<PAGE>
As filed with the Securities and Exchange Commission on June 30, 2000.
Registration No. 333-32756
---------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
PRE-EFFECTIVE AMENDMENT NO. 3
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
CURAGEN CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 06-1331400
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
555 Long Wharf Drive, 11/th/ Floor
New Haven, Connecticut 06511
(203) 401-3330
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
JONATHAN M. ROTHBERG, Ph.D.
Chief Executive Officer, President and
Chairman of the Board
CuraGen Corporation
555 Long Wharf Drive, 11/th/ Floor
New Haven, Connecticut 06511
(203) 401-3330
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
With a copy to:
Michael L. Fantozzi, Esquire
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, Massachusetts 02111
(617) 542-6000
Approximate date of commencement of proposed sale to the public: As soon as
practical after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [_]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 other than securities offered only in connection with dividend or interest
reinvestment, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Maximum
Title of Each Class of Amount to be Proposed Maximum Aggregate Offering Amount of
Securities to be Registered Registered Offering Price Per Unit Price Registration Fee
--------------------------- ------------ ----------------------- ------------------ ----------------
<S> <C> <C> <C> <C>
6% Convertible Subordinated
Debentures due 2007 ............... $150,000,000 100% $150,000,000(1) $39,600(2)
Common Stock, $.01 par value(3) ... 2,350,084 -- -- --
Common Stock, $.01 par value ...... 3,000,000 $31.625 $ 94,875,000 $25,047(2)
Common Stock, $.01 par value....... 937,500 $35.8125(4) $ 33,574,219 $ 8,864
</TABLE>
/(1)/ Equals the aggregate principal amount of the securities being registered.
/(2)/ Previously paid.
/(3)/ Such number represents the number of shares of common stock that are
currently issuable upon conversion of the debentures. Pursuant to Rule 416 under
the Securities Act, we are also registering such indeterminate number of shares
of common stock as may be issued from time to time upon conversion of the
debentures as a result of the antidilution protections of the debentures.
Pursuant to Rule 457(i), no registration fee is required for these shares.
/(4)/ The price of $35.8125 per share which was the average of the high and low
prices of the common stock reported by the NASDAQ National Market on June 27,
2000 is set forth solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) of the Securities Act of 1933, as amended.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING STOCKHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS
Subject to Completion, dated June 30, 2000
CURAGEN CORPORATION
$150,000,000 6% Convertible Subordinated Debentures Due 2007
2,350,084 Shares of common stock issuable upon conversion of the Debentures
3,937,500 additional shares of common stock
This prospectus covers the sale by selling holders of:
. our 6% Convertible Subordinated Debentures due 2007;
. our common stock into which the debentures are convertible; and
. an additional 3,937,500 shares of our common stock.
Our common stock is traded on the Nasdaq National Market under the symbol
"CRGN". On June 29, 2000, the closing sale price of our common stock was
$38.688.
We have not applied for listing of the debentures on any securities
exchange or for quotation through any automated quotation system. The
debentures are eligible for trading in the Private Offerings, Resales and
Trading Through Automated Linkages ("PORTAL") Market of the Nasdaq Stock Market.
The debentures are unsecured general obligations of CuraGen and rank
subordinate in right of payment to all of our existing and future senior debt.
As of March 31, 2000, we had approximately $10.1 million of senior debt
outstanding.
INVESTING IN THE DEBENTURES OR OUR
COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 5.
Neither the Securities and Exchange Commission nor any state securities
-----------------------------------------------------------------------
commission has approved or disapproved of these securities, or determined if
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this prospectus is truthful or complete. Any representation to the contrary is
-------------------------------------------------------------------------------
a criminal offense.
-------------------
The date of this prospectus is , 2000.
--------
<PAGE>
================================================================================
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SUMMARY.................................................................. 1
RISK FACTORS............................................................. 5
FORWARD-LOOKING STATEMENTS............................................... 16
RATIO OF EARNINGS TO FIXED CHARGES....................................... 17
DESCRIPTION OF DEBENTURES................................................ 18
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS................. 33
DESCRIPTION OF CAPITAL STOCK............................................. 37
SELLING HOLDERS.......................................................... 40
PLAN OF DISTRIBUTION..................................................... 41
LEGAL MATTERS............................................................ 41
EXPERTS.................................................................. 42
ADDITIONAL INFORMATION................................................... 42
INCORPORATION OF DOCUMENTS BY REFERENCE.................................. 43
================================================================================
</TABLE>
<PAGE>
SUMMARY
This Summary does not contain all of the information you should consider
before investing in the debentures or the common stock. You should read this
entire prospectus carefully. The information in this prospectus reflects the
two-for-one stock split of our common stock, paid in the form of a stock
dividend on March 30, 2000.
OUR BUSINESS
We are a genomics based drug discovery and development company. We develop
and use technologies to discover genes and to understand how they function in
order to accelerate the discovery and development of products to improve human
health, animal health and to improve agricultural vitality. We conduct this
work in collaboration with other pharmaceutical and biotechnology companies and
on our own behalf through internal discovery and development programs.
We are in an early stage of development and have just begun to incorporate
our technologies into commercialized products. We have experienced net losses of
$25,762,760 in 1999, $18,936,920 in 1998 and $7,290,434 in 1997. We expect to
experience losses for the next several years.
We make our technologies, processes and information systems accessible over
the Internet, fully integrate them with one another to improve efficiency and
ease of use, and rapidly generate comprehensive information about the following:
. gene sequence; the order in which nucleotides (the building blocks of
DNA) appear in a gene and control the function of the gene;
. variations in gene sequences;
. gene expression (the degree of gene activity);
. biological pathways (the pathways that proteins follow in carrying out
the biological functions of cells); and
. the way potential drugs affect gene expression and the related
biological pathways.
Our base of technologies has three primary systems which consist of:
proprietary technologies, automated processes, and software used to analyze and
organize our biological databases. Each of our technologies is fully operational
and has been commercialized:
. SeqCalling which identifies sequences and discovers variations in gene
sequences known as Single Nucleotide Polymorphisms, or SNPs;
. GeneCalling, a patented technology that discovers genes and measures
gene activity; and
. PathCalling, a patented technology that analyzes the function and
relationships between genes and the proteins these genes encode in
biological pathways.
In addition to accelerating the discovery of new drug candidates, we use
our GeneCalling technologies, related biological databases, and software
analysis tools to predict the potential efficacy and safety of drug candidates
currently in pharmaceutical development pipelines, and to review the performance
and side effects of drugs already being marketed. This approach, referred to as
pharmacogenomics, is helping pharmaceutical companies develop more effective and
safer drugs.
We unified our SeqCalling, GeneCalling and PathCalling technologies,
processes and databases through a computer operating software program we refer
to as GeneScape. GeneScape enables users to access our technologies over the
Internet and provides researchers at multiple sites simultaneous, real-time
access to our technologies, systems and databases, allowing them to collaborate
on discovery and development projects. We plan to continue enhancing and
building additional technologies that we will incorporate into the GeneScape
software program.
We market our technologies and gene information to pharmaceutical,
biotechnology, agricultural and animal health companies through research
collaborations. These collaborations typically provide current revenues,
milestone payments for successful projects, and royalty-based revenues from our
partners' drug development programs. We currently have research collaborations
with Abgenix, Inc., Biogen, Inc., COR Therapeutics, Inc., Gemini Genomics plc,
Genentech, Inc., Glaxo-Wellcome, Inc., Hoffmann-La Roche Inc. and its affiliate,
Roche Vitamins, Inc. and Pioneer Hi-Bred International, Inc.
We also apply our suite of genomics technologies on our own behalf to build
a broad portfolio of research programs that encompass drug discovery, drug
development and pharmacogenomics. We have established internal programs to
discover products to treat metabolic diseases, cancer, autoimmune diseases and
disorders of the central nervous system. During the next five years, our
objective is to systematically analyze the genetic basis of many common
diseases, study how many commonly prescribed drugs work and identify their
potentially adverse side effects, while building a proprietary pipeline of
therapeutic products.
<PAGE>
We focus our efforts on programs that address unmet medical needs and that
we believe have the potential to yield products that can be commercialized in a
relatively short time. At each stage, we plan to reevaluate the relative merits
of continuing such programs solely through internal efforts or through research
collaborations.
The goal of our drug development programs is to advance promising
therapeutic candidates into the FDA's clinical approval process. We currently
focus on two broad classes of therapeutics: secreted proteins and fully human
antibodies. We are currently evaluating the efficacy of a number of secreted
proteins as potential human therapeutics using animal models. Antibodies are
naturally occurring proteins used by the body's immune system to combat many
diseases. As therapeutic products, antibodies have several potential advantages
over other therapies such as reducing unwanted side effects that may occur with
other therapies. Fully human antibodies are desirable because they avoid the
risk of rejection present with mouse or partial mouse antibodies.
We file patent applications to protect our genomics technologies, gene-
related discoveries, products, information systems and proprietary databases,
software and other methods and technology. As of June 29, 2000, we had
approximately 350 patent applications pending with the United States Patent and
Trademark Office, and had filed numerous corresponding international and foreign
patent applications. As of June 29, 2000, the U.S. Patent Office has issued us
ten patents for aspects of our technologies, discoveries and products.
We incorporated in Delaware in November 1991. Our principal executive
offices are located at 555 Long Wharf Drive, 11th Floor, New Haven, Connecticut
06511. Our telephone number is (203) 401-3330. We maintain a web site on the
Internet at http://www.curagen.com.
----------------------
2
<PAGE>
THE OFFERING
Securities Offered................ $150,000,000 in aggregate principal amount of
6% Convertible Subordinated Debentures due
2007.
6,287,584 shares of common stock, including
2,350,084 shares issuable upon conversion
of the debentures.
Maturity.......................... February 2, 2007, unless earlier redeemed,
repurchased or converted.
Interest Payment Dates............ August 2 and February 2, beginning August 2,
2000.
Interest Rate..................... 6% per year, subject to adjustment under
certain circumstances.
Optional Conversion by Holders.... Holders may convert the debentures at any
time prior to or on February 2, 2007, unless
previously redeemed or repurchased, into
shares of common stock initially at a
conversion price of $63.8275 per share (equal
to a conversion rate of 15.67 shares per
$1,000 principal amount of debentures),
subject to adjustment under certain
circumstances.
Optional Redemption by CuraGen.... Prior to February 2, 2003, we may redeem some
or all of the debentures at a redemption
price equal to 103% of the principal amount
of the debentures, plus accrued and unpaid
interest to but excluding the provisional
redemption date, if:
. the market price of our common stock
exceeds the applicable following
thresholds for at least 20 trading
days in any consecutive 30-day
trading period:
<TABLE>
<CAPTION>
Trigger
During the Twelve Months Commencing Price
----------------------------------- ----------
<S> <C>
February 2, 2000................... $108.5067
February 2, 2001................... $102.1240
February 2, 2002................... $ 95.7412
</TABLE>
and
. we have caused to become effective a
shelf registration statement with
respect to the resale of the debentures
and the common stock issuable upon
conversion of the debentures, and expect
the registration statement to remain
effective and available for use for the
30 days following the provisional
redemption date.
The redemption trigger prices are calculated
as a percentage of the debenture conversion
price. Therefore, the trigger prices are
subject to adjustment in the event the
conversion price is adjusted.
In addition to the interest accrued and
unpaid to but excluding the provisional
redemption date, we will make an interest
make-whole payment equal to the sum of:
. the present value of the aggregate
amount of the interest that would
otherwise have accrued from the
provisional redemption date through
February 2, 2003; and
. unpaid Additional Amounts, if any.
We must pay you any accrued and unpaid
interest as well as the interest make-whole
payment on the debentures called for
provisional redemption, regardless of whether
those debentures are converted prior to the
date of the provisional redemption.
The interest make-whole payment will be
payable in cash or, at our option, subject to
certain conditions, in common stock. The
number of shares of common stock will equal
the amount of the interest make-whole payment
divided by 95% of the average closing sale
price for the five consecutive trading days
ending on and including the third day prior
to the date of the provisional redemption.
On or after February 2, 2003, we may redeem
some or all of the debentures at the
redemption prices, plus accrued and unpaid
interest to but excluding the non-provisional
redemption date.
Right of Holders to Require
Repurchase....................... Each holder of the debentures may require us
to repurchase all of the holder's debentures
at 100% of their principal amount plus
accrued and unpaid interest in certain
circumstances involving a change of control.
The repurchase price is payable in:
3
<PAGE>
. cash; or
. at our option, subject to the satisfaction of
certain conditions, in common stock. The
number of shares of common stock will equal
the repurchase price divided by 95% of the
average closing sale price for the five
consecutive trading days ending on and
including the third day prior to the
repurchase date.
Subordination................ The debentures are our unsecured subordinated
obligations. The debentures rank junior in right
of payment to all of our existing and future
Senior Debt. Therefore, if we are unable to fully
repay our debt, you may receive less than the
holders of the Senior Debt. As of March 31, 2000,
we had approximately $10.1 million of Senior Debt
outstanding.
Ratio of Earnings to
Fixed Charges................ For the periods indicated, our earnings were
inadequate to cover our fixed charges.
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
1998 1999 1999
(Actual) (Pro forma)
---------- ---------- -----------
<S> <C> <C> <C>
Deficiency of earnings available
to cover fixed charges......... $18,936,920 $25,762,760 $35,477,046
</TABLE>
Form, Denomination and
Registration................. The debentures were issued in fully registered
form. The debentures initially were issued in
denominations of $1,000.
The debentures sold to "qualified institutional
buyers", as defined in Rule 144A, and to "non-
U.S. persons" outside the United States in
compliance with Regulation S were represented by a
global debenture deposited with the trustee as
custodian for The Depository Trust Company and
registered in the name of Cede & Co., DTC's
nominee. Beneficial interests in the global
debenture were shown on, and any transfers will be
effected only through, records maintained by DTC
and its participants.
Use of Proceeds.............. We will not receive any proceeds from the sale by
the selling holders of the debentures and the
common stock.
Trading...................... The debentures are designated for trading in the
Private Offerings, Resales and Trading through
Automated Linkages market, known as PORTAL.
Nasdaq Symbol for our Common
Stock........................ Our common stock is traded on the Nasdaq National
Market under the symbol "CRGN".
4
<PAGE>
RISK FACTORS
Investing in our debentures or common stock is very risky. You should
carefully consider the following risk factors and all other information
contained in this prospectus and incorporated by reference before purchasing our
debentures or common stock. You should be able to bear a complete loss of your
investment. See "Forward-Looking Statements."
We have a history of operating losses and expect to incur losses in the future
and we may never achieve or maintain profitability.
We have a limited operating history and we have experienced operating
losses since our inception and expect these losses to continue for the next
several years. We may never be profitable or achieve significant revenues. For
example, we experienced net losses of $25,762,760 in 1999, $18,936,920 in 1998
and $7,290,434 in 1997. In order to develop our technologies, including
expanding our SeqCalling, GeneCalling and PathCalling database development
efforts, we expect to incur significant increases in our expenses over the next
several years. In addition, we expect significant increases in expenses in
connection with our internal research and product development programs. As a
result, we expect to incur operating losses at least through 2002. Our ability
to achieve significant revenues and profitability will depend upon obtaining
additional research collaborations and subscribers for our SeqCalling,
GeneCalling and PathCalling products, services and related databases and our
internal development programs. Although we currently have seven research
collaborations, we may not be able to obtain any additional research
collaborations or enter into any additional subscription arrangements for
products, services, databases or our internal development programs. As a result,
we may never achieve or maintain profitability.
Our technologies and products are at an early stage of development and may never
be commercially viable or successful.
Our technologies and databases are still in the early stages of development
and we have just begun to incorporate our technologies into commercialized
products. Our products focus primarily on the development of diagnostic drugs to
treat a variety of complex human and animal diseases and agronomic traits. There
is limited scientific understanding generally relating to the role of genes in
these diseases and traits, and few products based on gene discoveries have been
developed and commercialized. Accordingly, even if we were successful in
identifying genes, biological pathways or drug candidates associated with
specific diseases or in identifying genes associated with certain agronomic
traits, we or our collaborators may not be able to develop or commercialize
products to improve human and animal health and the vitality of agriculture.
In addition, our SeqCalling, GeneCalling and PathCalling products and
services and the related databases are in the early stage of development. These
products systematically analyze the genetic information contained within a cell
to discover and develop novel therapeutic, agricultural and diagnostic products.
This technology is unproven and there is little precedent for the business
represented by our SeqCalling, GeneCalling and PathCalling products, services
and related databases. Their success will depend upon our ability to use
software tools to generate data concerning the following:
. gene sequences;
. gene variations;
. the level of gene activity;
5
<PAGE>
. biological pathways; and
. drug candidates.
In addition, because of the complexity of such data, we may not be able to
detect any design defects or software errors in our existing or future
technologies and databases.
Even if we or our collaborators develop products for commercial use, we may
not be able to develop products that:
. meet applicable regulatory standards, in a timely manner or at all;
. successfully compete with other technologies and products;
. avoid infringing the proprietary rights of others;
. can be manufactured in sufficient quantities or at reasonable cost; or
. can be marketed successfully.
We expect that it will be a number of years, if ever, before we recognize
revenue from the sale of products to improve human and animal health and the
vitality of agriculture. As a result, our products may never be commercially
viable or successful.
There is a limited number of potential customers for our products and we
may never generate sufficient revenues to become or stay profitable.
Due to the specialized nature of our products, there are a limited number
of pharmaceutical, biotechnology and agricultural companies that are potential
customers for our products and services. Additional reasons why there may not be
a great demand for our products and services include:
. our potential collaborators and subscribers may determine to conduct
in-house gene research;
. our competitors may offer similar services at competitive prices;
. we may not be able to service satisfactorily our collaborators and
subscribers;
. others may publicly disclose or patent the proprietary information
contained in our databases (including information related to gene
expression, biological pathways or drug candidates); and
. technological innovations may be discovered that are more advanced
than those used by and available to us.
If there is not sufficient demand for our products we may never generate
enough revenues to become or stay profitable.
We may need to raise additional funding which may not be available on terms
acceptable to us, or at all, harming our ability to implement our business
plan.
