and regulations of the Commission. Statements contained in this
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prospectus as to the contents of any contract or other documents are not
necessarily complete, and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the registration statement.
Each of these statements is qualified in all respects by this reference and the
exhibits and schedules thereto. For further information aboutregarding us and the
securities. You may inspectshares being offered by this prospectus, reference is hereby made to the
registration statement and such exhibits without chargeand schedules which may be obtained
from the Commission at theits principal office in Washington, D.C. upon payment of
the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549, and you may obtain copies fromfees prescribed by the SEC at
prescribed rates.Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporatedocuments listed below have been filed by reference" the information we fileCompany under the
Exchange Act with the SEC, which means that we can disclose important information to youCommission and are incorporated herein by referring to those documents. The information incorporated by reference is an
important part of this prospectus. Any statement contained in a document which
is incorporated by reference in this prospectus is automatically updated and
superseded if information contained in this prospectus, or information that we
later file with the SEC, modifies or replaces this information. We incorporate
by reference the following documents we filed with the SEC:
-reference:
- SDL's Annual Reports on Form 10-K and Form 10-K/A for the year ended
December 31, 1998;
-January 1, 1999;
- SDL's Quarterly Reports on Form 10-Q for the quarters ended March 31,
1999, and June 30, 1999 and September 30, 1999;
-
- SDL's Definitive Proxy Statement dated April 9, 1999, filed in
connection with SDL's 1999 Annual Meeting of Stockholders held on May
13, 1999;
- SDL's Definitive Proxy Statement dated January 21, 2000, filed in
connection with SDL's Special Meeting of Stockholders held on February
28, 2000;
- SDL's current reportsCurrent Reports on Form 8-K each dated as of May 18, 1999 and
filed with the SEC on June 2, 1999 and June 29, 1999;
- SDL's Current Report on Form 8-K dated as of September 21, 1999 respectively;
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-and
filed with the SEC on September 23, 1999;
- the description of SDL's common stock contained in SDL's Registration
Statement on Form 8-A filed on March 31, 1995 under Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act");
-Act; and
- the description of SDL's preferred stock rights contained in SDL's
Registration Statement on Form 8-A filed on November 7, 1997 under
Section 12 of the Exchange Act, including SDL's Registration Statement
on Form 8-A/A filed on March 19, 1999 updating such description;
- - all documents filed by the Company with the SEC pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of the
initial registration statement and prior to effectiveness of the
registration statement; and
- - all documents filed by the Company with the SECdescription.
Each document we file pursuant to Sections 13(a), 13(c), 14 orand 15(d) of
the Exchange Act aftersubsequent to the date of this prospectus and prior to the
termination of this offering.
You should rely only on the informationoffering made hereby shall be deemed to be incorporated by
reference or set
forth in this prospectus and to be part hereof from the date of filing such
documents. Any statement contained herein or in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this prospectus to the extent that a statement
contained herein (or in the applicable prospectus supplement. We havesupplement) or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any
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such statement so modified or superseded shall not authorized anyone elsebe deemed, except as so
modified or superseded, to provide you with different information. We may only
useconstitute a part of this prospectus.
Copies of all documents which are incorporated herein by reference (not
including the exhibits to such information, unless such exhibits are
specifically incorporated by reference in such information) will be provided
without charge to each person, including any beneficial owner, to whom this
prospectus is delivered upon written or oral request. Requests should be
directed to sell securities if it is accompanied by a prospectus
supplement. We are only offering these securities in states where the offer is
permitted. You should not assume that the information in this prospectus or the
applicable prospectus supplement is accurate as of any date other than the dates
on the front of these documents.Michael L. Foster, Vice President - Finance, SDL, Inc., 80 Rose
Orchard Way, San Jose, California 95134-1365, telephone number: (408) 943-4344.
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THE COMPANY
SDL designs, manufactures and markets semiconductor lasers, fiber optic
related products lasers and optoelectronic systems. Its products are used in a diversity of
markets such as telecommunications, cable television, dense wavelength division
multiplexing ("DWDM"), satellite communications, printing, medical and materials
processing.
SDL was established in 1983 as a joint venture between Xerox and
Spectra-Physics to develop and commercialize semiconductor laser technology. The
management of SDL led a group to buy-out the joint venture partners in 1992 andSince 1996, the Company issued its common stock to the public in an initial public offering
in 1995 and was admitted to NASDAQ at the same time. SDL's technical staff,
including over fifty PhDs, represents one of the largest investments in core
technology in the photonics industry. From the original products introduced in
1984, SDL has expanded its product offering to over 200 standard products in
addition to providing custom design and packaging for original equipment
manufacturer ("OEM") customers. SDL's revenue also includes revenue from
customer-funded research programs.
By 1995, the management of SDL recognized that its core technical
strengths of high reliability and high power were particularly well-suited to
the growing market opportunity in fiber optic communications. Since the
acquisition of Seastar Optics in 1995, SDL's strategy
has increasinglystrongly focused on providing solutions for optical communications. SDL'sThe
Company's optical communications products power the transmission of data, voice
and Internet information over fiber optic networks to meet the needs of
telecommunications, DWDM,dense wavelength division multiplexing (DWDM), cable
television and satellite communications applications. LedThe demand for DWDM
solutions accelerated significantly in 1999 due to the technology's unique
ability to expand network bandwidth and provide much faster transmission of
data, voice and video signals. With the qualification of the Company's new wafer
fabrication facility in the first half of 1998 and expansion of yields and
assembly and test capacity in 1999, the Company was able to successfully ramp
capacity and achieve significant revenue growth. Revenue from fiber optic
communications products increased by growth179 percent in shipments
of its flagship 980 nm semiconductor laser pump module,1999 compared to 1998.
Revenue from SDL products were also able to capture a strong position in the
undersea fiber optic communications market, where Company revenue increased
from less than 1 percent total revenue in 1998 from
fiber optic products for terrestrial, undersea and cable television
communications increased by more than 100 percent compared with 1997. Overall,
communications-related revenue increased to 7330 percent of total revenue in
the first halffourth quarter of 1999. In May 1999,SDL's optical products also serve a wide variety of
non-communications applications, including materials processing, printing,
medical and scientific instrumentation.
We were incorporated in a transaction accounted forCalifornia on March 29,1983 and in Delaware on
November 16, 1992. We were known as a
pooling-of-interest,Spectra Diode Laboratories, Inc. until we
changed our name to SDL, completedInc. in April 1993. References to "SDL" or the
acquisition of IOC International plc
("IOC")"Company" refer to SDL, Inc., a United Kingdom-based provider of lithium niobate modulators. SDL
believes the merger with IOC will strengthen SDL's positionour subsidiaries and predecessor entities acquired
in the transmitter
portion of the DWDM telecommunications market.previous acquisitions. Our headquarters are located at 80 Rose Orchard Way,
San Jose, California, 95134-1365, and our telephone number is (408) 943-9411.
USE OF PROCEEDS
Unless otherwise indicatedAll of the shares being offered under this prospectus are offered by the
Selling Stockholders, and we will not receive any of the proceeds from the sale
of the shares. This registration statement is intended to satisfy certain of our
obligations under a Share Purchase Agreement and Registration Rights Agreement
with the holders of all of the equity interests in Queensgate. Under that
agreement, we have agreed to pay expenses of registration of these shares under
United States federal and state securities laws.
RISK FACTORS
You should carefully consider the risk factors set forth in our reports
filed with the SEC which are incorporated by reference herein, in evaluating an
investment in the applicablecommon stock. This prospectus supplement,and our documents filed with the
Company intends to useSEC and incorporated by reference herein include "forward-looking statements"
within the net proceedsmeaning of any sale of securities pursuant to
this prospectus for general corporate purposes.
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RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth SDL's consolidated ratios of earnings to
fixed charges for the periods shown.
Six Months
Ended June 30,
1999 Year Ended December 31,
-------------- --------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Ratio of Earnings to Fixed
Charges 10.5x 8.1x N/A 17.2x N/A 4.1x
SDL had net losses for the years ended December 31, 1997 and 1995.
Consequently, earnings were insufficient to cover fixed charges by approximately
$23.9 million and $0.9 million in the years ended December 31, 1997 and 1995,
respectively.
The ratio of earnings to fixed charges in computed as income before
income taxes, plus fixed charges, divided by fixed charges. Fixed charges
consist of interest expense and an estimated component of rental expense.
FORWARD LOOKING STATEMENTS
SomeSection 27A of the information includedSecurities Act and Section 21E of the
Exchange Act. All statements in or incorporated by reference in this prospectus,
containsother than statements of historical fact, are "forward-looking statements" for
purposes of these provisions, including any statements of the plans and
objectives for future operations and any statement of assumptions underlying any
of the foregoing. In some cases, forward-looking statements such as those pertaining to our
(including certain of our subsidiaries') technology, products, and business
performance. Forward-looking statements involve numerous risks and uncertainties
and you should not rely on them as predictions of future events. There is no
assurance that the events or circumstances reflected in forward-looking
statements willcan be achieved or will occur. You can identify forward-looking
statementsidentified by
the use of forward-looking terminology such as "believes,"
"expects," "may," "will," "should," "seeks," "approximately," "intends,"expects," "plans," "pro forma,"anticipates,"
"estimates""estimates," "potential," or "anticipates""continue," or the negative of these
words and phrasesthereof or similar words or phrases. You can also identify
forward-looking statements by discussions of strategy, plans or intentions.
Forward-looking statements are necessarily dependent on assumptions,
data or methods that may be incorrect or imprecise and we may not be able to
realize them. We caution you not to place undue reliance on forward-looking
statements, which reflect our analysis only. It is important to note that the
Company'sother
comparable terminology. Our actual results could differ materially from thosethese
projected or assumed in such forward
looking statements. Among the factors that could cause actual results to differ
materially are the factors detailed below under the caption "Risk Factors". You
should also consultthese forward-looking statements because of
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risks and uncertainties, including risks and uncertainties described in the risk
factors listedincorporated by reference in the Company's Reports on Form
10-K and Form 10-K/A for the year ended December 31, 1998, on the Form 10-Q for
the quarter ended March 31, 1999, on the Form 10-Q for the quarter ended June
30, 1999 and on other reports filed by SDL from timethis prospectus. We assume no obligation to
time under the Exchange
Act.
RISK FACTORS
SDL has Experienced and Could Again Experience Manufacturing
Difficulties
The manufacture of semiconductor lasers and related products and systems
that we sell is highly complex and precise, requiring production in a highly
controlled and clean environment. Changes in the manufacturing processesupdate any such forward-looking statement or the
inadvertent use of defective or contaminated materials by us or our suppliers
have in the past and could in the future significantly impair our ability to
achieve acceptable manufacturing yields and product reliability. If we do not
achieve acceptable yields or product reliability, our operatingreason why actual results and
customer relationships will be adversely affected. We rely almost exclusively on
our own production capability in:
- computer-aided chip and package design,
- wafer fabrication,
- wafer processing,
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differ.
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- device packaging,
- hybrid microelectronic packaging,
- printed circuit board testing, and
- final assembly and testingSELLING STOCKHOLDERS
The following table provides the names of products.
Because we manufacture, package and test these components, products and
systems at our own facility, and because these components, products and systems
are not readily available from other sources, our business and results of
operations will be significantly impaired if our manufacturing is interrupted by
any of the following:
- shortages of parts of equipment,
- equipment failures,
- poor yields,
- fire or natural disaster, or
- otherwise.
A significant portion of our production relies or occurs on equipment
for which we do not have a backup. To alleviate, at least in part, this
situation, we remodeled our front-end wafer fabrication facility and our
packaging and test facility. We cannot assure you that we will not experience
further start-up costs and yield problems in fully utilizing our increased wafer
capacity targeted by these remodeling efforts. In addition, we are deploying a
new manufacturing execution software system designed to further automate and
streamline our manufacturing processes, and there may be unforeseen deficiencies
in this system which could adversely affect our manufacturing processes. In the
event of any disruption in production by one of these machines or systems, our
business and results of operations could be materially adversely affected.
Furthermore, we have a limited number of employees dedicated to the operation
and maintenance of our equipment, loss of whom could affect our ability to
effectively operate and service our equipment. We experienced lower than
expected production yields on some of our products, including certain key
product lines during 1997 and the first halfnumbers of 1998. This reduction in yields:
- adversely affected gross margins,
- delayed component, product and system shipments, and
- to a certain extent, delayed new orders booked.
Although more recently, our yields have improved, we cannot assure you
that yields will continue to improve or not decline in the future, nor that in
the future our manufacturing yields will be acceptable to ship products on time.
To the extent that we experience lower than expected manufacturing yields or
experience any shipment delays, gross margins will likely be significantly
reduced and we could lose customers and experience reduced or delayed customer
orders and cancellation of existing backlog. We presently are ramping production
of some of our product lines by:
- hiring and training now personnel,
- acquiring new equipment, and
- expanding our packaging facilities and capabilities.
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Difficulties in starting production to meet expected demand and
schedules have occurred in the past and may occur in the future including the
following:
- quality problems could arise, yields could fall, and gross margins
could be reduced during such a ramp.
- aggressive volume pricing for large long-term orders has been
provided to certain customers.
