<PAGE>
Filed Pursuant to Rule 424(b)(2)
Registration No. 333-46239
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MARCH 16, 1998)
$300,000,000
UNITED STATES SURGICAL CORPORATION
7 1/4% SENIOR NOTES DUE MARCH 15, 2008
------------------
Interest on the Senior Notes (the "Notes") is payable semiannually on March
15 and September 15 of each year, commencing September 15, 1998. The Notes are
not redeemable prior to maturity by the Company and will not be subject to any
sinking fund.
The Notes will be represented by one or more book-entry securities
registered in the name of a nominee of The Depository Trust Company (the
"Depositary"). Beneficial interests in the Notes will be shown on, and transfers
thereof will be effected only through, records maintained by the Depositary and
its participants. Except as described in this Prospectus Supplement and the
accompanying Prospectus, Notes in certificated form will not be issued in
exchange for the book-entry securities.
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 3 OF THE ACCOMPANYING PROSPECTUS FOR A
DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE
PURCHASERS OF THE NOTES.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (THE "COMMISSION") OR ANY STATE SECURITIES COMMISSION
NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<S> <C> <C> <C>
UNDERWRITING
DISCOUNTS AND PROCEEDS TO
PRICE TO PUBLIC(1) COMMISSIONS(2) COMPANY(1)(3)
Per Note 99.847% .750% 99.097%
Total $299,541,000 $2,250,000 $297,291,000
</TABLE>
(1) Plus accrued interest, if any, from March 20, 1998.
(2) For information regarding indemnification of the Underwriters, see
"Underwriting."
(3) Before deducting expenses payable by the Company estimated at $400,000.
------------------------
The Notes are offered by the several Underwriters, subject to prior sale,
when, as and if accepted by them and subject to certain conditions. It is
expected that delivery of the Notes in book-entry form will be made through the
facilities of The Depository Trust Company on or about March 20, 1998.
------------------------
SALOMON SMITH BARNEY
MERRILL LYNCH & CO.
J.P. MORGAN & CO.
BANCAMERICA ROBERTSON STEPHENS
BNY CAPITAL MARKETS, INC.
CHASE SECURITIES INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
March 17, 1998
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES, INCLUDING
OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH SECURITIES,
AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE OFFERING OF THE
NOTES. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
Trademarks of the Company appear herein in italicized capital letters.
THE COMPANY
OVERVIEW
United States Surgical Corporation (together with its subsidiaries, the
"Company") is a Delaware corporation primarily engaged in developing,
manufacturing and marketing a proprietary line of technologically advanced
surgical products to hospitals throughout the world. The Company specializes in
technologies that improve patient care and lower health care costs. The Company
develops, manufactures and markets surgical staplers, laparoscopic products and
sutures and products in numerous surgical specialties including spine surgery;
vascular and cardiovascular surgery and interventional cardiology; urology; and
breastcare. The Company has also recently completed the acquisition of
Valleylab, the world's leading manufacturer and marketer of electrosurgical and
ultrasound surgical products. The Company currently operates domestically and
internationally through subsidiaries, divisions and distributors.
To respond to business conditions in the health care market, including cost
containment initiatives by health care providers and payors, the Company has
expanded its marketing efforts to meet the needs of hospital management through
cost effective pricing programs, by assisting hospitals in implementing more
efficient surgical practices and by demonstrating the favorable economics
associated with the use of the Company's products. The Company has also
implemented a strategy to expand its product lines beyond general surgery
through a program of acquisitions and alliances in a number of surgical
specialties where the Company believes market conditions and product innovation
offer substantial growth opportunities, including the following acquisitions:
Surgical Dynamics and the Smith & Nephew spinal products business (spine
surgery); Progressive Angioplasty Systems and a controlling interest in Medolas
(vascular and cardiovascular surgery and interventional cardiology); the
strategic alliance with Trex Medical and the acquisition of NeoVision
(breastcare); and the acquisition of Valleylab. In addition, the Company
continues to expand its product and technology base in its established
businesses through investment in internal research and development and
acquisition of new technologically advanced products that provide better patient
care and an effective means of reducing hospital costs.
The Company's principal executive offices are located at 150 Glover Avenue,
Norwalk, Connecticut 06856; telephone (203) 845-1000.
VALLEYLAB ACQUISITION
In December 1997, the Company entered into an agreement with Pfizer Inc. to
acquire Valleylab, the world's leading manufacturer of electrosurgical and
ultrasound surgical products, based in Boulder, Colorado and which has been in
existence for over 30 years. The Valleylab acquisition, which is the largest
acquisition in the Company's history, was completed in early 1998.
Valleylab's products consist primarily of electrosurgical generators,
pencils, accessories, and patient return pads. In addition, Valleylab's products
include ultrasound cutting devices including generators, handpieces, tubing and
titanium tips, and laparoscopic surgical devices. Electrocautery, which has been
utilized since the 1920s, offers a safe, versatile and effective method to cut
and coagulate tissue and is utilized in a broad range of surgical applications.
Electrical current flows from the generator to the active electrode (an
electrosurgical pencil or other surgical instrument) and then through the body
tissue to the patient return pad where it is collected and returned to the
generator. Ultrasonic aspiration systems use a
S-2
<PAGE>
combination of mechanical vibration and suction to selectively fragment tissue.
An ultrasonic aspirator system consists of an ultrasonic generator, a handpiece
and a single- use pack containing tubing and titanium tips. A transducer within
the handpiece vibrates the hollow titanium tip at ultrasonic frequencies while
suction is applied to the tip core. When applied to a surgical site, tissue with
high water content is fragmented and aspirated. Valleylab is currently
developing several additional products which use radio-frequency energy and are
designed to improve clinical outcomes and reduce procedure cost and duration.
The Valleylab acquisition constitutes a major milestone in the Company's
strategy to grow through acquisition. The Company believes that Valleylab offers
a major opportunity for the Company to acquire a leading medical device company
with strong brand name recognition, an established customer base and
demonstrated profitability. The Company believes that the Valleylab business
provides substantial growth opportunities principally through innovative product
upgrades, aggressive expansion of international sales through the Company's
subsidiaries and international distributor network, and through Valleylab's
substantial expertise and product development activities in women's health care
and radiofrequency energy which will complement the Company's internal product
development efforts in these areas.
S-3
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Notes are estimated to
be approximately $296.9 million, after deduction of underwriting discounts and
commissions and estimated offering expenses. The Company intends to use the net
proceeds from the sale of the Notes to reduce outstanding indebtedness under the
Company's $450,000,000 Credit Agreement dated as of January 30, 1998 among the
Company, the lenders party thereto, Bank of America National Trust and Savings
Association as Syndication Agent, The Bank of New York as Administrative Agent
and Morgan Guaranty Trust Company of New York as Documentation Agent (the
"364-Day Credit Facility"). Borrowings under the 364-Day Credit Facility bear
interest, at the election of the Company, at a rate equal to (i) the higher of
(a) the prime rate of The Bank of New York and (b) the sum of 1/2 of 1% plus the
federal funds rate or (ii) in the case of Eurodollar loans, the sum of between
.225% and .650% (dependent on a certain financial ratio) and adjusted LIBOR. The
outstanding indebtedness under the 364-Day Credit Facility was incurred solely
to finance the acquisition of Valleylab. Bank of America National Trust and
Savings Association, The Bank of New York, The Chase Manhattan Bank, Morgan
Guaranty Trust Company of New York and NationsBank, N.A., agent banks and
lenders under the 364-Day Credit Facility, are affiliated with BancAmerica
Robertson Stephens, BNY Capital Markets, Inc., Chase Securities Inc., J.P.
Morgan Securities Inc. and NationsBanc Montgomery Securities LLC, respectively,
each of which is an Underwriter of the offering being made hereby. See
"Underwriting."
RATIOS OF EARNINGS TO FIXED CHARGES AND OF
EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the Company's ratios of consolidated earnings
to fixed charges and consolidated earnings to combined fixed charges and
preferred stock dividends for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
<S> <C> <C> <C> <C>
1997 PRO
FORMA(3) 1997 1996 1995
------------- ----- ----- -----
Ratio of earnings to fixed charges and capitalized interest (1)........... 2.9 6.4 6.2 3.7
Ratio of earnings to combined fixed charges, capitalized interest and
preferred stock dividends (1)........................................... 2.6 4.9 3.0 1.9
<CAPTION>
<S> <C> <C>
1994 1993
----- ---------
Ratio of earnings to fixed charges and capitalized interest (1)........... 2.0 N.M.(2)
Ratio of earnings to combined fixed charges, capitalized interest and
preferred stock dividends (1)........................................... 1.2
</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 and
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 were inadequate to cover fixed charges. The dollar amount of the
deficiency for the year ended December 31, 1993 was $147 million. If
restructuring charges of $138 million were excluded from the calculation,
the dollar amount of the deficiency would have been $9 million.
(3) The 1997 Pro Forma calculation gives effect to the amount of debt required
to fund the acquisition of Valleylab ($425 million) assuming such debt was
outstanding since January 1, 1997. No other pro forma adjustments are
included in the pro forma calculation.
S-4
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1997, on an actual basis and as adjusted to give effect to the
acquisition of Valleylab and the sale of the Notes, after deducting underwriting
discounts and commissions and estimated offering expenses, and assumes the use
of the proceeds from the sale of the Notes to reduce outstanding borrowings as
described under "Use of Proceeds."
<TABLE>
<CAPTION>
DECEMBER 31, 1997
--------------------------
<S> <C> <C>
ACTUAL AS ADJUSTED
------------ ------------
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Long-term debt (less current maturities):
Long-term bank credit facilities(1)............................................... $ 28,800 $ 153,800
7 1/4% Senior Notes due March 15, 2008............................................ -- 300,000
Other long-term debt.............................................................. 102,500 102,500
------------ ------------
Total long-term debt(1)....................................................... $ 131,300 $ 556,300
------------ ------------
------------ ------------
Stockholders' equity:
Preferred stock $5.00 par value, authorized 2,000,000 shares;
none outstanding................................................................ $ -- $ --
Common stock $.10 par value, authorized 250,000,000 shares; issued, 82,898,473.... 8,300 8,300
Additional paid-in capital--common stock.............................................. 973,600 973,600
Retained earnings..................................................................... 395,800 395,800
Treasury stock at cost; 7,015,207 shares.............................................. (96,800) (96,800)
Accumulated translation adjustments................................................... (28,300) (28,300)
Unrealized gain on marketable securities.............................................. 4,300 4,300
------------ ------------
Total stockholders' equity.................................................... 1,256,900 1,256,900
------------ ------------
Total capitalization(1)....................................................... $ 1,388,200 $ 1,813,200
------------ ------------
------------ ------------
</TABLE>
- ------------------------
(1) Actual at December 31, 1997 excludes $425 million of indebtedness incurred
under the 364-Day Credit Facility on January 30, 1998 in connection with the
acquisition of Valleylab. The Company intends to use the proceeds from the
offering of the Notes, borrowings under long-term bank credit facilities and
$3.1 million of cash on hand to repay such indebtedness.
S-5
<PAGE>
The following should be read in conjunction with the Consolidated Financial
Statements of the Company on Form 10-K which is incorporated by reference in
this Registration Statement.
