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Filed Pursuant to Rule 424(b)(3)
File Number 333-45825
PROSPECTUS
OMNICARE, INC.
$345,000,000 PRINCIPAL AMOUNT OF 5% CONVERTIBLE
SUBORDINATED DEBENTURES DUE 2007
(Interest payable June 1 and December 1)
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8,976,222 SHARES OF COMMON STOCK
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This Prospectus relates to (i) $345,000,000 aggregate principal amount
of 5% Convertible Subordinated Debentures due 2007 (the "Debentures") of
Omnicare, Inc., a Delaware corporation ("Omnicare" or the "Company"), (ii)
8,712,121 shares of common stock, par value $1.00 per share (the "Common
Stock"), of the Company which are initially issuable upon conversion of the
Debentures plus such additional indeterminate number of shares of Common Stock
as may become issuable upon conversion of the Debentures as a result of
adjustments to the conversion price (the "Conversion Shares") and (iii) 264,101
additional shares of Common Stock (the "Additional Shares"). The Conversion
Shares and the Additional Shares are referred to herein collectively as the
"Shares." The Debentures and the Shares that are being registered hereby are to
be offered for the account of the holders thereof or by their transferees,
pledgees, donees or successors (the "Selling Securityholders"). The Debentures
were initially acquired from the Company by Morgan Stanley & Co. Incorporated,
Credit Suisse First Boston Corporation, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, NationsBanc Montgomery Securities, Inc., Smith Barney Inc. and
William Blair & Company, L.L.C. (the "Initial Purchasers") in December 1997 in
connection with a private offering. See "Description of the Debentures."
The Debentures are convertible into Common Stock of the Company at any
time after March 10, 1998 through maturity, unless previously redeemed, at a
conversion price of $39.60 per share, subject to adjustments in certain events.
The Common Stock is traded on the New York Stock Exchange ("NYSE") under the
symbol "OCR." On February 5, 1998, the closing price of the Common Stock on the
NYSE Composite Tape was $31.75 per share.
The Debentures do not provide for a sinking fund. The Debentures are
redeemable at the option of the Company, in whole or in part, at the redemption
prices set forth in this Prospectus, together with accrued interest, except that
no redemption may be made prior to December 6, 2000. Upon a Fundamental Change
(as defined herein), each holder of Debentures shall have the right, at the
holder's option, to require the Company to redeem such holder's Debentures at
declining redemption prices, subject to adjustments in certain events as
described herein, together with accrued interest. See "Description of Debentures
- - Optional Redemption by the Company" and "- Redemption at Option of the
Holder."
The Debentures are unsecured obligations of the Company and are
subordinated to all present and future Senior Indebtedness (as defined herein)
of the Company and will be effectively subordinated to all indebtedness and
liabilities of subsidiaries of the Company. The Indenture (as defined herein)
does not restrict the incurrence of any other indebtedness or liabilities by the
Company or its subsidiaries. See "Description of Debentures - Subordination of
Debentures."
The Initial Purchasers have advised the Company that they intend to
make a market in the Debentures. The Initial Purchasers, however, are not
obligated to do so and any such market making may be discontinued at any time
without notice, in the sole discretion of the Initial Purchasers. No assurance
can be given that any market for the Debentures will develop or be maintained.
The Debentures and the Shares are being registered to permit public
secondary trading of (i) the Debentures and, upon conversion, the Conversion
Shares and (ii) the Additional Shares, by the holders thereof from time to time
after the date of this Prospectus. The Company has agreed, among other things,
to bear all expenses (other than underwriting discounts and commissions) in
connection with the registration and sale of the Debentures and the Shares
covered by this Prospectus.
The Company will not receive any of the proceeds from sales of
Debentures or the Shares by the Selling Securityholders. The Debentures and the
Shares may be offered in negotiated transactions or otherwise, at market prices
prevailing at the time of sale or at negotiated prices. See "Plan of
Distribution." The Selling Securityholders may be deemed to be "underwriters" as
defined in the Securities Act of 1933, as amended (the "Securities Act"). If any
broker-dealers are used by the Selling Securityholders, any commissions paid to
broker-dealers and, if broker-dealers purchase any Debentures or Shares as
principals, any profits received by such broker-dealers on the resale of the
Debentures or Shares may be deemed to be underwriting discounts or commissions
under the Securities Act. In addition, any profits realized by the Selling
Securityholders may be deemed to be underwriting commissions.
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SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
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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 February 13, 1998
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AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement (the "Registration Statement") on Form
S-3 under the Securities Act with respect to the Debentures and the Shares
offered hereby. This Prospectus does not contain all the information set forth
in the Registration Statement and the exhibits and schedules thereto. For
further information with respect to the Company and the Debentures and the
Shares offered hereby, reference is made to the Registration Statement and to
the exhibits and schedules filed therewith. Statements contained in this
Prospectus as to the contents of any contract or other document are not
necessarily complete and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference. The
Company is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files
reports, proxy statements and other information with the Commission. Copies of
such reports, proxy statements, the Registration Statement and exhibits thereto
and other information may be inspected without charge at the offices of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549
and at the regional offices of the Commission located at 7 World Trade Center,
New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661, and copies of such documents may be obtained from
the Public Reference Section of the Commission at its Washington, D.C. or
regional offices upon the payment of the fees prescribed by the Commission. The
Commission maintains a World Wide Web site on the Internet at http://www.sec.gov
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. Reports,
proxy statements and other information concerning Omnicare can be inspected at
the NYSE, 20 Broad Street, New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, as amended; the Company's Quarterly Reports on Form 10-Q for
the quarters ended March 31, 1997, as amended, June 30, 1997 and September 30,
1997, as amended; the Company's Current Reports on Form 8-K dated January 31,
1997, February 6, 1997, May 31, 1997, August 6, 1997, August 8, 1997, September
12, 1997 (as amended September 29, 1997 and December 4, 1997), December 1, 1997
and December 10, 1997; and the Company's Form 8-A Registration Statement filed
September 14, 1993 are hereby incorporated by reference in this Prospectus. All
documents filed with the Commission pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering being made hereby shall be deemed to be incorporated
by reference into this Prospectus and to be a part hereof from the date of
filing of such documents. Any statement contained in any document incorporated
or deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that a statement
contained herein or in 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 modified or superseded, to constitute a part of this Prospectus. The
Company will provide without charge to each person, including any beneficial
owner, to whom this Prospectus is delivered, upon written or oral request of
such person, a copy of any and all of the documents that have been or may be
incorporated by reference herein (other than exhibits to such documents which
are not specifically incorporated by reference into such documents). Such
requests should be directed to Omnicare, Inc., 50 East RiverCenter Blvd. --
Suite 1530, Covington, Kentucky 41011, Attention: Corporate Secretary -- Cheryl
D. Hodges (telephone: (606) 291-6800).
THE COMPANY
Omnicare is a leading independent provider of pharmacy and related
services to long-term care institutions such as nursing homes, retirement
centers and other institutional health care facilities. Omnicare purchases,
repackages and dispenses pharmaceuticals, both prescription and
non-prescription, and provides computerized medical recordkeeping and
third-party billing for residents in such facilities. Omnicare also provides
consultant pharmacist services, including evaluating monthly patient drug
therapy, monitoring the control, distribution and administration of drugs within
the nursing facility and assisting in compliance with state and federal
regulations. In addition, Omnicare provides ancillary services, such as infusion
therapy, distributes medical supplies and offers clinical care plan and
financial software information systems to its client nursing home facilities.
Omnicare
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currently provides these services to approximately 445,100 residents in
approximately 5,500 long-term care and other institutional health care
facilities in 37 states. Omnicare's executive offices are located at 50 East
RiverCenter Blvd. -- Suite 1530, Covington, Kentucky 41011, and its telephone
number is (606) 655-1180.
RISK FACTORS
This Prospectus (including the documents incorporated by reference
herein) contains, in addition to historical information, forward-looking
statements that involve risks and uncertainties. The Company's actual results
could differ materially. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed below, as well as
those discussed elsewhere in this Prospectus (including the documents
incorporated by reference herein).
RISKS RELATING TO ACQUISITION PROGRAM
In accordance with its strategy for growth, which is to build its
institutional pharmacy business into a national organization dedicated to
serving the long-term care market, Omnicare is presently engaged in a geographic
expansion program which incorporates an active acquisition program in the
long-term care pharmacy industry. The success of Omnicare's acquisition program
and of its underlying growth strategy will depend, among other things, on the
continued availability of suitable acquisition candidates. Although Omnicare
historically has not had difficulty in identifying suitable acquisition
candidates, there can be no assurance that Omnicare will consummate any
additional acquisitions due to the potential for increased competition for
acquisitions from other firms seeking to enter this market or to enhance their
institutional pharmacy businesses.
Omnicare's strategy also contemplates the continued internal growth of
the acquired businesses. Any business acquisition, however, involves inherent
uncertainties, such as the effect on the acquired businesses of integration into
a larger organization and the availability of management resources to oversee
the operations of acquired businesses. Potential obstacles to the successful
integration of acquired businesses include, among others, consolidation of
financial and managerial functions and elimination of operational redundancies,
achievement of purchasing efficiencies and the addition and integration of key
personnel. Even though an acquired business may have enjoyed excellent growth as
an independent company prior to an acquisition, there can be no assurance that
such growth would continue after an acquisition. There can be no assurance, that
any acquisition will be integrated successfully or will not have an adverse
impact on Omnicare's results of operations or financial condition.
RISKS OF GOVERNMENT REGULATION
Omnicare's pharmacy business is subject to federal, state and local
regulations, and its pharmacies are required to be licensed in the states in
which they are located. The failure to obtain or renew any required regulatory
approvals or licenses could adversely affect the continued operation of
Omnicare's business. In addition, the long-term care facilities that contract
for Omnicare's services are also subject to federal, state and local regulations
and are required to be licensed in the states in which they are located. The
failure by these institutions to comply with such regulations or to obtain or
renew any required licenses could result in the loss of Omnicare's ability to
provide pharmacy services to their residents. Omnicare is also subject to
federal and state laws that prohibit certain direct and indirect payments
between health care providers that are intended, among other things, to induce
or encourage the referral of residents to, or the recommendation of, a
particular provider of items or services. Violation of these laws can result in
loss of licensure, civil and criminal penalties and exclusion from the Medicare,
Medicaid and other federal health care programs.
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DEPENDENCE UPON GOVERNMENT-SPONSORED AND THIRD PARTY REIMBURSEMENT
Approximately one-half of Omnicare's pharmacy services billings are
reimbursed by government-sponsored programs, largely Medicaid and to a lesser
extent Medicare, and the remainder is paid or reimbursed by individual
residents, long-term care facilities and other third party payors, including
private insurers. Medicaid and Medicare are highly regulated. The failure, even
if inadvertent, of Omnicare and/or its client institutions to comply with
applicable reimbursement regulations could adversely affect Omnicare's business.
Omnicare's sales and profitability are, and will continue to be,
affected by the efforts of all payors to contain or reduce the cost of health
care by lowering reimbursement rates, limiting the scope of covered services,
and negotiating reduced or capitated pricing arrangements. Any changes which
serve to lower reimbursement levels under Medicare, Medicaid or private pay
programs, including managed care contracts, could adversely affect Omnicare.
Furthermore, other changes in such reimbursement programs or in regulations
related thereto, such as modifications in the timing or processing of payments
and other changes intended to limit or decrease the growth of Medicaid, Medicare
or other third party expenditures, could adversely affect Omnicare's business.