- cost reductions in manufacturing are required to avoid a drop in
gross margins for certain products sold to customers receiving volume
pricing.
These cost reductions may not occur rapidly enough to avoid a decrease
in gross margins on products sold under volume pricing terms. In that event, our
business and results of operations would be materially adversely affected.
Our Business Depends on Developing Now Products and Applications
Our current products serve many applications in the communications and
materials processing and printing markets. In many cases, our products are
substantially completed, but the customer's product incorporating our products
is not yet completed or the applications or markets for the customer's product
are new or emerging. In addition, some of our customers are currently in the
process of developing new products that are in various stages of development,
testing and qualification, and sometimes are in emerging applications or new
markets.
We believe that rapid customer acceptance of our new products is key to
our financial results. A substantial portion of our products address markets
that are not now, and may never become, substantial commercial markets. We have
experienced, and are expected to continue to experience, fluctuation in customer
orders and competitive, technological and pricing constraints that may preclude
development of markets for our products and our customers' products.
Our customers are often required to test and qualify laser pump modules,
transmitters, and marking systems among other new products for potential volume
applications. We cannot assure you that:
- we or our customers will continue their existing product development
efforts, or if continued that such efforts will be successful,
- markets will develop for any of our technology or that pricing will
enable such markets to develop, or
- other technology or products will not supersede our products or our
customer's products.
We may also be unable to develop new products on a timely schedule.
Moreover, even if we are successful in the timely development of new products
that are accepted in the market, we often experience lower margins on these
products. The lower margins are due to lower yields and other factors, and thus
we may be unable to manufacture and sell new products at an acceptable cost so
as to achieve acceptable gross margins.
Our Growth and Expansion May Strain Our Resources
We have on occasion been unable to manufacture products in quantities
sufficient to meet demand of our existing customer base and new customers. The
expansion in the scope of our operations has placed a considerable strain on our
management, financial, manufacturing and other resources and has required us to
implement and improve a variety of operating, financial and other systems,
procedures and controls. In addition, we are currently deploying a new
enterprise resource planning system.
We cannot assure you that any existing or new systems, procedures or
controls will be adequate to support our operations or that our systems,
procedures and controls will be designed, implemented or improved in a
cost-effective and timely manner. Any failure to implement, improve and expand
such systems, procedures and
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controls in an efficient manner at a pace consistent with our business could
have a material adverse effect on our business and results of operations.
Our future success is dependent, in part, on our ability to attract,
assimilate and retain additional employees, including certain key personnel. We
will continue to need a substantial number of additional personnel, including
those with specialized skills, to commercialize our products and expand all
areas of our business in order to continue to grow. Competition for such
personnel is intense, and we cannot assure you that we will be able to attract,
assimilate or retain additional highly qualified personnel.
Our Acquisition Strategy Poses Several Risks
Our strategy involves the acquisition and integration of additional
companies' products, technologies and personnel. We have limited experience in
acquiring outside businesses. Acquisition of businesses requires substantial
time and attention of management personnel and may require additional equity or
debt financings. Furthermore, integration of newly established or acquired
businesses is often disruptive. Since we have acquired or in the future may
acquire one or more businesses, we cannot assure you that we will:
- identify appropriate targets,
- acquire such businesses on favorable terms, or
- be able to successfully integrate such organizations into our
business.
Failure to do so could significantly impair our business, financial
condition and results of operations.
We Have Depended on Government Programs and Contracts
We derived approximately 26 percent, 34 percent, and 40 percent of our
revenue during fiscal 1998, 1997, and 1996, respectively, directly and
indirectly from a variety of Federal government sources. We received
approximately 13 percent, 17 percent and 20 percent of our revenue for fiscal
1998, 1997 and 1996, respectively, from Lockheed Martin through several US
government and commercial programs. We derived almost all of our revenue from
Lockheed Martin during these periods from Federally-funded programs.
The demand for certain of our services and products is directly related
to the level of funding of government programs. We believe that the success and
further development of our business is dependent, in significant part, upon the
continued existence and funding of such programs and upon our ability to
participate in such programs. For example, Federal programs funded substantially
all of our research revenue for 1998, 1997 and 1996. Most of our
Federally-funded programs are subject to renewal every one or two years, so that
continued work by us under these programs in future periods is not assured. For
example, we have been informed by Lockheed Martin that one of our largest
federally funded programs will wind down in 1999. Federally-funded programs are
subject to termination for convenience of the government agency, at which point
we would be reimbursed for related allowable costs incurred to the termination
date.
Federally-funded contracts are subject to audit of pricing and actual
costs incurred, which have resulted, and could result in the future, in price
adjustments. The Federal government has in the past, and could in the future,
challenge our accounting methodology for computing indirect rates and allocating
indirect costs to government contracts. The government is currently challenging
certain indirect cost allocations. While we believe that amounts recorded on our
financial statements are adequate to cover all related risks, the government has
not concluded its investigation or agreed to a settlement with us. Although the
outcome of this matter cannot be determined at this time, we do not believe that
its outcome will have a material adverse effect on our financial position,
results of operations and cash flows. However, based on future developments, our
estimate of the outcome of these matters could change in the near term. In
addition, a change in our accounting practices in this area could result in
reduced profit margins on government contracts.
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We Depend Upon Key Personnel and May be Unable to Hire Qualified
Personnel
Our future performance also depends in significant part upon the
continued service of our key technical and senior management personnel. The loss
of the services of one or more of our officers or other key employees could
significantly impair our business, operating results and financial condition.
While many of our current employees have many years of service with us, there
can be no assurance that we will be able to retain our existing personnel. If we
are unable to retain and hire additional personnel, our business and results of
operations could be materially and adversely affected. See also "Our Acquisition
Strategy Poses Several Risks."
We Have Been Subject to Patent Infringement Claims
The semiconductor, optoelectronics, communications, information and
laser industries are characterized by frequent litigation regarding patent and
other intellectual property rights. From time to time we have received and may
receive in the future, notice of claims of infringement of other parties'
proprietary rights and licensing offers to commercialize third party patent
rights. In addition, we cannot assure you that:
- additional infringement claims (or claims for indemnification
resulting from infringement claims) will not be asserted against us,
or
- that existing claims or any other assertions will not result in an
injunction against the sale of infringing products or otherwise
significantly impair our business and results of operations.
In 1985, we first received correspondence from Rockwell International
Corporation alleging that we used a fabrication process that infringes
Rockwell's patent rights. Those allegations led to two related lawsuits, one of
which is still pending. The first lawsuit was filed in August 1993, when
Rockwell sued the Federal government in the United States Court of Federal
Claims, alleging infringement of these patent rights with respect to the
contracts the Federal government has had with at least 15 companies, including
us (Rockwell International Corporation v. the United States of America, No.
93-542C (US Ct. Fed. CO)). We were not originally named as a party to this
lawsuit. However, the Federal government asserted that, if it was held liable to
Rockwell for infringement of Rockwell's patent rights in connection with some of
its contracts with us, then we would be liable to indemnify the Federal
government for a portion of its liability on certain contracts.
In June 1995, after Rockwell filed a second lawsuit against us in the
Northern District of California, we filed a motion to intervene in the first
lawsuit. That motion was granted on August 17, 1995. Upon intervening in the
Federal government's lawsuit, we filed an answer to Rockwell's complaint,
alleging that:
- Rockwell's patent was invalid and that we did not infringe Rockwell's
patent,
- Rockwell's patent was unenforceable under the doctrine of inequitable
conduct, and
- Rockwell's action is barred by the doctrines of laches and equitable
estoppel.
After extensive discovery, we moved, as did the Federal government, for
summary judgment on the ground that Rockwell's patent was invalid. By order
dated February 5, 1997, the Court of Federal Claims granted those motions and
entered judgment in our favor and in favor of the Federal government. However,
Rockwell appealed the Court of Federal Claims' decision, and on June 15, 1998,
the United States Court of Appeals for the Federal Circuit issued an opinion
vacating the judgment that had been entered in our favor and in favor of the
Federal government. The Federal Circuit held that the Court of Federal Claims
had erred in finding that there were no genuine disputes of material fact
concerning the obviousness of the Rockwell patent, and that the resolution of
this and other disputes requires a trial. The Federal Circuit:
- remanded the case back to the trial court for further proceedings on
the issue of whether Rockwell's patent was invalid on obviousness
grounds, and
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- affirmed the Court of Federal Claims' denial of our motion for
summary judgment of invalidity based on anticipation, as well as the
Court of Federal Claims' claim construction.
Subsequent to the Federal Circuit's action, Rockwell and the United
States reached a settlement in the first lawsuit which had been filed on August
1993. Pursuant to the settlement, a judgment was entered in Rockwell's favor
against the Federal government in the amount of $16,900,000. We did not
participate in the settlement. The Federal government has not again raised the
issue of our potential indemnity obligation.
As noted above, we made our decision to intervene in the lawsuit filed
on August 1993 after Rockwell filed suit against us in the Northern District of
California in May 1995, alleging that we had infringed the Rockwell patent in
connection with our manufacture and sale of products to customers other than the
United States. Again, the complaint alleges that we used a fabrication process
that infringes the Rockwell patent (Rockwell International Corporation v. SDL,
Inc., No. C95-01729 MHP (US Dist. Ct., N.D. Cal.)). By its complaint, Rockwell
seeks a permanent injunction against us to:
- enjoin us from infringement of the Rockwell patent,
- require us to pay damages in an unspecified amount for our alleged
past infringement of the patent, treble damages and attorneys' fees.
The complaint was served on us on June 30, 1995, and we filed an answer
to the complaint on August 18, 1995, alleging that:
- Rockwell's patent is invalid,
- we did not infringe Rockwell's patent,
- Rockwell's patent is unenforceable under the doctrine of inequitable
conduct, and
- Rockwell's action is barred by the doctrines of laches and equitable
estoppel.
On August 11, 1995, prior to filing our answer, we filed a motion to
stay this action based upon the pendency of the lawsuit brought the Federal
government. The District Court granted our motion to stay on September 15, 1995.
Subsequent to the settlement of the lawsuit against the Federal government, the
District Court lifted the stay, and discovery has re-commenced for the lawsuit
filed on May 1995.
Although the Court of Federal Claims ruled in our favor, finding the
patent invalid on motion for summary judgment, the Court of Appeals for the
Federal Circuit reversed the summary judgment ruling, meaning that the issue of
validity needed to go to trial. Such a trial would now occur before a jury in
California. We believe that we have meritorious defenses to Rockwell's
allegations. It should be noted that the resolution of intellectual property
disputes is often fact intensive and, therefore, the results are inherently
uncertain. There can be no assurance that Rockwell will not ultimately prevail
in this dispute. If Rockwell were to prevail, Rockwell could be awarded
substantial monetary damages and/or an injunction against us for the sale of
infringing products. If this injunction were entered, we may seek to obtain a
license to use Rockwell's patent.
We cannot assure you, however, that a license would be available on
reasonable terms or at all. The award of monetary damages against us, or the
grant of an injunction and failure to obtain a license to use Rockwell's patent
on commercially reasonable terms could have a material adverse effect on our
business and results of operations. Litigation of Rockwell's claim against us is
expected to involve significant expense to us and could divert the attention of
our technical and management personnel and could have a material adverse effect
on our business and results of operations.
In addition, we are involved in various legal proceedings arising in the
ordinary course of our business.
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Orders from Our Customers Fluctuate
Our product revenue is subject to fluctuations in customer orders.
Occasionally, some of our customers have ordered more products than they need in
a given period, thereby building up inventory and delaying placement of
subsequent orders until such inventory has been reduced. We may also build
inventory in anticipation of receiving new orders in the future. Also, customers
have occasionally placed large orders that they have subsequently cancelled. In
addition, due to the fact that our sales of our 980 nm pump module products
comprise a significant portion of our total revenues, our revenues are
particularly susceptible to customer order fluctuations for this product. These
fluctuations, cancellations and the failure to receive new orders can have
adverse effects on our business and results of operations. We may also have
incurred significant inventory or other expenses in preparing to fill such
orders prior to their cancellation. Virtually our entire backlog is subject to
cancellation. Cancellation of significant portions of our backlog, or delays in
scheduled delivery dates, could have a material adverse effect on our business
and results of operations.
We Depend on Ownership of Our Technology and Our Technical Expertise
Our future success and competitive position is dependent in part upon
our proprietary technology, and we rely in part on patent, trade secret,
trademark and copyright law to protect our intellectual property. There can be
no assurance that:
- any of the 127 patents owned or approximately 134 patents licensed by
us will not be invalidated, circumvented, challenged or licensed to
others,
- the rights granted under the patents will provide competitive
advantages to us,
- any of our approximately 90 pending or future patent applications
will be issued with the scope of the claims sought by us, if at all,
or
- that others will not develop technologies that are similar or
superior to our technology, duplicate our technology or design around
the patents we own, or patent or assert patents on technology which
we might use or intend to use.
In addition, effective copyright and trade secret protection may be
unavailable, limited or not applied for in certain foreign countries. Our
technology is licensed on a non-exclusive basis from Xerox and other third
parties that may license such technology to others, including our competitors.