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997(1) 1996 1995(2) 1994(3) 1993(4)
------------ ------------ ------------ ------------ ------------
Net sales.................................. $ 1,172,100 $ 1,112,700 $ 1,022,300 $ 918,700 $ 1,037,200
Income (loss) before income taxes.......... $ 121,000 $ 141,700 $ 89,800 $ 32,700 $ (137,400)
Net Income (loss).......................... $ 94,100 $ 109,100 $ 79,200 $ 19,200 $ (138,700)
Net Income (loss) per basic common share
(5)...................................... $ 1.24 $ 1.48 $ 1.05 $ .08 $ (2.48)
Average number of basic common shares
outstanding (5).......................... 72,100 60,500 57,000 56,600 56,000
Net Income (loss) per diluted common share
(5)...................................... $ 1.21 $ 1.43 $ 1.04 $ .08 $ (2.48)
Average number of diluted common shares
outstanding (5).......................... 73,700 62,600 57,400 56,900 56,000
Dividends paid per common share............ $ .16 $ .08 $ .08 $ .08 $ .245
At December 31,
Total assets............................... $ 1,726,000 $ 1,514,800 $ 1,265,500 $ 1,103,500 $ 1,170,500
Long-term debt............................. $ 131,300 $ 142,400 $ 256,500 $ 248,500 $ 505,300
Stockholders' equity (6)................... $ 1,256,900 $ 1,053,800 $ 741,100 $ 662,000 $ 443,900
</TABLE>
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(1) In the second quarter of 1997, the Company recorded litigation costs of $24
million ($.24 per basic common share), restructuring charges of $6 million
($.06 per basic common share), and the tax benefit resulting from an IRS
examination of $7 million ($.10 per basic common share). In the fourth
quarter of 1997, the Company recorded restructuring charges of $12 million
($.11 per basic common share), and wrote off the carrying value of two
terminated license/distribution agreements of $3 million each ($.05 per
basic common share). In addition, the Company expensed $4 million of certain
software related costs, previously capitalized ($.04 per basic common share)
as a result of a mandated change in accounting standards.
(2) In the third quarter of 1995, the Company reached an agreement with respect
to the settlement of all issues raised by the Internal Revenue Service in
the examination of the Company's income tax returns for the years 1984
through 1990. As a result of the agreement, the Company recognized a net
credit to the tax provision of $10 million ($.18 per basic common share) in
the third quarter of 1995.
(3) In the fourth quarter of 1994 the Company signed a letter of intent to
purchase certain assets of its independent distributor in Japan, which
included inventory of the Company's products purchased by the independent
distributor but not yet sold to third parties at December 31, 1994. Sales
and net income were reduced by $17 million and $8 million ($.14 per basic
common share), respectively, in anticipation of the pending reacquisition of
these products and valuing these products at the Company's cost.
(4) Income (loss) before income taxes and net income (loss) for 1993 include
restructuring charges of $137.6 million and $129.6 million ($2.31 per basic
common share), respectively.
(5) In the fourth quarter of 1997, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 128 "Earnings Per Share"
(FAS 128), as required. The previously reported earnings per share, and
share outstanding information, have been restated as required by FAS 128.
(6) Included in Stockholders' equity in 1996, 1995 and 1994 is $191.5 million of
convertible preferred stock which had a liquidation value of $200.0 million.
The preferred stock was redeemed and converted into common shares on April
1, 1997.
S-6
<PAGE>
The following should be read in conjunction with the Consolidated Financial
Statements of the Company on Form 10-K which is incorporated by reference in
this Registration Statement.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
In 1997 the Company attained sales of $1.17 billion compared with sales of
$1.11 billion in 1996 and $1.02 billion in 1995. Sales increased $59 million or
5% in 1997, increased $90 million or 9% in 1996, and increased $104 million or
11% in 1995. In 1997 the Company reported net income of $94.1 million. Net
income, as adjusted, for the effect of litigation costs ($24 million or $.24 per
basic common share), restructuring charges ($18 million or $.18 per basic common
share) , the termination of two distribution/ license agreements ($6 million or
$.05 per basic common share), the expensing, as a result of a mandated change in
accounting, of previously capitalized software related costs ($4 million or $.04
per basic common share), and the benefits resulting from an IRS examination ($7
million or $.10 per basic common share) was $124 million or $1.65 per basic
common share (after preferred stock dividends of $5 million) compared with $109
million or $1.48 per basic common share (after preferred stock dividends of $20
million) in 1996 and net income of $79 million or $1.05 per basic common share
(after preferred stock dividends of $20 million) in 1995. Net income and net
income per basic common share, as adjusted, increased $15 million and $.17,
respectively, in 1997 compared to 1996, increased $30 million and $.43,
respectively, in 1996 compared to 1995, and increased $60 million and $.97,
respectively, in 1995 compared to 1994. The effect of changes in foreign
currency exchange rates on results of operations was to decrease net income by
$27 million in 1997 in comparison to 1996, decrease net income by $8 million in
1996 in comparison to 1995, and increase net income by $14 million in 1995 in
comparison to 1994.
The increase in sales in 1997 to $1.17 billion compared to $1.11 billion in
1996 was primarily due to volume increases attributable to new product
introductions, specifically the substantial growth of the Company's Surgical
Dynamics (SDI) business, as well as the Company's ABBI device, and related
products. The increase in 1997 sales was partially offset by a reduction in the
Company's core mechanical products business as continuing industry pricing
pressures, and competition impact the marketplace in which the Company operates.
Sales were negatively impacted by the reduction of inventories at Just-in-Time
(JIT) distributors due to hospital purchases from JIT distributors exceeding
distributor purchases from the Company by $24.1 million and $13.1 million for
1996 and 1995, respectively. JIT inventories stabilized in 1997.
The following table analyzes the change in sales in 1997, 1996 and 1995
compared with the prior years.
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
(IN MILLIONS)
COMPOSITION OF SALES INCREASE:
Sales volume increase...................................................................... $ 144 $ 117 $ 64
Net price changes(A)(B).................................................................... (35) (12) 12
Effects of changes in foreign currency exchange rates...................................... (50) (15) 28
--------- --------- ---------
Sales increase............................................................................. $ 59 $ 90 $ 104
--------- --------- ---------
--------- --------- ---------
</TABLE>
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(A) Approximately $13 million and $36 million of the sales increase accounted
for in net price changes for 1996 and 1995, respectively, is the result of
the 1995 acquisition of the Company's former Japanese distributor and the
change from distributor pricing to subsidiary pricing as of April 1, 1995.
In addition, the sales for 1996 include twelve months of subsidiary
operations in Japan as compared to three months of distributor operations
through the former Japanese distributor and eight months of operations as a
subsidiary in 1995. The Company receives higher selling prices when selling
as a subsidiary to the ultimate customer than was previously recognized by
the Company when sales were made at distributor prices to the Company's
former distributor.
(B) Prices were adversely effected by approximately $16 million and $7 million,
respectively, in 1997 and 1996 due to changes in reimbursement to French
public hospitals by France's Social Security Administration.
S-7
<PAGE>
Sales volume accounted for all of the sales increases in 1997 and 1996 and
62% of the 1995 sales increase.
Gross margin from operations (sales less cost of products sold divided by
sales) was 60% in 1997 compared with 59% in 1996 and 56% in 1995. The reduction,
as a percentage of sales , in cost of products sold and improved gross margins
over the comparable 1996 period are primarily attributable to higher sales
volumes of the Company's SDI products and the ongoing corporate wide cost saving
initiatives. Gross margins continued to improve throughout 1995 and 1996 as a
result of the implementation of the 1993/1994 restructuring plans, higher sales
volumes and ongoing cost savings initiatives as well as the inclusion, effective
April 1, 1995, of higher margin sales resulting from the acquisition of certain
assets from the Company's former Japanese distributor. The reserves for
obsolescence of production tooling and inventories, which are an ongoing cost of
business, amounted to $12 million, $30 million and $45 million, respectively, in
the years ended December 31, 1997, 1996 and 1995. Changes in foreign currency
exchange rates from those existing in the prior year had the effect of
decreasing cost of products sold by $5 million in 1997, and were immaterial in
1996 and 1995.
The Company's investment in research and development during the past three
years (1997 - $72 million; 1996 - $58 million; 1995 - $43 million) has yielded
numerous product improvements as well as the development of numerous new product
lines as the Company continues to broaden its product offerings. The $14 million
increase in research and development expense in 1997 compared to 1996 is
primarily attributable to increased spending towards developing advanced
surgical techniques which could be used for additional surgical applications,
including surgical specialties, and significant clinical costs primarily in the
vascular, cardiovascular and interventional cardiology field in which the
Company plans to significantly increase its presence in 1998. The increase in
research and development expense in 1996 as compared to 1995 is also
attributable to increased spending towards developing advanced surgical
techniques and products, some of which were introduced throughout 1997. The
increase in research and development expense in 1995 compared to 1994 resulted
primarily from $4.6 million of charges during the third quarter of 1995 related
to certain technologies which the Company decided not to pursue. The Company is
continuing its on-going commitment to develop and acquire unique new products
and technologies for use in new surgical procedures and specialty areas.
Selling, general and administrative expenses expressed as a percentage of
sales were 40% in 1997 (38% after adjusting for the unusual termination costs of
distribution/license agreements and expensing of capitalized computer software
costs in the fourth quarter of 1997), 40% in 1996 and 41% in 1995. The increase
in selling, general, and administrative expenses in 1997 as compared to 1996, is
attributable to $10 million of fourth quarter expenses attributable to certain
previously capitalized software costs ($4 million), and two distribution/license
agreements ($6 million) which the Company decided to terminate. In addition,
1997 selling, general, and administrative expense contains the intangible
amortization, as well as the selling, general and administrative expense of its
recent 1997 acquisitions. The increase in 1996 and 1995 in selling, general and
administrative expenses is primarily due to the effects of the initiation by the
Company of the marketing of the Company's products to its Japanese customers as
a result of the acquisition of certain assets from the Company's former Japanese
distributor. Changes in foreign currency exchange rates from those existing in
the prior year had the effect of decreasing selling, general, and administrative
expenses by $19 million in 1997 and $6 million in 1996, and increasing selling,
general, and administrative expenses by $13 million in 1995.
The Company recorded restructuring charges of $6 million during the second
quarter of 1997 which related primarily to employee severance costs associated
with the Company's consolidation of manufacturing and certain marketing
operations. The Company had an additional restructuring of operations during the
fourth quarter of 1997 of $12 million which also related to additional employee
termination and facility disposals as part of the Company's cost cutting
objectives. Collectively, the 1997 restructuring charges resulted in over 450
employee terminations worldwide, which should save the Company approximately $19
million on an annual basis. The majority of the cash outlays relative to the
second quarter restructuring were made during the third and fourth quarter of
1997 with the remainder to be made in 1998. All of the cash outlays relative to
the fourth quarter 1997 restructuring will be made in 1998.
S-8
<PAGE>
The Company recorded restructuring charges of approximately $7 million
during the fourth quarter of 1995. These restructuring charges related primarily
to lease terminations and employee severance costs associated with the
relocation of one of the Company's largest international subsidiaries and the
plan to centralize the distribution of the Company's products to its European
customers. In addition, severance payments were incurred in relation to the
restructuring of the Company's manufacturing plants. The majority of the cash
outlays relative to these restructuring charges were made during the third and
fourth quarters of 1995, with the remainder made during 1996. The 1995
restructuring charges were basically offset by the reversal of restructuring
cost estimates in excess of ultimate costs which were originally recognized in
the Company's fourth quarter 1993 consolidated statements of operations. There
were no material adjustments to previously accrued restructuring charges in
1997.
The decrease in interest expense in 1997 and 1996 as compared to 1995 is
attributable to the reduction of bank borrowings with the proceeds from the
Company's public common stock offering in June 1996 and the interest income
generated by the investment of the remaining proceeds in high quality short-term
liquid money market instruments.
The tax provision for 1997 relates to domestic state and federal taxes,
including taxes in Puerto Rico, as well as foreign taxes, while the provisions
for 1996 and 1995 related primarily to foreign taxes and taxes in Puerto Rico.