UNCERTAINTIES ASSOCIATED WITH HEALTH CARE REFORM AND FEDERAL BUDGET LEGISLATION
In recent years, a number of legislative proposals have been introduced
in Congress that would effect major changes in the health care system, either
nationally or at the state level. The Balanced Budget Act of 1997 ("Balanced
Budget Act") signed into law on August 5, 1997, seeks to achieve a balanced
federal budget by, among other things, reducing federal spending on the Medicare
and Medicaid programs. With respect to Medicare, the law mandates establishment
of a prospective payment system ("PPS") for Medicare skilled nursing facilities
("SNFs") under which facilities will be paid a federal per diem rate for
virtually all covered SNF services. It is anticipated that the PPS will be
phased in over three cost reporting periods, starting with cost reporting
periods beginning on or after July 1, 1998. In the accompanying Conference
Report, the conferees specifically note that, to ensure that the frail elderly
residing in SNFs receive needed and appropriate medication therapy, the
Secretary of the Department of Health and Human Services is to consider, as part
of the PPS for SNFs, the results of studies conducted by independent
organizations, including those which examine appropriate payment mechanism and
payment rates for medication therapy, and to develop case mix adjustments that
reflect the needs of such residents. The Balanced Budget Act also imposes limits
on annual updates in payments to Medicare SNFs for routine services, and
institutes consolidated billing for SNF services for all non-physician Medicare
Part B items and services for SNF residents, effective July 1, 1998. The law
also imposes numerous other cost savings measures affecting Medicare SNF
services. In addition, the Balanced Budget Act requires, as a condition of
issuance or renewal of a Medicare Part B supplier number, for the supplier to
obtain a surety bond. In January 1998, new rules were proposed to establish
additional supplier standards, including the requirement to obtain a surety
bond. A supplier must obtain a surety bond for each tax identification number
for which it has a Medicare supplier number.
The Balanced Budget Act also repeals the "Boren Amendment" federal
payment standard for Medicaid payments to Medicaid nursing facilities effective
October 1, 1997. There can be no assurance that budget constraints or other
factors will not cause states to reduce Medicaid reimbursement to nursing
facilities or that payments to nursing facilities will be made on a timely
basis. The law also grants greater flexibility to states to establish Medicaid
managed care programs without the need to obtain a federal waiver. Although
these waiver projects
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generally exempt institutional care, including nursing facility and
institutional pharmacy services, no assurances can be given that these programs
ultimately will not change the reimbursement system for long-term care,
including pharmacy services, from fee-for-service to managed care negotiated or
capitated rates. The Company anticipates that federal and state governments will
continue to review and assess alternative health care delivery systems and
payment methodologies. It is not possible to predict the effect of the recent
budget legislation or the interpretation or administration of such legislation
on Omnicare's business. Accordingly, there can be no assurance that these
changes or any future health care legislation will not adversely affect
Omnicare's business.
COMPETITION
The long-term care pharmacy business is highly regionalized and, within
a given geographic region of operations, highly competitive. In the geographic
regions it serves, Omnicare competes with numerous local and regional
institutional pharmacies, as well as the pharmacy operations owned by other
long-term care facilities. In its program of acquiring institutional pharmacy
providers, Omnicare competes with other companies with similar acquisition
strategies. Certain of Omnicare's competitors have substantial financial
resources. There can be no assurance that Omnicare will not encounter increased
competition which could adversely affect its business, results of operations or
financial condition.
SUBORDINATION OF DEBENTURES
The Debentures are subordinate in right of payment to all current and
future Senior Indebtedness of the Company. Senior Indebtedness includes all
indebtedness of the Company, whether existing on or created or incurred after
the date of the issuance of the Debentures, that is not made subordinate to or
pari passu with the Debentures by the instrument creating the indebtedness. At
December 31, 1997, the aggregate amount of Senior Indebtedness outstanding and
the aggregate amount of indebtedness and other liabilities of the Company and
its subsidiaries to which the Debentures are effectively subordinated was
approximately $40,000,000. The Indenture does not limit the amount of
additional indebtedness, including Senior Indebtedness, which the Company can
create, incur, assume or guarantee. By reason of such subordination of the
Debentures, in the event of insolvency, bankruptcy, liquidation, reorganization,
dissolution or winding up of the business of the Company or upon default in
payment with respect to any Senior 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
Debentures only after all Senior Indebtedness of the Company has been paid in
full. In addition, holders of the Debentures are effectively subordinated to the
claims of creditors of the Company's subsidiaries to the extent of the assets of
such subsidiaries. In the event of the insolvency, bankruptcy, liquidation,
reorganization, dissolution or winding up of the business of any subsidiary of
the Company, creditors of such subsidiary generally will have the right to be
paid in full before any distribution is made to the Company or the holders of
the Debentures. See "Description of Debentures."
LIMITATIONS ON REPURCHASE UPON A FUNDAMENTAL CHANGE
In the event of a Fundamental Change, each holder of the Debentures
will have the right, at the holder's option, to require the Company to
repurchase all or a portion of such holder's Debentures as described herein
under the caption "Description of Debentures - Redemption at Option of the
Holder." The Company's ability to
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repurchase the Debentures upon a Fundamental Change may be limited by the terms
of the Company's Senior Indebtedness and the subordination provisions of the
Indenture. Further, the ability of the Company to repurchase Debentures upon a
Fundamental Change will be dependent on the availability of sufficient funds and
compliance with applicable securities laws. Accordingly, there can be no
assurance that the Company will be able to repurchase the Debentures upon a
Fundamental Change. The term "Fundamental Change" is limited to certain
specified transactions involving a Change in Control (as defined) and may not
include other events that might adversely affect the financial condition of the
Company or result in a downgrade of the credit rating (if any) of the Debentures
nor would the requirement that the Company offer to repurchase the Debentures
upon a Fundamental Change necessarily afford holders of the Debentures
protection in the event of a highly leveraged reorganization, merger or similar
transaction involving the Company. See "Description of Debentures."
ABSENCE OF PUBLIC MARKET; TRANSFER RESTRICTIONS
Prior to this offering there has been no public trading market for the
Debentures, although the Debentures have been eligible for trading through the
Nasdaq Stock Market's Portal Market.SM Debentures acquired pursuant to this
Prospectus will not be eligible for trading in the Portal Market. Although the
Initial Purchasers have advised the Company that the Initial Purchasers
currently intend to make a market in the Debentures, the Initial Purchasers are
not obligated to do so and may discontinue such market making at any time
without notice. In addition, such market making activity will be subject to the
limits imposed by the Securities Act and the Exchange Act. Accordingly, there
can be no assurance that any public market for the Debentures will develop or,
if one does develop, that it will be maintained. If an active public market for
the Debentures fails to develop or be sustained, the trading price of such
Debentures could be materially adversely affected. The Company does not intend
to apply for listing of the Debentures on any securities exchange.
USE OF PROCEEDS
The Company will not receive any of the proceeds from sales of the
Debentures or the Shares by the Selling Securityholders.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges
of the Company for the periods indicated:
<TABLE>
<CAPTION>
Nine Months
Ended
Year Ended December 31, September 30,
----------------------- -------------
1992 1993 1994 1995 1996 1996 1997
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges 3.41x 5.43x 3.92x 6.37x 12.96x 10.64x 19.22x
</TABLE>
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The ratio of earnings to fixed charges is computed by dividing fixed
charges into earnings before income taxes plus fixed charges. Fixed charges
consist of interest expense and that portion of net rental expense (one-third)
deemed representative of the interest factor.
DESCRIPTION OF DEBENTURES
The Debentures were issued under an indenture dated as of December 10,
1997 (the "Indenture"), between the Company and The First National Bank of
Chicago, as trustee (the "Trustee"). Copies of the form of Indenture and
Registration Rights Agreement (as defined below) are available from the Trustee
upon request by a registered holder of the Debentures. The following summaries
of certain provisions of the Debentures, the Indenture and the Registration
Rights Agreement do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, all the provisions of the
Debentures, the Indenture and the Registration Rights Agreement, including the
definitions therein of certain terms which are not otherwise defined in this
Prospectus. Wherever particular provisions or defined terms of the Indenture (or
of the Form of Debenture which is a part thereof) or the Registration Rights
Agreement are referred to, such provisions or defined terms are incorporated
herein by reference. References in this section to the "Company" are solely to
Omnicare, Inc., a Delaware corporation, and not its subsidiaries.
GENERAL
The Debentures represent unsecured general obligations of the Company
subordinate in right of payment to certain other obligations of the Company as
described under "Subordination of Debentures" and convertible into Common Stock
as described under "Conversion of Debentures." The Debentures are limited to
$345,000,000 aggregate principal amount, are issuable only in denominations of
$1,000 and multiples thereof and will mature on December 1, 2007 unless earlier
redeemed at the option of the Company or at the option of the holder upon a
Fundamental Change (as defined).
The Indenture does not contain any financial covenants or restrictions
on the payment of dividends, the incurrence of Senior Indebtedness (as defined
below under "Subordination of Debentures") or the issuance or repurchase of
securities of the Company. The Indenture contains no covenants or other
provisions to afford protection to holders of the Debentures in the event of a
highly leveraged transaction or a change in control of the Company except to the
extent described under "Redemption at Option of the Holder."
The Debentures bear interest at the rate of 5% per annum from December
10, 1997, payable semi-annually on June 1 and December 1, commencing on June 1,
1998, to holders of record at the close of business on the preceding May 15 and
November 15, respectively, except (i) that the interest payable upon redemption
(unless the date of redemption is an interest payment date) will be payable to
the person to whom principal is payable and (ii) as set forth in the next
succeeding sentence. In the case of any Debenture (or portion thereof) which is
converted into Common Stock of the Company during the period from (but
excluding) a record date to (but excluding) the next succeeding interest payment
date either (i) if such Debenture (or portion thereof) has been called for
redemption
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on a redemption date which occurs during such period, or is to be
redeemed in connection with a Fundamental Change on a Repurchase Date (as
defined) which occurs during such period, the Company shall not be required to
pay interest on such interest payment date in respect of any such Debenture (or
portion thereof) or (ii) if otherwise, any Debenture (or portion thereof)
submitted for conversion during such period shall be accompanied by funds equal
to the interest payable on such succeeding interest payment date on the
principal amount so converted (see "Conversion of Debentures"). Interest may, at
the Company's option, be paid either (i) by check mailed to the address of the
person entitled thereto as it appears in the Debenture register or (ii) by
transfer to an account maintained by such person located in the United States;
provided, however, that payments to The Depository Trust Company, New York, New
York ("DTC") will be made by wire transfer of immediately available funds to the
account of DTC or its nominee. Interest will be computed on the basis of a
360-day year composed of twelve 30-day months
FORM, DENOMINATION AND REGISTRATION
Global Debenture, Book-Entry Form. Debentures are issuable in fully
registered form, without coupons, in denominations of $1,000 principal amount
and multiples thereof. Debentures sold by the Selling Securityholders pursuant
to the Registration Statement of which this Prospectus forms a part will be
represented by a global Debenture (the "Registered Global Debenture"), except as
set forth below under "Certificated Debentures." The Registered Global Debenture
will be deposited with, or on behalf of, DTC and registered in the name of Cede
& Co. ("Cede") as DTC's nominee. Beneficial interests in the Registered Global
Debenture will be exchangeable for definitive certificated Debentures only in
accordance with the terms of the Indenture.
