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PROSPECTUS
RULE 424(B)(3)
REGISTRATION NO. 33-63281
$140,000,000
[LOGO of United State Filter Corp]
UNITED STATES FILTER CORPORATION
6% CONVERTIBLE SUBORDINATED NOTES DUE 2005
AND
SHARES OF COMMON STOCK
ISSUABLE UPON CONVERSION THEREOF
This Prospectus covers the resale from time to time by the holders (the
"Selling Securityholders") of up to $140,000,000 aggregate principal amount of
6% Convertible Subordinated Notes due 2005 (the "Notes") of United States
Filter Corporation (the "Company"). This Prospectus also covers sales by the
Selling Securityholders from time to time of shares of common stock, $.01 par
value (the "Common Stock"), of the Company into which the Notes are convertible
(the "Conversion Shares").
The Notes are convertible at the option of the holder into shares of Common
Stock of the Company, at any time at or prior to maturity, unless previously
redeemed, at a conversion price of $27.50 per share (equivalent to a conversion
rate of 36.36 shares per $1,000 principal amount of Notes), subject to
adjustment in certain events. Interest on the Notes is payable semi-annually on
March 15 and September 15 of each year, commencing on March 15, 1996.
The Notes are redeemable, in whole or in part, at the option of the Company,
at any time on or after September 23, 1998, at the redemption prices set forth
herein, plus accrued and unpaid interest to the date of redemption. The Company
is required to offer to purchase the Notes upon a Change of Control (as
defined), at 101% of the principal amount thereof, plus accrued and unpaid
interest to the date of purchase.
The Notes are unsecured general obligations of the Company, subordinated in
right of payment to all existing and future Senior Indebtedness of the Company,
and are structurally subordinated to all liabilities (including trade payables)
of the Company's subsidiaries. The Indenture does not restrict the incurrence
of Senior Indebtedness or other indebtedness by the Company or its
subsidiaries. At September 30, 1995 the Company had approximately $14,573,000
of Senior Indebtedness, and the Company's subsidiaries had approximately
$119,822,000 of trade payables and accrued liabilities. See "Description of
Notes."
The Notes were issued by the Company on September 18, 1995 in a private
placement and were resold by the initial purchaser thereof to qualified
institutional buyers or other accredited institutional investors in
transactions exempt from registration under the Securities Act of 1933, as
amended (the "Securities Act"), and in sales outside the United States within
the meaning of Regulation S under the Securities Act.
The Selling Securityholders may offer Notes or Conversion Shares from time to
time to purchasers directly or through underwriters, dealers or agents. Such
Notes or Conversion Shares may be sold at market prices prevailing at the time
of sale or at negotiated prices. Each Selling Securityholder will be
responsible for payment of any and all commission to brokers, which will be
negotiated on an individual basis.
The Notes have been designated for trading in the Private Offerings, Resales
and Trading through Automated Linkages ("PORTAL") Market. The Common Stock is
listed on the New York Stock Exchange (the "NYSE") under the trading symbol
USF. On November 24, 1995, the last reported sale price of the Common Stock as
reported on the NYSE was $21 per share. The Conversion Shares have been listed
on the NYSE. For a description of certain federal income tax consequences to
the holders of the Notes, see "Certain Federal Income Tax Consequences."
The Company will not receive any of the proceeds from the sale of any Notes
or Conversion Shares by the Selling Securityholders. Expenses of preparing and
filing the registration statement to which this Prospectus relates and all
post-effective amendments will be borne by the Company. See "Plan of
Distribution" for a description of the indemnification arrangements between the
Company and the Selling Securityholders.
SEE "RISK FACTORS" ON PAGES 3 THROUGH 6 OF THE PROSPECTUS FOR CERTAIN
INFORMATION RELEVANT TO THIS OFFERING.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this Prospectus is November 27, 1995.
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AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (together with all
amendments and exhibits, referred to as the "Registration Statement") under
the Securities Act with respect to the Notes and Conversion Shares offered by
this Prospectus. This Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the Rules and Regulations of the Commission. For further
information with respect to the Company and the securities offered hereby,
reference is made to the Registration Statement and the exhibits and schedules
thereto, all of which may be obtained from the Commission in Washington, D.C.
as described below.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files periodic reports, proxy materials and other information with
the Commission. Such reports, proxy materials and other information may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the following regional offices of the Commission: Seven World Trade Center,
New York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies may also be obtained from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. In addition, such reports, proxy materials and other
information may be inspected and copied at the New York Stock Exchange, 20
Broad Street, New York, New York 10005.
The Company will make available to any prospective purchaser of the Notes
copies of the Indenture and Registration Rights Agreement, and the reports,
proxy material or other information filed with the Commission under the
Exchange Act and such additional information reasonably requested in
connection with the consideration of an investment in the Notes. Any such
request should be directed to the General Counsel of the Company at 73-710
Fred Waring Drive, Suite 222, Palm Desert, California 92260 (telephone number:
(619) 340-0098).
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company (Commission File No. 1-10728)
with the Commission under the Exchange Act are incorporated in this Offering
Memorandum by reference: (a) the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1995, as amended on Forms 10-K/A dated June 29,
1995, July 25, 1995, August 10, 1995 and November 14, 1995; (b) the Company's
Quarterly Reports on Form 10-Q for the quarters ended June 30, 1995 and
September 30, 1995; and (c) the Company's Current Reports on Form 8-K dated
April 3, 1995 (two reports on that date), May 3, 1995, May 4, 1995 (as amended
on Form 8-K/A on October 6, 1995), June 12, 1995, June 27, 1995, July 13,
1995, August 11, 1995, August 30, 1995, September 7, 1995, September 18, 1995,
October 2, 1995, October 5, 1995, November 1, 1995 and November 2, 1995 and
all other reports filed pursuant to Section 13(a) or 15(d) of the Exchange Act
since March 31, 1995.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus and any amendment or supplement hereto to the
extent that a statement contained herein (or in any other subsequently filed
document which also is, or is deemed to be, incorporated by reference herein)
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus or any such amendment or supplement.
On request, the Company will provide, without charge, to each person,
including any beneficial owner, to whom this Prospectus is delivered a copy of
any or all of the documents incorporated by reference (other than exhibits to
such documents that are not specifically incorporated by reference in such
documents). Requests for such copies should be directed to Dorrie B. Osborne,
Assistant Secretary and Director of Stockholder Relations, United States
Filter Corporation, 73-710 Fred Waring Drive, Palm Desert, Suite 222,
California 92260 (telephone number (619) 340-0098).
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THE COMPANY
The Company is a leading global provider of industrial and commercial water
treatment systems and services, with an installed base of more than 90,000
systems in the United States, Europe, Latin America and the Far East. The
Company offers a single-source solution to its industrial, commercial and
municipal customers through what the Company believes to be the industry's
broadest range of cost-effective water treatment systems, services and proven
technologies. The Company capitalizes on its substantial installed base to
sell additional systems and utilizes its global network of 124 sales and
service facilities, including 12 manufacturing plants, to provide customers
with ongoing service and maintenance. In addition, the Company is a leading
international provider of service deionization ("SDI") and outsourced water
services, including operation of water purification and wastewater treatment
systems at customer sites.
The Company's principal executive offices are located at 73-710 Fred Waring
Drive, Suite 222, Palm Desert, California 92260. The Company's telephone
number is (619) 340-0098. References herein to the Company shall mean United
States Filter Corporation and its subsidiaries, unless the context requires
otherwise.
RISK FACTORS
Prospective purchasers should carefully consider the following factors
relating to the business of the Company and the Notes, together with the
information and financial data included or incorporated by reference in this
Prospectus, before purchasing Notes and Conversion Shares offered hereby.
ACQUISITION STRATEGY
In pursuit of its strategic objective of becoming the leading global single-
source provider of water treatment systems and services the Company has, since
1991, acquired and successfully integrated more than 18 domestic and
international businesses with strong market positions and substantial water
treatment expertise. The Company's acquisition strategy entails the potential
risks inherent in assessing the value, strengths, weaknesses, contingent or
other liabilities and potential profitability of acquisition candidates and in
integrating the operations of acquired companies. Although the Company
generally has been successful in pursuing these acquisitions, there can be no
assurance that acquisition opportunities will continue to be available, that
the Company will have access to the capital required to finance potential
acquisitions, that the Company will continue to acquire businesses or that any
business acquired will be integrated successfully or prove profitable. The
Company has no current plans regarding any material acquisitions.
INTERNATIONAL TRANSACTIONS
The Company has made and expects it will continue to make acquisitions and
to obtain contracts in Europe, Latin America, the Far East and other areas
outside the United States. While these activities may provide important
opportunities for the Company to offer its products and services
internationally, they also entail the risks associated with conducting
business internationally, including the risk of currency fluctuations, slower
payment of invoices and possible social, political and economic instability.
RELIANCE ON KEY PERSONNEL
The Company's operations are dependent on the continued efforts of senior
management, in particular Richard J. Heckmann, its Chairman, Chief Executive
Officer and President. Should any of the senior managers be unable to continue
in their present roles, the Company's prospects could be adversely affected.
PROFITABILITY OF FIXED PRICE CONTRACTS
A significant portion of the Company's revenues are generated under fixed
price contracts. To the extent that original cost estimates are inaccurate,
costs to complete increase, delivery schedules are delayed or progress
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under a contract is otherwise impeded, revenue recognition and profitability
from a particular contract may be adversely affected. The Company routinely
records upward or downward adjustments with respect to fixed price contracts
due to changes in estimates of costs to complete such contracts. There can be
no assurance that future downward adjustments will not be material.
CYCLICALITY OF CAPITAL EQUIPMENT SALES
The sale of capital equipment within the water treatment industry is
cyclical and influenced by various economic factors including interest rates
and general fluctuations of the business cycle. The Company's revenues from
capital equipment sales were approximately 60% of total revenues for the
fiscal year ended March 31, 1995 and 48% for the three months ended June 30,
1995. While the Company sells capital equipment to customers in diverse
industries and in domestic and international markets, cyclicality of capital
equipment sales and instability of general economic conditions could have an
adverse effect on the Company's revenues and profitability.
POTENTIAL ENVIRONMENTAL RISKS
The Company's business and products may be significantly influenced by the
constantly changing body of environmental laws and regulations, which require
that certain environmental standards be met and impose liability for the
failure to comply with such standards. While the Company endeavors at each of
its facilities to assure compliance with environmental laws and regulations,
there can be no assurance that the Company's operations or activities, or
historical operations by others at the Company's locations, will not result in
civil or criminal enforcement actions or private actions that could have a
materially adverse effect on the Company. In particular, the Company's
activities as owner and operator of a hazardous waste treatment and recovery
facility are subject to stringent laws and regulations and compliance reviews.
Failure of this facility to comply with those regulations could result in
substantial fines and the suspension or revocation of the facility's hazardous
waste permit. In addition, to some extent, the liabilities and risks imposed
by such environmental laws on the Company's customers may adversely impact
demand for certain of the Company's products or services or impose greater
liabilities and risks on the Company, which could also have an adverse effect
on the Company's competitive or financial position.
COMPETITION
The water purification and wastewater treatment industry is fragmented and
highly competitive. The Company competes with many domestic and international
companies in its global markets. The principal methods of competition in the
markets in which the Company competes are technology, service, price, product
specifications, customized design, product knowledge and reputation, ability
to obtain sufficient performance bonds, timely delivery, the relative ease of
system operation and maintenance, and the prompt availability of replacement
parts. In the municipal contract bid process, pricing and ability to meet bid
specifications are the primary considerations. While no competitor is
considered dominant, there are competitors that are larger and have
significantly greater resources than the Company, which, among other things,
could be a competitive disadvantage to the Company in securing certain
projects.
