<PAGE>
Filed Pursuant to Rule 424(b)(2)
Registration 33-59729
PROSPECTUS SUPPLEMENT
(To Prospectus dated July 17, 1995)
4,300,000 SHARES [LOGO OF USSC]
UNITED STATES SURGICAL CORPORATION
COMMON STOCK
($.10 PAR VALUE)
All of the 4,300,000 shares of Common Stock, $.10 par value (the "Common
Stock"), offered hereby are being sold by United States Surgical Corporation
("USSC" or the "Company"). The Common Stock is listed on the New York Stock
Exchange ("NYSE") under the symbol "USS." On May 30, 1996, the last reported
sale price for the Common Stock, as reported on the NYSE, was $34.88 per
share. See "Price Range of Common Stock and Distributions."
SEE "RISK FACTORS" ON PAGE S-2 OF THIS PROSPECTUS SUPPLEMENT AND ON PAGE 2 OF
THE ACCOMPANYING PROSPECTUS FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS IN THE COMMON STOCK OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT COMPANY(1)
<S> <C> <C> <C>
Per Share................................ $34.25 $1.1988 $33.0512
Total(2)................................. $147,275,000 $5,154,840 $142,120,160
</TABLE>
- -------------------------------------------------------------------------------
(1) Before deducting expenses payable by the Company estimated at $400,000.
(2) The Company has granted the Underwriter a 30-day option to purchase up to
an aggregate of 645,000 additional shares of Common Stock at the Price to
Public, less the Underwriting Discount, solely to cover over-allotments,
if any. If the Underwriter exercises such option in full, the total Price
to Public, Underwriting Discount and Proceeds to Company will be
$169,366,250, $5,928,066, and $163,438,184, respectively. See
"Underwriting."
The shares of Common Stock are offered subject to receipt and acceptance by
the Underwriter, to prior sale and to the Underwriter's right to reject any
order in whole or in part and to withdraw, cancel or modify the offer without
notice. It is expected that delivery of the shares of Common Stock will be
made at the office of Salomon Brothers Inc, Seven World Trade Center, New
York, New York, or through the facilities of The Depository Trust Company, on
or about June 5, 1996.
- ------------------------
SALOMON BROTHERS INC
- -----------------------------------------------------------------
The date of this Prospectus Supplement is May 30, 1996.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
----------------
Statements in this Prospectus Supplement and the accompanying Prospectus
which are not historical are forward looking, involving risks and
uncertainties, and may or may not be realized by the Company. The Company
undertakes no duty to update such forward looking statements. Many factors
could cause actual results to differ from these forward looking statements,
including loss of market share through competition, introduction of competing
products by other firms, pressure on prices from competition or purchasers of
the Company's products, regulatory obstacles to introduction of new products
which are important to the Company's growth, lack of acceptance of new
products by the health care market, slow rates of conversion by surgeons to
procedures which utilize the Company's products, changes in distribution of
the Company's products, consolidation in the health care market, and interest
rate and foreign exchange fluctuations.
RISK FACTORS
Prior to making an investment decision with respect to the shares of Common
Stock offered hereby, prospective investors should carefully consider the
specific factors set forth below, together with all of the other information
appearing herein or in the accompanying Prospectus, or incorporated by
reference herein or therein, in light of their particular investment
objectives and financial circumstances.
COMPETITION
There is considerable competition in the markets in which the Company
engages in business and no assurance can be given as to the Company's
competitive position. The impact of competition will likely have a continuing
effect on sales volumes and on prices charged by the Company. In addition,
increased cost consciousness has revived competition from reusable instruments
to some extent. The Company believes that disposable instruments are safer and
more cost efficient for hospitals and the health care system than are reusable
instruments, but it cannot predict the extent to which reusable instruments
will competitively impact the Company. The Company, however, also offers
reusable instruments.
HEALTH CARE MARKET
The health care industry continues to undergo change, led primarily by
market forces which are demanding greater efficiencies and reduced costs.
Federal government proposed health care mandates in the United States have not
occurred, and it is unclear whether, and to what extent, any future government
mandate will affect the domestic health care market. Industry led changes are
expected to continue irrespective of any governmental efforts toward health
care reform. The scope and timing of any further government sponsored
proposals for health care reform are presently unclear.
Changes in the health care industry and the trend toward cost containment,
along with competition, have contributed to continuing reductions in prices
for the Company's products and, in the near term, to slower acceptance of more
advanced surgical procedures in which the Company's products are used, given
hospital and surgeon concerns as to the costs of training and reimbursement by
payors. While the Company is implementing programs to assist hospitals in cost
containment through more efficient surgical practices and application of
minimally invasive surgery, there can be
S-2
<PAGE>
no assurance that the Company will not continue to be adversely affected by
these matters.
The costs of training for newer, more complicated procedures and concerns as
to reimbursement for newer procedures in view of changes in the health care
system have affected the rate at which the surgical community is learning the
more advanced laparoscopic procedures. More advanced applications of
laparoscopy may become specialized rather than practiced broadly by the
general surgical community. In addition, specialty surgeons may not be
experienced in minimally invasive surgery and may require familiarization with
this approach prior to acceptance in their practices.
An undue focus on discrete costs or similar limits which fails to consider
the overall value of minimally invasive surgery could adversely impact the
Company, and there can be no assurance as to the impact of cost containment on
future operations. Some hospitals may also lose per night revenues through
reduced post-operative care requirements as to procedures performed by
laparoscopy, which could influence their acceptance of newer procedures. In
addition, the rapid changes in the market for surgical devices, along with
competition, could affect both prices and volumes of sales.
DIVERSIFICATION STRATEGY
Although the Company believes that new areas of surgical practice it is
entering offer significant opportunities for revenue growth and profitability,
considerable risks may be involved and there can be no assurance that
favorable results will be achieved. See "Recent Developments--New Product
Initiatives." Costs of acquiring or developing technologies or instruments for
use in specialty applications may be significant, which could adversely affect
both near term and longer term results if successful products are not
developed and introduced. In addition, considerable competition exists for
products used in these surgical specialties, including competitors developing
other techniques and from sources of more traditional products. Further,
acceptance of newer techniques, even with demonstrated clinical advantages,
may be slow given concerns as to expenditures for newer practices by health
care payors and requirements for extensive training with newer approaches.
While the Company believes its products may be useful in coronary surgery,
surgeons practicing in this field have not traditionally performed minimally
invasive surgery or used disposable instruments extensively and no assurance
can be given as to the acceptance of such products or techniques in this area.
The Company expects intense competition in sales of products for specialty
surgical applications. A broad range of companies, including the Ethicon
division of Johnson & Johnson, presently offer products for use in
cardiovascular, urologic, orthopedic, and oncological procedures. Many of such
companies have significantly greater capital than the Company and are expected
to devote substantial resources to development of other new technologies which
would be competitive with products which the Company may offer. There are also
a number of smaller companies engaged in the development of surgical specialty
devices, and products developed by such firms could present additional
competition.
S-3
<PAGE>
THE COMPANY
The Company is a Delaware corporation primarily engaged in developing,
manufacturing and marketing a proprietary line of technologically advanced
surgical wound management products, including surgical stapling instruments,
laparoscopic products and sutures, for use in hospitals throughout the world.
The Company also sells to distributors, domestically and internationally. The
Company currently operates domestically and internationally through
subsidiaries, branches and divisions.
The Company manufactures and markets innovative mechanical products for the
wound closure market. In this category, its principal products consist of a
series of surgical stapling instruments (both disposable and reusable),
disposable surgical clip appliers and disposable loading units ("DLU"s) for
use with stapling instruments. The instruments are an alternative to manual
suturing techniques utilizing needle/suture combinations and enable surgeons
to reduce blood loss, tissue trauma and operating time while joining internal
tissue, reconstructing or sealing off organs, removing diseased tissue,
occluding blood vessels and closing skin, either with titanium, stainless
steel, or proprietary absorbable POLYSORB (TM) copolymer staples or with
titanium, stainless steel, or absorbable POLYSURGICLIP (TM) copolymer clips.
Surgical stapling also makes possible several surgical procedures which cannot
be achieved with surgical needles and suturing materials. The disposable
instruments and DLUs are expended after a single use or, in the case of
reloadable disposable instruments, after a single surgical procedure.
The Company manufactures and markets specialized wound management products
designed for use in the field of laparoscopic (also referred to as endoscopic)
surgery. This minimally invasive surgical technique requires incisions in the
patient of up to one-half inch through which various procedures are performed
using laparoscopic instruments inserted through ports known as trocars, and
optical devices, known as laparoscopes, for viewing inside the body cavity.
Laparoscopy generally provides patients with significant reductions in post-
operative hospital stay, pain, recuperative time and hospital costs, with
improved cosmetic results, and with the ability to return to work and normal
life in a shorter time frame. The Company has developed and markets disposable
surgical clip appliers and stapling instruments designed for laparoscopic uses
in a variety of sizes and configurations. The Company's products in this area
also include trocars and a line of instruments which allows the surgeon to
see, cut, clamp, retract, suction, irrigate or otherwise manipulate tissue
during a laparoscopic procedure. The Company also designs and markets
laparoscopes. Applications for minimally invasive surgery currently include
cholecystectomy (gall bladder removal), hysterectomy, hernia repair, bladder
suspension for urinary stress incontinence, anti-reflux procedures for
correction of heartburn, and various forms of bowel, stomach, gynecologic,
urologic, and thoracic (chest) surgery.
Laparoscopic products are offered individually, in pre-assembled kits and in
custom kits designed for specific surgical procedures such as cholecystectomy,
hernia repair, laparoscopically assisted vaginal hysterectomy, bowel and other
procedures. Kits are intended to offer the surgeon and operating room staff
convenience and ease of accessibility to instruments, and provide a cost
efficient means of purchasing the Company's products for hospital materials
management departments.
Numerous studies have shown that, in addition to reduced patient recovery
time, laparoscopy is a safe and efficacious technique. However, and
particularly in more complex surgical procedures, surgeons must receive
adequate training before achieving competency to perform laparoscopy. The
Company supports certification of surgeons in this technique to ensure that
the Company's products are used properly.
The Company offers certain of its products in both disposable and reusable
versions. Disposable instruments, as described in the preceding paragraphs,
reduce the user's capital investment, eliminate the risks and costs associated
with maintenance, sterilizing and repair of reusable instruments, and provide
the surgeon with a new sterile instrument for each procedure, offering more
efficacious and
S-4
<PAGE>
safer practice for both patients and operating room personnel. Reusable
instruments provide an alternative for surgeons and hospitals preferring this
approach.
The Company continues to expand manufacturing and marketing of its line of
sutures products, which was introduced in 1991. The Company believes that
sutures, which represent a major portion of the wound closure market, are a
natural complement to its other wound management products. This market is
currently dominated by other manufacturers. Although the Company believes that
its share of the suture market increased last year, there can be no assurance
that market share will continue to increase or that the Company will realize
significant market share in the near future.
The primary trend in the health care industry is toward cost containment.
Payors and managed care organizations have been able to exercise greater
influence through managed treatment and hospitalization patterns, including a
shift from reimbursement on a retrospective basis to prospective limits for
patient treatment. Hospitals have been severely impacted by the resulting cost
restraints and are competing for business and becoming more sophisticated in
management and marketing. The increasing use of managed care, centralized
purchasing decisions, consolidations among hospitals and hospital groups, and
integration of health care providers are continuing to affect purchasing
patterns in the health care system. Purchasing decisions are often shared by a
coalition of surgeons, nursing staff, materials managers, and hospital
administrators, with purchasing decisions taking into account whether a
product reduces the cost of treatment and/or attracts additional patients to a
hospital.
The Company believes it could potentially benefit from this focus on cost
containment and on managed care. Stapling and minimally invasive surgery
decrease operating room time including patient time under anesthesia, patient
recovery time and in many cases are highly cost effective. Doctors, patients,
employers and payors all value decreased patient recovery time. This could
lead to potential increases in volume as surgical stapling and minimally
invasive procedures are selected over alternative techniques. The Company is
adapting itself to this new environment by promoting the cost effectiveness of
its products, by striving to efficiently produce the highest quality products
at the lowest cost, and by assisting hospitals and payors in achieving
meaningful cost reductions for the health care system while retaining the
quality of care permitted by the Company's products.
The Company continually explores and conducts discussions with regard to
acquisitions and other strategic corporate transactions. The Company currently
has no agreements, commitments or understandings with respect to any
particular transactions. No assurance can be given with respect to the timing,
likelihood or financial or business effect of any possible transaction.
Except where the context otherwise requires, the term Company includes the
Company's subsidiaries, branches and divisions. The Company's principal
executive offices are located at 150 Glover Avenue, Norwalk, Connecticut
06856; telephone (203) 845-1000.
RECENT DEVELOPMENTS
The Company has taken steps to diversify beyond the general surgery market
and explore new growth areas in surgery where it can utilize its manufacturing
expertise, research and development experience and the skills of its sales
force. To this end, the Company is building a line of surgical specialty
instrumentation and technology for cardiovascular, oncological, urological and
orthopedic procedures. The Company believes that minimally invasive
instrumentation and more advanced techniques can be applied to these specialty
practices. The Company plans to obtain such technologies through internal
research and development and by acquiring, investing in, or creating alliances
with, other firms or persons who have developed such technology.
Although the Company intends to continue improving and expanding its product
lines applicable to general surgery, it believes that laparoscopic and other
more advanced techniques may be applied to additional surgical applications,
including surgical specialties. During 1995, the Company announced several new
products and techniques for such purposes and continues research and
development toward these ends.
S-5
<PAGE>
NEW PRODUCT INITIATIVES
The Company has developed and introduced specialized wound closure
instrumentation for use in vascular procedures, including its new VCS vascular
clip applier, a device which permits arteriotomies, venotomies, and vascular
anastomoses without penetration of the inner wall of the vessel. The Company
has developed and introduced a new minimally invasive technique for harvesting
the saphenous vein from a patient's leg in connection with cardiovascular
surgery, requiring only a few small incisions rather than an incision running
the length of the patient's leg, minimizing patient discomfort and scarring.
The Company believes its products may also be used for a variety of minimally
invasive cardiovascular and peripheral vascular surgeries, and is developing
additional instruments for use in such procedures.
The Company is offering miniaturized instruments for minimally invasive
surgery. During 1995, the Company acquired licenses to the MINISITE 2mm
endoscope, trocar, and accessory products (including miniaturized hand
instruments), and is introducing miniaturized versions of its current line of
products. The Company believes that its miniaturized line of instruments may
have application in a wide variety of procedures, including areas in which
minimally invasive procedures are not presently applied, such as trauma,
diagnostic, and rehabilitative procedures, and may enable some procedures to
be performed under conscious sedation outside the traditional operating room
environment. In addition, the smaller instruments may allow laparoscopic post-
operative review after surgery without hospitalization or general anesthesia,
which the Company believes may also help reduce health care costs and improve
clinical outcomes.
The Company's BIOSYN suture, introduced in 1995, is the first synthetic
absorbable suture which combines the benefits of a monofilament suture with
many of the advantages of braided sutures, such as tensile strength, ease of
handling, and first throw hold capability. The Company believes that its
BIOSYN sutures will compete effectively with its competitors' gut, absorbable
braided and absorbable monofilament sutures, providing uses across a wide
variety of surgical applications. The Company believes that the versatility of
the BIOSYN suture will provide hospitals with a cost effective method of
standardization and increased efficacy.
In the orthopedic field, the Company introduced the AUTO SUTURE endoscopic
spinal system in late 1995, consisting of a variety of instruments
manufactured by the Company for application in laparoscopic lumbar discectomy
and fusion, and in video assisted thoracic spine procedures. Although the
Company believes that spinal surgery offers the potential for new markets for
its endoscopic products, sales of these products may depend on acceptance of
laparoscopy by orthopedic surgeons and neurosurgeons.
STRATEGIC INITIATIVES
During 1995, the Company acquired a license with respect to the CHEMOSITE
Infusion Ports business from Device Labs, Inc., a privately held manufacturer.
An infusion port is a device implanted into a patient to provide repeated
access to the vascular system, such as for delivery of medications, blood
products and nutrition fluids, or the withdrawal of blood samples. The
principal use today is for delivery of chemotherapeutic agents to cancer
patients. Infusion ports have replaced external catheters to a large extent,
and are commonly used by surgeons.
During 1995, the Company entered a strategic alliance with Lorad, a unit of
ThermoTrex Corporation, in which it obtained marketing and distribution rights
to their stereotactic table. The customized table, together with the Company's
ABBI system breast biopsy device, combines the accuracy of stereotactic
imaging with minimally invasive removal of the entire breast biopsy in a
single step while the patient is under local anesthesia. The ABBI system can
also perform core needle and needle localization for advanced breast biopsy.
The ABBI system offers the surgeon increased accuracy and control and the
patient reduced scarring and disfigurement, and may significantly reduce
procedural and operating room costs.
S-6
<PAGE>
The Company acquired in 1995 Surgical Dynamics Inc. ("SDI") of Concord,
California, a subsidiary of E-Z-EM, Inc. SDI is a leading developer and
manufacturer of spinal cages and other instrumentation for spine surgery.
Spinal cages represent a new technological advance in implantable spine
devices. They provide support during bone in-growth for patients with painful
degenerative disc disease, with many advantages over present practices for
repairing the spine. SDI has completed a four-year clinical trial under
control of the United States Food and Drug Administration ("FDA") and
submitted its PMA (pre-market approval) to the FDA. The PMA is receiving
expedited review by the FDA. On May 23, 1996 the FDA's independent advisory
Panel recommended FDA approval of the Company's PMA. A final decision by the
FDA is anticipated during the latter part of the third quarter of 1996. SDI
has received regulatory approval for use of the device in Europe and Japan.