Purchasers of the Debentures offered hereby may hold their interests in
the Registered Global Debenture directly through DTC or indirectly through
organizations which are participants in DTC (the "Participants"). Transfers
between Participants will be effected in the ordinary way in accordance with DTC
rules and will be settled in clearing house funds.
Persons who are not Participants may beneficially own interests in the
Registered Global Debenture held by DTC only through Participants or certain
banks, brokers, dealers, trust companies and other parties that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly ("Indirect Participants"). So long as Cede, as the nominee of DTC, is
the registered owner of the Registered Global Debenture, Cede for all purposes
will be considered the sole holder of the Registered Global Debenture. Except as
provided below, owners of beneficial interests in the Registered Global
Debenture will not be entitled to have certificates registered in their names,
will not receive or be entitled to receive physical delivery of certificates in
definitive form, and will not be considered the holders thereof.
Payment of interest on and the redemption price of the Registered
Global Debenture will be made to Cede, the nominee for DTC, as the registered
owner of the Registered Global Debenture by wire transfer of immediately
available funds on each interest payment date or the redemption date, as the
case may be. Neither the Company, the Trustee nor any paying agent will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Registered
Global Debenture or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
The Company has been informed by DTC that, with respect to any payment
of interest on, or the redemption price of, the Registered Global Debenture,
DTC's practice is to credit Participants' accounts on the payment date therefor
with payments in amounts proportionate to their respective beneficial interests
in the principal amount
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represented by the Registered Global Debenture as shown on the records of DTC,
unless DTC has reason to believe that it will not receive payment on such
payment date. Payments by Participants to owners of beneficial interests in the
principal amount represented by the Registered Global Debenture held through
such Participants will be the responsibility of such Participants, as is now the
case with securities held for the accounts of customers registered in "street
name."
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a person
having a beneficial interest in the principal amount represented by the
Registered Global Debenture to pledge such interest to persons or entities that
do not participate in the DTC system, or otherwise take actions in respect of
such interest, may be affected by the lack of a physical certificate evidencing
such interest.
Neither the Company nor the Trustee (or any registrar, paying agent or
conversion agent under the Indenture) will have any responsibility for the
performance by DTC or its Participants or Indirect Participants of their
respective obligations under the rules and procedures governing their
operations. DTC has advised the Company that it will take any action permitted
to be taken by a holder of Debentures (including, without limitation, the
presentation of Debentures for exchange as described below), only at the
direction of one or more Participants to whose account with DTC interests in the
Registered Global Debenture are credited, and only in respect of the principal
amount of the Debentures represented by the Registered Global Debenture as to
which such Participant or Participants has or have given such direction.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and to facilitate the clearance and settlement
of securities transactions between Participants through electronic book-entry
changes to the accounts of its Participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and may include
certain other organizations. Certain of such Participants (or their
representatives), together with other entities, own DTC. Indirect access to the
DTC system is available to others such as banks, brokers, dealers and trust
companies that clear through, or maintain a custodial relationship with, a
Participant, either directly or indirectly.
Although DTC has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Registered Global Debenture among
Participants, it is under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. If DTC is at
any time unwilling or unable to continue as depositary and a successor
depositary is not appointed by the Company within 90 days, the Company will
cause Debentures to be issued in definitive form in exchange for the Registered
Global Debenture.
Certificated Debentures. Holders of Debentures may request that
certificated Debentures be issued in lieu of, or in exchange for, Debentures
represented by the Registered Global Debenture. Furthermore, certificated
Debentures may be issued in exchange for Debentures represented by the
Registered Global Debenture if no successor depositary is appointed by the
Company as set forth above under "Global Debenture, Book-Entry Form."
9
<PAGE> 10
CONVERSION OF DEBENTURES
The holders of Debentures will be entitled at any time after March 10,
1998 through the close of business on the final maturity date of the Debentures,
subject to prior redemption, to convert any Debentures or portions thereof (in
denominations of $1,000 or multiples thereof) into Common Stock of the Company,
at the conversion price set forth on the cover page of this Prospectus, subject
to adjustment as described below. Except as described below, no payment or other
adjustment will be made on conversion of any Debentures for interest accrued
thereon or for dividends on any Common Stock issued. If any Debentures not
called for redemption are converted after a record date for the payment of
interest and prior to the next succeeding interest payment date, such Debentures
must be accompanied by funds equal to the interest payable on such succeeding
interest payment date on the principal amount so converted. The Company is not
required to issue fractional shares of Common Stock upon conversion of
Debentures and, in lieu thereof, will pay a cash adjustment based upon the
market price of Common Stock on the last business day prior to the date of
conversion. In the case of Debentures called for redemption, conversion rights
will expire at the close of business on the business day preceding the day fixed
for redemption unless the Company defaults in the payment of the redemption
price. A Debenture in respect of which a holder is exercising its option to
require redemption upon a Fundamental Change may be converted only if such
holder withdraws its election to exercise its option in accordance with the
terms of the Indenture.
The initial conversion price of $39.60 per share of Common Stock is
subject to adjustment under formulae as set forth in the Indenture in certain
events, including:
(i) the issuance of Common Stock of the Company as a dividend
or distribution on the Common Stock;
(ii) certain subdivisions and combinations of the Common
Stock;
(iii) the issuance to all holders of Common Stock of certain
rights or warrants to purchase Common Stock;
(iv) the distribution to all holders of Common Stock of
capital stock (other than Common Stock) or evidences of Indebtedness of
the Company or of assets (including securities, but excluding those
rights, warrants, dividends and distributions referred to above or paid
in cash);
(v) distributions consisting of cash, excluding any quarterly
cash dividend on the Common Stock to the extent that the aggregate cash
dividend per share of Common Stock in any fiscal quarter does not
exceed the greater of (x) the amount per share of Common Stock of the
next preceding quarterly cash dividend on the Common Stock to the
extent that such preceding quarterly dividend did not require an
adjustment of the conversion price pursuant to this clause (v) (as
adjusted to reflect subdivisions or combinations of the Common Stock),
and (y) 3.75 percent of the average of the last reported sales price of
the Common Stock during the ten trading days immediately prior to the
date of declaration of such dividend,
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<PAGE> 11
and excluding any dividend or distribution in connection with the
liquidation, dissolution or winding up of the Company. If an adjustment
is required to be made as set forth in this clause (v) as a result of a
distribution that is a quarterly dividend, such adjustment would be
based upon the amount by which such distribution exceeds the amount of
the quarterly cash dividend permitted to be excluded pursuant to this
clause (v). If an adjustment is required to be made as set forth in
this clause (v) as a result of a distribution that is not a quarterly
dividend, such adjustment would be based upon the full amount of the
distribution;
(vi) payment in respect of a tender offer or exchange offer by
the Company or any subsidiary of the Company for the Common Stock to
the extent that the cash and value of any other consideration included
in such payment per share of Common Stock exceeds the Current Market
Price (as defined in the Indenture) per share of Common Stock on the
trading day next succeeding the last date on which tenders or exchanges
may be made pursuant to such tender or exchange offer, and
(vii) payment in respect of a tender offer or exchange offer
by a person other than the Company or any subsidiary of the Company in
which, as of the closing date of the offer, the Board of Directors is
not recommending rejection of the offer. The adjustment referred to in
this clause (vii) will only be made if the tender offer or exchange
offer is for an amount that increases the offeror's ownership of Common
Stock to more than 25% of the total shares of Common Stock outstanding,
and if the cash and value of any other consideration included in such
payment per share of Common Stock exceeds the Current Market Price per
share of Common Stock on the business day next succeeding the last date
on which tenders or exchanges may be made pursuant to such tender or
exchange offer. The adjustment referred to in this clause (vii) will
generally not be made, however, if, as of the closing of the offer, the
offering documents with respect to such offer disclose a plan or an
intention to cause the Company to engage in a consolidation or merger
of the Company or a sale of all or substantially all of the Company's
assets.
In the case of (i) any reclassification of the Common Stock or (ii) a
consolidation, merger or combination involving the Company or a sale or
conveyance to another person of the property and assets of the Company as an
entirety or substantially as an entirety, in each case as a result of which
holders of Common Stock shall be entitled to receive stock, other securities,
other property or assets (including cash) with respect to or in exchange for
such Common Stock, the holders of the Debentures then outstanding will generally
be entitled thereafter to convert such Debentures into the kind and amount of
shares of stock, other securities or other property or assets which they would
have owned or been entitled to receive upon such reclassification,
consolidation, merger, combination, sale or conveyance had such Debentures been
converted into Common Stock immediately prior to such reclassification,
consolidation, merger, combination, sale or conveyance assuming that a holder of
Debentures would not have exercised any rights of election as to the stock,
other securities or other property or assets receivable in connection therewith.
In the event of a taxable distribution to holders of Common Stock or in
certain other circumstances requiring conversion price adjustments, the holders
of Debentures may, in certain circumstances, be deemed to have received a
distribution subject to United States income tax as a dividend; in certain other
circumstances, the absence of such an adjustment may result in a taxable
dividend to the holders of Common Stock. See "Certain United States Federal
Income Tax Considerations" below.
11
<PAGE> 12
The Company from time to time may to the extent permitted by law reduce
the conversion price by any amount for any period of at least 20 days, in which
case the Company shall give at least 15 days' notice of such reduction, if the
Board of Directors has made a determination that such reduction would be in the
best interests of the Company, which determination shall be conclusive. The
Company may, at its option, make such reductions in the conversion price, in
addition to those set forth above, as the Board of Directors deems advisable to
avoid or diminish any income tax to holders of Common Stock resulting from any
dividend or distribution of stock (or rights to acquire stock) or from any event
treated as such for income tax purposes. See Certain United States Federal
Income Tax Considerations."
No adjustment in the conversion price will be required unless such
adjustment would require a change of at least 1% in the conversion price then in
effect; provided that any adjustment that would otherwise be required to be made
shall be carried forward and taken into account in any subsequent adjustment.
Except as stated above, the conversion price will not be adjusted for the
issuance of Common Stock or any securities convertible into or exchangeable for
Common Stock or carrying the right to purchase any of the foregoing.
OPTIONAL REDEMPTION BY THE COMPANY
The Debentures are not entitled to any sinking fund. At any time on or
after December 6, 2000, the Debentures will be redeemable at the Company's
option on at least 30 days' notice as a whole or, from time to time, in part at
the following prices (expressed as a percentage of the principal amount),
together with accrued interest to, but excluding, the date fixed for redemption:
If redeemed during the period beginning December 6, 2000 and ending on
November 30, 2001 at a redemption price of 103.500%, and if redeemed during the
12-month period beginning December 1:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- -----
<S> <C>
2001.............................. 103.000%
2002.............................. 102.500
2003.............................. 102.000
2004.............................. 101.500
2005.............................. 101.000
2006.............................. 100.500
</TABLE>
and 100% at December 1, 2007, provided that any semi-annual payment of interest
becoming due on the date fixed for redemption shall be payable to the holders of
record on the relevant record date of the Debentures being redeemed.
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<PAGE> 13
If less than all of the outstanding Debentures are to be redeemed, the
Trustee shall select the Debentures to be redeemed in principal amounts of
$1,000 or multiples thereof by lot, pro rata or by another method the Trustee
considers fair and appropriate. If a portion of a holder's Debentures is
selected for partial redemption and such holder converts a portion of such
Debentures, such converted portion shall be deemed to be of the portion selected
for redemption.