TECHNOLOGICAL AND REGULATORY CHANGE
The water purification and wastewater treatment business is characterized by
changing technology, competitively imposed process standards and regulatory
requirements, each of which influences the demand for the Company's products
and services. Changes in regulatory or industrial requirements may render
certain of the Company's purification and treatment products and processes
obsolete. Acceptance of new products may also be affected by the adoption of
new government regulations requiring stricter standards. The Company's ability
to anticipate changes in technology and regulatory standards and to
successfully develop and introduce new and enhanced products on a timely basis
will be a significant factor in the Company's ability to grow and to remain
competitive. There can be no assurance that the Company will be able to
achieve the technological advances that
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may be necessary for it to remain competitive or that certain of its products
will not become obsolete. In addition, the Company is subject to the risks
generally associated with new product introductions and applications,
including lack of market acceptance, delays in development or failure of
products to operate properly.
SHARES ELIGIBLE FOR FUTURE SALE
The market price of the Company's Common Stock could be adversely affected
by the availability for sale of shares held on November 15, 1995 by securities
holders of the Company, including (i) up to 2,965,829 shares which may be
delivered by Laidlaw Inc. or its affiliates ("Laidlaw"), at Laidlaw's option
in lieu of cash, at maturity pursuant to the terms of 5 3/4% Exchangeable
Notes due 2000 of Laidlaw (the amount of shares or cash delivered or paid to
be dependent within certain limits upon the value of the Common Stock at
maturity), (ii) 2,926,829 shares issuable upon conversion of convertible
debentures of the Company at a conversion price of $20.50 per share of Common
Stock that are currently registered for sale under the Securities Act pursuant
to a shelf registration statement, (iii) 2,353,729 outstanding shares that are
covered by three shelf registration statements filed under the Securities Act,
(iv) 1,320,000 shares issuable upon conversion of shares of preferred stock of
the Company, which are subject to an agreement pursuant to which the holder
has certain rights to request the Company to register the sale of such
holder's Common Stock under the Securities Act and, subject to certain
conditions, to include certain percentages of such shares in other
registration statements filed by the Company ("Registration Rights"), and (v)
334,626 outstanding shares subject to Registration Rights. In addition, the
Company has registered for sale under the Securities Act 2,000,000 shares
which may be issuable by the Company from time to time in connection with
acquisitions of businesses or assets from third parties.
SUBORDINATION
The Notes are subordinated in right of payment to all existing and future
Senior Indebtedness and are structurally subordinated to all liabilities
(including trade payables) of the Company's subsidiaries. The Indenture does
not restrict the incurrence of Senior Indebtedness or other indebtedness by
the Company or its subsidiaries. At September 30, 1995 the Company had
approximately $14.6 million of Senior Indebtedness outstanding. By reason of
such subordination of the Notes, in the event of the insolvency, bankruptcy,
liquidation, reorganization, dissolution or winding up of the business of the
Company or upon a default in payment with respect to any indebtedness of the
Company or an event of default with respect to such indebtedness resulting in
the acceleration thereof, the assets of the Company will be available to pay
the amounts due on the Notes only after all Senior Indebtedness has been paid
in full. The Notes rank pari passu in all respects with other unsecured
subordinated obligations of the Company, including the Company's 5%
Convertible Subordinated Debentures due 2000 (as defined). See "Description of
the Notes--Subordination."
The Company conducts its operations through its subsidiaries. Accordingly,
the Company's ability to meet its cash obligations is dependent in part upon
the ability of its subsidiaries to make cash distributions to the Company. The
ability of its subsidiaries to make distributions to the Company is and will
continue to be restricted by, among other limitations, applicable provisions
of the laws of national or state governments and contractual provisions. The
Indenture does not limit the ability of the Company's subsidiaries to incur
such restrictions in the future. The right of the Company to participate in
the assets of any subsidiary (and thus the ability of holders of the Notes to
benefit indirectly from such assets) are generally subject to the prior claims
of creditors, including trade creditors, of that subsidiary except to the
extent that the Company is recognized as a creditor of such subsidiary, in
which case the Company's claims would still be subject to any security
interest of other creditors of such subsidiary. The Notes, therefore, are
structurally subordinated to creditors, including trade creditors, of
subsidiaries of the Company with respect to the assets of the subsidiaries
against which such creditors have a claim. At September 30, 1995 the Company's
subsidiaries had approximately $119.8 million of trade payables and accrued
liabilities.
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ABSENCE OF EXISTING MARKET FOR NOTES
There is no established public trading market for the Notes. The Company
does not intend to list the Notes on any national securities exchange or to
seek the admission thereof to trading in the National Association of
Securities Dealers Automated Quotation system. The Company has been advised by
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") and PaineWebber
Incorporated ("PaineWebber"), the initial purchasers of the Notes (the
"Initial Purchasers"), that DLJ and PaineWebber are making and currently
intend to continue making a market in the Notes. However, DLJ and PaineWebber
are not obligated to make such a market and any market-making activities may
be discontinued at any time without notice. In addition, such market-making
activity is subject to the limits imposed by the Securities Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and may be
limited during the pendency of the shelf registration statement to which this
Prospectus relates. See "Description of the Notes--Registration Rights;
Liquidated Damages." Although the Notes have been designated for trading
through PORTAL, no assurance can be given that an active trading market for
the Notes will develop or, if such market develops, as to the liquidity or
sustainability of such market. If a trading market does not develop or is not
maintained, holders of the Notes may experience difficulty in reselling the
Notes or may be unable to sell them at all. If a market for the Notes
develops, any such market may be discontinued at any time. If a public trading
market develops for the Notes, future trading prices of the Notes will depend
on many factors, including, among other things, prevailing interest rates, the
Company's results of operations and the market for similar securities.
Depending on prevailing interest rates, the market for similar securities and
other factors, including the financial condition of the Company, the Notes may
trade at a discount from their principal amount.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED MARCH 31, SEPTEMBER 30,(1)
------------------------ ----------------
1991 1992 1993 1994 1995 1994 1995
---- ---- ---- ---- ---- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed
Charges(2).......................... -- -- 1.3x -- 3.3x 2.8x 2.8x
</TABLE>
- --------
(1) The historical consolidated financial data from which the Ratios of
Earnings to Fixed Charges were derived for the fiscal years ended March
31, 1991 through March 31, 1994 and for the six months ended September 30,
1994 has been restated to include the accounts and operations of
Liquipure, which was merged with the Company in July 1994 and accounted
for as a pooling of interests.
(2) The ratio of earnings to fixed charges has been computed by dividing
earnings available for fixed charges (income before interest expense,
interest income and income taxes, plus fixed charges) by fixed charges.
Fixed charges consist of interest expense (including amortization of
deferred financing costs) and the portion of rental expense that is
representative of the interest factor (deemed by the Company to be one-
third). Fixed charges exceeded loss before fixed charges by $1,848,000,
$6,290,000 and $4,874,000 for the years ended March 31, 1991, 1992 and
1994, respectively.
USE OF PROCEEDS
The Selling Securityholders will receive all of the net proceeds from the
sale of the Notes and Conversion Shares offered hereby. The Company will not
receive any of the proceeds from any such sale.
DESCRIPTION OF THE NOTES
Set forth below is a summary of certain provisions of the Notes. The Notes
were issued pursuant to an indenture (the "Indenture") dated as of September
18, 1995, by and between the Company and The First National Bank of Boston, as
trustee (the "Trustee"). State Street Bank and Trust Company is the successor
to
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The First National Bank of Boston, as Trustee. The following summary of the
Notes, the Indenture and the Registration Rights Agreement does not purport to
be complete and is subject to, and is qualified in its entirety by, reference
to all of the provisions of the Indenture and the Registration Rights
Agreement, including the definitions thereof. Copies of the Indenture and the
Registration Rights Agreement can be obtained from the Company upon request.
Capitalized terms used herein without definition have the meanings ascribed to
them in the Indenture or the Registration Rights Agreement, as appropriate. As
used in this section, "the Company" refers to United States Filter
Corporation, exclusive of its subsidiaries. Wherever particular provisions of
the Indenture are referred to in this summary, such provisions are
incorporated by reference as a part of the statements made and such statements
are qualified in their entirety by such reference.
GENERAL
The Notes are unsecured, subordinated, general obligations of the Company,
limited in aggregate principal amount to $140,000,000. The Notes are
subordinated in right of payment to all Senior Indebtedness of the Company, as
described under "Subordination" below. The Notes were issued only in fully
registered form, without coupons, in denominations of $1,000 and integral
multiples thereof.
The Notes mature on September 15, 2005. The Notes bear interest at 6% per
annum from the date of issuance or from the most recent Interest Payment Date
to which interest has been paid or provided for, payable semi-annually on
March 15 and September 15 of each year, commencing March 15, 1996, to the
persons in whose names such Notes are registered at the close of business on
March 1 or September 1 immediately preceding such Interest Payment Date.
Principal of, premium, if any, and interest on, and liquidated damages with
respect to, the Notes will be payable, the Notes will be convertible and the
Notes may be presented for registration of transfer or exchange, at the office
or agency of the Company maintained for such purpose, which office or agency
shall be maintained in the Borough of Manhattan, The City of New York.
Interest will be calculated on the basis of a 360-day year consisting of
twelve 30-day months.
At the option of the Company, payment of interest and liquidated damages may
be made by check mailed to the Holders of the Notes at the addresses set forth
upon the registry books of the Company. No service charge will be made for any
registration of transfer or exchange of Notes, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith. Until otherwise designated by the Company,
the Company's office or agency is the corporate trust office of the Trustee
presently located at 150 Royall Street, Canton, Massachusetts 02021.
CONVERSION RIGHTS
The Holder of any Notes has the right, at the Holder's option, to convert
any portion of the principal amount thereof that is an integral multiple of
$1,000 into shares of Common Stock at any time prior to the second Business
Day prior to the Stated Maturity of the Note (unless earlier redeemed or
repurchased) at the Conversion Price of $27.50 per share (equivalent to a
conversion rate of 36.36 shares per $1,000 principal amount of Notes) (subject
to adjustment as described below). The right to convert a Note called for
redemption or delivered for repurchase will terminate at the close of business
on the fifth or second Business Day, respectively, prior to the Redemption
Date or Repurchase Date for such Note, unless the Company subsequently fails
to pay the applicable Redemption Price or Repurchase Price, as the case may
be.
In the case of any Note that has been converted after any Record Date, but
on or before the next Interest Payment Date, interest the stated due date of
which is on such Interest Payment Date shall be payable on such Interest
Payment Date notwithstanding such conversion, and such interest shall be paid
to the Holder of such Note who is a Holder on such Record Date. Any Note so
converted must be accompanied by payment of an amount equal to the interest
payable on such Interest Payment Date on the principal amount of Notes being
surrendered for conversion. No fractional shares will be issued upon
conversion but, in lieu thereof, an appropriate amount will be paid in cash by
the Company based on the market price of Common Stock (as determined in
accordance with the Indenture) at the close of business on the day of
conversion.