The Company's tax provisions in 1997, 1996 and 1995 reflect the lower effective
tax rates on a subsidiary's operations in Puerto Rico and the availability of a
tax credit under Section 936 of the Internal Revenue Code and the tax benefit of
certain net operating loss and tax credit carryforwards which were not
previously considered recognizable. In addition, in 1997 the Company's tax
provision reflects a reduction in federal taxes due to certain tax benefits
arising from the operation of the Company's Foreign Sales Corporation.
The Company is currently in the process of having its federal income tax
returns for the years 1991 through 1993 surveyed by the Internal Revenue Service
(IRS). Incident to such examination, during the second quarter of 1997 the IRS
documented its intention to accept the Company's tax filing position with
respect to years 1991 through 1993 on a basis such that certain previously
established tax reserves are no longer required. As a result, in the second
quarter of 1997 the Company reduced its current liability by $7 million,
recognizing a credit to the tax provision of $7 million.
In August 1995, the Company reached agreement with respect to settlement of
all issues raised by the IRS in its examination of the Company's income tax
returns for the years 1984 through 1990. Prior to this resolution, a significant
portion of deferred tax assets related to available net operating loss and tax
credit carryforwards had been fully reserved by the Company because of
uncertainty over the future utilization of the tax benefits. Based upon
circumstances relative to the IRS audit and the Company's estimate of future
domestic taxable income, it is more likely than not that a significant portion
of such fully reserved assets will be realized in the future. As a result, in
the third quarter of 1995 the Company reduced the valuation allowances related
to a significant portion of these deferred tax assets by $54.3 million (change
in valuation allowances in 1995 was a reduction of $75.6 million), increased its
current tax liabilities by $28.6 million for the remaining estimated tax
liabilities relating to years subsequent to 1990, decreased tax assets by $7.4
million, recognized a net credit to the tax provision of $10.0 million ($.18 per
basic common share) and recorded a credit to Additional paid-in capital (for
windfall tax benefits related to net operating losses generated from stock
compensation deductions in prior years) of $8.3 million.
In the fourth quarter of 1997, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 128 "Earnings Per Share" (SFAS
128), as required and restated the previously reported earnings per share in
conformity with FAS 128. The new standard specifies the computation,
presentation, and disclosure requirements for earnings per share.
The Financial Accounting Standards Board issued Accounting Standards (SFAS
130), " Reporting Comprehensive Income", in June 1997 which requires a statement
of comprehensive income to be included in the financial statements for fiscal
years beginning after December 15, 1997. The Company is presently designing such
statement and, accordingly, will include such statement beginning with the first
quarter of 1998.
S-9
<PAGE>
In addition, in June of 1997, the FASB issued SFAS 131, "Disclosures About
Segments of an Enterprise and Related Information". SFAS 131 requires disclosure
of certain information about operating segments and about products and services,
geographic areas in which a company operates, and their major customers. The
Company is presently in the process of evaluating the effect that this new
standard will have on disclosures in the Company's financial statements and the
required information will be reflected in the year ended December 31, 1998
financial statements.
FINANCIAL CONDITION
The increase in Receivables results primarily from the $19 million increase
in sales in the fourth quarter 1997 when compared to the fourth quarter 1996 and
sales of the Company's ABBI system biopsy device which is a capital equipment
purchase by hospitals and, accordingly, results in longer payment periods. In
addition, in some competitive situations extended payment terms have also
contributed to the increase in accounts receivable.
Inventory was increased during 1997 in order to support a higher level of
sales in 1997 as compared to 1996. In addition, new products introduced late in
1997, primarily resulting from the Company's 1997 acquisitions, had the effect
of increasing inventory balances.
The increase in Other assets during 1997 is primarily attributable to the
intangibles acquired in the Company's 1997 acquisitions (see Note E of Notes to
Consolidated Financial Statements included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1997 incorporated by reference
herein), and the increase in prepaid rent related to the Company's North Haven
facility lease agreement.
The increase in Accrued liabilities of $33 million during 1997 results from
the accrual of estimated settlement and related costs relative to ongoing
litigation and litigation related matters in which the company is a defendant.
The Company's current cash and cash equivalent balances, existing borrowing
capacity and projected operating cash flows are currently in excess of its
foreseeable operating cash flow requirements. In the second quarter of 1996, the
Company sold 4.3 million shares of its common stock in a public offering for
approximately $141.8 million of proceeds net of issuance costs. A portion of the
proceeds were used to repay certain domestic bank debt and the balance of the
proceeds was used for general corporate purposes, including financing the
Company's 1997 various cash acquisitions.
The Company entered into a $325 million credit agreement in December 1995.
This credit agreement matures January 2001 and provides for certain covenants
such as restrictions on asset sales, common stock dividends in excess of 20% of
net income and subsidiary debt as well as required maintenance of certain
minimum levels of tangible net worth and fixed charge coverage ratios and a
stipulated level of debt to total capitalization. The credit facility provides
for borrowings up to $25 million worth of Japanese Yen. The Company entered into
an additional conditional committed bank term loan facility of $175 million
during the third quarter of 1996 to exclusively finance its pending tender offer
for Circon Corporation (see Note C of Notes to Consolidated Financial Statements
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1997 incorporated by reference herein). This conditional term loan facility
has similar terms and conditions to the Company's present syndicated bank credit
facility. Throughout 1997 and 1996, the Company entered into additional
uncommitted facilities for 6 billion Japanese Yen (approximately $50 million)
with three Japanese banks and $95 million with four other banks which are short
term in nature. Such borrowings under the uncommitted facilities have been
categorized as long-term debt as such borrowings will be refinanced under the
Company's long-term bank credit agreement. The Company is in full compliance
with all of its covenants associated with its various bank and leasing
agreements.
The Company increased its capital spending in 1997 by 31% compared to 1996
levels as a result of investing in new and more efficient production and
information processing equipment. The Company's building programs were
essentially completed by 1995 which enabled the Company to reduce its capital
spending by more than 28% in 1995 compared to 1994 levels. Additions to
Property, plant, and equipment
S-10
<PAGE>
on the accrual method totaled $59 million in 1997 ($56 million on a cash basis)
compared with $44 million in 1996, and $48 million in 1995, and consist
primarily of additions to machinery and equipment ($39 million), molds and dies
($13 million), land and buildings ($3 million), and leasehold improvements ($4
million). During 1997 the Company removed from its balance sheet, Property,
plant, and equipment which had an original cost of $29 million and is now fully
depreciated and out of service.
The Company's North Haven facilities are leased from a trust, of which the
original developer (the "Owner Participant") holds the beneficial interest. The
Owner Participant has the right to require the Company or the Company's designee
to purchase the Owner Participant's beneficial interest. During 1997, the
Company and the Owner Participant agreed to amend the date this right could be
exercised from January 1998 to no earlier than April 2000. The Company's
obligation, if the right is exercised, would be to take title to the beneficial
interest in the trust, or find another investor, suitable to the noteholders who
financed these facilities, to take such title. In either case the Company's
obligations as lessee under the lease would not change. The Company would be
obligated, whether or not the right is exercised, to make payments called for
under the existing lease of approximately $57 million annually through the year
2002, a payment of $28 million in January 2003 and nominal annual payments of
$100,000 through 2022. In addition, the Company is obligated to make contingent
rental payments based upon the consumer price index. There are presently several
alternatives available to the Owner Participant and the Company relative to the
additional contingent rental payments. The earliest potential payment of
approximately $19 million could be due as early as July 2000 if the Owner
Participant exercises the right to sell the facility to the Company, or the
Owner Participant elects the one-time lump sum payment of contingent rent. If
this right is not exercised, and the Owner Participant does not elect the one-
time payment of contingent rent of approximately $19 million, the determination
of the additional contingent rental payments will be based upon movements in the
consumer price index during the period September 1997 to September 2000 with an
annual cap on the consumer price index movement of 2.5% per year. If the second
option is chosen, additional contingent rental payments cannot exceed
approximately $39 million as stipulated in the agreement. Under the second
option, the Company can elect to pay free of interest from 2004 to 2023 the
additional contingent rental payments in excess of $19 million. The present
value of the contingent rental payments under the second option of approximately
$23 million would be a charge to rent expense during the contingent rent period,
September 1997 to September 2000, in comparison to the $19 million charge during
the period, September 1997 to June 2000, under the other option. Through
December 31, 1997, the Company has accrued $4.5 million related to contingent
rental payments. If, as described above, the Company takes title to the
beneficial interest in the facilities in July 2000, it is estimated that the
Company's balance sheet would be affected through an increase in Property, plant
and equipment of $339 million, a decrease in Other assets of $213 million and an
increase in Long-term debt of $126 million.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. They are used to manage
well-defined interest rate and foreign exchange risks.
The Company routinely enters into contracts to reduce its exposure to and
risk from foreign exchange rate changes and interest rate fluctuations in the
regular course of the Company's global business. As of December 31, 1997 the
Company's foreign currency exchange contracts have all matured and the
outstanding foreign currency option contracts of $33 million will mature
throughout 1998. Realized and unrealized foreign currency gains and losses are
recognized when incurred and are included as a component of selling, general,
and administrative expenses in the consolidated statements of operations and
cash paid to vendors, suppliers and employees in the consolidated statements of
cash flows. Realized and unrealized foreign currency gains and losses relating
to the foreign exchange options and contracts were immaterial during the fourth
quarter and year ended December 31, 1997 in relation to the Company's projected
exposure to foreign exchange rate fluctuations.
In addition, the Company routinely enters into interest rate swap agreements
to reduce its exposure to interest rate fluctuations for a portion of its French
franc denominated financing lease. The net gain or loss from the exchange of
interest rate payments is included in interest (net) in the consolidated
statements of
S-11
<PAGE>
operations and interest paid (net) in the consolidated statements of cash flows.
As a result of the Company's interest rate hedging program, fluctuations in
interest rates have had an immaterial effect on the Company during the fourth
quarter and year ended December 31, 1997. The Company presently has a 200
million French franc denominated interest rate swap outstanding which expires in
December 1999, against its 458 million French franc denominated financing lease.
Historically, interest rate changes relative to this swap have had an immaterial
impact on the Company's Consolidated Financial Statements and are anticipated to
be immaterial in the future.
The Company maintains investments in marketable equity securities. The
securities are classified as available for sale and are recorded on the balance
sheet at fair value with unrealized gains or losses reported as a separate
component of shareholders' equity. The following analysis presents the
hypothetical change in fair values of the public equity investments held by the
Company that are sensitive to changes in the stock market. The modeling
technique used measures the hypothetical change in fair values arising from
selected hypothetical changes in the stock price for each security. Stock price
fluctuations of plus or minus 10% and plus or minus 25% were selected for
computational purposes. Estimates of fair value of these securities are as
follows assuming the respective percentage change in each share price (in
millions):
<TABLE>
<S> <C>
Current market value at December 31, 1997............................................. $ 40
10% decrease.......................................................................... $ 36
25% decrease.......................................................................... $ 30
10% increase.......................................................................... $ 44
25% increase.......................................................................... $ 50
</TABLE>
The Company operates in a global environment and, accordingly, is subject to
adverse fluctuations in foreign exchange rates in relation to the U.S. Dollar.
The fluctuations of foreign exchange rates may vary over time and could have a
materially adverse impact on the Company's Consolidated Financial Statements.
Historically, the Company's primary exposures have related to foreign currency
denominated revenues and operating expenses in Japan, France, and Germany, with
lesser exposures throughout the world. The Company has a limited exposure in the
Asian markets. Currently, the Company enters into foreign exchange contracts and
options primarily in the countries mentioned to attempt to manage its exposure.
The success of these instruments depends upon forecasts of activities
denominated in foreign currencies. To the extent the forecasts differ from
actual results, and unanticipated foreign currency volatility occurs, the
Company could experience unanticipated foreign currency gains or losses.