There can be no assurance that steps we take to protect our technology will
prevent misappropriation of such technology. In addition, litigation has been
necessary and may be necessary in the future:
- to enforce our patents and other intellectual property rights,
- to protect our trade secrets,
- to determine the validity and scope of the proprietary rights of
others, or
- to defend against claims of infringement or invalidity of
intellectual property rights developed internally or acquired from
third parties.
Litigation of this type has resulted in substantial costs and diversion
of resources and could have a material adverse effect on our business and
results of operations. Moreover, we may be required to participate in
interference proceedings to determine the propriety of inventions. These
proceedings could result in substantial cost to us.
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Our Markets Are Extremely Competitive
Our various markets are highly competitive. We face current or potential
competition from four primary sources:
- direct competitors,
- potential entrants,
- suppliers of potential now technologies, and
- suppliers of existing alternative technologies.
We offer a range of components, products and systems and have numerous
competitors worldwide in various segments of our markets. As the markets for our
products grow, new competitors have recently emerged and are likely to continue
to do so in the future. We also sell products and services to companies with
which we presently compete or in the future may compete and certain of our
customers have been or could be acquired by, or enter into strategic relations
with our competitors. In most of our product lines, our competitors and we are
working to develop new technologies, or improvements and modifications to
existing technologies, which will obsolete present products. Many of our
competitors have significantly greater financial, technical, manufacturing,
marketing, sales and other resources than we do. In addition, many of these
competitors may be able to respond more quickly to new or emerging technologies,
evolving industry trends and changes in customer requirements and to devote
greater resources to the development, promotion and sale of their products than
we. We cannot assure you that:
- our current or potential competitors have not already or will not in
the future develop or acquire products or technologies comparable or
superior to those that we developed,
- combine or merge with each other or our customers to form significant
competitors,
- expand production capacity to more quickly meet customer supply
requirements, or
- adapt more quickly than we do to now technologies, evolving industry
trends and changing customer requirements.
Increased competition has resulted and could, in the future, result in
price reductions, reduced margins or loss of market share, any of which could
materially and adversely affect our business and results of operations. We
cannot assure you that we will be able to compete successfully against current
and future competitors or that competitive pressures we face will not have a
material adverse effect on our business and results of operations. We expect
that both direct and indirect competition will increase in the future.
Additional competition could have an adverse material effect on our results of
operations through price reductions and loss of market share.
We Have Risks of Doing Business Internationally
Revenues from customers outside of the United States accounted for
approximately 27 percent, 25 percent and 21 percent, of our total revenue in
1998, 1997 and 1996, respectively. International revenue carries a number of
inherent risks, including:
- reduced protection for intellectual property rights in some
countries,
- the impact of unstable environments in economies outside the United
States,
- generally longer receivable collection periods,
- changes in regulatory environments,
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- tariffs, and
- other potential trade barriers.
In addition, some of our international revenue is subject to export
licensing and approvals by the Department of Commerce or other Federal
governmental agencies. Although to date, we have experienced little difficulty
in obtaining such licenses or approvals, the failure to obtain these licenses or
approvals or comply with such regulations in the future could have a material
adverse effect on our business and results of operations.
We currently use local distributors in key industrialized countries and
local representatives in smaller markets. Although we have formal distribution
contracts with some of our distributors and representatives, some of our
relationships are currently on an informal basis. Most of our international
distributors and representatives offer only our products; however, certain
distributors offer competing products and we cannot assure you that additional
distributors and representatives will not also offer products that are
competitive with our products. We cannot assure you that our international
distributors and representatives will enter into formal distribution agreements
at all or on acceptable terms, will not terminate informal or contractual
relationships, will continue to sell our products or that we will provide the
distributors and resellers with adequate levels of support. Our business and
results of operations will be affected adversely if we lose a significant number
of our international distributors and representatives or experience a decrease
in revenue from these distributors and representatives.
We Are Subject to Extensive Environmental Regulation
We are subject to a variety of federal, state and local laws and
regulations concerning the storage, use, discharge and disposal of toxic,
volatile, or otherwise hazardous or regulated chemicals or materials used in our
manufacturing processes. Further, we are subject to other safety, labeling and
training regulations as required by local, state and federal law. We have
established an environmental and safety compliance program to meet the
objectives of applicable federal, state and local laws. Our environmental and
safety department administers this compliance program which includes monitoring,
measuring and reporting compliance, establishing safety programs and training
our personnel in environmental and safety matters. We cannot assure you that
changes in these regulations and laws will not have an adverse economic effect
on us. Further, these local, state, and federal regulations could restrict our
ability to expand our operations. If we do not:
- obtain required permits for,
- operate within regulations for,
- control the use of, or
- adequately restrict
the discharge of hazardous or regulated substances or materials under present or
future regulations, we may be required to pay substantial penalties, to make
costly changes in our manufacturing processes or facilities or to suspend our
operations.
We Have Limited or Sole Source Suppliers for Necessary Materials
We depend on a single or limited number of outside contractors and
suppliers for raw materials, packages and standard components, and to assemble
printed circuit boards. We generally purchase these products through standard
purchase orders or one-year supply agreements. We do not have long-term
guaranteed supply agreements with these suppliers. We seek to maintain a
sufficient safety stock to overcome short-term shipping delays or supply
interruptions by our suppliers. We also endeavor to maintain ongoing
communications with our suppliers to guard against interruptions in supply. To
date, we have generally been able to obtain sufficient supplies in a timely
manner. However, our business and results of operations have in the past been
and could be impaired by:
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- a stoppage or delay of supply,
- substitution of more expensive or less reliable parts,
- receipt of defective parts or contaminated materials, and
- an increase in the price of such supplies or our inability to obtain
reduced pricing from our suppliers in response to competitive
pressures.
Our Stock Price Has Been and May Continue to be Volatile
The market price of our common stock may fluctuate significantly because
of:
- announcements of technological innovations,
- large customer orders,
- customer order delays or cancellations,
- customer qualification delays,
- new products by us, our competitors or third parties,
- possible acquisition of us by a third party,
- merger or acquisition announcements,
- production problems,
- quarterly variations in our actual or anticipated results of
operations, and
- developments in litigation in which we are involved.
Furthermore, the stock market has experienced extreme price and volume
volatility, which has particularly affected the market prices of many high
technology companies. This volatility has often been unrelated to the operating
performance of such companies. This broad market volatility may adversely affect
the market price of our common stock. Many companies in the optical
communications industry have in the past year experienced historical highs in
the market prices of their stock. We cannot assure you that the market price of
our common stock will not experience significant volatility in the future,
including volatility that is unrelated to our performance.
DESCRIPTION OF COMMON STOCK
SDL is authorized to issue up to 70,000,000 shares of
common stock $0.001 par value per share.
On May 18, 1999, SDLbeneficially owned by each Selling Stockholder, the number of
shares of common stock which may be issued 1,130,098to each Selling Stockholder in
satisfaction of the Company's obligations under the earn-out provisions of the
Share Purchase Agreement between the Company and the Selling Stockholders and
the number of shares of common stock beneficially owned by each Selling
Stockholder upon completion of the offering or offerings pursuant to this
prospectus, assuming each Selling Stockholder offers and sells all of its or
his/her respective shares. Selling Stockholders may, however, offer and sell
all, or some or none of their shares. Under some circumstances, the respective
donees, pledgees and transferees or other successors in interest of the Selling
Stockholders may also sell the shares listed below as being held by the Selling
Stockholders. No Selling Stockholder beneficially owns one percent or greater of
the Company's outstanding common stock. All share numbers set forth in the table
are included on a post-split shares in connection
with the acquisition of IOC International plc. The Company has also recently
effected a two-for-onebasis to reflect our 2-for-1 stock split of its common stockbeing
effected in the form of a 100% stock dividend. Tradingdividend payable on a post-split basis occurred on June 3, 1999. As of July 30,
1999, 31,249,752 shares of SDL's common stock were outstanding. The holders of
common stock are entitledMarch 13, 2000 to
one vote for each share heldstockholders of record on all
matters submitted toFebruary 29, 2000.
BENEFICIAL
BENEFICIAL OWNERSHIP PRIOR
OWNERSHIP TO OFFERING
PRIOR TO RESULTING FROM TOTAL
OFFERING ISSUANCE OF POTENTIAL
RESULTING MAXIMUM NUMBER BENEFICIAL BENEFICIAL
FROM ISSUANCE OF SHARES OWNERSHIP OWNERSHIP
OF SHARES ON PURSUANT TO THE PRIOR TO AFTER THE
MARCH 6, 2000 EARN-OUT OFFERING OFFERING
------------- --------------- ---------- ----------
STOCKHOLDERS:
3i Group plc (1).................... 126,470 857,414 983,884 0
Paul David Atherton................. 64,068 861,334 925,402 0
John Edward Herrin.................. 5,908 79,436 85,344 0
Thomas Rudolph Hicks................ 62,801 844,308 907,109 0
Newrick Kenneth Reay................ 64,068 861,334 925,402 0
James Ring.......................... 11,817 158,872 170,689 0
Phyllis Ring........................ 11,817 158,872 170,689 0
John Whiteley Ward.................. 1,012 13,604 14,616 0
------- --------- --------- ---
Total Stockholders Shares..... 347,961 3,835,174 4,183,135 0
OPTIONHOLDERS: 0
Christopher M. Shannon.............. -- 45,340 45,340 0
Ivor E. Thomas...................... -- 38,530 38,530 0
John H. Spensley.................... -- 9,028 9,028 0
Adrian G. Meldrum................... -- 4,514 4,514 0
David R. Jones...................... -- 6,748 6,748 0
Kent H. Wardley..................... -- 22,630 22,630 0
John E. Herrin...................... -- 3,388 3,388 0
John W. Ward........................ -- 3,388 3,388 0
Terrance C. Dines................... -- 3,388 3,388 0
Sean D. Staines..................... -- 2,234 2,234 0
Colin M. Chambers................... -- 2,234 2,234 0
Samuel Salloum...................... -- 2,234 2,234 0
Malachy McConnell................... -- 2,234 2,234 0
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Phil Rhead.......................... -- 2,234 2,234 0
Jayesh Patel........................ -- 2,234 2,234 0
Krzystof Pietraszewski.............. -- 2,234 2,234 0
Keith Gambles....................... -- 2,234 2,234 0
------- --------- --------- ---
Total Optionholders Shares...... -- 154,826 154,826 0
------- --------- --------- ---
Total of Stockholders
and Optionholders Shares.... 347,961 3,990,000 4,337,961 0
------- --------- --------- ---
(1) The Selling Stockholder is a votepublic company.
None of the stockholders. HoldersSelling Stockholders has had any material relationship with
us or our affiliates within the past three years. All of common stock have
cumulative voting rights in the election of directors. Subject to preferences
that may be granted to any then outstanding preferred stock, holders of common
stock are entitled to receive ratably such dividends as may be declared by the
Board of Directors out of funds legally available therefor. In the event of a
liquidation, dissolution or winding up of SDL, holders of common stock are
entitled to share ratably in all assets of SDL remaining after payment of
liabilities and the
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liquidation of any then outstanding preferred stock. Each share of common stock
also has a preferred stock purchase right under the Company's stockholder rights
agreement. See "Delaware Law and Certain Charter Provisions - Stockholder
Rights Agreement," below. Holders of common stock have no preemptive or other
subscription or conversion rights. There are no redemption or sinking fund
provisions applicable to the common stock. All outstanding shares of common
stock are,set forth above were "restricted securities" under the Securities Act
prior to this registration.
We agreed with the Selling Stockholders to file the registration
statement to register the resale of the shares. We agreed to prepare and file
all sharesnecessary amendments and supplements to the registration statement to keep
it effective until such time as all of common stock tothe securities covered by this
registration statement may be outstanding upon completion of
any offeringfreely sold by the Selling Stockholders without
registration pursuant to this prospectus will be validly issued, fully paid and
non-assessable.
The common stock is listed on the NASDAQ National Market System under
the symbol "SDLI." The transfer agent and registrar for our common stock is
Chase Mellon Shareholder Services.
DESCRIPTION OF PREFERRED STOCK
The board of directors has the authority, without further action by the
stockholders, to issue up to 1,000,000 shares of preferred stock in one or more
series and to fix the rights, preferences, privileges and restrictions thereof,
including dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preferences, sinking fund terms and the number of shares
constituting any series or the designation of such series, without any further
vote or action by stockholders. No shares of preferred stock of SDL are
outstanding. Of the 1,000,000 shares of preferred stock authorized, SDL has
designated 261,628 sharesRule 144(k) of the preferred stock as Series A Preferred Stock,
par value $0.001 per share. SDL has authorized the issuance of shares of Series
B Preferred Stock and 300,000 sharesSecurities Act assuming none of the
Preferred Stock as Series B
Preferred Stock, par value $0.001 per share upon exerciseSelling Stockholders is an affiliate of certain preferred
stock purchase rights associated with each share of common stock outstanding.
See "Delaware Law and Certain Charter Provision - Stockholder Rights Agreement"
below.
General
Because the Board of Directors has the power to establish the
preferences, powers and rights of each class of preferred stock, it may afford
the holders of any class of preferred stock preferences, powers and rights,
voting or otherwise, seniorSDL.