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The Conversion Price is subject to adjustment in certain events, including:
(a) any payment of a dividend (or other distribution) payable in Common Stock
on any class of Capital Stock of the Company, (b) any issuance to all holders
of Common Stock of rights, options or warrants entitling them to subscribe for
or purchase Common Stock at less than the then current market price (as
determined in accordance with the Indenture) of Common Stock, provided,
however, that if such options or warrants are only exercisable upon the
occurrence of certain triggering events, then the conversion price will not be
adjusted until such triggering events occur, (c) any subdivision, combination
or reclassification of Common Stock, (d) any distribution to all holders of
Common Stock of evidences of indebtedness, shares of Capital Stock other than
Common Stock, cash or other assets (including securities, but excluding those
dividends, rights, options, warrants and distributions referred to above and
excluding dividends and distributions paid exclusively in cash), (e) any
distribution consisting exclusively of cash (excluding any cash portion of
distributions referred to in (d) above, or cash distributed upon a merger or
consolidation to which the second succeeding paragraph applies) to all holders
of Common Stock in an aggregate amount that, combined together with (i) all
other such all-cash distributions made within the then preceding 12 months in
respect of which no adjustment has been made and (ii) any cash and the fair
market value of other consideration paid or payable in respect of any tender
offer by the Company or any of its subsidiaries for Common Stock concluded
within the preceding 12 months in respect of which no adjustment has been
made, exceeds 15% of the Company's market capitalization (defined as being the
product of the then current market price of the Common Stock times the number
of shares of Common Stock then outstanding) on the record date of such
distribution, and (f) the completion of a tender offer made by the Company or
any of its Subsidiaries for Common Stock that involves an aggregate
consideration that, together with (i) any cash and other consideration payable
in a tender offer by the Company or any of its Subsidiaries for Common Stock
expiring within the 12 months preceding the expiration of such tender offer in
respect of which no adjustment has been made and (ii) the aggregate amount of
any such all-cash distributions referred to in (e) above to all holders of
Common Stock within the 12 months preceding the expiration of such tender
offer in respect of which no adjustments have been made, exceeds 15% of the
Company's market capitalization on the expiration of such tender offer. The
Company reserves the right to make such reductions in the conversion price in
addition to those required in the foregoing provisions as it considers to be
advisable in order that any event treated for Federal income tax purposes as a
dividend of stock or stock rights will not be taxable to the recipients. No
adjustment of the conversion price is required to be made until the cumulative
adjustments amount to 1.0% or more of the conversion price as last adjusted.
In the event that the Company distributes rights or warrants (other than
those referred to in (b) in the preceding paragraph) pro rata to holders of
Common Stock, so long as any such rights or warrants have not expired or been
redeemed by the Company, the Holder of any Note surrendered for conversion is
entitled to receive upon such conversion, in addition to the shares of Common
Stock issuable upon such conversion (the "Conversion Shares"), a number of
rights or warrants to be determined as follows: (i) if such conversion occurs
on or prior to the date for the distribution to the holders of rights or
warrants of separate certificates evidencing such rights or warrants (the
"Distribution Date"), the same number of rights or warrants to which a holder
of a number of shares of Common Stock equal to the number of Conversion Shares
is entitled at the time of such conversion in accordance with the terms and
provisions of and applicable to the rights or warrants, and (ii) if such
conversion occurs after such Distribution Date, the same number of rights or
warrants to which a holder of the number of shares of Common Stock into which
such Note was convertible immediately prior to such Distribution Date would
have been entitled on such Distribution Date in accordance with the terms and
provisions of and applicable to the rights or warrants. The conversion price
of the Notes is not subject to adjustment on account of any declaration,
distribution or exercise of such rights or warrants.
In case of any reclassification, consolidation or merger of the Company with
or into another Person or any merger of another Person with or into the
Company (with certain exceptions), or in case of any sale, transfer or
conveyance of all or substantially all of the assets of the Company (computed
on a consolidated basis), each Note then outstanding will, without the consent
of any Holder of Notes, become convertible only into the kind and amount of
securities, cash and other property receivable upon such reclassification,
consolidation, merger, sale, transfer or conveyance by a holder of the number
of shares of Common Stock into which such Note was
8
<PAGE>
convertible immediately prior thereto, after giving effect to any adjustment
event, who failed to exercise any rights of election and received per share
the kind and amount received per share by a plurality of non-electing shares.
The Company will use its best efforts to cause all registrations with, and
to obtain any approvals by, any governmental authority under any Federal or
state law of the United States that may be required in connection with the
conversion of the Notes into Common Stock. If at any time during the three-
year period following September 18, 1995, a registration statement under the
Securities Act covering the shares of Common Stock issuable upon conversion of
the Notes is not effective, shares of Common Stock issued upon conversion of
the Notes ("Restricted Shares") may not be sold or otherwise transferred
except in accordance with or pursuant to an exemption from, or otherwise in a
transaction not subject to, the registration requirements of the Securities
Act and, if a registration statement under the Securities Act is not effective
at the time of a conversion, the Restricted Shares will bear a legend to that
effect. The Transfer Agent for the Common Stock is not required to accept for
registration or transfer any Restricted Shares, except upon presentation of
satisfactory evidence that these restrictions on transfer have been complied
with, all in accordance with such reasonable regulations as the Company may
from time to time agree with the Transfer Agent. Under certain circumstances,
the holders of the Notes are entitled to liquidated damages during such
period. See "Description of the Notes--Registration Rights; Liquidated
Damages."
SUBORDINATION
The Notes are general, unsecured obligations of the Company, subordinated in
right of payment to all existing and future Senior Indebtedness of the Company
and rank pari passu in all respects with other unsecured subordinated
indebtedness of the Company, including the 5% Convertible Subordinated
Debentures due 2000. The Notes are structurally subordinated in right of
payment to all liabilities (including trade payables and capitalized lease
obligations) of the Company's subsidiaries. At September 30, 1995 the Company
had $14,573,000 of Senior Indebtedness outstanding. The rights of Holders are
subordinated by operation of law to all existing and future indebtedness of
the Company's subsidiaries, which as of September 30, 1995 was approximately
$119,822,000 of trade payables and accrued liabilities. The Indenture does not
restrict the incurrence of Senior Indebtedness or other indebtedness by the
Company or its Subsidiaries.
The Indenture provides that no payment may be made by the Company on account
of the principal of, premium, if any, interest on, or liquidated damages with
respect to, the Notes, or to acquire any of the Notes (including repurchases
of Notes at the option of the Holder) for cash or property (other than Junior
Securities), or on account of the redemption provisions of the Notes, (i) upon
the maturity of any Senior Indebtedness of the Company by lapse of time,
acceleration (unless waived) or otherwise, unless and until all principal of,
premium, if any, and interest on such Senior Indebtedness are first paid in
full (or such payment is duly provided for), or (ii) in the event of default
in the payment of any principal of, premium, if any, or interest on any Senior
Indebtedness of the Company when it becomes due and payable, whether at
maturity or at a date fixed for prepayment or by declaration or otherwise (a
"Payment Default"), unless and until such Payment Default has been cured or
waived or otherwise has ceased to exist.
Upon (i) the happening of an event of default (other than a Payment Default)
that permits the holders of Senior Indebtedness or their representative
immediately to accelerate its maturity and (ii) written notice of such event
of default given to the Company and the Trustee by the holders of an aggregate
of at least $20,000,000 principal amount outstanding of such Senior
Indebtedness or their representative (a "Payment Notice"), then, unless and
until such event of default has been cured or waived or otherwise has ceased
to exist, no payment (by setoff or otherwise) may be made by or on behalf of
the Company on account of the principal of, premium, if any, interest on, or
liquidated damages with respect to, the Notes, or to acquire or repurchase any
of the Notes for cash or property, or on account of the redemption provisions
of the Notes, in any such case other than payments made with Junior Securities
of the Company. Notwithstanding the foregoing, unless (i) the Senior
Indebtedness in respect of which such event of default exists has been
declared due and payable in its entirety
9
<PAGE>
within 179 days after the Payment Notice is delivered as set forth above (the
"Payment Blockage Period"), and (ii) such declaration has not been rescinded
or waived, at the end of the Payment Blockage Period, the Company shall be
required to pay all sums not paid to the Holders of the Notes during the
Payment Blockage Period due to the foregoing prohibitions and to resume all
other payments as and when due on the Notes. Any number of Payment Notices may
be given; provided, however, that (i) not more than one Payment Notice shall
be given within a period of any 360 consecutive days, and (ii) no default that
existed upon the date of such Payment Notice or the commencement of such
Payment Blockage Period (whether or not such event of default is on the same
issue of Senior Indebtedness) shall be made the basis for the commencement of
any other Payment Blockage Period.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company (other than Junior Securities) shall be
received by the Trustee or the Holders at a time when such payment or
distribution is prohibited by the foregoing provisions, such payment or
distribution shall be held in trust for the benefit of the holders of Senior
Indebtedness of the Company, and shall be paid or delivered by the Trustee or
such Holders, as the case may be, to the holders of the Senior Indebtedness of
the Company remaining unpaid or unprovided for or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing any of such Senior Indebtedness of the
Company may have been issued, ratably according to the aggregate amounts
remaining unpaid on account of the Senior Indebtedness of the Company held or
represented by each, for application to the payment of all Senior Indebtedness
of the Company remaining unpaid, to the extent necessary to pay or to provide
for the payment of all such Senior Indebtedness in full after giving effect to
any concurrent payment or distribution to the holders of such Senior
Indebtedness.
Upon any distribution of assets of the Company upon any dissolution, winding
up, total or partial liquidation or reorganization of the Company, whether
voluntary or involuntary, in bankruptcy, insolvency, receivership or a similar
proceeding or upon assignment for the benefit of creditors or any marshalling
of assets or liabilities, (i) the holders of all Senior Indebtedness of the
Company will first be entitled to receive payment in full (or have such
payment duly provided for) before the Holders are entitled to receive any
payment on account of the principal of, premium, if any, interest on, and
liquidated damages with respect to, the Notes (other than Junior Securities)
and (ii) any payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities (other than Junior
Securities) to which the Holders or the Trustee on behalf of the Holders would
be entitled (by setoff or otherwise), except for the subordination provisions
contained in the Indenture, will be paid by the liquidating trustee or agent
or other person making such a payment or distribution directly to the holders
of Senior Indebtedness of the Company or their representative to the extent
necessary to make payment in full of all such Senior Indebtedness remaining
unpaid, after giving effect to any concurrent payment or distribution to the
holders of such Senior Indebtedness.
No provision contained in the Indenture or the Notes affects the obligation
of the Company, which is absolute and unconditional, to pay, when due,
principal of, premium, if any, interest on, and liquidated damages with
respect, to the Notes. The subordination provisions of the Indenture and the
Notes do not prevent the occurrence of any Default or Event of Default under
the Indenture or limit the rights of the Trustee or any Holder, subject to the
two preceding previous paragraphs, to pursue any other rights or remedies with
respect to the Notes.
As a result of these subordination provisions, in the event of the
liquidation, bankruptcy, reorganization, insolvency, receivership or similar
proceeding or an assignment for the benefit of the creditors of the Company or
any of its Subsidiaries or a marshalling of assets or liabilities of the
Company and its Subsidiaries, Holders of the Notes may receive ratably less
than other creditors.