The Company may not give notice of any redemption of Debentures if an
Event of Default with respect to the payment of interest on any Debentures has
occurred and is continuing.
REDEMPTION AT OPTION OF THE HOLDER
If a Fundamental Change (as defined) occurs at any time prior to
December 1, 2007, each holder of Debentures shall have the right, at the
holder's option, to require the Company to redeem any or all of such holder's
Debentures on the date (the "Repurchase Date") that is 30 days after the date of
the Company's notice of such Fundamental Change. The Debentures will be
redeemable in multiples of $1,000 principal amount.
The Company shall redeem such Debentures at a price expressed as a
percentage of the principal amount equal to (i) 105.000% if the Repurchase Date
is before December 1, 1998, (ii) 104.500% if the Repurchase Date is during the
period beginning December 1, 1998 and ending November 30, 1999, (iii) 104.000%
if the Repurchase Date is during the period beginning December 1, 1999 and
ending on December 5, 2000, and (iv) thereafter at the redemption price set
forth under "Optional Redemption by the Company" which would be applicable to a
redemption at the option of the Company on the Repurchase Date; provided that,
if the Applicable Price (as defined) is less than the Reference Market Price (as
defined), the Company shall redeem such Debentures at a price equal to the
foregoing redemption price multiplied by the fraction obtained, by dividing the
Applicable Price by the Reference Market Price. In each case, the Company shall
also pay accrued interest on the redeemed Debentures to, but excluding, the
Repurchase Date; provided that, if such Repurchase Date is an interest payment
date, then the interest payable on such date shall be paid to the holder of
record of the Debentures on the relevant record date.
The Company is required to mail to all holders of record of the
Debentures a notice of the occurrence of a Fundamental Change and of the
redemption right arising as a result thereof on or before the tenth day after
the occurrence of such Fundamental Change. The Company is also required to
deliver the Trustee a copy of such notice. To exercise the redemption right, a
holder of Debentures must deliver, on or before the 30th day after the date of
the Company's notice of a Fundamental Change (the "Fundamental Change Expiration
Time"), written notice of the holder's exercise of such right, together with the
Debentures to be so redeemed, duly endorsed for transfer, to the Company (or an
agent designated by the Company for such purpose). Payment for Debentures
surrendered for redemption (and not withdrawn) prior to the Fundamental Change
Expiration Time will be made promptly following the Repurchase Date.
The term "Fundamental Change" means the occurrence of any transaction
or event in connection with which all or substantially all Common Stock shall be
exchanged for, be converted into, be acquired for, or constitute in all material
respects solely the right to receive, consideration which is not all or
substantially all common stock listed (or, upon consummation of or immediately
following such transaction or event which will be listed) on a
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<PAGE> 14
United States national securities exchange or approved for quotation on the
Nasdaq National Market or any similar United States system of automated
dissemination of quotations of securities prices (whether by means of an
exchange offer, liquidation, tender offer, consolidation, merger, combination,
reclassification, recapitalization or otherwise). The term "Applicable Price"
means (i) in the event of a Fundamental Change in which the holders of the
Common Stock receive only cash, the amount of cash received by the holder of one
share of Common Stock and (ii) in the event of any other Fundamental Change, the
average of the last reported sale price for the Common Stock during the ten
trading days prior to the record date for the determination of the holders of
Common Stock entitled to receive cash, securities, property or other assets in
connection with such Fundamental Change, or, if there is no such record date,
the date upon which the holders of the Common Stock shall have the right to
receive such cash, securities, property or other assets in connection with the
Fundamental Change. The term "Reference Market Price" shall initially mean $20
and in the event of any adjustment to the conversion price described above
pursuant to the provisions of the Indenture, the Reference Market Price shall
also be adjusted so that the ratio of the Reference Market Price to the
conversion price after giving effect to any such adjustment shall always be the
same as the ratio of $20 to the conversion price specified on the cover page of
this Prospectus (without regards to any adjustment thereto).
The Company will comply with the provisions of Rule 13e-4 and any other
tender offer rules under the Exchange Act to the extent then applicable in
connection with the redemption rights of the holders of Debentures in the event
of a Fundamental Change.
The redemption rights of the holders of Debentures could discourage a
potential acquiror of the Company. The Fundamental Change redemption feature,
however, is not the result of management's knowledge of any specific effort to
obtain control of the Company by means of a merger, tender offer, solicitation
or otherwise, or part of a plan by management to adopt a series of anti-takeover
provisions. The term "Fundamental Change" is limited to certain specified
transactions and may not include other events that might adversely affect the
financial condition of the Company, nor would the requirement that the Company
offer to repurchase the Debentures upon a Fundamental Change necessarily afford
the holders of the Debentures protection in the event of a highly leveraged
transaction, reorganization, merger or similar transaction involving the
Company.
If a Fundamental Change were to occur, there can be no assurance that the
Company would have sufficient funds to pay the redemption price for all the
Debentures tendered by the holders thereof. In addition, the Company's ability
to repurchase the Debentures upon a Fundamental Change may be limited by the
terms of the Company's Senior Indebtedness and the subordination provisions of
the Indenture. Further, the ability of the Company to repurchase Debentures upon
a Fundamental Change will be dependent on compliance with applicable laws. The
Company's failure to redeem tendered Debentures in connection with a Fundamental
Change would in any event constitute an Event of Default under the Indenture.
SUBORDINATION OF DEBENTURES
The Indebtedness evidenced by the Debentures is subordinated to the
extent provided in the Indenture to the prior payment in full of all Senior
Indebtedness of the Company. The Debentures also are effectively subordinated to
all indebtedness and other liabilities, including trade payables and lease
obligations, if any, of the Company's subsidiaries.
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<PAGE> 15
Upon any distribution of assets of the Company upon any dissolution,
winding up, liquidation or reorganization, the payment of the principal of, or
premium, if any, and interest (including liquidated damages, if any) on the
Debentures is to be subordinated to the extent provided in the Indenture in
right of payment to the prior payment in full in cash of all Senior
Indebtedness. In the event of any acceleration of the Debentures because of an
Event of Default (as defined), the holders of any Senior Indebtedness then
outstanding would be entitled to payment in full in cash of all obligations in
respect of such Senior Indebtedness before the holders of the Debentures are
entitled to receive any payment or distribution in respect thereof. The
Indenture requires that the Company promptly notify holders of Senior
Indebtedness if payment of the Debentures is accelerated because of an Event of
Default.
The Company also may not make any payment upon or in respect of the
Debentures (including upon redemption) if (i) a default in the payment of the
principal, premium, if any, interest, rent or other obligations in respect of
Senior Indebtedness occurs and is continuing beyond any applicable period of
grace (a "Payment Default") or (ii) any other default occurs and is continuing
with respect to Designated Senior Indebtedness (as defined) that permits holders
of the Designated Senior Indebtedness as to which such default relates to
accelerate its maturity and the Trustee receives a notice of such default (a
"Payment Blockage Notice") from the Company or other person permitted to give
such notice under the Indenture (a "Non-Payment Default"). Payments on the
Debentures may and shall be resumed (a) in case of a Payment Default, upon the
date on which such default is cured or waived or ceases to exist and (b) in case
of a Non-Payment Default, the earlier of the date on which such Non-Payment
Default is cured or waived or ceases to exist or 179 days after the date on
which the applicable Payment Blockage Notice is received. No new period of
payment blockage may be commenced pursuant to a Payment Blockage Notice unless
and until (i) 365 days have elapsed since the initial effectiveness of the
immediately prior Payment Blockage Notice and (ii) all scheduled payments of
principal, premium, if any, and interest (including liquidated damages, if any)
on the Debentures that have come due have been paid in full in cash. No
Non-Payment Default that existed or was continuing on the date of delivery of
any Payment Blockage Notice to the Trustee shall be, or shall be made, the basis
for a subsequent Payment Blockage Notice.
In the event that, notwithstanding the foregoing, the Trustee or any
holder of the Debentures receives any payment or distribution of assets of the
Company of any kind in contravention of any of the subordination provisions of
the Indenture, whether in cash, property or securities, including, without
limitation, by way of set-off or otherwise, in respect of the Debentures before
all Senior Indebtedness is paid in full, then such payment or distribution will
be held by the recipient in trust for the benefit of holders of Senior
Indebtedness or their representatives to the extent necessary to make payment in
full of all Senior Indebtedness remaining unpaid, after giving effect to any
concurrent payment or distribution, or provision therefor, to or for the holders
of Senior Indebtedness.
By reason of the subordination provisions described above, in the event
of the Company's bankruptcy, dissolution or reorganization, holders of Senior
Indebtedness may receive more, ratably, and holders of the Debentures may
receive less, ratably, than the other creditors of the Company. Such
subordination will not prevent the occurrence of any Event of Default under the
Indenture.
The term "Senior Indebtedness" means the principal of, premium, if any,
interest (including all interest accruing subsequent to the commencement of any
bankruptcy or similar proceeding, whether or not a claim for post-petition
interest is allowable as a claim in any such proceeding) and rent payable on or
in connection with, and all fees, costs, expenses and other amounts accrued or
due on or in connection with, Indebtedness (as defined) of the Company, whether
outstanding on the date of the Indenture or thereafter created, incurred,
assumed, guaranteed or in effect guaranteed by the Company (including all
deferrals, renewals, extensions or refundings of, or
15
<PAGE> 16
amendments, modifications or supplements to, the foregoing), unless in the case
of any particular Indebtedness the instrument creating or evidencing the same or
the assumption or guarantee thereof expressly provides that such Indebtedness
shall not be senior in right of payment to the Debentures or expressly provides
that such Indebtedness is pari passu or junior to the Debentures.
Notwithstanding the foregoing, the term Senior Indebtedness shall not include
Indebtedness of the Company to any subsidiary of the Company, a majority of the
voting stock of which is owned, directly or indirectly, by the Company.
The term "Indebtedness" means, with respect to any Person (as defined)
and without duplication:
(a) all indebtedness, obligations and other liabilities
(contingent or otherwise) of such Person for borrowed money (including
obligations of the Company in respect of overdrafts, foreign exchange
contracts, currency exchange agreements, interest rate protection
agreements, and any loans or advances from banks, whether or not
evidenced by notes or similar instruments) or evidenced by bonds,
debentures, notes or similar instruments (whether or not the recourse
of the lender is to the whole of the assets of such Person or to only a
portion thereof), other than any account payable or other accrued
current liability or obligation incurred in the ordinary course of
business in connection with the obtaining of materials or services;
(b) all reimbursement obligations and other liabilities
(contingent or otherwise) of such Person with respect to letters of
credit, bank guarantees or bankers' acceptances;
(c) all obligations and liabilities (contingent or otherwise)
in respect of leases of such Person required, in conformity with
generally accepted accounting principles, to be accounted for as
capitalized lease obligations on the balance sheet of such Person and
all obligations and other liabilities (contingent or otherwise) under
any lease or related document (including a purchase agreement) in
connection with the lease of real property which provides that such
Person is contractually obligated to purchase or cause a third party to
purchase the leased property and thereby guarantee a minimum residual
value of the leased property to the lessor and the obligations of such
Person under such lease or related document to purchase or to cause a
third party to purchase such leased property;
(d) all obligations of such Person (contingent or otherwise)
with respect to an interest rate or other swap, cap or collar agreement
or other similar instrument or agreement or foreign currency hedge,
exchange, purchase or similar instrument or agreement;
(e) all direct or indirect guaranties or similar agreements by
such Person in respect of, and obligations or liabilities (contingent
or otherwise) of such Person to purchase or otherwise acquire or
otherwise assure a creditor against loss in respect of, indebtedness,
obligations or liabilities of another Person of the kind described in
clauses (a) through (d);
(f) any indebtedness or other obligations described in clauses
(a) through (d) secured by any mortgage, pledge, lien or other
encumbrance existing on property which is owned or held by such Person,
16
<PAGE> 17
regardless of whether the indebtedness or other obligation secured
thereby shall have been assumed by such Person; and
(g) any and all deferrals, renewals, extensions and refundings
of, or amendments, modifications or supplements to, any indebtedness,
obligation or liability of the kind described in clauses (a) through
(f).