PLAN OF DISTRIBUTION
This prospectus relates to the rights of holders of shares of common stock.
The issuance of preferred stock could adversely affect the voting power of
holders of common stockoffer and the likelihood that such holders will receive
dividend payments and payments upon liquidation and could have the effect of
delaying, deferring or preventing a change in control of SDL. SDL has no present
plan to issue any shares of preferred stock.
Preferred stock, upon issuance against full payment of the purchase
price therefor, will be fully paid and nonassessable. The specific terms of a
particular class of preferred stock will be described in the prospectus
supplement relating to that class, including a prospectus supplement providing
that preferred stock may be issuable upon the exercise of warrants. The
description of preferred stock set forth below and the description of the terms
of a particular class of preferred stock set forth in a prospectus supplement do
not purport to be complete and are qualified in their entirety by reference to
the Certificate of Designation relating to that class.
The preferences and other terms of the preferred stock of each class
will be fixed by the Certificate of Designation relating to the class. A
prospectus supplement relating to each class of preferred stock will specify the
following terms:
- The title and stated value of the preferred stock;
- The number of shares of the preferred stock offered, the liquidation
preference per share and the offering price of the preferred stock;
- The dividend rate(s), period(s), and/or payment date(s) or method(s)
of calculation thereof applicable to the preferred stock;
- Whether the preferred stock is cumulative or not and, if cumulative,
the date from which dividends on the preferred stock will accumulate;
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- The provision for a sinking fund, if any, for the preferred stock;
- The provision for redemption, if applicable, of the preferred stock;
- Any listing of the preferred stock on any securities exchange;
- The terms and conditions, if applicable, upon which the preferred
stock will be converted into common stock, including the conversion
price (or manner of calculation thereof);
- A discussion of any material federal income tax considerations
applicable to the preferred stock;
- The relative ranking and preferences of the preferred stock as to
dividend rights and rights upon liquidation, dissolution or winding
up of our affairs;
- Any limitations on issuance of any class of preferred stock ranking
senior to or on a parity with such class or series of preferred stock
as to dividend rights and rights upon liquidation, dissolution or
winding up of our affairs;
- Any other specific terms, preferences, rights, limitations or
restrictions of the preferred stock; and
- Any voting rights of the preferred stock.
Rank
Unless otherwise specified in the applicable prospectus supplement, the
preferred stock will be, with respect to dividends and upon our voluntary or
involuntary liquidation, dissolution or winding up:
- senior to all classes or series of common stock and to all of our
equity securities the terms of which provide that the equity
securities shall rank junior to the preferred stock;
- junior to all equity securities that we issue which rank senior to
the preferred stock; and
- on a parity with all equity securities that we issued other than
those that are referred to in the bullet points above.
The term "equity securities" does not include convertible debt
securities.
DESCRIPTION OF DEPOSITARY SHARES
General
We may issue depositary shares, each of which will represent a
fractional interest of a share of a particular class of preferred stock, as
specified in the applicable prospectus supplement. We will deposit with a
depositary (the "preferred stock depositary") shares of a class of preferred
stock represented by depositary shares pursuant to a separate deposit agreement
among the Company, the preferred stock depositary and the holderssale from time to time by the
holders of up to an aggregate maximum of 4,337,961 shares (adjusted for the
2-for-1 stock split payable on March 13, 2000) of our common stock. These shares
have been issued or may be issued in the future pursuant to an earn-out in
connection with the Share Purchase Agreement between SDL and the holders of all
of the depositary receipts issuedequity interests in Queensgate. This prospectus has been prepared in
connection with registering these shares to allow for sales of these shares by
the preferred stock depositary which
will evidenceapplicable Selling Stockholders to the depositarypublic as required by the terms of
the Share Purchase Agreement and a related Registration Rights Agreement. We
have registered the shares ("depositary receipts"). Subjectfor sale pursuant to the terms of the deposit agreement, each ownerShare Purchase
Agreement and the Registration Rights Agreement, but registration of a depositary receipt will be
entitled, in proportion to the fractional interestthese
shares does not necessarily mean that any of a share of a particular
class of preferred stock represented by the depositary shares evidenced by the
depositary receipt, to all the rights and preferences of the class of the
preferred stock represented by the depositary shares (including dividend,
voting, conversion, redemption and liquidation rights).
The depositarythese shares will be evidencedoffered and
sold by depositary receipts issuedthe holders thereof pursuant to this prospectus.
We will not receive any proceeds from this offering. The shares may be
sold from time to time to purchasers directly by any of the applicable deposit agreement. Immediately after we issueSelling
Stockholders, or under some circumstances, donees, pledgees, transferees or
other successors in interest ("Transferees") thereof. Alternatively, the Selling
Stockholders, or Transferees thereof, may from time to time offer the shares
through dealers or agents, who may receive compensation in the form of
commissions from the Selling Stockholders, or Transferees thereof, and/or the
purchasers of the shares for whom they may act as agent. The Selling
Stockholders, or Transferees thereof, and deliverany dealers or agents that participate
in the preferreddistribution of the shares may be deemed to be "underwriters" within the
meaning of the Securities Act and any profit on the sale of the shares by them
and any commissions received by any such dealers or agents might be deemed to be
underwriting commissions under the Securities Act of 1933.
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The Selling Stockholders are subject to the provisions of the Exchange
Act and the rules under it relating to stock manipulation, particularly
Regulation M. They are not to engage in any transaction in violation of these
provisions.
The Selling Stockholders may sell their shares directly to purchasers or
may use broker-dealers or agents to sell their shares. Broker-dealers or agents
who sell the shares may receive compensation in the form of commissions from the
Selling Stockholders or they may receive compensation from purchasers of the
shares for whom they acted as agents or to whom they sold the shares as
principal, or both. The compensation as to a preferred stock depositary, weparticular broker-dealer or agent
will cause
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the preferred stock depositary to issue the depositary receipts on our behalf.
You may obtain copiesnot be in excess of eight percent (8%) of the applicable formselling price of deposit agreementthe shares
sold by the particular broker-dealer or agent. The Selling Stockholders and depositary
receipt from us upon request. The statements madeany
broker-dealers or agents that participate in this section relatingthe sale of their common stock may
be deemed to be "underwriters" within the meaning of the Securities Act. Any
commissions or profits received by these broker-dealers or agents on any resale
of the shares may be underwriting discounts and commissions under the Securities
Act of 1933, as amended. Selling Stockholders who are "underwriters" within the
meaning of the Securities Act, will be subject to the deposit agreementprospectus delivery
requirements of the Securities Act.
We will pay all fees and expenses incurred in connection with preparing
and filing this prospectus and any prospectus supplement and the depositary receipt are summariesregistration
statement and any amendments thereto. The Selling Stockholders will pay any
brokerage commissions and similar selling expenses, if any, attributable in
connection with the sale of certain
anticipated provisions. These summaries are not complete and may be modified by
the applicable prospectus supplement. For more detail you should refershares of common stock.
We have agreed to the
deposit agreement itself, which will be filed as an exhibit tokeep the registration statement, of which this
prospectus isand any subsequent prospectus supplements constitute a part,
or incorporatedeffective until all of the securities covered by reference in this registration statement may
be freely sold by a Form 8-K.
Dividends and Other Distributions
The preferred stock depositary will distribute all cash dividends or
other cash distributions received in respect of a class or series of preferred
stockthe Selling Stockholders without registration pursuant to the record holders of depositary receipts evidencing the related
depositary shares in proportion to the number of depositary receipts owned by
such holders, subject to certain obligations of holders to file proofs,
certificates and other information and to pay certain charges and expenses to
the preferred stock depositary.
In the event of a distribution other than in cash, the preferred stock
depositary will distribute property that it receives to the record holders of
depositary receipts entitled to the property, subject to certain obligations of
holders to file proofs, certificates and other information and to pay certain
charges and expenses to the preferred stock depositary, unless the preferred
stock depositary determines that it is not feasible to make the distribution, in
which case the preferred stock depositary may, with our approval, sell the
property and distribute the net proceeds from the sale to the holders.
Withdrawal of Stock
Upon surrenderRule
144(k) of the depositary receipts at the corporate trust officeSecurities Act, assuming none of the preferred stock depositary,Selling Stockholders is an
affiliate of SDL. There can be no assurance that the holdersSelling Stockholders will
be entitled to delivery at
the corporate trust office,sell all or upon each such holder's order, of the number of
whole or fractional shares of the class or series of preferred stock and any
money or other property represented by the depositary shares evidenced by such
depositary receipts. Holders of depositary receipts will be entitled to receive
whole or fractional shares of the related class or series of preferred stock on
the basis of the proportion of preferred stock represented by each depositary
share as specified in the applicable prospectus supplement, but holders of such
shares of preferred stock will not thereafter be entitled to receive depositary
shares therefor. If the depositary receipts delivered by the holder evidence a
number of depositary shares in excess of the number of depositary shares
representing the number of shares of preferred stock to be withdrawn, the
preferred stock depositary will deliver to such holder at the same time a new
depositary receipt evidencing the excess number of depositary shares.
Redemption of Depositary Shares
Whenever we redeem shares of preferred stock held by the preferred stock
depositary, the preferred stock depositary will redeem as of the same redemption
date the number of the depositary shares representing shares of such class or
series of preferred stock so redeemed, provided we shall have paid in full to
the preferred stock depositary the redemption price of the preferred stock to be
redeemed plus an amount equal to any accrued and unpaid dividends on the
preferred stock to the date fixed for redemption. The redemption price per
depositary share will be equal to the corresponding portion of the redemption
price and any other amounts per share payable with respect to such class or
series of preferred stock. If we redeem fewer than all the depositary shares, we
will select the depositary shares that we will redeem pro rata (as nearly as may
be practicable without creating fractional depositary shares), by lot or by any
other equitable method that we determine.
From and after the date fixed for redemption, all dividends in respect of the shares of a class or series of preferred stock so called for redemption
will cease to accrue, the depositary shares called for redemption will no longer
be deemed to be outstanding and all rights of the holders of the depositary
receipts evidencing the depositary shares so called for redemption will cease,
except the right to receive any moneys payable upon redemption and any money or
other property to which the holders of the depositary receipts were entitled
upon redemption upon surrender of the depositary receipts to the preferred stock
depositary.
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Voting of the Preferred Stock
Upon receipt of notice of any meeting at which the holders of a class of
preferred stock deposited with the preferred stock depositary are entitled to
vote, the preferred stock depositary will mail the information contained in the
notice of meeting to the record holders of the depositary receipts evidencing
the depositary shares which represent such class of preferred stock. Each record
holder of depositary receipts evidencing depositary shares on the record date
(which will be the same date as the record date for such class of preferred
stock) will be entitled to instruct the preferred stock depositary as to the
exercise of the voting rights pertaining to the amount of preferred stock
represented by the holder's depositary shares. The preferred stock depositary
will vote the amount of such class or series of preferred stock represented by
the depositary shares in accordance with such instructions, and we will agree to
take all reasonable action which the preferred stock depositary may deem
necessary in order to enable the preferred stock depositary to do so. The
preferred stock depositary will abstain from voting the amount of preferred
stock represented by the depositary shares to the extent it does not receive
specific instructions from the holders of depositary receipts evidencing the
depositary shares. The preferred stock depositary will not be responsible for
any failure to carry out any instruction to vote, or for the manner or effect of
any such vote made, as long as any such action or non-action is in good faith
and does not result from the preferred stock depositary's negligence or willful
misconduct.
Liquidation Preference
In the event that we voluntarily or involuntarily liquidate, dissolve or
wind up, the holders of each depositary receipt will be entitled to the fraction
of the liquidation preference accorded each share of preferred stock represented
by the depositary share evidenced by the depositary receipt as set forth in the
applicable prospectus supplement.
Conversion of Preferred Stock
The depositary shares, as such, will not be convertible into common stock offered hereby.
Under the securities laws of certain states, the securities may be sold
in such states only through registered or any other securitieslicensed brokers or property. Nevertheless, if stated in the
applicable prospectus supplement relating to an offering of depositary shares,
holdersdealers.
Selling Stockholders may surrender depositary receipts to the applicable preferred stock
depositary with written instructions to the preferred stock depositary to
instruct us to cause conversion of a classalso resell all or series of preferred stock
represented by the depositary shares evidenced by the depositary receipts into
whole shares of common stock, other shares of a class or series of preferred
stock or other shares of stock, and we have agreed that upon receipt of these
instructions and any amounts payable, we will cause the conversion of the shares
of preferred stock utilizing the same procedures as those provided for delivery
of preferred stock to effect the conversion. If we convert only a portion of depositary shares evidenced by a depositary receipt, we will issue a depositary
receipt or receipts for any depositary shares that we do not covert. We will not
issue fractional shares of common stocktheir
securities in open market transactions in reliance upon conversion, and if conversion will
result in a fractional share, we will pay an amount in cash by equal to the
value of the fractional interest based upon the closing price of our common
stock on the last business day prior to the conversion.
Amendment and Termination of A Deposit Agreement
The form of depositary receipt evidencing depositary shares which
represent the preferred stock and any provision of the deposit agreement may at
any time be amended by agreement between us and the preferred stock depositary.