The Company conducts its operations through its Subsidiaries. Accordingly,
the Company's ability to meet its cash obligations is dependent upon the
ability of its Subsidiaries to make cash distributions to the Company. The
ability of its Subsidiaries to make distributions to the Company is and will
continue to be restricted by, among other limitations, applicable provisions
of the laws of national and state governments and contractual
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<PAGE>
provisions. The Indenture does not limit the ability of the Company's
subsidiaries to incur such restrictions in the future. The right of the
Company to participate in the assets of any Subsidiary (and thus the ability
of holders of the Notes to benefit indirectly from such assets) is generally
subject to the prior claims of creditors, including trade creditors, of that
Subsidiary except to the extent that the Company is recognized as a creditor
of such Subsidiary, in which case the Company's claims would still be subject
to any security interest of other creditors of such Subsidiary. The Notes,
therefore, are structurally subordinated to creditors, including trade
creditors, of Subsidiaries of the Company with respect to the assets of the
Subsidiaries against which such creditors have a claim.
REDEMPTION AT THE COMPANY'S OPTION
The Notes are not subject to redemption prior to September 23, 1998 and are
redeemable on such date and thereafter at the option of the Company, in whole
or in part, upon not less than 30 nor more than 60 days' notice to each
Holder, at the following redemption prices (expressed as percentages of the
principal amount) if redeemed during the 12-month period commencing September
15 of the years indicated below, in each case (subject to the right of Holders
of record on a Record Date to receive interest due on an Interest Payment Date
that is on or prior to such Redemption Date) together with accrued and unpaid
interest and liquidated damages, if any, to the Redemption Date:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
1998.............................................................. 103.75%
1999.............................................................. 103.00%
2000.............................................................. 102.25%
2001.............................................................. 101.50%
2002.............................................................. 100.75%
2003 and thereafter............................................... 100%
</TABLE>
In the case of a partial redemption, the Trustee shall select the Notes or
portions thereof for redemption on a pro rata basis, by lot or in such other
manner it deems appropriate and fair. The Notes may be redeemed in part in
multiples of $1,000 only.
The Notes will not have the benefit of any sinking fund.
Notice of any redemption will be sent, by first-class mail, at least 30 days
and not more than 60 days prior to the date fixed for redemption, to the
Holder of each Note to be redeemed to such Holder's last address as then shown
upon the registry books of the Registrar. The notice of redemption must state
the Redemption Date, the Redemption Price and the amount of accrued interest
to be paid. Any notice that relates to a Note to be redeemed in part only must
state the portion of the principal amount equal to the unredeemed portion
thereof and must state that on and after the Redemption Date, upon surrender
of such Note, a new Note or Notes in principal amount equal to the unredeemed
portion thereof will be issued. On and after the Redemption Date, interest
will cease to accrue on the Notes or portions thereof called for redemption,
unless the Company defaults in its obligations with respect thereto.
REPURCHASE OF NOTES AT THE OPTION OF THE HOLDER UPON A CHANGE OF CONTROL
The Indenture provides that in the event that a Change of Control (as
defined) has occurred, each Holder of Notes will have the right, at such
Holder's option, pursuant to an irrevocable and unconditional offer by the
Company (the "Repurchase Offer"), to require the Company to repurchase all or
any part of such Holder's Notes (provided, that the principal amount of such
Notes must be $1,000 or an integral multiple thereof) on the date (the
"Repurchase Date") that is no later than 40 Business Days after the occurrence
of such Change of Control at a cash price (the "Repurchase Price") equal to
101% of the principal amount thereof, together with accrued and unpaid
interest to the Repurchase Date. The Repurchase Offer shall be made within 15
Business Days following a Change of Control and shall remain open for 20
Business Days following its commencement (the
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<PAGE>
"Repurchase Offer Period"). Upon expiration of the Repurchase Offer Period,
the Company shall purchase all Notes tendered in response to the Repurchase
Offer. If required by applicable law, the Repurchase Date and the Repurchase
Offer Period may be extended as so required; however, if so extended, it shall
nevertheless constitute an Event of Default if the Repurchase Date does not
occur within 60 Business Days of the Change of Control.
The Indenture provides that a "Change of Control" occurs (i) upon any merger
or consolidation of the Company with or into any person or any sale, transfer
or other conveyance, whether direct or indirect, of all or substantially all
of the assets of the Company, on a consolidated basis, in one transaction or a
series of related transactions, if, immediately after giving effect to such
transaction, any "person" or "group" (as such terms are used for purposes of
Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable) is or
becomes the "beneficial owner," directly or indirectly, of more than 50% of
the total voting power in the aggregate normally entitled to vote in the
election of directors, managers, or trustees, as applicable, of the transferee
or surviving entity, (ii) when any "person's or "group" (as such terms are
used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or
not applicable) is or becomes the "beneficial owner," directly or indirectly,
of more than 50% of the total voting power in the aggregate normally entitled
to vote in the election of directors of the Company, or (iii) when, during any
period of 12 consecutive months after the Issue Date, individuals who at the
beginning of any such 12-month period constituted the Board of Directors of
the Company (together with any new directors whose election by such Board or
whose nomination for election by the shareholders of the Company was approved
by a vote of a majority of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved), cease for any reason to constitute a
majority of the Board of Directors of the Company then in office.
On or before the Repurchase Date, the Company will (i) accept for payment
Notes or portions thereof properly tendered pursuant to the Repurchase Offer,
(ii) deposit with the Paying Agent cash sufficient to pay the Repurchase Price
(together with accrued and unpaid interest) of all Notes so tendered and (iii)
deliver to the Trustee Notes so accepted, together with an Officers'
Certificate listing the Notes or portions thereof being purchased by the
Company. The Paying Agent will promptly mail to the Holders of Notes so
accepted payment in an amount equal to the Repurchase Price (together with
accrued and unpaid interest), and the Trustee will promptly authenticate and
mail or deliver to such Holders a new Note or Notes equal in principal amount
to any unpurchased portion of the Notes surrendered. Any Notes not so accepted
will be promptly mailed or delivered by the Company to the Holder thereof. The
Company will publicly announce the results of the Repurchase Offer on or as
soon as practicable after the Repurchase Date.
The phrase "all or substantially all" of the assets of the Company is likely
to be interpreted by reference to applicable state law at the relevant time,
and will be dependent on the facts and circumstances existing at such time. As
a result, there may be a degree of uncertainty in ascertaining whether a sale
or transfer of "all or substantially all" of the assets of the Company has
occurred. In addition, no assurances can be given that the Company will be
able to acquire the Notes tendered upon the occurrence of a Change of Control.
For purposes of this definition, (i) the terms "person" and "group" shall
have the meaning used for purposes of Rules 13d-3 and 13d-5 of the Exchange
Act as in effect on the Issue Date, whether or not applicable; and (ii) the
term "beneficial owner" shall have the meaning used in Rules 13d-3 and 13d-5
under the Exchange Act as in effect on the Issue Date, whether or not
applicable, except that a "person" shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time or upon the occurrence of certain events.
The Change of Control purchase feature of the Notes may make more difficult
or discourage a takeover of the Company, and, thus, the removal of incumbent
management. The Change of Control purchase feature resulted from negotiations
between the Company and the Initial Purchasers.
The provisions of the Indenture relating to a Change of Control may not
afford the Holders protection in the event of a highly leveraged transaction,
reorganization, restructuring, merger, spin-off or similar transaction that
may adversely affect Holders, if such transaction does not constitute a Change
of Control, as set forth above.
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<PAGE>
In addition, the Company may not have sufficient financial resources available
to fulfill its obligation to repurchase the Notes upon a Change of Control or
to repurchase other debt securities of the Company or its Subsidiaries
providing similar rights to the holders thereof.
To the extent applicable and if required by law, the Company will comply
with Section 14 of the Exchange Act and the provisions of Regulation 14E and
any other tender offer rules under the Exchange Act and any other securities
laws, rules and regulations that may then be applicable to any offer by the
Company to purchase the Notes at the option of Holders upon a Change of
Control.
The right to require the Company to repurchase Notes as a result of the
occurrence of a Change of Control could create an event of default under
Senior Indebtedness as a result of which any repurchase could, absent a
waiver, be blocked by the subordination provision of the Notes. See "--
Subordination." Failure of the Company to repurchase the Notes when required
would result in an Event of Default with respect to the Notes whether or not
such repurchase is permitted by the subordination provisions.
RULE 144A INFORMATION REQUIREMENT
The Company has agreed to furnish to the Holders or beneficial holders of
the Notes or the underlying Common Stock and prospective purchasers of the
Notes or the underlying Common Stock designated by the Holders of the Notes or
the underlying Common Stock, upon their request, the information required to
be delivered pursuant to Rule 144A(d)(4) under the Securities Act until such
time as such securities are no longer "restricted securities" within the
meaning of Rule 144 under the Securities Act.
LIMITATION ON MERGER, SALE OR CONSOLIDATION
The Indenture provides that the Company may not, directly or indirectly,
consolidate with or merge with or into another person or sell, lease, convey
or transfer all or substantially all of its assets (computed on a consolidated
basis), whether in a single transaction or a series of related transactions,
to another Person or group of affiliated Persons, unless (i) either (a) in the
case of a merger or consolidation the Company is the surviving entity or (b)
the resulting, surviving or transferee entity is a corporation organized under
the laws of the United States, any state thereof or the District of Columbia
and expressly assumes by supplemental indenture all of the obligations of the
Company in connection with the Notes and the Indenture; and (ii) no Default or
Event of Default shall exist or shall occur immediately after giving effect on
a pro forma basis to such transaction.
Upon any consolidation or merger or any transfer of all or substantially all
of the assets of the Company in accordance with the foregoing, the successor
corporation formed by such consolidation or into which the Company is merged
or to which such transfer is made, shall succeed to, and be substituted for,
and may exercise every right and power of, the Company under the Indenture
with the same effect as if such successor corporation had been named therein
as the Company, and the Company will be released from its obligations under
the Indenture and the Notes, except as to any obligations that arise from or
as a result of such transaction.
REPORTS
Whether or not the Company is subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act, the Company shall deliver to the
Trustee and to each Holder, within 15 days after it is or would have been
required to file such with the SEC, annual and quarterly consolidated
financial statements substantially equivalent to financial statements that
would have been included in reports filed with the SEC if the Company was
subject to the requirements of Section 13 or 15(d) of the Exchange Act,
including, with respect to annual information only, a report thereon by the
Company's certified independent public accountants as such would be required
in such reports to the SEC and, in each case, together with a management's
discussion and analysis of financial condition and results of operations as
such would be so required.
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<PAGE>
EVENTS OF DEFAULT AND REMEDIES
The Indenture defines an Event of Default as (i) the failure by the Company
to pay any installment of interest on, or liquidated damages with respect to,
the Notes as and when due and payable and the continuance of any such failure
for 30 days, (ii) the failure by the Company to pay all or any part of the
principal of, or premium, if any on the Notes when and as the same become due
and payable at maturity, redemption, by acceleration or otherwise, including,
without limitation, pursuant to any Repurchase Offer or otherwise, (iii) the
failure of the Company to perform any conversion of Notes required under the
Indenture and the continuance of any such failure for 30 days, (iv) the
failure by the Company to observe or perform any other covenant or agreement
contained in the Notes or the Indenture and, subject to certain exceptions,
the continuance of such failure for a period of 60 days after written notice
is given to the Company by the Trustee or to the Company and the Trustee by
the Holders of at least 25% in aggregate principal amount of the Notes
outstanding, (v) certain events of bankruptcy, insolvency or reorganization in
respect of the Company or any of its Subsidiaries, (vi) a default in the
payment of principal, premium or interest when due that extends beyond any
stated period of grace applicable thereto or an acceleration for any other
reason of the maturity of any Indebtedness of the Company or any of its
Subsidiaries with an aggregate principal amount in excess of $15 million, and
(vii) final unsatisfied judgments not covered by insurance aggregating in
excess of $15 million, at any one time rendered against the Company or any of
its Subsidiaries and not stayed, bonded or discharged within 75 days. The
Indenture provides that if a Default occurs and is continuing, the Trustee
must, within 90 days after the occurrence of such default, give to the Holders
notice of such default.