The term "Designated Senior Indebtedness" means Senior Indebtedness
under the Company's existing revolving credit facility or any other particular
Senior Indebtedness in which the instrument creating or evidencing the same or
the assumption or guarantee thereof (or related agreements or documents to which
the Company is a party) expressly provides that such Senior Indebtedness shall
be "Designated Senior Indebtedness" for purposes of the Indenture (provided that
such instrument, agreement or other document may place limitations and
conditions on the right of such Senior Indebtedness to exercise the rights of
Designated Senior Indebtedness).
The Debentures will also be effectively subordinated to all
liabilities, including trade payables and lease obligations, if any, of the
Company's subsidiaries. Any right of the Company to receive the assets of any of
its subsidiaries upon the liquidation or reorganization thereof (and the
consequent right of the holders of the Debentures to participate in these
assets) will be effectively subordinated to the claims of that subsidiary's
creditors (including trade creditors), except to the extent that the Company is
itself recognized as a creditor of such subsidiary, in which case the claims of
the Company would still be subordinate to any security interests in the assets
of such subsidiary and any indebtedness of such subsidiary senior to that held
by the Company.
The Company's ability to redeem, repurchase or make interest and
principal payments on the Debentures is dependent upon the earnings of its
subsidiaries and the distribution of those earnings (through dividends or
otherwise) to, or upon loans or other payment of funds by those subsidiaries to,
the Company. The subsidiaries are separate and distinct legal entities and have
no obligation, contingent or otherwise, to pay any amounts due pursuant to the
Debentures or to make any funds available therefor, whether by dividends, loans
or other payments. In addition, the payment of dividends and the making of loans
and advances to the Company by its subsidiaries may be subject to statutory,
contractual or other restrictions and are dependent upon the earnings or
financial condition of those subsidiaries and subject to various business
considerations. As a result, the Company may be unable to gain access to the
cash flow or assets of its subsidiaries in amounts sufficient to pay the
principal of or interest on the Debentures when due or to redeem Debentures at
the option of the holders thereof after the occurrence of a Fundamental Change.
As of December 31, 1997, the aggregate amount of Senior Indebtedness
outstanding and the aggregate amount of indebtedness and other liabililties of
the Company and its subsidiaries to which the Debentures are effectively
subordinated was approximately $40,000,000. The Indenture will not limit the
amount of additional indebtedness, including Senior Indebtedness, which the
Company can create, incur, assume or guarantee, nor will the Indenture limit the
amount of indebtedness or other liabilities that any subsidiary can create,
incur, assume or guarantee.
The Company is obligated to pay reasonable compensation to the Trustee
and to indemnify the Trustee against certain losses, liabilities or expenses
incurred by it in connection with its duties relating to the Debentures. The
Trustee's claims for such payments will generally be senior to those of the
holders of the Debentures in respect of all funds collected or held by the
Trustee.
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<PAGE> 18
EVENTS OF DEFAULT; NOTICE AND WAIVER
An Event of Default is defined in the Indenture as being: default in
payment of the principal of or premium, if any (upon redemption or otherwise),
on the Debentures (whether or not such payment is permitted to be made under the
subordination provisions described above); default for 30 days in payment of any
installment of interest, including liquidated damages, if any, on the Debentures
(whether or not such payment is permitted to be made under the subordination
provisions described above); default by the Company for 60 days after notice in
the observance or performance of any other covenants in the Indenture; or
certain events involving bankruptcy, insolvency or reorganization of the Company
or any of its Significant Subsidiaries (as defined). The Indenture provides that
the Trustee may withhold notice to the holders of the Debentures of any default
(except in payment of principal or premium, if any, or interest (including
liquidated damages, if any) with respect to the Debentures) if the Trustee
considers it in the interest of the holders of the Debentures to do so.
The Indenture provides that if an Event of Default shall have occurred
and be continuing, the Trustee or the holders of not less than 25% in principal
amount of the Debentures then outstanding may declare the principal of, premium,
if any, and accrued interest (including liquidated damages, if any) on the
Debentures to be due and payable immediately. In the case of certain events of
bankruptcy or insolvency of the Company, the principal of, premium, if any, and
accrued interest (including liquidated damages, if any) on the Debentures shall
automatically become and be immediately due and payable. However, if the Company
shall cure all defaults (except the nonpayment of principal of, premium, if any,
and interest (including liquidated damages, if any) on any of the Debentures
which shall have become due by acceleration) and certain other conditions are
met, with certain exceptions, such declaration may be canceled and past defaults
may be waived by the holders of a majority of the principal amount of the
Debentures then outstanding.
The Indenture provides that any payment of principal, premium, if any,
or interest (including liquidated damages, if any) that is not made when due
(whether or not such payment is permitted to be made under the subordination
provisions described above) will accrue interest, to the extent legally
permissible, at the annual rate set forth on the cover page hereof from the date
on which such payment was required under the terms of the Indenture until the
date of payment.
The holders of a majority in principal amount of the Debentures then
outstanding shall have the right to direct the time, method and place of
conducting any proceedings for any remedy available to the Trustee, subject to
certain limitations specified in the Indenture.
The Indenture provides that no holder of the Debentures may pursue any
remedy under the Indenture, except for a default in the payment of principal,
premium, if any, or interest (including liquidated damages, if any), on the
Debentures, unless such holder shall have previously given to the Trustee
written notice of a continuing Event of Default, and the holders of at least 25%
in principal amount of the outstanding Debentures shall have made a written
request, and offered reasonable indemnity, to the Trustee to pursue the remedy,
and the Trustee shall not have received from the holders of a majority in
principal amount of the outstanding Debentures a direction inconsistent with
such request and shall have failed to comply with such request within 60 days
after receipt of such request.
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<PAGE> 19
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of a majority in principal amount of
the Debentures at the time outstanding, to modify the Indenture or any
supplemental indenture or the rights of the holders of the Debentures, except
that no such modification shall (i) extend the fixed maturity of any Debenture,
reduce the rate or extend the time for payment of interest thereon, reduce the
principal amount thereof or premium, if any, thereon, reduce any amount payable
upon redemption thereof, change the obligation of the Company to redeem any
Debenture upon the happening of any Fundamental Change in a manner adverse to
the holders of the Debentures, impair the right of a holder to institute suit
for the payment thereof, change the currency in which the Debentures are
payable, impair the right to convert the Debentures into Common Stock subject to
the terms set forth in the Indenture, or modify the provisions of the Indenture
with respect to the subordination of the Debentures in a manner adverse to the
holders of the Debentures in any material respect, without the consent of each
holder of a Debenture so affected or (ii) reduce the aforesaid percentage of
Debentures whose holders are required to consent to any such modification of the
Indenture or any such supplemental indenture, without the consent of the holders
of all of the Debentures then outstanding. The Indenture also provides for
certain modifications of its terms without the consent of the holders of the
Debentures.
REGISTRATION RIGHTS OF THE DEBENTUREHOLDERS
Pursuant to the terms of the Registration Rights Agreement dated as of
December 10, 1997 between the Company and the Initial Purchasers (the
"Registration Rights Agreement"), the Company has filed with the Commission a
Registration Statement, of which this Prospectus forms a part, covering resales
by holders of the Debentures and the Common Stock issuable upon conversion of
the Debentures. The Company has agreed to keep the Registration Statement
effective until the earlier of (i) the sale pursuant to the Registration
Statement of all the securities registered pursuant to the Registration Rights
Agreement thereunder and (ii) the expiration of the holding period applicable to
such securities under Rule 144(k) under the Securities Act, or any successor
provision. The Registration Rights Agreement provides that the Company may
suspend the use of this Prospectus for a period not to exceed 30 days in any
three-month period, or not to exceed an aggregate of 60 days in any 12-month
period under certain circumstances relating to pending corporate developments,
public filings with the Commission and similar events. The Company has agreed to
pay predetermined liquidated damages to those holders of Debentures and those
holders of Common Stock issued upon conversion of the Debentures who have
requested to sell pursuant to the Registration Statement if the Registration
Statement is unavailable for periods in excess of those permitted above. The
Company has further agreed, if such unavailability continues for an additional
thirty-day period, to pay predetermined liquidated damages to all holders of
Debentures and all holders of Common Stock issued upon conversion of the
Debentures, whether or not such holder has requested to sell pursuant to the
Registration Statement. The Registration Rights Agreement provides for Selling
Securityholders to (i) be named as a selling securityholder in this Prospectus
or a supplement hereto and (ii) deliver this Prospectus together with any
relevant Prospectus Supplement to purchasers, and further provides for Selling
Securityholders to be bound by those provisions of the Registration Rights
Agreement which are applicable to the Selling Securityholders (including
indemnification provisions). The Company has agreed to pay all expenses incident
to the Company's performance of and compliance with the Registration Rights
Agreement (other than underwriting discounts and selling commissions), provide
to each Selling Securityholder copies of this Prospectus and any relevant
Prospectus Supplement, notify the Selling Securityholders by release made to
Reuters Economic Services and Bloomberg Business News when the Registration
Statement has become effective and take certain other actions as are required to
permit, subject to the foregoing, unrestricted resales of the Debentures and the
underlying Common Stock.
19
<PAGE> 20
INFORMATION CONCERNING THE TRUSTEE
The First National Bank of Chicago, as Trustee under the Indenture, has
been appointed by the Company as paying agent, conversion agent, registrar and
custodian with regard to the Debentures.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The authorized capital stock of the Company consists of 110,000,000
shares of Common Stock, par value $1.00 per share, and 1,000,000 shares of
preferred stock, without par value. At December 31, 1997, 82,152,665 shares of
Common Stock were issued and outstanding. The Board of Directors, without
further action by the stockholders, is authorized to issue preferred stock in
one or more series and to designate as to any such series the dividend rate,
redemption prices, preferences on liquidation or dissolution, sinking fund
terms, conversion rights, voting rights and any other preferences or special
rights and qualifications. As of December 31, 1997, there was no preferred stock
issued or outstanding, and the Board of Directors has not authorized the
issuance of any preferred stock.
COMMON STOCK
The Common Stock has no preemptive rights and no redemption, sinking
fund or conversion provisions. All shares of Common Stock have one vote on any
matter submitted to the vote of stockholders. The Common Stock does not have
cumulative voting rights. Upon any liquidation of the Company, the holders of
Common Stock are entitled to receive, on a pro rata basis, all assets then
legally available for distribution after payment of debts and liabilities and
preferences on preferred stock, if any. Holders of Common Stock are entitled to
receive dividends when and as declared by the Board of Directors out of funds
legally available therefor (subject to the prior rights of preferred stock, if
any). All outstanding shares of Common Stock are fully paid and nonassessable.