However, any amendment that materially and adversely alters the rights of the
holders of depositary receipts or that would be materially or adversely
inconsistent with the rights granted to the holders of the related preferred
stock will not be effective unless such amendment has been approved by the
existing holders of at least two-thirds of the applicable depositary shares
evidenced by the applicable depositary receipts then outstanding. No amendment
will impair the right, subject to certain anticipated exceptions in the deposit
agreements, of any holder of depositary receipts to surrender any depositary
receipt with instructions to deliver to the holder the related class of
preferred stock and all money and other property, if any, represented by the
depositary receipt, except in order to comply with law. Every holder of an
outstanding depositary receipt at the time any such amendment becomes effective
will be deemed, by continuing to hold such depositary receipt, to consent and
agree to such amendment and to be bound by the applicable deposit agreement as
amended.
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Charges of A Preferred Stock Depositary
We will pay all transfer and other taxes and governmental charges
arising solely from the existence of the deposit agreement. In addition, we will
pay the fees and expenses of the preferred stock depositary in connection with
the performance of our dutiesRule 144 under the
deposit agreement.Securities Act. However, holders of
depositary receipts will pay the fees and expenses of the preferred stock
depositary for any duties requested by the holders to be performed which are
outside of those expressly provided for in the deposit agreement.
Resignation and Removal of Depositary
The preferred stock depositary may resign at any time by delivering to
us notice of its election to do so, they must meet the criteria and we may atconform to
the requirements of that Rule. In addition, any time remove the preferred
stock depositary, any such resignation or removalsecurities covered by this
prospectus which qualify for sale pursuant to take effect upon the
appointment of a successor preferred stock depositary. A successor preferred
stock depositary must be appointed within 60 days after deliveryRule 144A of the notice
of resignation or removal and mustSecurities Act,
as amended, may be a bank or trust company with its principal
office in the United States and a combined capital and surplus of at least
$50,000,000.
Miscellaneous
The preferred stock depositary will forwardsold under Rule 144A rather than pursuant to holders of depositary
receiptsthis prospectus.
A Selling Stockholder may not sell any reports and communications from us which are received by the
preferred stock depositary with respect to the related preferred stock.
We will not be liable, and the preferred stock depositary will not be
liable, if we are prevented or it is prevented from or delayed in, by law or any
circumstances beyond its or our control, performing the obligations under the
deposit agreement. Our obligations and the obligations of the preferred stock
depositary under the deposit agreement will be limited to performing our duties
in good faith and without negligence (in the case of any action or inaction in
the voting of a class or series of preferred stock represented by the depositary
shares), gross negligence or willful misconduct. We will not be obligated, and
the preferred stock depositary will not be obligated, to prosecute or defend any
legal proceeding in respect of any depositary receipts, depositary shares or
shares of a class or series of preferred stock represented thereby unless
satisfactory indemnity is furnished. We may rely on, and the preferred stock
depositary may rely on, written advice of counsel or accountants, or information
provided by persons presenting shares of preferred stock represented thereby for
deposit, holders of depositary receipts or other persons that we believe in good
faith to be competent to give such information, and on documents that we believe
in good faith to be genuine and signed by a proper party.
If a preferred stock depositary receives conflicting claims, requests or
instructions from any holders of depositary receipts, on the one hand, and from
us, on the other hand, the preferred stock depositary will be entitled to act on
such claims, requests or instructions received by us.
DESCRIPTION OF WARRANTS
We currently have no warrants outstanding (other than options issued
under our stock option plans). We may issue warrants for the purchase of common stock or preferred stock. We may issue warrants independently or together with
any other securities offered pursuant to any prospectus supplement and warrants
may be attached to or separate from such securities. We will issue each series
of warrants under a separate warrant agreement that we will enter into with a
warrant agent specified in the applicable prospectus supplement. The warrant
agent will act solely as our agent in connection with the warrants of such
series and will not assume any obligation or relationship of agency or trust for
or with any provisions of the warrants. We will set forth additional terms of
the warrants and the applicable warrant agreements in the applicable prospectus
supplement.
The applicable prospectus supplement will describe the terms of the
warrants in respect of which we are delivering this prospectus, including, where
applicable, the following:
- the title of the warrants;
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- the aggregate number of the warrants;
- the price or prices at which the warrants will be issued;
- the designation, terms and number of shares of preferred stock or
common stock purchasable upon exercise of the warrants;
- the designation and terms of any securities with which the warrants
are issued and the number of any warrants issued with each such
security;
- the date, if any, on and after which the warrants and the related
preferred stock or common stock will be separately transferable;
- the price at which each share of preferred stock or common stock
purchasable upon exercise of the warrants may be purchased;
- the date on which the right to exercise the warrants will commence
and the date on which the right will expire;
- the minimum or maximum amount of the warrants which may be exercised
at any one time;
- information with respect to book-entry procedures, if any;
- a discussion of certain federal income tax considerations; and
- any other terms of the warrants, including terms, procedures and
limitations relating to the exchange and exercise of the warrants.
DESCRIPTION OF DEBT SECURITIES
General
The debt securities may be secured or unsecured and may be senior or
subordinated indebtedness of the Company. Unless otherwise specified in the
applicable prospectus supplement, the debt securities are to be issued under an
indenture, as amended or supplemented from time to time, among the Company and a
trustee chosencovered by the Company and qualified to act as trustee under the Trust
Indenture Act of 1939, as amended. The indenture is subject to, and governed by,
the Trust Indenture Act of 1939, as amended. The statements made in this section
relating to the indenture and the debt securities are summaries of certain
provisions of the debt securities and the indenture. These summaries are not
complete. For more detail you should refer to the indenture, which we have filed
as an exhibit to the registration
statement of which this prospectus is a part.
Term
We will describe the particular terms of the debt securities offered by a prospectus supplement in the applicable prospectus supplement, along with any
applicable modifications of or additions to the general terms of the debt
securitiesmeans other than as described in this prospectus.
Accordingly, forWe have entered into a description of
the terms of any series of debt securities, you must refer to both the
prospectus supplement relating to that series and the description of the debt
securities set forth in this prospectus. A prospectus supplement may change any
of the terms of the debt securities described in this prospectus.
The Company may offer under this prospectus up to $300,000,000 (or its
equivalent in another currency based on the exchange rate at the time of sale)
aggregate principal amount of debt securities or if debt securities are issued
at a discount, such principal amount as may be sold for an initial public
offering price of up to $300,000,000. Unless we state otherwise in any
prospectus supplement, the Company may issue the debt securities in one or more
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series, as established from time to time by the Company. The Company need not
issue all debt securities of one series at the same time and, unless otherwise
provided, a series may be reopened, without the consent of the holders of the
debt securities of that series, for issuances of additional debt securities of
that series.
The Company may, but need not, designate more than one trustee under the
indenture, each with respect to one or more series of debt securities. Any
trustee may resign or be removed with respect to one or more series of debt
securities, and a successor trustee may be appointed to act with respect to the
series. If two or more persons are acting as trustee with respect to different
series of debt securities, each such trustee will be a trustee of a trust under
the indenture separate and apart from the trust administered by any other
trustee and, except as we state otherwise in this prospectus, any action to be
taken by a trustee may be taken by each trustee with respect to, and only with
respect to, the one or more series of debt securities for which it is trustee.
The following summaries set forth certain general terms and provisions
of the indenture and the debt securities. The prospectus supplement relating to
the series of debt securities being offered will contain further terms of the
debt securities, including the following specific terms:
- the title of the debt securities;
- the limit on the aggregate principal amount of the debt securities of
the series that may be authenticated and delivered under the indenture;
- the date or dates, or the method for determining the date or dates, on
which the Company will pay the principal of the debt securities;
- the rate or rates (which may be fixed or variable), or the method by
which such rate or rates will be determined, at which the debt securities will
bear interest, if any;
- the date or dates (or the method for determining the date or dates)
from which any interest will accrue, the dates upon which any interest will be
payable and the record dates for payment of interest (or the method by which the
record dates will be determined);
- the place or places, if any, other than or in addition to the Borough
of Manhattan, The City of New York, where the principal of (and premium, if any)
and interest, if any, on the debt securities will be payable, where the debt
securities may be surrendered for conversion or registration of transfer or
exchange and where notices or demands to or upon the Company in respect of the
debt securities and the indenture may be served;
- any obligation the Company has to redeem, repay or repurchase the debt
securities, in whole or in part, at the option of a holder of the debt
securities, and the period or periods within which, the date or dates on which
the price or prices at which and the terms and conditions upon which the Company
will redeem, repay or repurchase the debt securities;
- if other than the trustee, the identity of each security registrar
and/or paying agent;
- any conversion or exchange provisions of the debt securities;
- any provisions granting special rights to holders of the debt
securities;
- any deletions from, modifications of, or additions to the events of
default or covenants of the Company with respect to the debt securities, whether
or not such events of default or covenants are consistent with the events of
default or covenants with the indenture;
- the person to whom any interest will be payable, if other than the
person in whose name the debt security is registered; and
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- any other terms of the debt securities and any deletions from or
modifications or additions to the indenture in respect of the debt securities
(whether or not consistent with the other provisions of the indenture).
The Company may issue debt securities at a discount below their
principal amount and provide for less than the entire principal amount of the
debt securities to be payable upon declaration of acceleration of maturity. In
such cases, we will describe any material U.S. federal income tax, accounting
and other considerations in the applicable prospectus supplement.
Conversion and Exchange
The applicable prospectus supplement will specify the terms and
conditions, if any, on which debt securities of any series are convertible into
or exchangeable for common stock or preferred stock. Such terms may include
provisions for conversion or exchange, either mandatory, at the option of the
holder, or at the option of SDL, in which the number of shares of common stock
or preferred stock to be received by the holders of the debt securities would be
calculated according to the market price of common stock or preferred stock as
of a time stated in the prospectus supplement.
Denominations and Interest
Unless we specify otherwise in the applicable prospectus supplement, the
debt securities of any series will be issuable in denominations of $1,000 and
integral multiples thereof. Unless we specify otherwise in the applicable
prospectus supplement, interest on any series of debt securities will be payable
to the person in whose name the security is registered at the close of business
on the record date for such interest at the office of the Company maintained for
such purpose within the City and State of New York. However, unless we provide
otherwise in the applicable prospectus supplement, the Company may make interest
payments by check mailed to the address of the person entitled to the interest
as it appears in the applicable register for debt securities or by wire transfer
of funds to such person at an account maintained within the United States.
Global Notes
Unless we specify otherwise in the applicable prospectus supplement, the
debt securities of each series will be issued in the form of one or more fully
registered book-entry debt securities of such series (each, a "Global Note")
that will be deposited with, or on behalf of The Depository Trust Company, New
York, New York ("DTC"). Global Notes will be issued in fully registered form.
The Company anticipates that the Global Notes will be deposited with, or
on behalf of DTC, and that such Global Note will be registered in the name of
Cede & Co., DTC's nominee. Unless we specify otherwise in the applicable
prospectus supplement, the Company further anticipates that the following
provisions will apply to the depository arrangements with respect to the Global
Notes.
So long as DTC or its nominee is the registered owner of the Global
Notes, DTC or its nominee, as the case may be, will be considered the sole
holder of the debt securities represented by the Global Note for all purposes
under the indenture. Except as described below, owners of beneficial interests
in the Global Notes will not be entitled to have debt securities represented by
such Global Note registered in their names, will not receive or be entitled to
receive physical delivery of debt securities in certificated form and will not
be considered the owners or holders of the debt securities under the indenture.
The laws of some states require that certain purchasers of securities take
physical delivery of such securities in certificated form; accordingly, such
laws may limit the transferability of beneficial interests in the Global Notes.
The Global Notes will be exchangeable for certificated debt securities
only if:
- DTC notifies the Company that it is unwilling or unable to continue as
depository or DTC ceases to be a clearing agency registered under the Exchange
Act (if so required by applicable law or regulation) and, in
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either case, a successor depository is not appointed by the Company within 90
days after the Company receives such notice or becomes aware of such
ineligibility;
- the Company in its sole discretion determines that the Global Notes
shall be exchangeable for certificated debt securities; or
- there shall have occurred and be continuing an event of default with
respect to debt securities of any series under the indenture and beneficial
owners representing a majority in aggregate principal amount of the debt
securities of such series represented by a Global Note advise DTC to cease
acting as depository. Upon any such exchange, owners of a beneficial interest in
such Global Note will be entitled to physical delivery of individual debt
securities of such series in certificated form of like tenor, terms and rank,
equal in principal amount to such beneficial interest, and to have such debt
securities in certificated form registered in the names of the beneficial
owners, which names are expected to be provided by DTC's relevant Participants
(as identified by DTC) to the trustee.
Debt securities so issued in certificated form will be issued in denominations
of $1,000 or any integral multiple thereof, and will be issued in registered
form only, without coupons.