The Indenture provides that if an Event of Default occurs and is continuing
(other than an Event of Default specified in clause (v) above), then in every
such case, unless the principal of all of the Notes shall have already become
due and payable, either the Trustee or the Holders of 25% in aggregate
principal amount of the Notes then outstanding, by notice in writing to the
Company (and to the Trustee if given by Holders) (an "Acceleration Notice"),
may declare all principal and accrued interest thereon to be due and payable
immediately. If an Event of Default specified in clause (v) above occurs, all
principal and accrued interest thereon will be immediately due and payable on
all outstanding Notes without any declaration or other act on the part of the
Trustee or the Holders. The Holders of no less than a majority in aggregate
principal amount of Notes generally are authorized to rescind such
acceleration if all existing Events of Default, other than the non-payment of
the principal of, premium, if any, and interest on, and liquidated damages
with respect to, the Notes that have become due solely by such acceleration,
have been cured or waived.
Prior to the declaration of acceleration of the maturity of the Notes, the
Holders of a majority in aggregate principal amount of the Notes at the time
outstanding may waive on behalf of all the Holders any default, except a
default in the payment of principal of or interest on any Note not yet cured,
or a default with respect to any covenant or provision that cannot be modified
or amended without the consent of the Holder of each outstanding Note
affected. Subject to the provisions of the Indenture relating to the duties of
the Trustee, the Trustee is under no obligation to exercise any of its rights
or powers under the Indenture at the request, order or direction of any of the
Holders, unless such Holders have offered to the Trustee reasonable security
or indemnity. Subject to all provisions of the Indenture and applicable law,
the Holders of a majority in aggregate principal amount of the Notes at the
time outstanding have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee.
AMENDMENTS AND SUPPLEMENTS
The Indenture contains provisions permitting the Company and the Trustee to
enter into a supplemental indenture for certain limited purposes without the
consent of the Holders. With the consent of the Holders of not less than a
majority in aggregate principal amount of the Notes at the time outstanding,
the Company and the Trustee are permitted to amend or supplement the Indenture
or any supplemental indenture or modify the rights of the Holders; provided,
that no such modification may, without the consent of each Holder affected
thereby: (i) change the Stated Maturity of any Note or reduce the principal
amount thereof or the rate (or extend the time for payment) of interest
thereon or any premium payable upon the redemption thereof, or change the
place of
14
<PAGE>
payment where, or the coin or currency in which, any Note or any premium or
the interest thereon is payable, or impair the right to institute suit for the
enforcement of any such payment or the conversion of any Note on or after the
due date thereof (including, in the case of redemption, on or after the
Redemption Date), or reduce the Repurchase Price, or alter the Repurchase
Offer or redemption provisions in a manner adverse to the Holders, or (ii)
reduce the percentage in principal amount of the outstanding Notes, the
consent of whose Holders is required for any such amendment, supplemental
indenture or waiver provided for in the Indenture, or (iii) adversely affect
the right of such Holder to convert Notes, or (iv) modify any of the waiver
provisions, except to increase any required percentage or to provide that
certain other provisions of the Indenture cannot be modified or waived without
the consent of the Holder of each outstanding Note affected thereby.
NO PERSONAL LIABILITY OF STOCKHOLDERS, OFFICER, DIRECTORS AND EMPLOYEES
The Indenture provides that no stockholder, employee, officer or director,
as such, past, present or future of the Company or any successor corporation
shall have any personal liability in respect of the obligations of the Company
under the Indenture or the Notes by reason of his, her or its status as such
stockholder, employee, officer or director.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange the Notes in accordance with the
Indenture. The Company may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents, and to pay any taxes and fees
required by law or permitted by the Indenture. The Company is not required to
transfer or exchange any Notes selected for redemption. Also, the Company is
not required to transfer or exchange any Notes for a period of 15 days before
a selection of Notes to be redeemed.
The registered holder of a Note may be treated as the owner of it for all
purposes.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth below, the Notes were initially issued in the form of
registered Notes in global form (the "Global Notes"). Each Global Note was
deposited on the date of the closing of the sale of the Notes (the "Closing
Date") with, or on behalf of, The Depository Trust Company (the "Depositary")
and registered in the name of Cede & Co., as nominee of the Depositary.
Interests in Global Notes are available for purchase only by "qualified
institutional buyers," as defined in Rule 144A under the Securities Act
("QIBs").
Notes that were (i) originally issued to or transferred to institutional
"accredited investors," as defined in Rule 501(a)(1), (2), (3) or (7) under
the Securities Act, who are not QIBs or to any other persons who are not QIBs
or (ii) issued as described below under "Certificated Notes," were issued in
the form of registered definitive securities ("Certificated Notes"). Upon the
transfer to a QIB of Certificated Notes, such Certificated Notes will, unless
the Global Note has previously been exchanged for Certificated Notes, be
exchanged for an interest in the Global Note representing the principal amount
of Notes being transferred.
The Depositary has advised the Company that it is a limited-purpose trust
company that was created to hold securities for its participating
organizations (collectively, the "Participants") and to facilitate the
clearance and settlement of transactions in such securities between
Participants through electronic book-entry changes in accounts of its
Participants. The Depositary's Participants include securities brokers and
dealers (including the Initial Purchasers), banks and trust companies,
clearing corporations and certain other organizations. Access to the
Depositary's system is also available to other entities such as banks,
brokers, dealers and trust companies (collectively, "Indirect Participants")
that clear through or maintain a custodial relationship with a Participant,
either directly or indirectly. QIBs may elect to hold Notes purchased by them
through the Depositary. QIBs who are not Participants may beneficially own
securities held by or on behalf of the Depositary only through Participants or
Indirect Participants. Persons that are not QIBs may not hold Notes through
the Depositary.
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<PAGE>
The Company expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global Notes, the Depositary will credit
the accounts of Participants designated by the Initial Purchasers with an
interest in the Global Note and (ii) ownership of the Notes evidenced by the
Global Note will be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by the Depositary (with respect to
the interests of Participants), the Participants and the Indirect
Participants. The laws of some states require that certain persons take
physical delivery in definitive form of securities that they own and that
security interests in negotiable instruments can only be perfected by delivery
of certificates representing the instruments. Consequently, the ability to
transfer Notes evidenced by the Global Note will be limited to such extent.
So long as the Depositary or its nominee is the registered owner of a Note,
the Depositary or such nominee, as the case may be, will be considered the
sole owner or holder of the Notes represented by the Global Note for all
purposes under the Indenture. Except as provided below, owners of beneficial
interests in a Global Note will not be entitled to have Notes represented by
such Global Note registered in their names, will not receive or be entitled to
receive physical delivery of Certificated Notes, and will not be considered
the owners or holders thereof under the Indenture for any purpose, including
with respect to the giving of any directions, instructions or approvals to the
Trustee thereunder. As a result, the ability of a person having a beneficial
interest in Notes represented by a Global Note to pledge such interest to
persons or entities that do not participate in the Depositary's system, or to
otherwise take actions with respect to such interest, may be affected by the
lack of a physical certificate evidencing such interest.
Neither the Company nor the Trustee has any responsibility or liability for
any aspect of the records relating to or payments made on account of Notes by
the Depositary, or for maintaining, supervising or reviewing any records of
the Depositary relating to such Notes.
Payments with respect to the principal of, premium, if any, interest on, and
liquidated damages with respect to, any Note represented by a Global Note
registered in the name of the Depositary or its nominee on the applicable
record date are payable by the Trustee to or at the direction of the
Depositary or its nominee in its capacity as the registered Holder of the
Global Note representing such Notes under the Indenture. Under the terms of
the Indenture, the Company and the Trustee may treat the persons in whose
names the Notes, including the Global Notes, are registered as the owners
thereof for the purpose of receiving such payments and for any and all other
purposes whatsoever. Consequently, neither the Company nor the Trustee has or
will have any responsibility or liability for the payment of such amounts to
beneficial owners of Notes (including principal, premium, if any, interest, or
liquidated damages with respect thereto), or to immediately credit the
accounts of the relevant Participants with such payment, in amounts
proportionate to their respective holdings in principal amount of beneficial
interests in the Global Note as shown on the records of the Depositary.
Payments by the Participants and the Indirect Participants to the beneficial
owners of Notes are governed by standing instructions and customary practice
and are the responsibility of the Participants or the Indirect Participants.
CERTIFICATED NOTES
If (i) the Company notifies the Trustee in writing that the Depositary is no
longer willing or able to act as a depositary and the Company is unable to
locate a qualified successor within 90 days, or (ii) the Company, at its
option, notifies the Trustee in writing that it elects to cause the issuance
of Notes in definitive form under the Indenture, then, upon surrender by the
Depositary of the Global Notes, Certificated Notes will be issued to each
person that the Depositary identifies as the beneficial owner of the Notes
represented by Global Notes. In addition, subject to certain conditions, any
person having a beneficial interest in a Global Note may, upon request to the
Trustee, exchange such beneficial interest for Notes in the form of
Certificated Notes. Upon any such issuance, the Trustee is required to
register such Certificated Notes in the name of such person or persons (or the
nominee of any thereof), and cause the same to be delivered thereto.
Neither the Company nor the Trustee shall be liable for any delay by the
Depositary or any Participant or Indirect Participant in identifying the
beneficial owners of the Notes, and the Company and the Trustee may
16
<PAGE>
conclusively rely on, and shall be protected in relying on, instructions from
the Depositary for all purposes (including with respect to the registration
and delivery, and the respective principal amounts, of the Notes to be
issued).
SAME-DAY FUNDS SETTLEMENT AND PAYMENT
The Indenture requires that payments in respect of the Notes represented by
the Global Notes (including principal, premium, if any, interest and
liquidated damages with respect thereto) be made by wire transfer of
immediately available funds to the accounts specified by the Depositary. With
respect to Notes represented by Certificated Notes, the Company will make all
payments of principal, premium, if any, interest and liquidated damages with
respect thereto, by mailing a check to each such Holder's registered address.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearing-house or next-day funds. In contrast, the Notes
represented by the Global Notes have been designated for trading in the PORTAL
market and to trade in the Depositary's Same-Day Funds Settlement System, and
any permitted secondary market trading activity in such Notes will, therefore,
be required by the Depositary to be settled in immediately available funds.
The Company expects that secondary trading in the Certificated Notes will also
be settled in immediately available funds.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
The Company and the Initial Purchasers have entered into a Registration
Rights Agreement dated as of September 18, 1995 (the "Registration Rights
Agreement").