IMPACT OF THE YEAR 2000 ISSUE
The Year 2000 Issue is the result of potential problems with computer
systems or any equipment with computer chips that use dates where the date has
been stored as just two digits (e.g. 97 for 1997). On January 1, 2000, any clock
or date recording mechanism including date sensitive software which uses only
two digits to represent the year, may recognize a date using 00 as the year 1900
rather than the year 2000. This could result in a system failure or
miscalculations causing disruption of operations, including among other things,
a temporary inability to process transactions, send invoices, or engage in
similar activities.
The Company determined that it would be required to replace or modify
significant portions of its business application software so that its computer
systems would properly utilize dates beyond December 31, 1999. The Company
presently believes that with conversions to new systems and modifications to
existing software the Year 2000 Issue can be mitigated. However, if such
modifications and conversions are not made, or are not timely, the Year 2000
Issue could have a material impact on the operations of the Company.
During 1997, the Company initiated the implementation of Enterprise Resource
Planning (ERP) software to replace the Company's core business applications
which support sales and customer service, manufacturing, distribution, and
finance and accounting. The ERP software was selected to add functionality and
efficiency in the business processes of the Company in the normal course of
upgrading its systems
S-12
<PAGE>
to address its business needs. In addition, the Company also began a project to
analyze and assess the remainder of its business not addressed by the ERP
software. The scope of the project covers all computer systems, computer and
network hardware, production process controllers, office equipment, access
control, maintenance machinery, and the products it sells.
The Company is in the process of initiating formal communications with all
of its significant suppliers and large customers to determine the extent to
which the Company is vulnerable to those third parties failure to remediate
their own Year 2000 Issues. The Company can give no guarantee that the systems
of other companies on which the Company's systems rely will be converted on time
or that a failure to convert by another company or a conversion that is
incompatible with the Company's systems, would not have a material adverse
effect on the Company.
The Company is currently and will continue to utilize internal and external
resources to implement, reprogram, or replace and test software and related
assets affected by the Year 2000 Issue. The Company expects to complete the
majority of its efforts in this area by early 1999 leaving adequate time to
assess and correct any significant issues that may materialize. The total
remaining cost of the ERP system and the Year 2000 project is estimated at $30-
40 million and is being funded through operating cash flows. Of the total
project cost, approximately $25-30 million is attributable to the purchase and
implementation of the new software which will be capitalized. The remainder will
be expensed as incurred over the next two years and is not expected to have a
material effect on the results of operations during any quarterly or annual
reporting period. To date, the Company has incurred and expensed approximately
$4 million related to the assessment of, and preliminary efforts in connection
with, its Year 2000 project and the development of its remediation plan. All
cost estimates provided herein are inclusive of assessment, implementation,
training and education costs associated with the installation of the ERP
software which would have been incurred regardless of the Year 2000 Issue.
The costs of the project and the timetable in which the Company plans to
complete the Year 2000 compliance requirements are based on management's best
estimates, which were derived utilizing numerous assumptions of future events
including the continued availability of certain resources, third party
modification plans and other factors. However, there can be no guarantee that
these estimates will be achieved and actual results could differ materially from
these plans. Specific factors that might cause such material differences
include, but are not limited to, the availability and cost of personnel trained
in this area, the ability to locate and correct all relevant computer codes, and
similar uncertainties.
VALLEYLAB ACQUISITION
In December of 1997, the Company entered into an agreement with Pfizer Inc.
to purchase its Valleylab division for cash consideration of $425 million
payable at closing. The Valleylab acquisition was completed in early 1998.
Valleylab, based in Colorado is the world's leading manufacturer of
electrosurgical and ultrasonic products, with annual sales of approximately $200
million.
* * * * * *
The Company may, from time to time, provide estimates as to future
performance, including comments on financial estimates made by the analyst
community. These forward looking statements are estimates, 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
development 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, and interest
rate and foreign exchange fluctuations.
S-13
<PAGE>
DESCRIPTION OF THE NOTES
The following description of the Notes supplements, and should be read in
conjunction with, statements under "Description of Debt Securities" set forth in
the Prospectus. The Notes will be "Senior Debt Securities" (as defined in the
Prospectus). The Indenture pursuant to which the Notes will be issued is the
"Senior Indenture" (as defined in the Prospectus).
GENERAL
The Notes will be limited to $300,000,000 in aggregate principal amount. The
Notes constitute part of the senior debt of the Company and will rank pari passu
with all other unsecured and unsubordinated debt of the Company, including
without limitation the following: (i) the Company's five year syndicated credit
agreement of $325 million, dated as of December 20, 1995, (ii) the Company's
conditional committed term loan facility of $175 million, entered into by the
Company during the third quarter of 1996 exclusively to finance its tender offer
for Circon Corporation and (iii) the Company's 364-day term loan facility of
$450 million, dated as of January 30, 1998, entered into by the Company to
finance the acquisition of Valleylab (see Note L of Notes to Consolidated
Financial Statements contained in the Company's Annual Report on Form 10-K for
the year ended December 31, 1997 incorporated by reference herein). Borrowings
by subsidiaries of the Company under the aforementioned agreement and facilities
or their successors, and other borrowings by subsidiaries of the Company, all of
which are limited as described under "Description of Debt
Securities--Covenants--Limitation on Subsidiary Indebtedness," are structurally
senior to the Notes. The Company's subsidiary indebtedness at December 31, 1997
was $136.1 million. The Notes will bear interest from March 20, 1998, or from
the most recent date to which interest has been paid or provided for, at the
annual rate set forth on the cover page of this Prospectus Supplement, and will
mature on March 15, 2008. Interest will be payable semi-annually on March 15 and
September 15, commencing September 15, 1998 to the persons in whose names the
Notes are registered at the close of business on the preceding March 1 or
September 1, respectively. The Notes will be issued in fully registered form
only, in denominations of $1,000 and integral multiples thereof. All payments of
interest and principal will be payable in U.S. Dollars. Interest will be paid on
the basis of a 360-day year comprised of twelve 30-day months.
The Indenture permits the defeasance of the Notes upon the satisfaction of
the conditions described under "Description of Debt Securities--Defeasance and
Discharge" and "--Defeasance of Certain Obligations" in the Prospectus. The
Notes are subject to these defeasance provisions.
REDEMPTION AND SINKING FUND
The Notes will not be redeemable at the option of the Company prior to
maturity and will not be subject to any sinking fund.
COVENANTS
The covenants described under the caption "Description of Debt
Securities--Covenants" in the Prospectus will be applicable to the Notes, except
as set forth in the immediately following sentence. The percentage reference in
clause (xi) of the "Limitation on Liens" covenant to 10.0% shall be 5.0%;
PROVIDED, HOWEVER, that if and for so long as the Notes are assigned a rating of
Baa1 (or the equivalent) or higher by Moody's Investors Service, Inc. or its
successors ("Moody's") and a rating of BBB+ (or the equivalent) or higher by
Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies,
Inc. or its successors ("S&P"), such percentage shall be 10.0%; PROVIDED,
FURTHER, that in the event Moody's or S&P is no longer in existence or issuing
ratings, for purposes of determining whether such percentage shall be 5.0% or
10.0%, such organization may be replaced by a nationally recognized statistical
rating organization (as defined in Rule 436 under the Securities Act) designated
by the Company with notice to the Trustee
S-14
<PAGE>
and the provisions of the foregoing proviso shall apply to the rating issued by
such replacement rating agency.
BOOK-ENTRY, DELIVERY AND FORM
The Notes will be issued in the form of one or more Book-Entry Securities
(as defined in the Prospectus) which will be deposited with, or on behalf of,
the Depositary and registered in the name of the Depositary's nominee. See
"Description of Debt Securities--Global and Book-Entry Debt Securities" in the
Prospectus. Payments of principal of and interest on the Notes will be made to
the Depositary in immediately available funds.
The Depositary has advised as follows: It is a limited-purpose trust company
which was created to hold securities for its participating organizations (the
"Participants") and to facilitate the clearance and settlement of securities
transactions between Participants in such securities through electronic
book-entry changes in accounts of its Participants. Participants include
securities brokers and dealers (including the Underwriters), banks and trust
companies, clearing corporations and certain other organizations. Access to the
Depositary's system is also available to others such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a Participant. Persons who are not Participants may beneficially own securities
held by the Depositary only through Participants.
The laws of some states require that certain persons take physical delivery
of securities which they own. Consequently, the ability to transfer beneficial
interest in the Book-Entry Securities is limited to the extent this requirement
may prevent certain potential purchasers of such beneficial interests from
purchasing them.
Under the terms of the Senior Indenture, the Company and the Trustee will
treat the persons in whose names the Notes are registered as the owners of such
Notes for the purpose of receiving payment of principal of and interest on the
Notes and for all other purposes whatsoever. Therefore, neither the Company, the
Trustee nor any paying agent has any direct responsibility or liability for the
payment of principal of or interest on the Notes to owners of beneficial
interests in the Notes.
S-15
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date hereof, the Underwriters named below have severally
agreed to purchase, and the Company has agreed to sell to them, severally, the
respective principal amounts of Notes set forth opposite their respective names
below:
<TABLE>
<CAPTION>
UNDERWRITER PRINCIPAL AMOUNT
- ------------------------------------------------------------------------------------------------ ----------------
<S> <C>
Salomon Brothers Inc............................................................................ $ 132,000,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.......................................................................... 60,000,000
J.P. Morgan Securities Inc...................................................................... 60,000,000
BancAmerica Robertson Stephens.................................................................. 12,000,000
BNY Capital Markets, Inc........................................................................ 12,000,000
Chase Securities Inc............................................................................ 12,000,000
NationsBanc Montgomery Securities LLC........................................................... 12,000,000
----------------
Total..................................................................................... $ 300,000,000
----------------
----------------
</TABLE>
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the Notes, if any are
taken.
The Underwriters propose initially to offer the Notes directly to the public
at the public offering price set forth on the cover page hereof and to certain
dealers at such price less a concession not in excess of .450% of the principal
amount. The Underwriters may allow, and such dealers may reallow, a discount not
in excess of .250% of the principal amount to certain other dealers. After the
initial public offering, the public offering price, concession and discount may
be changed.
The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
In connection with the offering of the Notes, the Underwriters may purchase
and sell the Notes in the open market. These transactions may include
overallotment and stabilizing transactions and purchases to cover short
positions created by the Underwriters in connection with the offering of the
Notes. The Underwriters also may impose a penalty bid, whereby selling
concessions allowed to broker-dealers in respect of securities sold in the
offering may be retained by the Underwriters if such Notes are repurchased by
the Underwriters in stabilizing or covering transactions. These activities may
stabilize, maintain or otherwise affect the market price of the Notes, which may
be higher than the price that might otherwise prevail in the open market, and
these activities, if commenced, may be discontinued at any time. These
transactions may be effected in the over-the-counter market or otherwise.
The Company does not intend to apply for listing of the Notes on a national
securities exchange. The Notes are a new issue of securities with no established
trading market. The Underwriters have informed the Company that they intend to
make a market in the Notes, but are under no obligation to do so and such market
making activities may be terminated at any time. Therefore, no assurance can be
given as to the existence of a trading market in the Notes in the future.
Bank of America National Trust and Savings Association, The Bank of New
York, The Chase Manhattan Bank, Morgan Guaranty Trust Company of New York and
NationsBank, N.A., agent banks and lenders under the 364-Day Credit Facility,
are affiliates of BancAmerica Robertson Stephens, BNY Capital Markets, Inc.,
Chase Securities Inc., J.P. Morgan Securities Inc. and NationsBanc Montgomery
Securities LLC, respectively (each of which are Underwriters of the offering
being made hereby). Such lenders are
S-16
<PAGE>
expected to receive, in the aggregate, 28.9% of the estimated net proceeds of
the offering in repayment of a portion of amounts outstanding under the 364-Day
Credit Facility. See "Use of Proceeds."