Merger, Consolidation or Sale of Assets
Unless we specify otherwise in the applicable prospectus supplement, the
indenture provides that the Company will not, in any transaction or series of
transactions, consolidate with, or sell, lease, assign, transfer or otherwise
convey all or substantially all of its assets to, or merge with or into any
other person unless:
- either the Company is the continuing person or the successor person
(if other than the Company) formed by or resulting from any such consolidation
or merger or which shall have received the transfer of such assets shall
expressly assume payment of the principal of (and premium, if any) and interest
on all of debt securities, and the due and punctual performance and observance
of all of the covenants and conditions contained in the indenture;
- immediately after giving effect to the transaction and treating any
debt which becomes an obligation of the Company or any of its subsidiaries as a
result of such transaction as having been incurred by the Company or such
subsidiary at the time of such transaction, no event of default under the
indenture, and no event which, after notice or lapse of time, or both, would
become an event of default, shall have occurred and be continuing; and
- the Company delivers to the trustee an officers' certificate and legal
opinion covering these conditions.
In the event that the Company is not the continuing person, then, for purposes
of the second bullet point above, the successor person will be deemed to be the
Company.
Upon any such merger, consolidation, sale, assignment, transfer, lease
or conveyance in which the Company is not the continuing legal entity, the
successor entity formed by the consolidation or into which the Company is merged
or to which the sale, assignment, transfer, lease or other conveyance is made
shall succeed to, and be substituted for, and may exercise every right and power
of, the Company under the indenture with the same effect as if the successor
entity has been named as the Company in the indenture and the Company will be
released (except in the case of a lease) from its obligations under the
indenture and the debt securities.
Events of Default, Notice and Waiver
Unless we specify otherwise in the applicable prospectus supplement, the
indenture provides that the following events are "events of default" with
respect to any series of debt securities issued under the indenture:
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- default in the payment of any interest upon any debt security of that
series when it becomes due and payable, and continuance of that default for a
period of 30 days;
- default in the payment of principal of or premium, if any, on any debt
security of that series when due and payable;
- default in the performance or breach of any covenant or warranty of
the Company in the indenture with respect to any debt security of that series
(other than a covenant or warranty the default or breach of which is
specifically dealt with in the indenture), which default continues uncured for a
period of 60 days after receipt of written notice as provided in the indenture;
- the following:
- default in the payment of an aggregate principal amount exceeding
$10,000,000 of any evidence of indebtedness of the Company or any mortgage,
indenture, note, bond, capitalized lease or other instrument under which such
indebtedness is issued or by which such indebtedness is secured, such default
having continued after the expiration of any applicable grace period and having
resulted in the acceleration of the maturity of such indebtedness, but only if
such indebtedness is not discharged or such acceleration is not rescinded or
annulled;
- certain events of bankruptcy, insolvency or reorganization with
respect to the Company, the Company or any significant subsidiary of the Company
(as defined in Regulation S-X under the Securities Act); and
- any other event of default provided with respect to debt securities of
that series that is described in the applicable prospectus supplement.
A supplemental indenture establishing the terms of a particular series
of debt securities may delete, modify or add to the events of default described
above.
No event of default with respect to a particular series of debt
securities necessarily constitutes an event of default with respect to any other
series of debt securities. The occurrence of an event of default may constitute
an event of default under our bank credit agreements in existence from time to
time. In addition, the occurrence of certain events of default or an
acceleration under the indenture may constitute an event of default under
certain of our other indebtedness outstanding from time to time.
If an event of default with respect to debt securities of any series at
the time outstanding occurs and is continuing, then the trustee or the holders
of not less than a majority in principal amount of the outstanding debt
securities of that series may, by a notice in writing to us (and to the trustee
if given by the holders), declare all debt securities of that series to be due
and payable immediately.
At any time after a declaration of acceleration with respect to debt
securities of any series has been made, but before a judgment or decree for
payment of the money due has been obtained by the trustee, the holders of a
majority in principal amount of the outstanding debt securities of that series
may rescind and annul the acceleration if:
- the Company has paid or deposited with the trustee a sum sufficient to
pay:
- all overdue installments of interest on all outstanding debt
securities of that series;
- the principal of (and premium, if any, on) any outstanding debt
securities of that series which have become due otherwise than by such
declaration of acceleration, and interest thereon at the rates provided for in
such debt securities; and
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- to the extent lawful, interest upon overdue installments of interest
at the rate or rates provided in such debt securities; and
- all events of default with respect to debt securities of that series,
other than the nonpayment of the principal of (or premium, if any) or interest
on debt securities of that series which have become due solely by such
declaration of acceleration, have been cured or waived.
The indenture also provides that the holders of a majority in principal
amount of the outstanding debt securities of any series may on behalf of the
holders of all debt securities of such series waive any past default under the
indenture with respect to such debt securities and its consequences, except a
default:
- in the payment of the principal of (or premium, if any) or interest on
or payable in respect of any debt security of such series; or
- in respect of a covenant or provision of the indenture which cannot be
modified or amended without the consent of the holder of each outstanding debt
security of such series affected.
If the trustee knows of a default with respect to the debt securities of
any series, the indenture requires the trustee, within 90 days after the
default, to give notice to the holders of such debt securities, unless such
default shall have been cured or waived. However the trustee may withhold notice
to the holders of any debt securities of such series of any default (except a
default in the payment of the principal of (or premium, if any) or interest, if
any, on any debt security of such series) if the trustee determines such
withholding is in the interest of such holders.
The indenture provides that the trustee will be under no obligation to
exercise any of its rights or powers under the indenture at the request of any
holders of outstanding debt securities, unless the holders offer the trustee
security or indemnity reasonably satisfactory to it against the costs, expenses
and liabilities which might be incurred by it in compliance with such request.
Subject to certain rights of the trustee, the holders of a majority in principal
amount of the outstanding debt securities of any series will have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the trustee or exercising any trust or power conferred on the
trustee with respect to the debt securities of that series.
No holder of any debt security of any series will have any right to
institute any proceeding, judicial or otherwise, with respect to the indenture
or for the appointment of a receiver or trustee, or for any remedy under the
indenture, unless:
- that holder has previously given to the trustee written notice of a
continuing event of default with respect to debt securities of that series; and
- the holders of a majority in principal amount of the outstanding debt
securities of that series have made a written request, and offered reasonable
indemnity, to the trustee to institute the proceeding as trustee, and the
trustee has not received from the holders of a majority in principal amount of
the outstanding debt securities of that series a direction inconsistent with
that request and has failed to institute the proceeding within 60 days.
Notwithstanding the foregoing, the holder of any debt security will have
an absolute and unconditional right to receive payment of the principal of,
premium and any interest on that debt security on or after the due dates
expressed in that debt security and to institute suit for the enforcement of
payment.
The indenture requires the Company, within 120 days after the end of
each fiscal year, to furnish to the trustee a statement as to compliance with
the indenture. Further, upon any request by the Company to take any action under
the indenture, the Company will furnish to the trustee:
- an officers' certificate stating that all conditions precedent, if
any, provided for in the indenture relating to the proposed action have been
complied with; and
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- an opinion of counsel stating that in the opinion of such counsel all
such conditions precedent, if any, have been complied with.
Modification and Waiver
We may modify and amend the indenture with the consent of the holders of
a majority in principal amount of the outstanding debt securities of each series
affected by the modifications or amendments except that we may not make any
modification or amendment without the consent of the holders of each affected
debt security then outstanding if that amendment will:
- change the stated maturity of the principal of (or premium, if any,
on) or any installment of principal of or interest on such debt security;
- reduce the principal amount of debt securities or the rate or amount
of interest on such debt securities, or any premium payable on such debt
security;
- adversely affect the right of any holder of debt securities to
repayment of such debt security at the holder's option;
- change the place, or the currency, for payment of principal of (or
premium, if any) such debt security;
- impair the right to institute suit for enforcement of any payment on
or with respect to such debt security;
- reduce the amount of debt securities whose holders must consent to an
amendment or waiver or reduce the quorum or voting requirements set forth in the
indenture; or
- modify any of the foregoing provisions or any of the provisions
relating to the waiver of certain past defaults or certain covenants, except to
increase the required percentage to effect such action or to provide that
certain other provisions may not be modified or waived without the consent of
the holder of such debt security.
The holders of a majority in principal amount of the outstanding debt
securities of any series may on behalf of the holders of all debt securities of
that series waive the Company's compliance with certain covenants of the
indenture.
Modifications and amendments of the indenture may be made by the Company
and the trustee without the consent of any holder of debt securities issued
thereunder for any of the following purposes:
- to evidence the succession of another person to the Company under the
indenture;
- to add to the covenants of the CompanyRegistration Rights Agreement for the benefit of
the holders
of the debt securities or to surrender any right or power conferred upon the
Company in the indenture;
- to add events of default for the benefit of the holders of all or any
series of debt securities;
- to add or change any provisions of the indenture to facilitate the
issuance of the debt securities in certificated form, provided that such action
shall not adversely affect the interests of the holders of any debt securities
in any material respect;
- to secure the debt securities;
- to provide for the acceptance of appointment by a successor trustee or
to facilitate the administration of the trusts under the indenture by more than
one trustee;
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- to cure any ambiguity, defect or inconsistency in the indenture or to
add or change any other provisions with respect to matters or questions arising
under the indenture, provided that such action shall not adversely affect the
interests of holders of debt securities of any series or any related guarantees
in any material respect; or
- to supplement any of the provisions of the indenture to the extent
necessary to permit or facilitate defeasance and discharge of any series of debt
securities, provided that such action shall not adversely affect the interests
of the holders of the debt securities in any material respect.
The indenture provides that in determining whether the holders of the
requisite principal amount of outstanding debt securities of a series have given
any request, demand, authorization, direction, notice, consent or waiver under
the indenture or whether a quorum is present at a meeting of holders of the debt
securities of a series, debt securities of each series owned by the Company or
any other obligor upon such debt securities or any affiliate of the Company or
of such other obligor will be disregarded.
The indenture contains provisions for convening meetings of the holders
of debt securities of a series. A meeting may be called at any time by the
trustee and also, upon request, by the Company or the Holders of 25% in
principal amount of the outstanding debt securities of such series, in any such
case upon notice given as provided in the indenture. Except for any consent that
must be given by the holder of each debt security affected by certain
modifications and amendments of the indenture, any resolution presented at a
meeting or adjourned meeting duly reconvened at which a quorum is present may be
adopted by the affirmative vote of the holders of a majority in principal amount
of the outstanding debt securities of such series. However, except as referred
to above, any resolution with respect to any request, demand, authorization,
direction, notice, consent, waiver or other action that may be made, given or
taken by the holders of a specified percentage, which is less or more than a
majority, in principal amount of the outstanding debt securities of such series
may be adopted at a meeting or adjourned meeting duly reconvened at which a
quorum is present by the affirmative vote of the holders of such specified
percentage in principal amount of the outstanding debt securities of such
series. Any resolution passed or decision taken at any meeting of holders of
debt securities of any series duly held in accordance with the indenture will be
binding on all holders of debt securities of such series. The quorum at any
meeting called to adopt a resolution, and at any reconvened meeting, will be
persons holding or representing a majority in principal amount of the
outstanding debt securities of any series; provided, however, that if any action
is to be taken at such meeting with respect to a consent or waiver which may be
given by the holders of not less than a specified percentage, which is less or
more than a majority, in principal amount of the outstanding debt securities of
such series, the persons holding or representing such specified percentage in
principal amount of the outstanding debt securities of such series will
constitute a quorum.
Notwithstanding the provisions described above, the indenture provides
that if any action is to be taken at a meeting of holders of debt securities of
any series with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action that the indenture expressly provides
may be made, given or taken by the holders of a specified percentage in
principal amount of all outstanding debt securities of such series affected
thereby:
- there shall be no minimum quorum requirement for such meeting; and
- the principal amount of the outstanding debt securities of such series
that are entitled to vote in favor of such request, demand, authorization,
direction, notice, consent, waiver or other action shall be taken into account
in determining whether such request, demand, authorization, direction, notice,
consent, waiver or other action has been made, given or taken under the
indenture.
Defeasance of Debt Securities and Certain Covenants in Certain
Circumstances
Legal Defeasance and Covenant Defeasance. Unless we specify otherwise in
the applicable prospectus supplement, the indenture provides that the Company
may elect:
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- to be discharged from any and all obligations in respect of the debt
securities of any series (except for certain obligationsSelling Stockholders to register the
transfer or exchange of debt securities of such series, to replace stolen, lost
or mutilated debt securities of such series, and to maintain paying agencies and
certain provisions relating to the treatment of funds held by paying agents)
("legal defeasance"); or
- to be released from compliance with the covenants in the indenture
("covenant defeasance").
The Company will be so discharged upon the deposit with the trustee, in
trust, of money and/or Government Obligations that, through the payment of
interest and principal in accordance with their terms, will provide money in an
amount sufficient to pay and discharge each installment of principal (and
premium, if any) and interest on the debt securities of that series on the
scheduled due dates or the applicable redemption date in accordance with the
terms of the indenture and those debt securities.