The Company entered into an agreement during 1995 with Alexion
Pharmaceuticals, Inc. ("Alexion") with respect to worldwide rights to market
Alexion's transgenetically engineered pig organs. In addition, the Company
acquired a 9.5% equity interest in Alexion. The agreement provides, under
certain conditions, for funding of Alexion's future research and development
and payment of royalties on any resulting product sales. Although the Company
believes that Alexion's technology is promising, substantial additional
research and development and clinical trials, including premarket approval by
the FDA, will be required before any products could be introduced to the
market, and no assurance can be given that the products will be successful in
human transplantation. Moreover, a number of other companies are engaged in
similar research, and such competition could adversely impact the Company's
opportunities in this area.
MARKETING INITIATIVES
The Company markets its products to hospital administrators and purchasing
groups as well as to surgeons, by demonstrating the economic efficiencies of
the Company's products and by assisting hospital management in realizing the
benefits of minimally invasive surgery. In 1995, the Company implemented its
PARTNERING WITH USSC program, which is designed to help hospital
administrators reduce costs, enhance quality and increase revenue. The program
encompasses the Company's BEST PRACTICES program, which assists hospitals in a
continuous effort to perform surgery more efficiently, enabling hospitals to
analyze and reduce systemwide costs, provides surgeon and staff training
programs and development of clinical guidelines for high-quality and efficient
patient care through minimally invasive surgery, and assistance with managed
care contracting and customized marketing materials. The Company also provides
training programs for primary care physicians in the use and advantages of
minimally invasive surgery, as they become the gatekeepers to managed care.
These approaches are designed to assist hospitals in remaining competitive in
the current health care environment.
S-7
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common Stock
offered hereby are estimated to be approximately $141,720,160, after deduction
of underwriting discounts and commissions and estimated offering expenses
(approximately $163,038,184 assuming the Underwriter's over-allotment option
is exercised in full). The net proceeds will be used by the Company for
general corporate purposes, which may include, among other things,
acquisitions of stock or assets of other companies, and reduction of
outstanding indebtedness under the Company's $325 million syndicated revolving
credit facility, maturing January 5, 2001 (the "Credit Facility"), and under
certain uncommitted loan facilities (the "Uncommitted Facilities"). The
principal balances outstanding as of March 31, 1996, were, respectively,
approximately $85 million under the Credit Facility and approximately $29
million under the Uncommitted Facilities. The interest rates on such
borrowings are variable, based on bidding and pricing formulas, and currently
approximate 6%. Borrowings under these facilities have been used by the
Company for general corporate purposes. To the extent that proceeds are used
to finance acquisitions of other businesses, the businesses acquired are
expected to be in the surgical field. Although the Company is continually
engaged in discussions with potential acquisition candidates, it currently has
no agreements, commitments or understandings with respect to any particular
acquisitions.
PRICE RANGE OF COMMON STOCK AND DISTRIBUTIONS
The Company's Common Stock is listed on the NYSE under the symbol "USS." The
following table sets forth, for the fiscal periods indicated, the high and low
of the daily sales prices of the Common Stock on the NYSE and the cash
dividend distributions per share declared by the Company with respect to each
such period.
<TABLE>
<CAPTION>
HIGH LOW DIVIDEND
------- ------- --------
<S> <C> <C> <C>
1994:
First Quarter........................................ $32 1/2 $15 7/8 $.02
Second Quarter....................................... 24 5/8 16 .02
Third Quarter........................................ 28 3/8 21 1/4 .02
Fourth Quarter....................................... 27 1/2 18 1/4 .02
1995:
First Quarter........................................ 24 1/4 18 3/4 .02
Second Quarter....................................... 24 19 1/8 .02
Third Quarter........................................ 27 3/4 20 3/8 .02
Fourth Quarter....................................... 27 1/4 21 3/8 .02
1996:
First Quarter........................................ 33 1/8 19 3/4 .02
Second Quarter (through May 30, 1996)................ 38 3/4 30 5/8 .02
</TABLE>
The last reported sale price of the Common Stock on the NYSE on May 30, 1996
was $34.88 per share. As of May 30, 1996, there were 9,534 holders of record
of the Common Stock.
Any future determination to pay cash dividends will continue to be at the
discretion of the Company's Board of Directors and will depend upon the
earnings of the Company, its financial condition, results of operations,
capital requirements and other factors as the Company's Board of Directors may
deem relevant. The Company's Credit Facility limits Common Stock dividends to
the greater of 20% of net income, as defined, or existing dividend levels as
indicated in the table above, until the Company acquires an investment grade
debt rating. In addition, the payment of dividends on the Common Stock is
subject to the rights of holders of shares of the Company's Series A
Convertible Preferred Stock. See "Description of Common Stock" in the
accompanying Prospectus.
S-8
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of March
31, 1996, on an actual basis and as adjusted to give effect to the sale of the
Common Stock offered hereby, after deducting underwriting discounts and
commissions and estimated offering expenses, and assumes the use of the
proceeds therefrom to reduce borrowings under the Credit Facility and certain
Uncommitted Facilities and for general corporate purposes, including
acquisitions. See "Use of Proceeds."
<TABLE>
<CAPTION>
MARCH 31, 1996
------------------------
ACTUAL AS ADJUSTED
(UNAUDITED) (UNAUDITED)
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Long-term debt (net of current maturities)
Long-term bank credit facilities.................... $ 128,500 $ 15,000(1)
Financing lease..................................... 92,000 92,000
Note payable to former distributor.................. 39,800 39,800
---------- ----------
Total long-term debt............................. $ 260,300 $ 146,800
---------- ----------
Stockholders' equity
Preferred stock $5.00 par value, authorized
2,000,000 shares; 9.76% Series A cumulative
convertible, 177,400 shares issued and outstanding
(liquidation value--$200 million).................. $ 900 $ 900
Additional paid-in capital--preferred stock......... 190,600 190,600
Common stock $.10 par value, authorized 250,000,000
shares; issued, 65,501,390 actual and 69,801,390 as
adjusted........................................... 6,600 7,000(1)
Additional paid-in capital--common stock............ 401,100 542,400(1)
Retained earnings................................... 248,100 248,100
Treasury stock at cost; 8,084,829 shares............ (86,400) (86,400)
Accumulated translation adjustments................. 2,700 2,700
---------- ----------
Total stockholders' equity........................ 763,600 905,300
---------- ----------
Total capitalization.............................. $1,023,900 $1,052,100
========== ==========
</TABLE>
- --------
(1) Assumes $28,200 of the proceeds from the offering will be invested in
short-term U.S. government securities pending utilization of such
proceeds for general corporate purposes, including acquisitions.
S-9
<PAGE>
SELECTED FINANCIAL INFORMATION
This table should be read in conjunction with the Company's consolidated
financial statements and notes thereto incorporated by reference into this
Prospectus Supplement and the accompanying Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------- -----------------------
1995 1996
1993 1994 1995 (UNAUDITED) (UNAUDITED)
---------- -------- ---------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
Net sales............... $1,037,200 $918,700 $1,022,300 $240,600 $266,000
Cost of products sold... 518,400 463,600 451,700 112,900 112,200
---------- -------- ---------- -------- --------
Gross profit........... 518,800 455,100 570,600 127,700 153,800
Research and
development............ 50,800 37,500 43,100 10,100 12,400
Selling, general and
administrative......... 449,300 366,700 417,000 94,000 110,300
Interest................ 18,500 18,200 20,700 4,900 4,000
Restructuring charges... 137,600 -- -- -- --
---------- -------- ---------- -------- --------
Income (loss) before
income taxes........... (137,400) 32,700 89,800 18,700 27,100
Income taxes............ 1,300 13,500 10,600 4,300 6,200
---------- -------- ---------- -------- --------
Net income (loss)....... (138,700) 19,200 79,200 14,400 20,900
Preferred stock
dividends.............. -- 14,900 19,500 4,900 4,900
---------- -------- ---------- -------- --------
Net income (loss)
applicable to common
shares................. $ (138,700) $ 4,300 $ 59,700 $ 9,500 $ 16,000
Average number of common
shares outstanding..... 56,000 56,600 57,000 56,900 57,300
Net income (loss) per
common share (primary
and fully diluted)..... $ (2.48) $ .08 $ 1.05 $ .17 $ .28
Dividends declared per
common share........... $ .245 $ .08 $ .08 $ .02 $ .02
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1996
-----------------------
DECEMBER 31, ACTUAL AS ADJUSTED
1995 (UNAUDITED) (UNAUDITED)
------------ ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
SELECTED BALANCE SHEET
DATA
Cash and cash equivalents............. $ 10,500 $ 11,700 $ 39,900(1)
Property, plant and equipment--net.... 504,900 493,700 493,700
Total assets.......................... 1,265,500 1,276,500 1,304,700(1)
Long-term debt (net of current
portion)............................. 256,500 260,300 146,800(1)
Stockholders' equity(2)............... 741,100 763,600 905,300(1)
</TABLE>
- --------
(1) Assumes $28,200 of the proceeds from the offering will be invested in
short-term U.S. government securities pending utilization of such proceeds
for general corporate purposes, including acquisitions. See "Use of
Proceeds."
(2) Includes $191,500 representing additional paid-in capital applicable to
the issuance of Series A Convertible Preferred Stock.
S-10
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS
(UNAUDITED)
The following table sets forth the Company's ratios of consolidated earnings
to total fixed charges and capitalized interest and consolidated earnings to
combined fixed charges, capitalized interest and preferred stock dividends for
the periods indicated.
<TABLE>
<CAPTION>
THREE
MONTHS
YEARS ENDED DECEMBER 31, ENDED
--------------------------- MARCH 31,
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges and
capitalized interest(1)................ 7.51 7.43 -- (2) 2.13 3.81 4.75
Ratio of earnings to combined fixed
charges, capitalized interest and
preferred stock dividends(1)........... 7.51 7.43 -- (2) 1.18 1.96 2.33
</TABLE>
- --------
(1) The ratios of earnings to fixed charges and capitalized interest and to
combined fixed charges, capitalized interest and preferred stock dividends
are computed by dividing the sum of earnings before provision for income
taxes and fixed charges (excluding capitalized interest) by total fixed
charges and capitalized interest, or by the sum of total fixed charges,
capitalized interest and preferred stock dividends. Total fixed charges
and capitalized interest include all interest (including capitalized
interest) and the interest factor of all rentals, assumed to be one-third
of consolidated rent expense. Preferred stock dividends have been
increased to an amount representing the pretax earnings which would be
required to cover such dividend requirements, assuming a statutory tax
rate of 35%.
(2) Earnings were inadequate to cover fixed charges. The dollar amount of the
deficiency at December 31, 1993 was $146.9 million. If restructuring
charges of $137.6 million were excluded from the calculation, the dollar
amount of the deficiency would have been $9.3 million.
S-11
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement"), USSC has agreed to sell to Salomon Brothers
Inc (the "Underwriter"), and the Underwriter has agreed to purchase, the
number of shares of Common Stock set forth below. In the Underwriting
Agreement, the Underwriter has agreed, subject to the terms and conditions set
forth therein, to purchase all of the shares of Common Stock offered hereby
(other than those covered by the over-allotment option) if any are purchased.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Salomon Brothers Inc ........................................... 4,300,000
</TABLE>
The Underwriter has advised USSC that it proposes initially to offer such
shares of Common Stock to the public at the public offering price set forth on
the cover page of this Prospectus Supplement, and to certain dealers at such
price less a concession not in excess of $0.72 per share of Common Stock. The
Underwriter may allow, and such dealers may reallow, a discount not in excess
of $0.10 per share of Common Stock to certain other dealers. After the initial
public offering, the public offering price, concession and discount may be
changed.
USSC has granted the Underwriter an option, exercisable within 30 days from
the date hereof, to purchase up to an aggregate of 645,000 additional shares
of Common Stock at the public offering price set forth on the cover page
hereof, less the underwriting discount. The Underwriter may exercise such
option to purchase such additional shares solely for the purpose of covering
over-allotments, if any, incurred in the sale of the shares of Common Stock
offered hereby.
For a period of 90 days after the date of this Prospectus Supplement, the
Company has agreed not to offer, sell, contract to sell or otherwise dispose
of any shares of Common Stock, any other capital stock of the Company or any
security convertible into or exercisable or exchangeable for Common Stock or
any other capital stock without the prior written consent of the Underwriter,
except the Common Stock to be issued in connection with this offering,
securities to be issued in connection with acquisitions, or securities to be
issued pursuant to existing employee or outside director plans.
The Common Stock is listed on the NYSE under the symbol "USS."
USSC has agreed to indemnify the Underwriter against, or contribute to
payments that the Underwriter may be required to make in respect of, certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
Salomon Brothers Inc has from time to time provided investment banking
services to the Company for which it has received customary fees. The
Underwriter may engage in transactions with and perform services for USSC in
the ordinary course of business. William F. May, a member of the Board of
Directors of Salomon Brothers Inc, is also a member of the Board of Directors
of USSC.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
In addition to the specific documents incorporated by reference into the
Prospectus to which this Prospectus Supplement relates (see "Incorporation of
Certain Documents By Reference" in such Prospectus), the following documents,
which have been filed with the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended, are incorporated by reference
into this Prospectus Supplement: (a) Annual Report on Form 10-K for the year
ended December 31, 1995 and (b) Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 1996.
S-12
<PAGE>
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon by
Thomas R. Bremer, Senior Vice President and General Counsel of the Company.
Certain other legal matters in connection with the offering of Common Stock
hereby will be passed upon for the Company by Skadden, Arps, Slate, Meagher &
Flom, New York, New York, and certain legal matters will be passed upon for
the Underwriter by Cravath, Swaine & Moore, New York, New York. Mr. Bremer and
one member of Skadden, Arps, Slate, Meagher & Flom each own less than 1% of
the outstanding Common Stock of the Company.
EXPERTS
The financial statements and the related financial statement schedule
incorporated in this Prospectus Supplement and the accompanying Prospectus by
reference from the Company's Annual Report on Form 10-K for the year ended
December 31, 1995, and the Income Statement of the Surgical Division of
Century Medical, Inc. for the year ended March 31, 1995, incorporated herein
by reference from the Company's Current Report on Form 8-K filed on July 10,
1995, have been audited, respectively, by Deloitte & Touche LLP, and Deloitte
Touche Tohmatsu, independent auditors, as stated in their reports, which are
incorporated herein by reference, and have been so incorporated in reliance
upon the reports of such firms given upon their authority as experts in
accounting and auditing.
S-13
<PAGE>
PROSPECTUS
UNITED STATES SURGICAL CORPORATION
DEBT SECURITIES, PREFERRED STOCK, DEPOSITARY SHARES,
COMMON STOCK AND WARRANTS
United States Surgical Corporation (the "Company") may offer from time to
time, together or separately, (i) its debt securities (the "Debt Securities"),
which may be either senior debt securities (the "Senior Debt Securities") or
subordinated debt securities (the "Subordinated Debt Securities"), consisting
of notes, debentures or other unsecured evidences of indebtedness in one or
more series, (ii) shares of its preferred stock, par value $5.00 per share
(the "Preferred Stock"), which may be issued in the form of depositary shares
evidenced by depositary receipts (the "Depositary Shares"); (iii) shares of
its common stock, par value $.10 per share (the "Common Stock"), and (iv)
warrants to purchase Debt Securities, Preferred Stock, Depositary Shares, or
Common Stock or any combination thereof, as shall be designated by the Company
at the time of the offering (the "Warrants") in amounts, at prices and on
terms to be determined at the time of the offering. The Debt Securities,
Preferred Stock, the Depositary Shares, Common Stock, and Warrants are
collectively called the "Securities".
The Securities may be offered as separate series or issuances at an aggregate
initial public offering price not to exceed $200,000,000 or, if applicable,
the equivalent thereof in one or more foreign currencies, currency units,
composite currencies or in amounts determined by reference to an index as
shall be designated by the Company, in amounts, at prices and on terms to be
determined in light of market conditions at the time of sale and set forth in
the applicable Prospectus Supplement.
Unless otherwise specified in a Prospectus Supplement, the Senior Debt
Securities, when issued, will be unsecured and will rank on a parity with all
other unsecured and unsubordinated indebtedness of the Company. The
Subordinated Debt Securities, when issued, will be subordinated in right of
payment to all Senior Debt (as hereinafter defined) of the Company.
Certain specific terms of the particular Securities in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement, including, where applicable, (i) in the case of Debt Securities,
the title, aggregate principal amount, denominations, maturity, any interest
rate (which may be fixed or variable) and time of payment of any interest, any
terms for redemption at the option of the Company or the holder, any terms for
sinking fund payments, any terms for conversion or exchange into other
Securities, currency or currencies of denomination and payment, if other than
U S. dollars, any listing on a securities exchange and any other terms in
connection with the offering and sale of the Debt Securities in respect of
which this Prospectus is delivered, as well as the initial public offering
price; (ii) in the case of Preferred Stock and Depositary Shares, the specific
title, the aggregate amount, any dividend (including the method of calculating
payment of dividends), seniority, liquidation, redemption, voting and other
rights, any terms for any conversion or exchange into other Securities, any
listing on a securities exchange, the initial public offering price and any
other terms, (iii) in the case of Common Stock, the number of shares of Common
Stock and the terms of offering thereof; and (iv) in the case of Warrants, the
designation and number, the exercise price, any listing of the Warrants or the
underlying Securities on a securities exchange and any other terms in
connection with the offering, sale and exercise of the Warrants.