The Company has agreed not to offer, sell, contract to sell or otherwise
dispose of any debt securities of the Company in an offering to the public (or
in a private offering where holders of the debt securities are granted rights to
have such debt securities registered under the Securities Act or to exchange
such debt securities for other debt securities that are so registered) from the
date of this Prospectus Supplement until the first business day after the
closing of the offering being made hereby without the prior consent of Salomon
Brothers Inc.
Certain of the Underwriters and their affiliates engage in transactions
(including commercial banking transactions) with and perform services for the
Company or one or more of its affiliates in the ordinary course of business
future. In particular, Chase Securities Inc. acted as financial advisor to the
Company in connection with the Valleylab acquisition, for which Chase Securities
Inc. received from the Company a customary fee.
LEGAL OPINIONS
The validity of the Notes will be passed upon for the Company by Thomas R.
Bremer, Senior Vice President and General Counsel of the Company. Certain other
legal matters will be passed upon for the Company by Dewey Ballantine LLP,
counsel for the Company, and certain legal matters will be passed upon for the
Underwriters by Cravath, Swaine & Moore, counsel for the Underwriters. Mr.
Bremer beneficially owns, or has rights to acquire pursuant to the Company's
employee benefit plans, an aggregate of less than 1% of the outstanding Common
Stock of the Company.
S-17
<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 $500,000,000 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. Any Prospectus Supplement relating to any series
of Securities will contain information concerning certain United States federal
income tax considerations, if applicable, to the Securities.
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 "RISK FACTORS" BEGINNING ON PAGE 3 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
---------------------
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. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
--------------------------
The date of this Prospectus is March 16, 1998
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (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
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
The Commission also maintains a site on the World Wide Web, the address of which
is http://www.sec.gov, that contains reports, proxy and information statements
and other information regarding issuers such as the Company, that file
electronically with the Commission. Copies of such material can be obtained from
the Public Reference Section of the Commission, Washington, D.C. 20549, at
prescribed rates. The Company's Common Stock is 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, as amended (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, 1997;
(2) Current Report on Form 8-K, dated February 11, 1998, as amended; and
(3) 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-B, declared effective by the Commission on 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 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 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.
------------------------
Trademarks of the Company appear herein in italicized capital letters.
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RISK FACTORS
THIS PROSPECTUS (INCLUDING THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN)
CONTAINS, IN ADDITION TO HISTORICAL INFORMATION, FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM SUCH HISTORICAL AND FORWARD-LOOKING STATEMENTS. FACTORS THAT
COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO,
THOSE DISCUSSED BELOW, AS WELL AS THOSE DISCUSSED ELSEWHERE IN THIS PROSPECTUS
(INCLUDING THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN). EXCEPT WHERE THE
CONTEXT OTHERWISE REQUIRES, THE TERM "COMPANY" AS USED HEREIN INCLUDES THE
COMPANY'S SUBSIDIARIES AND DIVISIONS.
COMPETITION
There is intense competition in the markets in which the Company engages in
business. Many major companies that compete with the Company, such as Ethicon,
Inc. ("Ethicon"), a Johnson & Johnson subsidiary, and Sherwood-Davis & Geck (a
unit of Tyco International) have a wider range of other medical products than
the Company and dominate much of the markets for these other products. Ethicon
markets, in addition to sutures and other wound closure products, disposable
skin staplers, clip appliers, and internal staplers. Sherwood-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, through a division known as Ethicon Endo-Surgery, markets
a line of endoscopic instruments which directly compete with the Company's
products and is its principal competitor in the minimally invasive surgery
market. 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 in excess of 70% of the domestic
suture 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.
There is intense competition in sales of products for use in spinal,
vascular, cardiovascular, interventional cardiology, breast biopsy, urologic,
orthopedic and oncological procedures. A broad range of companies presently
offer products or are developing products for use in such procedures. Many of
such companies have significantly greater capital than the Company and are
expected to devote substantial resources to development of newer technologies
which would be competitive with products which the Company may offer. There are
also a number of smaller companies which offer such products which present
additional competition. Competitors which are developing or offering products in
spine procedures include Spine-Tech, Inc. (recently acquired by Sulzer Medica)
and Sofamor Danek Group, Inc. Principal competitors which are developing or
offering cardiovascular, vascular and interventional cardiology products include
Johnson & Johnson's Ethicon and Cordis subsidiaries, Boston Scientific
Corporation, Medtronic, Inc., Guidant Corporation, C.R. Bard, Inc., Heartport,
Inc. and CardioThoracic Systems, Inc. Ethicon, through its acquisition of
Biopsys Medical, Inc. and its alliance with Fischer Imaging Corporation, offers
products which compete directly with the Company's ABBI System.
The market for the electrosurgical and ultrasound surgical products being
offered by the Company's recently-acquired Valleylab subsidiary is highly
competitive. Competitive pricing pressure and the introduction of new products
by competitors could have an adverse effect on Valleylab's revenues and
profitability. Competitors of Valleylab products include Minnesota Mining and
Manufacturing Company, CONMED Corporation and Erbe Electromedizin GmbH.
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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. Some
of 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 adversely affected. Due to the
considerable competition in the industry, 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.
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 consolidation and 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 through group purchasing
organizations, 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 has implemented 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.
Internationally, several factors have slowed the pace of conversion from
traditional to minimally invasive procedures or acceptance of surgical
techniques that utilize the Company's products. The socialization of health care
in many developed, international countries results in surgeons and patients
having less influence on the type of care the patients receive. Cost containment
efforts by governments often slow down the process of obtaining reimbursement
for procedures that are performed with the Company's products. The Company
expects these factors to continue to impact growth in foreign countries. In
addition, the Company is experiencing pricing pressures from competition and
from cost containment efforts by health care payors in many foreign countries.
There can be no assurance as to the impact of cost containment on the
Company's future operations.
DEPENDENCE ON PATENTS AND PROPRIETARY RIGHTS; PATENT LITIGATION
The Company owns numerous United States and foreign patents and has numerous
patent applications pending. The Company also has license rights to certain
patents held by third parties. The Company
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is currently subject to claims of, and legal actions alleging, infringement by
the Company of the patent rights of others. An adverse outcome with respect to
one or more of these claims or actions or any future claims or actions could
have a material adverse effect on the Company. For a description of these legal
actions, see Item 3 (Legal Proceedings) of the Company's Annual Report on Form
10-K for the year ended December 31, 1997. In addition, there can be no
assurance that pending patent applications will result in issued patents, that
patents issued or licensed by the Company will not be challenged or circumvented
by competitors or that such patents will be found to be valid or sufficiently
broad to protect the Company's technology or provide the Company with any
competitive advantage. Third parties could also obtain patents that may require
licensing for the conduct of the Company's business.
STRINGENT GOVERNMENT REGULATION
The Company's products are subject to extensive regulation by the Federal
Food and Drug Administration ("FDA") and, in many instances, by comparable
agencies in the foreign countries in which these products are manufactured or
distributed. In particular, the Company must obtain specific clearance from the
FDA before it can market products in the United States. The process of obtaining
such clearances can be time consuming and expensive, and there can be no
assurance that all clearances sought by the Company will be granted or that FDA
review will not involve delays adversely affecting the marketing and sale of the
Company's products. In the past, the Company's stapling and endoscopic products
have been cleared by the FDA under the most expedited form of pre-market review
or have not required FDA approval. Many of the Company's new products under
development, however, may be subject to a more complex and time consuming
regulatory process. Many of these future products may require lengthy human
clinical trials and the Pre-Market Approval of the FDA relating to Class III
Medical Devices. Current FDA enforcement policy prohibits the promotion or
labeling of approved products for unapproved uses. The Company is also required
to adhere to the manufacturing, testing, control, labeling, documentation and
product surveillance requirements of the FDA. These regulations may have a
material impact on the Company's business. Laws regulating surgical products are
also in effect in many of the foreign countries where the Company does business.
The Company is now subject to uniform regulations for European Economic Area
nations which took effect on January 1, 1995 and which subject the Company to a
single regulatory scheme for all participating countries. Although the Company
has taken steps designed to comply with these new, more rigorous regulations,
including obtaining ISO 9000 certifications of its operations, there is no
assurance that these regulations will not have a material adverse effect on the
Company. Federal, state and foreign regulations regarding the manufacture and
sale of medical devices are subject to future changes. If the FDA believes that
a company is not in compliance with applicable regulations, it can institute
proceedings to detain or seize products, issue a recall, impose operating
restrictions, enjoin future violations and assess civil and criminal penalties
against the company, its officers or its employees and can recommend criminal
prosecution to the Department of Justice. Other regulatory agencies may have
similar powers. In addition, product approvals could be withdrawn due to the
failure to comply with regulatory standards or the occurrence of unforeseen
problems following initial marketing. In addition, any adverse regulatory
action, depending on its magnitude, may have a material adverse effect on the
Company.
EFFECT OF ACQUISITIONS AND ALLIANCES
The Company has implemented a strategy to expand its product lines beyond
general surgery through a program of acquisitions and alliances in a number of
surgical specialties where the Company believes market conditions and product
innovation offer substantial growth opportunities. Although the Company believes
that these areas of surgical practice 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. In January 1998,
the Company acquired the Valleylab division of Pfizer Inc. ("Valleylab"), the
Company's largest acquisition to date. The Company's future success is partially
dependent upon its ability effectively to integrate acquired businesses with the
Company's operations. In addition, the financial
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performance of the Company is now and will continue to be subject to various
risks associated with the acquisition of businesses, including the financial
effects associated with the integration of such businesses. There can be no
assurance that past or future acquisitions will be successfully integrated or
that any such acquisition will otherwise be successful. As part of its strategy
of expanding its product lines through a program of acquisitions and alliances,
the Company regularly engages in discussions with potential acquisition
candidates. Such acquisitions could be material in relation to the acquisitions
previously completed by the Company (including in relation to the Valleylab
acquisition). There can be no assurance that any such acquisitions will be
consummated.
RISKS RELATING TO INTERNATIONAL OPERATIONS
International sales represented approximately 47% of the Company's net sales
in 1997. As a result of its international operations, the Company is subject to
risks associated with operating in foreign countries, including devaluations and
fluctuations in currency exchange rates, imposition of limitations on
conversions of foreign currencies into dollars or remittance of dividends and
other payments by foreign subsidiaries, imposition or increase of withholding
and other taxes on remittances and other payments by foreign subsidiaries, trade
barriers, political risks, including political instability, hyperinflation in
certain foreign countries and imposition or increase of investment and other
restrictions by foreign governments. There can be no assurance that such risks
will not have a material adverse effect on the Company's business and operating
results. For a discussion of certain factors impacting the Company's growth
internationally, see "--Health Care Market."
POSSIBLE OBSOLESCENCE FROM TECHNOLOGICAL CHANGE AND NEED TO DEVELOP NEW PRODUCTS
The surgical products market is characterized by rapid product development
and technological change. The present or future products of the Company could be
rendered obsolete or uneconomical by technological advances by one or more of
the Company's current or future competitors. The Company's future success will
depend upon its ability to develop or acquire new products and technology to
remain competitive with other developers of surgical products. The Company's
business strategy emphasizes the continued development or acquisition and
commercialization of new products and the enhancement of existing products.
There can be no assurance that the Company will be able to continue to
successfully develop or acquire new products and to enhance existing products,
to manufacture these products in a commercially viable manner, to obtain
required regulatory approvals or to gain satisfactory market acceptance for such
products.
POTENTIAL PRODUCT LIABILITY
The Company's business exposes it to potential product liability risks which
are inherent in the design, manufacture and marketing of surgical products.