20
<PAGE> 21
CERTAIN ANTITAKEOVER PROVISIONS
With certain exceptions, in the event a person owns 10% or more of the
Company's stock entitled to vote, a majority of the shares not so owned is
required to authorize (1) any merger of the Company with such person, (2) any
sale, lease or other disposition of all or substantially all of the Company's
assets to such person or (3) certain issuances and transfers of securities of
the Company to such person. Directors may be removed without cause only by the
affirmative vote of the holders of two-thirds of the Company's capital stock
entitled to vote on the election of directors. The Board of Directors of the
Company, when evaluating any offer of another person to make a tender or
exchange offer, merge or purchase or otherwise acquire all or substantially all
of the assets of the Company, shall, in connection with the exercise of its
judgment in determining what is in the best interests of the Company and its
stockholders, give due consideration to all relevant factors, including the
social and economic effects on employees, customers, suppliers and other
constituents of Omnicare and on the communities in which Omnicare operates or is
located. The sections of the Company's Restated Certificate of Incorporation
described in this paragraph may not be altered, amended or repealed without
approval of two-thirds of the outstanding shares of each class entitled to vote
thereon as a class.
TRANSFER AGENT
Omnicare's transfer agent for its Common Stock is Chase Mellon
Shareholder Services, LLC, Ridgefield Park, New Jersey.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a general summary of certain United States federal tax
consequences relating to an investment in the Debentures. This discussion is
based on existing provisions of the Internal Revenue Code of 1986, as amended
(the "Code"), Treasury regulations promulgated thereunder, judicial decisions
and administrative rulings, all of which are subject to change with possible
retroactive effect. This summary does not discuss any state, local or foreign
tax considerations, and does not address all federal income tax consequences
applicable to all categories of investors, some of which may be subject to
special rules, such as life insurance companies, tax-exempt organizations,
dealers in securities or currency, banks or other financial institutions,
investors whose functional currency is not the U.S. dollar, and investors that
hold Debentures as part of a hedge, straddle or conversion transaction. In
addition, this summary is generally limited to Debentures and Common Stock that
are held as "capital assets" within the meaning of the Code. Federal tax
considerations for Non-U.S. Holders are discussed separately below.
Interest on Debentures. Interest paid on the Debentures will be taxable
to a holder as ordinary interest income at the time that such interest is
accrued or received in accordance with the holder's method of tax accounting.
The Debentures were not issued with original issue discount within the meaning
of the Code.
Constructive Dividends. Certain corporate transactions, such as
distributions of assets to holders of Common Stock, may be treated as deemed
distributions to holders of the Debentures if the conversion price of the
Debentures is adjusted to reflect such transaction. Adjustments to the
conversion price, however, made pursuant to a bona fide, reasonable adjustment
formula which has the effect of preventing dilution of the interest of the
holders of Debentures, generally will not be considered to result in a deemed
distribution. Such a deemed distribution will be
21
<PAGE> 22
taxable as a dividend, return of capital, or capital gain in accordance with the
rules discussed below under "Dividends on Shares of Common Stock" and holders
may recognize income as a result even though they will receive no cash or
property.
Sale or Exchange of Debentures or Shares of Common Stock. In general, a
holder of Debentures will recognize gain or loss upon the sale, redemption,
retirement or other disposition of Debentures measured by the difference between
(i) the amount of cash and the fair market value of any property received
(except to the extent attributable to accrued interest, which will generally be
taxable as ordinary income) and (ii) such holder's adjusted tax basis in the
Debentures. A holder's tax basis in Debentures generally will equal the cost of
the Debentures to the holder increased by the amount of market discount, if any,
previously taken into income by the holder or decreased by any bond premium
theretofore amortized by the holder with respect to the Debentures. In general,
each holder of the Common Stock into which the Debentures have been converted
will recognize gain or loss upon the sale, exchange, or other disposition of the
Common Stock measured by the difference between (i) the amount of cash and the
fair market value of any property received and (ii) the holder's adjusted basis
in the Common Stock. (For a discussion of the basis and holding period of shares
of Common Stock, see "Conversion of Debentures," below.) Subject to the market
discount rules discussed below, the gain or loss on the disposition of
Debentures or Common Stock will be capital gain or loss and will be long-term
gain or loss if the Debentures or shares of Common Stock have been held for more
than one year at the time of such disposition. In the case of individuals, "net
capital gain," i.e. the excess of net long-term capital gain over net short-term
capital loss is generally subject to a reduced rate of federal income tax.
Capital gains and losses from property held for more than 18 months will be
taken into account in determining "adjusted net capital gain," which is subject
to a further reduction in the rate of tax pursuant to a recent amendment of the
Code. Also, in taxable years beginning after December 31, 2000, an additional
reduction in the rate of tax may be available in certain circumstances for
capital gains from property held by the taxpayer for more than five years.
Conversion of Debentures. A holder of Debentures will not recognize
gain or loss on the conversion of the Debentures solely into Common Stock except
with respect to cash in lieu of fractional shares. The holder's tax basis in the
shares of Common Stock received upon conversion of the Debentures will be equal
to the holder's aggregate basis in the Debentures exchanged therefor (less any
portion thereof allocable to cash received in lieu of a fractional share of
Common Stock). The holding period of the Common Stock will generally include the
period during which such holder held the Debentures prior to conversion. Under
current ruling policy of the Internal Revenue Service, cash received in lieu of
a fractional share of Common Stock should generally be treated as a payment in
exchange for such fractional share rather than as a dividend. Gain or loss
recognized on the receipt of cash paid in lieu of such fractional shares
generally will equal the difference between the amount of cash received and the
amount of tax basis allocable to the fractional shares.
Market Discount. The Debentures may be affected by the "market
discount" provisions of the Code. For this purpose, the market discount on a
Debenture will generally be equal to the amount, if any, by which the stated
redemption price at maturity of a Debenture exceeds the holder's tax basis in
the Debenture immediately after its acquisition. Subject to a de minimis
exception, a holder of a Debenture acquired at a market discount will generally
be required to treat as ordinary income any gain recognized on the disposition
of such Debenture to the extent of the accrued market discount on such Debenture
at the time of disposition. In general, market discount will be treated as
accruing on a straight-line basis over the term of the Debenture or, at the
election of the holder, under a constant-yield method. A holder of a Debenture
acquired at a market discount may be required to defer the deduction of a
portion of the interest on any indebtedness incurred or maintained to purchase
or carry such Debenture until the Debenture is disposed of in a taxable
transaction, unless the holder elects to include accrued market discount in
income currently. If a holder acquires a Debenture at a market discount and
receives Common Stock upon conversion of the Debenture, the amount of accrued
market discount through the date of conversion will be treated as ordinary
income upon the disposition of the Common Stock.
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<PAGE> 23
Bond Premium. When a Debenture is acquired only with cash, it is
acquired at a premium if the amount paid for the Debenture (less the amount
deemed attributable to the rights to convert the Debenture to Common Stock)
exceeds the principal amount of the Debenture due at maturity. If a Debenture is
acquired at a premium and held as an investment, a holder may elect to amortize
the premium. If a holder elects to amortize the premium, the interest income on
the Debenture is reduced by an amount of the bond premium allocated to the
interest payment. An election also causes a holder's tax basis in the Debenture
to be reduced by the amount of premium used to offset the interest income. An
election applies to all taxable bonds then owned or subsequently acquired by a
holder. If bonds were acquired prior to the taxable year to which the election
applies, the amortizable premium for such bonds does not include the premium
that would have been amortized in prior years had the election been in effect
during those prior years. For purposes of determining the amount of premium and
the amortization period, the Company will be deemed to exercise its optional
redemption in a manner that maximizes a holder's yield on the Debenture. If a
holder does not elect to amortize the premium, then such premium will be taken
into account for determining gain or loss upon a subsequent sale or exchange of
the Debenture.
Dividends on Common Stock. Distributions on shares of Common Stock will
constitute dividends for United States federal income tax purposes to the extent
of current or accumulated earnings and profits of the Company as determined
under United States federal income tax principles. Dividends paid to holders
that are United States corporations may qualify for the dividends-received
deduction. To the extent that a holder receives distributions on shares of
Common Stock that would otherwise constitute dividends for United States federal
income tax purposes but that exceed current and accumulated earnings and profits
of the Company, such distributions will be treated first as a non-taxable return
of capital reducing the holder's basis in the shares of Common Stock. Any such
distributions in excess of the holder's basis in the shares of Common Stock will
generally be treated as capital gain.
CERTAIN FEDERAL TAX CONSIDERATIONS APPLICABLE TO NON-U.S. HOLDERS
For purposes of this summary, the term "U.S. Holder" means a beneficial
owner of Debentures or Common Stock that is (i) a citizen or resident of the
United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or any political subdivision
thereof, (iii) an estate the income of which is subject to United States federal
income taxation regardless of its source, and (iv) a trust if (a) a court within
the United States is able to exercise primary supervision over the
administration of the trust and (b) one or more U.S. persons have the authority
to control all substantial decisions of the trust. The term "Non-U.S. Holder"
means a beneficial owner of Debentures or Common Stock other than a U.S. Holder.
Interest on Debentures. Generally, interest paid on Debentures to a
Non-U.S. Holder will not be subject to United States federal income tax if (i)
such interest is not effectively connected with the conduct of a trade or
business within the United States by such Non-U S. Holder, (ii) the Non-U.S.
Holder does not actually or constructively own 10% or more of the total combined
voting power of all classes of stock of the Company entitled to vote, is not a
bank receiving interest on an extension of credit made pursuant to a loan
agreement entered into in the ordinary course of its trade or business, and is
not a controlled foreign corporation with respect to which the Company is a
"related person" within the meaning of the Code, and (iii) the beneficial owner,
under penalty of perjury, certifies that the owner is not a United States person
and provides the owner's name and address. For purposes of determining ownership
of stock of the Company, a Non-U.S. Holder of Debentures will be deemed to own
the Common Stock into which the Debentures could be converted. If certain
requirements are satisfied, the certification described in clause (iii) above
may be provided by a securities clearing organization, a bank, or other
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<PAGE> 24
financial institution that holds customers' securities in the ordinary course of
its trade or business. Under recently adopted United States Treasury
regulations, which generally are effective for payments made after December 31,
1998, subject to certain transition rules, the certification described in clause
(iii) above may also be provided by a qualified intermediary on behalf of one or
more beneficial owners or other intermediaries, provided that such intermediary
has entered into a withholding agreement with the Internal Revenue Service and
certain other conditions are met. A Non-U.S. Holder that is not exempt from tax
under the rules described above will generally be subject to United States
federal withholding tax at a rate of 30% unless the interest is effectively
connected with the conduct of a United States trade or business, in which case
the interest will be subject to the United States federal income tax on net
income that applies to United States persons generally. Non-U.S. Holders should
consult applicable tax treaties, which may provide different rules.
Sales or Exchange of Debentures or Shares of Common Stock. A Non-U.S.
Holder generally will not be subject to United States federal income or
withholding tax on gain realized on the sale or exchange of Debentures or Common
Stock unless (i) the holder is an individual who was present in the United
States for 183 days or more during the taxable year and (a) such holder has a
"tax home" in the United States or (b) the gain is attributable to an office or
other fixed place of business maintained in the United States by such holder,
(ii) the gain is effectively connected with the conduct of a trade or business
of the holder in the United States, or (iii) the Company is or has been a
"United States real property holding corporation" at any time within the shorter
of the five-year period preceding such disposition or such holder's holding
period. If the Company becomes a "United States real property holding
corporation," gain recognized on a disposition of Debentures or Common Stock
would not be subject to federal income tax if (i) the Common Stock is "regularly
traded on an established securities market" within the meaning of the Code and
(ii) either (A) the Non-U.S. Holder disposing of Common Stock did not own,
actually or constructively, at any time during the five-year period preceding
the disposition, more than 5% of the Common Stock, or (B) in the case of a
disposition of Debentures, the Non-U.S. Holder did not own, actually or
constructively, Debentures which, as of any date on which such holder acquired
Debentures had a fair market value greater than that of 5% of the Common Stock.