The Company's Common Stock is listed on the New York Stock Exchange under the
trading symbol "USS". Any Common Stock sold pursuant to a Prospectus
Supplement will be listed on such exchange, subject to official notice of
issuance.
The Securities may be sold directly, through agents, underwriters or dealers
as designated from time to time, or through a combination of such methods. See
"Plan of Distribution". If agents of the Company or any dealers or
underwriters are involved in the sale of the Securities in respect of which
this Prospectus is being delivered, the names of such agents, dealers or
underwriters and any applicable commissions or discounts will be set forth in
or may be calculated from the Prospectus Supplement with respect to such
Securities. The net proceeds to the Company from such sale also will be set
forth in the applicable Prospectus Supplement.
SEE DISCUSSION OF RISK FACTORS, BEGINNING ON PAGE 2.
---------------
This Prospectus may not be used to consummate sales of securities unless
accompanied by a Prospectus Supplement.
---------------
THESE SECURLTIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURLTIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
---------------
The date of this Prospectus is July 17, 1995.
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, THE
ACCOMPANYING PROSPECTUS SUPPLEMENT OR THE DOCUMENTS INCORPORATED OR DEEMED
INCORPORATED BY REFERENCE HEREIN, AND ANY INFORMATION OR REPRESENTATIONS NOT
CONTAINED HEREIN OR THEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR BY ANY AGENT, DEALER OR UNDERWRITER. THIS PROSPECTUS OR
PROSPECTUS SUPPLEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY THE SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS
SUPPLEMENT AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN OR THEREIN
IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
See discussion of the Company, beginning on page 4.
RISK FACTORS
COMPETITION
There is intense competition in the markets in which the Company engages in
business. Products competitive with the Company's staplers and clip appliers
include various absorbable and non-absorbable sutures, clips and tape, as well
as disposable and steel stapling instruments, disposable loading units
("DLUs") and some hand loaded staplers. Many major companies that compete with
the Company, such as Johnson & Johnson, Minnesota Mining and Manufacturing
Company ("3M") and Davis & Geck, a unit of American Home Products Corporation,
have a wider range of other medical products and dominate much of the markets
for these other products. Ethicon, Inc. ("Ethicon"), a Johnson & Johnson
subsidiary, markets, in addition to sutures and other wound closure products,
disposable skin staplers, clip appliers, and internal staplers. 3M markets
disposable skin staplers and internal stapling instruments. Davis & Geck
markets disposable skin staplers, clip appliers and suture materials. The
Company believes that these major companies will continue their efforts to
develop and market competitive devices.
The market for products for minimally invasive surgery is highly
competitive. Ethicon markets a line of endoscopic instruments directly
competitive with the Company's products and is its principal competitor. The
Company believes that Ethicon devotes considerable resources to research and
development and sales efforts in this field. Numerous other companies
manufacture and distribute disposable endoscopic instruments. In addition,
manufacturers of reusable trocars and other reusable endoscopic instruments,
including Richard Wolf Medical Instruments Corp. (a subsidiary of Richard
Wolf, GmbH) and Karl Storz Endoscopy-American Inc. (a subsidiary of Karl
Storz, GmbH), compete directly with the Company.
Industry studies show Ethicon currently has approximately 80% of the suture
market, while Davis & Geck has about 13% of this market. The Company expects
that, because the size of the total suture market is relatively stable, any
increase in the Company's market share in this area will have to be earned at
the expense of the other current market participants.
The Company's principal methods of competing are the development of
innovative products, the performance and breadth of its products, its
technically trained sales force, educational services, including sponsorship
of training programs in advanced laparoscopic techniques, and more recently,
assisting hospital management with cost containment and marketing programs.
The Company's major competitors have greater financial resources than the
Company. Some of its competitors, particularly Ethicon, have engaged in
substantial price discounting and other significant efforts to gain market
share, including bundled contracts for a wide variety of healthcare products
with group purchasing organizations. In the current health care environment,
cost containment has become the predominant factor in purchasing decisions by
hospitals. As a result, the Company's traditional reliance on the quality of
its products for marketing purposes has been impacted. While the Company
believes that the advantages of its various products will continue to provide
the best value to its customers, there is considerable competition in the
industry and no assurance can be given as to the Company's competitive
position. The impact of competition will likely have a continuing effect on
sales volumes and on prices charged by the Company.
2
<PAGE>
HEALTH CARE MARKET
The health care industry continues to undergo change, led primarily by
market forces which are demanding greater efficiencies and reduced costs.
Government proposed health care mandates in the United States have not
occurred, and it is unclear whether, and to what extent, any government
mandate will affect the domestic health care market. Industry led changes are
expected to continue irrespective of any governmental efforts toward health
care reform. The scope and timing of any further government sponsored
proposals for health care reform are presently unclear.
The primary trend in the industry is toward cost containment. Payors have
been able to exercise greater influence through managed treatment and
hospitalization patterns, including a shift from reimbursement on a cost basis
to per capita limits for patient treatment. Hospitals have been severely
impacted by the resulting cost restraints. The increasing use of managed care,
centralized purchasing decisions, consolidations among hospitals and hospital
groups, and integration of health care providers, are continuing to affect
purchasing patterns in the health care system. Purchasing decisions are often
shared by a coalition of surgeons, nursing staff, and hospital administrators,
with purchasing decisions taking into account whether a product reduces the
cost of treatment and/or attracts additional patients to a hospital. All of
these factors have contributed to reductions in prices for the Company's
products, to a reduction in the volume of hospital purchasing and, in the near
term, slower acceptance of more advanced surgical procedures in which the
Company's products are used, given hospital and surgeon concerns as to the
costs of training and reimbursement by payors. While the Company is
implementing programs to assist hospitals in cost containment through more
efficient surgical practices and application of minimally invasive surgery,
there can be no assurance that the Company will not continue to be adversely
affected by these matters.
The Company believes it could, over the long term, benefit from this focus
on cost containment. Stapling and laparoscopy decrease operating room time,
including anesthesia, and patient recovery time, and in many cases are highly
cost effective. Doctors, patients, employers and payors all value decreased
patient recovery time. This could lead to potential increases in volume as
surgical stapling and laparoscopic procedures are selected over alternative
techniques. However, an undue focus on discrete costs or other limits which
fail to consider the overall value of stapling and laparoscopy could adversely
impact the Company, and there can be no assurance as to the impact of cost
containment on future operations. Some hospitals may also lose per night
revenues through reduced post-operative care requirements as to procedures
performed by laparoscopy, which could influence their acceptance of newer
procedures. The rapid changes in the market for surgical devices, along with
competition, could affect both prices and volumes of sales, despite these
efforts.
GOVERNMENT REGULATION
The Company's business is subject to varying degrees of governmental
regulation in the countries in which it operates. In the United States, the
Company's products are subject to regulation as medical devices by the United
States Food and Drug Administration (the "FDA"), as well as by other federal
and state agencies. These regulations pertain to the manufacturing, labeling,
development and testing of the Company's devices as well as to the maintenance
of required records. An FDA regulation also requires prompt reporting by all
medical device manufacturers of an event or malfunction involving a medical
device where such device caused or contributed to death or serious injury or
is likely to do so.
Federal law provides for several routes by which the FDA reviews medical
devices prior to their entry into the marketplace. To date, all the Company's
new products have been cleared by the FDA under the most expedited form of
pre-market review, but the Company, along with the rest of the industry,
continues to experience lengthy delays in the FDA approval process. Timely
product approval is important to the Company's maintaining its technological
competitive advantages.
In foreign countries, the degree of government regulation affecting the
Company varies considerably among countries, ranging from stringent testing
and approval procedures in certain
3
<PAGE>
locations to simple registration procedures in others, while in some countries
there is virtually no regulation of the sale of the Company's products. In
general, the Company has not encountered material delays or unusual regulatory
impediments in marketing its products internationally. Establishment of
uniform regulations for European Community nations took place on January 1,
1995. The Company believes it will be subject to a single regulatory scheme
for all the participating countries and has taken the necessary steps to
assure ongoing compliance with these new, more rigorous regulations, including
obtaining International Standards Organization ("ISO") certification for its
manufacturing operations which will allow the Company to market products in
Europe with a single registration applicable to all participating countries.
LEVERAGE
As of March 31, 1995, the Company's consolidated indebtedness and off
balance sheet financing approximate 45% of the sum of its stockholders' equity
and consolidated indebtedness (including such off balance sheet financing).
This degree of leverage increases the Company's vulnerability to adverse
general economic and health care industry conditions and to increased
competitive pressures, including pricing pressure from better capitalized
competitors. Issuance of additional debt would increase this degree of
leverage and, therefore, could exacerbate the Company's vulnerability to such
market conditions.
THE COMPANY
The Company is a Delaware corporation primarily engaged in developing,
manufacturing and marketing a proprietary line of technologically advanced
surgical wound management products to hospitals throughout the world. The
Company's principal executive offices are located at 150 Glover Avenue,
Norwalk, Connecticut 06856; telephone (203) 845-1000. The Company currently
operates domestically and internationally through subsidiaries, branches and
distributors. Except where the context otherwise requires, the term Company
includes the Company's divisions and subsidiaries.
The Company manufactures and markets innovative mechanical products for the
wound closure market. In this category, its principal products consist of a
series of surgical stapling instruments (both disposable and reusable),
disposable surgical clip appliers and DLUs for use with stapling instruments.
The instruments are an alternative to manual suturing techniques utilizing
needle/suture combinations and enable surgeons to reduce blood loss, tissue
trauma and operating time while joining internal tissue, reconstructing or
sealing off organs, removing diseased tissue, occluding blood vessels and
closing skin, either with titanium, stainless steel, or absorbable
POLYSORB(TM) copolymer staples or with titanium, stainless steel, or
absorbable, POLYSURGICLIP (TM) copolymer clips. Surgical stapling also makes
possible several surgical procedures which cannot be achieved with surgical
needles and suturing materials. The disposable instruments and DLUs are
expended after a single use or, in the case of reloadable disposable
instruments, after a single surgical procedure.
The Company manufactures and markets specialized wound management products
designed for use in the field of laparoscopic (also referred to as endoscopic)
surgery. This minimally invasive surgical technique requires incisions in the
patient of up to one half inch through which various procedures are performed
using laparoscopic instruments inserted through ports known as trocars, and
optical devices, known as laparoscopes, for viewing inside the body cavity.
Laparoscopy generally provides patients with significant reductions in post-
operative hospital stay, pain, recuperative time and hospital costs, improved
cosmetic results, and the ability to return to work and normal life in a
shorter time frame. The Company has developed and markets disposable surgical
clip appliers and stapling instruments designed for laparoscopic uses in a
variety of sizes and configurations. The Company's products in this area also
include trocars and a line of instruments which allows the surgeon to see,
cut, clamp, retract or otherwise manipulate tissue during a laparoscopic
procedure. The Company also designs and markets laparoscopes. Applications for
minimally invasive surgery currently include
4
<PAGE>
cholecystectomy (gall bladder removal), hysterectomy, hernia repair, anti-
reflux procedures for correction of heartburn, and various forms of bowel,
stomach, gynecologic, urologic, and thoracic (chest) surgery.
Disposable instruments, as described in the immediately preceding
paragraphs, reduce the user's capital investment, eliminate the risks and
costs associated with maintenance, sterilizing and repair of reusable
instruments, and provide the surgeon with a new sterile instrument for each
procedure, offering more efficacious and safer practice for both patients and
operating room personnel.
The Company continues to expand manufacturing and marketing of its line of
suture products, which was introduced in 1991. The Company believes that
sutures, which represent a major portion of the wound closure market, are a
natural complement to its other wound management products. This market is
currently dominated by other manufacturers. The Company's market share is
increasing but, because of competitive pressures, there can be no assurance
that market share will continue to increase or that the Company will realize
significant market share in the near future.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
reports and other information with the Securities and Exchange Commission (the
"Commission"). Such reports, proxy statements, and other information filed by
the Company can be inspected and copied at the public reference facilities of
the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the following Regional Offices of the
Commission: 7 World Trade Center, 13th Floor, New York, New York 10048; and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material can be obtained from the Public
Reference Section of the Commission, Washington, D.C. 20549, at prescribed
rates. Certain securities of the Company are listed on, and reports, proxy
statements and other information concerning the Company can be inspected and
copied at the offices of, the New York Stock Exchange, Inc. ("New York Stock
Exchange"), 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a registration statement on Form
S-3 under the Securities Act of 1933 (the "Securities Act") with respect to
the Securities offered hereby (the "Registration Statement"). This Prospectus
and the accompanying Prospectus Supplement does not contain all information
set forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. Reference is made
to the Registration Statement and to the exhibits relating thereto for further
information with respect to the Company and the Securities offered hereby.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant to
the Exchange Act (File No. 1-9776) are incorporated herein by reference:
(1) Annual Report on Form 10-K for the year ended December 31, 1994;
(2) Quarterly Report on Form 10-Q for the quarter ended March 31, 1995;
(3) Current Report on Form 8-K filed on July 10, 1995; and
(4) the description of the Company's Common Stock, par value $.10 per
share (the "Common Stock"), contained in the Company's Registration
Statement on Form 8-A, dated August 3, 1990.
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the filing of a post-effective amendment which
indicates the termination of the offering of the Securities made by this
Prospectus shall be deemed to be incorporated by reference in this Prospectus
and to be a part of
5
<PAGE>
this Prospectus from the date of filing of such documents. Any statement
contained in a document, all or a portion of which is incorporated or deemed
to be incorporated by reference herein, or contained in this Prospectus, shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of such person,
a copy of any and all of the documents referred to above which have been or
may be incorporated by reference in this Prospectus (without exhibits to such
documents other than exhibits specifically incorporated by reference into such
documents). Such written or oral request should be directed to United States
Surgical Corporation, 150 Glover Avenue, Norwalk, Connecticut 06856,
Attention: Investor Relations Department (203) 845-1333.
Unless otherwise indicated, currency amounts in this Prospectus and any
Prospectus Supplement are stated in United States dollars ("$," "dollars,"
"U.S. dollars" or "U.S.$").
RATIOS OF EARNINGS TO FIXED CHARGES AND OF EARNINGS
TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(UNAUDITED)
The following table sets forth the Company's ratios of consolidated earnings
to total fixed charges and capitalized interest and consolidated earnings to
combined fixed charges, capitalized interest and preferred stock dividends for
the periods indicated.
<TABLE>
<CAPTION>
QUARTER
ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
--------- ---------------------------
1995 1994 1993 1992 1991 1990
--------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges and
capitalized interest (1).............. 3.53 2.13 --(2) 7.43 7.51 5.56
Ratio of earnings to combined fixed
charges, capitalized interest and
preferred stock dividends (1)......... 1.75 1.18 --(2) 7.43 7.51 5.56
</TABLE>
- --------
(1) The ratios of earnings to fixed charges and capitalized interest and to
combined fixed charges, capitalized interest and preferred stock dividends
are computed by dividing the sum of earnings before provision for income
taxes and fixed charges (excluding capitalized interest) by total fixed
charges and capitalized interest, or by the sum of total fixed charges,
capitalized interest and preferred stock dividends. Total fixed charges
and capitalized interest includes all interest (including capitalized
interest) and the interest factor of all rentals, assumed to be one-third
of consolidated rent expense. Preferred stock dividends have been
increased to an amount representing the pretax earnings which would be
required to cover such dividend requirements, assuming a statutory tax
rate of 35%.
(2) Earnings are inadequate to cover fixed charges. The dollar amount of the
deficiency at December 31, 1993 was $146.9 million. If restructuring
charges of $137.6 million were excluded from the calculation, the dollar
amount of the deficiency would have been $9.3 million.
USE OF PROCEEDS
The net proceeds to be received from the sale of the Securities offered
hereby will be used for general corporate purposes, including possible
acquisitions of the stock or assets of other companies, repurchase of shares
of the Company's Common Stock, retirement of short-term or long-term
indebtedness, or expenditures for property, plant and equipment, or for such
other uses as may be set forth in a prospectus supplement.
6
<PAGE>
DESCRIPTION OF DEBT SECURLTIES
The following description sets forth certain general terms and provisions of
the Debt Securities to which any Prospectus Supplement may relate. The
particular terms of the Debt Securities offered by any Prospectus Supplement
and the extent, if any, to which such general provisions may not apply to the
Debt Securities so offered will be described in the Prospectus Supplement
relating to such Debt Securities.
The Senior Debt Securities will be issued under an Indenture (the "Senior
Indenture"), to be entered into between the Company and the trustee named in
the Indenture. The Subordinated Debt Securities will be issued under a
separate Indenture (the "Subordinated Indenture"), to be entered into between
the Company and the trustee named in the Indenture. The Senior Indenture and
the Subordinated Indenture are sometimes referred to collectively as the
"Indentures." Copies of the forms of the Senior Indenture and the Subordinated
Indenture have been filed as exhibits to the Registration Statement. The
trustees under the Senior Indenture and under the Subordinated Indenture are
referred to herein as the "Trustees."
The following summaries of certain provisions of the Senior Debt Securities,
the Subordinated Debt Securities and the Indentures do not purport to be
complete and are subject to, and qualified in their entirety by reference to,
all the provisions of the Indenture applicable to a particular series of Debt
Securities, including the definitions therein of certain terms. Wherever
particular Sections, Articles or defined terms of the Indentures are referred
to herein or in a Prospectus Supplement, it is intended that such Sections,
Articles or defined terms shall be incorporated by reference herein or
therein, as the case may be. Section and Article references used herein are
references to the applicable Indenture. Except as otherwise indicated, the
terms of the Senior Indenture and the Subordinated Indenture are identical.