Manufacturing flaws, design defects or inadequate disclosure of product-related
risks with respect to products manufactured or sold by the Company could result
in an unsafe condition or injury to, or death of, the patient. The occurrence of
such a problem could result in product liability claims and/or a recall of, or
safety alert relating to, one or more of the Company's products. For example,
Surgical Dynamics, Inc. ("Surgical Dynamics"), a subsidiary of the Company,
offers spinal products, some of which are designed to be permanently implanted
in the human body. There has been substantial litigation in the spinal implant
industry in recent years and the Company faces the business risk of financial
exposure to product liability claims with respect to such products. There can be
no assurance that the Company's current product liability insurance will be
adequate or that the Company will be able to obtain insurance in the future at
satisfactory rates or in adequate amounts. Product liability claims or product
recalls in the future, regardless of their ultimate outcome, could have a
material adverse effect on the Company's business and reputation and on its
ability to attract and retain customers for its products.
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THE COMPANY
OVERVIEW
The Company is a Delaware corporation primarily engaged in developing,
manufacturing and marketing a proprietary line of technologically advanced
surgical products to hospitals throughout the world. The Company specializes in
technologies that improve patient care and lower health care costs. The Company
develops, manufactures and markets surgical staplers, laparoscopic products and
sutures and products in numerous surgical specialties including spine surgery;
vascular and cardiovascular surgery and interventional cardiology; urology; and
breastcare. The Company has also recently completed the acquisition of
Valleylab, the world's leading manufacturer and marketer of electrosurgical and
ultrasound surgical products. The Company currently operates domestically and
internationally through subsidiaries, divisions and distributors.
To respond to business conditions in the health care market, including cost
containment initiatives by health care providers and payors, the Company has
expanded its marketing efforts to meet the needs of hospital management through
cost effective pricing programs, by assisting hospitals in implementing more
efficient surgical practices and by demonstrating the favorable economics
associated with the use of the Company's products. The Company has also
implemented a strategy to expand its product lines beyond general surgery
through a program of acquisitions and alliances in a number of surgical
specialties where the Company believes market conditions and product innovation
offer substantial growth opportunities, including the following acquisitions:
Surgical Dynamics and the Smith & Nephew spinal products business (spine
surgery); Progressive Angioplasty Systems and a controlling interest in Medolas
(vascular and cardiovascular surgery and interventional cardiology); the
strategic alliance with Trex Medical and the acquisition of NeoVision
(breastcare); and the acquisition of Valleylab. In addition, the Company
continues to expand its product and technology base in its established
businesses through investment in internal research and development and
acquisition of new technologically advanced products that provide better patient
care and an effective means of reducing hospital costs.
The Company's principal executive offices are located at 150 Glover Avenue,
Norwalk, Connecticut 06856; telephone (203) 845-1000.
WOUND CLOSURE PRODUCTS
AUTO SUTURE STAPLING PRODUCTS, CLIP APPLIERS, PRODUCTS FOR MINIMALLY
INVASIVE SURGERY AND SUTURE PRODUCTS
The Company is a leading multinational developer, manufacturer and marketer
of innovative surgical wound closure products. In this category, principal
products consist of a series of surgical stapling instruments (both single use
and reusable), and single use loading units ("DLUs") for use with stapling
instruments and single use surgical clip appliers. The instruments are an
alternative to manual suturing techniques utilizing needle/suture combinations
which 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 copolymer staples or with titanium,
stainless steel, or proprietary absorbable copolymer clips. Surgical stapling
also makes possible several surgical procedures which cannot be achieved with
surgical needles and suturing materials.
The Company is a leading manufacturer and marketer of specialized wound
management products designed for use in the field of minimally invasive surgery.
This surgical technique (also referred to as laparoscopic or endoscopic surgery)
requires incisions of up to one half inch in diameter through which various
procedures are performed using laparoscopic instruments and optical devices,
known as laparoscopes or endoscopes, 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
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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 single use
surgical clip appliers and stapling instruments in a variety of sizes and
configurations designed for laparoscopic uses. The Company's products in this
area also include trocars, which provide entry ports to the body in laparoscopic
surgery, and a line of instruments which allows the surgeon to see, cut,
cauterize, 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, pediatric and thoracic (chest) surgery. The Company believes that
laparoscopy can also be used effectively in many other surgical procedures.
Sutures comprise a major portion of the wound closure market. Since most
surgical procedures which use staples also require manual suturing, the Company
considers sutures to be a natural complement to its stapling instrumentation.
The Company is continuing its expansion into this mature global market. The
Company offers a complete suture product line, including both absorbable
products and non-absorbable suture products.
SPINE SURGERY PRODUCTS
The Company, through its subsidiary Surgical Dynamics, is a leading
developer and manufacturer of spinal cages and other instrumentation for spine
surgery and instruments for arthroscopic procedures. During the latter part of
1997, Surgical Dynamics acquired Smith & Nephew's spinal product business,
including spinal instrumentation systems for cervical, thoracic and lumbar
procedures, and instruments for minimally invasive spinal surgery. The
acquisition enables Surgical Dynamics to offer spine surgeons a broader range of
products, including rigid spinal fixation systems.
VASCULAR THERAPIES
PRODUCTS FOR VASCULAR AND CARDIOVASCULAR SURGERY AND INTERVENTIONAL
CARDIOLOGY
During the latter part of 1997, the Company established Vascular Therapies,
a new division to develop and market the Company's products for vascular and
cardiovascular surgery and interventional cardiology. These products include:
(i) specialized instrumentation for use in vascular procedures, including the
Company's VCS vascular clip applier (a device which permits arteriotomies,
venotomies, and vascular anastomoses without penetration of the inner wall of
the vessel); (ii) the Company's ONE-SHOT instrument for joining small vessels,
including coronary arteries; (iii) the Company's MINI HARVEST system products,
which permit minimally invasive harvesting of the saphenous vein from a
patient's leg in connection with cardiovascular surgery; and (iv) the Company's
MINI-CABG line of instruments, which allows surgeons to operate on a beating
heart through a 3- to 4-inch incision between the ribs instead of the 12-inch
incision associated with traditional approaches and permits reduced operating
time, recuperating time and costs, and reduce risks associated with current
practices.
During the latter part of 1997, the Company acquired Progressive Angioplasty
Systems, Inc., a developer and marketer of a line of coronary stents and balloon
angioplasty catheters. In addition, the Company is continuing development of
intravascular radiation therapy, a new technology to reduce restenosis in
patients following balloon angioplasty and stenting procedures, and the
development of products for transmyocardial revascularization and percutaneous
transmyocardial revascularization (frequently known as TMR and PTMR,
respectively), promising cardiovascular surgical and interventional cardiology
procedures that are designed to create pathways for blood to reach
oxygen-starved heart tissue in patients with coronary artery problems.
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BREASTCARE PRODUCTS
The Company is continuing development of a comprehensive approach to breast
care. The Company's ABBI system incorporates a stereotactic table and the
Company's ABBI biopsy device. The ABBI biopsy device combines wire localization
with removal of a biopsy specimen. This system allows a one-step, minimally
invasive process for breast biopsy, offering the surgeon increased accuracy and
control, and helping hospitals reduce procedural and operating room costs. The
one piece larger specimen (5 mm to 20 mm in diameter) obtained by the ABBI
system aids in specimen orientation and diagnosis during pathology assessment,
and facilitates physicians' decision making for improved results. The Company
offers the stereotactic tables under a strategic alliance with Lorad, a unit of
Trex Medical Corporation and a leading manufacturer of stereotactic equipment.
The Company received FDA approval in the later part of 1997 to market its MIBB
minimally invasive breast biopsy device. MIBB permits doctors to remove multiple
tissue samples as small as 2 mm in diameter using either stereotactic x-ray (the
ABBI system) or 3-D ultrasound (the SONOPSY system) technology.
The Company's SONOPSY system incorporates a proprietary breast compression
device with an automated three-dimensional ultrasound scanner to accurately
locate and biopsy suspicious lesions using MIBB or the Company's core needle
biopsy products. The Company acquired the SONOPSY system during the latter part
of 1997 in connection with its acquisition of NeoVision Corporation, with which
it previously had a sales and marketing agreement. The Company expects to offer
multiple versions of SONOPSY, including a version that integrates ABBI and
SONOPSY so that the clinician can simultaneously image by ultrasound or x-ray
for biopsy guidance, potentially increasing the number of lesions that can
benefit from ABBI or MIBB biopsies. During the latter part of 1997, the Company
enhanced its ultrasound technology capabilities by acquiring the assets of DRS
Medical Systems, Inc., a developer and marketer of ultrasound systems for
medical applications.
In January 1998, the Company introduced its NAVIGATOR Gamma Guidance System.
The NAVIGATOR System and the Company's LYMPHAZURIN Blue Dye are principal
products designed for use by surgeons during a lymphatic mapping procedure.
Current treatment standards for many cancer patients call for an Axiallary Lymph
Node Dissection (ALND) in conjunction with resection of the primary tumor. In
this procedure, up to 25 lymph nodes are harvested in order to obtain critical
staging information. Due to the radical nature of this surgery, ALND is
associated with a high degree of post-operative morbidity. Lymphatic mapping is
a minimally invasive technique that allows the surgeon to harvest the sentinel
(primary) lymph node from the affected nodal basin through a small incision. The
NAVIGATOR System is used to track a radioactive mapping agent in the lymph node
basin while the LYMPHAZURIN is used to dye the appropriate lymph nodes blue,
thus aiding in the identification of the sentinel node. The procedure is
designed to provide a less traumatic patient staging with lower morbidity and
costs compared to the more radical ALND procedure. The lymphatic mapping
procedure is currently being utilized for staging patients who have been
diagnosed with malignant melanoma and breast cancer.
VALLEYLAB ACQUISITION
In December 1997, the Company entered into an agreement with Pfizer Inc. to
acquire Valleylab, the world's leading manufacturer of electrosurgical and
ultrasound surgical products based in Boulder, Colorado and which has been in
existence for over 30 years. The Valleylab acquisition, which is the largest
acquisition in the Company's history, was completed in early 1998.
Valleylab's products consist primarily of electrosurgical generators,
pencils, accessories, and patient return pads. In addition, Valleylab's products
include ultrasound cutting devices including generators, handpieces, tubing and
titanium tips, and laparoscopic surgical devices. Electrocautery, which has been
utilized since the 1920s, offers a safe, versatile and effective method to cut
and coagulate tissue and is utilized in a broad range of surgical applications.
Electrical current flows from the generator to the active electrode (an
electrosurgical pencil or other surgical instrument) and then through the body
tissue to the
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patient return pad where it is collected and returned to the generator.
Ultrasonic aspiration systems use a combination of mechanical vibration and
suction to selectively fragment tissue. An ultrasonic aspirator system consists
of an ultrasonic generator, a handpiece and a single-use pack containing tubing
and titanium tips. A transducer within the handpiece vibrates the hollow
titanium tip at ultrasonic frequencies while suction is applied to the tip core.
When applied to a surgical site, tissue with high water content is fragmented
and aspirated. Valleylab is currently developing several additional products
which use radio-frequency energy and are designed to improve clinical outcomes
and reduce procedure cost and duration.
The Valleylab acquisition constitutes a major milestone in the Company's
strategy to grow through acquisition. The Company believes that Valleylab offers
a major opportunity for the Company to acquire a leading medical device company
with strong brand name recognition, an established customer base and
demonstrated profitability. The Company believes that the Valleylab business
provides substantial growth opportunities principally through innovative product
upgrades, aggressive expansion of international sales through the Company's
subsidiaries and international distributor network, and through Valleylab's
substantial expertise and product development activities in women's health care
and radiofrequency energy which will complement the Company's internal product
development efforts in these areas.