We anticipate that our existing capital resources are not sufficient to
fund our future operating plans and we will need to raise significant additional
capital. We established a substantial scientific infrastructure to develop our
technologies and to add information to our databases. We used substantial
amounts of cash to establish this infrastructure and expect our capital and
operating expenses to increase over the next several years as we expand this
infrastructure and our research and development activities. The amount of
additional capital which we expect we will need to raise will depend on many
factors, including:
. the progress of our research programs;
. the number and breadth of our research programs;
. our ability to attract subscribers to our products and services;
. the achievement of the milestones under certain of our existing
collaborations;
. our ability to establish and maintain additional collaborations;
. the progress of our collaborators;
. our activities relating to the commercialization rights we have
retained in our collaborations;
. the costs incurred in enforcing and defending our patent claims and
other intellectual property rights; and
. the costs and timing of obtaining regulatory approvals for any of our
products to improve human and animal health and the vitality of
agriculture.
We expect to raise the additional capital we require through public or
private equity offerings, debt financings or additional collaborations and
licensing arrangements. Additional financing may not be available to us when we
need it, or, if available, we may not be able to obtain such financing on terms
favorable to us or our stockholders. If we raise additional capital by issuing
equity securities, your ownership in us will be diluted. If we raise additional
funds through collaborations and licensing arrangements, we may be required to
relinquish rights to certain of our technologies or product candidates, or to
grant licenses on unfavorable terms. If we relinquish rights or grant licenses
on unfavorable terms our revenues could decrease. If adequate
6
<PAGE>
funds are not available on terms acceptable to us, or at all, our business,
financial condition and results of operations would be materially adversely
affected.
We rely significantly on our collaborative partners, and if our partners reduce
or stop funding our research efforts or terminate their collaborations with us
entirely we may not be able to develop or commercialize our products.
We rely on collaborators for the preclinical study and clinical development
of therapeutics and for regulatory approval, manufacturing and marketing of
products resulting from the application of our technology. We also intend to
rely on certain collaborators for significant funding in support of our research
efforts. It is important, then, that we enter into research collaborations and
licensing arrangements with a variety of third parties so we can implement our
strategy to develop and commercialize products for the health of humans and
animals and the vitality of agriculture based upon our discoveries. We have
entered into research collaborations with Abgenix, Inc., COR Therapeutics, Inc.,
Glaxo-Wellcome, Inc., Hoffmann-La Roche Inc. and its affiliate, Roche Vitamins,
Inc. and Pioneer Hi-Bred International, Inc. and research collaboration and
database subscription arrangements with Biogen, Inc. and Genentech, Inc.
Our agreements with collaborators typically allow them significant
discretion to elect whether to pursue such activities. We cannot control the
amount and timing of resources our collaborators devote to our programs or
potential products. In addition, our collaborators can terminate their
agreements with us any time the collaboration permits them to or if we
materially breach the contract. We may not be able to maintain or expand
existing collaborations or establish any additional research collaborations,
licensing or subscription arrangements. If any of our collaborators were to
breach or terminate its agreement with us or otherwise fail to conduct
collaborative activities successfully and in a timely manner, the preclinical or
clinical development or commercialization of product candidates or research
programs would be delayed or terminated. Moreover, if funding from one or more
of our collaborative programs were reduced or terminated, we would need to
devote additional internal resources to product development, scale back or
terminate certain research development programs or seek alternative
collaborators. Disputes may arise in the future with respect to the ownership of
rights to any technology developed with our collaborators. These and other
possible disagreements between collaborators and us could lead to delays in the
collaborative research, development or commercialization of certain therapeutic,
agricultural or diagnostic products, or could require or result in litigation or
arbitration to resolve. If our collaborative partners reduce or stop funding our
research efforts, or terminate their collaborations with us, we may not be able
to develop or commercialize our products. Such disputes could materially
adversely affect our business, financial condition and results of operations.
We face intense competition which is likely to increase and could result in
reduced acceptance and demand for our technologies and products.
We face, and will continue to face, intense competition from one or more of
the following entities:
. pharmaceutical companies;
. biotechnology companies;
. diagnostic companies;
. academic and research institutions; and
. government agencies.
We are also subject to significant competition from organizations that are
pursuing technologies and products that are the same as or similar to our
technology and products. Many of the organizations competing with us have
greater capital resources, research and development staffs and facilities and
marketing capabilities. In addition, research in the field of genomics generally
is highly competitive. Our competitors in the genomics area include:
. Affymetrix, Inc.;
. Celera Genomics Group;
. Human Genome Sciences, Inc.;
. Incyte Pharmaceuticals, Inc.;
. Millennium Pharmaceuticals, Inc.;
. major pharmaceutical companies; and
7
<PAGE>
. universities and other research institutions (including those
receiving funding from the federally funded Human Genome Project).
We believe that our future success will depend in large part on our ability
to maintain a competitive position in the genomics field. Before we recover
development expenses for our products or technologies, such products or
technologies may become obsolete as a result of technological developments by us
or others. New technologies which are less expensive or more effective could
make our products obsolete. We may not be able to make the enhancements to our
technology necessary to compete successfully with newly emerging technologies.
A number of our competitors are attempting to rapidly identify and patent
genes and gene fragments sequenced at random, typically without specific
knowledge of the function of such genes or gene fragments. If our competitors
discover or characterize important genes or gene fragments before we do, it
could adversely affect any of our related disease research programs. We expect
that competition in genomics research will intensify as technical advances are
made and become more widely known. As a result, there may be reduced acceptance
and demand for our technologies and products.
If our patent applications do not result in issued patents, then our competitors
may obtain rights to commercialize our discoveries, which would harm our
competitive position.
Our business and competitive position depend upon our ability to protect
our SeqCalling, GeneCalling and PathCalling proprietary databases, proprietary
software and other proprietary methods and technology and related discoveries.
Our commercial success also depends in part on obtaining patent protection
on genes and proteins for which we or our collaborators or subscribers discover
utility and on products, methods and services based on such discoveries. We have
applied for patent protection on novel genes and proteins, novel mutants of
known genes and their uses, partial sequences of novel proteins and their gene
sequences and uses, and novel uses for previously identified genes discovered by
third parties. We also seek patent protection for our therapeutic, diagnostic
and drug screening methods and products. We have filed patent applications for
our proprietary methods and devices for gene expression analysis, sequencing,
discovery of biological pathways and for development. As of June 29, 2000, we
had approximately 350 patent applications pending covering our technologies with
the United States Patent and Trademark Office, and had filed numerous
corresponding international and foreign patent applications. As of June 29,
2000, our patent applications have resulted in ten issued patents with respect
to aspects of our technology.
Patent law relating to the scope of claims in the technology fields in
which we operate is still evolving. The degree of future protection for our
proprietary rights is uncertain. Furthermore, third parties may independently
develop similar or alternative technologies, duplicate any of our technologies,
or, if patents are issued to us, design around the patented technologies
developed by us. We cannot predict whether our pending patent applications will
result in the issuance of valid patents. Litigation, which could result in
substantial cost to us, may be necessary to enforce our patent and proprietary
rights and/or to determine the scope and validity of others' proprietary rights.
We may participate in interference proceedings that may in the future be
declared by the United States Patent and Trademark Office to determine priority
of invention, which could result in substantial cost to us. The outcome of any
such litigation or interference proceeding might not be favorable to us. If our
patent applications do not result in issued patents, we may not be able to
compete effectively.
If the scope of our issued patents does not provide us with sufficient
protection of our intellectual property from our competitors we may not be able
to compete effectively.
The patent positions of pharmaceutical, biopharmaceutical and biotechnology
companies, including us, are uncertain and involve complex legal and factual
questions. The scope of our issued patents may not protect our technologies and
products because:
. our pending patent applications may not result in issued patents;
. additional proprietary technologies we develop, if any, may not be
patentable;
. patents issued to us or our collaborative customers may not provide a
basis for commercially viable products;
. patents issued to us or our collaborative customers may not provide us
with any competitive advantages;
. patents issued to us or our collaborative customers may be challenged
or circumvented or invalidated by third parties; and
. patents issued to others may have an adverse effect on our ability to
do business.
The public availability of expressed sequence tags, genomic sequence
information or other sequence information prior to the time we apply for patent
protection on a corresponding full-length or partial gene could adversely affect
our ability to obtain patent protection with respect to such gene or gene
sequences. We may not be able to obtain further patents for our products or
methods, or, if we are able to obtain further patents, these patents may not
provide us with substantial protection or be commercially beneficial. The
issuance of a patent is not conclusive as to its validity or enforceability, nor
does it provide the patent holder with freedom to operate without infringing the
patent rights of others. Third parties could initiate lawsuits against us to
challenge our patents and, if we lose, our competitors could be free to use the
subject matter covered by the patent, or we may license the technology to others
to settle such litigation. If a court invalidates key patents that we own or
license or the U.S. Patent Office does not approve our pending patent
applications we may not be able to compete effectively in the marketplace.
If we infringe upon third parties' patents, those parties could sue us for
patent infringement or they could require us to pay licensing fees which could
increase our expenses.
Our competitors and other groups are attempting to rapidly identify and
characterize genes through the use of gene expression analysis and other
technologies. To the extent any patents issue to other parties on such partial
or full-length genes or uses for such genes, the risk increases that the sale of
potential products, including therapeutics, or processes developed by us or our
collaborators may give rise to claims of patent infringement. We have sought and
intend to continue seeking patent protection for novel uses for genes and
proteins which may have been patented by third parties. In such cases, we would
need a license from the holder of the patent with respect to such gene or
protein in order to make, use or sell such gene or protein for such use. We may
not be able to acquire such licenses on commercially reasonable terms, if at
all.
In addition, others may have filed and in the future are likely to file
patent applications covering genes or gene products that are similar or
identical to our products. Any such patent application may have priority over
our patent applications. Any legal action against us or our collaborators
claiming damages and seeking to enjoin commercial activities relating to the
affected products and processes could, in addition to subjecting us to potential
liability for damages, require us or our collaborators to obtain a license in
order to continue to manufacture or market the affected products and processes
or could enjoin us from continuing to manufacture or market the affected
products and processes. We or our collaborators might not prevail in any such
action or that any license required under any such patent would be made
available on commercially acceptable terms, if at all. We believe that there may
be significant litigation in the industry regarding patent and other
intellectual property rights. If we become involved in such litigation, it could
consume a substantial portion of our managerial and financial resources.
A third party has indicated to us that it believes at some time in the
future we may be required to obtain a license in order to perform certain
processes that we use in the conduct of
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our business. We believe that, if required, such license would be available on
commercially reasonable terms.
If our security measures do not protect our proprietary technologies, we may not
be able to protect our trade secrets harming our competitive position.
We rely upon trade secret protection for some of our confidential and
proprietary information that is not subject matter for which patent protection
is being sought. We believe that we have developed proprietary technology,
processes and information systems for use in gene expression, biological pathway
and molecular target discovery, including proprietary biological protocols,
instrumentation, robotics and automation, software and an integrated
bioinformatics system. In addition, we have developed databases of proprietary
gene expression patterns and sequencing, human genetic variations, biological
pathways and the effects of drugs on gene expression which we update on an
ongoing basis and which can be accessed over the Internet. We have taken
security measures to protect our proprietary technologies, processes,
information systems and data and continue to explore ways to enhance such
security. Such measures, however, may not provide adequate protection for our
trade secrets or other proprietary information. While we require employees,
academic collaborators and consultants to enter into confidentiality and/or non-
disclosure agreements where appropriate, any of the following could still occur:
. third parties could disclose proprietary information about us;
. others may independently develop substantially equivalent proprietary
information and techniques or otherwise gain access to our trade
secrets or disclose such technology; or
. we may not be able to meaningfully protect our trade secrets.
If our competitors learn our trade secrets, we may not be able to compete
effectively in the market.
If we cannot retain commercialization rights for our technologies and products
we may not realize revenue from those technologies and products.
In our research collaborations, we seek to retain commercialization rights
for the development and marketing of certain products or services to improve
human and animal health and the vitality of agriculture. We may not be
successful in retaining such rights and we have not developed any
pharmaceutical, agricultural or diagnostic products or services to date. We may
seek to commercialize any future retained rights, as well as
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any products developed in our internal development programs, directly or through
collaborations with others. The value of these rights and products, if any, will
be largely derived from our gene expression, biological pathway and drug
screening efforts, the success of which is also uncertain. Even if we identify
and label relevant disease-related genes, biological pathways and/or drug
candidates, we do not currently have sufficient infrastructure, including
manufacturing and marketing, to commercialize our retained rights. If we seek to
commercialize retained rights and products developed internally through joint
ventures or research collaborations, we may be required to relinquish material
rights on terms that may not be favorable to us. If we cannot retain and develop
commercialization rights for our technologies and products we may not realize
revenue from those technologies and products.
If we, or our collaborators, do not comply with government regulations, we may
not be able to develop or sell our technologies and products.
Prior to the marketing of any new drug developed by us or our collaborative
customers, that new drug must undergo an extensive regulatory approval process
in the United States and other countries. This regulatory process includes
preclinical and clinical studies, as well as post-marketing surveillance to
establish a compound's safety and efficacy, and can take many years and require
substantial resources. Data obtained from such studies are susceptible to
varying interpretations that could delay, limit or prevent regulatory approval.
The rate of completion of clinical trials is dependent upon, among other
factors, the enrollment of patients. Patient accrual is a function of many
factors, including:
. the size of the patient population;
. the proximity of patients to clinical sites;
. the eligibility criteria for the study; and
. the existence of competitive clinical trials.
Delays in planned patient enrollment in clinical trials may result in
increased costs, program delays, or both. We may encounter delays or rejections
based upon changes in United States Food and Drug Administration policies for
drug approval during the period of product development and FDA regulatory review
of each submitted new drug application, in the case of new pharmaceutical
agents, or product license application in the case of biologics. We may also
encounter similar delays in the regulatory approval of any diagnostic product
and in obtaining regulatory approvals in foreign countries. Under current
guidelines, proposals to conduct clinical research involving gene therapy at
institutions supported by the National Institutes of Health must be approved by
the Recombinant DNA Advisory Committee and the National Institutes of Health.
Because some of the products that result from our disease research programs
involve new technologies and may be based upon a new therapeutic approach, such
products may be subject to substantial additional review by various government
regulatory authorities and, as a result, we may obtain regulatory approvals more
slowly than for products using more conventional technologies.
Even if we obtain regulatory approval for and market a product, such
product and its manufacturer are subject to continuing review. We may be
adversely affected by the discovery of previously unknown problems with a
product, including withdrawal of the product from the market. We could incur
various adverse consequences as a result of any of the following events:
. violations of regulatory requirements at any stage, including
preclinical studies and clinical trials, the approval process or post-
approval;
. the FDA's delay in approval or refusal to approve a product;
. withdrawal of an approved product from the market; or
. the imposition of criminal penalties against the manufacturer and new
drug application or product license application holder.
We have not submitted an investigational new drug application for any
product candidate of ours, and no product candidate has been approved for
commercialization in the United States or elsewhere. With respect to our
internal discovery and drug programs, we may rely on our collaborators to file
investigational new drug applications and generally direct the regulatory
approval process. We or any of our collaborators may not be able to conduct
clinical testing or obtain the necessary approvals from the FDA or other
regulatory authorities for any products. If we do not obtain required
governmental approvals we may delay or preclude our collaborators from marketing
drugs or diagnostic products developed by us or limit the commercial use of such
products.
We use hazardous materials and chemicals in our business and any disputes
relating to improper handling, storage or disposal of these materials could be
time consuming and costly.
Our research and development activities involve the controlled use of
hazardous materials and chemicals. We are subject to federal, state and local
laws and regulations governing the use, storage, handling and disposal of such
materials and certain waste products. Although we believe that our safety
procedures for handling and disposing of such materials comply with the
standards prescribed by federal, state and local laws and regulations, the risk
of accidental contamination or injury from these materials cannot be completely
eliminated. In the event of such an accident, third parties could hold us liable
for any damages that result and any liability could exceed our resources.
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If we fail to retain our key personnel and hire, train and retrain qualified
employees, we may not be able to develop or commercialize our technologies.
We depend on the principal members of our management and scientific staff,
including Dr. Jonathan M. Rothberg, our Chief Executive Officer, President and
Chairman of the Board. We have not entered into employment agreements with any
of the principal members of our management or scientific staff that bind any of
them to a specific term of employment. We maintain key person life insurance on
the life of Dr. Rothberg in the amount of $2,000,000. Our future success also
will depend in part on the continued services of our key scientific and
management personnel and our ability to attract, hire and retain additional
personnel. There is intense competition for such qualified personnel and there
can be no assurance that we will be able to continue to attract and retain such
personnel. If we fail to retain our key personnel and hire, train and retrain
qualified employees, we may not be able to develop or commercialize our
technologies.
If we do not retain our current licensed technologies and acquire new ones, we
might not be able to pursue our research and development activities.
We have acquired or licensed certain components of our technologies from
third parties. If any third party changed or terminated their licensing
agreements with us, we may not be able to obtain the components we need to
develop our technologies In addition, some of our licenses impose an obligation
on us to market the licensed technology to third parties. If we breach any of
these licenses or fail to maintain rights to such technology we may not be able
to continue our research and development activities or begin new ones.
The government has certain rights to funded technologies and we may have to
provide some of our technology for free which could increase our expense without
a corresponding increase in revenue.
Under existing government grants and agreements, the government has a
statutory right to practice or have practiced and, under certain circumstances
(including inaction on our part or our licensees to achieve practical
application of the invention or a need to alleviate public health or safety
concerns not reasonably satisfied by us or our licensees), to grant to other
parties licenses under, any inventions first reduced to practice under the
government grants and agreements. If the government exercises its rights to
obtain our technologies for free we could experience an increase in expenses
without a corresponding increase in revenues.
If we fail to maintain our relationships with our academic collaborators and
scientific advisors, or acquire new relationships, we may not be able to
research or develop new technologies or products.
We have relationships with collaborators and consultants at academic and
other institutions who conduct research at our request. Such collaborators and
consultants are not our employees. Substantially all of our collaborators and
consultants are employed by employers other than us and may have commitments to,
or consulting or advisory contracts with, other entities that may limit their
availability to us. As a result, we have limited control over their activities
and, except as otherwise required by our collaboration and consulting
agreements, can expect only limited amounts of their time to be dedicated to our
activities. Our ability to discover genes and biological pathways involved in
human disease and commercialize products based on those discoveries may depend
in part on continued collaborations with researchers at academic and other
institutions. We may not be able to negotiate additional acceptable
collaborations with collaborators or consultants at academic and other
institutions, which could hinder our ability to research and develop new
technologies and products.