Capitalized terms not otherwise defined herein shall have the meanings given
to them in the applicable Indenture.
GENERAL
The Indentures will not limit the aggregate principal amount of Debt
Securities which may be issued thereunder, and each Indenture provides that
Debt Securities may be issued thereunder from time to time in one or more
series up to the aggregate amount from time to time authorized by the Company
for each series. (Section 3.1) Unless otherwise specified in the Prospectus
Supplement, the Senior Debt Securities when issued will be unsecured and
unsubordinated obligations of the Company and will rank equally and ratably
with all other unit and unsubordinated indebtedness of the Company. The
Subordinated Debt Securities when issued will be unsecured obligations of the
Company, subordinated in right of payment to the prior payment in full of all
Senior Debt (as defined in the Subordinated Indenture) of the Company as
described in the applicable Prospectus Supplement. (Section 16.1 of the
Subordinated Indenture)
Reference is made to the Prospectus Supplement relating to the particular
series of Debt Securities offered thereby for a description of the following
terms or additional provisions of the Debt Securities: (1) the title of the
Debt Securities; (2) whether the Debt Securities are Senior Debt Securities or
Subordinated Debt Securities; (3) any limit on the aggregate principal amount
of the Debt Securities; (4) whether the Debt Securities are to be issuable as
Registered Securities or Bearer Securities or both, whether any of the Debt
Securities shall be issuable in whole or in part in temporary or permanent
global form or in the form of Book-Entry Securities and, if so, the
circumstances under which any such global securities or Book-Entry Securities
may be exchanged for Debt Securities registered in the name of, and any
transfer of such global or Book-Entry Securities may be registered to, a
Person other than the depository for such temporary or permanent global
securities or Book-Entry Securities or its nominee; (5) the price or prices
(expressed as a percentage of the aggregate principal amount thereof) at which
the Debt Securities will be issued; (6) the date or dates on which the Debt
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Securities will mature; (7) the rate or rates per annum at which the Debt
Securities will bear interest, if any, and the date from which any such
interest will accrue; (8) the Interest Payment Dates on which any such
interest on the Debt Securities will be payable, the Regular Record Date for
any interest payable on any Debt Securities which are Registered Securities on
any Interest Payment Date and the extent to which, or the manner in which, any
interest payable on a temporary global Security on an Interest Payment Date
will be paid; (9) any mandatory or optional sinking fund or analogous
provisions; (10) each office or agency where, subject to the terms of the
applicable Indenture as described below under "Payment and Paying Agents," the
principal of and any premium and interest on the Debt Securities will be
payable and each office or agency where, subject to the terms of the
applicable Indenture as described below under "Form, Exchange, Registration
and Transfer," the Debt Securities may be presented for registration of
transfer or exchange; (11) the date, if any, after which and the price or
prices at which the Debt Securities may, pursuant to any optional or mandatory
redemption provisions, be redeemed, in whole or in part, and the other
detailed terms and provisions of any such optional or mandatory redemption
provisions, which may include with respect to a particular series or
particular Debt Securities within a series, a redemption option of Holders
upon certain conditions, as defined in the applicable Indenture; (12) the
denominations in which any Debt Securities which are Registered Securities
will be issuable, if other than denominations of $1,000 and any integral
multiple thereof, and the denomination or denominations in which any Debt
Securities which are Bearer Securities will be issuable, if other than the
denomination of $5,000; (13) the currency or currency units of payment of the
principal of (and premium, if any) and interest on the Debt Securities; (14)
any index used to determine the amount of payments of the principal of (and
premium, if any) and interest on the Debt Securities and the manner in which
such amounts shall be determined; (15) the terms and conditions, if any,
pursuant to which such Debt Securities are convertible or exchangeable into a
security or securities of the Company; (16) the terms pursuant to which such
Debt Securities are subject to defeasance; and (17) any other terms of the
Debt Securities not inconsistent with the provisions of the applicable
Indenture. Any such Prospectus Supplement will also describe any special
provisions for the payment of additional amounts with respect to the Debt
Securities. Debt Securities may also be issued under the Indenture upon the
exercise of Warrants. See "Description of Warrants."
Debt Securities may be issued as Original Issue Discount Securities. An
Original Issue Discount Security is a Debt Security, including any Zero-Coupon
Security, which is issued at a price lower than the amount payable upon the
Stated Maturity thereof and which provides that upon redemption or
acceleration of the maturity, an amount less than the amount payable upon the
Stated Maturity, determined in accordance with the terms of such Debt
Security, shall become due and payable. (Section 5.2) Certain special United
States federal income tax considerations applicable to Debt Securities sold at
an original issue discount will be described in the Prospectus Supplement
relating thereto. In addition, certain special United States federal income
tax or other considerations applicable to any Debt Securities which are
denominated in a currency or currency unit other than United States dollars
may be described in the applicable Prospectus Supplement relating thereto.
FORM, EXCHANGE, REGISTRATION AND TRANSFER
Debt Securities of a series may be issuable in definitive form solely as
Registered Securities, solely as Bearer Securities or as both Registered
Securities and Bearer Securities. (Section 3.1) Unless otherwise indicated in
an applicable Prospectus Supplement, Bearer Securities will have interest
coupons attached. (Section 2.1) The Indentures also will provide that Debt
Securities of a series may be issuable in temporary or permanent global form
and may be issued as Book-Entry Securities that will be deposited with, or on
behalf of, The Depository Trust Company (the "Depository") or another
depository named by the Company and identified in a Prospectus Supplement with
respect to such series. See "Global and Book-Entry Debt Securities."
In connection with its original issuance, no Bearer Security (including a
Debt Security exchangeable for a Bearer Security or a Debt Security in global
form that is either a Bearer Security
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or exchangeable for Bearer Securities) shall be mailed or otherwise delivered
to any location in the United States (as defined under "Limitations on
Issuance of Bearer Securities") and a Bearer Security may be delivered in
connection with its original issuance only if the Person entitled to receive
such Bearer Security furnishes written certification of the beneficial
ownership of the Bearer Security as required by Treasury Regulation Section
1.163-5(c)(2)(i)(D)(3) (or any comparable successor provisions). In the case
of a Bearer Security in permanent global form, such certification must be
given in connection with notation of a beneficial owner's interest therein in
connection with the original issuance of such Debt Security. See "Global and
Book-Entry Debt Securities" and "Limitations on Issuance of Bearer
Securities."
Registered Securities of any series will be exchangeable for other
Registered Securities of the same series of any authorized denominations and
of a like aggregate principal amount and tenor. In addition, if Debt
Securities of any series are issuable as both Registered Securities and Bearer
Securities, at the option of the Holder upon request confirmed in writing, and
subject to the terms of the applicable Indenture, Bearer Securities (with all
unmatured coupons, except as provided below, and all matured coupons in
default) of such series will be exchangeable into Registered Securities of the
same series of any authorized denominations and of a like aggregate principal
amount and tenor. Bearer Securities surrendered in exchange for Registered
Securities between a Regular Record Date or a Special Record Date and the
relevant date for payment of interest shall be surrendered without the coupon
relating to such date for payment of interest and interest accrued as of such
date will not be payable in respect of the Registered Security issued in
exchange for such Bearer Security, but will be payable only to the Holder of
such coupon when due in accordance with the terms of the applicable Indenture.
Registered Securities will not be issued in exchange for Bearer Securities.
(Section 3.5) Each Bearer Security, and any coupon attached thereto, other
than a temporary global Bearer Security will bear the following legend: "Any
United States person who holds this obligation will be subject to limitations
under the United States income tax laws, including the limitations provided in
Sections 165(j) and 1287(a) of the United States Internal Revenue Code." A
Book-Entry Security may not be registered for transfer or exchange (other than
as a whole by the Depository to a nominee or by such nominee to such
Depository) unless the Depository or such nominee notifies the Company that it
is unwilling or unable to continue as Depository or the Depository ceases to
be qualified as required by the applicable Indenture or the Company instructs
the Trustee in accordance with the applicable Indenture that such Book-Entry
Securities shall be so registrable and exchangeable or there shall have
occurred and be continuing an Event of Default or an event which after notice
or lapse of time would be an Event of Default with respect to the Debt
Securities evidenced by such Book-Entry Securities or there shall exist such
other circumstances, if any, as may be specified in the applicable Prospectus
Supplement.
Debt Securities may be presented for exchange as provided above, and
Registered Securities may be presented or surrendered for registration of
transfer or for exchange (with the form of transfer endorsed thereon duly
executed), at the office of the Security Registrar or at the office of any
transfer agent designated by the Company for such purpose with respect to any
series of Debt Securities and referred to in an applicable Prospectus
Supplement, without service charge and upon payment of any taxes and other
governmental charges as described in the applicable Indenture. Such transfer
or exchange will be effected upon the Security Registrar or such transfer
agent, as the case may be, being satisfied with the documents of title and
identity of the person making the request. (Section 3.5) If a Prospectus
Supplement refers to any transfer agents (in addition to the Security
Registrar) initially designated by the Company with respect to any series of
Debt Securities, the Company may at any time rescind the designation of any
such transfer agent or approve a change in the location through which any such
transfer agent acts, except that, if Debt Securities of a series are issuable
solely as Registered Securities, the Company will be required to maintain a
transfer agent in each Place of Payment for which series and, if Debt
Securities of a series are issuable as Bearer Securities, the Company will be
required to maintain (in addition to the Security Registrar) a transfer agent
in a Place
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of Payment for such series located outside the United States. The Company may
at any time designate additional transfer agents with respect to any series of
Debt Securities. (Section 10.2)
In the event of any redemption in part, the Company shall not be required to
(i) issue, register the transfer of or exchange Debt Securities of any series
during a period beginning at the opening of business 15 days before any
selection of Debt Securities of that series to be redeemed and ending at the
close of business on (A) if Debt Securities of the series are issuable only as
Registered Securities, the day of mailing of the relevant notice of redemption
and (B) if Debt Securities of the series are issuable as Bearer Securities,
the day of the first publication of the relevant notice of redemption or, if
Debt Securities of the series are also issuable as Registered Securities and
there is no publication, the mailing of the relevant notice of redemption;
(ii) register the transfer of or exchange any Registered Security being
redeemed in part, except the unredeemed portion of any Registered Security
being redeemed in part; or (iii) exchange any Bearer Security so selected for
redemption, except that such Bearer Security may be exchanged for a Registered
Security of that series and like tenor, provided, that such Registered
Security shall be simultaneously surrendered for redemption. (Section 3.5)
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of the principal of (and premium, if any) and interest on Bearer Securities
will be payable, subject to any applicable laws and regulations, at the
offices of such Paying Agents outside the United States as the Company may
designate from time to time, at the option of the Holder, by check or by
transfer to an account maintained by the payee with a bank located outside the
United States. Unless otherwise indicated in an applicable Prospectus
Supplement, payment of interest on Bearer Securities on any Interest Payment
Date will be made only against surrender to the Paying Agent of such coupon
relating to such Interest Payment Date. (Section 10.1) No payment with respect
to any Bearer Security will be made at any office or agency of the Company in
the United States or by check mailed to any address in the United States or by
transfer to an account maintained with a bank located in the United States.
Notwithstanding the foregoing, payments of the principal of (and premium, if
any) and interest on Bearer Securities denominated and payable in U.S. dollars
will be made at the office of the Company's Paying Agent in the Borough of
Manhattan, The City of New York, if (but only if) payment of the full amount
thereof in U.S. dollars at all offices or agencies outside the United States
is illegal or effectively precluded by exchange controls or other similar
restrictions. (Section 10.2)
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of the principal of (and premium, if any) and interest on Registered
Securities will be made at the office of such Paying Agent or Paying Agents as
the Company may designate from time to time, except that at the option of the
Company payment of any interest may be made by check mailed to the address of
the person entitled thereto as such address shall appear in the Security
Register. Unless otherwise indicated in an applicable Prospectus Supplement,
payment of any installment of interest on Registered Securities will be made
to the Person in whose name such Registered Security is registered at the
close of business on the Regular Record Date for such interest. (Section 3.7)
Unless otherwise indicated in an applicable Prospectus Supplement, the
Corporate Trust Office of the Trustee in The City of New York will be
designated as a Paying Agent for the Company for payments with respect to Debt
Securities which are issuable solely as Registered Securities and the Company
will maintain a Paying Agent outside of the United States for payments with
respect to Debt Securities (subject to the limitations described above in the
case of Bearer Securities) which are issuable solely as Bearer Securities or
both Registered Securities and Bearer Securities. (Section 10.2) Any Paying
Agents outside the United States and any other Paying Agent in the United
States initially designated by the Company for the Debt Securities will be
named in an applicable Prospectus Supplement. The Company may at any time
designate additional Paying Agents or rescind the designation of any Paying
Agent or approve a change in the office through which any Paying Agent
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acts, except that, if Debt Securities of a series are issuable solely as
Registered Securities, the Company will be required to maintain a Paying Agent
in each Place of Payment for such series and, if Debt Securities of a series
are issuable as Bearer Securities, the Company will be required to maintain
(i) a Paying Agent in the Borough of Manhattan, The City of New York for
payments with respect to any Registered Securities of the series (and for
payments with respect to Bearer Securities of the series in the circumstances
described above, but not otherwise), and (ii) a Paying Agent in a Place of
Payment located outside the United States where Debt Securities of such series
and any coupons appertaining thereto may be presented and surrendered for
payment; provided that if the Debt Securities of such series are listed on The
Stock Exchange of the United Kingdom and the Republic of Ireland or the
Luxembourg Stock Exchange or any other stock exchange located outside the
United States and such stock exchange shall so require, the Company will
maintain a Paying Agent in London or Luxembourg or any other required city
located outside the United States, as the case may be, for the Debt Securities
of such series. (Section 10.2)
Payments of the principal of (and premium, if any) and interest on Book-
Entry Securities registered in the name of any Depository or its nominee will
be made to the Depository or its nominee, as the case may be, as the
registered owner of the global security representing such Book-Entry
Securities. The Company expects that the Depository, upon receipt of any
payment of the principal of (and premium, if any) or interest, will credit
immediately participants' accounts with payments in amounts proportionate to
their respective beneficial interests as shown on the records of such
Depository or its nominee. Neither the Company, the Trustee, any Paying Agent
nor the Securities Registrar for such Debt Securities will have any
responsibility or liability for any aspects of the records relating to, or
payments made on account of, such beneficial ownership interests in the Book-
Entry Securities or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
All moneys paid by the Company to a Paying Agent for the payment of the
principal of (and premium, if any) or interest on any Debt Securities which
remain unclaimed at the end of two years after such principal, premium or
interest shall have become due and payable will be repaid to the Company and
the Holder of such Debt Security or any coupon will thereafter, as an
unsecured general creditor, look only to the Company for payment thereof.
(Section 10.3)
GLOBAL AND BOOK-ENTRY DEBT SECURITIES
If so specified in an applicable Prospectus Supplement, the portion of the
Debt Securities of a series which are usable as Bearer Securities will
initially be represented by one or more temporary or permanent global Debt
Securities, without interest coupons, to be deposited with a common depositary
in London for the benefit of Euro-clear System ("Euro-clear") and CEDEL Bank,
SOCIETE ANONYME ("CEDEL") for credit to the respective accounts of the
beneficial owners of such Debt Securities (or to such other accounts as they
may direct). (Section 3.4) Unless otherwise indicated by an applicable
Prospectus Supplement, on or after 40 days following its issuance, each such
temporary global Debt Security will be exchangeable for definitive Bearer
Securities, definitive Registered Securities or all or a portion of a
permanent global Debt Security, or any combination thereof, as specified in an
applicable Prospectus Supplement, only upon written certification in the form
and to the effect described under "Form, Exchange, Registration and Transfer."
No Bearer Security (including a Debt Security in permanent global form)
delivered in exchange for a portion of a temporary or permanent global Debt
Security shall be mailed or otherwise delivered to any location in the United
States in connection with such exchange. (Section 3.5)
A person having a beneficial interest in a permanent global Debt Security
will, except with respect to payment of the principal of (and premium, if any)
and interest on such permanent global Debt Security, be treated as a Holder of
such principal amount of Outstanding Debt Securities represented by such
permanent global Debt Security as shall be specified in a written statement of
the Holder of such permanent global Debt Security or, in the case of a
permanent global Debt Security in bearer
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form, of the operator of Euro-clear or CEDEL which is provided to the Trustee
by such Person. (Section 2.3)
If Debt Securities to be sold in the United States are designated by the
Company in a Prospectus Supplement as Book-Entry Securities, a global security
representing the Book-Entry Securities will be deposited in the name of Cede &
Co., as nominee for the Depository representing the securities to be sold in
the United States. Upon such deposit of the Book-Entry Securities, the
Depository shall credit an account maintained or designated by an institution
to be named by the Company or any purchaser of the Debt Securities represented
by the Book-Entry Securities with an aggregate amount of Debt Securities equal
to the total number of Debt Securities that have been so purchased. The
specific terms of any depository arrangement with respect to any portion of a
series of Debt Securities to be represented by one or more global securities
will be described in the applicable Prospectus Supplement. Beneficial
interests in such Debt Securities will only be evidenced by, and transfers
thereof will only be effected through, records maintained by the Depository
and the institutions that are Depository participants.