The preceding sentence assumes that the Common Stock is and will continue to be
listed on a domestic stock exchange and regularly quoted by brokers and hence
will be "regularly traded" on an established securities market at the time of
disposition.
Dividends on Shares of Common Stock. Generally, to the extent a
distribution with respect to Common Stock is treated as a dividend (as described
above under "Dividends on Common Stock"), a Non-U.S. Holder will be subject to
United States federal income tax withholding at a rate of 30% unless the
dividend is effectively connected with the conduct of trade or business within
the United States by the Non-U.S. Holder. If the dividend is effectively
connected with the conduct of a trade or business within the United States, the
dividend will be subject to the United States federal income tax on net income
that applies to United States persons generally (and, with respect to corporate
holders, the branch profits tax under certain circumstances). Non-U.S. Holders
should consult any applicable income tax treaties, which may provide for a lower
rate of withholding or other rules different from those described above. A
Non-U.S. Holder (and in the case of Non-U.S. Holders that are treated as
partnerships or otherwise fiscally transparent the partners, shareholders or
other beneficiaries of such Non-U.S. Holders) may be required to satisfy certain
certification requirements in order to claim a reduction of or exemption from
withholding under the foregoing rules.
Estate Tax. Debentures held by an individual who at the time of death
is not a United States citizen or resident, as specially defined for United
States estate tax purposes, will not be subject to United States federal estate
tax provided (i) the Debentures were not held in connection with a United States
trade or business and (ii) the individual does not actually or constructively
own 10% or more of the total combined voting power of all classes of stock of
the Company entitled to vote. Common Stock owned by such an individual at the
time of death, and in certain circumstances transferred before death, will be
includible in the taxable estate and may be subject to United
24
<PAGE> 25
States federal estate tax unless otherwise provided by an applicable tax treaty.
Estates of nonresident aliens are generally allowed a statutory credit which has
the effect of offsetting United States federal estate tax imposed on the first
$60,000 of the taxable estate.
INFORMATION REPORTING AND BACKUP WITHHOLDING
U.S. Holders. Information reporting and backup withholding may apply to
payments of interest or dividends on or the proceeds of the sale or other
disposition of the Debentures or shares of Common Stock made by the Company
with respect to certain noncorporate U.S. Holders. Such U.S. Holders generally
will be subject to backup withholding at a rate of 31% unless the recipient of
such payment supplies a taxpayer identification number, certified under
penalties of perjury, as well as certain other information, or otherwise
establishes, in the manner prescribed by law, an exemption from backup
withholding. Any amount withheld under backup withholding is allowable as a
credit against the U.S. Holder's federal income tax, upon furnishing the
required information.
Non-U.S. Holders. Generally, information reporting and backup
withholding of United States federal income tax at a rate of 31% may apply to
payments of principal, interest and premium (if any) to Non-U.S. Holders if the
payee fails to certify that the holder is a non-U.S. person or if the Company or
its paying agent has actual knowledge that the payee is a United States person.
The 31% backup withholding tax generally will not apply to dividends paid to
foreign holders outside the United States that are subject to 30% withholding as
discussed above or that are subject to a tax treaty that reduces such
withholding.
The payment of the proceeds on the disposition of Debentures or shares
of Common Stock to or through a United States office of a United States or
foreign broker will be subject to information reporting and backup withholding
unless the owner provides the certification described above or otherwise
establishes an exemption. The proceeds of the disposition by a Non-U.S. Holder
of Debentures or shares of Common Stock to or through a foreign office of a
broker will generally not be subject to backup withholding. However, if such
broker is a U.S. person, a controlled foreign corporation for United States tax
purposes, or a foreign person 50% or more of whose gross income from all sources
for certain periods is effectively connected with a United States trade or
business, information reporting will apply unless such broker has documentary
evidence in its files of the Non-U.S. Holder's foreign status and has no actual
knowledge to the contrary or unless the Non-U.S. Holder otherwise establishes an
exemption. Both backup withholding and information reporting will apply to the
proceeds of such dispositions if the broker has actual knowledge that the payee
is a U.S. Holder.
Recently adopted United States Treasury regulations, which generally
are effective for payments made after December 31, 1998, subject to certain
transition rules, alter the foregoing rules in certain respects. Those
regulations provide presumptions under which a Non-U.S. Holder is subject to
information reporting and backup withholding at the rate of 31% unless the
Company receives certification of the holder's non-U.S. status. Depending on the
circumstances, this certification will need to be provided (i) directly by the
Non-U.S. Holder, (ii) in the case of a Non-U.S. Holder that is treated as a
partnership or other fiscally transparent entity, by the partners, shareholders
or other beneficiaries of such entity, or (iii) certain qualified financial
institutions or other qualified entities on behalf of the Non-U.S. Holder.
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<PAGE> 26
SELLING SECURITYHOLDERS
The Debentures were originally acquired on December 10, 1997 from the
Company by the Initial Purchasers. The Initial Purchasers advised the Company
that the Initial Purchasers have resold the Debentures in transactions exempt
from the registration requirements of the Securities Act to "qualified
institutional buyers" (as defined in Rule 144A of the Securities Act) and
certain institutional "accredited investors" (as defined in Rule 501(a)(1), (2),
(3), or (7) under the Securities Act). These subsequent purchasers, or their
transferees, pledgees, donees or successors, may from time to time offer and
sell any or all of the Debentures and/or Conversion Shares pursuant to this
Prospectus.
The Debentures and the Conversion Shares have been registered pursuant
to the Registration Rights Agreement which provides that the Company file a
Registration Statement with regard to the Debentures and the Conversion Shares
within 90 days of the date of original issuance of the Debentures and keep such
Registration Statement effective until the earlier of (i) the sale pursuant to
the Registration Statement of all the securities registered pursuant to the
Registration Rights Agreement thereunder and (ii) the expiration of the holding
period applicable to such securities under Rule 144(k) under the Securities Act
or any successor provision. In addition, 264,101 Additional Shares are being
registered pursuant to the Registration Statement for the account of certain
securityholders of the Company. The Selling Securityholders may choose to sell
Debentures and/or Shares from time to time. See "Plan of Distribution."
The following table sets forth the name of each Selling Securityholder
who has provided the Company with notice as of the date of this Prospectus
pursuant to the Registration Rights Agreement of such Selling Securityholder's
intent to sell or otherwise dispose of Debentures and/or Conversion Shares
pursuant to the Registration Statement, the principal amount of Debentures and
the number of Conversion Shares which may be sold from time to time by such
Selling Securityholder pursuant to the Registration Statement and the percentage
of outstanding Debentures and Common Stock beneficially owned by such Selling
Securityholder as of December 31, 1997. No such Selling Securityholder nor any
of its affiliates has held any position or office with, been employed by or
otherwise has had any material relationship with, the Company or any of its
affiliates during the three years prior to the date of this Prospectus. Because
the Selling Securityholders may offer all or some portion of the Debentures and
Conversion Shares, no estimate can be given as to the percentage of Debentures
or Common Stock that will be held by the Selling Securityholders upon
termination of sales pursuant to this Prospectus. In addition, the Selling
Securityholders identified below may have sold, transferred or disposed of all
or a portion of their Debentures since the date on which they provided the
information regarding their holdings in transactions exempt from the
registration requirements of the Securities Act.
<TABLE>
<CAPTION>
Principal Percentage of
Amount of Debentures Outstanding Percentage of Common
Debentures that Beneficially Owned Conversion Shares Stock Beneficially
May be Sold Before Offering That May Be Sold** Owned Before Offering
----------- --------------- ------------------ ---------------------
Name
----
<S> <C> <C> <C> <C>
Aim Balanced Fund $3,500,000 1.014% 88,383 *
Aim Charter Fund $26,500,000 7.681% 669,191 *
</TABLE>
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<PAGE> 27
<TABLE>
<S> <C> <C> <C> <C>
Aim Income Fund $2,000,000 * 50,505 *
Aim Vi Growth & Income $4,000,000 1.159% 101,010 *
American Community Mutual $ 250,000 * 6,313 *
Insurance Company
American Pioneer Life $ 50,000 * 1,262 *
Insurance Company of New York
American Progressive Life & $ 50,000 * 1,262 *
Health Insurance Company of
New York
American Public Entity $ 45,000 * 1,136 *
Excess Pool
American Republic Insurance $ 500,000 * 12,626 *
Company
Anthracite Mutual Fire $ 15,000 * 378 *
Insurance Company
Associated Physicians $ 30,000 * 757 *
Insurance Company
Bank of America Convertible $ 275,000 * 6,944 *
Securities Fund
Bank of America Employee $ 135,000 * 3,409 *
Benefit Convertible Fund
Bank of America Equity $3,310,000 * 83,585 *
Income Fund
BCS Life Insurance Company $ 400,000 * 10,101 *
Capital Markets Transaction, $5,000,000 1.449% 126,262 *
Inc.
Care America Life Insurance $ 20,000 * 505 *
Company
Catholic Relief Insurance $ 220,000 * 5,555 *
Company of America
Century National Insurance $ 780,000 * 19,696 *
Company
CFW-C, L.P. $2,000,000 * 50,505 *
Chicago Mutual Insurance $ 40,000 * 1,010 *
Company
Chrysler Insurance Company $2,500,000 * 63,131 *
Concord Life Insurance $ 100,000 * 2,525 *
Company
Condor Insurance Company $ 110,000 * 2,777 *
Delta Air Lines Master Trust $2,660,000 * 67,171 *
</TABLE>
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<PAGE> 28
<TABLE>
<S> <C> <C> <C> <C>
Farmers Home Mutual $ 95,000 * 2,398 *
Insurance Company
Federated Rural Electric $ 70,000 * 1,767 *
Insurance Company
First Patriot Insurance $ 60,000 * 1,515 *
Company
Frontier Insurance Company $ 500,000 * 12,626 *
Goodville Mutual Casualty $ 40,000 * 1,010 *
Company
Gopher State Mutual $ 85,000 * 2,146 *
Insurance Company
Grain Dealers Mutual $ 90,000 * 2,272 *
Insurance
Guarantee Trust Life $ 500,000 * 12,626 *
Insurance Company
Guaranty Income Life $ 250,000 * 6,313 *
Insurance Company
Holy Family Society $ 40,000 * 1,010 *
Illinois Founders Insurance $ 50,000 * 1,262 *
Company
ISBA Mutual Insurance Company $ 70,000 * 1,767 *
Lebanon Mutual Insurance $ 70,000 * 1,767 *
Company
Lehman Brothers $12,625,000 3.659% 318,813 *
International (Europe)
Lone Star Life Insurance $ 550,000 * 13,888 *
Company
Medico Life Insurance Company $ 320,000 * 8,080 *
MedMarc Insurance Company $ 350,000 * 8,838 *
Michigan Mutual Insurance $ 2,100,000 * 53,030 *
Company
Middle Cities Risk $ 150,000 * 3,787 *
Management Trust
Midwest Security Life $ 170,000 * 4,292 *
Midwestern National Life $ 250,000 * 6,313 *
Insurance Company of Ohio
Millers Casualty Insurance $ 180,000 * 4,545 *
Company of Texas
Millers Mutual Fire $ 1,500,000 * 37,878 *
Insurance Company of Texas
</TABLE>
28
<PAGE> 29
<TABLE>
<S> <C> <C> <C> <C>
Mutual Protective Insurance $ 300,000 * 7,575 *
Company
Natwest Securities Limited $5,000,000 1.449% 126,262 *
New Castle Mutual Insurance $ 15,000 * 378 *
Company
Nomic Insurance Company $ 250,000 * 6,313 *
OCM Convertible Limited $ 175,000 * 4,419 *
Partnership
OCM Convertible Trust $4,735,000 1.372% 119,570 *
Old Guard Fire Insurance $ 130,000 * 3,282 *
Company
Old Guard Insurance Company $ 240,000 * 6,060 *
Orrington International Fund $ 185,000 * 4,671 *
Ltd.