OTHER PRODUCTS
The Company is continuing development of its Radio Frequency Therapy ("RFT")
system, a new technology for treating benign prostate hyperplasia ("BPH"), an
enlargement of the prostate that constricts the urethra, making urination
difficult and causing other bothersome symptoms. The most common procedure for
BPH uses electrocautery to burn away prostate tissue. Although effective, the
procedure requires general or spinal anesthesia, uncomfortable and confining
post-operative catheterization and a four to six week recovery period. The
procedure also has potentially serious side effects-- including impotence--and
costs more than $8,000.
RFT is completely automated and uses radio waves and a flexible scope, which
most surgeons already own. The Company's system, combined with the scope, is
designed to allow surgeons to perform the procedure in their offices using only
local anesthesia and with shorter operating time. Patients should not require
postoperative catheterization and should be able to resume normal activities in
a few days. The RFT system will not only be better for the patient, but will
offer the first truly cost-effective minimally invasive approach to BPH. It will
be available outside the United States during the first half of 1998.
The Company maintains an alliance with V.I. Technologies, Inc. and has
obtained exclusive worldwide rights to market V.I. Technologies' human fibrin
glue for wound healing applications. The product is a tissue adhesive, treated
by a unique method to address viral transmission concerns, and is intended to be
used during surgical procedures to augment or replace sutures or staples for
wound closure. The Company also owns approximately 9% of the outstanding shares
of Alexion Pharmaceuticals, Inc. which is traded on the Nasdaq System. The
Company maintains an alliance with Alexion with respect to worldwide
manufacturing and marketing rights to market Alexion's transgenetically
engineered non-human cells, tissues and organs. The Company has certain options
to fund Alexion's future research and development and pay royalties on any
resulting product sales. During the latter part of 1997, the Company purchased
additional equity, exclusive licensing rights and certain xenograft
manufacturing assets from Alexion.
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RATIOS OF EARNINGS TO FIXED CHARGES AND OF
EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the Company's ratios of consolidated earnings
to fixed charges and consolidated earnings to combined fixed charges and
preferred stock dividends for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
Ratio of earnings to fixed charges and capitalized interest (1).......... 6.4 6.2 3.7 2.0 N.M.(2)
Ratio of earnings to combined fixed charges, capitalized interest and
preferred stock dividends (1).......................................... 4.9 3.0 1.9 1.2
</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 and
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 were inadequate to cover fixed charges. The dollar amount of the
deficiency for the year ended December 31, 1993 was $147 million. If
restructuring charges of $138 million were excluded from the calculation,
the dollar amount of the deficiency would have been $9 million.
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the
Securities offered hereby will be used for general corporate purposes, including
possible acquisitions of technologies or 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.
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DESCRIPTION OF DEBT SECURITIES
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 Bank of New York, as
trustee. The Subordinated Debt Securities will be issued under a separate
Indenture (the "Subordinated Indenture"), to be entered into between the Company
and The Bank of New York, as trustee. 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 trustee under the Senior
Indenture and under the Subordinated Indenture is referred to herein as the
"Trustee."
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
unsecured 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 15.1 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 in the name of, a
Person other than the depositary 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
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,
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<PAGE>
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, redemption at the option of Holders upon certain conditions; (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. 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 ("DTC") or another depositary 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 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
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<PAGE>
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 may not be
exchanged 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 Internal Revenue
Code." A Book-Entry Security may not be registered for transfer or exchange
(other than as a whole by DTC to a nominee or by such nominee to such DTC)
unless DTC or such nominee notifies the Company that it is unwilling or unable
to continue as depositary or DTC 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 such
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 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 the mailing
of a notice of redemption of Debt Securities of that series to be redeemed and
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<PAGE>
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 payment of any interest may be made
at the option of the Company by check mailed to the address of the person
entitled thereto as such address shall appear in the Security Register or, if so
provided in the applicable Prospectus Supplement, at the option of the Holder by
wire transfer to an account designated by the Holder. 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
that 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) that 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 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
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<PAGE>
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 depositary or its nominee
will be made to the depositary 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 depositary, 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 depositary 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 that are issuable 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 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 DTC representing the securities to be sold in the
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United States. Upon such deposit of the Book-Entry Securities, DTC 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 depositary
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 Book-Entry Securities will
only be evidenced by, and transfers thereof will only be effected through,
records maintained by DTC and the institutions that are DTC 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 15.1 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 15.2 of the Subordinated
Indenture)
By reason of such subordination, in the event of liquidation or insolvency,
creditors of the Company who are Holders of Senior Debt may recover more,
ratably, than the Holders of Subordinated Debt Securities, and creditors who are
not Holders of Senior Debt 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 15.3 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 resulting in the
acceleration of the maturity thereof, or if any judicial proceeding shall be
pending with respect to any such default. (Section 15.4 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 15.15 of the Subordinated Indenture)
The Subordinated Indenture does not limit or prohibit the incurrence of
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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 whether or not such
claim for post-petition interest is allowed in such proceeding) on all
indebtedness of the Company (including, without limitation, indebtedness
incurred pursuant to any long-term credit arrangement or facility (or any
refinancing thereof) to which the Company is a party and 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 of the Company
for rent and other amounts payable in respect of the Company's leased facilities
located at North Haven, Connecticut (the "North Haven Facilities") under a lease
agreement and participation agreement, each dated January 14, 1993, as amended
from time to time, to the extent such obligations equal principal and interest
payable to holders of notes from time to time issued by the lessor of the North
Haven Facilities pursuant to a trust indenture dated as of January 14, 1993, as
amended from time to time, 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 provides that such indebtedness or obligation is not superior in
right of payment to the Subordinated Debt Securities; provided however, Senior
Debt will not include (1) any obligation of the Company to any Subsidiary, (2)
any liability for Federal, state, local or other taxes owed or owing by the
Company, (3) any accounts payable or other liability to trade creditors arising
in the ordinary course of business (including guarantees thereof or instruments
evidencing such liabilities), (4) any obligations with respect to any capital
stock of the Company or (5) any indebtedness incurred in violation of the
applicable Indenture. (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 XIV)
COVENANTS
LIMITATIONS ON LIENS
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 to secure any indebtedness
for money borrowed 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 "Limitation on Liens" covenant by such Lien
equally and ratably with such indebtedness for so long as such indebtedness
shall be so secured, subject to the following exceptions: (i) with respect to
any series
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of Senior Debt Securities, any Lien existing on the date of issuance of such
series; (ii) any Lien existing on property owned or leased by a corporation at
the time it becomes a Subsidiary; (iii) any Lien existing on property at the
time of the acquisition thereof by the Company or any Subsidiary; (iv) any Lien
to secure any indebtedness incurred prior to, at the time of, or within 12
months after the acquisition of Restricted Property for the purpose of financing
all or any part of the purchase price thereof and any Lien to the extent that it
secures indebtedness which is in excess of the purchase price and for the
payment of which recourse may be had only against such Restricted Property; (v)
any Lien to secure any indebtedness incurred prior to, at the time of, or within
12 months after the completion of the construction, alteration, repair or
improvement of Restricted Property for the purpose of financing all or any part
of the cost thereof and any Lien to the extent that it secures indebtedness
which is in excess of such cost and for the payment of which recourse may be had
only against such Restricted Property; (vi) any Lien securing indebtedness of a
Subsidiary owing to the Company or to another Subsidiary of the Company; (vii)
any Liens securing industrial development, pollution control, or similar revenue
bonds or indebtedness issued by or guaranteed by the United States of America,
any State thereof or any other country or any department, agency or
instrumentality thereof; (viii) Liens resulting from the deposit of funds or
evidences of indebtedness in trust for the purpose of defeasing indebtedness of
the Company or any of its Subsidiaries; (ix) Liens securing Hedging Obligations;
(x) any extension, renewal or replacement (or successive extensions, renewals or
replacements) in whole or in part of any Lien referred to in clauses (i) through
(ix) above, so long as the Lien as so extended, renewed or replaced is limited
to the same property or properties subject to the Lien so extended, renewed or
replaced (plus improvements and additions on such property or properties); and
(xi) any Lien not permitted by the foregoing clauses (i) through (x) securing
indebtedness, if the outstanding principal amount of such indebtedness, together
with the aggregate outstanding principal amount of all other indebtedness of the
Company and its Subsidiaries owning Restricted Property which would otherwise be
subject to the foregoing restrictions and the aggregate Value of existing Sale
and Leaseback Transactions which would be subject to the restrictions of the
covenant described in the "Limitation on Sale and Leaseback Transactions"
covenant but for this clause (xi), does not exceed 10.0% of Consolidated Net
Tangible Assets at the time such Lien is incurred. (Section 10.7)
LIMITATION ON SALE AND LEASEBACK TRANSACTIONS
Unless otherwise provided in the applicable Prospectus Supplement, pursuant
to the Senior Indenture the Company will 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 such Subsidiary would be entitled
under the provisions described under "Limitations on Liens" above to incur
indebtedness, 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 Funded Debt (whether by redemption, defeasance,
repurchase or otherwise) or to the acquisition of Restricted Property. (Section
10.8)
LIMITATION ON SUBSIDIARY INDEBTEDNESS
Unless otherwise provided in the applicable Prospectus Supplement, pursuant
to the Senior Indenture, the Company will covenant not to permit any Subsidiary
to incur any indebtedness for borrowed money, other than indebtedness to the
Company or another Subsidiary, if after giving effect to the incurrence of such
indebtedness and the application of the proceeds thereof, the Subsidiaries would
have outstanding indebtedness for borrowed money, other than indebtedness to the
Company or another Subsidiary, in an aggregate amount in excess of 10% of the
total amount of assets (less applicable reserves and other properly deductible
items), as set forth on or included in the most recent balance sheet of the
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Company and its consolidated Subsidiaries and determined in accordance with
generally accepted accounting principles; PROVIDED, HOWEVER, that if and for so
long as the Notes are assigned a rating of Baa1 (or the equivalent) or higher by
Moody's Investors Service, Inc. or its successors ("Moody's") and a rating of
BBB+ (or the equivalent) or higher by Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc. or its successors ("S&P"), such
limitation shall cease to be applicable; PROVIDED, FURTHER, that in the event
Moody's or S&P is no longer in existence or issuing ratings, for purposes of
determining whether such limitation shall be applicable, such organization may
be replaced by a nationally recognized statistical rating organization (as
defined in Rule 436 under the Securities Act) designated by the Company with
notice to the Trustee and the provisions of such limitation shall apply to the
rating issued by such replacement rating agency.
CERTAIN DEFINITIONS
"CONSOLIDATED NET TANGIBLE ASSETS" means the total amount of assets (less
applicable reserves and other properly deductible items) after deducting (1) all
current liabilities (excluding the amount of those which are by their terms
extendable or renewable at the option of the obligor to a date more than 12
months after the date as of which the amount is being determined) and (2) all
intangible assets other than patents, patent applications pending and licenses,
all as set forth on or included in the most recent balance sheet of the Company
and its consolidated Subsidiaries and determined in accordance with generally
accepted accounting principles.
"FUNDED DEBT" means indebtedness of the Company or a Subsidiary owning
Restricted Property maturing by its terms more than one year after its creation
and indebtedness classified as long-term debt under generally accepted
accounting principles and in each case ranking at least PARI PASSU with the
outstanding Senior Debt Securities. The foregoing notwithstanding, "Funded Debt"
shall also include indebtedness incurred pursuant to that certain Credit
Agreement dated as of January 30, 1998 among the Company, the lenders party
thereto, Bank of America National Trust and Savings Association, as Syndication
Agent, The Bank of New York, as Administrative Agent, and Morgan Guaranty Trust
Company of New York, as Documentation Agent.