SUBORDINATION OF SUBORDINATED DEBT SECURITIES
Unless otherwise indicated in the Prospectus Supplement, the following
provisions will apply to the Subordinated Debt Securities.
The Subordinated Debt Securities will, to the extent set forth in the
Subordinated Indenture, be subordinate in right of payment to the prior
payment in full of all Senior Debt. (Section 16.1 of the Subordinated
Indenture) In the event of (a) any insolvency or bankruptcy case or
proceeding, or any receivership, liquidation, reorganization or other similar
case or proceeding in connection therewith, relative to the Company or to its
creditors, as such, or to its assets, or (b) any liquidation, dissolution or
other winding up of the Company, whether voluntary or involuntary and whether
or not involving insolvency or bankruptcy, or (c) any assignment for the
benefit of creditors or any other marshaling of assets and liabilities of the
Company, then and in any such event the holders of Senior Debt shall be
entitled to receive payment in full of all amounts due or to become due on or
in respect of all Senior Debt, or provision shall be made for such payment in
cash, before the Holders of Subordinated Debt Securities are entitled to
receive any payment on account of principal of (or premium, if any) or
interest on Subordinated Debt Securities, and to that end the holders of
Senior Debt shall be entitled to receive, for application to the payment
thereof, any payment or distribution of any kind or character, whether in
cash, property or securities, including any such payment or distribution which
may be payable or deliverable by reason of the payment of any other
indebtedness of the Company being subordinated to the payment of Subordinated
Debt Securities, which may be payable or deliverable in respect of the
Subordinated Debt Securities in any such case, proceeding, dissolution,
liquidation or other winding up event. (Section 16.2 of the Subordinated
Indenture)
By reason of such subordination, in the event of liquidation or insolvency,
creditors of the Company may recover less, ratably, than Holders of Senior
Debt and may recover more, ratably, than the Holders of the Subordinated Debt
Securities.
In the event of the acceleration of the maturity of any Subordinated Debt
Securities, the Holders of all Senior Debt outstanding at the time of such
acceleration will first be entitled to receive payment in full of all amounts
due thereon before the Holders of the Subordinated Debt Securities will be
entitled to receive any payment upon the principal of (and premium, if any) or
interest on the Subordinated Debt Securities. (Section 16.3 of the
Subordinated Indenture)
No payments on account of the principal of (and premium, if any) or interest
in respect of the Subordinated Debt Securities may be made if there shall have
occurred and be continuing a default in any payment with respect to Senior
Debt, or an event of default with respect to any Senior Debt
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resulting in the acceleration of the maturity thereof, or if any judicial
proceeding shall be pending with respect to any such default. (Section 16.4 of
the Subordinated Indenture) For purposes of the subordination provisions, the
payment, issuance and delivery of cash, property or securities (other than
stock and certain subordinated securities of the Company) upon conversion of a
Subordinated Debt Security will be deemed to constitute payment on account of
the principal of such Subordinated Debt Security. (Section 16.15 of the
Subordinated Indenture)
The Subordinated Indenture does not limit or prohibit the incurrence of
additional Senior Debt, which may include indebtedness that is senior to the
Subordinated Debt Securities, but subordinate to other obligations of the
Company. The Senior Debt Securities constitute Senior Debt under the
Subordinated Indenture.
"Senior Debt" is defined to include the principal of (and premium, if any)
and interest (including interest accrued on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company to the
extent that such claim for past-petition interest is allowed in such
proceeding) on all indebtedness of the Company (including indebtedness of
others guaranteed by the Company), other than the Subordinated Debt
Securities, whether outstanding on the date of the Subordinated Indenture or
thereafter created, incurred or assumed, which is (i) for money borrowed, (ii)
evidenced by a note or similar instrument given in connection with the
acquisition of any businesses, properties or assets of any kind, (iii)
obligations and liabilities (contingent or otherwise) in respect of the
Company's manufacturing facilities located at North Haven, Connecticut, under
a lease agreement and participation agreement, each dated January 14, 1993, or
(iv) obligations of the Company as lessee under leases required to be
capitalized on the balance sheet of the lessee under generally accepted
accounting principles or leases of property or assets made as part of any sale
and leaseback transaction to which the Company is a party, including
amendments, renewals, extensions, modifications and refundings of any such
indebtedness or obligation, unless in any case the instrument creating or
evidencing any such indebtedness or obligation or pursuant to which the same
is outstanding is provided that such indebtedness or obligation is not
superior in right of payment to the Subordinated Debt Securities. (Section 1.1
of the Subordinated Indenture)
The Prospectus Supplement may further describe the provisions, if any,
applicable to the subordination of the Subordinated Debt Securities of a
particular series.
CONVERSION OR EXCHANGE RIGHTS
The terms on which Debt Securities of any series are convertible into or
exchangeable for Common Stock or other securities of the Company will be set
forth in the Prospectus Supplement relating thereto. Such terms will include
provisions as to whether conversion or exchange is mandatory, at the option of
the Holder or at the option of the Company, and may include provisions
pursuant to which the number of shares of Common Stock or other securities of
the Company to be received by the Holders of Debt Securities would be subject
to adjustment. (Section 3.1 and Article XV)
COVENANTS
Unless otherwise provided in the applicable Prospectus Supplement, pursuant
to the Senior Indenture the Company will covenant not to create, assume or
suffer to exist any lien on any Restricted Property (described below) to
secure any debt of the Company, any subsidiary or any other person, or permit
any subsidiary so to do, without securing the Senior Debt Securities of any
series having the benefit of the covenant by such lien equally and ratably
with such debt for so long as such debt shall be so secured, subject to
certain exceptions specified in the Indenture. Exceptions include: (a)
existing liens or liens on property owned or leased by corporations at the
time they become subsidiaries; (b) liens existing on property when acquired,
or incurred to finance the purchase price, construction or improvement
thereof; (c) certain liens in favor of or required by contracts with
governmental entities;
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and (d) liens otherwise prohibited by such covenant, securing indebtedness
which, together with the aggregate amount of outstanding indebtedness secured
by liens otherwise prohibited by such covenant and the value of certain sale
and leaseback transactions, does not exceed 10% of the Company's Consolidated
Net Tangible Assets (defined in the Indentures as total assets less current
liabilities and goodwill). (Section 10.7)
Unless otherwise provided in the Senior Debt Securities, the Company will
also covenant not to, and not to permit any subsidiary to, enter into any sale
and leaseback transaction covering any Restricted Property unless (a) the
Company or each subsidiary would be entitled under the provisions described
above to incur debt, in a principal amount at least equal to the value of such
sale and leaseback transaction, secured by liens on the property to be leased,
without equally and ratably securing the Debt Securities, or (b) the Company,
during the six months following the effective date of such sale and leaseback
transaction, applies an amount equal to the value of such sale and leaseback
transaction to the voluntary retirement of long-term indebtedness or to the
acquisition of Restricted Property. (Section 10.8)
The Senior Indenture defines Restricted Property as (a) any manufacturing
facility (or portion thereof) owned or leased by the Company and any
subsidiary which, in the opinion of the Board of Directors, is of material
importance to the business of the Company and its subsidiaries taken as a
whole, but no such manufacturing facility (or portion thereof) shall be deemed
of material importance if its gross book value (before deducting accumulated
depreciation) is less than 5% of the Company's Consolidated Net Tangible
Assets, or (b) any shares of capital stock or indebtedness of any subsidiary
owning any such manufacturing facility.
There are no liens prohibited by the covenants described above on, or any
sale and leaseback transactions prohibited by such covenants covering, any
property which would qualify as Restricted Property. The Company will amend
this Prospectus to disclose or disclose in any Prospectus Supplement the
existence of any lien on or any sale and leaseback transaction covering any
Restricted Property, which would require the Company to secure the Debt
Securities or apply certain amounts to retirement of indebtedness or
acquisitions of property, as provided in such covenants.
Unless so specified in the Prospectus Supplement, there is not any other
provision with respect to the applicable Securities and the Indentures contain
no other restrictive covenants, including any that would afford holders of the
Debt Securities protection in the event of a highly leveraged transaction
involving the Company or any of its affiliates, or any covenants relating to
total indebtedness, interest coverage, stock repurchases, recapitalizations,
dividends and distributions to shareholders, current ratios and acquisitions
and divestitures.
CONSOLIDATION, MERGER, SALE OF ASSETS OR HIGHLY LEVERAGED TRANSACTION
The Company, without the consent of the Holders of any of the Outstanding
Debt Securities under the applicable Indenture, may consolidate with or merge
with or into, or sell, lease, transfer or otherwise dispose of its assets
substantially as an entirety to, any Person which is a corporation,
partnership or trust organized and validly existing under the laws of any
domestic jurisdiction, or may permit any such Person to consolidate with or
merge with or into the Company or sell, lease, transfer or otherwise dispose
of its assets substantially as an entirety to the Company, provided that,
among other things, any successor Person assumes the Company's obligations on
the Debt Securities and under the applicable Indenture, that after giving
effect to the transaction no Event of Default, and no event which, after
notice or lapse of time, would become an Event of Default, shall have occurred
and be continuing, and that certain other conditions are met. (Section 8.1)
Other than the covenants and provisions in the Indenture described above, and
provisions below relating to Redemption at the Option of Holders upon a Change
in Control (except as approved by the Continuing Directors), there are no
covenants or provisions in the Indenture which would provide the Holders of
the Debt Securities with
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any special protection or rights in the event the Company is involved in a
Change in Control, as hereinafter defined, or other change in control, highly
leveraged transaction, reorganization, restructuring or merger, or similar
transaction involving the Company that may adversely affect Holders of the
Debt Securities.
REDEMPTION AT THE OPTION OF HOLDERS UPON CHANGE IN CONTROL
In the event of any Change in Control (as hereinafter defined) of the
Company, prior to maturity of the Debt Securities, that has not been approved
by the Continuing Directors (as hereinafter defined) of the Company, Debt
Securities may be submitted for redemption, on and after the Exchange Date in
the case of Debt Securities of any series issuable as Bearer Securities or at
any time in the case of all other Debt Securities, at the option of the
Holders, unless, prior to the expiration of ten days following such Change in
Control, the Company, if permitted to do so by the terms of the Debt
Securities of a series, shall have called all of the Debt Securities of such
series for redemption. (Sections 14.2 and 14.3) Bearer Securities may be so
redeemed only in whole and Registered Securities in whole or in part in
increments of $1,000. Any Debt Securities to be so submitted must be submitted
during a period (the "Exercise Period") commencing on the date of the
Company's notice described below to Holders of such Change in Control and
expiring on the 20th business day after such notice is given.
Debt Securities submitted for redemption will be redeemed on a Redemption
Date that will be the 15th day after expiration of the Exercise Period, at a
redemption price of 100% of the principal amount of the Debt Security, plus
accrued interest to the Redemption Date. Exercise of this redemption option by
the Holder of a Debt Security will be irrevocable.
On or before the tenth day after a Change in Control, the Company is
obligated, unless the Continuing Directors have approved such Change in
Control prior to such date, to give notice to Holders as set forth under
"Notices" below, and, on or before the ninth day after a Change of Control,
written notice to the Trustee, regarding the Change in Control, the date of
expiration of the Exercise Period, the applicable Redemption Date, the
Redemption Price and the procedure which the Holder must follow to exercise
this option. (Section 14.3) To exercise this option, the Holder must deliver
on or before the expiration of the Exercise Period to one of the Paying Agents
referred to below written notice of the Holder's exercise of such option,
together with the Debt Securities with respect to which the option is being
exercised, duly endorsed (in the case of Registered Securities) for transfer.
Each Bearer Security delivered for redemption must be delivered with all
coupons maturing after the Redemption Date. If the Redemption Date falls
between any Regular Record Date and the next succeeding Payment Date,
Registered Securities must be accompanied by payment of an amount equal to the
interest thereon which the registered Holder is to receive on such Interest
Payment Date.
As used herein, a "Change in Control" of the Company shall be deemed to have
occurred at such time or times as (a) the Company determines that any person
or related group of persons is the beneficial owner, directly or indirectly,
of 25% or more of the outstanding Common Stock of the Company or (b)
individuals who constitute the Continuing Directors cease for any reason to
constitute at least a majority of the Company's directors. "Continuing
Director" means any director who is a director on the date of the applicable
indenture and any director who is nominated or elected by a majority of
Continuing Directors who are then directors. (Section 1.1)
In the future, the Company could enter into certain transactions, including
certain recapitalizations or leveraged transactions of the Company, that would
not constitute a Change in Control or would constitute a Change of Control but
would not trigger the Change of Control purchase feature of the Debt
Securities if approved by the Continuing Directors and would increase the
amount of the Company's indebtedness outstanding at such time. If a Change in
Control were to occur, there can be no assurance that the Company would have
sufficient funds to pay the Change in Control purchase price for all Debt
Securities tendered by the Holders thereof. In addition, the Company's ability
to
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purchase Debt Securities with cash may be limited by the terms of its then
existing borrowing agreements. A default by the Company on its obligation to
pay the Change in Control purchase price or a breach of its covenant would
result in an Event of Default and could result in acceleration of the maturity
of other indebtedness of the Company at the time outstanding pursuant to cross
default provisions. The Company will comply with the provisions of Rule 13e-4,
Rule 14e-1 and any other tender offer rules under the Exchange Act which may
then be applicable and will file a Schedule 13E-4 or any other schedule
required thereunder and will otherwise comply with all federal or state
securities laws, as required, in connection with any of the Debt Securities
providing for redemption at the option of Holders.
EVENTS OF DEFAULT
Any one of the following events will constitute an Event of Default under
the applicable Indenture with respect to Debt Securities of any series: (a)
failure to pay any interest on any Debt Security of that series when due,
continued for 30 days (in the case of the Subordinated Indenture, whether or
not such payment is prohibited by the subordination provisions); (b) failure
to pay the principal of (or premium, if any) on any Debt Security of that
series when due (in the case of the Subordinated Indenture, whether or not
such payment is prohibited by the subordination provisions); (c) failure to
deposit any sinking fund payment, when due, in respect of any Debt Security of
that series (in the case of the Subordinated Indenture, whether or not such
deposit is prohibited by the subordination provisions); (d) failure to perform
any other covenant of the Company in the applicable Indenture or such Debt
Security (other than a covenant included in the applicable Indenture solely
for the benefit of a series of Debt Securities other than that series),
continued for 60 days after written notice has been given as provided in the
applicable Indenture; (e) certain events in bankruptcy, insolvency or
reorganization involving the Company; or (f) any other Event of Default
provided with respect to the Debt Securities of that series. (Section 5.1)
If an Event of Default with respect to the Debt Securities of any series at
the time Outstanding occurs and is continuing, then in every such case the
Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Debt Securities of that series by notice as provided in the
applicable Indenture may declare the principal amount of the Debt Securities
of that series (or, if any of the Debt Securities of that series are Original
Issue Discount Securities, such portion of the principal amount of such Debt
Securities, as may be specified in the terms thereof) 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 and before a judgment or decree
for payment of 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, under certain circumstances, rescind and annul such declaration. (Section
5.2)
The Indentures will provide that, subject to the duty of the Trustee during
default to act with the required standard of care, the Trustee will be under
no obligation to exercise any of its rights or powers under the applicable
Indenture at the request or direction of any of the Holders, unless such
Holders shall have offered to the Trustee reasonable security or indemnity.
(Section 6.1) Subject to such provisions for the indemnification of the
Trustee, the Holders of a majority in aggregate 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 Trustees or exercising any trust or power conferred on the Trustee,
with respect to the Debt Securities of that series. (Section 5.12)
The Company will be required to furnish to the applicable Trustee annually a
statement as to the performance of certain of its obligations under the
applicable Indenture and as to any default in such performance. (Section 10.9)
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DEFEASANCE AND DISCHARGE
If so specified with respect to any particular series of Debt Securities,
the Company may discharge its indebtedness and its obligations or certain of
its obligations under the applicable Indenture with respect to such series by
depositing funds or obligations issued or guaranteed by the United States of
America with the Trustee. (Section 4.3)
The Indentures will provide that, if so specified with respect to the Debt
Securities of any series, the Company will be discharged from any and all
obligations in respect of the Debt Securities of such series (including, in
the case of Subordinated Debt Securities, the subordination provisions
described under "Subordination of Subordinated Debt Securities" herein and,
except for certain obligations relating to temporary Debt Securities and
exchange of Debt Securities, registration of transfer or exchange of Debt
Securities of such series, replacement of stolen, lost or mutilated Debt
Securities of such series, maintenance of paying agencies, to hold monies for
payment in trust and payment of additional amounts, if any, required in
consequence of United States withholding taxes imposed on payments to non-
United States persons) upon the deposit with the Trustee, in trust, of money
and/or U S. Government Obligations which through the payment of interest and
principal in respect thereof in accordance with their terms will provide money
in an amount sufficient to pay the principal of (and premium, if any), each
installment of interest on, and any sinking fund payments on, the Debt
Securities of such series on the Stated Maturity of such payments in
accordance with (Section 4.6 of the Senior Indenture; Section 4.3 of the
Subordinated Indenture) the terms of the applicable Indenture and the Debt
Securities of such series. Such a trust may only be established if, among
other things, (a) the Company has delivered to the applicable Trustee an
Opinion of Counsel to the effect that (i) the Company has received from, or
there has been published by, the Internal Revenue Service a ruling, or (ii)
since the date of the applicable Indenture there has been a change in
applicable federal income tax law, in either case to the effect that, and
based thereon such Opinion of Counsel shall confirm that, the Holders of Debt
Securities of such series will not recognize income, gain or loss for federal
income tax purposes as a result of such deposit, defeasance and discharge, and
will be subject to federal income tax on the same amounts and in the same
manner and at the same times as would have been the case if such deposit,
defeasance and discharge had not occurred; (b) the Debt Securities of such
series, if then listed on any domestic or foreign securities exchange, will
not be delisted as a result of such deposit, defeasance and discharge; and (c)
in the case of the Subordinated Debt Securities, (x) no default in the payment
of the principal of (and premium, if any) or any interest on any Senior Debt
beyond any applicable grace period shall have occurred and be continuing, or
(y) no other default with respect to any Senior Debt shall have occurred and
be continuing and shall have resulted in the acceleration of such Senior Debt.