Our academic collaborators, consultants and scientific advisors may have
relationships with other commercial entities, some of which could compete with
us. Our academic collaborators, consultants and scientific advisors sign
agreements which provide for confidentiality of our
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proprietary information and of the results of studies. We may not be able to
maintain the confidentiality of our technology and other confidential
information in connection with every academic collaboration or advisory
arrangement, and any unauthorized dissemination of our confidential information
could harm our competitive position.
We have a lengthy sales cycle for our technologies and products that can
increase our expenses without a corresponding increase in revenue.
Our ability to obtain collaborators and subscribers for our products and
services depends in significant part upon the perception that such products and
services can help accelerate drug discovery and development efforts. Our sales
cycle is typically lengthy because we must educate our customers about our
products and sell the benefits of our products and services to a variety of
constituencies within potential collaborators and subscribers, including
research and development personnel and key management. In addition, each
subscription and collaboration involves the negotiation of agreements
containing terms that may be unique to each subscriber or collaborator. If we
decide to seek collaborators to assist us in our discovery and development
programs, the education, sales and negotiation efforts related to any such
collaborations may lengthen the sales cycle of our products. We may expend
substantial funds and management effort without generating a database
subscription or a collaboration. As a result, we would increase our expenses
without a corresponding increase in revenues.
We anticipate that our quarterly operating results will fluctuate which could
have an adverse effect on our stock price.
Our results of operations historically have fluctuated on a quarterly basis
and can be expected to continue to fluctuate. In fiscal year 1999 our net loss
per common share was $0.27 on March 31, $0.22 on June 30, $0.19 on September 30
and $0.23 on December 31. We expect that losses will continue to fluctuate from
quarter to quarter and that such fluctuations may be substantial. Quarterly
operating results can fluctuate as a result of a number of factors, including
the following:
. the level of investment in our discovery and development programs and
related databases;
. the commencement, delay, cancellation or completion of contracts;
. the timing of option, license and milestone payments under our
agreements;
. the mix of services provided by us;
. the timing of start-up expenses for new services and facilities; and
. the timing and integration of acquisitions and changes in regulations
related to our products and services.
We believe that quarterly comparisons of our financial results are not
necessarily meaningful and you should not rely on them as an indication of our
future performance. In addition, fluctuations in quarterly results could
adversely affect the market price of our common stock in a manner unrelated to
our long-term operating performance.
If we produce our own pharmaceutical products in the future, we may not have the
resources to bring them to market.
Although we are not in clinical trials with our own pharmaceutical
products, any products we develop in the future will require significant
research and development and preclinical testing, and will require extensive
clinical testing prior to submission of any regulatory application for
commercial use. If we undertake these activities without the collaboration of
others, we may need to expend significant funds. Such potential pharmaceutical
products will be subject to the risks of failure inherent in the development of
pharmaceutical products based on new technologies. These risks include the
possibility that:
. the products will be unsafe or ineffective or otherwise
fail to receive necessary regulatory clearances;
. the products, if safe and effective, will be difficult to manufacture
on a large scale or be uneconomical to market;
. proprietary rights of third parties will preclude us or our partners
from marketing such products; or
. third parties will market superior or equivalent products.
As a result, we may not be able to develop any commercially viable
products. Clinical trials or marketing of any such potential pharmaceutical
products may expose us to liability claims from the use of such pharmaceutical
products. We may not be able to obtain product liability insurance or maintain
sufficient coverage at a reasonable cost. In addition, should we choose to
develop pharmaceutical products internally, we will have to make significant
investments in pharmaceutical product development, marketing, sales and
regulatory compliance resources, and we will have to establish or contract for
the manufacture of products under the Good Manufacturing Practices of the FDA.
We may not have the resources to develop or commercialize successfully any
potential pharmaceutical products.
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The uncertainty associated with pharmaceutical pricing, reimbursement and
related matters may adversely affect our business.
The continuing efforts of government and third party payors to contain or
reduce the costs of health care through various means may materially adversely
affect our business, financial condition and results of operations. In certain
foreign markets, pricing and profitability of prescription pharmaceuticals are
subject to government control. In the United States, we expect that there will
continue to be a number of federal and state proposals to implement similar
government control. In addition, increasing emphasis on managed care in the
United States will continue to put pressure on the pricing of pharmaceutical and
diagnostic products. Cost control initiatives could decrease the price that we
or any of our subscribers and collaborators receive for any products in the
future and may have a material adverse effect on our revenues and results of
operations. Further, to the extent that cost control initiatives have a material
adverse effect on our subscribers or collaborators, our ability to commercialize
our products and to realize royalties could be adversely affected.
Our ability and the ability of any of our subscribers or collaborative
customers to commercialize pharmaceutical or diagnostic products may depend in
part on the extent to which reimbursement for the products will be available
from government and health administration authorities, private health insurers
and other third party payors. Significant uncertainty exists as to the
reimbursement status of newly approved health care products. Third party payors,
including Medicare, increasingly are challenging the prices charged for medical
products and services. Government and other third party payors are increasingly
attempting to contain health care costs by limiting both coverage and the level
of reimbursement for new pharmaceutical or diagnostic products and by refusing
in some cases to provide coverage for uses of approved products for disease
indications for which the FDA has not granted labeling approval. Third party
insurance coverage might not be available to patients for any products
discovered and developed by us or our subscribers or collaborators. If adequate
coverage and reimbursement levels are not provided by government and other third
party payors for our products, the market acceptance of these products may be
reduced. Any such reduction may have a material adverse effect on our business,
financial condition, results of operations and cash flows.
Our stock price has been and may continue to be volatile and you could lose all
or part of your investment.
The market price of our common stock since our initial public offering in
March 1998 has been volatile. This volatility has been caused, and will in the
future continue to be caused by the following factors, some of which are beyond
our control:
. announcements of our results of research activities;
. our own publications;
. quarterly variations in our operating results;
. new collaborative agreements;
. technological innovations by ourselves and our competitors;
. announcements of new commercial products and initiatives by us,
collaborative partners or competitors;
. changes in government regulation or new regulatory actions;
. changes in patent laws;
. developments concerning proprietary rights;
. developments in litigation initiated by or against us; and
. fluctuations in the stock market price and volume of traded shares
generally, especially fluctuations in the traditionally volatile
technology and biotechnology sectors.
Our stock price could drop below the price you paid for your shares. As a
result, you could lose all or part of your investment.
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We have a large amount of outstanding indebtedness and if we cannot meet our
debt service requirements, we will have substantial liquidity problems and may
not be able to implement our business plan.
As of March 31, 2000, our long-term debt was approximately $157,400,000
($150,000,000 of which is due to our sale of debentures and approximately $7.4
million which consists of capitalized leases). As a result of our large amount
of indebtedness:
. our interest expense and related debt service costs are high;
. we may have difficulty obtaining additional financing; and
. our ability to react quickly in an unfavorable economic climate is
constrained.
Currently, we are not generating sufficient cash flow from operations to
satisfy our annual debt service payments. We may have to borrow additional funds
or sell additional equity to meet our debt service obligations. If we are unable
to satisfy our debt service requirements, we will have substantial liquidity
problems, which would negatively impact our future prospects.
The debentures are subordinated to all existing and future Senior Debt and if we
are unable to fully repay our debt, you may receive less than the holders of
Senior Debt.
The debentures are contractually subordinated in right of payment to our
existing and future Senior Debt. As of March 31, 2000, we had approximately
$10.1 million of Senior Debt, consisting exclusively of capitalized leases.
----
The indenture does not limit the creation of additional Senior Debt or any other
indebtedness. Any significant additional indebtedness incurred may materially
adversely impact our ability to service our debt, including the debentures. Due
to the subordination provisions, in the event of our insolvency, funds which we
would otherwise use to pay the holders of the debentures will be used to pay the
holders of Senior Debt to the extent necessary to pay the Senior Debt in full.
As a result of these payments, our general creditors may recover less, ratably,
than the holders of our Senior Debt and such general creditors may recover more,
ratably, than the holders of the debentures or our other subordinated
indebtedness. In addition, the holders of our Senior Debt may, under certain
circumstances, restrict or prohibit us from making payments on the debentures.
As a result, if we are unable to fully repay our debt, you may receive less than
the holders of the Senior Debt.
Our ability to repurchase the debentures with cash, if required upon a change
of control, may be limited.
In certain circumstances involving a change of control, the holders of the
debentures may require us to repurchase some or all of the debentures. We may
not have sufficient financial resources at such time or would be able to arrange
financing to pay the repurchase price of the debentures. Our ability to
repurchase the debentures in such event may be limited by law, by the indenture,
by the terms of other agreements relating to our Senior Debt and by such
indebtedness and agreements as may be entered into, replaced, supplemented or
amended from time to time. We may be required to refinance our Senior Debt in
order to make such payments. We may not have the financial ability to repurchase
the debentures if payment for our Senior Debt is accelerated.
There is currently no trading market for our debentures and, although they are
eligible to trade in the PORTAL market, you may have difficulty selling your
debentures.
The debentures are a new issue of securities for which there is currently
an insignificant trading market. Although the debentures are eligible for
trading in the PORTAL market, we cannot predict whether an active trading market
for the debentures will develop or be sustained. If an active market for the
debentures fails to develop or be sustained, the trading price of the debentures
could fall. If an active trading market were to develop, the debentures could
trade at prices that may be lower than the initial offering price. Whether or
not the debentures could trade at lower prices depends on many factors,
including:
. prevailing interest rates;
. the markets for similar securities;
. general economic conditions; and
. our financial condition, historical financial performance and future
prospects.
The market for unrated debt is subject to disruptions, which could have an
adverse effect on the market price of the debentures.
The debentures have not been rated. As a result, you will have the risks
associated with an investment in unrated debt. Historically, the market for
unrated debt has been subject to disruptions that have caused substantial
volatility in the prices of such securities and greatly reduced liquidity for
the holders of such securities. If the debentures are traded, they may trade at
a discount from their initial offering price, depending on, among other things,
prevailing interest rates, the markets for similar securities, general economic
conditions and our financial condition, results of operations and prospects. The
liquidity of, and trading markets for, the debentures also may be adversely
affected by general declines in the market for unrated debt. Such declines may
adversely affect the liquidity of, and trading markets for, the debentures,
independent of our financial performance or prospects. In addition, certain
regulatory restrictions prohibit certain types of financial institutions from
investing in unrated debt, which may further suppress demand for such
securities. We cannot assure you that the market for the debentures will not be
subject to similar disruptions. Any such disruptions may have an adverse effect
on you.
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We must sell a substantial number of additional shares of common stock, which
could adversely affect the trading price of our common stock and the debentures.
We have a substantial number of shares of common stock subject to stock
options and warrants and the debentures may be converted into shares of common
stock. We cannot predict the effect, if any, that future sales of shares of
common stock or debentures, or the availability of shares of common stock or
debentures for future sale, will have on the market price of our common stock or
debentures. Sales of substantial amounts of common stock (including shares
issued upon the exercise of stock options or warrants or the conversion of the
debentures), or the perception that such sales could occur, may adversely affect
prevailing market prices for our common stock and debentures.
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FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference herein contain
forward-looking statements. These statements relate to future events or our
future financial performance. These statements include statements regarding (i)
our plan to build additional technologies and to enhance our GeneScape platform
and to systematically analyze the genetic basis of many common diseases, (ii)
the expected transformation of the pharmaceutical industry and our opportunity
with respect thereto, (iii) the likely success of our technologies, (iv) the
expected benefits of the linkage to be provided by our PathCalling systems, (v)
the expected benefits, effects, efficiency and performance of our services and
products, (vi) our ability (a) to overcome the limitations of competing
technologies, processes and databases by condensing key steps in gene-based
discovery and development, (b) to develop, through our products and services,
the next generation of therapeutic products for important complex diseases, (c)
to populate our databases, and (d) to develop, in a timely fashion, a broad
portfolio of research programs that encompass drug discovery, drug development
and pharmacogenomics, (vii) the capacity of our products to predict the
efficiency and safety of drugs already on the market, (viii) the suitability of
Curagen discovered genes and proteins involved in diabetes, hypertension and
ischemic stroke as targets for small molecule drug development and (ix) the
expected future levels of losses, operating expenses and material commitments.
In some cases, you can identify forward-looking statements by terminology such
as "may," "will," "should," "expects," "anticipates," "believes," "estimates,"
"predicts," "potential" or "continue" or the negative of such terms or other
comparable terminology. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors, including the risks outlined
under "Risk Factors" that may cause our or our industry's actual results, levels
of activity, performance or achievements expressed or implied by such forward-
looking statements. Before deciding to purchase our common stock you should
carefully consider the risks described in the "Risk Factors" section, in
additional to the other information set forth in this prospectus and the
documents incorporated by reference herein.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other
person assumes responsibility for the accuracy and completeness of such
statements. We are under no duty to update any of the forward-looking
statements after the date of this prospectus to conform such statement to actual
results.
RECENT DEVELOPMENTS
On June 6, 2000, we and certain investors funded and launched a subsidiary
called 454 Corporation to develop novel technologies for use in drug discovery,
preclinical development, and pharmacogenomics. As part of the transaction, 454
Corporation sold four million shares of series B preferred stock to Soros Fund
Management, L.L.C., Cooper Hill Partners, L.L.C. and members of our senior
management team and related parties, for an aggregate purchase price of $20
million. Simultaneously, we agreed to sell to Soros Fund Management and Cooper
Hill Partners, for an aggregate purchase price of $12.5 million, five year
warrants to purchase 937,500 shares of our common stock at $32.375 per share.
To complete the funding of 454 Corporation in exchange for six million
shares of 454 Corporation series A preferred stock, we contributed to 454
Corporation $20 million in cash (including the $12.5 million from the sale of
our warrants) and technologies for conducting genomic analyses.
We agreed to register the resale of the shares of common stock underlying
the warrants, and those shares are included in this prospectus.
TRADEMARKS
GeneScape(R), GeneCalling(R), Niagara(R), QEA(R), OGI(R), SeqCalling(TM),
PathCalling(TM), HitCalling(TM), GeneTools(TM), CuraShop(TM), Niagara(TM),
MicroNiagara(TM), NanoNiagara(TM), CuraGen(TM), CuraMode(TM), CuraTools(TM),
CuraMap(TM), CuraSelect(TM), CuraToxT(TM) and GeneScape Portal(TM) and other
trademarks of CuraGen Corporation mentioned in this prospectus are the property
of CuraGen Corporation. All other trademarks or trade names referred to herein
are the property of their respective owners.
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RATIO OF EARNINGS TO FIXED CHARGES
We present below the ratio of our earnings to our fixed charges. Earnings
consist of net loss plus fixed charges. Fixed charges consist of interest
expense, amortization of debt issuance costs, that portion of rental expense we
believe to be representative of interest and preference dividends. The "pro
forma" information for the year ended December 31, 1999 reflects our issuance of
$150,000,000 of 6% Convertible Subordinated Debentures Due 2007, as if the
issuance had occurred as of January 1, 1999.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1999 1999
1998 (Actual) (Pro forma)
-------- ---------- -------------
<S> <C> <C> <C>
Ratio of earnings to fixed charges...... (9.28) (14.74) (2.13)
Deficiency of earnings available to
cover fixed charges..................... $18,936,920 $25,762,760 $35,477,046
</TABLE>
17
<PAGE>
DESCRIPTION OF THE DEBENTURES
We issued the debentures under a document called an "indenture", dated
February 2, 2000. The indenture is a contract between us and The Chase
Manhattan Bank, who acts as trustee. The terms of the debentures include those
provided in the indenture and those provided in the registration rights
agreement, which we entered into with the initial purchasers of the debentures.
The following description is only a summary of the material provisions of
the debentures, the indenture and the registration rights agreement. We urge you
to read these documents in their entirety because they, and not this
description, define your rights as holders of these debentures. You may request
copies of these documents at our address set forth under the caption "Summary"
on page 2.
When we refer to CuraGen in this section, we refer only to CuraGen
Corporation, a Delaware corporation, and not its future subsidiaries.
Brief Description of the Debentures
The debentures are:
. limited to $150,000,000 aggregate principal amount;
. general unsecured obligations, junior in right of payment to all of
our existing and future Senior Debt;
. convertible into our common stock at a conversion price of $63.8275
per share, subject to adjustment as described under "Conversion
Rights";
. redeemable at our option at the redemption prices set forth under
"Optional Redemption by CuraGen";
. subject to repurchase by us at your option if a change of control
occurs; and
. due on February 2, 2007, unless earlier redeemed by us at our option,
converted or repurchased by us at your option.
The indenture does not contain any financial covenants and does not
restrict us from paying dividends, incurring Senior Debt or any other
indebtedness or issuing or repurchasing our other securities. The indenture also
does not protect you in the event of a highly leveraged transaction or a change
in control of CuraGen except to the extent described under "--Repurchase at
Option of Holders Upon a Change of Control" below.
You may present definitive debentures for conversion, registration of
transfer and exchange, without service charge, at our office or agency in New
York City, which shall initially be the office or agency of the trustee in New
York City. For information regarding conversion, registration of transfer and
exchange of global debentures, see "--Form, Denomination and Registration"
below.
Interest
The debentures will bear interest from February 2, 2000 at the rate of 6%
per year, subject to adjustment upon the occurrence of a Reset Transaction. See
"--Interest Rate Adjustments" below. We will pay interest semiannually on
August 2 and February 2 of each year to the holders of record at the close of
business on the preceding July 19 and January 19, respectively, beginning August
2, 2000. There are two exceptions to the preceding sentence:
(1) In general, we will not pay interest accrued and unpaid on any
debenture that is converted into our common stock. See "--Conversion
Rights". Consequently, if a holder of debentures converts after a
record date for an interest payment but prior to the corresponding
interest payment date, it will receive on the interest payment date
interest accrued and paid on such debentures, notwithstanding the
conversion of such debentures prior to such interest payment date,
because such holder will have been the holder of record on the
corresponding record date. However, at the time such holder surrenders
such debentures for conversion, it must pay us an amount equal to the
interest that has accrued and will be paid on the interest payment
date. The preceding sentence does not apply, however, to a holder that
converts, after a record date for an interest payment but prior to the
corresponding interest payment date, debentures that are called by us
for redemption. Accordingly, if we redeem debentures on a date after a
record date for an interest payment but prior to the corresponding
interest payment date, and prior to the redemption date the holder of
such debentures chooses to convert such debentures, the holder will
not be required to pay us, at the time it surrenders such debentures
for conversion, the amount of interest on such debentures it will
receive on the interest payment date.