"HEDGING OBLIGATION" of any Person means an obligation of such Person
pursuant to any rate swap transaction, basis swap, forward rate transaction,
commodity swap, commodity option, equity or equity index swap, equity or equity
index option, bond option, interest rate option, foreign exchange transaction,
cap transaction, floor transaction, collar transaction, currency swap
transaction, cross-currency rate swap transaction, currency option or any other
similar transaction (including any option with respect to any of the foregoing
transactions) or any combination of the foregoing transactions.
"LIEN" means any mortgage, pledge, lien, encumbrance, charge or security
interest.
"RESTRICTED PROPERTY" means (1) any manufacturing facility, or portion
thereof, owned or leased by the Company or 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 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
Consolidated Net Tangible Assets, or (2) any shares of capital stock or
indebtedness of any Subsidiary owning any such manufacturing facility. As used
in this definition, "manufacturing facility" means any real property (or portion
thereof) used for actual commercial scale manufacturing and excludes, without
limitation, sales offices, research facilities, pilot production facilities, and
any facility (or portion thereof) used primarily for warehousing or general
administration.
"SALE AND LEASEBACK TRANSACTION" means any arrangement with any Person
pursuant to which the Company or any Subsidiary leases any Restricted Property
that has been or is to be sold or transferred by the Company or the Subsidiary
to such Person, other than (1) temporary leases for a term, including renewals
at the option of the lessee, of not more than five years, (2) leases between the
Company and a
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Subsidiary or between Subsidiaries, and (3) leases of a Restricted Property
executed by the time of, or within 12 months after the latest of, the
acquisition, the completion of construction or improvement, or the commencement
of commercial operation of the Restricted Property.
"SUBSIDIARY" of any Person means (i) any Person of which more than 50% of
the total voting power of shares of capital stock entitled (without regard to
the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by any Person or one or more of the Subsidiaries of that Person or a
combination thereof, and (ii) any partnership, joint venture or other Person in
which such Person or one or more of the Subsidiaries of that Person or a
combination thereof has the power to control by contract or otherwise the board
of directors or equivalent governing body or otherwise controls such entity.
"VALUE" means, with respect to a Sale and Leaseback Transaction, an amount
equal to the present value of the lease payments with respect to the term of the
lease remaining on the date as of which the amount is being determined, without
regard to any renewal or extension options contained in the lease, discounted at
the weighted average interest rate on the Senior Debt Securities of all series
(including the effective interest rate on any Original Issue Discount
Securities) which are outstanding on the effective date of such Sale and
Leaseback Transaction and which have the benefit of the "Limitation on Sale and
Leaseback Transactions" covenant above.
Unless so specified in the Prospectus Supplement, the applicable Securities
and the Indentures will not provide for any restrictive covenants 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 and current
ratios.
CONSOLIDATION, MERGER, SALE OF ASSETS
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 provisions in the
Indenture described above, there are no covenants or provisions in the Indenture
which would provide the Holders of the Debt Securities with any special
protection or rights in the event the Company is involved in a change in control
or other highly leveraged transaction, reorganization, restructuring or merger,
or similar transaction involving the Company that may adversely affect Holders
of the Debt Securities.
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
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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 other
than an Event of Default resulting from bankruptcy, insolvency or reorganization
involving the Company, 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. If an Event of Default with respect to the Debt Securities
of any series results from bankruptcy, insolvency or reorganization involving
the Company, all outstanding Debt Securities of such series shall become due and
payable without any further action or notice. 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 Trustee 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 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 10.10)
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 the terms of the applicable
Indenture and the Debt Securities of such series.
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(Section 4.6) Such a trust may only be established if, among other things, (a)
the Company has delivered to the 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)
DEFEASANCE OF CERTAIN OBLIGATIONS
The Indentures will provide that, if so specified with respect to the Debt
Securities of any series, the Company may omit to comply with any covenants
applicable to such Debt Securities (including, in the case of Senior Debt
Securities, the restrictive covenants described under "Covenants" above) 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), and each installment
of principal (and premium, if any) and interest on the Debt Securities of such
series on the Stated Maturity of such payments or upon optional redemption and
any mandatory sinking fund payments or analogous payments on the Debt Securities
of such series on the day on which such payments are due and payable in
accordance with the terms of the applicable Indenture and the Debt Securities of
such series. (Sections 4.5 and 4.6) The obligations of the Company under the
applicable Indenture and the Debt Securities of such series other than with
respect to such covenants shall remain in full force and effect. (Section 4.5)
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 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
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)
In the event the Company exercises its option to omit compliance with the
covenants applicable with respect to the Debt Securities of any series as
described above and the 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 Debt Securities of such series at the time
of their Stated Maturity but may not be sufficient to pay amounts due on the
Debt Securities of such series at the time of the acceleration resulting from
such Event of Default. The Company shall in any event remain liable for such
payments as provided in the applicable Indenture.
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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 other than in accordance with the terms of the applicable Indenture (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 obligations of the Company to
maintain an office or agency 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.
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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 of 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 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 Bearer Securities (including Bearer Securities in temporary or
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 to 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
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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 the Trustee in the ordinary course of business.
(Section 6.3)
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DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of (i) 250,000,000
shares of common stock, $.10 par value per share (the "Common Stock"), and (ii)
2,000,000 shares of preferred stock, $5.00 par value (the "Preferred Stock"). At
December 31, 1997, there were (a) 75,883,266 shares of Common Stock outstanding,
(b) 25,268,549 shares of Common Stock reserved for issuance in connection with
restricted stock rewards, stock option plans and employee stock purchase plans
and (c) no shares of Preferred Stock outstanding.
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, 2,000,000 shares of
Preferred Stock are authorized for issuance. 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 series of Preferred Stock will not
be entitled to any further participation in any distribution of assets of the
Company.
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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.
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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 $50,000,000 (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 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
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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 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.
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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 $50,000,000.
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.
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DESCRIPTION OF COMMON STOCK
GENERAL
Subject to the rights of the holders of any shares of the Company's
Preferred Stock, 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
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
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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 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.
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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 be exercised at the corporate trust office of the War
ant 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
Unless otherwise provided in the applicable Prospectus Supplement, in
compliance with United States federal tax laws and regulations, Bearer
Securities (including Debt Securities in global form) may not be offered, sold,
resold or delivered in connection with their original issuance in the United
States or to
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United States persons (each as defined below) other than to a Qualifying Branch
of a United States Financial Institution (as defined below) or a United States
person acquiring Bearer Securities through a Qualifying Branch of a United
States Financial Institution. Any underwriters, agents and dealers participating
in the offering of Debt Securities must agree that they will not offer any
Bearer Securities for sale or resale in the United States or to United States
persons (other than a Qualifying Branch of a United States Financial Institution
or a United States person acquiring Bearer Securities through a Qualifying
Branch of a United States Financial Institution) or 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 (other than
a Qualifying Branch of a United States Financial Institution or a United States
person acquiring Bearer Securities through a Qualifying Branch of a United
States Financial Institution). Furthermore, the owner of the obligation (or
financial institution or clearing organization through which the owner holds the
obligation) must certify that the owner is not a United States person. The term
"Qualifying Branch of a United States Financial Institution" means a branch
located outside the United States of a United States securities clearing
organization, bank or other financial institution listed under Treasury
Regulation Section 1.165-12(c)(1)(v) that agrees to comply with the requirements
of Section 165(j)(3)(A), (B) or (C) of the United States Internal Revenue Code
of 1986, as amended (the "Code"), and the regulations thereunder.
Bearer Securities and any coupons appertaining thereto 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 Internal Revenue
Code." Under Sections 165(j) and 1287(a) of the Code, holders that are United
States persons, with certain exceptions, will not be entitled to deduct any loss
on Bearer Securities and must treat as ordinary income any gain realized on the
sale or other disposition of Bearer Securities.
The term "United States person" means a citizen or resident of the United
States, a corporation, partnership or other entity created or organized in or
under the laws of the United States or of any political subdivision thereof, an
estate the income of which is subject to United States federal income taxation
regardless of its source, or a trust if a court within the United States is able
to exercise primary supervision over the administration of the trust and one or
more United States persons have the authority to control all substantial
decisions of the trust. The term "United States" means the United States of
America (including the states and the District of Columbia), its territories,
its possessions and other areas subject to its jurisdiction.
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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 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.
37
<PAGE>
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.
In connection with underwritten offerings of the Securities and in
accordance with applicable law and industry practice, underwriters may
over-allot or effect transactions which stabilize, maintain or otherwise affect
the market price of the Securities at levels above those which might otherwise
prevail in the open market, including by entering stabilizing bids, effecting
syndicate covering transactions or imposing penalty bids. A stabilizing bid
means the placing of any bid, or the effecting of any purchase, for the purpose
of pegging, fixing or maintaining the price of a security. A syndicate covering
transaction means the placing of any bid on behalf of the underwriting syndicate
or effecting of any purchase to reduce a short position created in connection
with the offering. A penalty bid means an arrangement that permits the managing
underwriter to reclaim a selling concession from a syndicate member in
connection with the offering when Securities originally sold by the syndicate
member are purchased in syndicate covering transactions. Such transactions may
be effected on the NYSE, in the over-the-counter market, or otherwise.
Underwriters are not required to engage in any of these activities. Any such
activities, if commenced, may be discontinued at any time.
LEGAL OPINIONS
The validity of the Securities will be passed upon for the Company by Thomas
R. Bremer, Senior Vice President and General Counsel of the Company. Certain
other legal matters will be passed upon for the Company by Dewey Ballantine LLP,
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. Mr. Bremer beneficially owns, or has rights to acquire
pursuant to the Company's employee benefit plans, an aggregate of 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 by reference from the Company's Annual Report on
Form 10-K for the year ended December 31, 1997, have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and have been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing. The combined financial statements of Valleylab, a Business of Pfizer
Inc., as of December 31, 1997, and for the year then ended, have been
incorporated by reference herein and in the registration statement in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
38
<PAGE>
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NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER AND THEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO 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.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PROSPECTUS SUPPLEMENT PAGE
---------
<S> <C>
The Company............................... S-2
Use of Proceeds........................... S-4
Ratios of Earnings to Fixed Charges and of
Earnings to Combined Fixed Charges and
Preferred Stock Dividends............... S-4
Capitalization............................ S-5
Selected Financial Data................... S-6
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.............................. S-7
Description of the Notes.................. S-14
Underwriting.............................. S-16
Legal Opinions............................ S-17
<CAPTION>
PROSPECTUS PAGE
---------
<S> <C>
Available Information..................... 2
Incorporation of Certain Documents by
Reference............................... 2
Risk Factors.............................. 3
The Company............................... 7
Ratios of Earnings to Fixed Charges and of
Earnings to Combined Fixed Charges and
Preferred Stock Dividends............... 11
Use of Proceeds........................... 11
Description of Debt Securities............ 12
Description of Capital Stock.............. 27
Description of Preferred Stock............ 27
Description of Depositary Shares.......... 30
Description of Common Stock............... 33
Description of Warrants................... 33
Limitations on Issuance of Bearer
Securities.............................. 35
Plan of Distribution...................... 37
Legal Opinions............................ 38
Experts................................... 38
</TABLE>
$300,000,000
UNITED STATES
SURGICAL CORPORATION
7 1/4% SENIOR NOTES
DUE MARCH 15, 2008
---------------
PROSPECTUS SUPPLEMENT
MARCH 17, 1998
--------------------------
SALOMON SMITH BARNEY
MERRILL LYNCH & CO.
J.P. MORGAN & CO.
BANCAMERICA ROBERTSON STEPHENS
BNY CAPITAL MARKETS, INC.
CHASE SECURITIES INC.
NATIONSBANC MONTGOMERY
SECURITIES LLC
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