In the event of any such defeasance and discharge of Debt Securities of such
series, Holders of Debt Securities of such series would be able to look only
to such trust fund for payment of principal of and any premium and any
interest on their Debt Securities until Maturity. (Section 4.6 of the Senior
Indenture; Section 4.3 of the Subordinated Indenture)
DEFEASANCE OF CERTAIN OBLIGATIONS
The Senior Indenture will provide that, if so specified with respect to the
Senior Debt Securities of any series, the Company may omit to comply with the
restrictive covenants described under "Covenants" above and any other
covenants applicable to such Senior Debt Securities which are subject to
covenant defeasance and any such omission shall not be an Event of Default
with respect to the Debt Securities of such series, upon the irrevocable
deposit with the Trustee, in trust, of money and/or U.S. Government
Obligations which through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay the principal of (and premium, if any), each installment of
interest on and any sinking fund payments on thereof in accordance with their
terms will provide money in an amount sufficient to pay the principal of (and
premium, if any), and each installment of principal (and premium, if any) and
interest on the Senior Debt Securities of such series on the Stated Maturity
of such payments or upon optional redemption
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and any mandatory sinking fund payments or analogous payments on the Senior
Debt Securities of such series on the day on which such payments are due and
payable in accordance with the terms of the Senior Indenture and the Senior
Debt Securities of such series. (Sections 4.5 and 4.6 of the Senior Indenture)
The obligations of the Company under the Senior Indenture and the Senior Debt
Securities of such series other than with respect to such covenants shall
remain in full force and effect. (Section 4.5 of the Senior Indenture) Such a
trust may be established only if, among other things, the Company has
delivered to the Trustee an Opinion of Counsel to the effect that (i) the
Holders of the Senior Debt Securities of such series will not recognize
income, gain or loss for federal income tax purposes as a result of such
deposit, defeasance and discharge of certain obligations and will be subject
to federal income tax on the same amount and in the same manner and at the
same times as would have been the case if such deposit, defeasance and
discharge had not occurred and (ii) the Senior Debt Securities of such series,
if then listed on any domestic or foreign securities exchange, will not be
delisted as a result of such deposit, defeasance and discharge. (Section 4.6
of the Senior Indenture)
In the event the Company exercises its option to omit compliance with the
covenants described under "Covenants" above with respect to the Senior Debt
Securities of any series as described above and the Senior Debt Securities of
such series are declared due and payable because of the occurrence of any
Event of Default, then the amount of money and U.S. Government Obligations on
deposit with the Trustee will be sufficient to pay amounts due on the Senior
Debt Securities of such series at the time of their Stated Maturity but may
not be sufficient to pay amounts due on the Senior Debt Securities of such
series at the time of the acceleration resulting from such Default. The
Company shall in any event remain liable for such payments as provided in the
Senior Indenture.
The Trustee must deliver or pay to the Company from time to time, upon
request of the Company, any amounts held by it with respect to any Securities
which, in the opinion of a nationally recognized firm of independent public
accountants, are in excess of the amount which would then be required to be
deposited to effect a satisfaction, discharge or defeasance, as the case may
be, with respect to such Securities.
MEETINGS, MODIFICATION AND WAIVER
Modifications and amendments of the Indentures may be made by the Company
and the Trustee under the applicable Indenture only with the consent of the
Holders of not less than a majority in principal amount of the Outstanding
Debt Securities issued under the applicable Indenture and affected by such
modification or amendment unless a greater percentage of such principal amount
is specified in the applicable Prospectus Supplement; provided, however, that
no such modification or amendment may, without the consent of each Holder of
such Outstanding Debt Security affected thereby, (a) change the Stated
Maturity of the principal of, or any installment of principal of or interest
on, any such Debt Security, (b) reduce the principal amount of (and premium,
if any) or interest on, any such Debt Security, (c) change any obligation of
the Company to pay additional amounts, (d) reduce the amount of principal of
an Original Issue Discount Security or any other Debt Security payable upon
acceleration of the maturity thereof, (e) change the coin or currency in which
any Debt Security or any premium or interest thereon is payable, (f) impair
the right to institute suit for the enforcement of any payment on or with
respect to any such Debt Security, (g) adversely change the right to convert
or exchange, including decreasing the conversion rate or increasing the
conversion price of, such Debt Security (if applicable), (h) in the case of
the Subordinated Indenture, modify the subordination provisions in a manner
adverse to the Holders of the Subordinated Debt Securities, (i) reduce the
percentage in principal amount of Outstanding Debt Securities of any series,
the consent of whose Holders is required for modification or amendment of the
applicable Indenture or for waiver of compliance with certain provisions of
the applicable Indenture or for waiver of certain defaults, (j) reduce the
requirements contained in the applicable Indenture for quorum or voting, (k)
change any
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obligations of the Company to maintain an office or agency in the places and
for the purposes required by the Indentures, or (l) modify any of the above
provisions. (Section 9.2)
The Holders of at least a majority in principal amount of the Outstanding
Debt Securities of each series may, on behalf of the Holders of all the Debt
Securities of that series, waive, insofar as that series is concerned,
compliance by the Company with certain restrictive provisions of the
applicable Indenture and, if applicable, such Debt Securities, unless a
greater percentage of such principal amount is specified in the applicable
Prospectus Supplement. The Holders of not less than a majority in principal
amount of the Outstanding Debt Securities of each series may, on behalf of all
Holders of Debt Securities of that series and any coupons pertaining thereto,
waive any past default under the applicable Indenture, except a default (a) in
the payment of principal of (and premium, if any) or any interest on any Debt
Security of such series, and (b) in respect of a covenant or provision of the
applicable Indenture and, if applicable, such Debt Securities which cannot be
modified or amended without the consent of the Holder of each Outstanding Debt
Security of such series affected. (Section 5.13)
The applicable Indenture will provide that in determining whether the
Holders of the requisite principal amount of the Outstanding Debt Securities
have given any request, demand, authorization, direction, notice, consent or
waiver thereunder or are present at a meeting of Holders of Debt Securities
for quorum purposes, (i) the principal amount of an Original Issue Discount
Security that shall be deemed to be Outstanding shall be the amount of the
principal thereof that would be due and payable as of the date of such
determination upon acceleration of the Maturity thereof, and (ii) the
principal amount of a Debt Security denominated in a foreign currency or
currency units shall be the U.S. dollar equivalent, determined on the date of
original issuance of such Debt Security, of the principal amount of such Debt
Security or, in the case of an Original Issue Discount Security, the U.S.
dollar equivalent, determined on the date of original issuance of such Debt
Security, of the amount determined as provided in (i) above.
The applicable Indenture will contain provisions for convening meetings of
the Holders of Debt Securities of a series if Debt Securities of that series
are issuable as Bearer Securities. A meeting may be called at any time by the
Trustee, and also, upon request, by the Company or the Holders of at least 25%
in principal amount of the Outstanding Debt Securities of such series, in any
such case upon notice given in accordance with "Notices" below. (Sections 13.1
and 13.2) Except for any consent which must be given by the Holder of each
Outstanding Debt Security affected thereby, as described above, any resolution
presented at a meeting or adjourned meeting 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 that series; provided, however,
that, except for any consent which must be given by the Holder of each
Outstanding Debt Security affected thereby, as described above, any resolution
with respect to any consent or waiver which may be given by the Holders of not
less than a majority in principal amount of the Outstanding Debt Securities of
a series may be adopted at a meeting or an adjourned meeting at which a quorum
is present only by the affirmative vote of a majority in principal amount of
the Outstanding Debt Securities of that series; and provided, further, that,
except for any consent which must be given by the Holder of each Outstanding
Debt Security affected thereby, as described above, any resolution with
respect to any request, demand, authorization, direction, notice, consent,
waiver or other action which may be made, given or taken by the Holders of a
specified percentage, which is less than or greater than a majority in
principal amount of the Outstanding Debt Securities of a 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 the
principal amount of the Outstanding Debt Securities of that series. Any
resolution passed or decision taken at any meeting of Holders of Debt
Securities of any series duly held in accordance with the applicable Indenture
will be binding on all Holders of Debt Securities of that series and the
related coupons. The quorum at any meeting called to adopt a resolution or
with respect to a consent or waiver which may
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be given by the Holders of not less than a majority in principal amount of the
Outstanding Debt Securities of a series, and at any reconvened meeting, will
be persons holding or representing a majority in principal amount of the
Outstanding Debt Securities of a series. (Section 13.4)
NOTICES
Except as otherwise provided in the applicable Indenture, notices to Holders
of Bearer Securities will be given by publication at least twice in a daily
newspaper in The City of New York and in such other city or cities as may be
specified in such Debt Securities Notices to Holders of Registered Securities
will be given by mail to the address of such Holders as they appear in the
Security Register. (Section 1.6)
TITLE
Title to any temporary global Debt Security, any Bearer Securities
(including Bearer Securities in permanent global form) and any coupons
appertaining thereto will pass by delivery. The Company, the Trustee and any
agent of the Company or the Trustee may treat the bearer of any Bearer
Security and the bearer of any coupon and the registered owner of any
Registered Security as the absolute owner thereof (whether or not such Debt
Security or coupon shall be overdue and notwithstanding any notice to the
contrary) for the purpose of making payment and for all other purposes.
(Section 3.8)
REPLACEMENT OF DEBT SECURITIES AND COUPONS
Any mutilated Debt Security or a Debt Security with a mutilated coupon
appertaining thereto will be replaced by the Company at the expense of the
Holder upon surrender of such Debt Security to the Trustee. Debt Securities or
coupons that became destroyed, stolen or lost will be replaced by the Company
at the expense of the Holder upon delivery of the Trustee of the Debt Security
and coupons or evidence of the destruction, loss or theft thereof satisfactory
to the Company and the Trustee; in the case of any coupon which becomes
destroyed, stolen or lost, such coupon will be replaced by issuance of a new
Debt Security in exchange for the Debt Security to which such coupon
appertains. In the case of a destroyed, lost or stolen Debt Security or
coupon, an indemnity satisfactory to the Trustee and the Company may be
required at the expense of the Holder of such Debt Security or coupon before a
replacement Debt Security will be issued. (Section 3.6)
GOVERNING LAW
The Indentures, the Debt Securities and the coupons will be governed by, and
construed in accordance with, the laws of the State of New York without regard
to principles of conflicts of laws. (Section 1.13)
REGARDING THE TRUSTEE
The Indentures contain limitations on the right of the Trustee, as a
creditor of the Company, to obtain payment of claims in certain cases or to
realize on certain property received in respect of any such claim as security
or otherwise. (Section 6.10) In addition, the Trustee may be deemed to have a
conflicting interest and may be required to resign as Trustee if at the time
of a default under one of the Indentures it is a creditor of the Company.
(Section 6.8) The Company may from time to time maintain deposit accounts and
conduct its banking transactions with a Trustee in the ordinary course of
business. (Section 6.3)
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 250,000,000 shares
of common stock, $.10 par value per share (the "Common Stock"), and 2,000,000
shares of preferred stock, $5.00 par value (the "Preferred Stock").
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At March 31, 1995, there were outstanding (a) 56,900,891 shares of Common
Stock, excluding 8,130,028 shares held as Treasury shares, (b) employee stock
options to purchase an aggregate of approximately 13,791,717 shares of Common
Stock, and (c) 177,400 shares of Series A Convertible Preferred Stock
(Dividend Enhanced Convertible Securities, referred to as the "DECS"),
represented by 8,870,000 Depositary Shares (the "Depositary Shares"), each
Depositary Share representing a 1/50 interest in a share of the DECS. (See
"Preferred Stock Outstanding", below).
DESCRIPTION OF PREFERRED STOCK
The following summary contains a description of certain general terms of the
Company's Preferred Stock to which any Prospectus Supplement may relate.
Certain terms of any series of Preferred Stock offered by any Prospectus
Supplement will be described in the Prospectus Supplement relating thereto. If
so indicated in the Prospectus Supplement, the terms of any series may differ
from the terms set forth below. The description of certain provisions of the
Company's Preferred Stock does not purport to be complete and is subject to
and qualified in its entirety by reference to the provisions of the Company's
Certificate of Incorporation, and the Certificate of Designation (the
"Certificate of Designation") relating to each particular series of Preferred
Stock which will be filed or incorporated by reference, as the case may be, as
an exhibit to the Registration Statement of which this Prospectus is a part at
or prior to the time of the issuance of such Preferred Stock.
GENERAL
Under the Company's Certificate of Incorporation, the Board of Directors of
the Company is authorized, without further stockholder action, to provide for
the issuance of up to 2,000,000 shares of Preferred Stock, of which 177,400
have been issued. (See "Preferred Stock Outstanding") The Preferred Stock may
be issued in one or more series, with such designations of titles; dividend
rates; any redemption provisions; special or relative rights in the event of
liquidation, dissolution, distribution or winding up of the Company; any
sinking fund provisions; any conversion provisions; any voting rights thereof;
and any other preferences, privileges, powers, rights, qualifications,
limitations and restrictions, as shall be set forth as and when established by
the Board of Directors of the Company. The shares of any series of Preferred
Stock will be, when issued, fully paid and non-assessable and holders thereof
will have no preemptive rights in connection therewith.
RANK
Any series of Preferred Stock will, with respect to rights on liquidation,
winding up and dissolution, rank (i) senior to all classes of Common Stock and
to all equity securities issued by the Company, the terms of which
specifically provide that such equity securities will rank junior to such
series of Preferred Stock; (ii) on a parity with all equity securities issued
by the Company, the terms of which specifically provide that such equity
securities will rank on a parity with such series of Preferred Stock (see
"Preferred Stock Outstanding"); (iii) junior to all equity securities issued
by the Company, the terms of which specifically provide that such equity
securities will rank senior to such series of Preferred Stock. In addition,
any series of Preferred Stock will, with respect to dividend rights, rank (i)
senior to all equity securities issued by the Company, the terms of which
specifically provide that such equity securities will rank junior to such
series of Preferred Stock and, to the extent provided in the applicable
Certificate of Designation, to Common Stock, (ii) on a parity with all equity
securities issued by the Company, the terms of which specifically provide that
such equity securities will rank on a parity with such series of Preferred
Stock and, to the extent provided in the applicable Certificate of
Designation, to Common Stock, and (iii) junior to all equity securities issued
by the Company, the terms of which specifically provide that such equity
securities will rank senior to such series of Preferred Stock. As used in any
Certificate of Designation for these purposes, the term "equity securities"
will not include debt securities convertible into or exchangeable for equity
securities.
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DIVIDENDS
Holders of each series of Preferred Stock will be entitled to receive, when,
as and if declared by the Board of Directors of the Company out of funds
legally available therefor, cash dividends at such rates and on such dates as
are set forth in the Prospectus Supplement relating to such series of
Preferred Stock. Such rate may be fixed or variable or both. Dividends will be
payable to holders of record of Preferred Stock as they appear on the books of
the Company (or, if applicable, the records of the Depositary referred to
below under "Description of Depositary Shares") on such record dates as shall
be fixed by the Board of Directors. Dividends on any series of Preferred Stock
may be cumulative or noncumulative.
No full dividends may be declared or paid on funds set apart for the payment
of dividends on any series of Preferred Stock unless dividends shall have been
paid or set apart for such payment on equity securities ranking on a parity
with respect to dividends with such series of Preferred Stock. If full
dividends are not so paid, such series of Preferred Stock shall share
dividends pro rata with such other equity securities.
CONVERSION AND EXCHANGE
The Prospectus Supplement for any series of Preferred Stock will state the
terms, if any, on which shares of that series are convertible into shares of
another series of Preferred Stock or Common Stock or exchangeable for another
series of Preferred Stock, Common Stock or Debt Securities of the Company. The
Common Stock of the Company is described below under "Description of Common
Stock."
REDEMPTION
A series of Preferred Stock may be redeemable at any time, in whole or in
part, at the option of the Company or the holder thereof and may be subject to
mandatory redemption pursuant to a sinking fund or otherwise upon terms and at
the redemption prices set forth in the Prospectus Supplement relating to such
series.
In the event of partial redemptions of Preferred Stock, whether by mandatory
or optional redemption, the shares to be redeemed will be determined by lot or
pro rata, as may be determined by the Board of Directors of the Company, or by
any other method determined to be equitable by the Board of Directors.
On and after a redemption date, unless the Company defaults in the payment
of the redemption price, dividends will cease to accrue on shares of Preferred
Stock called for redemption and all rights of holders of such shares will
terminate except for the right to receive the redemption price.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the Company, holders of each series of Preferred Stock will be entitled to
receive out of assets of the Company available for distribution to
shareholders, before any distribution is made on any securities ranking junior
with respect to liquidation, including Common Stock, distributions upon
liquidation in the amount set forth in the Prospectus Supplement relating to
such series of Preferred Stock, plus an amount equal to any accrued and unpaid
dividends. If, upon any voluntary or involuntary liquidation, dissolution or
winding up of the Company, the amounts payable with respect to the Preferred
Stock of any series and any other securities ranking on a parity with respect
to liquidation rights are not paid in full, the holders of the Preferred Stock
of such series and such other securities will share ratably in any such
distribution of assets of the Company in proportion to the full liquidation
preferences to which each is entitled. After payment of the full amount of the
liquidation preference to which they are entitled, the holders of such
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series of Preferred Stock will not be entitled to any further participation in
any distribution of assets of the Company.