(2) We will pay interest to a person other than the holder of record on
the record date if we redeem the debentures on a date that is after
the record date and prior to the corresponding interest payment date.
In this instance, we will pay interest accrued and unpaid on the
debentures being redeemed to but not including the redemption date to
the same person to whom we will pay the principal of such debentures.
Except as provided below, we will pay interest on:
. the global debentures to DTC in immediately available funds;
18
<PAGE>
. any definitive debentures having an aggregate principal amount of
$5,000,000 or less by check mailed to the holders of these debentures;
and
. any definitive debentures having an aggregate principal amount of more
than $5,000,000 by wire transfer in immediately available funds at the
election of the holders of these debentures.
At maturity, we will pay interest on the definitive debentures at our
office or agency in New York City, which initially will be the office or agency
of the trustee in New York City.
We will pay principal and premium, if any, on:
. the global debentures to DTC in immediately available funds;
. any definitive debentures at our office or agency in New York City,
which initially will be the office or agency of the trustee in New
York City.
Interest generally will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
Interest Rate Adjustments
If a Reset Transaction occurs, the interest rate will be adjusted to equal
the Adjusted Interest Rate from the effective date of such Reset Transaction to,
but not including, the effective date of any succeeding Reset Transaction.
A "Reset Transaction" means:
. a merger, consolidation or statutory share exchange to which the
entity that is the issuer of the common stock into which the
debentures are then convertible is a party;
. a sale of all or substantially all the assets of that entity;
. a recapitalization of that common stock; or
. a distribution described in clause (4) of the sixth paragraph under
"--Conversion Rights" below,
after the effective date of which transaction or distribution the debentures
would be convertible into:
. shares of an entity the common stock of which had a dividend yield for
the four fiscal quarters of such entity immediately preceding the
public announcement of the transaction or distribution that was more
than 2.5% higher than the dividend yield on our common stock (or other
common stock then issuable upon conversion of the debentures) for the
four fiscal quarters preceding the public announcement of the
transaction or distribution; or
. shares of an entity that announces a dividend policy prior to the
effective date of the transaction or distribution which policy, if
implemented, would result in a dividend yield on that entity's common
stock for the next four fiscal quarters that would result in such a
2.5% increase.
The "Adjusted Interest Rate" with respect to any Reset Transaction will
be the rate per year that is the arithmetic average of the rates quoted by two
dealers engaged in the trading of convertible securities selected by us or our
successor as the rate at which interest should accrue so that the fair market
value, expressed in dollars, of a debenture immediately after the later of:
. the public announcement of the Reset Transaction; or
. the public announcement of a change in dividend policy in connection
with the Reset Transaction,
will most closely equal the average Trading Price of a debenture for the 20
trading days preceding the date of public announcement of the Reset Transaction.
However, the Adjusted Interest Rate will not be less than 6% per year.
For purposes of the definition of Reset Transaction, the dividend yield on
any security for any period means the dividends paid or proposed to be paid
pursuant to an announced dividend policy on the security for that period divided
by, if with respect to dividends paid on that security, the average Closing
Price (as defined in the indenture) of the security during that period and, if
with respect to dividends proposed to be paid on the security, the Closing Price
of such security on the effective date of the related Reset Transaction.
The "Trading Price" of a security on any date of determination means:
. the closing sale price (or, if no closing sale price is reported, the
last reported sale price) of a security (regular way) on the New York
Stock
19
<PAGE>
Exchange on that date;
. if that security is not listed on the NYSE on that date, the closing
sale price as reported in the composite transactions for the principal
U.S. securities exchange on which that security is listed;
. if that security is not so listed on a U.S. national or regional
securities exchange, the closing sale price as reported by the Nasdaq
National Market;
. if that security is not so reported, the last price quoted by
Interactive Data Corporation for that security or, if Interactive Data
Corporation is not quoting such price, a similar quotation service
selected by us;
. if that security is not so quoted, the average of the mid-point of the
last bid and ask prices for that security from at least two dealers
recognized as market-makers for that security; or
. if that security is not so quoted, the average of that last bid and
ask prices for that security from a dealer engaged in the trading of
convertible securities.
Conversion Rights
You may convert any outstanding debentures (or portions of outstanding
debentures) into our common stock, initially at the conversion price of
$63.8275 per share (equal to a conversion rate of 15.67 shares per $1,000
principal amount of debentures). The conversion price is, however, subject to
adjustment as described below. We will not issue fractional shares of common
stock upon conversion of debentures. Instead, we will pay a cash adjustment
based upon the closing sale price of our common stock on the business day
immediately preceding the conversion date. You may convert debentures only in
denominations of $1,000 and whole multiples of $1,000.
You may exercise conversion rights at any time prior to the close of
business on the business day preceding the maturity date of the debentures.
However, if you are a holder of debentures that have been called for redemption,
you must exercise your conversion rights prior to the close of business on the
second business day preceding the redemption date, unless we default in payment
of the redemption price. In addition, if you have exercised your right to
require us to repurchase your debentures because a change of control has
occurred, you may convert your debentures into our common stock only if you
withdraw your notice and convert your debentures prior to the close of business
on the business day immediately preceding the change of control repurchase date.
Except as provided below, if you convert your debentures into our common
stock on any day other than an interest payment date, you will not receive any
interest that has accrued on these debentures. By delivering to the holder the
number of shares issuable upon conversion, determined by dividing the principal
amount of the debentures being converted by the conversion price, together with
a cash payment, if any, in lieu of fractional shares, we will satisfy our
obligation with respect to the debentures. That is, accrued but unpaid interest
will be deemed to be paid in full rather than canceled, extinguished or
forfeited. If you convert after a record date for an interest payment but prior
to the corresponding interest payment date, you will receive on the interest
payment date interest accrued and paid on such debentures, notwithstanding the
conversion of such debentures prior to such interest payment date, because you
will have been the holder of record on the corresponding record date. However,
at the time you surrender such debentures for conversion, you must pay us an
amount equal to the interest that has accrued and will be paid on the debentures
being converted on the interest payment date. However, the preceding sentence
does not apply to debentures that are converted after being called by us for
redemption. Accordingly, if we call your debentures for redemption on a date
that is after a record date for an interest payment but prior to the
corresponding interest payment date, and prior to the redemption date you choose
to convert your debentures, you will not be required to pay us at the time you
surrender such debentures for conversion the amount of interest on such
debentures you will receive on the date that has been fixed for redemption.
Furthermore, if we call your debentures for redemption on a date that is prior
to a record date for an interest payment date, and prior to the redemption date
you choose to convert your debentures, you will receive on the date that has
been fixed for redemption the amount of interest you would have received if you
had not converted your debentures.
You will not be required to pay any taxes or duties relating to the
issuance or delivery of our common stock if you exercise your conversion rights,
but you will be required to pay any tax or duty which may be payable relating to
any transfer involved in the issuance or delivery of the common stock in a name
other than yours. (If you convert any debenture within two years after its
original issuance, the common stock issuable upon conversion will not be issued
or delivered in a name other than yours unless the applicable restrictions on
transfer have been satisfied.) Certificates representing shares of common stock
will be issued or delivered only after all applicable taxes and duties, if any,
payable by you have been paid.
To convert interests in the global debenture, you must deliver to DTC,
Euroclear or Clearstream Banking S.A. (formerly Cedelbank) ("Clearstream"), as
applicable, the appropriate instruction form for conversion pursuant to DTC's
conversion program or in accordance with the normal operating procedures of
Euroclear or Clearstream, as applicable, after application has been made to make
the underlying common stock eligible for trading on Euroclear or Clearstream, as
applicable. To convert a definitive debenture, you must:
. complete the conversion notice on the back of the debenture (or a
facsimile thereof);
. deliver the completed conversion notice and the debentures to be
converted to the specified office of the conversion agent;
. pay all funds required, if any, relating to interest on the debentures
to be converted to which you are not entitled, as described in the
second preceding paragraph; and
20
<PAGE>
. pay all taxes or duties, if any, as described in the preceding
paragraph.
The conversion date will be the date on which all of the foregoing
requirements have been satisfied. The debentures will be deemed to have been
converted immediately prior to the close of business on the conversion date. A
certificate for the number of shares of common stock into which the debentures
are converted (and cash in lieu of any fractional shares) will be delivered as
soon as practicable on or after the conversion date.
We will adjust the initial conversion price for certain events, including:
(1) issuances of our common stock as a dividend or distribution on our
common stock;
(2) certain subdivisions and combinations of our common stock;
(3) issuances to all holders of our common stock of certain rights or
warrants to purchase our common stock (or securities convertible into
our common stock) at less than (or having a conversion price per share
less than) the current market price of our common stock;
(4) distributions to all holders of our common stock of shares of our
capital stock (other than our common stock), evidences of our
indebtedness or assets (including securities, but excluding:
(a) the rights and warrants referred to in clause (3),
(b) any dividends and distributions in connection with a
reclassification, change, consolidation, merger, combination,
sale or conveyance resulting in a change in the conversion
consideration pursuant to the second succeeding paragraph, or
(c) any dividends or distributions paid exclusively in cash);
(5) distributions consisting exclusively of cash to all holders of our
common stock to the extent that such distributions, combined together
with:
(a) all other such all-cash distributions made within the preceding
12 months for which no adjustment has been made, plus
(b) any cash and the fair market value of other consideration paid
for any tender offers by us or any of our subsidiaries for our
common stock expiring within the preceding 12 months for which no
adjustment has been made,
exceeds 10% of our market capitalization on the record date for such
distribution; market capitalization is the product of the then current
market price of our common stock times the number of shares of our
common stock then outstanding; and
(6) purchases of our common stock pursuant to a tender offer made by us or
any of our subsidiaries to the extent that the same involves an
aggregate consideration that, together with:
(a) any cash and the fair market value of any other consideration
paid in any other tender offer by us or any of our subsidiaries
for our common stock expiring within the 12 months preceding such
tender offer for which no adjustment has been made, plus
(b) the aggregate amount of any all-cash distributions referred to in
clause (5) above to all holders of our common stock within 12
months preceding the expiration of tender offer for which no
adjustments have been made,
exceeds 10% of our market capitalization on the expiration of such
tender offer.
We will not make an adjustment in the conversion price unless such
adjustment would require a change of at least 1% in the conversion price then in
effect at such time. We will carry forward and take into account in any
subsequent adjustment any adjustment that would otherwise be required to be
made. Except as stated above, we will not adjust the conversion price for the
issuance of our common stock or any securities convertible into or exchangeable
for our common stock or carrying the right to purchase any of the foregoing.
If we:
. reclassify or change our common stock (other than changes resulting
from a subdivision or combination); or
. consolidate or combine with or merge into any person or sell or convey
to another person all or substantially all of our property and assets,
and the holders of our common stock receive stock, other securities or other
property or assets (including cash or any combination thereof) with respect to
or in exchange for their common stock, the holders of the debentures may convert
the debentures into the consideration they would have received if they had
converted their debentures immediately prior to such reclassification, change,
consolidation, combination, merger, sale or conveyance. We may not become a
party to any such transaction unless its terms are consistent with the
foregoing.
If a taxable distribution to holders of our common stock or other
transaction occurs which results in any adjustment of the conversion price, you
may, in certain circumstances, be deemed to have received a distribution subject
to U.S. income tax as a dividend. In certain other circumstances, the absence of
an adjustment may result in a taxable dividend to the holders of our common
stock. See "Certain United States Federal Income Tax
21
<PAGE>
Considerations".
We may from time to time, to the extent permitted by law, reduce the
conversion price of the debentures by any amount for any period of at least 20
days. In that case, we will give at least 15 days' notice of such decrease. We
may make such reductions in the conversion price, in addition to those set forth
above, as our board of directors deems advisable to avoid or diminish any income
tax to holders of our common stock resulting from any dividend or distribution
of stock (or rights to acquire stock) or from any event treated as such for
income tax purposes.
Optional Redemption by CuraGen
Provisional Redemption
At any time prior to February 2, 2003, we may redeem some or all of the
debentures on at least 20 but not more than 60 days' notice at a provisional
redemption price equal to 103% of the principal amount of debentures if:
(1) the shelf registration statement covering resales of debentures and
the common stock issuable upon conversion of the debentures is
effective and available for use and is expected to remain effective
and available for use for the 30 days following the provisional
redemption date; and
(2) the Current Market Value of our common stock equals or exceeds the
following trigger prices for at least 20 trading days in any
consecutive 30-day trading period ending on the trading day prior to
the date the notice of the provisional redemption is mailed. The
"Current Market Value" means the average of the high and low sale
prices of our common stock, as reported on the Nasdaq National Market
or any national securities exchange on which our common stock is then
listed, on such trading day.
Trigger
-------
During the Twelve Months Commencing Price
----------------------------------- ----------
February 2, 2000.................. $108.5067
February 2, 2001.................. $102.1240
February 2, 2002.................. $ 95.7412
The redemption trigger prices are calculated as a percentage of the
debenture conversion price. Therefore, the trigger prices are subject to
adjustment in the event the conversion price is adjusted. We must also give the
trustee 30 days notice of the redemption.
Upon any provisional redemption, we will make an additional payment (the
"interest make-whole payment") with respect to the debentures we call for
provisional redemption. The interest make-whole payment will equal the sum of:
(1) the present value of the aggregate amount of the interest that would
otherwise have accrued from the provisional redemption date through
February 2, 2003 (the "interest make-whole period"); and
(2) unpaid Additional Amounts (as defined in "--Registration Rights"), if
any.
We will calculate the present value by using the bond equivalent yield on
U.S. Treasury notes or bills having a term nearest in length to that of the
interest make-whole period, as of the date the notice of the provisional
redemption is mailed. We will pay the interest make-whole payment on all
debentures we call for provisional redemption, including those debentures which
are converted into our common stock after the date the notice of the provisional
redemption is mailed and prior to the provisional redemption date. We will pay
the interest make-whole payment in cash or, at our option, in common stock. The
number of shares of common stock a holder will receive will equal the amount of
the interest make-whole payment divided by 95% of the average of the Trading
Prices of our common stock for the five trading days immediately preceding and
including the third day prior to the date of the provisional redemption.
However, we may not pay you in common stock unless we satisfy certain conditions
described in the indenture.
In addition, we will pay interest on the debentures being redeemed,
including those debentures which are converted into our common stock after the
date the notice of the provisional redemption is mailed and prior to the
provisional redemption date. This interest will include interest accrued and
unpaid to, but excluding, the provisional redemption date. If the provisional
redemption date is an interest payment date, we will pay the interest to the
holder of record on the corresponding record date, which may or may not be the
same person to whom we will pay the provisional redemption price.
Non-provisional Redemption
At any time on or after February 2, 2003, we may redeem some or all of the
debentures on at least 20 but not more than 60 days' notice, at the following
redemption prices (expressed in percentages of the principal amount).
Redemption
----------
During the Twelve Months Commencing Price
----------------------------------- -----
February 2, 2003.................. 103%
February 2, 2004.................. 102%
February 2, 2005.................. 101%
February 2, 2006.................. 100%
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<PAGE>
In addition, we will pay interest on the debentures being redeemed,
including those debentures which are converted into our common stock after the
date the notice of the redemption is mailed and prior to the redemption date.
This interest will include interest accrued and unpaid to, but excluding, the
redemption date. If the redemption date is an interest payment date, we will pay
the interest to the holder of record on the corresponding record date, which may
or may not be the same person to whom we will pay the redemption price.
Repurchase at Option of Holders Upon a Change of Control
If a change of control occurs, you will have the right to require us to
repurchase all of your debentures not previously called for redemption, or any
portion of those debentures that is equal to $1,000 or a whole multiple of
$1,000. The repurchase date is 45 days after the date we give notice of a change
of control. The repurchase price is equal to 100% of the principal amount of the
debentures to be repurchased. We will also pay interest accrued and unpaid to,
but excluding, the repurchase date.
Instead of paying the repurchase price in cash, we may pay the repurchase
price in common stock. The number of shares of common stock a holder will
receive will equal the repurchase price divided by 95% of the average of the
closing sale prices of our common stock for the five trading days immediately
preceding and including the third day prior to the repurchase date. However, we
may not pay in common stock unless we satisfy certain conditions prior to the
repurchase date as provided in the indenture.
Within 30 days after the occurrence of a change of control, we are required
to give you notice of the occurrence of the change of control and of your
resulting repurchase right. To exercise the repurchase right, you must deliver
prior to or on the 30th day after the date of our notice written notice to the
trustee of your exercise of your repurchase right, together with the debentures
with respect to which your right is being exercised. Your notice will be
irrevocable, except with respect to conversion rights. You may withdraw this
otherwise irrevocable notice by delivering to the paying agent a notice of
withdrawal prior to the close of business on the business day immediately
preceding the repurchase date, so long as you also convert these debentures
prior to the close of business on the business day immediately preceding the
repurchase date. We will not pay interest accrued and unpaid on any of the
debentures you convert.
A "change of control" will be deemed to have occurred at such time after
the original issuance of the debentures when either of the following has
occurred:
. the acquisition by any person, including any syndicate or group deemed
to be a "person" under Section 13(d)(3) of the Securities Exchange Act
of 1934, as amended, of beneficial ownership, directly or indirectly,
through a purchase, merger or other acquisition transaction or series
of transactions of shares of our capital stock entitling that person
to exercise 50% or more of the total voting power of all shares of our
capital stock entitled to vote generally in elections of directors,
other than any acquisition by us, any of our subsidiaries or any of
our employee benefit plans; or
. our consolidation or merger with or into any other person, any merger
of another person into us, or any conveyance, transfer, sale, lease or
other disposition of all or substantially all of our properties and
assets to another person, other than:
(1) any transaction (A) that does not result in any reclassification,
conversion, exchange or cancellation of outstanding shares of our
capital stock and (B) pursuant to which holders of our capital
stock immediately prior to the transaction have the entitlement
to exercise, directly or indirectly, 50% or more of the total
voting power of all shares of our capital stock entitled to vote
generally in the election of directors of the continuing or
surviving person immediately after the transaction; and
(2) any merger solely for the purpose of changing our jurisdiction of
incorporation and resulting in a reclassification, conversion or
exchange of outstanding shares of common stock solely into shares
of common stock of the surviving entity.