Pursuant to the Registration Rights Agreement, the Company has filed with
the SEC a shelf registration statement under the Securities Act (the "Shelf
Registration Statement") on Form S-3, to cover resales of Transfer Restricted
Securities by the holders thereof who satisfy certain conditions relating to
the provision of information in connection with the Shelf Registration
Statement. The Company will use its best efforts to cause the applicable
registration statement to be declared effective by the SEC as soon as
practicable after the date of filing and to keep such registration statement
effective until September 18, 1998, three years after the date of original
issue of the Notes, or until the Shelf Registration Statement is no longer
required for transfer of the Notes or the underlying Common Stock. For
purposes of the foregoing, "Transfer Restricted Securities" means each Note
and share of Common Stock issued upon conversion thereof until the date on
which such Note or share of Common Stock has been effectively registered under
the Securities Act and disposed of in accordance with the Shelf Registration
Statement or the date on which such Note or share of Common Stock is
distributed to the public pursuant to Rule 144 under the Securities Act or is
salable pursuant to Rule 144(k) under the Securities Act (or any similar
provisions then in force).
The Registration Rights Agreement provides that (i) the Company will file
the Shelf Registration Statement with the SEC on or prior to 90 days after the
Closing Date and (ii) the Company will use its best efforts to cause the Shelf
Registration Statement to be declared effective by the SEC on or prior to 120
days after the Closing Date (the "Effectiveness Target Date"). If (i) the
Shelf Registration Statement is not filed with the SEC on or prior to 90 days
after the Closing Date, (ii) the Shelf Registration Statement has not been
declared and effective by the SEC within 120 days after the Closing Date, or
(iii) the Shelf Registration Statement is filed and declared effective but
shall thereafter cease to be effective (without being succeeded immediately by
an additional Shelf Registration Statement filed and declared effective) for a
period of time which shall exceed 90 days in the aggregate per year (each such
event referred to in clauses (i) through (iii), a "Registration Default"), the
Company will pay liquidated damages to each Holder of Transfer Restricted
Securities, during the first 90-day period immediately following the
occurrence of such Registration Default, in an amount equal to $0.05 per week
per $1,000 principal amount of Notes and, if applicable, $0.01 per week per
share (subject to adjustment in the event of stock splits, stock
recombinations, stock dividends and the like) of Common Stock constituting
Transfer Restricted Securities held by such Holder. The amount of the
liquidated damages will increase by an additional $0.05 per week per $1,000
principal amount or $0.01 per week per share (subject to adjustment as set
forth above) of Common Stock constituting Transfer Restricted Securities for
each subsequent 90-day period until the
17
<PAGE>
applicable Registration Statement is filed and the applicable Registration
Statement is declared effective, or the Shelf Registration Statement again
becomes effective, as the case may be, up to a maximum amount of liquidated
damages with respect to any Registration Default of $0.25 per week per $1,000
principal amount of Notes or $0.05 per week per share (subject to adjustment
as set forth above) of Common Stock constituting Transfer Restricted
Securities. All accrued liquidated damages shall be paid to holder of Notes by
wire transfer of immediately available funds or by Federal funds check by the
Company on each Damages Payment Date. Following the cure of a Registration
Default, liquidated damages will cease to accrue with respect to such
Registration Default.
So long as the Notes and Common Stock are outstanding, the Company will
continue to provide to holders of the Notes and Common Stock and to
prospective purchasers of the Notes and Common Stock the information required
by Rule 144A(d) (4), if applicable. The Shelf Registration Statement will
remain effective until the earlier of three years following the Closing or
until the Shelf Registration Statement is no longer required for transfer of
the Notes or the underlying Common Stock.
CERTAIN DEFINITIONS
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
that is not a day on which banking institutions in New York, New York are
authorized or obligated by law or executive order to close.
"Capital Stock" means, with respect to any corporation, any and all shares,
interests, rights to purchase (other than convertible or exchangeable
indebtedness), warrants, options, participations or other equivalents of or
interests (however designated) in stock issued by that corporation.
"Indebtedness" of any person means, without duplication, (a) all liabilities
and obligations, contingent or otherwise, of any such person, (i) in respect
of borrowed money (whether or not the recourse of the lender is to the whole
of the assets of such person or only to a portion thereof), (ii) evidenced by
bonds, notes, debentures or similar instruments, (iii) representing the
balance deferred and unpaid of the purchase price of any property or services,
except such as would constitute trade payables to trade creditors in the
ordinary course of business that are not more than 90 days past their original
due date, (iv) evidenced by bankers' acceptances or similar instruments issued
or accepted by banks, (v) for the payment of money relating to a Capitalized
Lease Obligation, or (vi) evidenced by a letter of credit or a reimbursement
obligation of such person with respect to any letter of credit; (b) all net
obligations of such person under Interest Swap and Hedging Obligations; (c)
all liabilities of others of the kind described in the preceding clauses (a)
or (b) that such person has guaranteed or that is otherwise its legal
liability and all obligations to purchase, redeem or acquire any Capital
Stock; and (d) any and all deferrals, renewals, extensions, refinancings and
refundings (whether direct or indirect) of any liability of the kind described
in any of the preceding clauses (a), (b) or (c), or this clause (d), whether
or not between or among the same parties.
"Issue Date" or "Closing Date" means the date of first issuance of the Notes
under the Indenture.
"Junior Securities" of any Person means any Qualified Capital Stock and any
Indebtedness of such Person that is subordinated in right of payment to the
Notes and has no scheduled installment of principal due, by redemption,
sinking fund payment or otherwise, on or prior to the Stated Maturity of the
Notes.
"Senior Indebtedness" of the Company means any Indebtedness of the Company,
whether outstanding on the date of the Indenture or thereafter created,
incurred, assumed, guaranteed or in effect guaranteed by the Company, unless
the instrument creating or evidencing such Indebtedness provides that such
Indebtedness is not senior or superior in right of payment to the Notes or to
other Indebtedness which is pari passu with, or subordinated to, the Notes;
provided that in no event shall Senior Indebtedness include (a) Indebtedness
of the Company owed or owing to any Subsidiary of the Company or any officer,
director or employee of the Company or any Subsidiary of the Company, (b)
Indebtedness to trade creditors, (c) the Company's 5% Convertible Subordinated
Debentures due 2000, or (d) any liability for taxes owed or owing by the
Company.
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<PAGE>
"Stated Maturity" when used with respect to any Note, means September 15,
2005.
"Subsidiary," with respect to any person, means (i) a corporation a majority
of whose Capital Stock with voting power normally entitled to vote in the
election of directors is at the time, directly or indirectly, owned by such
person, by such person and one or more Subsidiaries of such person or by one
or more Subsidiaries of such person, (ii) a partnership in which such Person
or a subsidiary of such Person is, at the time, a general partner, or (iii)
any other person (other than a corporation) in which such person, one or more
Subsidiaries of such person, or such person and one or more subsidiaries of
such person, directly or indirectly, at the date of determination thereof has
at least majority ownership interest.
SELLING SECURITYHOLDERS
The Notes and Conversion Shares that may be offered pursuant to this
Prospectus will be offered by the Selling Securityholders identified in the
table below. The following table sets forth information with respect to the
Selling Securityholders and the principal amount of Notes owned, all of which
may be sold hereunder, and the percentage of all outstanding Notes held by the
Selling Securityholders, all as of September 22, 1995:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
NAME OF SELLING NOTES PERCENT OF TOTAL
SECURITYHOLDER OWNED OUTSTANDING NOTES
--------------- ----------- -----------------
<S> <C> <C>
Investors Diversified Services $20,000,000 14.3%
Trust Company of the West 12,000,000 8.6
Fidelity Management 10,000,000 7.1
Lynch & Mayer 3,000,000 2.1
Oppenheimer Mgmt-Funds 3,000,000 2.1
Phoenix Insurance 3,000,000 2.1
General Motors Corp. 2,500,000 1.7
Keystone Funds Inc. 2,500,000 1.7
Oak Tree Capital 2,500,000 1.7
Peck Associates 2,500,000 1.7
Aim Investment Mgmt 2,000,000 1.4
Janus Fund 2,000,000 1.4
Massachusetts Investors Trust 2,000,000 1.4
Morgan Guaranty Tr. Co. 2,000,000 1.4
Putnam Management 2,000,000 1.4
Strong Associates 2,000,000 1.4
Allstate Insurance Co. 1,500,000 1.1
Franklin Asset Management 1,500,000 1.1
Vance Sanders 1,500,000 1.1
American Capital Mgmt 1,000,000 0.7
AON Corporation 1,000,000 0.7
Sea Associates 1,000,000 0.7
Delaware Management 1,000,000 0.7
Fiduciary Trust Co Of New York 1,000,000 0.7
Merrill Lynch Asset Management 1,000,000 0.7
New York Life Insurance 1,000,000 0.7
Pacific Mutual--L.A. 1,000,000 0.7
Tennessee State Ret 1,000,000 0.7
Dean Witter Intercapital 1,000,000 0.7
Fred Alger Mgmt-N.Y. 500,000 0.4
Bass Brothers Enterprises Inc. 500,000 0.7
Bank of America Capital Mgmt. 500,000 0.4
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
NAME OF SELLING NOTES PERCENT OF TOTAL
SECURITYHOLDER OWNED OUTSTANDING NOTES
--------------- --------- -----------------
<S> <C> <C>
Harris Trust & Savings Bank 500,000 0.4
Neuberger Berman 500,000 0.4
Pallisade 500,000 0.4
Rochester Funds 500,000 0.4
Stein Roe & Farnham 500,000 0.4
Value Line 500,000 0.4
B.A.I.I. 3,000,000 2.1
Kuwait Financial Trading Contracting 1,000,000 0.7
Aveco Berne 750,000 0.5
Gulf Investment Partners 500,000 0.4
Vereinsbk Hamburg 500,000 0.4
Maap 400,000 0.3
Abn Amro Bank Zurich 350,000 0.3
Lloyds Geneve 350,000 0.3
Barclays Biarritz 300,000 0.2
Barque Lazard Freres 300,000 0.2
Kantonale Bank Zurich 300,000 0.2
Atag Berne 250,000 0.1
Banque Indosuez 200,000 0.1
B.S.I. (Intl.) 200,000 0.1
Capital Trust 200,000 0.1
Paribas Lugano 200,000 0.1
Rominvest 200,000 0.1
Unione Banche Svizzera 200,000 0.1
United Gulf 200,000 0.1
Banca Commerciale Lugano 100,000 0.1
Clayvard 100,000 0.1
Daiwa Inv. Trust Mgmt 100,000 0.1
Gen De Banque Brux 100,000 0.1
Paribas-Bruxelles (Intl) 100,000 0.1
Sempione 100,000 0.1
Cincinnati Financial 1,500,000 1.1
Everglades Partners 100,000 0.1
Pacific Capital 100,000 0.1
Mass Mutual Life Insurance Co. 3,000,000 2.1
Gen Capital 1,500,000 1.1
Royal Trust 1,300,000 0.9
Templeton Investment Counsel 1,000,000 0.7
Sahuaro Comm. 100,000 0.1
Calamos 1,500,000 1.1
State of Montana 1,500,000 1.1
Koch Industries 500,000 0.4
Camden Asset 1,500,000 1.1
Sage Capital 1,000,000 0.7
Hermes Capital 250,000 0.2
Froley Revx Investments 3,000,000 2.1
Nicholas Applegate Capital Mgmt 3,000,000 2.1
Desai Capital Mgmt 1,500,000 1.1
Orion 1,500,000 1.1
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
NAME OF SELLING NOTES PERCENT OF TOTAL
SECURITYHOLDER OWNED OUTSTANDING NOTES
--------------- ------------ -----------------
<S> <C> <C>
Solomon 1,500,000 1.1
Bass Brothers 1,000,000 0.7
Hull 1,000,000 0.7
Society Nat'l. Bk. 1,000,000 0.7
Baker Nye 500,000 0.4
Highbridge 500,000 0.4
Latterman 500,000 0.4
Paloma 500,000 0.4
Simon 500,000 0.4
Lipco Partners 350,000 0.3
Firebird 250,000 0.2
Forest Hills 250,000 0.2
Gabelli Asset Management 250,000 0.2
Q Investments 250,000 0.2
Carret & Co. 100,000 0.1
Gordon Mgt 100,000 0.1
Lindner Dividend Fund Inc. 5,200,000 3.6
Willougby Houn Harris & Rentner 300,000 0.2
Mctash & Hill 100,000 0.1
------------
Total $140,000,000
============
</TABLE>
The preceding table has been prepared based upon information furnished to the
Company by The Depository Trust Company ("DTC"), State Street Bank and Trust
Company, trustee under the Indenture, and by or on behalf of the Selling
Securityholders.