This trust may only be established if, among other things:
- the Company has delivered to the trustee a legal opinion to the effect
that the holders of the debt securities will not recognize income, gain or loss
for United States federal income tax purposes as a result of such legal
defeasance or covenant defeasance and will be subject to United States federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such legal defeasance or covenant defeasance had not
occurred, and such legal opinion, in the case of legal defeasance, must refer to
and be based upon a ruling of the Internal Revenue Service or a change incommon stock under applicable United
States federal income tax law occurring afterand state securities laws under various circumstances and at
various times. Pursuant to this Registration Rights Agreement, we have agreed to
indemnify the date of the
indenture;
- such legal defeasance or covenant defeasance will not result in a
breach or violation of, or constitute a default under, the indenture or any
other material agreement or instrument to which the Company is a party or by
which it is bound; and
- no event of default or event which with notice or lapse of time or
both would become an event of default with respect to the debt securities shall
have occurred and shall be continuing on the date of, or, solely in the case of
events of default due to certain events of bankruptcy, insolvency, or
reorganization, during the period ending on the 91st day after the date of, such
deposit into trust.
"Government Obligations" means securities which are:
- direct obligations of the United States of America, for the payment of
which obligations its full faith and credit is pledged; or
- obligations of a person controlled or supervised by and acting as an
agency or instrumentality of the United States of America, the payment of which
is unconditionally guaranteed as a full faith and credit obligation by the
United States of America and which, in either of the above cases, are not
callable or redeemable at the option of the issuer thereof and also includes a
depository receipt issued by a bank or trust company as custodian with respect
to any such Government Obligation held by such custodian for the account of the
holder of a depository receipt, provided that (except as provided by law) such
custodian is not authorized to make any amount received by the custodian.
Subordination
The applicable prospectus supplement will set forth the terms and
conditions, if any, upon which the debt securities are subordinated to other
indebtedness of the Company. Such terms will include a description of the
indebtedness ranking senior to the debt securities, the restrictions on payments
to the holders of such debt securities while a default with respect to such
senior indebtedness is continuing, the restrictions, if any, on payments to the
holders of such debt securities following an event of default, and provisions
requiring holders of such debt securities to remit certain payment to holders of
senior indebtedness.
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DELAWARE LAW AND CERTAIN CHARTER PROVISIONS
Certain provisions of Delaware law and SDL's Restated Certificate of
Incorporation, as amended (the "Certificate") could make more difficult the
acquisition of SDL by means of a tender offer, a proxy contest or otherwiseSelling Stockholders, and the removal of incumbent officers and directors. These provisions are expected
to discourage certain types of coercive takeover practices and inadequate bids
and to encourage persons seeking to acquire control of SDL to negotiate first
with SDL.
Delaware Statute
SDL is subject to the provisions of Delaware General Corporation Law
section 203 (the "Delaware Statute"). In general, the Delaware Statute prohibits
certain business combinations between a publicly-held Delaware corporation, such
as SDL, and any "interested stockholder" for a period of three years after the
date on which the latter became an interested stockholder unless the business
combination is approved in a prescribed manner. A "business combination"
includes a merger, asset sale or other transaction resulting in financial
benefit to the interested stockholder. An "interested stockholder" is a person
who, together with affiliates and associates, owns (or within three years prior,
did own) 15 percent or more of the corporation's outstanding voting stock.
Classified board of directors
The Certificate provides that, so long as the board of directors
consists of more than two directors, the board of directors will be divided into
three classes of directors serving staggered three-year terms. As a result,
approximately one-third of SDL's board of directors will be elected each year.
In addition, the Certificate provides for cumulative voting in the election of
directors, allowing the election of a director at each election by holders
representing a large minority of shares.
Advance notice for raising business or making nominations at meetings
The Certificate establishes an advance notice procedure for bringing
business before an meeting of stockholders and for nominating (other than by or
at the direction of the Board of Directors) candidates for election as directors
at an annual meeting or a special meeting for the purpose of electing directors.
To be timely, notice of nominations or other business to be brought before an
annual meeting must be received by the Secretary of SDL not earlier than 90 nor
later than 60 days prior to the first anniversary of the preceding year's annual
meeting or, if the date of the annual meeting is advanced by more than 30 days
or delayed by more than 60 days from such anniversary, such notice must be
received not earlier than 90 days prior to such annual meeting and not later
than the later of: (i) the 60th day prior to the annual meeting; or (ii) the
10th day following the date on which notice of the date of the annual meeting
was mailed or public disclosure thereof was made, whichever occurs first.
Other charter provisions
The Certificate provides that in determining whether to take or refrain
from taking corporate action on any matter, the Board of Directors may take into
account the interests of customers, employees and other constituencies of SDL
and its subsidiaries, including the effect upon communities in which SDL and its
subsidiaries do business, and may consider long-term as well as short-term
interests of SDL and its stockholders, in addition to any other considerations
which the Board of Directors may lawfully take into account.
Stockholder rights agreement
On November 6, 1997, the Board of Directors adopted and approved a
stockholder rights agreement, as amended (the "SDL Rights Agreement") and
declared a dividend of one right (each a "Right") for each share of SDL common
stock outstanding on November 17, 1997. On February 11, 1999, SDL amended and
restated the SDL Rights Agreement to eliminate those provisions that require
that certain actions may only be taken by independent directors. The RightsSelling Stockholders have certain anti-takeover effects and are intended to discourage coercive or unfair
takeover tactics and to encourage any potential acquirer to negotiate a price
fair to all SDL stockholders. The rights may
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cause substantial dilution to an acquiring party that attempts to acquire SDL on
terms not approved by the Board of Directors, but they will not interfere with
any negotiated merger or other business combination. In the event that any
person or group (except for a certain existing stockholder of SDL so long as
such stockholder is not required to report its ownership on Schedule 13(D))
acquires beneficial ownership of fifteen (15) percent or more of the outstanding
shares of SDL's common stock as defined in the SDL Rights Agreement, each holder
of a Right, other than a Right beneficially owned by the acquiring person, will
thereafter have the right to receive upon exercise that number of shares of
SDL's common stock having a market value of two times the exercise price of the
Right. In addition, if at any time following such acquisition of fifteen (15)
percent or more of the outstanding common stock, SDL is acquired in a merger or
other business combination or transaction, or fifty (50) percent or more of its
consolidated assets or earning power are sold, each holder of a Right will
receive, upon exercise of that Right, that number of shares of common stock of
the acquiring company which, at the time of such transaction, will have a market
value of two times the exercise price of the Right.
PLAN OF DISTRIBUTION
We may sell securities offered pursuant to any applicable prospectus
supplement directly to one or more purchasers or though agents or underwriters.
We may sell securities offered pursuant to any applicable prospectus supplement
in at-the-market equity offerings or on a negotiated or competitive bid basis
through underwriters or dealers or directly to other purchasers or through
agents. We will name any underwriter or agent involved in the offer and sale of
the securities in the applicable prospectus supplement.
We may distribute the securities from time to time in one or more
transactions:
- at a fixed price or prices, which may be changed;
- at market prices prevailing at the time of sale;
- at prices related to prevailing market prices; or
- at negotiated prices.
The Company also may, from time to time, authorize underwriters acting
as the Company's agents to offer and sell securities upon the terms and
conditions as set forth in the applicable prospectus supplement. In connection
with the sale of the securities, underwriters may be deemed to have received
compensation from us in the form of underwriting discounts or commissions and
may also receive commissions from purchasers of securities for whom they may act
as agent. Underwriters may sell the securities to or through dealers, and
dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agent.
We will describe in the applicable prospectus supplement any
underwriting compensation we pay to underwriters or agents in connection with
the offering of the securities, and any discounts, concessions or commissions
allowed by underwriters to participating dealers. Dealers and agents
participating in the distribution of the securities may be deemed to be
underwriters, and any discounts and commissions received by them and any profit
realized by them on resale of the securities may be deemed to be underwriting
discounts and commissions. We may enter into agreementsagreed to
indemnify underwriters, dealers and agents againstus, for certain civil liabilities, including liabilities under the Securities Act and to reimburse these persons for certain
expenses. We will describe any indemnification agreements in the applicable
prospectus supplement.
Unless we specify otherwise inExchange
Act.
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If required, at a time a particular offer of the relatedshares is made, a
prospectus supplement, each
series of securities offered will be distributed that will set forth the name and
names of any dealers or agents and any commissions and other terms constituting
compensation from the Selling Stockholders, or transferees thereof, and any
other required information. The shares may be sold from time to time at varying
prices determined at the time of sale or at negotiated prices.
In order to comply with the securities laws of certain states, if
applicable, the shares may be sold only through registered or licensed brokers
or dealers. In addition, in certain states, the shares may not be sold unless
they have been registered or qualified for sale in such state or an exemption
from such registration or qualification requirement is available and is complied
with.
The shares may also be sold in one or more of the following
transactions: (a) block transactions (which may involve crosses) in which a
new issue with no established trading
market, other thanbroker-dealer may sell all or a portion of such stock as agent but may position
and resell all or a portion of the common stock which is listed onblock as principal to facilitate the
NASDAQ National
Market System. Any shares of common stock soldtransaction; (b) purchases by any such broker-dealer as principal and resale by
such broker-dealer for its own account pursuant to a prospectus supplement may be listed onsupplement; (c)
ordinary brokerage transactions and transactions in which any such broker-dealer
solicits purchasers; (d) sales "at the NASDAQ National Market System, subjectmarket" to official notice of issuance. We may elect to list any series of preferred stock
and any series of debt securities, depository shares or warrants on any
exchange, but we are not obligated to do so. It is possible that one or more
underwriters may makethrough a market in a series of offered securities,
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33
but will not be obligated to do so and may discontinue any market making at any
time without notice. Therefore, no assurance can be given as to the liquidity of
themaker or
into an existing trading market, on an exchange or otherwise, for the securities.
If indicatedsuch shares;
and (e) sales in the applicable prospectus supplement, we may authorize
dealers acting as our agentsother ways not involving market makers or established trading
markets, including direct sales to solicit offers by certain institutions to
purchase the securities from us at the public offering price set forth in the
prospectus supplement pursuant to delayed delivery contracts providing for
payment and delivery on the date or dates stated in the prospectus supplement.
We may make delayed delivery with various institutions, including commercial and
savings banks, insurance companies, pension funds, investment companies and
educational and charitable institutions. Delayed delivery contracts will not be
subject to any conditions except:
- the purchase by an institution of the securities covered by its
delayed delivery contracts shall not at the time of delivery be prohibited under
the laws of any jurisdiction in the United States to which the institution is
subject; and
- if the securities are sold to underwriters, we shall have sold to the
underwriters the total principal amount of the offered securities less the
principal amount coveredpurchasers. In effecting sales,
broker-dealers engaged by the delayed delivery contracts.
To facilitate the offering of the securities, certain persons
participating in the offeringSelling Stockholders may engage in transactions that stabilize,
maintain, or otherwise affect the price of the securities. This may include
over-allotments or short sales of the securities, which involves the sale by
persons participating in the offering of more securities than we soldarrange for other
broker-dealers to them.
In these circumstances, these persons would cover the over-allotments or short
positions by making purchases in the open market or by exercising their
over-allotment option. In addition, these persons may stabilize or maintain the
price of the debt securities by bidding for or purchasing debt securities in the
open market or by imposing penalty bids, whereby selling concessions allowed to
dealers participating in the offering may be reclaimed if securities sold by
them are repurchased in connection with stabilization transactions. The effect
of these transactions may be to stabilize or maintain the market price of the
securities at a level above that which might otherwise prevail in the open
market. These transactions may be discontinued at any time.
Certain of the underwriters and their affiliates may be customers of,
engage in transactions with and perform services for, us in the ordinary course
of business.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for
the Company by Morrison & Foerster LLP, Palo Alto, California.participate.
EXPERTS
The consolidated financial statements of SDL, Inc. incorporated by
reference in SDL, Inc.'s Annual Report (Form 10-K/A) for the year ended December
31, 1998,January
1, 1999, have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon incorporated by reference therein and incorporated
herein by reference. The supplemental consolidated financial statements of SDL,
Inc. appearing in SDL, Inc.'s Current Report on Form 8-K dated May 18, 1999 have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report included therein and incorporated by reference elsewhere herein, which is
based in part on the report of Arthur Andersen, independent auditors. Such
consolidated financial statements and supplemental consolidated financial
statements referred to above are incorporated herein by reference in reliance
upon such reports given on the authority of such firms as experts in accounting
and auditing.
31LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered
pursuant to this prospectus is being passed upon for the Company by Morrison &
Foerster LLP, Palo Alto, California.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated fees and expenses other than underwriting
discounts and commissions,payable
by the Company in connection with the offeringissuance and distribution of the securities
being registered.Common
Stock registered hereby. All the amounts shownof such fees and expenses are estimates, except for the
Securities Act registration fee.
Securities Act Registration Fee................. $ 249,819
Printing and Exchange Commission Registration Fee............... $83,400.00
Printing Fees..................................................... $50,000.00duplicating fees................... 5,000
Legal Feesfees and Expenses........................................... $100,000.00expenses......................... 50,000
Accounting Feesfees and Expenses...................................... $75,000.00
Miscellaneous..................................................... $6,600.00expenses.................... 15,000
Miscellaneous expenses.......................... 5,181
-----------
Total........................................................ $315,000.00
===========*Total.................................. $ 325,000
-----------
*None of the expenses listed above will be borne by the selling stockholders.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under sectionSection 145 of the General CorporationCorporate Law of the State of Delaware,
the Registrant has broad powers to indemnify its directors and officers against
liabilities they may incur in such capacities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act"). The Registrant's
Amended and Restated Bylaws also provide for mandatory indemnification of its
directors and executive officers, and permissive indemnification of its
employees and agents, to the fullest extent permissible under Delaware law.