However, a change of control will be deemed not to have occurred if the
closing sale price per share of our common stock for any five trading days
within:
. the period of 10 consecutive trading days ending immediately after the
later of the change of control or the public announcement of the
change of control, in the case of a change of control under the first
clause above, or
. the period of 10 consecutive trading days ending immediately before
the change of control, in the case of a change of control under the
second clause above,
equals or exceeds 110% of the conversion price of the debentures in effect on
each such trading day. The beneficial owner shall be determined in accordance
with Rule 13d-3 promulgated by the SEC under the Exchange Act. The term
"person" includes any syndicate or group which would be deemed to be a
"person" under Section 13(d)(3) of the Exchange Act.
Rule 13e-4 under the Exchange Act, requires the dissemination of certain
information to security holders if an issuer tender offer occurs and may apply
if the repurchase option becomes available to holders of the debentures. We will
comply with this rule to the extent applicable at that time.
We may, to the extent permitted by applicable law, at any time purchase the
debentures in the open market or by tender at any price or by private agreement.
Any debenture so purchased by us may, to the extent permitted by applicable law,
be reissued or resold or may be surrendered to the trustee for cancellation. Any
debentures surrendered to the trustee may not be reissued or resold and will be
canceled promptly.
The change of control feature of the debentures may in certain
circumstances make more difficult or discourage a takeover of CuraGen and
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<PAGE>
thus, the removal of incumbent management. The repurchase right is not the
result of our knowledge of any effort to accumulate any common stock or to
obtain control of CuraGen by means of a merger, tender offer, solicitation, or
otherwise, or part of a plan by us to adopt a series of anti-takeover
provisions. Instead, this right is the result of negotiations between us and the
initial purchasers.
The foregoing provisions would not necessarily protect holders of the
debentures if highly leveraged or other transactions involving us occur that may
adversely affect holders.
Our ability to repurchase debentures upon the occurrence of a change in
control is subject to important limitations. The occurrence of a change in
control could cause an event of default under, or be prohibited or limited by,
the terms of Senior Debt that we may incur in the future. As a result, any
repurchase of the debentures would, absent a waiver, be prohibited under the
subordination provisions of the indenture until the Senior Debt is paid in full.
Further, we cannot assure you that we would have the financial resources, or
would be able to arrange financing, to pay the repurchase price for all the
debentures that might be delivered by holders of debentures seeking to exercise
the repurchase right. Any failure by us to repurchase the debentures when
required following a change in control would result in an event of default under
the indenture, whether or not such repurchase is permitted by the subordination
provisions of the indenture. Any such default may, in turn, cause a default
under Senior Debt that we may incur in the future. See "--Subordination"
below.
Subordination
The debentures are subordinated in right of payment to the prior payment in
full of all our existing and future Senior Debt. The indenture provides that in
the event of any distribution of our assets upon our dissolution, winding up,
liquidation or reorganization, the holders of our Senior Debt will first be paid
in respect of all Senior Debt in full in cash or other payment satisfactory to
the holders of Senior Debt before we make any payments of principal of, or
premium, if any, and interest (including Additional Amounts or interest make-
whole payments, if any) on the debentures. In addition, if the debentures are
accelerated because of an event of default, the holders of any Senior Debt would
be entitled to payment in full in cash or other payment satisfactory to the
holders of Senior Debt of all obligations in respect of Senior Debt before the
holders of the debentures are entitled to receive any payment or distribution.
Under the indenture, we must promptly notify holders of Senior Debt if payment
of the debentures is accelerated because of an event of default.
The indenture further provides if any default by us has occurred and is
continuing in the payment of principal of or premium, if any, or interest on,
rent or other payment obligations in respect of, any Senior Debt, no payment may
be made on account of principal of, premium, if any, or interest on the
debentures (including Additional Amounts or interest make-whole payments, if
any), until all such payments due in respect of that Senior Debt have been paid
in full in cash or other payment satisfactory to the holders of that Senior
Debt. During the continuance of any event of default with respect to any
Designated Senior Debt (other than a default in payment of the principal of or
premium, if any, or interest on, rent or other payment obligations in respect of
any Designated Senior Debt), permitting the holders thereof to accelerate the
maturity thereof (or, in the case of any lease, permitting the landlord either
to terminate the lease or to require us to make an irrevocable offer to
terminate the lease following an event of default thereunder), no payment may be
made by us, directly or indirectly, with respect to principal of or premium, if
any, or interest on the debentures (including Additional Amounts or interest
make-whole payments, if any) for 179 days following written notice to us, from
any holder, representative or trustee under any agreement pursuant to which that
Designated Senior Debt may have been issued, that such an event of default has
occurred and is continuing, unless such event of default has been cured or
waived or that Designated Senior Debt has been paid in full in cash or other
payment satisfactory to the holders of that Designated Senior Debt. However, if
the maturity of that Designated Senior Debt is accelerated (or, in the case of a
lease, as a result of such events of default, the landlord under the lease has
given us notice of its intention to terminate the lease or to require us to make
an irrevocable offer to terminate the lease following an event of default
thereunder), no payment may be made on the debentures until that Designated
Senior Debt has been paid in full in cash or other payment satisfactory to the
holders of that Designated Senior Debt or such acceleration (or termination, in
the case of the lease) has been cured or waived.
By reason of such subordination provisions, in the event of insolvency,
funds which we would otherwise use to pay the holders of debentures will be used
to pay the holders of Senior Debt to the extent necessary to pay Senior Debt in
full in cash or other payment satisfactory to the holders of Senior Debt. As a
result of these payments, our general creditors may recover less, ratably, than
holders of Senior Debt and such general creditors may recover more, ratably,
than holders of debentures.
"Senior Debt" means the principal of, premium, if any, interest (including
all interest accruing subsequent to the commencement of any bankruptcy or
similar proceeding, whether or not a claim for post-petition interest is
allowable as a claim in any such proceeding) and rent payable on or termination
payment with respect to or in connection with, and all fees, costs, expenses and
other amounts accrued or due on or in connection with, our Indebtedness, whether
outstanding on the date of the indenture or subsequently created, incurred,
assumed, guaranteed or in effect guaranteed by us (including all deferrals,
renewals, extensions or refundings of, or amendments, modifications or
supplements to, the foregoing), unless in the case of any particular
Indebtedness, the instrument creating or evidencing such Indebtedness or the
assumption or guarantee thereof expressly provides that that Indebtedness shall
not be senior in right of payment to the debentures or expressly provides that
such Indebtedness is equal with or junior to the debentures. However, the term
"Senior Debt" does not include our Indebtedness to any of our subsidiaries of
which we own, directly or indirectly, a majority of the voting stock.
"Indebtedness" means, with respect to any person:
(1) all indebtedness, obligations and other liabilities (contingent or
otherwise) of that person for borrowed money (including obligations in
respect of overdrafts, foreign exchange contracts, currency exchange
agreements, interest rate protection agreements, and any loans or
advances from banks, whether or not evidenced by notes or similar
instruments) or evidenced by bonds, debentures, notes or other
instruments for the payment of money, or incurred in connection with
the acquisition of any property, services or assets (whether or not
the recourse of the lender is to the whole of the assets of such
person or to only a portion thereof), other than any account payable
or other
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accrued current liability or obligation to trade creditors incurred in
the ordinary course of business in connection with the obtaining of
materials or services;
(2) all reimbursement obligations and other liabilities (contingent or
otherwise) of that person with respect to letters of credit, bank
guarantees, bankers' acceptances, surety bonds, performance bonds or
other guaranty of contractual performance;
(3) all obligations and liabilities (contingent or otherwise) in respect
of (A) leases of such person required, in conformity with generally
accepted accounting principles, to be accounted for as capitalized
lease obligations on the balance sheet of such person, and (B) any
lease or related documents (including a purchase agreement) in
connection with the lease of real property which provides that such
person is contractually obligated to purchase or cause a third party
to purchase the leased property and thereby guarantee a minimum
residual value of the leased property to the landlord and the
obligations of such person under such lease or related document to
purchase or to cause a third party to purchase the leased property;
(4) all obligations of such person (contingent or otherwise) with respect
to an interest rate or other swap, cap or collar agreement or other
similar instrument or agreement or foreign currency hedge, exchange,
purchase or similar instrument or agreement;
(5) all direct or indirect guaranties or similar agreements by that person
in respect of, and obligations or liabilities (contingent or
otherwise) of that person to purchase or otherwise acquire or
otherwise assure a creditor against loss in respect of, indebtedness,
obligations or liabilities of another person of the kind described in
clauses (1) through (4);
(6) any indebtedness or other obligations described in clauses (1) through
(4) secured by any mortgage, pledge, lien or other encumbrance
existing on property which is owned or held by such person, regardless
of whether the indebtedness or other obligation secured thereby shall
have been assumed by such person; and
(7) any and all deferrals, renewals, extensions and refundings of, or
amendments, modifications or supplements to, any indebtedness,
obligation or liability of the kind described in clauses (1) through
(6).
"Designated Senior Debt" means our Senior Debt which, at the date of
determination, has an aggregate amount outstanding of, or under which, at the
date of determination, the holders thereof are committed to lend up to, at least
$25 million (subject to certain exceptions) and is specifically designated in
the instrument evidencing or governing that Senior Debt as "Designated Senior
Debt" for purposes of the indenture. However, the instrument may place
limitations and conditions on the right of that Senior Debt to exercise the
rights of Designated Senior Debt. At December 31, 1999, we had approximately
$11.0 million of Senior Debt and no Designated Senior Debt. The indenture does
not restrict the creation of Senior Debt or any other indebtedness in the
future.
The debentures are our obligations exclusively and will be, in effect,
subordinated to all Indebtedness (including trade payables) of any subsidiaries
that we own in the future. The indenture does not limit the amount of
Indebtedness or other liabilities any future subsidiaries may incur. Our ability
to make required interest, principal, repurchase, cash conversion or redemption
payments on the debentures may be impaired as a result of the obligations of any
future subsidiaries. Any future subsidiaries would be separate and distinct
legal entities and would have no obligation, contingent or otherwise, to pay any
amounts due pursuant to the debentures or to make any funds available therefor,
whether by dividends, loans or other payments. Any right we have to receive
assets of any of our future subsidiaries upon the latter's liquidation or
reorganization (and the consequent right of the holders of the debentures to
participate in those assets) will be effectively subordinated to the claims of
that subsidiary's creditors, except to the extent that we are ourselves
recognized as a creditor of that subsidiary, in which case our claims would
still be subordinate to any security interests in the assets of that subsidiary
and any indebtedness of that subsidiary senior to that held by us.
In the event that, notwithstanding the foregoing, the trustee or any holder
of debentures receives any payment or distribution of assets of any kind in
contravention of any of the subordination provisions of the indenture, whether
in cash, property or securities, including, without limitation, by way of set-
off or otherwise, in respect of the debentures before all Senior Debt is paid in
full, then such payment or distribution will be held by the recipient in trust
for the benefit of the holders of the Senior Debt or their representative or
representatives to the extent necessary to make payment in full of all Senior
Debt remaining unpaid, after giving effect to any concurrent payment or
distribution, or provision therefor, to or for the holders of Senior Debt.
We are obligated to pay reasonable compensation to the trustee and to
indemnify the trustee against any losses, liabilities or expenses incurred by it
in connection with its duties relating to the debentures. The trustee's claims
for such payments will be senior to those of holders of the debentures in
respect of all funds collected or held by the trustee.
Events of Default
Each of the following constitutes an event of default under the indenture:
(1) our failure to pay when due the principal of or premium, if any, on
any of the debentures at maturity, upon redemption or exercise of a
repurchase right or otherwise, whether or not such payment is
prohibited by the subordination provisions of the indenture;
(2) our failure to pay an installment of interest (including Additional
Amounts, if any) on any of the debentures for 30 days after the date
when due, whether or not such payment is prohibited by the
subordination provisions of the indenture;
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(3) our failure to perform or observe any other term, covenant or
agreement contained in the debentures or the indenture for a period of
60 days after written notice of such failure, requiring us to remedy
the same, shall have been given to us by the trustee or to us and the
trustee by the holders of at least 25% in aggregate principal amount
of the debentures then outstanding;
(4) our default under any Indebtedness for money borrowed by us, the
aggregate outstanding principal amount of which is in an amount in
excess of $7.5 million, for a period of 30 days after written notice
to us by the trustee or to us and the trustee by holders of at least
25% in aggregate principal amount of the debentures then outstanding,
which default:
. is caused by our failure to pay when due principal or interest on
such Indebtedness by the end of the applicable grace period, if
any, unless such Indebtedness is discharged; or
. results in the acceleration of such Indebtedness, unless such
acceleration is waived, cured, rescinded or annulled; and
(5) certain events of our bankruptcy, insolvency or reorganization.
The indenture provides that the trustee shall, within 90 days of the
occurrence of a default, give to the registered holders of the debentures notice
of all uncured defaults known to it, but the trustee shall be protected in
withholding such notice if it, in good faith, determines that the withholding of
such notice is in the best interest of such registered holders, except in the
case of a default in the payment of the principal of, or premium, if any, or
interest on, any of the debentures when due or in the payment of any redemption
or repurchase obligation.
If an event of default specified in clause (5) above occurs and is
continuing, then automatically the principal of all the debentures and the
interest thereon shall become immediately due and payable. If an event of
default shall occur and be continuing, other than with respect to clause (5)
above (the default not having been cured or waived as provided under "--
Modifications, Amendments and Meetings" below), the trustee or the holders of at
least 25% in aggregate principal amount of the debentures then outstanding may
declare the debentures due and payable at their principal amount together with
accrued interest, and thereupon the trustee may, at its discretion, proceed to
protect and enforce the rights of the holders of debentures by appropriate
judicial proceedings. Such declaration may be rescinded or annulled either with
the written consent of the holders of a majority in aggregate principal amount
of the debentures then outstanding or a majority in aggregate principal amount
of the debentures represented at a meeting at which a quorum (as specified under
"--Modifications, Amendments and Meetings" below) is present, in each case upon
the conditions provided in the indenture.
The indenture contains a provision entitling the trustee, subject to the
duty of the trustee during default to act with the required standard of care, to
be indemnified by the holders of debentures before proceeding to exercise any
right or power under the indenture at the request of such holders. The indenture
provides that the holders of a majority in aggregate principal amount of the
debentures then outstanding through their written consent, or the holders of a
majority in aggregate principal amount of the debentures then outstanding
represented at a meeting at which a quorum is present by a written resolution,
may direct the time, method and place of conducting any proceeding for any
remedy available to the trustee or exercising any trust or power conferred upon
the trustee.
We are required to furnish annually to the trustee a statement as to the
fulfillment of our obligations under the indenture.
Consolidation, Merger or Assumption
We may, without the consent of the holders of debentures, consolidate with,
merge into or transfer all or substantially all of our assets to any other
corporation organized under the laws of the United States or any of its
political subdivisions provided that:
. the surviving corporation assumes all our obligations under the
indenture and the debentures;
. at the time of such transaction, no event of default, and no event
which, after notice or lapse of time, would become an event of
default, shall have happened and be continuing; and
. certain other conditions are met.
Modifications, Amendments and Meetings
Changes Requiring Approval of Each Affected Holder
The indenture (including the terms and conditions of the debentures) cannot
be modified or amended without the written consent or the affirmative vote of
the holder of each debenture affected by such change to:
. change the maturity of the principal of or any installment of interest
on that debenture (including any payment of Additional Amounts);
. reduce the principal amount of, or any premium or interest on
(including any payment of Additional Amounts), that debenture;
. change the currency of payment of that debenture or interest thereon;
. impair the right to institute suit for the enforcement of any payment
on or with respect to that debenture;
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. modify our obligations to maintain an office or agency in New York
City;
. except as otherwise permitted or contemplated by provisions concerning
corporate reorganizations, adversely affect the repurchase option of
holders upon a change of control or the conversion rights of holders
of the debentures;
. modify the subordination provisions of the indenture in a manner
adverse to the holders of debentures;
. modify the redemption provisions of the indenture in a manner adverse
to the holders of debentures;
. reduce the percentage in aggregate principal amount of debentures
outstanding necessary to modify or amend the indenture or to waive any
past default; or
. reduce the percentage in aggregate principal amount of debentures
outstanding required for the adoption of a resolution or the quorum
required at any meeting of holders of debentures at which a resolution
is adopted.
Changes Requiring Majority Approval
The indenture (including the terms and conditions of the debentures) may be
modified or amended either:
. with the written consent of the holders of at least a majority in
aggregate principal amount of the debentures at the time outstanding;
or
. by the adoption of a resolution at a meeting of holders by at least a
majority in aggregate principal amount of the debentures represented
at such meeting.
Changes Requiring No Approval
The indenture (including the terms and conditions of the debentures) may be
modified or amended by us and the trustee, without the consent of the holder of
any debenture, for the purposes of, among other things:
. adding to our covenants for the benefit of the holders of debentures;
. surrendering any right or power conferred upon us;
. providing for conversion rights of holders of debentures if any
reclassification or change of our common stock or any consolidation,
merger or sale of all or substantially all of our assets occurs;
. providing for the assumption of our obligations to the holders of
debentures in the case of a merger, consolidation, conveyance,
transfer or lease;
. reducing the conversion price, provided that the reduction will not
adversely affect the interests of the holders of debentures;
. complying with the requirements of the SEC in order to effect or
maintain the qualification of the indenture under the Trust Indenture
Act of 1939, as amended;
. making any changes or modifications necessary in connection with the
registration of the debentures under the Securities Act as
contemplated in the registration rights agreement; provided that such
change or modification does not, in the good faith opinion of our
board of directors and the trustee, adversely affect the interests of
the holders of debentures in any material respect;
. curing any ambiguity or correcting or supplementing any defective
provision contained in the indenture; provided that such modification
or amendment does not, in the good faith opinion of our board of
directors and the trustee, adversely affect the interests of the
holders of debentures in any material respect; or
. adding or modifying any other provisions which we and the trustee may
deem necessary or desirable and which will not adversely affect the
interests of the holders of debentures.
Meetings
The indenture contains provisions for convening meetings of the holders of
debentures to consider matters affecting their interests.
Quorum
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The quorum at any meeting called to adopt a resolution will be persons
holding or representing a majority in aggregate principal amount of the
debentures at the time outstanding and, at any reconvened meeting adjourned for
lack of a quorum, 25% of the aggregate principal amount.