Other than as a result of the ownership of Notes, none of the Selling
Securityholders listed above had any material relationship with the Company
within the three year period ending on the date of this Prospectus.
Because the Selling Securityholders may offer all or some of the Notes that
they hold and/or Conversion Shares pursuant to the offering contemplated by
this Prospectus, and because there are currently no agreements, arrangements or
understandings with respect to the sale of any of the Notes or Conversion
Shares by the Selling Securityholders, no estimate can be given as to the
principal amount of Notes or Conversion Shares that will be held by the Selling
Securityholders after completion of this offering. See "Plan of Distribution."
PLAN OF DISTRIBUTION
The Company will not receive any of the proceeds from this offering. The
Notes and Conversion Shares offered hereby may be sold from time to time by or
for the account of any of the Selling Securityholders or by their pledgees,
donees or transferees or other successors in interest to the Selling
Securityholders. The Notes and the Conversion Shares may be sold hereunder
directly to purchasers by the Selling Securityholders, in negotiated
transactions; by or through brokers or dealers in ordinary brokerage
transactions or transactions in which the broker solicits purchasers; block
trades in which the broker or dealer will attempt to sell Notes or Conversion
Shares as agent but may position and resell a portion of the block as
principal; transactions in which a broker or dealer purchases as principal for
resale for its own account; or through underwriters or agents. The Notes or
Conversion Shares may be sold at a fixed offering price, which may be changed,
at the prevailing market price at the time of sale, at prices related to such
prevailing market price or at negotiated prices. Any brokers, dealers,
underwriters or agents may arrange for others to participate in any such
transaction and may receive compensation in the form of discounts, commissions
or concessions from the Selling Securityholders and/or the
21
<PAGE>
purchasers of Notes or Conversion Shares. Each Selling Securityholder will be
responsible for payment of any and all commissions to brokers. To the extent
required, the name of any such broker, dealer, agent or underwriter and any
applicable commissions with respect to a particular offer, including required
information pertaining to that offer, will be set forth in an accompanying
Prospectus Supplement. The aggregate proceeds to the Selling Securityholders
from the sale of the Notes and Conversion Shares offered by the Selling
Securityholders hereby will be the purchase price of such Notes and Conversion
Shares less any broker's commissions.
The Company has been advised by DLJ and PaineWebber, the Initial Purchasers,
that DLJ and PaineWebber are making and currently intend to continue making a
market in the Notes. However, DLJ and PaineWebber are not obligated to make
such a market and any market-making activities may be discontinued at any time
without notice. There can be no assurance that an active market for the Notes
will develop or continue. The Company does not intend to apply for listing of
the Notes on any securities exchange or for quotation through the National
Association of Securities Dealers Automated Quotation System. The Common Stock
is listed and principally traded on the New York Stock Exchange.
In order to comply with the securities laws of certain states, if
applicable, the Notes and Conversion Shares will be sold in such jurisdiction
only through registered or licensed brokers or dealers. In addition, in
certain states the Notes and Conversion Shares may not be sold unless they
have been registered or qualified for sale in the applicable state or an
exemption from the registration or qualification requirement is available and
is complied with.
The Selling Securityholders and any broker-dealers, agents or underwriters
that participate with the Selling Securityholders in the distribution of the
Notes or Conversion Shares may be deemed to be "underwriters" within the
meaning of the Securities Act, in which event any commissions received by such
broker-dealers, agents or underwriters and any profit on the resale of the
Notes or Conversion Shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
Under applicable rules and regulations under the Exchange Act, any persons
engaged in the distribution of the Notes or the Conversion Shares offered
hereby may not simultaneously engage in market making activities with respect
to either the Notes or the Conversion Shares for a period of nine business
days (two business days in the case of Conversion Shares) prior to the
commencement of such distribution. In addition, and without limiting the
foregoing, each Selling Securityholder will be subject to applicable
provisions of the Exchange Act and the rules and regulations thereunder,
including, without limitation, Rules 10b-2, 10b-5, 10b-6 and 10b-7, which
provisions may limit the timing of purchases and sales of Notes or Conversion
Shares by the Selling Securityholders.
In addition, any securities covered by this Prospectus which qualify for
sale pursuant to Rule 144 or Rule 144A of the Securities Act may be sold under
Rule 144 or Rule 144A rather than pursuant to this Prospectus. There is no
assurance that any Selling Securityholder will sell any or all of the Notes or
Conversion Shares described herein, and any Selling Securityholder may
transfer, devise or gift such securities by other means not described herein.
The Notes were originally sold to DLJ and PaineWebber in September 1995 in a
private placement. The Company agreed to indemnify and hold DLJ and
PaineWebber harmless against certain liabilities under the Securities Act that
could arise in connection with the sale of the Notes by DLJ and PaineWebber.
The Company and the Selling Securityholders are obligated to indemnify each
other against certain liabilities arising under the Securities Act.
The Company will use its best efforts to cause the registration statement to
which this Prospectus relates to become effective as promptly as is
practicable and to keep the registration statement effective until September
18, 1998, three years after the date of original issue of the Notes, or until
the Shelf Registration Statement is no longer required for transfer of the
Notes or the underlying Common Stock. The Company is permitted to suspend the
use of this Prospectus in connection with sales of Notes and Conversion Shares
by holders during certain
22
<PAGE>
periods of time under certain circumstances relating to pending corporate
developments and public filings with the Commission and similar events.
Expenses of preparing and filing the registration statement and all post-
effective amendments will be borne by the Company.
DESCRIPTION OF CAPITAL STOCK
General. As of October 3, 1995, the Company was authorized to issue
75,000,000 shares of Common Stock, par value $.01 per share, of which
25,509,909 shares were issued and outstanding, and 3,000,000 shares of
preferred stock, par value $.10 per share, of which 880,000 shares have been
designated Series A Voting Cumulative Convertible Preferred Stock ("Series A
Preferred Stock"), all of which were issued and outstanding, and of which
64,815 have been designated Series B Voting Convertible Preferred Stock, of
which none were issued and outstanding. Of the unissued shares of Common
Stock, 1,320,000 shares were reserved for issuance upon conversion of the
Series A Preferred Stock, 2,926,829 shares were reserved for issuance upon
conversion of the Company's 5% Convertible Subordinated Debentures due 2000,
5,090,909 shares were reserved for issuance upon conversion of the Notes, an
aggregate of 2,214,669 shares were reserved for issuance pursuant to the
Company's 1991 Employee Stock Option Plan, and 327,000 shares were reserved
for issuance pursuant to the Company's 1991 Directors Stock Option Plan.
Common Stock. The holders of Common Stock are entitled to one vote for each
share held of record by them on all matters to be voted on by stockholders.
There is no cumulative voting with respect to the election of directors; thus,
the holders of shares having more than 50% of the Company's voting power
(including both common and voting preferred shares) voting for the election of
directors can elect all of the directors. The holders of Common Stock are
entitled to receive dividends when, as and if declared by the Board of
Directors out of funds legally available therefor, subject to the prior rights
of preferred stockholders. In the event of liquidation, dissolution or a
winding up of the Company's affairs, the holders of Common Stock are entitled
to share ratably in all assets remaining available for distribution to them
after payment of liabilities and after provision has been made for each class
of stock, including any preferred stock, that has preference over the Common
Stock. Except as described below under "Stock Purchase Rights," holders of
shares of Common Stock, as such, have no conversion, preemptive or other
subscription rights, and there are no redemption or sinking fund provisions
applicable to the Common Stock. All of the outstanding shares of Common Stock
are, and the Shares when issued will be, validly issued, fully paid and
nonassessable.
The Company currently intends to retain earnings to provide funds for the
operation and expansion of its business and accordingly does not anticipate
paying cash dividends on the Common Stock in the foreseeable future. Any
payment of cash dividends on the Common Stock in the future will depend upon
the Company's financial condition, earnings, capital requirements and such
other factors as the Board of Directors deems relevant. Dividends on the
Common Stock are subject to the prior payment of dividends on the Series A
Preferred Stock. In addition, under the Company's credit agreement with The
First National Bank of Boston and First Interstate Bank of California, no
dividends may be paid on the Common Stock without the consent of those banks.
Preferred Stock. Shares of preferred stock may be issued without stockholder
approval. The Board of Directors is authorized to issue such shares in one or
more series and to fix the rights, preferences, privileges, qualifications,
limitations and restrictions thereof, including dividend rights and rates,
conversion rights, voting rights, terms of redemption, redemption prices,
liquidation preferences and the number of shares constituting any series or
the designation of such series, without any vote or action by the
stockholders. The Company has no current plans for the issuance of any
additional shares of preferred stock. Any preferred stock to be issued could
rank prior to the Common Stock with respect to dividend rights and rights on
liquidation. The Board of Directors, without stockholder approval, may issue
preferred stock with voting and conversion rights that could adversely affect
the voting power of holders of Common Stock or create impediments to persons
seeking to gain control of the Company.
23
<PAGE>
Series A Preferred Stock. Each share of Series A Preferred Stock is
currently convertible into 1.5 shares of Common Stock subject to certain
events, and votes together with the Common Stock on an "as converted" basis,
except with respect to certain actions for which the Series A Preferred Stock
is entitled to vote as a class. The Series A Preferred Stock automatically
converts into Common Stock if the closing price of the Common Stock is at
least 150% of an amount equal to $25.00 divided by the number of shares into
which each share is convertible at that time. A cumulative dividend is payable
on the Series A Preferred Stock at the rate of $.812 per share annually,
subject to adjustment under certain circumstances. The Series A Preferred
Stock has a preference in liquidation over holders of common stock of $25 per
share plus accrued dividends. The Company, at its option, may redeem shares of
the Series A Preferred Stock, subject to certain conditions, at a price of $30
per share (and, under certain circumstances, at a price of $25.00 per share)
plus accrued dividends. Reacquired or redeemed shares are required to be
retired and cancelled.
Stock Purchase Rights. Laidlaw, which currently holds 2,965,829 shares of
Common Stock, and Aluminum Company of America, which currently holds 880,000
shares of Series A Preferred Stock, have certain rights to purchase voting
securities of the Company in order to maintain their respective percentage
voting interests. Except in connection with mergers or other acquisitions or
in the ordinary course under an employee stock option or stock bonus plan, in
the event the Company proposes to sell or issue shares of voting securities,
each of these holders has the right to purchase, on the same terms as the
proposed sale or issuance, that number of shares or rights as will maintain
such holder's percentage interest in the voting securities of the Company,
assuming the conversion of all convertible securities and the exercise of all
options and warrants then outstanding. In addition, these holders have other
purchase rights with respect to sales or issuances of securities by the
Company at prices below 85% of current market price at the time of sale or
issuance or the prevailing customary price for such securities or their
equivalent.