Orrington Investments $ 315,000 * 7,954 *
Limited Partnership
Ozark National Life $ 350,000 * 8,838 *
Insurance Company
Pacific Horizon Capital $4,400,000 1.275% 111,111 *
Income Fund
Pacific Innovation Trust $ 180,000 * 4,545 *
Capital Income Fund
Paloma Securities L.L.C*** $5,000,000 1.449% 126,262 *
Phico Insurance Company $ 150,000 * 3,787 *
Physicians Mutual Insurance $ 150,000 * 3,787 *
Company
Pioneer Insurance Company $ 30,000 * 757 *
Police & Fireman's Insurance $ 60,000 * 1,515 *
Association
Public Employees' Retirement $1,000,000 * 25,252 *
Association of Colorado
Reassurance Company of $ 350,000 * 8,838 *
Hanover
Secura Insurance, A Mutual $ 200,000 * 5,050 *
Company
Security Mutual Life $ 100,000 * 2,525 *
Insurance
Service Life and Casualty $ 40,000 * 1,010 *
Insurance Company
Service Lloyds Insurance $ 40,000 * 1,010 *
Company
</TABLE>
29
<PAGE> 30
<TABLE>
<S> <C> <C> <C> <C>
Shepherd Investments $12,625,000 3.659% 318,813 *
International Ltd.
Silverton International Fund $ 1,100,000 * 27,777 *
Limited
Standard Mutual Insurance $ 125,000 * 3,156 *
Company
State Employees Retirement $ 1,135,000 * 28,661 *
Fund of the State of Delaware
State of Connecticut $ 4,140,000 1.2% 104,545 *
Combined Investment Funds
Texas Builders Insurance $ 80,000 * 2,020 *
Company
Transguard Insurance $ 340,000 * 8,585 *
Company, Inc.
United National Insurance $ 2,000,000 * 50,505 *
Company
United Teacher Associates $ 800,000 * 20,202 *
Insurance Company
Washington International $ 200,000 * 5,050 *
Insurance Company
Western Home Insurance $ 140,000 * 3,535 *
Company
Westward Life Insurance $ 70,000 * 1,767 *
Company
Wisconsin Lawyers Mutual $ 100,000 * 2,525 *
Insurance Company
Wisconsin Mutual Insurance $ 100,000 * 2,525 *
Company
World Insurance Company $ 170,000 * 4,292 *
<FN>
- ----------
* Less than 1%.
** Assumes conversion of full amount of Debentures held by such holder at the
initial rate of $39.60 in principal amount of Debentures per share of
Common Stock.
*** Information is as of February 12, 1998.
</TABLE>
30
<PAGE> 31
Set forth below are the names of certain other Selling Securityholders
who acquired shares of Common Stock in certain transactions not related to the
sale of the Debentures and the maximum number of Additional Shares that may be
sold by each such Selling Securityholder from time to time hereunder. Except as
may otherwise be indicated in the footnotes to the table, no such Selling
Securityholder nor any of its affiliates has held any position or office with,
been employed by or otherwise has had any material relationship with, the
Company or any of its affiliates during the three years prior to the date of
this Prospectus. The percentage of Common Stock beneficially owned by each of
the Selling Securityholders identified below both prior to and after giving
effect to the offering being made hereby is less than 1%.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
NAME THAT MAY BE SOLD
---- ----------------
<S> <C>
Pharm-Corp of Maine 66,376(1)
Spectrum Care Pharmacy Limited Liability Company 46,463(1)
Add-On Health Systems, Inc. 59,738(1)
Konsult(2) 61,535(1)
Konsult Data Systems Corporation(3) 15,384(1)
Ralph Kalies(4) 2,737(1)
Michael J. Fiori(4) 11,868(1)
<FN>
- -----------------------------
(1) These Shares were acquired by the Selling Securityholder in connection with
an acquisition by the Company.
(2) The Selling Securityholder is a sole proprietorship owned and operated by
Ralph F. Kalies, Jr.
(3) The Selling Securityholder is a corporation of which Ralph Kalies is the
sole shareholder.
(4) The Selling Securityholder is an employee of the Company or a subsidiary
thereof.
</TABLE>
31
<PAGE> 32
This Prospectus may be supplemented as necessary to set forth
information respecting any Selling Securityholder providing the Company with
notice subsequent to the date of this Prospectus pursuant to the Registration
Rights Agreement of such Selling Securityholder's intent to sell or otherwise
dispose of Debentures and/or Shares pursuant to the Registration Statement.
PLAN OF DISTRIBUTION
The Debentures and the Shares are being registered to permit public
secondary trading of such securities by the holders thereof from time to time
after the date of this Prospectus. The Company has agreed, among other things,
to bear all expenses (other than underwriting discounts and selling commissions)
in connection with the registration and sale of the Debentures and the Shares
covered by this Prospectus.
The Company will not receive any of the proceeds from the offering of
Debentures and the Shares by the Selling Securityholders. Debentures and Shares
offered hereby may be sold from time to time directly by any Selling
Securityholder or, alternatively, through underwriters, broker-dealers or
agents. If Debentures or Shares are sold through underwriters or broker-dealers,
the Selling Securityholder will be responsible for underwriting discounts or
commissions or agent's commissions. Such Debentures or Shares may be sold in one
or more transactions at fixed prices, at prevailing market prices at the time of
sale, at varying prices determined at the time of sale, or at negotiated prices.
Such sales may be effected in transactions (which may involve crosses or block
transactions) (i) on any national securities exchange or quotation service on
which the Debentures or Shares may be listed or quoted at the time of sale, (ii)
in the over-the-counter market, (iii) in transactions otherwise than on such
exchanges or services or in the over-the-counter market, or (iv) through the
writing of options. In connection with sales of the Debentures or Shares or
otherwise, any Selling Securityholder may enter into hedging transactions with
broker-dealers, which may in turn engage in short sales of the Debentures or
Shares in the course of hedging the positions they assume. Any Selling
Securityholder may also sell short and deliver Debentures or Shares to close out
such short positions, or loan or pledge Debentures or Shares to broker-dealers
that in turn may sell such securities.
The outstanding Common Stock is publicly traded on the New York Stock
Exchange. The Initial Purchasers have advised the Company that they are making
and currently intend to continue making a market in the Debentures; however,
they are not obligated to do so and any such market-making may be discontinued
at any time without notice, in the sole discretion of the Initial Purchasers.
The Company does not intend to apply for listing of the Debentures on any
securities exchange. Accordingly, no assurance can be given as to the
development or liquidity of any trading market that may develop for the
Debentures. See "Risk Factors--Absence of Public Market; Transfer Restrictions."
The Selling Securityholders and any broker-dealers, agents or
underwriters that participate with the Selling Securityholders in the
distribution of the Debentures or the 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 profits realized
by the Selling Securityholders on the resales of the Debentures or the Shares
may be deemed to be underwriting commissions or discounts under the Securities
Act.
32
<PAGE> 33
In addition, any securities covered by this Prospectus which qualify
for sale pursuant to Rule 144, Rule 144A or any other available exemption from
registration under the Securities Act may be sold under Rule 144, Rule 144A or
such other available exemption rather than pursuant to this Prospectus. There is
no assurance that any Selling Securityholder will sell any or all of the
Debentures or Shares described herein, and any Selling Securityholder may
transfer, devise or gift such securities by other means not described herein.
The Debentures were originally sold by the Company to the Initial
Purchasers in December 1997 in a private placement. The Company agreed to
indemnify and hold the Initial Purchasers harmless against certain liabilities
under the Securities Act that could arise in connection with the sale of the
Debentures by the Initial Purchasers. The Registration Rights Agreement provides
for the Company and the Selling Securityholders to indemnify each other against
certain liabilities arising under the Securities Act.
The Company has agreed pursuant to the Registration Rights Agreement to
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 the earlier of (i) the sale pursuant
to the Registration Statement of all the securities registered pursuant to the
Registration Rights Agreement thereunder and (ii) the expiration of the holding
period applicable to such securities under Rule 144(k) under the Securities Act
or any successor provision. The Registration Rights Agreement provides that the
Company may suspend the use of this Prospectus in connection with sales of
Debentures and Shares by holders for a period not to exceed 30 days in any
three-month period, or not to exceed an aggregate of 60 days in any 12-month
period, under certain circumstances relating to pending corporate developments,
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.
LEGAL MATTERS
The validity of the Debentures and the Shares will be passed upon for
the Company by Thompson Hine & Flory LLP, Dayton, Ohio.
EXPERTS
The audited financial statements incorporated in this Prospectus by
reference to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 (as amended on Form 10K/A filed August 6, 1997) have been so
incorporated in reliance on the report of Price Waterhouse LLP to the extent and
for the periods appearing therein, given on the authority of said firm as
experts in auditing and accounting.
33
<PAGE> 34
The consolidated financial statements of American Medserve Corporation
as of December 31, 1996 and 1995 and for the year ended December 31, 1996, the
six months ended December 31, 1995 and the year ended June 30, 1995 incorporated
in this Prospectus by reference to Omnicare's Form 8-K dated September 12, 1997
(as amended September 29, 1997 and December 4, 1997) have been audited by Ernst
& Young LLP, independent accountants, as stated in their report appearing
therein.
34
<PAGE> 35
================================================================================
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY 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. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITY OTHER THAN THE DEBENTURES OR THE SHARES OF COMMON STOCK OFFERED HEREBY,
NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
OF THE SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT
IS UNLAWFUL TO MAKE SUCH AN 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.
-------------------
TABLE OF CONTENTS
Page
----
AVAILABLE INFORMATION.......................................................2
INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE.............................................................2
THE COMPANY.................................................................2
RISK FACTORS................................................................3
USE OF PROCEEDS.............................................................6
RATIO OF EARNINGS TO FIXED CHARGES..........................................6
DESCRIPTION OF DEBENTURES.................................................. 7
DESCRIPTION OF CAPITAL STOCK...............................................20
CERTAIN UNITED STATES FEDERAL
INCOME TAX CONSIDERATIONS................................................21
SELLING SECURITYHOLDERS....................................................26
PLAN OF DISTRIBUTION.......................................................32
LEGAL MATTERS..............................................................33
EXPERTS....................................................................33
================================================================================
================================================================================
OMNICARE, INC.
$345,000,000 Principal Amount of
5% Convertible Subordinated Debentures
due 2007
8,976,222 Shares of
Common Stock
PROSPECTUS
February 13, 1998
--------------------
================================================================================