Satisfaction and Discharge
We may satisfy and discharge our obligations under the indenture while
debentures remain outstanding, subject to certain conditions, if:
. all outstanding debentures will become due and payable at their
scheduled maturity within one year; or
. all outstanding debentures are scheduled for redemption within one
year,
and, in either case, we have deposited with the trustee an amount sufficient to
pay and discharge all outstanding debentures on the date of their scheduled
maturity or the scheduled date of redemption.
Governing Law
The indenture and the debentures are governed by, and construed in
accordance with, the law of the State of New York.
Information Concerning the Trustee
The Chase Manhattan Bank, as trustee under the indenture, has been
appointed by us as paying agent, conversion agent, registrar and custodian with
regard to the debentures. American Stock Transfer & Trust Company is the
transfer agent and registrar for our common stock. The trustee or its affiliates
may from time to time in the future provide banking and other services to us in
the ordinary course of their business.
Registration Rights
When we issued the debentures, we entered into a registration rights
agreement with the initial purchasers for the benefit of the holders of the
debentures. Pursuant to the agreement, we agreed to, at our expense:
. use our reasonable efforts to keep this registration statement
effective until the earliest of:
--two years after the last date of original issuance of any of the
debentures;
--the date when the holders of the debentures and the common stock
issuable upon conversion of the debentures are able to sell all
such securities immediately without restriction pursuant to the
volume limitation provisions of Rule 144 under the Securities Act;
and
--the date when all of the debentures and the common stock into which
the debentures are convertible that are owned by the holders who
complete and deliver in a timely manner the selling securityholder
election and questionnaire described below are registered under the
shelf registration statement and disposed of in accordance with the
shelf registration statement.
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Each holder must notify us not later than three business days prior to any
proposed sale by that holder pursuant to the shelf registration statement. This
notice will be effective for five business days. We may suspend the holder's use
of the prospectus for a reasonable period not to exceed 45 days in any 90-day
period, and not to exceed an aggregate of 90 days in any 360-day period, if:
. the prospectus would, in our judgment, contain a material misstatement
or omission as a result of an event that has occurred and is
continuing; and
. we reasonably determine that the disclosure of this material non-
public information would have a material adverse effect on us and our
subsidiaries taken as a whole.
However, if the disclosure relates to a previously undisclosed proposed or
pending material business transaction, the disclosure of which would impede our
ability to consummate such transaction, we may extend the suspension period from
45 days to 60 days. Each holder, by its acceptance of a debenture, agrees to
hold any communication by us in response to a notice of a proposed sale in
confidence.
Upon the initial sale of debentures or common stock issued upon conversion
of the debentures, each selling holder will be required to deliver a notice of
such sale to the trustee and us. The notice will, among other things:
. identify the sale as a transfer pursuant to the shelf registration
statement;
. certify that the prospectus delivery requirements, if any, of the
Securities Act have been complied with; and
. certify that the selling holder and the aggregate principal amount of
debentures or number of shares, as the case may be, owned by such
holder are identified in the related prospectus in accordance with the
applicable rules and regulations under the Securities Act.
If, the registration statement ceases to be effective or fails to be
usable and (1) we do not cure the registration statement within five business
days by a post-effective amendment or a report filed pursuant to the Exchange
Act or (2) if applicable, we do not terminate the suspension period, described
in the preceding paragraph, by the 45th or 60th day, as the case may be (each, a
"registration default"), additional interest (the "Additional Amounts") will
accrue on the debentures, from and including the day following the registration
default to but excluding the day on which the registration default has been
cured. Additional Amounts will be paid semiannually in arrears, with the first
semiannual payment due on the first interest payment date, as applicable,
following the date on which such Additional Amounts begin to accrue, and will
accrue at a rate per year equal to:
. an additional 0.25% of the principal amount to and including the 90th
day following such registration default; and
. an additional 0.5% of the principal amount from and after the 91st day
following such registration default.
In no event will Additional Amounts accrue at a rate per year exceeding
0.5%. If a holder has converted some or all of its debentures into common stock,
the holder will be entitled to receive equivalent amounts based on the principal
amount of the debentures converted. A holder will not be entitled to Additional
Amounts unless it has provided all information requested by the questionnaire
prior to the twenty business day deadline.
Form, Denomination and Registration
Denomination and Registration. The debentures were issued in fully
registered form, without coupons, in denominations of $1,000 principal amount
and whole multiples of $1,000.
Global Debentures; Book-Entry Form. Debentures sold in the United States in
reliance on Rule 144A under the Securities Act or in offshore
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transactions in reliance on Regulation S under the Securities Act were
represented by a single, permanent global debenture in definitive, fully-
registered form without interest coupons. The global debenture was deposited
with the trustee as custodian for DTC and registered in the name of a nominee of
DTC in New York, New York for the accounts of participants in DTC.
Investors who are "qualified institutional buyers" as defined in Rule 144A
under the Securities Act ("QIBs") and who purchase debentures in reliance on
Rule 144A may hold their interests in the global debenture directly through DTC
if they are DTC participants, or indirectly through organizations that are DTC
participants.
Investors who purchase debentures in offshore transactions in reliance on
Regulation S under the Securities Act may hold their interests in the global
debenture directly through Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system and Clearstream, if they are
participants in these systems, or indirectly through organizations that are
participants in these systems. Euroclear and/or Clearstream will hold interests
in the global debenture on behalf of their participants through their respective
depositaries, which in turn will hold the interests in the global debenture in
customers' securities accounts in the depositaries' names on the books of DTC.
Citibank, N.A., is acting initially as depositary for Clearstream, and The Chase
Manhattan Bank is acting initially as depositary for Euroclear.
Debentures transferred to institutional accredited investors (as defined in
Rules 501(a)(1), (2), (3) or (7) under the Securities Act) or to non-
institutional accredited investors (as defined in Rule 501(a)(4), (5) or (6)
under the Securities Act) that are not QIBs will be issued and physically
delivered in fully registered, definitive form and may not be represented by
interests in the global debenture. Otherwise, except in the circumstances
described below, holders of debentures represented by interests in the global
debenture will not be entitled to receive definitive debentures.
Upon transfer of a definitive debenture to a QIB pursuant to Rule 144A or
in an offshore transaction pursuant to Rule 904 of Regulation S, the definitive
debenture will be exchanged for an interest in the global debenture, and the
transferee will be required to hold its interest through a participant in DTC,
Euroclear or Clearstream, as applicable. Upon transfer of a beneficial interest
in a global debenture to an institutional accredited investor, the beneficial
interest will be exchanged for a definitive debenture. All transfers described
in this paragraph are subject to certain restrictions set forth in the
indenture, including a requirement for the delivery of certain certifications
and other documents.
Except as set forth below, the global debenture may be transferred, in
whole or in part, only to another nominee of DTC or to a successor of DTC or its
nominee.
DTC has advised us that it is:
. a limited purpose trust company organized under the laws of the State
of New York;
. a member of the Federal Reserve System;
. a "clearing corporation" within the meaning of the New York Uniform
Commercial Code; and
. a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act.
DTC was created to hold securities of institutions that have accounts with
DTC and to facilitate the clearance and settlement of securities transactions
among its participants in securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical movement
of securities certificates. DTC's participants include:
. securities brokers and dealers;
. banks;
. trust companies;
. clearing corporations; and
. certain other organizations.
Access to DTC's book-entry 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, whether directly or indirectly.
Upon the issuance of the global debenture, DTC credited, on its book-entry
registration and transfer system, the respective principal amounts of the
individual beneficial interests represented by the global debenture to the
accounts of participants. The accounts credited were designated by the initial
purchasers of the beneficial interests. Ownership of beneficial interests in the
global debenture is limited to participants or persons that may hold interests
through participants. Ownership of beneficial interests in the global debenture
is shown on, and the transfer of those ownership interests will be effected only
through, records maintained by DTC (with respect to participants' interests) and
the participants (with respect to the owners of beneficial interests in the
global debenture other than participants).
So long as DTC or its nominee is the registered holder and owner of the
global debenture, DTC or its nominee, as the case may be, will be considered the
sole legal owner of the debentures represented by the global debenture for all
purposes under the indenture and the debentures. Except as set forth below,
owners of beneficial interests in the global debenture will not be entitled to
receive definitive debentures and will not be considered to be the owners or
holders of any debentures under the global debenture. We understand that under
existing industry practice, in the
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event an owner of a beneficial interest in the global debenture desires to take
any action that DTC, as the holder of the global debenture, is entitled to take,
DTC would authorize the participants to take the action, and that participants
would authorize beneficial owners owning through the participants to take the
action or would otherwise act upon the instructions of beneficial owners owning
through them. No beneficial owner of an interest in the global debenture will be
able to transfer the interest except in accordance with DTC's applicable
procedures, in addition to those provided for under the indenture and, if
applicable, those of Euroclear and Clearstream.
We will make payments of the principal, premium, if any and interest
(including Additional Amounts and interest make-whole payments, if any) on the
debentures represented by the global debenture registered in the name of and
held by DTC or its nominee to DTC or its nominee, as the case may be, as the
registered owner and holder of the global debenture.
We expect that DTC or its nominee, upon receipt of any payment of principal
or interest in respect of the global debenture, will credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of the global debenture as shown on the
records of DTC or its nominee. We also expect that payments by participants and
indirect participants to owners of beneficial interests in the global debenture
held through such participants will be governed by standing instructions and
customary practices, as is now the case with securities held for accounts of
customers registered in the names of nominees for these customers. The payments,
however, will be the responsibility of the participants and indirect
participants, and neither we, the trustee nor any paying agent or conversion
agent will have any responsibility or liability for:
. any aspect of the records relating to, or payments made on account
of, beneficial ownership interests in the global debenture;
. maintaining, supervising or reviewing any records relating to the
beneficial ownership interests;
. any other aspect of the relationship between DTC and its
participants; or
. the relationship between the participants and indirect participants
and the owners of beneficial interests in the global debenture.
Unless and until it is exchanged in whole or in part for definitive
debentures, the global debenture may not be transferred except as a whole by DTC
to a nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC.
Participants in DTC will effect transfers with other participants in the
ordinary way in accordance with DTC rules and will settle transfers in same-day
funds. Participants in Euroclear and Clearstream will effect transfers with
other participants in the ordinary way in accordance with the rules and
operating procedures of Euroclear and Clearstream, as applicable. If a holder
requires physical delivery of a definitive debenture for any reason, including
to sell debentures to persons in jurisdictions which require physical delivery
or to pledge debentures, the holder must transfer its interest in the global
debenture in accordance with the normal procedures of DTC and the procedures set
forth in the indenture.
Cross-market transfers between DTC, on the one hand, and directly or
indirectly through Euroclear or Clearstream participants, on the other, will be
effected in DTC in accordance with DTC rules on behalf of Euroclear or
Clearstream, as the case may be, by its respective depositary; however, these
cross-market transactions will require delivery of instructions to Euroclear or
Clearstream, as the case may be, by the counterparty in the system in accordance
with its rules and procedures and within its established deadlines (Brussels
time). Euroclear or Clearstream, as the case may be, will, if the transaction
meets its settlement requirements, deliver instructions to its respective
depositary to take action to effect final settlement on its behalf by delivering
or receiving interests in the global debenture in DTC, and making or receiving
payment in accordance with normal procedures for same-day funds settlement
applicable to DTC. Euroclear participants and Clearstream participants may not
deliver instructions directly to the depositaries for Euroclear or Clearstream.
Because of time zone differences, the securities account of a Euroclear or
Clearstream participant purchasing an interest in the global debenture from a
DTC participant will be credited during the securities settlement processing day
(which must be a business day for Euroclear or Clearstream, as the case may be)
immediately following the DTC settlement date, and the credit of any
transactions interests in the global debenture settled during the processing day
will be reported to the relevant Euroclear or Clearstream participant on that
day. Cash received in Euroclear or Clearstream as a result of sales of interests
in the global debenture by or through a Euroclear or Clearstream participant to
a DTC participant will be received with value on the DTC settlement date, but
will be available in the relevant Euroclear or Clearstream cash account only as
of the business day following settlement in DTC.
We expect that DTC will take any action permitted to be taken by a holder
of debentures (including the presentation of debentures for exchange as
described below) only at the direction of one or more participants to whose
accounts at DTC interests in the global debenture are credited and only in
respect of the portion of the aggregate principal amount of the debentures as to
which the participant or participants has or have given direction. However, if
there is an event of default under the debentures, DTC will exchange the global
debenture for definitive debentures, which it will distribute to its
participants. These definitive debentures are subject to certain restrictions on
registration of transfers and will bear appropriate legends restricting their
transfer.
Although we expect that DTC, Euroclear and Clearstream will agree to the
foregoing procedures in order to facilitate transfers of interests in the global
debenture among participants of DTC, Euroclear, and Clearstream, DTC, Euroclear
and Clearstream are under no obligation to perform or continue to perform these
procedures, and these procedures may be discontinued at any time. Neither we nor
the trustee have any responsibility for the performance by DTC, Euroclear or
Clearstream or their participants or indirect participants of their obligations
under the rules and procedures governing their operations.
If DTC is at any time unwilling or unable to continue as a depositary for
the global debenture or ceases to be a clearing agency registered under the
Exchange Act and we do not appoint a successor depositary within 90 days, we
will issue definitive debentures in exchange for the global
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debenture. The definitive debentures will be subject to certain restrictions on
registration of transfers and will bear appropriate legends concerning these
restrictions.
Definitive Debentures. A QIB may request that its debenture be issued in
definitive form, and may request at any time that its interest in a global
debenture be exchanged for a debenture in definitive form. Definitive debentures
may also be issued in exchange for debentures represented by the global
debentures if we do not appoint a successor depositary as set forth above under
"--Global Debentures; Book-Entry Form" or in certain other circumstances set
forth in the indenture.
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MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of material U.S. federal income tax consequences
of the purchase, ownership, disposition and conversion of the debentures and the
common stock into which debentures may be converted, but does not purport to be
a complete analysis of all the potential tax considerations relating thereto.
This summary is based upon the Internal Revenue Code of 1986, as amended (the
"Code"), U.S. Treasury Regulations, Internal Revenue Service ("IRS")
rulings, and judicial decisions currently in effect, all of which are subject to
change (possibly with retroactive effect) or different interpretations.
This summary does not deal with all aspects of U.S. federal income taxation
that may be relevant to holders of the debentures or common stock and does not
deal with tax consequences arising under the laws of any state, local or foreign
jurisdiction or with any estate or gift tax considerations. This summary deals
only with holders that will hold debentures and common stock as capital assets
and does not address tax considerations applicable to investors that may be
subject to special tax rules such as banks, insurance companies, tax-exempt
organizations, dealers in securities or currencies, traders in securities that
elect mark-to-market treatment, persons that will hold debentures or common
stock as part of an integrated investment (including a "straddle") comprised
of debentures or shares of common stock and one or more other positions, persons
that have a "functional currency" other than the U.S. dollar or holders of
debentures that did not acquire the debentures in the initial distribution
thereof at their original issue price.
For the purpose of this discussion, a "U.S. Holder" refers to (a) an
individual who is a citizen or resident of the United States, (b) a U.S.
domestic corporation or (c) any other person that is subject to U.S. federal
income tax on a net income basis in respect of its investment in the debentures.
We have not obtained, nor do we intend to obtain, a ruling from the IRS
with respect to the U.S. federal income tax consequences of acquiring or holding
debentures or common stock, and there can be no assurance that the IRS will not
challenge one or more of the tax consequences described herein.
PROSPECTIVE HOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING
THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THEIR OWNERSHIP AND
DISPOSITION OF THE DEBENTURES, INCLUDING CONVERSION OF THE DEBENTURES, AND THE
EFFECT THAT THEIR PARTICULAR CIRCUMSTANCES MAY HAVE ON SUCH TAX CONSEQUENCES. WE
HAVE BEEN ADVISED BY OUR COUNSEL, MINTZ, LEVIN, COHN, FERRIS, GLOVSKY AND POPEO,
P.C., THAT WHILE THE FOLLOWING DOES NOT PURPORT TO DISCUSS ALL TAX MATTERS
RELATING TO THE DEBENTURES AND COMMON STOCK, THE FOLLOWING ARE THE MATERIAL TAX
CONSIDERATIONS OF THE DEBENTURES AND COMMON STOCK, SUBJECT TO THE QUALIFICATIONS
SET FORTH BELOW.
Material U.S. Federal Income Tax Considerations Applicable to U.S. Holders
Interest on Debentures
Stated interest on the debentures generally will be taxable to a U.S.
Holder as ordinary interest income at the time that such interest is accrued or
received in accordance with the holder's regular method of accounting for U.S.
federal income tax purposes.
Sale, Exchange, Redemption or Retirement of Debentures
In general, a U.S. Holder of debentures will recognize gain or loss upon
the sale, exchange, redemption, retirement or other disposition of the
debentures (other than a conversion into common stock or a repurchase for common
stock) measured by the difference between (a) the amount realized (except to the
extent attributable to accrued but unpaid interest which will be treated as
such) and (b) the U.S. Holder's adjusted tax basis in the debentures. Any such
gain or loss recognized on the sale, exchange, redemption, retirement or other
disposition of a debenture will be capital gain or loss, and generally will be
long-term capital gain or loss if the debenture has been held for more than one
year at the time of the sale or exchange.
Conversion or Repurchase for Common Stock
In general, a holder of debentures will not recognize gain or loss on the
conversion of the debentures into shares of common stock or a repurchase of a
debenture for common stock, except upon the receipt of cash in lieu of a
fractional share. The holder's tax basis in the shares of common stock received
upon conversion or repurchase of the debentures will equal the holder's
aggregate basis in the debentures exchanged therefor (less any portion thereof
allocable to a fractional share). The holding period of the shares of common
stock received by the holder upon conversion or repurchase of debentures
generally will include the period during which the holder held the debentures
prior to conversion or repurchase. Cash received in lieu of a fractional share
of common stock should be treated as a payment in exchange for such fractional
share (rather than a dividend). Gain or loss recognized on the receipt of cash
paid in lieu of a fractional share generally will equal the difference between
the amount of cash received and the tax basis allocable to the fractional share.
Any such gain or loss generally will result in capital gain or loss, and
generally will be long-term capital gain or loss if the debentures were held for
more than one year at the time of conversion or repurchase.