Certain Voting Arrangements. Pursuant to the agreements whereby the Company
acquired Smogless S.p.A. ("Smogless") in September 1994, the Company agreed,
so long as Laidlaw owns at least 5% of the Company's voting securities, to
nominate a person designated by Laidlaw for election to the Board. In
addition, Laidlaw agreed to vote all shares owned by it for the Board's
nominees for election to the Board and on all other matters in the same
proportion as the votes cast by the other holders of voting securities, other
than those that relate to any business combination or similar transaction
involving the Company or any amendment to the Company's Certificate of
Incorporation or Bylaws.
Laidlaw has also agreed not to (i) solicit proxies in opposition to a
recommendation of the Board, (ii) join a group for the purpose of acquiring,
voting or disposing of voting securities of the Company or (iii) solicit
stockholders for the approval of one or more stockholder proposals.
Laidlaw has agreed not to acquire voting securities of the Company during
the six-year period following the date of the Smogless acquisition if, after
the acquisition, its percentage share of the Company's voting power would
exceed 40%, except under certain circumstances, including if any person makes
(a) an offer to acquire voting securities of the Company that would result in
such person owning 20% or more of the voting power of the Company or (b) a
formal proposal for a business combination involving control of the Company,
which proposal is either (i) not withdrawn or terminated or rejected by the
Board within 30 days after such proposal is made, or (ii) accepted by the
Board.
Certain Charter and Bylaw Provisions. The Company's Certificate of
Incorporation (the "Certificate") places certain restrictions on the voting
rights of a "Related Person," defined therein as any person who directly or
indirectly owns 5% or more of the outstanding voting stock of the Company. The
founders and the original directors of the Company are excluded from the
definition of "Related Persons," as are seven named individuals including
Richard J. Heckmann, the Chairman of the Board, President and Chief Executive
Officer of the Company. These voting restrictions apply in two situations.
First, the vote of a director who is also a Related Person is not counted in
the vote of the Board of Directors to call a meeting of stockholders where
that meeting will consider a proposal made by the Related Person director.
Second, any amendments to the Certificate that
24
<PAGE>
relate to specified Articles therein (those dealing with corporate governance,
limitation of director liability or amendments to the Certificate), in
addition to being approved by the Board of Directors and a majority of the
Company's outstanding voting stock, must also be approved by either (i) a
majority of directors who are not Related Persons, or (ii) the holders of at
least 80% of the Company's outstanding voting stock, provided that if the
change was proposed by or on behalf of a Related Person, then approval by the
holders of a majority of the outstanding voting stock not held by Related
Persons is also required. In addition, any amendment to the Company's Bylaws
must be approved by one of the methods specified in clauses (i) and (ii) in
the preceding sentence.
The Certificate and the Company's Bylaws provide that the Board of Directors
shall fix the number of directors and that the Board shall be divided into
three classes, each consisting of one-third of the total number of directors
(or as nearly as may be possible). Stockholders may not take action by written
consent. Meetings of stockholders may be called only by the Board of Directors
(or by a majority of its members). Stockholder proposals, including director
nominations, may be considered at a meeting only if written notice of that
proposal is delivered to the Company from 30 to 60 days in advance of the
meeting, or within ten days after notice of the meeting is first given to
stockholders.
Delaware Anti-Takeover Law. Section 203 of the Delaware General Corporation
Law ("Section 203") provides, in general, that a stockholder acquiring more
than 15% of the outstanding voting shares of a corporation subject to the
statute (an "Interested Stockholder"), but less than 85% of such shares, may
not engage in certain "Business Combinations" with the corporation for a
period of three years subsequent to the date on which the stockholder became
an Interested Stockholder unless (i) prior to such date the corporation's
board of directors has approved either the Business Combination or the
transaction in which the stockholder became an Interested Stockholder or (ii)
the Business Combination is approved by the corporation's board of directors
and authorized by a vote of at least two-thirds of the outstanding voting
stock of the corporation not owned by the Interested Stockholder.
Section 203 defines the term "Business Combination" to encompass a wide
variety of transactions with or caused by an Interested Stockholder in which
the Interested Stockholder receives or could receive a benefit on other than a
pro rata basis with other stockholders, including mergers, certain asset
sales, certain issuances of additional shares to the Interested Stockholder,
transactions with the corporation that increase the proportionate interest of
the Interested Stockholder or transactions in which the Interested Stockholder
receives certain other benefits.
These provisions could have the effect of delaying, deferring or preventing
a change of control of the Company. The Company's stockholders, by adopting an
amendment to the Certificate or Bylaws of the Company, may elect not to be
governed by Section 203, effective twelve months after adoption. Neither the
Certificate nor the Bylaws of the Company currently excludes the Company from
the restrictions imposed by Section 203.
DESCRIPTION OF CERTAIN INDEBTEDNESS
The following summarizes the material long-term indebtedness of the Company.
At September 30, 1995, the Company's total consolidated long-term debt
(including current maturities) accounted for 42.6% of its total
capitalization. This summary does not include a description of the Notes and
is not a complete description of the indebtedness described. The description
set forth herein is qualified in its entirety by reference to the material
agreements relating to such indebtedness.
5% Convertible Subordinated Debentures Due 2000. The Company has outstanding
$60,000,000 principal amount of 5% Convertible Subordinated Debentures due
2000, which are due on October 15, 2000. Interest on the 5% Convertible
Subordinated Debentures due 2000 is payable semi-annually. The 5% Convertible
Subordinated Debentures due 2000 are redeemable in whole or in part at the
option of the Company at any time
25
<PAGE>
on or after October 25, 1996 at a price, expressed as a percentage of the
principal amount, ranging from 102.86% in 1996 to 100.71% in 1999, plus
accrued interest. The 5% Convertible Subordinated Debentures due 2000 are
unsecured subordinated obligations of the Company and will rank pari passu in
all respects with other unsecured subordinated obligations of the Company,
including the Notes. Upon certain changes in control of the Company, holders
of the 5% Convertible Subordinated Debentures due 2000 have the right to
require the Company to repurchase all or a portion of their 5% Convertible
Subordinated Debentures due 2000 at 100% of principal amount plus accrued
interest. The 5% Convertible Subordinated Debentures due 2000 are convertible
into Common Stock, currently at a conversion price of $20.50 per share,
subject to adjustment upon the occurrence of certain events. The Company has
filed and is maintaining the effectiveness of a shelf registration statement
covering resales by the holders of all 5% Convertible Subordinated Debentures
due 2000 and the Common Stock issuable upon conversion thereof.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain Federal income tax considerations for
purchasers of the Notes and is based on the Federal income tax law now in
effect, which is subject to change, possibly retroactively. This summary does
not discuss all aspects of Federal income taxation that may be relevant to
particular holders of Notes in light of their individual investment
circumstances or to certain types of investors subject to special tax rules
(e.g., financial institutions, insurance companies, tax-exempt organizations
and foreign taxpayers), nor does it discuss any aspects of state, local or
foreign tax law consequences. This summary assumes that investors will hold
their Notes as "capital assets" (generally, property held for investment)
under the Internal Revenue Code of 1986, as amended. Prospective purchasers
are urged to consult their tax advisors regarding the specific Federal, state,
local and foreign income and other tax consequences of purchasing, holding and
disposing of the Notes.
SALE OR EXCHANGE
A holder will recognize capital gain or loss upon the sale or other
disposition of a Note in an amount equal to the difference between the amount
realized from such disposition and his tax basis in the Note. Such gain or
loss will be long-term if the Note has been held for more than one year.
CONVERSION
A holder's conversion of a Note into Common Stock is generally not a taxable
event (except with respect to cash received in lieu of a fractional share).
The holder's tax basis in the Common Stock received on conversion of a Note
will be the same as the holder's tax basis in the Note at the time of
conversion (exclusive of any tax basis allocable to a fractional share), and
the holding period for the Common Stock received on conversion will include
the holding period of the Note converted.
CONSTRUCTIVE DIVIDEND
If at any time the Company makes a distribution of property to shareholders
that would be taxable to such shareholders as a dividend for Federal income
tax purposes and, in accordance with the antidilution provisions of the Notes,
the Conversion Price of the Notes is decreased, the amount of such decrease
may be deemed to be the payment of a taxable dividend to holders. For example,
a decrease in the Conversion Price in the event of distributions of evidence
of indebtedness or assets of the Company will generally result in deemed
dividend treatment to holders, but generally a decrease in the event of stock
dividends or the distribution of rights to subscribe for shares will not. See
"Description of the Notes--Conversion Rights."
26
<PAGE>
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon the
Company by Damian C. Georgino, Vice President and General Counsel of the
Company. Mr. Georgino presently holds 100 shares of the Company's Common Stock
and options granted under the Company's 1991 Employee Stock Option Plan to
purchase an aggregate of 10,000 shares of the Common Stock.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The consolidated financial statements of United States Filter Corporation
and its subsidiaries as of March 31, 1994 and 1995 and for each of the three
years in the period ended March 31, 1995, have been incorporated herein by
reference in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, which report is incorporated herein by
reference, and upon the authority of said firm as experts in accounting and
auditing.
The statements of assets acquired and liabilities assumed of Arrowhead
Industrial Water, Inc. as of December 31, 1994 and 1993 and the related
statements of revenues and expenses for each of the two years then ended, have
been incorporated herein by reference in reliance upon the report of KPMG Peat
Marwick LLP, independent certified public accountants, which report is
incorporated herein by reference, and upon the authority of said firm as
experts in accounting and auditing.
The combined financial statements of Continental H2O Services, Inc. and
Evansville Water Corporation d/b/a Interlake Water Systems as of December 31,
1994 and for the year then ended have been incorporated herein by reference in
reliance upon the report of KPMG Peat Marwick LLP, independent certified
public accountants, which report is incorporated herein by reference, and upon
the authority of said firm as experts in accounting and auditing.
The consolidated financial statements of Polymetrics, Inc. and subsidiaries
as of December 31, 1994 and for the year then ended have been incorporated
herein by reference in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, which report is incorporated herein
by reference, and upon the authority of said firm as experts in accounting and
auditing.
27
<PAGE>
===============================================================================
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE
IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................................................... 2
Incorporation of Certain Documents by Reference........................... 2
The Company................................................................ 3
Risk Factors............................................................... 3
Ratio of Earnings to Fixed Charges......................................... 6
Use of Proceeds............................................................ 6
Description of the Notes................................................... 6
Selling Securityholders.................................................... 19
Plan of Distribution....................................................... 21
Description of Capital Stock............................................... 23
Description of Certain Indebtedness........................................ 25
Certain Federal Income Tax Consequences.................................... 26
Legal Matters.............................................................. 27
Independent Certified Public Accountants................................... 27
</TABLE>
================================================================================
================================================================================
$140,000,000
LOGO
UNITED STATES FILTER CORPORATION
6% CONVERTIBLE SUBORDINATED NOTES DUE 2005
AND
SHARES OF COMMON STOCK
ISSUABLE UPON CONVERSION THEREOF
---------------
PROSPECTUS
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NOVEMBER 27, 1995
================================================================================