VOTING RIGHTS
Except as set forth in the Prospectus Supplement relating to a particular
series of Preferred Stock or except as expressly required by applicable law,
the holders of shares of Preferred Stock will have no voting rights.
TRANSFER AGENT AND REGISTRAR
The transfer agent for each series of Preferred Stock will be described in
the applicable Prospectus Supplement.
DESCRIPTION OF DEPOSITARY SHARES
The description set forth below of certain provisions of the Deposit
Agreement (as defined below) and of the Depositary Shares and Depositary
Receipts (as defined below) does not purport to be complete and is subject to
and qualified in its entirety by reference to the forms of Deposit Agreement
and Depositary Receipt relating to the Preferred Stock, which will be filed or
incorporated by reference, as the case may be, as exhibits to the Registration
Statement of which this Prospectus is a part.
GENERAL
The Company may, at its option, elect to offer fractional shares of
Preferred Stock, rather than full shares of Preferred Stock. In such event,
the Company will issue receipts for Depositary Shares, each of which will
represent a fraction (to be set forth in the Prospectus Supplement relating to
a particular series of Preferred Stock) of a share of a particular series of
Preferred Stock as described below.
The shares of any series of Preferred Stock represented by Depositary Shares
will be deposited under a Deposit Agreement (the "Deposit Agreement") between
the Company and a bank or trust company selected by the Company having its
principal office in the United States and having a combined capital and
surplus of at least $60,000,000 (the "Depositary"). Subject to the terms of
the Deposit Agreement, each owner of a Depositary Share will be entitled, in
proportion to the applicable fraction of a share of Preferred Stock
represented by such Depositary Share, to all the rights and preferences of the
Preferred Stock represented thereby (including dividend, voting, redemption,
conversion and liquidation rights).
The Depositary Shares will be evidenced by depositary receipts issued
pursuant to the Deposit Agreement (the "Depositary Receipts"). Depositary
Receipts will be distributed to those persons purchasing the fractional shares
of Preferred Stock in accordance with the terms of the offering.
Pending the preparation of definitive Depositary Receipts, the Depositary
may, upon the written order of the Company or any holder of deposited
Preferred Stock, execute and deliver temporary Depositary Receipts which are
substantially identical to, and entitle the holders thereof to all the rights
pertaining to, the definitive Depositary Receipts. Depositary Receipts will be
prepared thereafter without unreasonable delay, and temporary Depositary
Receipts will be exchangeable for definitive Depositary Receipts.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Depositary will distribute all cash dividends or other cash
distributions received in respect of the deposited Preferred Stock to the
record holders of Depositary Shares relating to such Preferred Stock in
proportion to the numbers of such Depositary Shares owned by such holders.
In the event of a distribution other than in cash, the Depositary will
distribute property received by it to the record holders of Depositary Shares
entitled thereto. If the Depositary determines that it is not
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feasible to make such distribution, it may, with the approval of the Company,
sell such property and distribute the net proceeds from such sale to such
holders.
REDEMPTION OF STOCK
If a series of Preferred Stock represented by Depositary Shares is to be
redeemed, the Depositary Shares will be redeemed from the proceeds received by
the Depositary resulting from the redemption, in whole or in part, of such
series of Preferred Stock held by the Depositary. The Depositary Shares will
be redeemed by the Depositary at a price per Depositary Share equal to the
applicable fraction of the redemption price per share payable in respect of
the shares of Preferred Stock so redeemed. Whenever the Company redeems shares
of Preferred Stock held by the Depositary, the Depositary will redeem as of
the same date the number of Depositary Shares representing shares of Preferred
Stock so redeemed. If fewer than all the Depositary Shares are to be redeemed,
the Depositary Shares to be redeemed will be selected by the Depositary by lot
or pro rata or by any other equitable method as may be determined by the
Depositary.
WITHDRAWAL OF STOCK
Any holder of Depositary Shares may, upon surrender of the Depositary
Receipts at the corporate trust office of the Depositary (unless the related
Depositary Shares have previously been called for redemption), receive the
number of whole shares of the related series of Preferred Stock and any money
or other property represented by such Depositary Receipts. Holders of
Depositary Shares making such withdrawals will be entitled to receive whole
shares of Preferred Stock on the basis set forth in the related Prospectus
Supplement for such series of Preferred Stock, but holders of such whole
shares of Preferred Stock will not thereafter be entitled to deposit such
Preferred Stock under the Deposit Agreement or to receive Depositary Receipts
therefor. If the Depositary Shares surrendered by the holder in connection
with such withdrawal exceed the number of Depositary Shares that represent the
number of whole shares of Preferred Stock to be withdrawn, the Depositary will
deliver to such holder at the same time a new Depositary Receipt evidencing
such excess number of Depositary Shares.
VOTING DEPOSITED PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of any series of
deposited Preferred Stock are entitled to vote, the Depositary will mail the
information contained in such notice of meeting to the record holders of the
Depositary Shares relating to such series of Preferred Stock. Each record
holder of such Depositary Shares on the record date (which will be the same
date as the record date for the relevant series of Preferred Stock) will be
entitled to instruct the Depositary as to the exercise of the voting rights
pertaining to the amount of the Preferred Stock represented by such holder's
Depositary Shares. The Depositary will endeavor, insofar as practicable, to
vote the amount of such series of Preferred Stock represented by such
Depositary Shares in accordance with such instructions, and the Company will
agree to take all reasonable actions that may be deemed necessary by the
Depositary in order to enable the Depositary to do so. The Depositary will
abstain from voting shares of the Preferred Stock to the extent it does not
receive specific instructions from the holder of Depositary Shares
representing such Preferred Stock.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The form of Depositary Receipt evidencing the Depositary Shares and any
provision of the Deposit Agreement may at any time be amended by agreement
between the Company and the Depositary. However, any amendment which
materially and adversely alters the rights of the holders of the Depositary
Shares representing Preferred Stock of any series will not be effective unless
such amendment has been approved by the holders of at least the amount of the
Depositary Shares then outstanding representing the minimum amount of
Preferred Stock of such series necessary to approve
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any amendment that would materially and adversely affect the rights of the
holders of the Preferred Stock of such series. Every holder of an outstanding
Depositary Receipt at the time any such amendment becomes effective, or any
transferee of such holder, shall be deemed, by continuing to hold such
Depositary Receipt, or by reason of the acquisition thereof, to consent and
agree to such amendment and to be bound by the Deposit Agreement as amended
thereby. The Deposit Agreement automatically terminates if (i) all outstanding
Depositary Shares have been redeemed; or (ii) each share of Preferred Stock
has been converted into other preferred stock or Common Stock or has been
changed for debt securities; or (iii) there has been a final distribution in
respect of the Preferred Stock in connection with any liquidation, dissolution
or winding up of the Company and such distribution has been distributed to the
holders of Depositary Shares.
CHARGES OF DEPOSITARY
The Company will pay all transfer and other taxes and governmental charges
arising solely from the existence of the depositary arrangements. The Company
will pay all charges of the Depositary in connection with the initial deposit
of the relevant series of Preferred Stock and any redemption of such Preferred
Stock. Holders of Depositary Receipts will pay other transfer and other taxes
and governmental charges and such other charges or expenses as are expressly
provided in the Deposit Agreement to be for their accounts.
RESIGNATION AND REMOVAL OF DEPOSITARY
The Depositary may resign at any time by delivering to the Company notice of
its intent to do so, and the Company may at any time remove the Depositary,
any such resignation or removal to take effect upon the appointment of a
successor Depositary and its acceptance of such appointment. Such successor
Depositary must be appointed within 60 days after delivery of the notice of
resignation or removal and must be a bank or trust company having its
principal office in the United States and having a combined capital and
surplus of at least $60,000,000.
MISCELLANEOUS
The Depositary will forward all reports and communications from the Company
which are delivered to the Depositary and which the Company is required to
furnish to the holders of the deposited Preferred Stock.
Neither the Depositary nor the Company will be liable if it is prevented or
delayed by law or any circumstances beyond its control in performing its
obligations under the Deposit Agreement. The obligations of the Company and
the Depositary under the Deposit Agreement will be limited to performance in
good faith of their duties thereunder and they will not be obligated to
prosecute or defend any legal proceeding in respect of any Depositary Shares,
Depositary Receipts or shares of Preferred Stock unless satisfactory indemnity
is furnished. They may rely upon written advice of counsel or accountants, or
upon information provided by holders of Depositary Receipts or other persons
believed to be competent and on documents believed to be genuine.
PREFERRED STOCK OUTSTANDING
The Company has issued and outstanding 177,400 shares of DECS. The DECS rank
senior to the Common Stock as to the payment of dividends and distributions of
assets on liquidation, dissolution or winding up of the Company. Dividends on
the DECS are cumulative at the annual rate of $110.00 per share, or $2.20 per
Depositary Share, payable quarterly in arrears on January 1, April 1, July 1,
and October 1 in each year until mandatory conversion or redemption thereof,
but only if, when and as declared by the Board of Directors. Accrued and
unpaid dividends, whether or not declared, are payable out of funds legally
available therefor on April 1, 1998, the date of mandatory conversion of the
DECS. At any time after April 1, 1997, subject to certain limitations, the
Company
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may redeem each share of DECS for shares of Common Stock having a market value
of $1,025.00, together with an additional cash dividend of up to $27.50 per
share, declining ratably after April 1, 1997 to $0 by March 1, 1998. On April
1, 1998, each share of DECS outstanding will automatically convert into 50
shares of Common Stock of the Company, subject to adjustments in certain
cases, and prior to this date each share may be converted into 47.65 shares of
Common Stock at any time at the option of the holder.
Each share of DECS has a liquidation preference equal to the sum of (i) the
per share price to investors ($1,127.50) and (ii) the amount of accrued and
unpaid dividends on each share of DECS.
As long as any shares of DECS are outstanding, no dividends (other than
dividends payable in shares of, or warrants, rights or options exercisable for
or convertible into shares of, any capital stock, including, without
limitation, the Common Stock, of the Company ranking junior to the shares of
DECS as to the payment of dividends and the distribution of assets upon
liquidation (collectively "Junior Stock") and cash in lieu of fractional
shares in connection with any such dividend) will be paid or declared in cash
or otherwise, nor will any other distribution be made (other than a
distribution payable in Junior Stock and cash in lieu of fractional shares in
connection with any such distribution), on any Junior Stock unless: (i) full
dividends on Preferred Stock ranking on a parity with the DECS ("Parity
Preferred Stock") have been paid, or declared and set aside for payment, for
all dividend periods terminating on or prior to the date of such Junior Stock
dividend or distribution payment to the extent such dividends are cumulative;
(ii) dividends in full for the current quarterly dividend period have been
paid, or declared and set aside for payment, on all Parity Preferred Stock to
the extent such dividends are cumulative; (iii) the Company has paid or set
aside all amounts, if any, then or theretofore required to be paid or set
aside for all purchase, retirement, and sinking funds, if any, for any Parity
Preferred Stock; and (iv) the Company is not in default on any of its
obligations to redeem any Parity Preferred Stock.
In addition, as long as any shares of DECS are outstanding, no shares of any
Junior Stock may be purchased, redeemed or otherwise acquired by the Company
or any of its subsidiaries (except in connection with a reclassification or
exchange of any Junior Stock through the issuance of other Junior Stock (and
cash in lieu of fractional shares in connection therewith)) or the purchase,
redemption or other acquisition of any Junior Stock with any Junior Stock (and
cash in lieu of fractional shares in connection therewith), nor may any funds
be set aside or made available for any sinking fund for the purchase,
redemption or acquisition of any Junior Stock unless: (i) full dividends on
Parity Preferred Stock have been paid, or declared and set aside for payment,
for all dividend periods terminating on or prior to the date of such purchase,
redemption, acquisition, setting aside or making available to the extent such
dividends are cumulative; (ii) dividends in full for the current quarterly
dividend period have been paid, or declared and set aside for payment, on all
Parity Preferred Stock to the extent such dividends are cumulative; (iii) the
Company has paid or set aside all amounts, if any, then or theretofore
required to be paid or set aside for all purchase, retirement, and sinking
funds, if any, for any Parity Preferred Stock; and (iv) the Company is not in
default on any of its obligations to redeem any Parity Preferred Stock.
Subject to the provisions described above, such dividends or other
distributions (payable in cash, property, or Junior Stock) as may be
determined by the Board of Directors may be declared and paid on shares of any
Junior Stock from time to time and Junior Stock may be purchased, redeemed or
otherwise acquired by the Company or any of its subsidiaries, and funds may be
set aside or made available for that purpose, from time to time. In the event
of the declaration and payment of any such dividends or other distributions,
the holders of such Junior Stock will be entitled, to the exclusion of holders
of the Parity Preferred Stock, to share therein according to their respective
interests.
As long as any shares of DECS are outstanding, dividends or other
distributions may not be declared or paid on any Parity Preferred Stock (other
than dividends or other distributions payable in Junior Stock and cash in lieu
of fractional shares in connection therewith), and the Company may not
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purchase, redeem or otherwise acquire any Parity Preferred Stock (except with
any Junior Stock and cash in lieu of fractional shares in connection therewith
and except with the right, subject to clause (b) of this paragraph and any
similar requirement of any other Preferred Stock, to receive accrued and
unpaid dividends), unless either: (a)(i) full dividends on Parity Preferred
Stock have been paid, or declared and set aside for payment, for all dividend
periods terminating on or prior to the date of such Parity Preferred Stock
dividend, distribution, redemption, purchase or acquisition payment to the
extent such dividends are cumulative; (ii) dividends in full for the current
quarterly dividend period have been paid, or declared and set aside for
payment, on all Parity Preferred Stock to the extent such dividends are
cumulative; (iii) the Company has paid or set aside all amounts, if any, then
or theretofore required to be paid or set aside for all purchase, retirement,
and sinking funds, if any, for any Parity Preferred Stock; and (iv) the
Company is not in default on any of its obligations to redeem any Parity
Preferred Stock; or (b) with respect to the declaration and payment of
dividends only, any such dividends are declared and paid pro rata so that the
amounts of any dividends declared and paid per share of DECS and each other
share of Parity Preferred Stock will in all cases bear to each other the same
ratio that accrued and unpaid dividends (including any accumulation with
respect to unpaid dividends for prior dividend periods, if such dividends are
cumulative) per share of DECS and such other share of Parity Preferred Stock
bear to each other.
DESCRIPTION OF COMMON STOCK
GENERAL
Subject to the rights of the holders of any shares of the Company's
Preferred Stock, including the DECS which may at the time be outstanding,
holders of Common Stock are entitled to receive such dividends as may be
declared from time to time by the Board of Directors out of funds legally
available therefor.
The holders of Common Stock are entitled to one vote per share on all
matters submitted to a vote of shareholders and do not have cumulative voting
rights. Holders of Common Stock are entitled to receive, upon any liquidation
of the Company, all remaining assets available for distribution to
shareholders after satisfaction of the Company's liabilities and the
preferential rights of any preferred stock that may then be issued and
outstanding. The outstanding shares of Common Stock are, and the shares
offered hereby will be, fully paid and nonassessable. The holders of Common
Stock have no preemptive, conversion or redemption rights. The Common Stock is
listed on the New York Stock Exchange. The registrar and transfer agent for
the Common Stock is First Chicago Trust Company of New York.
CERTAIN PROVISIONS
The Board of Directors, generally without further action by the
shareholders, is authorized to issue Preferred Stock in one or more series and
to designate as to any such series the dividend rate, redemption prices,
preferences on liquidation or dissolution, conversion rights, voting rights
and any other preferences, and relative, participating, optional or other
special rights and qualifications, limitations and restrictions. The rights of
the holders of Common Stock will be subject to, and may be adversely affected
by, the rights of the holders of any Preferred Stock that may be issued in the
future. Issuance of a new series of Preferred Stock, while providing desirable
flexibility in connection with possible acquisitions or other corporate
purposes, could have the effect of making it more difficult for a third party
to acquire, or discouraging a third party from acquiring, a majority of the
outstanding voting stock of the Company.
Generally, Section 203 of the Delaware General Corporation Law prohibits a
publicly held Delaware corporation from engaging in any "business combination"
with any "interested stockholder" for a period of three years following the
date that such stockholder became an interested stockholder, unless (i) prior
to such date either the business combination or the transaction which resulted
in the
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stockholder being an interested stockholder is approved by the board of
directors of the corporation, (ii) upon consummation of the transaction which
resulted in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned (A) by persons
who are both directors and officers and (B) certain employee stock plans, or
(iii) on or after such date the business combination is approved by the board
and authorized at an annual or special meeting of stockholders, and not by
written consent, by the affirmative vote of at least 66 2/3% of the
outstanding voting stock which is not owned by the interested stockholder. A
"business combination" includes certain mergers, consolidations, asset sales,
transfers and other transactions resulting in a financial benefit to the
interested stockholder. An "interested stockholder" is a person who, together
with affiliates and associates, owns (or within the preceding three years, did
own) 15% or more of the corporation's voting stock.