Registration Rights; Additional Amounts
The registration of the debentures pursuant to our obligations under
"Description of the Debentures--Registration Rights" will not constitute a
taxable event for U.S. federal income tax purposes and will not affect a U.S.
Holder's tax basis in the debentures. A U.S. Holder's holding period for the
registered debentures will include the holding period such U.S. Holder had in
the debentures before such debentures were registered.
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We intend to take the position that the possibility that holders of
debentures will be paid Additional Amounts due to a failure to register within
the prescribed time periods is a remote or incidental contingency as of the
issue date of the debentures, within the meaning of the applicable Treasury
Regulations. Accordingly, any Additional Amount should be taxable to a U.S.
Holder as ordinary income at the time it accrues or is received in accordance
with such U.S. Holder's regular method of tax accounting. Our determination that
the payment of Additional Amounts is a remote or incidental contingency is
binding upon all holders of the debentures, unless a holder properly discloses
to the IRS that it is taking a contrary position.
Interest Rate Reset
We intend to take the position that the possibility of an interest rate
reset as described under "Description of the Debentures--Interest Rate
Adjustments" is a remote contingency as of the issue date of the debentures
within the meaning of the applicable Treasury Regulations. Under this approach,
if an interest rate reset occurs, interest paid at the Adjusted Interest Rate
would be treated as stated interest on the debentures that is subject to the
same rules as described under-- "Interest on Debentures." Our determination
that the possibility of an interest rate reset is a remote contingency is
binding upon all holders of the debentures, unless a holder properly discloses
to the IRS that it is taking a contrary position.
It is possible, however, that the IRS might take a different position, in
which case U.S. Holders might be required to treat the debentures as contingent
payment debt instruments. The rules applicable to contingent payment debt
instruments are complex. Very generally, if the debentures were treated as
contingent payment debt instruments, U.S. Holders would be required to accrue
interest on the debentures at a "comparable yield", which is likely to be
higher than the stated rate of interest on the debentures, and any gain on sale,
exchange, redemption or retirement of debentures would be treated as ordinary
income rather than as capital gain. Prospective holders are urged to consult
their own tax advisors regarding the foregoing.
Adjustments to Conversion Price-Constructive Dividends
If at any time (a) we make a distribution to our shareholders or purchase
common stock in a tender offer and such distribution or purchase would be
taxable to such stockholders as a dividend for U.S. federal income tax purposes
(e.g., distributions of evidences of indebtedness or assets, but generally not
stock dividends or rights to subscribe for common stock) and, pursuant to the
antidilution provisions of the indenture, the conversion rate of the debentures
is increased, or (b) the conversion rate of the debentures is increased at our
discretion, such increase may be deemed to be the payment of a taxable dividend
to holders or beneficial owners of debentures (pursuant to Section 305 of the
Code). Holders of debentures therefore could have taxable income as a result of
an event in which they receive no cash or property. Similarly, a failure to
adjust the conversion rate to reflect a stock dividend or other event increasing
the proportionate interest of the holders of outstanding common stock could, in
some circumstances, give rise to deemed dividend income to U.S. Holders of such
common stock.
Dividends Paid on the Shares
In general, a U.S. Holder will be required to include in gross income as
ordinary dividend income the amount of any distributions paid on the common
stock after a conversion or repurchase for common stock (or deemed distributions
on the debentures as described above under "Adjustments to Conversion Price--
Constructive Dividends") to the extent that such distributions are paid out of
our current or accumulated earnings and profits as determined for U.S. federal
income tax purposes. Distributions in excess of such earnings and profits will
be applied against and will reduce the U.S. Holder's tax basis in its common
stock and, to the extent in excess of such tax basis, will be treated as gain
from a sale or exchange of such common stock.
Disposition of Shares
Gain or loss realized on the sale or exchange of common stock will equal
the difference between (a) the amount realized on such sale or exchange and (b)
the holder's adjusted tax basis in such common stock. Such gain or loss will
generally be long-term capital gain or loss if the holder has held or is deemed
to have held (e.g., by reason of ownership of the debentures) the common stock
for more than one year.
Material U.S. Federal Income Tax Considerations Applicable to Non-U.S. Holders
Interest on Debentures
Payment on a debenture by us or any paying agent to a holder of a debenture
that is not a U.S. Person (as defined below) (a "Non-U.S. Holder") will not be
subject to withholding of U.S. federal income tax, provided that, with respect
to payments of interest, (a) the holder does not actually or constructively own
10 percent or more of the combined voting power of all classes of our capital
stock and is not a controlled foreign corporation related to us through stock
ownership and (b) the beneficial owner of the debenture provides a statement
signed under penalties of perjury that includes its name and address and
certifies that it is a Non-U.S. Holder in compliance with applicable
requirements (or, with respect to payments made after December 31, 2000,
satisfies certain documentary evidence requirements for establishing that it is
a Non-U.S. Holder).
If these requirements are not satisfied, a thirty percent withholding tax
will apply to interest payments on the debentures, unless the interest is
effectively connected with a U.S. trade or business, or an applicable treaty
provides for a lower rate of, or exemption from, withholding tax.
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For this purpose, a "U.S. Person" is 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 any political subdivision thereof, an
estate the income of which is subject to U.S. federal income taxation regardless
of its source or a trust if (a) a U.S. court is able to exercise primary
supervision over the trust's administration and (b) one or more United States
persons have the authority to control all of the trust's substantial decisions.
Sale, Exchange or Redemption of Debentures or Shares of Common Stock
In general, a Non-U.S. Holder will not be subject to U.S. federal income
tax on gain realized on the sale, exchange or redemption of debentures or shares
of common stock received in exchange therefor, unless (a) such gain is
effectively connected with the conduct by the holder of a trade or business in
the United States or (b) in the case of gain realized by an individual holder,
the holder is present in the United States for 183 days or more in the taxable
year of the sale and either (A) such gain or income is attributable to an office
or other fixed place of business maintained in the United States by such holder
or (B) such holder has a tax home in the United States.
Conversion of Debentures
A Non-U.S. Holder generally will not be subject to U.S. federal income tax
on the conversion of a debenture into shares of common stock. However, to the
extent a Non-U.S. Holder receives cash in lieu of a fractional share upon
conversion, any gain upon the receipt of cash would be subject to the rules
described above regarding the sale or exchange of common shares.
Dividends on Shares of Common Stock
In general, any dividend paid, or deemed paid, on common stock (including a
deemed distribution on the debentures described above under "Certain Federal
Income Tax Consequences Applicable to U.S. Holders-Adjustments to Conversion
Price-Constructive Dividends," or a payment of Additional Amounts with respect
to common stock) to a Non-U.S. Holder will be subject to U.S. federal income tax
withholding at a rate of 30%, unless (a) a lower rate is provided by an
applicable tax treaty or (b) the distribution is effectively connected with the
conduct of a trade or business in the United States by the Non-U.S. Holder. For
either of these exceptions to apply, the Non-U.S. Holder may be required to
provide a properly executed certificate claiming the benefit of a treaty or
exemption.
Federal Estate Taxes
A debenture will not be subject to U.S. federal estate tax as a result of
the death of a holder who is not a citizen or resident of the United States at
the time of death, provided that such holder did not at the time of death
actually or constructively own 10 percent or more of the combined voting power
of all classes of our stock and, at the time of such holder's death, payments of
interest on such debenture would not have been effectively connected with the
conduct by such holder of a trade or business in the United States.
Common stock owned or treated as being owned by a Non-U.S. Holder at the
time of death will be included in such holder's gross estate for U.S. federal
estate tax purposes, unless an applicable estate tax treaty provides otherwise.
Information Reporting and Backup Withholding
U.S. Holders
Information reporting and backup withholding may apply to payments of
principal, interest, premium or dividends on or the proceeds from the sale or
other disposition (including a payment of cash in lieu of a fractional share
upon conversion) of the debentures or common stock with respect to certain
noncorporate U.S. Holders. Such U.S. Holders generally will be subject to backup
withholding at a rate of 31 % unless the U.S. Holder provides a correct taxpayer
identification number and certain other information, certified under penalties
of perjury, to the payor, or otherwise establishes an exemption from backup
withholding. Any amount withheld under backup withholding is allowable as a
credit against the U.S. Holder's federal income tax liability, provided the
proper information is provided to the IRS.
Non-U.S. Holders
In general, information reporting will apply to payments of interest and/or
premium (if any) on the debentures or dividends on the common stock, and backup
withholding at a rate of 31% may apply unless the payee certifies that it is not
a U.S. person or otherwise establishes an exemption. In addition, information
reporting and backup withholding will apply to payments of principal on the
debentures unless the payee certifies that it is not a U.S. person or otherwise
establishes an exemption.
Information reporting requirements and backup withholding tax will not
apply to any payment of the proceeds of the sale of a debenture or common stock
effected outside the United States by a foreign office of a foreign "broker"
(as defined in applicable Treasury regulations), provided that such broker (a)
derives less than 50 percent of its gross income for certain periods from the
conduct of a trade or business in the United States, (b) is not a controlled
foreign corporation for U.S. federal income tax purposes and (c) with respect to
sales effected after December 31, 2000, is not a foreign partnership that, at
any time during its taxable year, is 50 percent or more (by income or capital
interest) owned by U.S. persons or is engaged
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in the conduct of a U.S. trade or business. Payment of the proceeds of the sale
of a debenture or common stock effected outside the United States by a foreign
office of any other broker will not be subject to backup withholding tax, but
will be subject to information reporting requirements unless such broker has
documentary evidence in its records that the beneficial owner is a Non-U.S.
Holder and certain other conditions are met, or the beneficial owner otherwise
establishes an exemption. Payment of the proceeds of a sale or other disposition
(including a payment of cash in lieu of a fractional share upon conversion) of a
debenture or common stock by the United States office of a broker will be
subject to information reporting requirements and backup withholding tax unless
the beneficial owner certifies its non-U.S. status under penalties of perjury or
otherwise establishes an exemption.
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DESCRIPTION OF CAPITAL STOCK
The following description of our capital stock and certain provisions of
our certificate of incorporation and bylaws is a summary and is qualified in its
entirety by the provisions of our certificate of incorporation and bylaws.
Our authorized capital stock consists of 250,000,000 shares of common
stock, par value of $.01 per share, 3,000,000 shares of non-voting common stock,
par value of $.01 per share and 5,000,000 shares of preferred stock, par value
of $.01 per share. As of June 29, 2000, there were 36,670,905 shares of common
stock outstanding, held of record by 147 stockholders and 1,955,272 shares of
non-voting common stock outstanding held by one stockholder. In addition, as of
June 29, 2000, there were outstanding options to purchase 4,686,374 shares of
common stock and warrants to purchase 977,500 shares of common stock.
Common Stock
Holders of our common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. The holders of
our common stock are entitled to receive ratably such dividends as are declared
by the Board of Directors out of funds legally available therefor except that
(a) no cash dividends will be declared and paid on the common stock unless at
the same time an equal cash dividend is declared and paid, per share, on the
non-voting common stock, and (b) no dividend of property (including our capital
stock) will be declared and paid on the common stock unless a dividend of an
equal amount of the same property has also been declared and paid, per share, on
the non-voting common stock. See "Dividend Policy". In the event we liquidate,
dissolve or wind up the affairs of our business, holders of common stock and
non-voting common stock have the right (together as one class) to a ratable
portion of assets remaining after the payment of all debts and other
liabilities. Holders of our common stock have neither preemptive rights nor
rights to convert their common stock into any other securities and are not
subject to future calls or assessments. There are no redemption or sinking fund
provisions applicable to the common stock. All outstanding shares of common
stock are, and the shares issuable upon conversion of the debentures will be,
fully paid and non-assessable. The rights, preferences and privileges of the
holders of common stock are subject to, and may be adversely affected by, the
rights of the holders of our shares of preferred stock that we may designate and
issue in the future.
Non-Voting Common Stock
Except as provided under the Delaware General Corporate Law, the holders of
our non-voting common stock are not entitled to vote on any matters submitted to
a vote of stockholders. The holders of our non-voting common stock are entitled
to receive ratably such dividends as are declared by the Board of Directors out
of funds legally available therefor, except that (a) no cash dividends will be
declared and paid on our non-voting common stock unless at the same time an
equal cash dividend is declared and paid, per share, on our common stock, and
(b) no dividend of property (including capital stock) will be declared and paid
on our non-voting common stock unless a dividend of an equal amount of the same
property has also been declared and paid, per share, on our common stock. See
"Dividend Policy". In the event we liquidate, dissolve or wind up the affairs
of our business, holders of our non-voting common stock and common stock have
the right (together as one class) to a ratable portion of assets remaining after
the payment of all debts and other liabilities. Holders of our non-voting common
stock have the right, at any time, to convert each share of non-voting common
stock into shares of common stock at the rate of one share of common stock for
each share of non-voting common stock. In addition, upon the transfer of
beneficial ownership of any shares of non-voting common stock, those shares will
be automatically converted into shares of common stock at the rate of one share
of common stock for each share of non-voting common stock. This automatic
conversion will not apply if that transfer is made to (1) a majority-owned
subsidiary of Genentech, (2) a corporation of which Genentech is a wholly-owned
subsidiary ("Genentech Parent"), or (3) a wholly owned subsidiary of the
Genentech Parent; except that if that transfer is made to a wholly-owned
subsidiary of Genentech or the Genentech Parent and that wholly-owned subsidiary
ceases to be a wholly-owned subsidiary of Genentech or the Genentech Parent,
then those shares will be automatically converted into shares of our common
stock at the rate of one share of common stock for each share of non-voting
common stock. Holders of our non-voting common stock do not have preemptive
rights and are not subject to future calls or assessments. There are no
redemption or sinking fund provisions applicable to our non-voting common stock.
The rights, preferences and privileges of the holders of our non-voting common
stock are subject to, and may be adversely affected by, the rights of the
holders of shares of preferred stock that we may designate and issue in the
future.
Warrants
As of June 29, 2000, there were outstanding warrants to purchase 977,500
shares of our common stock held by 8 investors. Warrants to purchase 40,000
shares expire in 2002 and have exercise prices that range from $4.00 per share
to $5.00 per share with a weighted average exercise price of $4.54 per share.
Warrants to purchase 937,500 shares expire in 2005 and have an exercise price of
$32.375 per share. The number of shares for which the warrants are exercisable
is subject to adjustment for stock splits, combinations or dividends and
reclassifications, exchanges or substitutions.
Registration Rights
Nine of our stockholders have registration rights. Each of Pequot Partners
Fund, L.P. and Pequot International Fund, Inc. has demand and piggyback
registration rights with respect to 1,500,000 shares of common stock, that are
included in this registration statement. The holders of our warrants to purchase
937,500 shares of common stock also have registration rights, and those shares
are included in this registration statement. After December 8, 2000, Abgenix
will have demand and piggyback registration rights with respect to 837,990
shares of common stock. Demand registration rights entitle the holder to cause
us to register its shares of common stock. Piggyback registration rights allow
the holder to include its shares of common stock in registration statements that
we file. We are obligated to pay the costs associated with these
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registrations.
Anti-Takeover Effects of Provisions of Our Charter and Bylaws
Our certificate of incorporation provides for our board of directors to be
divided into three classes, with staggered three-year terms. As a result, only
one class of directors will be elected at each annual meeting of stockholders,
with the other classes continuing for the remainder of their respective three-
year terms. Stockholders have no cumulative voting rights, and the stockholders
representing a majority of the shares of common stock outstanding are able to
elect all of the directors.
The stockholders may amend our bylaws or adopt new bylaws, only by the
affirmative vote of 66 2/3% the outstanding voting securities. A special
meeting of the stockholders may be called by the affirmative vote of a majority
of our Board of Directors. These provisions may have the effect of delaying,
deferring or preventing a change in control.
The classification of our board of directors and lack of cumulative voting
will make it more difficult for our existing stockholders to replace our board
of directors as well as for another party to obtain control of us by replacing
our board of directors. Since our board of directors has the power to retain and
discharge our officers, these provisions could also make it more difficult for
existing stockholders or another party to effect a change in management.
These and other provisions may have the effect of deterring hostile
takeovers or delaying changes in control or management. These provisions are
intended to enhance the likelihood of continued stability in the composition of
our board of directors and in the policies of our board of directors and to
discourage certain types of transactions that may involve an actual or
threatened change in control. These provisions are designed to reduce our
vulnerability to an unsolicited acquisition proposal. The provisions also are
intended to discourage certain tactics that may be used in proxy rights.
However, such provisions could have the effect of discouraging others from
making tender offers for our shares and, as a consequence, they also may inhibit
fluctuations in the market price of the our shares that could result from actual
or rumored takeover attempts. Such provisions also may have the effect of
preventing changes in our management.
Section 203 of the Delaware General Corporation Law
We are subject to Section 203 of the Delaware General Corporation Law,
which, subject to certain exceptions, prohibits a Delaware corporation from
engaging in any business combination with any interested stockholder for a
period of three years following the time that such stockholder became an
interested stockholder, unless:
. prior to such time, the board of directors of the corporation approved
either the business combination or the transaction that resulted in the
stockholder becoming an interested holder;
. upon consummation of the transaction that 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
directors and also officers and (b) by employee stock plans in which
employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or
exchange offer; or
. at or subsequent to such time, the business combination is approved by
the board of directors 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.
In general, Section 203 defines "business combination" to include the
following:
. any merger or consolidation involving the corporation and the interested
stockholder;
. any sale, transfer, pledge or other disposition of 10% or more of the
assets of the corporation involving the interested stockholder;
. subject to certain exceptions, any transaction that results in the
issuance or transfer by the corporation of any stock of the corporation
to the interested stockholder;
. any transaction involving the corporation that has the effect of
increasing the proportionate share of the stock or any class or series
of the corporation beneficially owned by the interested stockholder; or
. the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits by or through
the corporation.
In general, Section 203 defines "interested stockholder" as an entity or
person beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by such entity or person.
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Transfer Agent and Registrar
American Stock Transfer & Trust Company is the transfer agent and registrar
for our common stock.