The Registrant's Amended and Restated Certificate of Incorporation
provides that the liability of its directors for monetary damages shall be
eliminated to the fullest extent permissible under Delaware law. Pursuant to
Delaware law, this includes elimination of liability for monetary damages for
breach of the directors' fiduciary duty of care to the Registrant and its
stockholders.Stockholders. These provisions do not eliminate the directors' duty of care and,
in appropriate circumstances, equitable remedies such as injunctive or other
forms of non-monetarynon monetary relief will remain available under Delaware law. In
addition, each director will continue to be subject to liability for breach of
the director's duty of loyalty to the Registrant, for acts or omissions not in
good faith or involving intentional misconduct, for knowing violations of law,
for any transaction from which the director derived an improper personal
benefit, and for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Delaware law. The provision also does not
affect a director's responsibilities under any other laws, such as the
federal securities laws or state or federal environmental laws. The Registrant has entered into agreements with its directors and
certain of its executive officers that require the Registrant to indemnify such
persons against expenses, judgments, fines, settlements and other amounts
actually and reasonably incurred (including expenses of a derivative action) in
connection with any proceeding, whether actual or threatened, to which any such
person may be made a party by reason of the fact that such person is or was a
director or officer of the Registrant or any of its affiliated enterprises,
provided such person acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interests of the Registrant and,
with respect to any criminal proceeding, had no reasonable cause to believe his
or her conduct was unlawful. The indemnification agreements also set forth
certain procedures that will apply in the event of a claim for indemnification
thereunder.
The Registrant has obtainedmaintains
a policy of directors' and officers' liability insurance that insures the
Registrant'sCompany's directors and officers against the cost of defense, settlement or
payment of a judgment under certain circumstances.
32Pursuant to written agreement between the respective Selling stockholders and
the Company, the directors and officers of the Company are indemnified by such
Selling
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Stockholders against certain civil liabilities that they may incur under the
Securities Act in connection with this registration statement and the related
prospectus.
ITEM 16. EXHIBITS
[TO BE REVISED]
Number Document
------ --------
1.1* Form of Underwriting Agreement between the Company and the
Representatives.
3.1 Form of Registrant's Restated Certificate of Incorporation.(1)
3.1.1 Form of Registrant's Certificate of Designation of the Series B
Preferred Stock.(4)
3.1.2 Form of Registrant's Certificate of Correction of Restated
Certificate of Incorporation.(4)
3.1.3 Form of Amendment to Registrant's Restated Certificate of
Incorporation.(5)
3.2 Form of Registrant's Amended and Restated Bylaws.(1)
4.1 Reference is made to Exhibits 3.1 and 3.2.
4.2 Specimen Common Stock certificate.(1)
4.3.1 Rights Agreement, dated November 6, 1997, between SDL and Chase
Mellon Shareholder Services, L.L.C., together with; Exhibit A,
Form of Rights Certificate; Exhibit B, of Summary of Rights to
Purchase Preferred Stock; and Exhibit C Form of Certificate of
Designation of the Series B Preferred Stock.(2)
4.3.2 First Amended and Restated Rights Agreement, dated February 11,
1999, between SDL and Chase Mellon Shareholders Services, L.L.C.,
a New Jersey limited liability company.(3)
4.4 Form of Indenture.
4.5* Form of Preferred Stock Certificate.
4.6* Form of Warrant Agreement.
4.7* Form of Deposit Agreement.
5.1 Opinion of Morrison & Foerster LLP as to the validity of the
issuance of the securities.
12.1 Calculation of Ratio of Earnings to Fixed Charges.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Arthur Andersen, Independent Auditors.
23.3 Consent of Morrison & Foerster LLP (included in Exhibit 5.1).
24.1 Power of attorney of certain signatories (included on the
Signature Page).
25.1* Statement of Eligibility of Trustee on Form T-1.
Notes regarding exhibits incorporated by reference
(1) Incorporated3.1 - Restated Certificate of Incorporation of the Registrant including all
amendments thereto(1)
3.2 - Bylaws of the Registrant (incorporated by reference to the identically numbered exhibitExhibit 3.2 to
SDL'sRegistrant's Registration Statement on Form S-1 (File No. 33-87752))
4.1 - Reference is made to Exhibits 3.1 and 3.2
4.3.1 - Rights Agreement, dated November 6, 1997, between SDL and Chase Mellon
Shareholder Services, L.L.C., which became effective on March 15, 1995.
(2) Incorporatedtogether with; Exhibit A, Form of Rights
Certificate; Exhibit B, of Summary of Rights to Purchase Preferred Stock; and
Exhibit C Form of Certificate of Designation of the Series B Preferred Stock
(incorporated by reference to Exhibit 1 to SDL'sRegistrant's Registration Statement
on Form 8-A (File No. 000-25688), filed with the SEC on November 7, 1997.
(3) Incorporated1977)
4.3.2 - First Amended and Restated Rights Agreement, dated February 11, 1999,
between SDL and Chase Mellon Shareholders Services, L.L.C., a New Jersey limited
liability company (incorporated by reference to Exhibit 1 to SDL'sRegistrant's
Registration Statement on Form 8-A/A8-A (File No. 000-25688) filed with the SEC on
March 19, 1999.
(4) Incorporated by reference to the identically numbered exhibit to
SDL's Annual Report1999)
5.1 - Opinion of Morrison & Foerster LLP(1)
23.1 - Consent of Ernst & Young LLP, Independent Auditors(1)
23.2 - Consent of Arthur Andersen, Chartered Accountants(1)
23.3 - Consent of Morrison & Foerster LLP (included in Exhibit 5.1)(1)
24.1 - Power of Attorney (included on Form 10-K/A for the fiscal year ended
December 31, 1998.
33signature page hereto)(1)
- --------------
(1) previously filed.
II-2
36
(5) Incorporated by reference to the identically numbered exhibit to
SDL's Quarterly Report on Form 10-Q for the quarter ended June
30, 1999.
- ------------------
* To be filed by amendment or incorporated by reference in connection with the
offering of the applicable securities.14
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) any deviation from the low or high and of the
estimated maximum offering price may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate changes
in volume and price represent no more than a 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this registration statement or
any material change to such information in this registration statement;
Provided,provided, however, that subparagraphs (i) and (ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in the periodic reports filed by the Registrant pursuant
to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered herein, 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 thethese securities being registered which remain unsold at the termination
of the offering.
The undersigned Registrant hereby further undertakes that, for the
purposes of determining any liability under the Securities Act of 1933, each
filing of the Registrant's annual reports pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 (and, wherewhen applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference into this
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby further 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 14a-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.II-3
15
The undersigned Registrant hereby further undertakes that:
34
37
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance under Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4), or
497(h) under the Securities Act of 1933 shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof. The undersigned Registrant hereby further undertakes to file an
application for the purpose of determining the eligibility of the Trustee to act
under subsection (a) of Section 310 of the Trust Indenture Act in accordance
with the rules and regulations prescribed by the Commission under Section
305(b)(2) of the Act.
Insofar as indemnification
for liabilities arising under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the Registrant pursuant to the
provisions described under Item 15 above,of this registration statement, or otherwise
(other than insurance), 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 Securitiessuch Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Securitiessuch Act and
will be governed by the final adjudication of such issue.
35II-4
3816
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrantCompany
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 amendment to
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of San Jose, State of California on August __, 1999.March 20, 2000.
SDL, INC.
By: /s/ DONALD R. SCIFRES
------------------------------------
Donald R. Scifres
---------------------------------
Chairman of the Board,
and
Chief Executive Officer and President
II-5
17
Pursuant to the requirements of the Securities Act of 1933, this
amendment to registration statement on Form S-3 has been signed by the following
persons in the capacities and on the dates indicated. Each person whose signature appears below
hereby authorizes Donald R. Scifres and Michael L. Foster and each of them, as
Attorney-in-fact, to sign on his behalf individually and In each capacity stated
below, and to file, any amendments, including post-effective amendments, to this
registration statement.indicated:
SIGNATURE TITLE DATE
--------- ----- ----
/s/ DONALDDonald R. SCIFRESScifres Chairman of the Board, and August 11, 1999
- ------------------------------------- Chief Executive March 20, 2000
- ------------------------------ Officer and President (Principal Executive
Donald R. Scifres (Principal Executive
Officer)
/s/ MICHAEL L. FOSTER Chief Financial Officer August 11, 1999
- ------------------------------------- and Treasurer (Principal Michael L. Foster Vice President, Finance and Chief March 20, 2000
- ------------------------------ Financial Officer (Principal Financial and
Michael L. Foster Accounting Officer)
/s/ KEITHMark B. GEESLINMyers Director August 11, 1999March 20, 2000
- -------------------------------------
Keith B. Geeslin
/s/ ANTHONY B. HOLBROOK Director August 11, 1999
- -------------------------------------
Anthony B. Holbrook
/s/ MARK B. MYERS Director August 11, 1999
- -------------------------------------------------------------------
Mark B. Myers
/s/ FREDERICKeith B. Geeslin Director March 20, 2000
- ------------------------------
Keith B. Geeslin
/s/Frederic N. SCHWETTMANNSchwettmann Director August 11, 1999March 20, 2000
- -------------------------------------------------------------------
Frederic N. Schwettmann
/s/ Anthony B. Holbrook Director March 20, 2000
- ------------------------------
Anthony B. Holbrook
36II-6
39
EXHIBIT INDEX
Number Document
1.1* Form of Underwriting Agreement between the Company and the
Representatives.18
Exhibit Index
3.1 Form of Registrant's- Restated Certificate of Incorporation.(1)
3.1.1 Form of Registrant's Certificate of DesignationIncorporation of the Series B
Preferred Stock.(4)
3.1.2 FormRegistrant including all
amendments thereto(1)
3.2 - Bylaws of Registrant's Certificate of Correction of Restated
Certificate of Incorporation.(4)
3.1.3 Form of Amendmentthe Registrant (incorporated by reference to Exhibit 3.2 to
Registrant's Restated Certificate of
Incorporation.(5)
3.2Registration Statement on Form of Registrant's Amended and Restated Bylaws.(1)S-1 (File No. 33-87752))
4.1 - Reference is made to Exhibits 3.1 and 3.2.
4.2 Specimen Common Stock certificate.(1)3.2
4.3.1 - Rights Agreement, dated November 6, 1997, between SDL and Chase Mellon
Shareholder Services, L.L.C., together with; Exhibit A, Form of Rights
Certificate; Exhibit B, of Summary of Rights to Purchase Preferred Stock; and
Exhibit C Form of Certificate of Designation of the Series B Preferred Stock.(2)Stock
(incorporated by reference to Exhibit 1 to Registrant's Registration Statement
on Form 8-A (File No. 000-25688) filed with the SEC on November 7, 1977)
4.3.2 - First Amended and Restated Rights Agreement, dated February 11, 1999,
between SDL and Chase Mellon Shareholders Services, L.L.C., a New Jersey limited
liability company.(3)
4.4company (incorporated by reference to Exhibit 1 to Registrant's
Registration Statement on Form of Indenture.
4.5* Form of Preferred Stock Certificate.
4.6* Form of Warrant Agreement.
4.7* Form of Deposit Agreement.8-A (File No. 000-25688) filed with the SEC on
March 19, 1999)
5.1 - Opinion of Morrison & Foerster LLP as to the validity of the
issuance of the securities.
12.1 Calculation of Ratio of Earnings to Fixed Charges.LLP(1)
23.1 - Consent of Ernst & Young LLP, Independent Auditors.Auditors(1)
23.2 - Consent of Arthur Andersen, Independent Auditors.Chartered Accountants(1)
23.3 - Consent of Morrison & Foerster LLP (included in Exhibit 5.1).(1)
24.1 - Power of attorney of certain signatoriesAttorney (included on the
Signature Page).
25.1* Statement of Eligibility of Trustee on Form T-1.
Notes regarding exhibits incorporated by reference
signature page hereto)(1)
Incorporated by reference to the identically numbered exhibit to
SDL's Registration Statement on Form S-1 (File No. 33-87752),
which became effective on March 15, 1995.
(2) Incorporated by reference to Exhibit 1 to SDL's Registration
Statement on Form 8-A (File No. 000-25688), filed with the SEC
on November 7, 1997.
40
(3) Incorporated by reference to Exhibit 1 to SDL's Registration
Statement on Form 8-A/A filed with the SEC on March 19, 1999.
(4) Incorporated by reference to the identically numbered exhibit to
SDL's Annual Report on Form 10-K/A for the fiscal year ended
December 31, 1998.
(5) Incorporated by reference to the identically numbered exhibit to
SDL's Quarterly Report on Form 10-Q for the quarter ended June
30, 1999.
- --------------
* To be filed by amendment or incorporated by reference in connection with the
offering of the applicable securities.-----------
(1) previously filed.