The overall effect of these provisions may be to deter or discourage hostile
takeover attempts by making it more difficult for a person who has gained a
substantial equity interest in the Company effectively to exercise control.
DESCRIPTION OF WARRANTS
The Company may issue Warrants, including Warrants to purchase Debt
Securities ("Debt Warrants"), Preferred Stock, including Preferred Stock
represented by Depositary Shares ("Preferred Stock Warrants"), Common Stock
("Common Stock Warrants"), or any combination thereof. Warrants may be issued
independently or together with any Securities and may be attached to or
separate from such Securities. The Warrants are to be issued under warrant
agreements (each a "Warrant Agreement") to be entered into between the Company
and a bank or trust company, as warrant agent (the "Warrant Agent"), all as
shall be set forth in the Prospectus Supplement relating to Warrants being
offered pursuant thereto.
DEBT WARRANTS
The applicable Prospectus Supplement will describe the terms of Debt
Warrants offered thereby, the Warrant Agreement relating to such Debt Warrants
and the certificates representing such Debt Warrants, including the following:
(1) the title of such Debt Warrants; (2) the aggregate number of such Debt
Warrants; (3) the price or prices at which such Debt Warrants will be issued;
(4) the currency or currencies, including composite currencies or currency
units, in which the price of such Debt Warrants may be payable; (5) the
designation, aggregate principal amount and terms of the Debt Securities
purchasable upon exercise of such Debt Warrants, and the procedures and
conditions relating to the exercise of such Debt Warrants; (6) the designation
and terms of any related Debt Securities with which such Debt Warrants are
issued, and the number of such Debt Warrants issued with each such Debt
Security; (7) the currency or currencies, including composite currencies or
currency units, in which the principal of or any premium or interest on the
Debt Securities purchasable upon exercise of such Debt Warrants will be
payable; (8) the date, if any, on and after which such Debt Warrants and the
related Debt Securities will be separately transferable; (9) the principal
amount of Debt Securities purchasable upon exercise of each Debt Warrant, and
the price at which and the currency or currencies, including composite
currencies or currency units, in which such principal amount of Debt
Securities may be purchased upon such exercise; (10) the date on which the
right to exercise such Debt Warrants will commence, and the date on which such
right will expire; (11) the maximum or minimum number of such Debt Warrants
which may be exercised at any time; (12) a discussion of any material federal
income tax considerations; and (13) any other terms of such Debt Warrants and
terms, procedures and limitations relating to the exercise of such Debt
Warrants.
Certificates representing Debt Warrants will be exchangeable for new
certificates representing Debt Warrants of different denominations, and Debt
Warrants may be exercised at the corporate trust
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office of the Warrant Agent or any other office indicated in the Prospectus
Supplement. Prior to the exercise of their Debt Warrants, holders of Debt
Warrants will not have any of the rights as holders of the Debt Securities
purchasable upon such exercise and will not be entitled to payment of
principal of or any premium or interest on the Debt Securities purchasable
upon such exercise.
PREFERRED STOCK WARRANTS
The applicable Prospectus Supplement will describe the terms of Preferred
Stock Warrants offered thereby, the Warrant Agreement relating to such
Preferred Stock Warrants and the certificates representing such Preferred
Stock Warrants, including the following: (1) the title of such Preferred Stock
Warrants; (2) the aggregate number of such Preferred Stock Warrants; (3) the
price or prices at which such Preferred Stock Warrants will be issued; (4) the
currency or currencies, including composite currencies or currency units, in
which the price of such Preferred Stock Warrants may be payable; (5) the
designation, number of shares and terms (including, among others, dividend,
liquidation, redemption and voting rights) of the Preferred Stock (including
Preferred Stock represented by Depositary Shares) purchasable upon exercise of
such Preferred Stock Warrants, and the procedures and conditions relating to
the exercise of such Preferred Stock Warrants; (6) the designation and terms
of any related Securities of the Company with which such Warrants are issued,
and the number of such Preferred Stock Warrants issued with each such
Security; (7) the date, if any, on and after which such Preferred Stock
Warrants and the related Securities will be separately transferable; (8) the
maximum or minimum number of Preferred Stock Warrants which may be exercised
at any time; (9) if applicable, a discussion of any material federal income
tax considerations; and (10) any other terms of such Preferred Stock Warrants,
including terms, procedures and limitations relating to the exchange and
exercise of such Preferred Stock Warrants.
Certificates representing Preferred Stock Warrants will be exchangeable for
new certificates representing Preferred Stock Warrants of different
denominations, and Preferred Stock Warrants may be exercised at the corporate
trust office of the Warrant Agent or any office indicated in the Prospectus
Supplement. Prior to the exercise of their Preferred Stock Warrants, holders
of such Preferred Stock Warrants will not have any of the rights as holders of
the Preferred Stock purchasable upon such exercise and will not be entitled to
any dividend payments, liquidation premiums or voting rights of the Preferred
Stock (including Preferred Stock represented by Depositary Shares) purchasable
upon such exercise.
COMMON STOCK WARRANTS
The applicable Prospectus Supplement will describe the terms of any Common
Stock Warrants, the Warrant Agreement relating to such Common Stock Warrants
and the certificates representing such Common Stock Warrants in respect of
which this Prospectus is being delivered which may include: (1) the title of
such Common Stock Warrants; (2) the aggregate number of such Common Stock
Warrants; (3) the price or prices at which such Common Stock Warrants will be
issued; (4) the currency or currencies, including composite currencies or
currency units, in which the price of such Common Stock Warrants may be
payable; (5) if applicable, the designation and terms of any related Security
with which such Common Stock Warrants are issued, and the number of such
Common Stock Warrants issued with each such related Security; (6) if
applicable, the date on and after which such Common Stock Warrants and the
related Security will be separately transferable; (7) the date on which the
right to exercise such Common Stock Warrants will commence, and the date on
which such right will expire; (8) the maximum or minimum number of such Common
Stock Warrants which may be exercised at any time; (9) if applicable, a
discussion of any material federal income tax considerations; and (10) any
other terms of such Common Stock Warrants, including terms, procedures and
limitations relating to the exchange and exercise of such Common Stock
Warrants.
Certificates representing Common Stock Warrants will be exchangeable for new
certificates representing Common Stock Warrants of different denominations,
and Common Stock Warrants may
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be exercised at the corporate trust office of the Warrant Agent or any other
office indicated in the Prospectus Supplement. Prior to the exercise of their
Common Stock Warrants, holders of Common Stock Warrants will not have any of
the rights as holders of Common Stock purchasable upon such exercise and will
not be entitled to dividend payments, if any, or voting rights of the Common
Stock purchasable upon such exercise.
EXERCISE OF WARRANTS
Each Warrant will entitle the holder to purchase for cash such principal
amount of Debt Securities or number of shares of Preferred Stock or Common
Stock at such exercise price as shall in each case be set forth in, or be
determinable as set forth in, the Prospectus Supplement relating to the
Warrants offered thereby. Warrants may be exercised at any time up to the
close of business on the expiration date set forth in the Prospectus
Supplement relating to the Warrants offered thereby. After the close of
business on the expiration date, unexercised Warrants will become void.
Warrants may be exercised as set forth in the Prospectus Supplement relating
to the Warrants offered thereby. Upon receipt of payment and the certificate
representing the Warrant properly completed and duly executed at the corporate
trust office of the Warrant Agent or any other office indicated in the
Prospectus Supplement, the Company will, as soon as practicable, forward the
Securities purchasable upon such exercise. If less than all of the Warrants
represented by such certificate are exercised, a new certificate will be
issued for the remaining Warrants.
LIMITATIONS ON ISSUANCE OF BEARER SECURITIES
In compliance with United States federal tax laws and regulations, Bearer
Securities (including Debt Securities that are exchangeable for Bearer
Securities and Debt Securities in permanent global form that are either Bearer
Securities or exchangeable for Bearer Securities) may not be offered, sold,
resold or delivered in connection with their original issuance in the United
States or to United States persons (each as defined below) except as otherwise
permitted by Treasury Regulation Section 1.163-5(c)(2)(i)(D) including offers
and sales to offices located outside the United States of United States
financial institutions (as defined in Treasury Regulation Section 1.165-
12(c)(1)(v)) which agree in writing to comply with the requirements of Section
165(j)(3)(A),(B) or (C) of the Code, as defined below, and the regulations
thereunder, and any underwriters, agents and dealers participating in the
offering of Debt Securities must agree in writing that they will not offer,
sell or resell any Bearer Securities to persons within the United States or to
United States persons (except as described above) nor deliver Bearer
Securities within the United States. In addition, any such underwriters,
agents and dealers must represent in writing that they have in effect, in
connection with the offer and sale of the Debt Securities, procedures
reasonably designed to ensure that their employees or agents who are directly
engaged in selling the Debt Securities are aware that Bearer Securities cannot
be offered or sold to a person who is within the United States or is a United
States person except as otherwise permitted by Treasury Regulation Section
1.163-5(c)(2)(i)(D). Furthermore, the owner of the obligation (or the
financial institution or clearing organization through which the owner holds
the obligation) must certify to the Company that the owner is not a United
States Person. Bearer Securities and any coupons attached hereto will bear the
following legend: "Any United States person who holds this obligation will be
subject to limitations under the United States income tax laws, including the
limitations provided in Sections 165(j) and 1287(a) of the United States
Internal Revenue Code." Purchasers of Bearer Securities may be affected by
certain limitations under United States tax laws. The applicable Prospectus
Supplement or Prospectus Supplements will describe such limitations for any
Bearer Securities relating thereto.
As used herein, "United States person" means (i) an individual who is, for
United States Federal income tax purposes, a citizen or resident of the United
States, (ii) a corporation, partnership or other entity created or organized
in or under the laws of the United States or of any political subdivision
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thereof, or (iii) an estate or trust the income of which is subject to United
States Federal income taxation regardless of its source, and "United States"
means the United States of America (including the States and the District of
Columbia), its territories and its possessions.
PLAN OF DISTRIBUTION
The Company may sell Securities to or through underwriters or dealers,
directly to other purchasers, or through agents. The Prospectus Supplement
with respect to the Securities will set forth the terms of the offering of the
Securities, including the name or names of any underwriters, dealers or
agents, the price of the offered Securities and the net proceeds to the
Company from such sale, any delayed delivery arrangements, any underwriting
discounts or other items constituting underwriters' compensation, any
discounts or concessions allowed or reallowed or paid to dealers and any
securities exchanges on which the Securities may be listed.
If underwriters are used in the sale, the Securities will be acquired by the
underwriters for their own account and may be resold from time to time in one
or more transactions, including negotiated transactions, at a fixed public
price or at varying prices determined at the time of sale. The underwriter or
underwriters with respect to a particular underwritten offering of Securities
will be named in the Prospectus Supplement relating to such offering, and if
an underwriting syndicate is used, the managing underwriter or underwriters
will be set forth on the cover of such Prospectus Supplement. Unless otherwise
set forth in the Prospectus Supplement, the obligations of the underwriters or
agents to purchase the Securities will be subject to certain conditions
precedent and the underwriters will be obligated to purchase all the
Securities if any are purchased. Any initial public offering price and any
discounts or concessions allowed or reallowed or paid to dealers may be
changed from time to time.
If a dealer is utilized in the sale of any Securities in respect of which
this Prospectus is delivered, the Company will sell such Securities to the
dealer, as principal. The dealer may then resell such Securities to the public
at varying prices to be determined by such dealer at the time of resale. The
name of the dealer and the terms of the transaction will be set forth in the
Prospectus Supplement relating thereto.
Securities may be sold directly by the Company to one or more institutional
purchasers, or through agents designated by the Company from time to time, at
a fixed price or prices, which may be changed, or at varying prices determined
at time of sale. Any agent involved in the offer or sale of the Securities
will be named, and any commissions payable by the Company to such agent will
be set forth, in the Prospectus Supplement relating thereto. Unless otherwise
indicated in the Prospectus Supplement, any such agent will be acting on a
best efforts basis for the period of its appointment.
In connection with the sale of the Securities, underwriters or agents may
receive compensation from the Company or from purchasers of Securities for
whom they may act as agents in the form of discounts, concessions, or
commissions. Underwriters, agents, and dealers participating in the
distribution of the Securities may be deemed to be underwriters, and any
discounts or commissions received by them from the Company and any profit on
the resale of the Securities by them may be deemed to be underwriting
discounts or commissions under the Securities Act.
If so indicated in the Prospectus Supplement, the Company will authorize
agents, underwriters or dealers to solicit offers by certain specified
institutions to purchase Securities from the Company at the public offering
price set forth in such Prospectus Supplement pursuant to delayed delivery
contracts providing for payment and delivery on a specified date in the
future. Such contracts will be subject only to those conditions set forth in
the Prospectus Supplement, and the Prospectus Supplement will set forth the
commission payable for solicitation of such contracts.
Each underwriter, dealer and agent participating in the distribution of any
Debt Securities which are issuable in bearer form will agree that it will not
offer, sell or deliver, directly or indirectly, Debt
31
<PAGE>
Securities in bearer form in the United States or to United States persons
except as otherwise permitted by Treasury Regulation Section 1.163-
5(c)(2)(i)(D). See "Limitations on Issuance of Bearer Securities."
The Securities may not be offered or sold directly or indirectly in Great
Britain other than to persons whose ordinary business it is to buy or sell
shares or debentures (except in circumstances which do not constitute an offer
to the public within the meaning of the Companies Act of 1985), and this
Prospectus and any Prospectus Supplement or any other offering material
relating to the Securities may not be distributed in or from Great Britain
other than to persons whose business involves the acquisition and disposal, or
the holding, of securities whether as principal or as agent.
Each series of Securities will be a new issue with no established trading
market, other than the Common Stock which is listed on the New York Stock
Exchange. Any Common Stock sold pursuant to a Prospectus Supplement will be
listed on the New York Stock Exchange, subject to official notice of issuance.
Any underwriters to whom Securities are sold by the Company for public
offering and sale may make a market in such Securities, but such underwriters
will not be obligated to do so and may discontinue any market making at any
time without notice. No assurance can be given as to the liquidity of the
trading market for any Securities.
Agents, dealers, and underwriters may be entitled under agreements entered
into with the Company to indemnification by the Company against certain civil
liabilities, including liabilities under the Securities Act, or to
contribution with respect to payments that such agents, dealers, or
underwriters may be required to make with respect thereto. Underwriters,
dealers, or agents and their associates may be customers of, engage in
transactions with and perform services for, the Company in the ordinary course
of business.
LEGAL OPINIONS
The validity of the Securities will be passed upon by Thomas R. Bremer,
Senior Vice President and General Counsel of the Company. Certain other legal
matters in connection with any offering of Securities will be passed upon for
the Company by Skadden, Arps, Slate, Meagher & Flom, counsel for the Company,
and certain legal matters will be passed upon for any underwriters or agents,
by Cravath, Swaine & Moore, counsel for such underwriters or agents.
EXPERTS
The financial statements and the related financial statement schedules
incorporated in this prospectus by reference from the Company's Annual Report
on Form 10-K for the year ended December 31, 1994, and the Income Statement of
the Surgical Division of Century Medical, Inc. for the year ended March 31,
1995, incorporated in this prospectus by reference from the Company's Current
Report in Form 8-K filed on July 10, 1995, have been audited, respectively, by
Deloitte & Touche LLP, and Deloitte Touche Tohmatsu, independent auditors, as
stated in their reports, which are incorporated herein by reference, and have
been so incorporated in reliance upon the reports of such firms given upon
their authority as experts in accounting and auditing.
32
<PAGE>
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMA-
TION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PRO-
SPECTUS SUPPLEMENT OR THE PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY USSC
OR BY THE UNDERWRITER. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND
THE PROSPECTUS NOR ANY SALE MADE HEREUNDER AND THEREUNDER SHALL UNDER ANY CIR-
CUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF USSC SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING
SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT
IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
PROSPECTUS SUPPLEMENT
<S> <C>
Risk Factors............................................................. S-2
The Company.............................................................. S-4
Recent Developments...................................................... S-5
Use of Proceeds.......................................................... S-8
Price Range of Common Stock and Distributions............................ S-8
Capitalization (Unaudited)............................................... S-9
Selected Financial Information (March 31 data Unaudited)................. S-10
Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined
Fixed Charges and Preferred Stock Dividends (Unaudited)................. S-11
Underwriting............................................................. S-12
Incorporation of Certain Documents by Reference.......................... S-12
Legal Matters............................................................ S-13
Experts.................................................................. S-13
PROSPECTUS
Risk Factors............................................................. 2
The Company.............................................................. 4
Available Information.................................................... 5
Incorporation of Certain Documents by Reference.......................... 5
Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed
Charges and Preferred Stock Dividends (Unaudited)....................... 6
Use of Proceeds.......................................................... 6
Description of Debt Securities........................................... 7
Description of Capital Stock............................................. 20
Description of Preferred Stock........................................... 21
Description of Depositary Shares......................................... 23
Preferred Stock Outstanding.............................................. 25
Description of Common Stock.............................................. 27
Description of Warrants.................................................. 28
Limitations on Issuance of Bearer Securities............................. 30
Plan of Distribution..................................................... 31
Legal Opinions........................................................... 32
Experts.................................................................. 32
</TABLE>
4,300,000 SHARES
UNITED STATES SURGICAL CORPORATION
COMMON STOCK
($.10 PAR VALUE)
[LOGO OF USSC]
- ---------------------------------
SALOMON BROTHERS INC
- ------------------------------------------------------
PROSPECTUS SUPPLEMENT
DATED MAY 30, 1996