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SELLING HOLDERS
The debentures were originally issued by us and sold by Lehman Brothers
Inc., Morgan Stanley & Co. Incorporated and Dain Rauscher Incorporated, as the
initial purchasers, in a transaction exempt from the registration requirements
of the Securities Act to persons reasonably believed by the initial purchasers
to be qualified institutional buyers or other institutional accredited
investors. Selling holders of the debentures, including their transferees,
pledgees or donees or their successors, may from time to time offer and sell any
or all of the debentures and common stock into which the debentures are
convertible. In addition, up to 1,500,000 shares may be sold by each of Pequot
Partners Fund, LP and Pequot International Fund, LP pursuant to a registration
rights agreement with us, and an aggregate of 937,500 shares issuable upon
exercise of warrants may be sold by Quantum Industrial Partners LDC, Quantum
Partners LDC, CLSP, L.P., CLSP-SBS I, L.P. CLSP-SBS II, L.P. and CLSP II, L.P.
The selling holders have represented to us that they have or will purchase
the debentures and the common stock for their own account for investment only
and not with a view toward selling or distributing them, except through sales
registered under the Securities Act or exemptions. We agreed with the selling
holders to file this registration statement to register the resale of the
debentures and the common stock. We agreed to prepare and file all necessary
amendments and supplements to the registration statement to keep it effective
until the date on which the debentures and the common stock no longer qualify as
"registrable securities" under our registration rights agreements.
The following table shows information with respect to the selling holders
and the principal amounts of debentures and common stock they beneficially own
that may be offered under this prospectus. The information is based on
information provided by or on behalf of the selling holders.
The selling holders may offer all, some or none of the debentures or common
stock. Thus, we cannot estimate the amount of the debentures or the common stock
that will be held by the selling holders upon termination of any sales. The
column showing ownership after completion of the offering assumes that the
selling holders will sell all of the securities offered by this prospectus. In
addition, the selling holders identified below may have sold, transferred or
otherwise disposed of all or a portion of their debentures since the date on
which they provided the information about their debentures in transactions
exempt from the registration requirements of the Securities Act. None of the
selling holders has had any material relationship with us or our affiliates
within the past three years.
After the offering, no selling holder named in the table below will
beneficially own one percent or more of our common stock, except that Pequot
Partners Fund L.P. will own 2.4% of our common stock and Quantum Industrial
Partners LDC will own 9.12% of our common stock. Common stock owned
prior to the offering includes shares of common stock issuable upon conversion
of our 6% Convertible Subordinated Debentures Due 2007.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
Names of Security Principal Amount of Common Stock Common Stock Common Stock
Holder Debentures Beneficially Owned Offered Owned After
Owned and Offered Completion of The
(in thousands) Offering
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AIG SoundShore $ 8,725 136,696 136,696 0
Holdings, LTD
AIG SoundShore $ 769 12,048 12,048 0
Opportunity Holdings
Fund LTD
AIG SoundShore $ 1,106 17,328 17,328 0
Strategic Holding
Fund LTD
Argent Classic $ 7,350 115,154 115,154 0
Convertible Arbitrage
Fund (Bermuda) L.P.
Argent Convertible $ 1,000 15,667 15,667 0
Arbitrage Fund LTD
BND Arbitrage SNC $10,250 160,589 160,589 0
Chartwell Investment $ 1,000 15,667 15,667 0
Partners
CIBC World $13,070 204,770 204,770 0
Markets
Credit Suisse $ 950 14,884 14,884 0
First Boston Corporation
Deephaven Domestic $ 3,500 54,835 54,835 0
Convertible Trading LTD
Deutsche Bank $13,250 207,590 207,590 0
Securities, Inc.
Donaldson, Lufkin, $ 4,125 64,627 64,627 0
and Jenrette Securities
Corporation
Family Services $ 300 4,700 4,700 0
Life Insurance Co.
Fidelity Financial Trust $ 8,000 125,337 125,337 0
Guardian Life $ 6,500 101,836 101,836 0
Insurance Co.
Guardian Pension $ 200 3,133 3,133 0
Trust
JMG Capital $ 2,550 39,951 39,951 0
Partners LP
JMG Convertible $ 500 7,834 7,834 0
Investments LP
JMG Triton $ 6,070 95,100 95,100 0
Offshore Fund LTD
KBC Financial Products $ 200 3,133 3,133 0
Kentfield Trading Ltd. $ 950 14,884 14,884 0
Lyxor Master $ 2,750 43,084 43,084 0
Fund
Merrill Lynch $ 250 3,917 3,917 0
Convertible Fund, Inc.
Michael Angelo, LP $ 3,250 50,918 50,918 0
Paloma Securities LLC $ 1,000 15,667 15,667 0
Quattro Fund LTD $ 1,000 15,667 15,667 0
Sagamore Hill Hub
Fund Ltd. $ 250 3,917 3,917 0
Sage Capital $ 1,500 23,501 23,501 0
Tribeca Investments LLC $ 4,500 70,502 70,502 0
Value Line Convertible $ 500 7,834 7,834 0
Fund, Inc.
Warburg Dillon $ 30 470 470 0
Read LLC
Depository Trust Company $44,605 698,844 698,844 0
Pequot Partners -- 2,379,800 1,500,000 879,800
Fund, LP
Pequot International -- 1,500,000 1,500,000 0
Fund, Inc.
Quantum Industrial
Partners LDC -- 3,626,517 281,250 3,345,267
Quantum Partners LDC -- 281,250 281,250 0
CLSP, L.P. -- 534,079 226,913 307,166
CLSP-SBS I, L.P. -- 81,034 81,034 0
CSLP-SBS II, L.P. -- 30,397 30,397 0
CLSP II, L.P. -- 36,656 36,656 0
</TABLE>
Information concerning the selling holders may change from time to time and
any changed information will be set forth in supplements to this prospectus if
and when necessary.
40
<PAGE>
PLAN OF DISTRIBUTION
The selling holders and their successors, including their transferees,
pledgees or donees or their successors, may sell the debentures and our common
stock directly to purchasers or through underwriters, broker-dealers or agents,
who may receive compensation in the form of discounts, concessions or
commissions from the selling holders or the purchasers. These discounts,
concessions or commissions as to any particular underwriter, broker-dealer or
agent may be in excess of those customary in the types of transactions involved.
The debentures and common stock may be sold in one or more transactions at
fixed prices, at prevailing market prices at the time of sale, at prices related
to the prevailing market prices, at varying prices determined at the time of
sale, or at negotiated prices. These sales may be effected in transactions,
which may involve crosses or block transactions:
. on any national securities exchange or U.S. inter-dealer system of a
registered national securities association on which the debentures or
our common stock may be listed or quoted at the time of sale;
. in the over-the-counter market;
. in transactions otherwise than on these exchanges or systems or in the
over-the-counter market;
. through the writing of options, whether the options are listed on an
options exchange or otherwise; or
. through the settlement of short sales.
In connection with the sale of the debentures and common stock, the selling
holders may enter into hedging transactions with broker-dealers or other
financial institutions, which may in turn engage in short sales of the
debentures or common stock in the course of hedging the positions they assume.
The selling holders may also sell the debentures or common stock short and
deliver these securities to close out their short positions, or loan or pledge
the debentures or common stock to broker-dealers that in turn may sell these
securities.
The aggregate proceeds to the selling holders from the sale of the
debentures or common stock offered by them will be the purchase price of the
debentures or common stock less discounts and commissions, if any. Each of the
selling holders reserves the right to accept and, together with their agents
from time to time, to reject, in whole or in part, any proposed purchase of
debentures or common stock to be made directly or through agents. We will not
receive any of the proceeds from this offering.
Our common stock is listed for trading on The Nasdaq National Market. The
debentures are currently eligible for trading on the PORTAL System of the Nasdaq
Stock Market.
In order to comply with the securities laws of some states, if applicable,
the debentures and common stock may be sold in these jurisdictions only through
registered or licensed brokers or dealers. In addition, in some states the
debentures and common stock may not be sold unless they have been registered or
qualified for sale or an exemption from registration or qualification
requirements is available and is complied with.
The selling holders and any underwriters, broker-dealers or agents that
participate in the sale of the debentures and common stock may be "underwriters"
within the meaning of Section 2(11) of the Securities Act. Any discounts,
commissions, concessions or profit they earn on any resale of the shares may be
underwriting discounts and commissions under the Securities Act. Selling holders
who are "underwriters" within the meaning of Section 2(11) of the Securities Act
will be subject to the prospectus delivery requirements of the Securities Act.
The selling holders have acknowledged that they understand their obligations to
comply with the provisions of the Exchange Act and the rules thereunder relating
to stock manipulation, particularly Regulation M.
In addition, any securities covered by this prospectus which qualify for
sale pursuant to Rule 144, Rule 144A or Regulation S of the Securities Act may
be sold under Rule 144, Rule 144A or Regulation S rather than pursuant to this
prospectus.
To the extent required, the specific debentures or shares of our common
stock to be sold, the names of the selling holders, the respective purchase
prices and public offering prices, the names of any agent, dealer or
underwriter, and any applicable commissions or discounts with respect to a
particular offer will be set forth in an accompanying prospectus supplement or,
if appropriate, a post-effective amendment to the registration statement of
which this prospectus is a part.
We entered into a registration rights agreement for the benefit of holders
of the debentures to register their debentures and our common stock under
applicable federal and state securities laws under specific circumstances and at
specific times. The registration rights agreement provides for cross-
indemnification of the selling holders and us and our respective directors,
officers and controlling persons against specific liabilities in connection with
the offer and sale of the debentures and our common stock, including liabilities
under the Securities Act. We will pay substantially all of the expenses incurred
by the selling holders of incident to the offering and sale of the debentures
and our common stock. We estimate that our total expenses of the offering of the
debentures and common stock will be approximately $136,001.
LEGAL MATTERS
The validity of the debentures and our common stock has been passed upon by
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. Mintz Levin owns an
aggregate of 34,146 shares of common stock and a warrant to purchase 6,000
shares of common stock. Attorneys of Mintz Levin own an aggregate of
approximately 51,592 shares of common stock and a warrant to purchase 30,000
shares of common stock.
41
<PAGE>
EXPERTS
Our financial statements incorporated in this Prospectus by reference from
our Annual Report on Form 10-K for the year ended December 31, 1999 have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report, which is incorporated herein by reference, and has been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
ADDITIONAL INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may inspect and copy such material at the public
reference facilities maintained by the SEC at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, as well as at the SEC's regional offices at 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center,
Suite 1300, New York, New York 10048. You may also obtain copies of such
material from the SEC at prescribed rates by wiring to the Public Reference
Section of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549. Please call
the SEC at 1-800-SEC-0330 for further information on the public reference rooms.
Our filings are also available to the public from the SEC's web site at
www.sec.gov.
Our common stock is quoted on the Nasdaq National Market. You may inspect
reports and other information concerning us at the offices of the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C.
20006.
42
<PAGE>
INCORPORATION OF DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus and information we file later with the
SEC will automatically update and supersede this information. We incorporate by
reference the documents listed below and any future filings made with the SEC
under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934.
The documents we are incorporating by reference are:
Annual Report on Form 10-K for the year ended December 31, 1999, filed on
March 7, 2000;
Quarterly Report on Form 10-Q for the quarter ended March 31, 2000, filed
on May 12, 2000;
Definitive Proxy Statement, filed on April 25, 2000;
Current Report on Form 8-K, filed on January 28, 2000;
Current Report on Form 8-K, filed on February 15, 2000;
Current Report on Form 8-K, filed on March 2, 2000;
Current Report on Form 8-K, filed on April 17, 2000;
Current Report on Form 8-K, filed on June 6, 2000; and
The description of the common stock contained in our Registration
Statement on Form S-1 filed with the SEC on October 16, 1997, including
any amendments or reports filed for the purpose of updating such
description.
You may request, orally or in writing, a copy of these documents, which
will be provided to you at no cost, by contacting:
Investor Relations
Curagen Corporation
555 Long Wharf Drive, 11th floor
New Haven, Connecticut 06511
Telephone: (203) 401-3330
43
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the Company's estimates (other than the SEC
and Nasdaq registration fees) of the expenses in connection with the issuance
and distribution of the shares of common stock being registered. None of the
following expenses are being paid by the selling holders.
Item Amount
------
SEC registration fee.................................... $ 73,511.00
Nasdaq listing fee...................................... 17,500.00
Legal fees and expenses................................. 20,000.00
Accounting fees and expenses............................ 10,000.00
Printing Fees........................................... 10,000.00
Miscellaneous fees and expenses......................... 5,000.00
-----------
Total................................................... $136,001.00
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The amendment and restatement of the Company's Certificate of Incorporation
(the "Restated Certificate") provides that the Company shall indemnify to the
fullest extent authorized by the Delaware General Corporation Law ("DGCL"), each
person who is involved in any litigation or other proceeding because such person
is or was a director or officer of the Company or is or was serving as an
officer or director of another entity at the request of the Company, against all
expense, loss or liability reasonably incurred or suffered in connection
therewith. The Restated Certificate provides that the right to indemnification
includes the right to be paid expenses incurred in defending any proceeding in
advance of its final disposition; provided, however, that such advance payment
will only be made upon delivery to the Company of an undertaking, by or on
behalf of the director or officer, to repay all amounts so advanced if it is
ultimately determined that such director is not entitled to indemnification. If
the Company does not pay a proper claim for indemnification in full within 60
days after a written claim for such indemnification is received by the Company,
the Restated Bylaws authorize the claimant to bring an action against the
Company and prescribe what constitutes a defense to such action.
Section 145 of the DGCL permits a corporation to indemnify any director or
officer of the corporation against expenses (including attorney's fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
in connection with any action, suit or proceeding brought by reason of the fact
that such person is or was a director or officer of the corporation, if such
person acted in good faith and in a manner that he or she reasonably believed to
be in, or not opposed to, the best interests of the corporation, and, with
respect to any criminal action or proceeding, if he or she had no reason to
believe his or her conduct was unlawful. In a derivative action, (i.e., one
brought by or on behalf of the corporation), indemnification may be made only
for expenses, actually and reasonably incurred by any director or officer in
connection with the defense or settlement of such an action or suit, if such
person acted in good faith and in a manner that he reasonably believed to be in,
or not opposed to, the best interests of the corporation, except that no
indemnification shall be made if such person shall have been adjudged to be
liable to the corporation, unless and only to the extent that the court in which
the action or suit was brought shall determine that the defendant is fairly and
reasonably entitled to indemnity for such expenses despite such adjudication of
liability.
Pursuant to Section 102(b)(7) of the DGCL, Article Tenth of the Restated
Certificate eliminates the liability of a director or the corporation or its
stockholders for monetary damages for such breach of fiduciary duty as a
director, except for liabilities arising (i) from any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) from acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the DGCL, or (iv) from any
transaction from which the director derived an improper personal benefit. The
Company has obtained primary and excess insurance policies insuring the
directors and officers of the Company against certain liabilities that they may
incur in their capacity as directors and officers. Under such policies, the
insurers, on behalf of the Company, may also pay amounts for which the Company
has granted indemnification to the directors or officers.
ITEM 16. EXHIBITS
(a) Exhibits.
4.1** Indenture dated as of February 2, 2000 between the Registrant and The
Chase Manhattan Bank, as trustee.
4.2** Registration Rights Agreement dated as of February 2, 2000 among the
Registrant and Lehman Brothers Inc., Morgan Stanley & Co. Incorporated
and Dain Rauscher Incorporated, as the initial purchasers.
5.1** Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
regarding legality of securities being registered.
8.1** Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
regarding tax matters.
12.1** Computation of Ratio of Earnings to Fixed Charges.
23.1* Consent of Deloitte & Touche LLP.
23.2 Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. (see
Exhibit 5.1).
24.1 Power of Attorney (included on signature page).
II-1
<PAGE>
25.1** Form T-1 Statement of Eligibility of The Chase Manhattan Bank to
act as trustee under the Indenture.
* Filed herewith
** Previously filed
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or any decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and
any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons
of the Registrant, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
(c) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of
the Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(d) The undersigned registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the trustee to act under
Subsection (a) of Section 310 of the Trust Indenture Act in accordance with
the rules and regulations prescribed by the Commission under Section
305(b)(2) of the Trust Indenture Act.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New Haven and State of Connecticut on the 30th day of
June, 2000.
CURAGEN CORPORATION
By: /s/ Jonathan M. Rothberg
--------------------------
Jonathan M. Rothberg
Chief Executive Officer, Chairman of the Board
and President
POWER OF ATTORNEY
The registrant and each person whose signature appears below constitutes and
appoints Jonathan M. Rothberg, Ph.D. and David M. Wurzer, C.P.A. and each of
them singly, his, her or its true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him, her or it and in his,
her or its name, place and stead, in any and all capacities, to sign and file
(i) any and all amendments (including post-effective amendments) to this
Registration Statement, with all exhibits thereto, and other documents in
connection therewith, and (ii) a registration statement, and any and all
amendments thereto, relating to the offering covered hereby filed pursuant to
Rule 462(b) under the Securities Act of 1933, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he, she, or it might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or their or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities
and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Jonathan M. Rothberg Chief Executive Officer, Chairman of the Board of Directors June 30, 2000
------------------------------ and President (Principal Executive Officer)
Jonathan M. Rothberg
/s/ * Executive Vice President, Treasurer and Chief Financial Officer June 30, 2000
------------------------------ (Principal Financial and Accounting Officer)
David M. Wurzer
/s/ * Director June 30, 2000
------------------------------
Richard H. Booth
/s/ * Director June 30, 2000
------------------------------
Vincent T. DeVita, Jr.
/s/ * Director June 30, 2000
------------------------------
Robert E. Patricelli
/s/ * Director June 30, 2000
------------------------------
Randy Thurman
* By Power of Attorney
</TABLE>
II-3
<PAGE>
EXHIBIT INDEX
Exhibit
Number Exhibit
------ -------
4.1** Indenture dated as of February 2, 2000 between the Registrant and The
Chase Manhattan Bank, as trustee.
4.2** Registration Rights Agreement dated as of February 2, 2000 among the
Registrant and Lehman Brothers Inc., Morgan Stanley & Co. Incorporated
and Dain Rauscher Incorporated, as the initial purchasers.
5.1** Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
regarding legality of securities being registered.
8.1** Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
regarding tax matters.
12.1** Computation of Ratio of Earnings to Fixed Charges.
23.1* Consent of Deloitte & Touche LLP.
23.2 Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. (see
Exhibit 5.1).
24.1 Power of Attorney (included on signature page).
25.1** Form T-1 Statement of Eligibility of The Chase Manhattan Bank to
act as trustee under the Indenture.
* Filed herewith
** Previously filed
